How Technology Can Help to Handle Shortage of Accountants

Introduction

In the world of modern finance and accounting, a notable challenge we face is the shortage of skilled accountants. This concern resonates with leaders across the accounting and finance sector, revealing a distinct scarcity of accountants to fulfill the demands of financial responsibilities and regulatory compliance.

The root causes of this labor shortage are multifaceted, including a decline in the number of accountancy professionals entering the workforce and the inevitable attrition and retirement of seasoned experts. Recognizing and addressing these challenges is essential for the industry’s sustained growth and stability. The question remains: Is there a viable solution?

This article focuses on the impact of skilled accountant shortages on the global economy and explores the potential avenue of investment in technology and automation as a means to overcome these challenges.

Key Reasons Shortage of Accountants

Aging CPAs reaching retirement, fewer new entrants, lower enrollment for accounting degrees, and decreased CPA exam candidates have contributed to the shortage of accountants. Additionally, CPAs switching careers to finance and technology related fields has further exacerbated the talent shortage. 

1. Increasing demand for accountancy professionals 

   Due to evolving tax, regulatory demands, accounting standards and rising complexity in financial transactions firms of all sizes across industries have an increasing need of accountancy professionals which has propelled the number of vacancies for different accountancy roles. 

   Additionally, the new ways of working such as remote hybrid style of working have increased compliance and internal control related issues all of which fall under the purview of CPAs. This has further led to increasing dependency on accounting professionals.

2. Decrease in number of accountancy professionals entering the workforce

   There has been a dearth in the number of new accountants entering the industry as accountancy courses across bachelors and masters are seeing lower enrollment rate across colleges. Added to this there has been a decrease in the number of candidates enrolling for the CPA examination with fewer candidates passing the final CPA examination. 

   This has led to a shortage of new talent supply that has further contributed to the widening demand and supply gap. 

3. Attrition and retirement of accountancy professionals 

   Accountancy professionals have been switching careers aligned more towards other financial and technology enabled roles for better opportunities as well as due to better remuneration. Further a substantial number of accountancy professionals across countries like USA, UK, Germany, and Australia have retired or reached retirement eligibility. 

   The summation of both has resulted in a growing number of vacancies for accountancy-related roles. 

4. Lack of attraction for accountancy as a viable career option 

   Various factors such as salary considerations, views regarding long working hours during busy seasons and most accountancy roles being seen as performing mundane tasks such as data entry and considerable paperwork have made it difficult to attract new talents to this field. 

   These factors in combination with substantial efforts and cost required to pass exams to get CPA licenses impacts enrollment in accountancy related courses. For example, in the USA the 150-hour college credit rule that is mandatory for becoming a certified chartered accountant is further discouraging students to see accounting as a viable career option. 

Countries facing shortage of accountants 

The growing indications of an increasing demand for CPAs have led to concerns about accounting talent shortage. Factors contributing to this demand include changes in accounting regulations, complexity in financial reporting, and need for specialized expertise. Some countries with shortage of accountants are the USA, UK and Ireland. 

USA 

• According to a Wall Street Journal report more than 300,000 accountants quit from 2019-2021.
• According to the Bureau of Labor Statistics, the US had 1.65 million accountants and auditors in 2022, down 15.9% from 2019. 
• As estimated by the American Institute of Certified Public Accountants (AICPA) almost 75% of CPAs have met retirement eligibility by 2020. 
• According to the AICPA and CIMA annual report there was a 7% decrease in the number of CPA candidates who took the examination in 2022 as compared to 2021 with 2022 seeing the lowest number of exam takers since 2006. 
• According to AICPA 2023 Trends report bachelor’s degree completions in accounting dropped 7.8% from 2021–2022 while master’s degree completion also fell by 6.4% in 2021–2022. 

UK and Ireland 

• According to the Financial Reporting Council Key Facts and Trends in the Accountancy Profession report the number of accountancy students fell by 3.5% in 2022 to just over 155,000. 
• According to studies there has also been a decrease of almost 30%+ from 2021 to 2022 in applications for accountancy related roles in the UK. 
• According to the Institute of Chartered Accountants in England and Wales, Manchester and Nottingham are facing severe accountancy talent crunch.
• To address this challenge the Ireland government has identified accountants, auditors, and tax professionals among the critical skill shortage list. 

6 Ways Shortage of Accountants Impact Businesses 

The shortage of accountants significantly impacts businesses by hindering their ability to maintain accurate financial records, make informed strategic decisions, and ensure compliance with complex regulations, thereby posing potential risks to overall financial health and stability. Some of the major areas they impact include

1. Rise in audit risk

   With experienced accountants exiting the field and a shortage of newcomers entering, an emerging audit risk looms over companies. The departure of seasoned professionals leaves a void in expertise, potentially hindering the thoroughness of audits. 

   This shortage could compromise the ability of companies to ensure accurate financial reporting and compliance with auditing standards.

2. Increasing compliance challenges

   The scarcity of qualified staff increases the likelihood of errors, ranging from minor discrepancies to major financial misstatements. Such errors not only jeopardize the accuracy of financial reports but also expose companies to potential SEC fines. The resulting impact on a company’s stock price adds an additional layer of concern for stakeholders. 

   This scenario amplifies the challenges in maintaining compliance with SEC regulations and financial reporting standards while grappling with talent shortage. 

3. Impact on financial statement accuracy

   The widening shortage of accountants is now evident in financial statements. Companies have started to disclose material weaknesses, a situation often attributed to the lack of accountants. 

   Companies must disclose a material weakness in their internal control over financial reporting if there is a reasonable possibility that a material misstatement could occur and couldn’t be prevented or detected by them on a timely basis. Material weaknesses in Internal Control over Financial Reporting (ICFR) become key predictors of restatements, both major and minor. 

   While companies with recurrent ICFR gaps may not face SEC charges solely for the recurrence, they risk higher borrowing rates, falling stock prices, and an exodus of investors if corrective measures are not promptly implemented.

4. Increased workload on existing staff

   Existing accounting staff may have to take on additional responsibilities and work longer hours to compensate for the shortage. This can lead to burnout, decreased morale, and a higher likelihood of errors. Insufficient staffing in the accounting department increases the risk of errors and may create opportunities for fraudulent activities. 

   The lack of oversight can compromise the integrity of financial records and expose the business to financial risks.

5. Impact on stakeholder confidence

   Investors, creditors, and other stakeholders rely on accurate and timely financial information to make informed decisions. A shortage of accountants can erode stakeholder confidence, potentially affecting the business’s relationships with investors and creditors.

6. Challenges in strategic planning

   Sound strategic planning requires accurate financial data and analysis. A shortage of accountants may hinder the ability of businesses to conduct thorough financial analysis, making it challenging to develop and execute effective long-term strategies. 

   Businesses may struggle to optimize their financial resources, allocate budgets effectively, and make informed financial decisions.

What is the AICPA Doing To Address the Accounting Talent Shortage? 

Some of the initiatives that the AICPA has taken to address the CPA shortage are. 

1. Revised CPA examination from 2024

   To revamp the image of the accountancy profession as well as showcase the important role of technology in accounting, the AICPA has launched the CPA Exam aligned with the CPA Evolution Licensure Model (CPA Evolution) for 2024. The CPA Evolution initiative is transforming the CPA licensure model to recognize the rapidly changing skills and competencies that the practice of accounting requires today and will require in the future. 

   Under CPA Evolution, all candidates will be required to pass three core exam sections covering Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), and Taxation and Regulation (REG). Each candidate will also choose one discipline — Business Analysis and Reporting (BAR), Information Systems and Controls (ISC), or Tax Compliance and Planning (TCP) to demonstrate knowledge and skills in that particular domain. 

2. Experience Learn and Earn (ELE) program to enable students to achieve 150 credit hours 

   The AICPA is launching an integrated education and experience program to assist students with completing the 150 credit hours of education required for CPA licensure. The ELE program combines meaningful online academic coursework with work experience. The program allows students to earn up to 30 educational credit hours through asynchronous courses with AICPA partners while they are employed with a CPA firm.

3. Changing the perception of accounting as a career among students 

   AICPA is working on several initiatives aimed at high school and college educators and students to help support the growth of the CPA pipeline. These include programs such as , academic champions program, a network of direct relationships with educators who act as CPA advocates and accounting opportunities experience a week to month-long program designed to raise awareness of accounting career opportunities among high school students by bringing CPAs into the classroom. 

4. Providing support to organizations to attract and retain talent

   AICPA through the Transform Your Business Model program is providing ongoing resources that support and enable changes within firms to create cultures that attract, retain, and develop talent from diverse backgrounds.

Ways To Overcome the Shortage of Accountants?

To address the shortage of accountants, organizations can strategically invest in technology for enhanced efficiency, offer competitive compensation and benefits, re-evaluate recruiting practices for optimal talent acquisition, and implement training and reskilling programs for accounting teams. 

1. Investment in technology and automation

   The ultimate and pivotal solution is to channel investments into technology and automation. How does this approach function specifically for addressing the shortage of accountants?
   Companies can strategically invest in advanced automation solutions to bridge skill gaps and boost productivity. This might involve AI to handle routine tasks, allowing skilled accountants to redirect their focus towards more complex responsibilities. Here’s how technology becomes a crucial asset in mitigating shortages within the accounting workforce

   • Technology to streamline processes and enhance efficiency

     Modernizing accounting processes is integral to streamlining workflows and enhancing overall efficiency. The initial step involves analyzing existing workflows to identify manual and tedious tasks. Automation becomes the solution to these challenges, freeing up accountants to focus on strategic initiatives such as analysis, cost control, and capital optimization. Automating the right processes improves efficiency and accuracy, enabling teams to accomplish more in less time with fewer errors. Beyond expediting manual tasks, automation eliminates human error, contributing to increased accuracy and safeguarding against potential issues down the line.

   • Changing the perception of accounting as an agile tech savvy function

     Embracing emerging technologies like artificial intelligence (AI) and machine learning further enhances the efficiency of accounting teams.AI does not replace accounting teams; instead, it complements their efforts, saving labor hours and improving overall operations. The collaboration between technology and human expertise brings about efficiency gains, making accounting teams more agile and responsive. Automation of repetitive tasks empowers accountants to redirect their focus to more value-adding work. This shift positions them as strategic partners within the business, transforming the accounting role from data crunching to a tech-savvy one.

   • Retaining and attracting new talent 

     Providing employees with access to AI technology becomes essential for attracting and retaining talent in the rapidly evolving financial landscape. The future of finance envisions employees working in tandem with AI to achieve significant productivity gains and unlock new levels of innovation. Modern financial systems have become a prerequisite for attracting new accounting talent, emphasizing the importance of embracing technology for long-term success.

     

2. 0ffering competitive compensation and benefits

   To effectively address the shortage of accountants, organizations should strategically focus on three key aspects: competitive salary structures, comprehensive benefits packages, and flexible work opportunities. Offering a competitive salary is paramount to attracting and retaining qualified accountants. Many firms are recognizing the need to align base salaries with the actual hours required for the job, providing a fair compensation framework.

   Complementing competitive salaries, firms should enhance benefits to make the overall package more appealing. This includes not only financial perks but also benefits such as comprehensive health coverage and unlimited paid time off. A robust benefits package not only meets the immediate needs of employees but also signals a commitment to their overall well-being.

   Simultaneously, embracing flexible work options is crucial in the evolving landscape. Remote work provides flexibility and opens up opportunities for firms to tap into talent beyond their immediate geographical area. As the workforce increasingly values the ability to balance work and personal life, offering remote work options becomes a significant differentiator.

   By strategically combining competitive salaries, comprehensive benefits, and flexible work opportunities, organizations can position themselves as attractive employers, effectively mitigating the shortage of accountants. This holistic approach not only addresses immediate concerns but also aligns with the changing expectations and preferences of the workforce.

3. Re-evaluation of recruiting practices

   To alleviate the shortage of accountants, a comprehensive reassessment of recruiting practices is essential. Organizations should start by leveraging partnerships with colleges and universities, creating avenues to attract young talent and provide hands-on training. Firms should tap into the pool of potential accountants by recruiting students enrolled in accounting programs for part-time jobs and internships. To further enhance the attractiveness of these opportunities firms can offer education assistance, creating a win-win situation that aids both recruitment and retention efforts. 

   Building strong connections with educational institutions and providing intensive internship opportunities can offer aspiring accountants valuable insights into the corporate setting, highlighting the stability and security the profession offers. Collaborating with academic institutions to develop a modern curriculum that equips students with the skills needed to meet the evolving demands of the accounting profession can help in effectively addressing the skills gap.

   While addressing immediate vacancies through international hiring may be a short-term solution, the focus should remain on developing a sustainable talent pipeline. Firms should invest in training and upskilling current employees, and emphasize diversity and inclusion within the profession for long-term success. By implementing these strategies, businesses can not only fill immediate gaps but also ensure a skilled and diverse workforce for the future of the accounting profession.

4. Continuous training & reskilling of accounting teams 

   To counter the accountant shortage, organizations must prioritize continuous training and reskilling initiatives for their accounting teams. Professional development is paramount in navigating the dynamic landscapes of both regulations and technology. Investing in ongoing training not only ensures compliance but also equips accountants with the tools to thrive in an evolving industry. 

   In particular, the integration of crucial tech skills becomes pivotal. Analytics, data visualization, cognitive computing, and machine learning are emerging as indispensable components in the accounting profession. These skills enhance efficiency, accuracy, and the ability to derive meaningful insights from complex datasets. As the accounting landscape becomes more technologically advanced, proficiency in these areas will be essential for accountants to remain competitive and contribute meaningfully to organizational success.

   Training and reskilling accountants go beyond compliance; they are prerequisites for addressing the accountant shortage. By embracing a continuous learning mindset and incorporating crucial tech skills, organizations not only bridge the talent gap but also empower their accounting teams to lead in an era of rapid change and innovation.

How Skilled Accountant Shortages Can Affect the Global Economy

The shortage of skilled accountants poses a significant challenge with far-reaching implications for the global economy. Industry leaders need to take decisive action to address this issue. The role of accountants in ensuring financial integrity, regulatory compliance, and strategic financial decision-making makes it imperative to tackle the shortage. 

Implementing the recommended strategies outlined above becomes crucial to overcome the scarcity of accounting professionals, guaranteeing a skilled workforce that is essential for the sound economic functioning of various industries.

How HighRadius Can Help Automate Manual Tasks in Accounting 

HighRadius leverages the latest technology to enable organizations to fundamentally transform their accounting processes with a comprehensive Record to Report (R2R) solutions, offering end-to-end capabilities to streamline and automate various accounting processes and workflows. Powered by cutting-edge accounting technologies, the R2R solution empowers organizations to achieve a remarkable 30% reduction in days to close by seamlessly integrating Financial Close Management, Account Reconciliation, and Anomaly Management.

At the heart of HighRadius’s R2R solution is an AI-powered platform designed to cater to all accounting roles. One of the standout features of the solution is its ability to automate almost 50% of manual repetitive tasks. This is achieved through LiveCube, a ‘No Code’ platform, that replaces Excel and automates data fetching, modeling, analysis, and journal entry proposals. It empowers the accounting teams as any stakeholder who is familiar with tools like Excel or Google Sheets, can rapidly build applications without relying on IT, significantly enhancing the automation of accounting calculations.

HighRadius Solution empowers organizations to experience enhanced efficiency by leveraging the best of the latest accounting technology and swiftly transitioning to modern accounting. The R2R solution not only provides organizations with a powerful, AI-driven platform that enhances efficiency and accuracy but also fundamentally changes the way organizations approach and execute their accounting processes.

FAQs

1. Will technology replace accountants?

While technology, such as AI and automation, is transforming accounting processes, it’s unlikely to fully replace accountants. Instead, accountants will increasingly use these tools to enhance their capabilities, focusing on higher value tasks such as complex analysis, strategy, and decision-making. 

2. How is technology changing the role of professional accountants?

Technology is transforming the role of accountants by automating routine tasks, enhancing data analysis through AI, & improving collaboration. Cloud computing enables real-time access, fostering agility. Accountants now focus on strategic tasks & advisory roles, leveraging technology for efficiency & innovation.

3. Is there a shortage of accountants?

Yes, there is a growing shortage of accountants globally. Increased demand for financial expertise, retirements, evolving regulatory and compliance complexities, decreased enrollments in accounting related courses and accountants switching to other career fields have contributed to this shortage.

4. Will automation replace accountants?

Automation is transforming accounting by automating manual routine tasks. However, accountants’ analytical and interpretive skills remain extremely crucial. Automation complements, not replaces, accountants, enabling them to focus on strategic aspects such as risk management, analysis and advisory roles.