Over the past year, we have consistently received requests to manage a company’s entire accounting function in addition to our suite of CFO services. In other words, business owners need assistance with the nuts and bolts (paying bills, recording journal entries, etc.) as well as the strategy. The reason that entrepreneurs and companies are looking to outsource their entire accounting function is beyond saving money and increasing efficiency in their finance function. It is because hiring experienced, talented, and most importantly, interested accountants is difficult. The accounting industry has been hit with a mini perfect-storm that has made college and graduate students less interested in the field and more focused on other professions within, and outside, finance.
Based on our knowledge of our market, we believe this trend is driven by the following primary factors:
- Decreased Number of Candidates: Over the past ten years, the required number of credits required for an accounting degree have increased at most institutions (from 128 credits to 150). The additional time and money invested to get a degree in accounting is less appealing to most young adults interested in finance when other disciplines, such as investment banking and corporate finance, only require four years of education and have a higher salary trajectory, leading to vacancies in entry level accountant positions. It’s becoming more and more challenging for companies to fill these roles.
- Emergence of AI: As you’ve likely read about in my blogs and mass media, the emergence of artificial intelligence (AI) in automating more of our mundane tasks is well-documented. It has had a significant impact on the accounting profession and how entry level jobs are now performed. Accounting tasks such as accounts payable, which required four or five people in an average sized company, now averages 1.5 people to perform the same tasks. While this automation saves money in the short term, it is negatively affecting entry-level positions that were used by companies to train its accounting staff, which historically has been filled by younger less-experienced accountants, differently. The soft landing space for the inexperienced accountant has disappeared, resulting in a wave of new professionals with three and seven years of professional experience that lack the bookkeeping and accounting fundamentals that college graduates 30 years earlier were able to master.
- Impact of Attrition: Simply put, the number of accountants in the US is declining. According to a recent article in the Wall Street Journal, there are about 1.65 million accountants in the United States. This is down 15.9% from 2019. This shortage is expected to worsen over the next five years as the current pool of accountants begin to retire and leave the industry. In short, we have too many Chief Financial Officers with too few candidates to hire and groom to be future finance executives.
All these drivers are making it more compelling for companies in the SMB arena to hire firms like AcceleratingCFO to recruit and retain the talent, take care of core operating needs, and provide top level finance strategy. With this model, companies can focus on their business goals, knowing that the finance support is in good hands.
Take-away: If you are like many other small business owners who are struggling finding talented finance employees and retaining them, reach out to us at firstname.lastname@example.org to discuss how hiring a Fractional CFO firm might be the best decision for your business.