By Richard Lavina.
Today’s accounting world faces an unprecedented challenge: How can firms scout and retain top talent from a perpetually shrinking pool of accounting professionals while avoiding undue burdens brought by inflation?
What’s happening as it relates to the accounting industry is that we’re at a supply crunch. Inflation makes hiring accountants out of college more expensive as past incomes quickly become outdated because new graduates are looking for higher-paying jobs.
The way accounting firms are built today is no different from one set up in the 90s, where you have a managing partner on top and interns/first-year staff at the bottom. Everyone along the way wears multiple hats and does different types of work. Each individual does different work together. At accounting firms, services can be separated into two categories: advisory and compliance. As far as commodities go, passing along the rising inflation rates to clients by raising the price of commoditized services such as tax returns, could drive business away.
Within the accounting profession’s present landscape, we are seeing more and more frequently that talented college students wishing to enter the workforce are looking for positions at a much higher salary than before. Unless prices are raised, accounting can become less lucrative. That’s not to say all entry-level staff starts by asking for higher salaries, but that’s where most of the crunch is. Traditionally within accounting firms, the work divided among the staff is part of a broader relationship. Give work to lower staff, they learn to work and progress upward and take on more responsibilities. The cycle continues each year with new staff replenishing the previous group as they progress through the firm’s ranks.
When graduates enter the job market, their eyes might wander toward the most lucrative opportunities, and their attention trickles down. Accounting firms, for that reason, can find themselves stuck in a difficult position. Given the current inflation we’re facing and the supply of young, talented college graduates that would replenish the employee hierarchy are looking elsewhere for higher-paying jobs, it becomes harder for accounting firms to support interns and first-year staff.
Bookkeeping and tax preparation are services that need to be done. However, you can’t cut bookkeeping and taxes because you might lose clients and revenue. So, what do firms do in this position where they can’t raise prices on essential services to increase salaries across the board?
There is no indication that inflation will slow down in the near term. Models indicate that it will take years before inflation slows to a reasonable rate. As such, the cost of living continues to surge nationwide. In the meantime, alternative staffing solutions are ideal for firms looking to free up compliance work to allow staff more time to provide value to their clients and the firm. Alternative staffing solutions are effective in that they grant firm access to a fractional workforce that can clear bookkeeping and tax work quickly and affordably. As the supply crunch tightens, we feel this will be a bigger player because fewer people will get into the accounting profession.
It’s where outsourcing services step in to help. Firms are at a bottleneck where they can’t raise the prices of bookkeeping and tax services to match inflation because customers won’t return. It’s a sacrifice to the bottom line that is ineffective. By providing firms with an outsourced workforce that works at a lower rate, firms have access to tax professionals who spend their free time completing these commoditized services without the same firms having to hire full- or part-time employees.
Firms can then deploy their staff’s time on other value-added services such as consulting. Doing so leverages their staff more efficiently and taps into the firm’s ability to grow because the outsourced work is no longer taking up their staff’s time. It’s the solution to increase revenue without worrying about inflation increasing prices and driving business away.
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Richard Lavina is CEO and co-founder of Taxfyle.
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Tags: Advisory, Firm Management
