The skills shortage is a critical issue facing businesses worldwide, and those that fail to address it may struggle to achieve their goals. The global talent crisis poses significant risks to businesses, and the accounting industry is not exempt from its impact. However, there are short and long-term solutions to navigate the talent squeeze and safeguard your business. In this piece, we will delve into the facts, causes, and potential remedies for the skills shortage, with a focus on the accounting industry in the United States.
Understanding the Global Talent Shortage
The global skills shortage has reached a 16-year high, with a 6% year-on-year rise in 2022. The number of employers struggling to find the talent they need has doubled from 34% in 2012 to 75% in 2022. These statistics highlight the severity and urgency of the issue. Several countries are experiencing the impact of the talent shortage:
United States: The 2021 financial reporting season revealed the strain on corporate finance teams and outside auditors due to a shortage of staff. The Public Company Accounting Oversight Board is concerned that the turnover of experienced staff is an “emerging audit risk”, further exacerbating the problem.
Australia: The skills shortage in Australia is evident in the accounting sector, with an estimated 9,000 accounting vacancies. The industry is grappling with recruitment and retention challenges, affecting practices of all sizes.
United Kingdom: The number of accountants applying for jobs in the UK dropped by 36% between June 2021 and June 2022. This shortage of skilled workers has forced accounting firms to turn down work and impeded their growth.
Causes of the Skills Shortage
The talent drought can be attributed to various factors:
Retirement of Baby Boomers: The Baby Boomer generation, encompassing those born between 1946 and 1964, have retired, or plan to, within the next decade. The AICPA estimates that almost 75% of the CPA workforce reached retirement age in 2020. Millennials, who should ideally fill these vacated roles, often lack the senior skills and managerial experience required.
Changing Attitudes to Work: Millennials and Gen Z workers, who make up a considerable portion of the workforce, prioritize flexibility, work-life balance, and higher wages. Many employees from these generations are actively seeking job changes, resulting in high turnover rates.
Education and Skills Gap: Traditional education models have struggled to keep up with the demands of the rapidly evolving Fourth Industrial Revolution. Higher education enrollment has declined due to rising costs, the inability to meet non-traditional student and labor market needs. Additionally, there is a lack of focus on continuing education and internal capacity building within businesses, leading to a skills mismatch. A McKinsey survey found that 46% of employees surveyed felt their skills would be irrelevant by 2024, with just 34% feeling supported by the skills development opportunities within their organizations.
The Implications for Accounting Firms in the U.S.
Accounting firms in the U.S.A. are not immune to the challenges posed by the skills shortage. The limited availability of skilled professionals has led to several consequences:
Increased Workload: With fewer staff available, corporate finance teams and auditors face heightened pressure to deliver accurate financial statements, potentially compromising the quality of their work. Founder of global staffing and talent solutions business, TOA Global, Nick Sinclair says, “The industry is under so much pressure with the volume of work, which means business leaders often find themselves focused solely on what they need to do now to get the work out as opposed to developing and growing their people. The benefit is that the more you grow your people, the more output they’re capable of and the more potential there is for them to add real value to your business.”
Risk to Audit Quality: The turnover of experienced staff poses a significant risk to audit quality. Firms must find ways to address this issue to ensure accurate and reliable financial reporting.
Growth Constraints: The skills shortage hampers the growth prospects of accounting firms, as they may be forced to turn down work due to a lack of qualified staff. The industry's stability and strength are negatively affected.
Navigating the Skills Shortage: Solutions for Success
To thrive in the talent wars and overcome the skills shortage, accounting firms in the U.S. should consider the following strategies:
Global Talent Solutions: Embracing global talent solutions can provide access to a larger pool of skilled professionals. Leveraging international markets, such as the Philippines, can help firms find the right talent-fit without sacrificing financial stability.
Career Development and Advancement: Firms should prioritize career development and advancement opportunities to attract and retain top talent. Shortening the path to partnership and offering growth opportunities aligned with employees' goals can keep them engaged and motivated.
Embrace Technology and Automation: Adopting advanced technologies and automation tools can alleviate the burden on existing staff and enhance productivity. By streamlining processes, firms can optimize resources and focus on high-value tasks.
Collaboration and Industry Partnerships: Collaborating with industry partners, educational institutions, and professional bodies can facilitate knowledge-sharing and create training programs tailored to address the skills gap. This approach promotes a collective effort to overcome the challenges posed by the talent shortage.
A Way Forward
Despite the monumental challenges and the significant risks the growing skills shortage poses to accounting firms, there are individuals within the industry who possess a forward-thinking mindset and demonstrate courage. These individuals are actively exploring innovative approaches to not only survive the talent drought but to flourish despite it.
It is possible, Nick Sinclair, founder of TOA Global, says, “to get the right people working at the right level in your business, at the right time and at the right cost”.
Nick’s seen this in the growth of global talent solutions. “The reality is that while many firms struggle to find the local talent they need, we post a job in the Philippines for elite accounting industry talent and get more than 200 applicants in three days. A key factor in growing through the skills shortage is putting the best talent to work at the right level in your firm, without losing time or sacrificing financial stability.”
If you’re ready to dig a bit deeper into offshoring as a solution to future-proof your firm against the skills shortage, you can read more in TOA Global’s Quick Guide to Thriving in the Skills Shortage.