The conversation around talent although it has been going on for some time, continues to be a dominant concern for the tax & accounting industry
In July and August, Thomson Reuters hosted two live polling webinars to learn more about small and midsize accounting firms’ talent perspectives and challenges. To set the stage of any conversation around talent, it was important for us to understand the current and near future trajectory of the industry.
Who is going?
When asked about plans to retired within the next five to seven years, slightly above 40% of the attendees at both webinars said they are planning to exit the industry. Add to this that 75% of accountants are eligible to retire in the next two or three years (although other factors, such as the pandemic may have increased this rate), and you have an industry facing a severe talent crunch.
Further, these numbers will have a prolific impact on the tax & accounting industry, which already is facing myriad competing challenges, including technological adoption, increasing and seemingly constant regulatory changes, more demand from clients, and the list goes on. Having slightly less than half of a workforce planning to retire for most industries is alarming, for the accounting industry, this is a crisis, especially because there is a greater demand for additional services from tax & accounting professionals.
Who is staying?
On the other hand, the good news is that almost 60% of those polled at the webinars are planning to continue in the profession. However, how and where they work is a challenge that still remains somewhat unforeseen. Not surprisingly, many tax & accounting firms that do have the necessary resources, still see talent as a top concern. Indeed, these concerns are not for the future as their colleagues and bosses retire over the next several year, but rather, the concern is for now.
Almost all of the webinar attendees have open headcounts and are looking to replace folks that have left or are trying to fill new roles in order to keep up with incoming work or take advantage of growth opportunities.
About 50% of firms indicated they would like to hire senior managers, and a little less (45%) indicated they wanted to hire additional staff. This is similar to the findings in the Thomson Reuters Institute’s 2022 Tax Professionals Report, released earlier this year. In that report, 60% of firms were looking to hire senior tax professionals and 52% said they were looking to bring on additional staff.
When asked about some of the primary challenges in recruiting, the most-cited response was that there simply was too few candidates available, which was mostly true in specific regions of the country, such as firms in midwestern states and especially those in smaller communities. Other webinar respondents expressed that when they were able to find quality talent, the firms often could not afford the salary being asked, which was often out of line with what firms were offering.
And this problem is unlikely to resolve itself, because the talent pool isn’t large enough and its growth appears less promising — statistics shows fewer college students are entering into the accounting field. That means that tax & accounting firms and their leaders must think creatively about securing the talent they need and how their work will get done.
What is the plan?
There is, and rightfully so, warranted concerns about the current and future state of the tax & accounting industry. When firm owners who said they are planning on retiring were asked about their plans for their businesses after their departure, their responses varied from following a restructuring or succession plan, merging with another firm, or simply winding down the business.
Interestingly, of those that indicated they going to follow a restructuring or succession plan, many hadn’t started yet, or even had an idea about how they would go about such a strategy. For those considering merging, they too also had a similar lack of a formal plan to execute this. It is worth noting that about 20% of respondents said they would wind down their business, which means that they may only keep a few clients.
Retiring or not, many firm leaders are worried about how they will continue to service their clients in the short and long term. Some have considered hiring non-traditional staff, such as retirees or stay-at-home parents to help fill the gaps. And hiring more support staff allows CPAs to do more accounting work and less of the administrative task — such as calling clients for documents or signatures, etc. — that can be enormously time consuming.
In addition, many firm leaders said they plan to leverage more technology to help increase efficiencies as well as take on more of the manual work that’s still being done by their individual employees. Outsourcing (both onshore and offshore) also has become a consideration for firms as they to look to see how they can get work done even though they may not have the bandwidth.
Finally, as businesses try to move beyond the everyday concerns of just staying afloat, keeping up with evolving regulations, chasing down clients for documents or signatures, many are looking at how they are being compensated.
Going beyond the Form 1040 work, most of which can now be done electronically, firms are examining other ways in which they can engage with clients. Most firm leaders envision adding more advisory or partnership-type services to increasing their value to clients and therefore increase the amount they can charge clients for those services. And for low-value clients or those that require more attention and work than the amount they are paying, firms are considering culling them as an option.
The tax & accounting industry is at a pivotal junction today, and those tax professionals and firm leaders that will remain in it will have to make some tough decisions. A firm’s survival won’t be based on whether or not it has enough work or clients, but instead on whether the firm and its leaders can manage their workflow efficiently, attract and retain high-quality talent, and provide value that satisfies clients and offers the firm a chance to charge accordingly. Indeed, the tax & accounting firm of the near future will have to come up with a new business model or least rethink its current one.