“Recruitment timelines have lengthened, salary expectations have risen, and competition for qualified professionals has intensified. For many firms, replacing experienced staff or expanding teams is neither quick nor cost-effective.”
Source: Alpha BPO
https://www.alphabpo.co.za/the-quiet-crisis-in-accounting-why-compliance-work-is-crowding-out-advisory/
Growth signals a financially healthy business, but it’s the way in which a business responds to growth that’s the real indicator of success. Traditionally, accounting firms have responded by hiring more staff to increase capacity.
The strategy worked when a consistent supply of graduates entering the profession existed. However, Canada’s accounting recruitment pool has shrunk, limiting firms’ options. The types of services in demand have also changed, with the focus now on advisory services and not compliance tasks.
Firms need experienced professionals to fill advisory roles. Unfortunately, recruiting professionals is a lengthy and expensive process. Firms must find alternatives to increase capacity without increasing headcount.
Specialization Optimizes Advisory Work
Finding and keeping good talent is a serious challenge throughout the accounting profession. But it’s an even steeper challenge for advisory practices. These practices need very specific, hard-to-find skills to grow and expand through advisory services—they need people who can analyze data, provide higher-level business advice based on those insights, and gain the trust of clients in long-term, ongoing, high-touch relationships.
Source: CPA.com
https://www.cpa.com/blog/2024/03/18/5-growing-pains-client-advisory-services-cas-and-what-do-about-them
Advisory work is a skill that includes in-depth data analysis and reporting, and a talent for interpreting data so that people with little to no finance knowledge can understand. Advisors must:
- Identify patterns and risks in financial data.
- Deliver strategic recommendations based on strong financial and business analysis.
- Communicate resulting insights clearly.
A critical component of an advisor’s role is relationship development, transitioning from transactional reporting to consultative engagement.
It’s not an easy shift, with many challenges that need to be overcome to succeed in an advisory-centric world.
Here’s why:
- An effective combination of compliance accounting and advisory skills is rare.
- Because the talent pool is small, firms must compete for the same group of experienced advisors.
- Advisory skills are largely based on experience. They can’t necessarily be taught.
These limitations make sustainable expansion very difficult.
Seasonal Peaks Demand Full Capacity
42% of annual CPA demand is concentrated in Q1 tax season, creating significant capacity constraints.
Source: Canada Accountants
https://canadaaccountants.app/market-trends-report
Accounting firms are under the most pressure during the first quarter tax season, when filing deadlines loom large.
As a result:
- Compliance requirements outrank advisory work.
- Regulatory completion trumps strategic analysis.
- There’s little opportunity to direct staff capacity elsewhere.
What does this mean for operational processes for the rest of the year? For a start, advisory engagement is inconsistent, and clients don’t trust inconsistency.
Moreover:
- Strategic discussions with clients are often postponed.
- It’s not easy for teams to switch from reactive delivery to planning mode.
- Managing high-volume workloads limits the addition of new advisory services.
This is when the temptation to increase headcount is most strongly felt. However, even though hiring additional staff eases short-term seasonal pressure, the long-term consequences of organizational bloat are expensive.
Recruiting New Professionals Presents a Challenge
“90% of finance and accounting hiring managers in Canada were struggling to fill vacant positions.”
Source: NCS Corp
https://ncscorp.ca/blog/shortage-accountants-canada/
We briefly touched on the recruitment challenges when the talent pool is small. The challenges are the result of:
- Longer hiring cycles.
- Potential hires often have several job offers to consider simultaneously.
- Rising recruitment costs across the industry.
Unfortunately for small to medium-sized enterprises (SMEs), the challenge is tougher because they have more finite resources (limiting salaries, benefits, and perks) and find it harder to compete with larger firms and bigger recruitment budgets.
One of the biggest questions is how the recruitment lag impacts expansion. One of the most worrying answers is that developing advisory practices is incredibly slow.
In addition:
- Scaling advisory capacity lags behind client demand.
- Labour shortages increase operational risk.
- Growth plans may stall due to talent constraints.
To compensate for recruitment challenges, firms must look at developing internal capacity, perhaps even specializing in a single niche. The narrow focus reduces the pressure on skills training and enables team members to provide deeper analysis and enhance strategic planning.
Demographic Trends Remove Available Expertise
33% of accountants in Canada are aged 50 or older, signalling a wave of retirements approaching.
Source: Job Bank
https://www.jobbank.gc.ca/explore_career/job_market_report/outlook_occupation_report.xhtml
Globally, skills shortages in accounting are largely due to a workforce reaching retirement age. In Canada, the impact of this phenomenon is significant:
- Experienced retirees take a lot of deep institutional knowledge with them.
- It’s not unusual for clients with well-established relationships that have lasted for years to leave the company when their partner retires.
- Succession planning becomes critical.
Why is succession planning so important? It can take a long time to recover from losing years of experience and knowledge when a key employee retires. A succession plan limits the risk by sharing knowledge with potential replacements and the company to avoid specialized data silos.
To mitigate the risk of leadership gaps, firms must:
- Invest in training programs for junior accountants.
- Prioritize knowledge transfer.
Take steps now so that you don’t have to play catch-up when senior professionals leave the firm.
Increasing Headcount Doesn’t Solve Structural Capacity Limits
Hiring more staff is a short-term solution at best. It can result in staff bloat, especially when none of the additions come with true specialization that fits the requirements for advisory work.
More disadvantages of bloat include:
- Increased operating costs, including extensive training to develop advisory skills.
- As teams grow, so does management complexity.
- Delayed expansion plans.
Recruitment doesn’t address any structural issues; instead, it creates financial pressure. New hires don’t provide the anticipated value. Profits slide, and underlying inefficiencies aren’t resolved.
Advisory Value Relies on Productivity, Not Recruitment
Scaling capacity or advisory growth is about quality, not quantity. Traditional accounting models aren’t designed this way. Tried and tested recruitment methods no longer make the grade. Adding advisory work to service offerings requires a different mindset.
Productivity-based scaling is the solution. Inherent automation features in software reduce manual administrative work while increasing output per professional.
One of the keys to successful expansion is the standardization of processes, which reduces repetitive and duplicate tasks.
All of this frees senior accounting staff to focus on analyzing and interpreting financial data, which they deliver in an actionable format.