The Year Ahead: Top challenges for 2023

November 28, 2022 9:00 AM

Given how long the war for talent in the accounting profession has been going on, it will come as no surprise that the majority of a panel of managing partners, thought leaders, consultants and other experts surveyed by Accounting Today as part of our annual "Year Ahead" program predicted that staffing will be the biggest challenge for accountants in 2023, and by a large margin.

It is a multifaceted challenge, however, and the experts Accounting Today polled on the subject touched on a number of those facets. Some noted that the challenge is, to a certain degree, self-inflicted by firms' dependence on outmoded work models and insistence on overworking staff, particularly during tax season, while others spoke of the profession's lack of success thus far with diversity, and the dwindling pipeline of new CPAs and new accountants. Still others focused on the capacity constraints firms suffer under when they can't find the talent they need — a major problem at a time when demand for accounting services is high.

There were other challenges mentioned, though, including the need for firms to take a more intentional approach to their growth and management strategies, the uncertain condition of the overall economy, cybersecurity issues, and the perpetual challenge of staying relevant in an ever-changing world.

The panels' responses to the question, "What's the biggest challenge facing accountants in 2023?" are below. You can also see their thoughts on the biggest opportunities for accountants, and the results of Accounting Today's annual survey of accounting firms about their plans for the next year.

Enoch Gonzalez - Enoch Photograp

Winning the race for relevance of our profession (accounting and finance) in an environment of speed, uncertainty, volatility and disruption. Is our profession fit for purpose? Are we agile and upskilling quickly enough in the areas of data science, technology enablement, strategy management and "nonfinancial" performance management (e.g., ESG/sustainability reporting and decision support)? Are we doing a good enough job at telling the story of the profession as one that is ethically sound, generates value for multiple stakeholders, makes a difference and inspires trust?

— Jeff Thomson, president and CEO, Institute of Management Accountants

The surface level challenge is the talent shortage many firms are facing. But if we look beyond that, the challenge is really about setting a clear strategy for the firm and building discipline and capabilities that support the strategy, creating an environment that attracts talent. That could include rightsizing the client base, focusing on a niche or growing client advisory as examples.

— Lisa Simpson, Vice president of firm services, AICPA

The biggest challenge facing accounting firms in 2023 is ensuring the relevance of the profession. More granularly, the biggest short-term challenge facing accounting firms in 2023 is finding and retaining staff. Accounting firms have thrown everything but the kitchen sink at the staff retention issue from allowing staff to work remotely, to setting one's own hours, to reducing the required the amount of expected billable hours. Yet we still have staff leaving at equal or higher than pre-pandemic levels.

Some think that just talking about the profession differently will lead to increased recruitment and retention. As I've said before, that's a simple answer to a complex problem. We have to face up to the real challenge of the work we are asking staff to do. Young staff want to make an impact on the businesses they serve and it's hard to translate that to the day-in, day-out traditional commodity work of audits and tax preparation. Expanding what accounting firms do to integrate business insight and analysis into traditional work will improve work satisfaction, lead to increased retention and recruitment, and prove more valuable to clients.

Changing what people do will not be easy. It will require development of strategic thinking skills in all staff. Just as importantly, it will require a change in the business model from more of the same (more audits and tax preparation engagements) to deeper relationships with clients. Increasing our value to clients will help to ensure the relevance of the profession.

— Todd Shapiro, president and CEO, Illinois CPA Society

Time — time to evolve, time to get work done and to time reboot personally. There has always been a shortage of time, but it seems like it's getting far more intense. There is also less down time between seasons … if there are even seasons anymore with the constant work that needs to be done and lack of team to do it. Most firms have more work and clients than they are able to handle.

— Jody Padar, Vice president of tax strategy and evangelism, April

Retaining staff. The pipeline of students has dropped, reducing the numbers of potential staff. Further, many of the working conditions in CPA firms have deteriorated, causing present staff to leave. At the same time, the demand for accounting services has been increasing. It seems firms are oblivious to the very real concerns of staff with very little actual efforts to retain them.

— Ed Mendlowitz, Emeritus partner, Withum

Firm leaders must flip the mindset from "We have a staffing problem" to "We need to change how we operate and do business," and then act on it with determination and clarity. The profession has, more than anything else, a business model problem. Until this is understood, we won't advance. Leaders must create an environment where talent remains invested, motivated and inspired. Happy clients will follow. It's our collective responsibility to make public accounting more appealing to talent.

— Eric Majchrzak, CEO, BeachFleischman

Capacity continues to be the No. 1 challenge for firms. The firms that have started to solve it with more dynamic staffing solutions, such as outsourcing, offshoring, fully remote, part-time, and more, are seeing relief — and providing hope for their team. In addition, pulling out all tasks, client communications and coordination, client set-up and more into a client service coordinator role that does not require an accounting degree has allowed partners, managers and even seniors to elevate and work at their highest and best use, which is required to make money in the professional services firms' leverage model. Technology has also been key to automate and digitize everywhere possible and make hard decisions when clients (or partners or admin) won't come along.

Firm leaders that have focused on new ways of doing business, staffing, and serving clients are finding the capacity and the ability to focus on important initiatives in their firms.

All firms need to do more in 2023 to re-recruit current team members and become a destination workplace for new high potential talent. And make the profession sound positive as staff and seniors are making career choices and building a feeder pipeline by promoting it to children, high schoolers, community colleges and college freshman.

— Tamera Loerzel, partner, ConvergenceCoaching

Unless you are living under a rock, is it staffing on the surface. To me the biggest issue is understanding their forward direction. Yes, firms made a lot of money and built excellent delivery systems to accommodate a heavy compliance workload.

Historically firms had an 85% annuity base of compliance work. The other 15% were projects or clients that went elsewhere. Today, the staffing keeps shrinking so they need to get past trying to patch it. They need to outsource, and they need to then get the shift going into advisory. A barrier is firms feel they just do not have the time to get there. The reality is time is a problem, but an underlying factor is most firms do not know how to start and advisory practice because it's not in their skill set. It not how they are trained to think, and their training and systems are all designed for delivery of compliance services.

— Bob Lewis, president, The Visionary Group

Helping our clients face the inflation/recession storm.

— Heidi LaMarca, CEO and MP, Windham Brannon

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Hiring additional talent and keeping it will continue to challenge firms as competition (both in public accounting and private industry) continue to raise offers (and for some offer lucrative incentives such as stock, options, and rollover equity).

— Allan Koltin, CEO, Koltin Consulting Group

While I believe staffing will be the biggest overall challenge accountants face in 2023, I think that from a technology perspective, security will be No. 1. Cybercriminal organizations saw their crypto-ransom hauls effectively doubled in the last year, according to the Financial Crimes Enforcement Network, providing significant incentive (and funding) for more advanced hacking and cyberbot development, which will only increase their ransomware and extortion harvests.

With a relatively small percentage of cybercriminals being caught, it will further attract more cybercriminals into the mix. And to leverage their efforts, I believe they will increase target niche specialization (similar to accounting firms) to leverage identified vulnerabilities into similar businesses. This of course includes targeting accounting firms for the significant trove of personally identifiable information we all have. I believe managing security is a mission-critical firm priority that today should be outsourced to enterprise-class managed security providers, as most firms do not have the required resources and IT personnel to do it comprehensively themselves.

— Roman Kepczyk, director of firm technology strategy, Right Networks

There is an unprecedented level of uncertainty in the world today — economic, political, regulatory and social. Building personal adaptive resiliency skills will be crucial for leaders, and will help them navigate these complexities to reduce stress for employees and clients. Those who do will reaffirm their trusted advisor role with clients and be well-positioned for the future.

— Kacee Johnson, vice president of strategy and innovation, CPA.com

The biggest challenge accounting firms face going into 2023 is staffing. Capacity challenges impact almost all firms and are causing concern for both current and future leaders. Professionals are forced to complete work typically performed by those in less experienced roles due to a gap in the number of professionals at the staff, senior and manager levels, thus creating frustration and perpetuating burnout. In addition, it is limiting the opportunities for growth and expansion in some cases. The fear of continued turnover looms as firms struggle to solve this challenge. An already stretched team and the new hybrid structure impacting compromised productivity and communication amplifies this challenge.

— Angie Grissom, owner and chief relationship officer, The Rainmaker Companies

Being able to staff at the appropriate levels to achieve desired leverage. Partners needing to push down tax/audit work to senior staff… . As we see in the Rosenberg Survey, this correlates to higher net income per partner, the more they can push down work, and it has been a real problem for many firms with staffing crisis.

— Julio Gonzalez, CEO, Engineered Tax Services

Terri Keefer

Getting out of our own way when it comes to making needed changes for survival or critical evolution; changing behavior usually requires changing our beliefs. What beliefs do we cling to that it might be time to challenge?

— Michelle Golden River, founder, Fore

The biggest challenge facing accountants in 2023 continues to be developing and maintaining relevant competencies in a world that is changing faster and faster. The complexity of the domestic and global regulatory environment, heightened need for more robust financial planning and analysis given the financial uncertainty, adoption of emerging technologies that enable differentiation, and a tight in-person, remote, and hybrid talent management environment are a just a few of the areas that require next level leadership. These areas require re-skilling and enhancement even for decades-old people leaders. Business as usual is no longer usual. We can't afford to rest on our laurels or primarily on what we did in 2019.

— Kimberly Ellison-Taylor, CEO, KET Solutions

Transformation. It's is touching every aspect of what accountants and their firms are focused on right now. Learning how to do what you do with less people, building and pulling up people faster and leveraging people to do part of the job you probably never thought would be outsourced are just a few of the many changes accountants and their firms are facing.

— Sarah Dobek, president and founder, Inovautus Consulting

With the recession looming, firms will be going through a period of consolidation. As such, we'll not only need to deal with pricing pressures — knowing the burden that is already placed on our clients — but we'll also need to find to continuously bring in top talent in a shifting market.

Another big challenge will be staying aware of and defending against the threat of cyber incidents. Firms in the accounting industry have always been the gatekeeper of sensitive client information, and that means we'll continue to be prime targets for malicious events. Keeping this information secure is of the utmost importance, but with the growing digital footprint of many organizations — and the expansion of the attack surface due to hybrid working — this will continue to be difficult to mitigate.

— Avani Desai, CEO, Schellman

The biggest challenge continues to be balancing client demands and staff workload. For too long now, the scales have been tipped in the clients' favor, to the expense of staff burnout. How long can we go on, tightly embracing work we shouldn't be doing anymore?

— Gale Crosley, founder, Crosley + Co.

MACPA

The profession is facing (and has been facing) a lot of challenges but none I think is more important than the issues surrounding human capital. I see this issue as twofold.

First is imperative to create a more diverse and even more importantly, inclusive profession. The second is to recruit and build up the next generation of leaders for the profession.

— Rebekah Brown, CEO, MACPA

Aiello-Michael-Centri Business Consulting

The shortage of talent. And not just talent from the current marketplace, but more importantly, the pipeline of new talent that is coming into the profession. Enrollment in the accounting major continues to drop while firms like Centri continue to grow and need more talent to support that trajectory. It will impact delivery to clients, it will impact firms' existing staff and most importantly, this will impact the overall economy. Firms need to focus on outreach to colleges and universities, even at the high school level, to convey the benefits of becoming a CPA and the industry as a whole.

— Michael Aiello, CEO and managing partner, Centri Business Consulting