In recent years, the accounting profession has been grappling with a concerning trend: a shortage of skilled workers. According to the American Institute of CPAs (AICPA), the demand for accounting graduates has consistently outpaced the supply. Candidates sitting for the certified public accountant (CPA) exam have also decreased from 48,004 first-time candidates in 2016 to 32,188 in 2021, a drop of 33% (as reported in the AICPA 2021 "Trends Report").1 Additionally, the AICPA/CIMA 2022 Annual Report reveals a 7% decrease from 2021 to 2022 for the total number of candidates taking the CPA exam.2 This shortage has significant implications not only for accounting firms but also for public corporations and private equity-owned companies, especially those with substantial leverage or debt.
For public corporations, the shortage of skilled accounting professionals presents a myriad of challenges. Financial reporting and compliance requirements imposed by regulatory bodies demand meticulous attention to detail and accuracy. Without an adequate workforce, companies may face delays in financial reporting, increased risk of errors, and heightened scrutiny from investors and regulators. Public company restatements rose commensurately in 2021, from less than 400 to 1,470, an increase of 289% according to a study published in May 2022 by Audit Analytics.3 Moreover, the inability to maintain robust internal controls could undermine investor confidence and erode shareholder value.
Similarly, private equity-owned companies, especially those burdened with substantial leverage or debt, face unique pressures stemming from the shortage of skilled accounting professionals. These firms often operate in complex financial environments, with intricate capital structures and intensive reporting obligations to stakeholders and lenders. Inadequate staffing levels can impede timely financial analysis, hinder effective risk management, and jeopardize compliance with debt covenants. Consequently, these companies may find themselves at a competitive disadvantage, facing heightened financing costs or difficulty accessing capital markets.
Several factors contribute to the shortage of skilled accounting professionals. These include demographic shifts, with a significant portion of the existing workforce nearing retirement age, and evolving educational trends that may not align with industry needs. For younger professionals, or students graduating college, demanding workloads and a lack of work-life balance resulting in pervasive burnout are causing workers to leave, or not even enter the profession. Meanwhile, concerns about career growth prospects and job security in the face of automation and artificial intelligence (AI) force many to question their future.
So, what does this mean if you run a finance and accounting group? Good people are hard to come by in this profession. Take your laundry list of requirements and throw it in the trash; your business is not as nuanced as you think, and finance and accounting are transferable skills. Hire hard workers that will get the job done and have a history of doing so. Setting clear expectations around personal and professional growth, managing career goals, and creating opportunities is paramount to retention and keeping people. Finally, know when to leverage professional consulting firms to augment your team before you have a massive issue on your hands. While this is never a cheap alternative, look at it from a value creation perspective to stabilize in the short term and drive transformation efforts for the longer term.
Footnotes
3. https://www.auditanalytics.com/doc/2021_Financial_Restatements_A_Twenty-One-Year_Review.pdf
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