With year-end accounting requirements on the horizon, Q3 and Q4 are pivotal windows. Audit preparation and SOX controls are top of mind for public companies, but an industry-wide accounting talent shortage is causing significant delays and material weaknesses, a growing problem that's leading to restatements for many notable organizations.
While companies are working in overdrive to fill accounting positions, they are finding themselves up against a confluence of factors:
- Changing expectations of working arrangements: The normalization of a distributed workforce during the pandemic set a baseline for accounting professionals who desire flexible work-from-home environments.
- Cost-cutting decisions: The effort to reduce labor-related expenses and right-size workforces amid 2023 recession fears resulted in tighter budgets, turnover and key unfilled roles, including accountants.
- Evolving expectations: Accountants often have specialized skills in specific accounting and finance processes, like treasury, for example. However, many employers are seeking catchall candidates for all things accounting in addition to potentially taking on managerial duties to warrant their salaries.
- A shift in appeal: Math, data and compliance-minded graduates and professionals are gravitating away from accounting and toward more lucrative opportunities in tech and finance.
- The evolving regulatory environment: As accounting at all levels of business becomes more regulated and requires stricter financial reporting, the continuous demand for new, specialized accounting capabilities intensifies. The application of existing and the adoption of new accounting standards continues to increase along with the complexity of financial reporting, driving demand for professionals who can navigate these intricate frameworks.
Collectively, these challenges are prompting organizations to look at accounting in a new light, as the tangible repercussions of the talent shortage continue to take root.
Accountant shortages have broad implications
While the accounting shortage is expected to worsen in the months and years ahead, the negative consequences are already being felt:
- Increased risk of material weaknesses and restatements: The shortage of accountants poses significant risks for businesses as evidenced by material weaknesses and restatements. Material weaknesses occur when internal controls over financial reporting are ineffective, leaving businesses vulnerable to errors, misstatements and fraudulent activities. Restatements can erode investor confidence and result in reputational damage, legal repercussions, and financial losses.
- Increased audit complexity and costs: With fewer skilled accountants, businesses face mounting challenges in completing audits and complying with regulatory requirements. The shortage can lead to increased audit complexities, longer review periods and higher costs associated with engaging external auditors to fill the gaps. These additional expenses can strain a company's financial resources, particularly for small and medium-sized enterprises. Not proactively hiring accountants internally leads to other costs down the line if outsourced accounting support is brought in but delivers low-quality work. Rework incurs heavy expenses under tight deadlines.
- Missed growth opportunities and misinformed decision-making: The accountant shortage hinders businesses' ability to seize growth opportunities and make informed decisions. Accountants play a critical role in analyzing financial data, providing insights, maintaining compliance and identifying areas for improvement. Without enough skilled professionals, businesses may lack the necessary financial intelligence to optimize operations, identify cost-saving measures and make strategic investments.
While public companies face higher compliance hurdles, smaller and midsized companies continue to face substantial accounting challenges as they tend to take a more reactive approach to hiring and planning. This sometimes results in hiring less-experienced accountants at the last second, opening companies up to errors and timing issues that contribute to misstatements and material weaknesses.
Companies on the cusp of going public, or that are newly public, often believe the accounting resources and requirements they encountered pre-IPO are sufficient. However, it's a different ballgame for public companies, and additional accounting expertise is required.
What's needed: technology-enabled accounting expertise
Because it can take months to find the right accounting candidate (and to secure a budget), companies may opt to outsource portions of their accounting function. Balancing the quality of accounting output against the cost is critical, as outsourcing to a low-quality center creates more problems when timeliness and accuracy are under a microscope. To meet evolving demands, an effective blend of technical and operational accounting background combined with technology enablement is paramount.
While there's a larger role for the accounting industry and universities to play in addressing the talent shortage, the near-term impetus is on companies to level-up their accounting capabilities.
- Embrace technology and automation: Leveraging advancements in technology and automation can help alleviate the shortage of accountants by streamlining routine tasks and allowing professionals to focus on higher-value activities. Businesses should invest in accounting software, data analytics tools, and robotic process automation to enhance efficiency and accuracy. This strategic adoption of technology can attract talent and create a more appealing, rewarding work environment.
- Enhance recruitment and retention efforts: To attract and retain skilled accountants, businesses need to revamp their recruitment and retention strategies. This includes offering competitive compensation packages, flexible work arrangements, opportunities for career growth and cross-training, and a supportive organizational culture. Collaboration with professional accounting associations can help businesses tap a wider talent pool to build strong accounting teams.
- Reassess strategic accounting value: Younger accountants are typically technologically savvy and keen to make an impact early in their careers. But if the accounting function is limited to number-crunching and financial statement preparation, its upside to the organization at large (and to individual accounting staff) is capped. Technical and operational accounting prowess across reporting, budgeting, planning, audit, transactions, compliance and more can level-up accounting's strategic position in the business and help justify its associated costs over the long term. A reassessment also allows HR and leadership to fill accounting positions more strategically and proactively.
Overcoming pain points in the market with a foundation of organizational accounting processes, technology and data starts with staffing the right people.
