We received the following from a small firm owner who is suffering under the weight of talent shortages, massive workloads, and hoards of would-be clients shopping around because their accountant (rightly) raised their fees. What’s a small firm to do?
I have a small firm in [redacted].
I have been reading constantly about how the large firms are merging, paying more for top talent, taking people away from other firms, etc. due to the natures of the current accounting marketplace.
The profession is clearly in a transition. Big firms turn away clients. Those clients turn to the next rung. That rung cuts clients loose. All the way down.
After a while, it trickles (more like a raging waterfall) down to small firms and sole practitioners. This is the problem. Those who have been sole practitioners are dying or retiring in droves. New accountants coming into the job market are being wooed by larger firms to the point we can’t hire them. In addition, where historically many accountants who, after 10 years or so decide to become a sole practitioner by either buying out a retiring person or just hanging out a shingle, this type of accountant doesn’t exist anymore.
I am overworked to the hilt as new prospects call on me all the time because their accountant died, retired, or tripled their fees. I can’t hire anyone because I can’t compete against the top 100 firms for talent.
Do you have any thoughts about addressing this?
Happy to address it but not sure what can be done about it? Ah well, let’s break it down anyway.
75 percent of AICPA members were eligible to retire by 2020 (per an AICPA estimate) and as we know the pandemic only accelerated many CPAs’ exits from the profession, be it due to illness or just coming to the realization that chasing clients down over receipts is not worth dying over. The flood of retirements was well underway prior to 2020, Covid just helped it along. The AICPA has 421,000 members, 75 percent of that is…315,750 which leaves 105,250 people to do the work of 421,000. Not to say that all those people are actively leaving, just know that they can in coming years. Boomers make up 47% of AICPA membership (58-76 year olds) and new accounting graduate numbers are trending down after a peak in 2015-16 meaning there will probably come a point where the Boomer vacuum becomes obvious. Maybe we’re already there.
The 2022 AICPA Private Companies Practice Section (PCPS) CPA Firm Top Issues Survey tells us that finding and retaining staff are not the top concerns for sole practitioners and very small firms (5 professionals on staff max), once you get to firms with 6-10 professionals ‘finding qualified staff’ becomes the #2 concern and for firms with 11-20 professionals and 21+ it is the top issue. At the bottom of the ladder, the smaller firms are most bothered by challenges working with the IRS, keeping up with changes and complexity of tax laws, and keeping up with Covid relief programs.
If we look ahead five years, even the small firms are stressing over staff. ‘Staffing (recruitment and/or retention)’ rises to the #1 issue impacting small firms of 2-5 professionals:
We tend to focus on the pros of the current market — an accountant shortage means wage pressure and leverage for the workers both of which benefit your average Going Concern reader — because we focus on Big 4 firms making $40 billion a year that can afford to pay their staff higher salaries (or can they?). But what happens when there’s no one to do the work at the bottom rung? Where do clients go? The PCAOB is already concerned that turnover at audit firms of all sizes could be a disaster for audit quality. Are these clients going to end up at shady strip mall tax places with dollar signs in the name? WON’T SOMEONE THINK OF THE CLIENTS.
Would anyone care to propose some solutions? Automation seems to be the obvious one but can we even automate our way out of this?