Can You Solve the Shortage of Accountants with Automation?
The shortage of accountants and the rise of technology presents an interesting opportunity for companies looking to solve their financial operations. Read more about the potential solution here.
Can You Solve the Shortage of Accountants with Automation?
As the accountant shortage grows, private and public organizations will only find it increasingly difficult to attract and retain accounting talent. Eventually, even those able to apply the classic supply-and-demand solution of simply paying more – bigger salaries and better perks – will run out of options. There are just not enough people entering the profession to make up for all the accountants who are retiring or moving to new fields. That said, there is an existing solution.
With the right technology, you can tackle the problem much more easily.
The Current Problem: The Shortage of Accountants
Unfortunately, your two most important numbers are moving in the wrong direction. Organizations need accountants more than ever, but fewer people are entering the field, and a lot of the ones already in are leaving.
Why Are There Not Enough Accountants?
Simply put, there's higher demand but lower supply.
As the world economies become increasingly intertwined and businesses gain access to new markets, they also quickly find themselves needing accountants to navigate the complex tax laws and regulations. The growing focus on ESG goals and the backlash on "greenwashing" means companies are now being asked to "measure things that they’ve never measured before, not least the impact of carbon emissions on the environment."
On the supply side, more than 300,000 US accountants and auditors left in the past two years, a 17% decline, according to The Wall Street Journal. It's not all retiring Baby Boomers, either. Numbers from the Bureau of Labor Statistics show that starting in 2019, many of those leaving were between 25-34 or 45-54 years old. In many cases, the experienced accountants moved into positions in finance or technology.
Further hurting the supply side is that fewer people are entering the field. According to the 2021 Trends Report from the Association of International Certified Professional Accountants (AICPA), there's been a steady drop in the number of students graduating with an accounting degree in the US: from 56,715 between 2015-2017 to 52,481 in 2019-2020.
There are likely many reasons behind the drop, including students not being attracted to jobs with long hours and lower starting salaries. Economic boom times mean there are more and also more attractive opportunities in other industries. In The Wall Street Journal article, the lead for PricewaterhouseCoopers LLP hiring in the US and Mexico describes the difficulty of luring students away from other fields: “I don’t know who we’re not competing with, quite honestly."
What Does This Mean for Businesses?
When you can't find enough accountants, everything starts to cost more, including your accountants. Salaries are growing faster now than they have in recent years, and many companies are even offering large signing bonuses.
According to a review of job postings done by Revelio Labs Inc., annual salaries for entry-level positions for US accountants and auditors rose 13% between 2021 and 2022 to nearly $61,000. That's up from an increase of 4% in 2021 and 2% in 2020. Higher up the ladder, the numbers are also getting bigger. From entry-level up to vice president, average salaries increased 12% to nearly $87,000 in 2022.
So, having fewer accountants means you get higher costs. However, you also get less oversight.
Writing for The Washington Post, Adrain Wooldridge explains, "Public companies are finding it harder to get accountants to audit their books and, when they do find them, must often work them harder. Important checks are skipped, and errors (or dodges) go unnoticed. If companies are late filing, then they risk running afoul of the Securities Exchange Commission; if they include errors, then they risk fines and adverse market reaction. Even small errors can lead to a plunge in stock prices."
Just how bad could things get? The headline for Wooldridge's opinion piece is The Accountant Shortage Threatens Capitalism's Future.
A Potential Solution: The Automation of Accounting Operations
Accounting isn't the first industry to have trouble attracting and keeping talent. In fact, there's a long and storied history of businesses dealing with labor pains. In many cases, the best solution was implementing automation to streamline and standardize workflows, reduce the risk of human error, and increase productivity per worker. The same principles that work on the assembly line can be effectively applied to knowledge-based tasks. You just need to know the right tasks to automate and then set up the right software solution to make it happen.
What Can You Automate in Accounting?
A lot, and for a good reason: so much of accounting comes down to collecting, categorizing, and crunching numbers. Because a lot of this work is repetitious, it lends itself to automation.
So, some of the key accounting processes you can automate include:
Another big one is expense management, and it's easy to see why automating the associated processes makes life easier for not only the accounting department but also anyone at the company who's had to walk around with a wallet packed with paper receipts.
Industry leader Fyle automates a lot of the expense management work for you at every step and saves you hours of productive time. It directly integrates with all Visa and Mastercard credit cards and gives the accounting department real-time visibility into card spend, along with instant spend alerts. Once the employee submits their receipts, which they can do using the mobile app, text messages, Slack, or even email, Fyle automatically reconciles/matches the receipt with the card transaction. There is no learning curve, and adoption by employees is almost instant. You can reimburse employees, track spending, and ensure compliance with the platform. All the expense data is automatically synced to your accounting software.
What are the Benefits of Automated Accounting Tools?
When you automate the right processes, you gain efficiency and accuracy. Your team gets more done, faster but with fewer mistakes.
What does this mean for the rest of the organization?
Because the accounting team can work faster, everyone else can get their requests handled sooner. Instead of waiting on reimbursements, for example, employees see the money hitting their accounts quickly. Or, if someone has a question about payroll, the people in accounting can track down the answer right away because they don't have to invest so much of their days into manually entering data. The team can also use that time you freed up to work on comprehensive analysis, including:
- Discovering trends
- Detecting fraud
- Tracking metrics
Because all their work is now more accurate, you finally have numbers you can trust. Instead of relying on guesswork and gut feelings, you know exactly how to set your budgets, where to cut back, and where to invest more. Additionally, although accurate accounting is great for forecasting, it's mandatory for reporting for taxes and other regulatory filings. Automation helps you reduce the risk of human error, making it much less likely anything throws up a red flag when the government is looking over your books.
Remember the accountant shortage? Automation is a strong solution because it means you need fewer accountants. Think of it this way: You don't need a specific number of accountants. What you do need is a specific amount of accounting work done. Before automation, the only way to do that was with a large number of accountants. With automation, you can get all the work done -- plus more -- with a smaller staff. More accounting, but at a lower overall cost.
A solid software solution is always going to cost less and be more reliably accurate than an extra employee.
The Next Question: In-House vs. Outsourced Accounting Automation
There are plenty of great reasons to implement automation, and there's more than one way to do it. Just like with traditional accounting, you need to pick between in-house and outsourced accounting. There are pros and cons to each, so your job isn't to pick the best one; it's all about picking the one that's best for you.
What are the Benefits of In-House Accounting?
For some quick context, you need to remember that the benefits of in-house accounting are all for when you have a good team going. They're fast and nimble, responsive and responsible. In that case, you benefit from in-house accounting because you have accountants you can closely control, who are willing and able to collaborate with you, and who you can trust to keep your company numbers confidential.
The benefits of in-house accounting come down to those three Cs:
The problem is that there's one more C: Cost.
With in-house accounting, you're paying salaries and benefits. You also have the costs connected to any tech upgrades the team needs. Plus, your company is responsible for paying any legal fees or penalties for financial errors. When the market to hire accountants is as competitive as it is today, finding the right fit can take a lot of recruiting hours and then carry a higher price tag for the salary.
Why is Outsourcing Accounting a Strong Strategic Move?
Outsourcing accounting saves you money. Remember, there are fewer accountants out there than companies need, so finding and keeping them is expensive. Plus, it's only going to get more expensive. Once you outsource, you're offloading all those HR costs. Instead of paying salaries and benefits and 401K contributions, you're only ever paying for the accounting work you need.
On top of the HR costs, you're saving in other ways, too. The outsourced team could be using the latest top-of-the-line accounting technology, but you didn't have to pay to implement it or train your staff on it. Had a good year and need more accounting work? When you outsource, it's easy to scale up. Not only do you not have to hire more people directly, you don't have to make room for them in the office. Additionally, you don’t have to take on the expenses training process yourself, should the processes and technology already be defined by the outsourced solution.
The Move to Automated Accounting & Outsourcing
Once you've decided to embrace the future of accounting, it's time to start thinking carefully about the here and now. Your first step should be to take a close look at your current accounting processes and procedures. What are your most common accounting activities? Who's involved, both inside and outside the department? What's critical to your overall business operations? Which tasks are going to be the easiest to automate? Which tasks can be outsourced to external accounting partners?
Once you have the answers to these questions, you can start to look for the software solution & accounting partners that best meets your needs.
Along the way, you'll need to work with people across departments and up and down the ladder. So, make sure you know the stakeholders and understand their concerns. The executive team will likely focus on price, the IT team will care about the security implications, and the accounting team will focus on how the new system will impact their day-to-day roles and responsibilities.
What Training and Re-Skilling do Accountants Need for Automation?
As accounting moves from manual entry to automation, accountants need to hold onto some of their skills while developing new ones. Just like always, they need to work fast and accurately, with a good feel for numbers and a close eye on small details.
That said, accountants will also need to improve their ability to see the big picture. With software taking care of a lot of the day-to-day operations, accountants need a more holistic view, allowing them to find new techniques and approaches to better serve the organization. If automation is taking care of collecting and crunching a set of numbers, your accountant needs to be thinking about what those numbers say about the company's overall financial health. Ideally, they would also be able to clearly communicate those insights to other departments.
The One Thing About Automated Accounting You Should Never Forget
The whole accounting field has been changing for a long time, and the effects of those changes are now impossible to ignore. With the introduction of automation, many of the daily chores for accountants can now be done by software faster and without the risk of human error.
Yet, we will always need accountants for the simple reason that automation always needs oversight. Remember, there are plenty of robots working in factories putting together products. There are plenty of people there, too, making sure everything is running not only smoothly but also correctly.
It's more than just oversight. We need accountants for current insights and future innovations. Accounting automation solutions are great at following instructions, but someone has to come up with them. Is there a better way to work the numbers? Would a different style of reporting make more sense for the CEO? Without accountants, there's no real way to know.
The Steps You Can Take Right Now
Looking down the pike, attracting and retaining accounting talent is only going to get harder. Eventually, supply and demand will price accountants out of reach for many companies. The solution is to prepare your business today for the fast-approaching future; it's time to proactively start implementing accounting automation. With strong, streamlined automatic processes, not only can you make life better for yourself tomorrow but you can also make it easier today.