Innovative ways to create capacity 

By Natalya Yashina, CPA, DASM 

Turnover in public accounting is not a new phenomenon. Before the pandemic, accounting firms, on average, experienced a turnover rate of up to 25% a year.1 The biggest issue for large accounting firms per the Accounting Today 2021 “Year Ahead” Survey is recruiting and retaining good talent. Small and mid-sized firms also noted that talent recruitment and retention was one of their big issues.2 These findings are echoed in the VSCPA 2022 Future of Work Survey (see page 10). The Great Resignation began in late 2020 when a higher-than-usual number of people began leaving their jobs; by 2021, the number of people leaving their jobs started to reach record numbers. 

To try and mitigate this trend, many firms are increasing their employees’ salaries and benefits while offering a more flexible work environment. Salary increases are not driven only by retention initiatives but also by rising inflation and the cost of living. In the Washington, D.C., metro area, for example, the average low-end salary for a senior associate in public accounting working for a mid-size firm was $91,000 in 2021.3 Back in 2019, the average low-end salary for the same senior associate was $84,000.4 Using the same data source, the average salary increases from 2019 to 2021 for public accounting professionals across all firm sizes and employee functions was 9%. At the same time, professionals in corporate accounting across all levels, functions and companies experienced at least a 20% salary increase from 2019–2021. These numbers don’t account for bonuses and other incentives. 

Accounting firms typically hire more accounting talent than other companies, where a relatively small team of accountants can accomplish the necessary accounting tasks and required reporting. Continuous salary and benefit increases as the means of competing with the industry for talent may not be a sustainable option for all accounting firms in the long run. How can accounting firms provide their clients with the best customer service amid the Great Resignation? Perhaps, in addition to benefits and perks, focusing on other strategies like offshoring and outsourcing, streamlining internal business operations, increasing teams’ productivity, and better defining flexibility for employees may help alleviate the talent strain. 

Outsourcing and offshoring talent 

There are two types of outsourcing talent: offshoring and hiring independent local contractors, or outsourcing. Both can help alleviate strain caused by the Great Resignation. Offshoring or hiring a professional overseas to perform certain tasks or an entire job function is becoming more prevalent among accounting firms. It helps with cost reduction and can solve some of the workforce issues. 

Typically, accounting firms offshore less complex and more routine work that doesn’t require professional judgment. This allows the firms’ professionals to focus on higher level and more complex work and the firm doesn’t need to hire another employee locally to perform lower-level tasks. While offshoring can be a very cost-effective method, it most likely requires a third-party service provider to help locate, match and vet professionals. You’d also need to determine what qualifications and training requirements they must have to ensure that work function or assigned tasks are performed by individuals with the right level of expertise and knowledge. Also, if you want talent that is overseas instead of U.S.-based, there may be additional tax and other legal and regulatory implications of hiring such professionals.5 

When we think about the freelancing industry, accounting (especially public accounting) rarely comes to mind. In the past few years, more accounting professionals are becoming interested in offering their services as self-employed independent contractors in the United States. These are experienced professionals, and they can provide complex advisory, audit and tax services as they may have even worked for accounting firms earlier in their careers. As a result, some larger firms are partnering with freelance management solutions companies to be matched with these professionals. 

Freelance management solutions companies offer a platform for U.S.-based self-employed professionals and companies to work together while staying compliant with laws and regulations.6 Self-employed professionals often look for short-term, project-based work, but some may be interested in long-term projects as well. For example, an accountant may be interested in working one busy season a year and then move on to another project with another company. Nonetheless, this is a win-win situation for both the firm and the self-employed professional. 

Partnering with a third-party freelance management company comes with certain costs that may be out of reach for small firms. Finding independent contractors through networking, 

internet searches, and reaching out directly may be a better and more cost-effective option for smaller firms. 

In addition to costs associated with hiring a freelance management company, hourly rates for independent contractors are higher than for employees who receive standard company benefits. Independent contractors must pay self-employment tax and income tax6, thus firms need to be prepared to pay more per hour or per project to hire them. As independent contractors don’t receive any benefits and, usually, are hired only for a specified length of time, the benefits typically outweigh costs. 

Streamlining business operations 

Have you recently reviewed your client base and found it to be in alignment with your firm’s mission and vision? If your client base is reflective of your firm’s mission and vision, then you are well positioned to reach your firm’s goals, including financial goals. However, if you find that your firm is struggling to recover from the pandemic effects or if your client base isn’t reflective of what you imagine it to be, revisiting your firm’s mission and vision may help your firm with your going-to-market efforts when identifying future clients. 

Streamlining business operations, including reviewing your contracts’ profitability and determining whether it makes business sense to renew them, is another way to gain efficiencies. The review process may also help reduce strain on your employees and potentially improve retention. If you have a contract that is continuously under-performing over several years and is negatively impacting your firm’s bottom line, maybe it’s time to reassess whether there is truly a strategic value in maintaining the client. 

Better teamwork, increased productivity 

Public accounting firms have a high-performance culture that is focused on developing employees. Teamwork is as important, if not more important, than taskwork. Research demonstrates that focusing on and improving teamwork through training has a positive impact on team performance.7 In the current market, retaining talent comes at a lesser cost than hiring or even outsourcing new talent. Providing appropriate and just-in-time training that helps employees develop necessary project management, leadership and teamwork skills, while prioritizing client-related work, can lead to increased efficiency and productivity. 

As employees gain new skills that help them manage their schedules and improve collaboration, they’ll be able to better manage overtime hours and resolve conflicts more effectively, all of which can lead to improved morale and possibly retention. If your audit teams are looking for quick ways to improve productivity while focusing on quality, check out “3 Quick Ways to Boost Audit Quality” from the summer 2022 issue of Disclosures magazine.

Defining flexibility 

Most of us have worked remotely at some point during the pandemic. While we can certainly accomplish much of our work remotely, it’s more challenging to manage teams and build team cohesiveness without face-to-face interactions. Perks such as flexible work options are one way of attracting potential new hires and keeping the morale up among current employees. That said, when we communicate that we offer flexible schedules, what do we really mean by that? Do we mean remote work options but 24/7 availability to answer emails and field phone calls, including weekends? Many people report they end up working more hours at home remotely versus in the office or at a client site. Thus, the “flexible” work arrangements buzzword is starting to lose its appeal. 

Dialogue is essential for understanding our employees’ needs and what they really see as flexible work arrangements. To have a true dialogue we must leave our opinions, experiences and biases behind us. Prepare talking points about what flexible work arrangements your firm offers and address any reservations that arise from current and perspective employees’ experiences to tackle the stigma associated with remote work. 

Summary 

The Great Resignation has brought a lot of havoc into every business. In today’s tight talent market, it’s more important than ever for accounting firms to explore available options and find a combination that works for them. If offshoring or outsourcing are not viable options at this time, focusing on retention strategies that go beyond increases to salary, benefits and perks may help strike the right chord and give employees more motivation to stick around longer. 

Natalya Yashina, CPA, DASM, is the founder and CEO of Capital Accounting Advisory, LLC, where she and her team provide training, project management, training needs assessment, team performance improvement, and strategy and visioning services to audit firms. Prior to expanding her firm’s offerings, Natalya focused on technical accounting and financial reporting services. She was the 2020–2021 chair of the VSCPA Accounting & Auditing Advisory Committee, which she has served on since 2018.