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Accountancy heading for a major skills crunch
iStock_Allkindza_Car cliff edge

Look out, there’s a skills crunch ahead!

by

Demographic trends and changing work patterns have set the profession on the road towards an inexorable collision between supply and demand. What can accountants caught up in the skills crisis do to come out unscathed?

8th Dec 2022
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There’s nothing more frustrating than watching a situation unfold where you can see the underlying causes, but you can’t do anything to prevent it.

That’s the feeling I get from watching accounting’s increasingly acute skills shortage. As we near the end of 2022, it feels like we’ve careered down the mountain road, the brakes aren’t working properly and we’ve crashed through the wooden roadblock marked “Danger steep drop ahead”.

The warning light started flashing as far back as 2018–19, when we could see staff retention and recruitment climbing up the list of concerns for entrants to our annual Accounting Excellence Awards. Progressive practitioners were clearly beginning to see that the lack of available talent was cramping their ambitions for growth.

Thanks to Covid, this storyline went a little out of focus during 2020–21, but when things settled down this year, we found that as with technology adoption and flexible working, the pandemic greatly accelerated the underlying trend. Making Tax Digital (MTD) and its more sophisticated cousin Digital Transformation might have been the focus of public conversations within the profession, but recruitment, retention and the lack of skilled people to tackle all these new challenges has become a persistent and ominous throb in the profession’s background soundtrack.

While regulatory shocks like MTD and the ever-changing nature of accounting services have intensified the squeeze in 2022, the current talent crisis goes back more than a decade to the profession’s response to the global financial crisis, when firms large and small reined in their training budgets. And the signs are that the downward cycle is starting to repeat itself this year. While the skills gap we’re seeing is entirely predictable, the extent of its impact is adding to my sense of delayed and slightly helpless shock.

Escape routes

The sound of people raising alarms echoed around the AccountingWEB Live Expo hall last week, along with indications of how accountants were adapting to the post-pandemic skills crunch. In his talk about how private equity investors were putting money into accountancy firms, Sam Edwards from PwC’s Strategy& consultancy commented that talent and skills featured in every conversation he and his colleagues were having.

“Accountants operate in a very constrained talent market,” said Edwards. “Everyone talks about how difficult it is to keep the talent you have. If you could just turn the talent taps on, there’s so much work out there you could be doing.”

For years and years, the software industry has been telling accountants that automating mundane tasks will increase their capacity and free their people up to do more valuable work. As Edwards put it, “Using technology will create more capacity in your team for you to take on more core work or cross-sell some of those interesting advisory services.”

The flow of traffic to stands of expense and data capture, accounts payable, payment apps, practice management and CRM suppliers showed that a lot more accountants are responding to those calls.

Other avenues are opening up, including a bigger role for bookkeepers and a surge in outsourcing. The roll call of providers at Coventry included Affinity Outsourcing, befree Global, Diamond Outsourcing and GI Outsourcing, not to mention IRIS, which runs a managed services division. Circulating among the crowd were well-known outsourcing faces Alex Falcon Huerta (Smart Offshore) and Vipul Sheth (AdvanceTrack).

“Outsourcing is not the dirty word it was,” said Jim Scott, managing director for accountancy at IRIS, during the future-gazing power hour with leading tech players at the event. “It’s a realistic option to make your business more efficient.”

Limits to the tech solution

During an Expo roundtable discussion, Can technology solve the skills shortage? Bobby Lane from Factotum warned of the danger that technology wasn’t so much the solution as a cause of the problem because of the way it was changing the kinds of skills and people needed. 

“We used to recruit people who could process accounts,” said Lane. “Now with technology, people assume that if the data goes in there, it passes across to the right destination in the accounts. How do you find people who can translate these numbers and advise businesses?” 

FreshPay founder Nicola Hageman agreed: “Automated tools like Dext Precision can help, but you still need the skill to be able to review figures and tell if they are correct. That’s the skill we’re losing.

“At FreshPay, we hear so many horror stories about people running payroll who aren’t up to date with the regulations. And sometimes software houses don’t help with sales pitches about how easy it all is, without mentioning what a disaster it could be if you get it wrong.”

Uh-oh! Things are getting scary…

At times like this I’m aware of the risk of sounding like one of those irritating locals by the side of the road muttering, “You need to watch out for that steep ravine…” Hundreds of articles have been published on AccountingWEB and other outlets about recruitment, motivation and retention.

But when the car is hurtling off the cliff, there’s not a lot of helpful information you can give to the people trapped inside. With January looming, accounting practitioners in particular are heading for a very bumpy ride.

Maybe you’ve seen the resource shortages coming and successfully implemented remedies, whether through automation, outsourcing or internal training and development. But if those routes haven’t steered you out of trouble, the only thing I can think to say is: don’t panic. Maybe slow down a little and put as much effort and time as you can into looking after your team. It also helps to know where you want to go so you can plan your route to bypass those resource barriers. You know where to find us if you want any more help or advice.

If the capacity crunch is adding to your busy season gloom, AccountingWEB will continue to publish practical advice and tips from other accountants about how they are dealing with these issues. Feel free to share your suggestions below.

Replies (17)

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By Justin Bryant
09th Dec 2022 09:30

I've heard stories of people buying other firms for their staff rather than their client list (which they are happy to jettison).

Thanks (1)
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By Tax Rascal
09th Dec 2022 10:34

Is there a study that quantifies this supposed skills shortage? Does anyone have any personal experience in struggling to hire talent?

If there is a short of talent, my first question to ask is why? Is the profession keeping up with the times and offering people an attractive work package?

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Replying to Tax Rascal:
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By Brodders
09th Dec 2022 10:38

Exactly what i was thinking...

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Replying to Tax Rascal:
Cherry
By cherrytelevision
09th Dec 2022 16:41

Your first question is to ask why - as John says in the article, firms stripped back their training budgets in the midst of the financial crisis.

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Replying to cherrytelevision:
7om
By Tom 7000
09th Dec 2022 17:03

Nothing to do with canning trainees and outsourcing to India then?
He said cynically

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Replying to Tom 7000:
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By Mr_awol
06th Jan 2023 10:22

Tom 7000 wrote:

Nothing to do with canning trainees and outsourcing to India then?
He said cynically

Or the general reduction in standards, making outsourcing to India more attractive (or at least less noticeable).

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7om
By Tom 7000
09th Dec 2022 10:56

hahahahaha

You think you are short of staff now, wait until the MTD tidal wave hits on 05/04/2024....

Winter is coming

Spot on article 10/10

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Replying to Tom 7000:
By ireallyshouldknowthisbut
09th Dec 2022 14:19

but but but but but its only an extra 6 minutes a quarter.

According to the hopelessly optimistic impact assessment (which was based on no error corrections)

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Replying to ireallyshouldknowthisbut:
7om
By Tom 7000
09th Dec 2022 16:04

correct but hours not minutes you almost past the exam ... but wrong units...

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By jon_griffey
09th Dec 2022 12:15

I see the root of the problem being that over recent years junior work has largely disappeared. When I started as a junior in '86 it was all about writing up books, ticking bank statements, adding columns, ETB's, agreeing T-accounts, calling and checking - even writing up bound ledgers. This is proper experience by repetition that lead to a solid understanding of the nuts and bolts of accounting and is largely gone now. As the numbers of junior staff have dwindled there are many fewer coming through as experienced seniors and so we have a skills shortage.

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Replying to jon_griffey:
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By Tax Rascal
09th Dec 2022 13:17

Companies want skilled staff, so they don't hire juniors. Juniors can't get jobs, so they can never become skilled. It's a catch-22.

I think firms should offer more in the way of apprenticeships. Instead, they ask that people have a degree and 2 years experience, ever asking more and more for a role that doesn't warrant the demands made. Perhaps more firms need the guts to take a chance on the person without experience, else we slip further into the "skill shortage".

Thanks (3)
Replying to jon_griffey:
Danny Kent
By Viciuno
12th Dec 2022 09:47

I 100% agree with you here. Juniors are now missing the most basic accounting know how as much of the "unskilled" stuff is automated. This leaves them with gapping holes in their knowledge. I was fortunate enough to have trained in an old school practice where nearly everything was done by hand.

The problem is that it is skilled, just people don't like doing it and have convinced themselves that computers can do the task properly. In reality they can't in most cases, and it takes away a valuable learning experience for trainee staff.

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Replying to Viciuno:
paddle steamer
By DJKL
12th Dec 2022 11:44

I suspect you are both right.

The issue is similar to what has happened with arithmetic, back in the day we all added, subtracted, multiplied and divided without calculators, scribbling on paper possibly, we learned by repetition, hundreds of Holmes McDougall sums, this familiarity with numbers had a bonus as it allowed us to later spot obvious errors in accounts, the "that cannot possibly be x", commonsense thoughts about numbers and of course there was often adding ETBs, cashbooks etc, sometimes mentally rather than with a calculator. (Add the pennies, carry forward, add the tens, carry forward etc)

I have noticed for instance that my wife and I can still add/ subtract/ mutiply/ divide in our heads (maybe not as fast as we used to), our two children (who both did fine at Maths at school and both hold first degrees and one also has an Msc) are poor at this ( It is strange that my son knows far more maths than I do (he is a software engineer) yet is compared with his parents woeful with arithmetic, which of course back in the day was a distinct O Grade)

Perhaps similarly not spending enough time with debits and credits is detrimental, the accounting building blocks not being fully understood perhaps leading to shakiness further on up the ranks.

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By lukeoliver
09th Dec 2022 14:02

Most clients, in most sectors are having issues recruiting, not just accountants. There is a general labour shortage and skilled labour is even harder to come by.

There are lots of potential factors.

Training people is costly in many ways. Some cannot afford to train staff or just choose not too. NLW / NMW have drawbacks as well as benefits. How do you afford to utilise a good member of staff to spend time training a Newbie when you are too busy?

Staff move jobs much more freely than historically, so when you do train someone up, they may leave, once they have fully trained and become increasingly valuable. Even if you have contracts to pay back exam fees etc, that does not pay for the time invested by other staff in giving practical experience.

The variety of work choices is huge. A lot of youngsters think they will become a You Tuber or an influencer. Pen pushing accountancy cannot compete!

A lot have people have a different outlook on life post Covid. Some have taken early retirement or semi-retirement

Brexit

There are so many reasons why a skills shortage, which to be fair had been looming for a long time, has been accelerated in the last few years and not just in accountancy.

However, as a result most other accountants that I speak to are too busy, if there is such a problem.

I never fully believed the doom merchants who have been saying compliance work is dead and that software / MTD will make us all redundant.

It will certainly be an interesting few years ahead whatever your view....

Incidentally I do like to train young people, we currently have 6 staff studying AAT because I remember that someone gave me a chance so I feel that I should do the same. (personal choice)

Whilst I have lost a few in the process, I now have 3 Managers who trained with us and have stayed and out of the 6 currently training I am cautiously optimistic about all of them.

My son has recently left school and he laughed when I asked if he wanted to come and work for me. He has chosen to do a course in the Construction Industry. Knowing the perils of training, I have asked a few friends and clients if he can do some Work Experience BUT without being paid. It is proving difficult to find someone because of H&S etc and they are worried if they do not pay him the NMW etc.

Our systems do not always help us.

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Replying to lukeoliver:
7om
By Tom 7000
09th Dec 2022 14:22

I got a BSC in Civil Engineering and was 6 months from being a chartered engineer. It wasnt for me.... 3 years later ACA....best thing I ever did Pay and working conditions 10x better

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Replying to Tom 7000:
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By wilcoskip
09th Dec 2022 15:58

The engineers that I trained with when I did my ACA exams all seemed to take to the work like ducks to water.

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By CHRISTINA GORHAM
29th Dec 2022 22:20

My experience as a working mum is that there is a shortage of part-time vacancies. When I was newly qualified (2018 ish), I was forced to compete for roles with fully qualified and experienced accountants who wanted to work part-time. I have no choice about part-time work and have found it almost impossible to get the experience needed to get off the bottom rung in this industry. Bookkeeping is advertised as perfect for mums but the shortage of roles we can apply for is frustrating. I hope this is different in the areas you are working in.

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