The accounting profession isn’t going out of style anytime soon. Now more than ever, with inflation putting a pinch on the entire economy, families and businesses alike need CPAs and accounting professionals to run a tight ship, keep clean books, and save on taxes.

The crisis in the accounting industry isn’t one of demand — it’s of supply. People are clamoring for the services of great accountants … yet none are to be found. They’re not imagining things.

“Finding qualified talent” tops the list of management challenges in multiple yearly surveys from organizations like the AICPA and the Illinois CPA Society (ICPAS). And, according to the Wall Street Journal, over 300,000 accountants left the profession between the years of 2019 and 2021 — a 17% decline in the talent pool. When you consider that there are between 500,000 and 600,000 accountants in the US (according to 2022 estimates), this translates to a loss of half of the population.

What’s going on, and should your accounting firm be worried? The answer is yes, and this paper will explain why, what’s causing the crisis, and what to do about it.

That’s changing, and it’s only going to get worse. Nearly 75% of the CPA workforce became retirement age in 2020, according to estimates from the American Institute of Certified Public Accountants (AICPA).

But it takes more than reaching retirement to empty the pipeline of qualified CPA candidates, as we’ll soon see…

Why are accountants leaving in the prime of their careers? Accounting Today attributes part of this attrition to the “Great Resignation” — the mass exodus of career professionals in the wake of the COVID-19 pandemic as the culture began to re-evaluate the role of work and career in their sense of personal fulfillment.

Some estimate that the Great Resignation is in the past, but there’s evidence that the exodus from the profession hasn’t even ended. An October 2023 report by the Institute of Management Accountants and Robert Half found that some 24% of accounting and finance professionals plan to leave their jobs within 12 months … 17% within the next six months.

According to AICPA/CIMA, the number of candidates taking the CPA qualification exam dropped 7%, marking the lowest exam participation since 2006. And 30% fewer passed the final section of the CPA exam in 2021 compared to 2016.

College enrollment in accounting programs bodies similarly dire portent, with bachelor program enrollment 2.8% and masters program enrollment down 8.4%. Private universities have experienced even more precipitous drops, such as a 34% decrease in accounting major enrollment at James Madison University over the four-year period of 2015-2019.

To make matters worse, college enrollment as a whole is expected to decline starting in 2025 due to the opposite of a “baby boom” — declining birth rates. Declining parenthood rates of two decades’ past will begin to bear fruit in the form of labor shortages.

“To respond to the market reality of staffing shortage, accountants are turning away new work,” said Hitendra Patil, President of Global F&A Services for Datamatics Business Solutions, Inc. “Even after making this hard choice, they are hitting burnout.“

Imagine building your firm’s reputation to the point where new business is coming to you … and you have to say “Sorry, we can’t take your money. We’re too understaffed.” Without a pipeline, more and more worthy firms will learn exactly what that feels like.

When accounting teams are spread thin, accountants and CPAs are forced to work longer hours under more stressful conditions. This heightened workload and fatigue makes them more prone to make mistakes on tax filings, financial statements, audits, and other critical accounting functions.

“If the people preparing the financials are overworked, or there’s not enough of them, you will have errors,” said Joshua Khavis, assistant professor of accounting and law at the University at Buffalo School of Management.

Overlooking key details can also expose companies to potential audits, fines, and legal liability. Let’s take what happened at Lyft, Inc.: An ‘extra zero’ was added to the company’s earnings press release, showing Lyft would see a margin expansion of 500 basis points. Shares in the company increased nearly 70% within minutes, then dropped significantly when the CFO confirmed the actual increase was 50 basis points. Investors filed a class-action securities lawsuit alleging Lyft defrauded investors. And that’s just one example of how a clerical error – the reason Lyft provided for the mistake – can have dire consequences.

With the cost of living skyrocketing and other professions — even the gig economy — offering more options, accounting firms are going to have to loosen their wallets to attract top people. Supply and demand.

Smart firms are changing the question. Instead of How can we get more without paying more? They are adopting the question: How can we cut enough extraneous costs that we can afford the people we need?

Well, the junior associates are not having it anymore. They would rather make the same money delivering for Uber Eats, where they can at least listen to podcasts.

Moreover, it’s a self-defeating approach. Many menial tasks that have historically been assigned to junior associates can be automated or outsourced. This has the added benefit of making it more rewarding and stimulating the work of a junior associate who went to the trouble of getting those 150 credit hours and passing the CPA exam. (See below.)

The truth is, the idea of “work-life balance” isn’t going anywhere. As fewer and fewer younger generations prioritize family life, it becomes harder and harder for them to justify a backbreaking workday. Even those with families are starting to prioritize a smaller house and more time with those families.

Successful SMB accounting firms will lean into this trend rather than fighting it, coming up with creative ways to help top recruits maintain work-life balance, rather than fighting it on principle.

• Business process automation
• Business process outsourcing
• Reduction of resource consumption

Another cost-saving tip: go paperless. You can reduce expenses related to paper, physical infrastructure, and manual processes through digital, cloud-based technologies like document management systems and client portals.

Tasks that accounting firms can outsource include:

• Basic tax preparation and filing
• Payroll services
• Bookkeeping
• Audit support services
• Accounts receivable and payable management
• IT support and maintenance

Tasks that accounting firms can digitize and/or automate include:

• Document management and storage
• Client onboarding
• Expense tracking and reporting
• Invoice processing
• Time tracking and billing
• Compliance monitoring
• Data analysis and reporting

For a growing number of employees, requiring in-person 5-days-a-week work is a dealbreaker. It’s a lynchpin of “work-life balance” — no commute, the ability to cook healthy meals or exercise at home, wear what they want to wear, and spend time with their family in comfortable surroundings.

Many companies let relatively trivial concerns derail them from offering remote-work arrangements — for example, the insistence on paper document management rather than cloud-based or online document management. Yes, accounting firms handle sensitive documents and materials, but a secure document management system like SmartVault can relocate sensitive document management to the Cloud. You can cut costs, enable remote work, and save some trees in the process.

By refusing to offer remote work, employers cut their ability to attract up-and-coming talent at the knees. By making the effort to offer the option, they open the door to a vast and growing talent pool — one that might even accept remote work as a concession to replace a higher salary!