Despite fast-rising salaries for both accountants and auditors, increased benefits, and greater incentives to complete an accounting-based degree, the number of new accountants entering the workforce is declining by the year.
According to a report by the American Institute of CPAs, the number of accounting majors at the bachelor’s and master’s levels has dropped by 4% since the pandemic. In 2010, there were nearly 50,000 CPA candidates sitting to take the required exam. But in 2021, that number dropped to just over 32,000. While not all accountants are CPAs, a drop in the number of CPAs — the licensed professionals required to perform many high-level accounting tasks — is a key symptom of the declining industry as a whole.
This upcoming shortage of accounting professionals is likely to impact small businesses and the economy in three major ways:
1. Expect less financial guidance for small businesses and big companies
The talent exodus is creating a widespread shortage of CFOs, CPAs, finance managers, FP&A professionals and other financial experts. That lack of talent is likely to lead to less financial oversight and guidance for companies of all sizes. And as more companies struggle to find qualified, affordable, experienced financial expertise and support, they may be exposed to greater risk.
Early-stage startups are already less-than-likely to have a CFO or senior accounting professional in place as they grow. And small businesses often rely on the expertise of their CEO to guide major financial decisions — whether that person has an accounting background or not. But as the cost of hiring an increasingly rare experienced accountant rises, these businesses will be forced to pay more to attract and retain the limited talent that is available — stretching their resources even further.
2. Anticipate fewer, longer financial audits for public companies
Comprehensive accounting audits that look into the integrity and compliance of large companies have never been more important than they are now — especially in the wake of banking collapses and market uncertainty. But with fewer qualified auditors staffing the Big Four firms (Deloitte, PwC, Ernst & Young and KPMG), expect the audits these firms do to be slower, less detailed, and potentially less accurate than in the past.
The Securities and Exchange Commission recently fined Earnst & Young $100 million when it was discovered that some of the firm’s accountants cheated on their licensing exams. This finding calls into question the accuracy and reliability of the work the firm has conducted, and suggests some auditors and accountants have been tempted to cut corners, faced with a growing workload and a shrinking workforce.
The increasing shortage of auditors and accountants is likely to lead to longer audit and due diligence periods for public companies and those in the merger or acquisition process. And those delays can make stakeholders (and stockholders) uneasy, creating further volatility across the market.
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As the audit periods and backlogs stretch, it may become more difficult for companies to complete their purchase or sales process, or access the funding they need to grow. That puts greater financial strain on the companies vulnerable to financial disruptions.
3. Watch for an increase in business failures
The exodus of accounting professionals may have a disproportionate impact on small businesses that strongly rely on the guidance of financial professionals to succeed. Without access to skilled accountants, these fragile businesses may make poor financial or tax decisions that leave them exposed to greater economic risks, noncompliance or increased liability.
The over 32 million small businesses in the U.S. represent the backbone of our economy. If these businesses don’t have access to the accounting guidance and support they need to succeed, and fail as a result, the economy as a whole is likely to slow. Small businesses are the engine driving productivity, employment and economic growth. Widespread disruptions in this sector can hurt local communities, leave millions of workers unemployed, and reduce access to the essential services these businesses provide.
How can your small business navigate the accountant shortage? Outsource your accounting services
Outsourced accounting firms can afford to attract and retain the most qualified accountants because they employ so many top-ranking professionals. While a single small business may be limited in who it can hire, based on its budget or location, outsourcing agencies can hire, train, and manage top talent from across the country — and offer your business just the on-demand services you need.
Outsourced accounting services give your business access to a higher caliber of talent, stronger financial guidance and a cost-effective way to manage your essential accounting tasks, without managing another team member. And that’s the safest way to future-proof your business, no matter how great the accountant shortage becomes.
Want more? In addition to taxes, accounting, bookkeeping and CFO services through its FinOps, Escalon’s Essential Business Services include PeopleOps (HR, benefits, recruiting and payroll) and Risk (business insurance). Talk to an expert today.
