The crunch for talent within the accounting profession remains one of the biggest obstacles for accounting firms today. 

The number of U.S. students completing a Bachelor’s degree in accounting fell about 8% in the 2019-2020 school year compared with the 2011-2012 period, shrinking to 52,481 graduates from 57,482, according to a 2021 report from the American Institute of Certified Public Accountants.

The reality is, these days fewer people in the United States want to be accountants. 

International talent

There are very strong candidates in other parts of the world that can fill that labor demand-talent gap, according to Jim Brady, vice chairman of advisory services at alliantgroup, an international tax services provider.

“You just have to tap into talent, wherever you can find it,” Brady said.

India, for example, happens to be a place where there are English speaking professionals that come from the Chartered Accountancy world — the equivalent to a Certified Public Accountant in the U.S. — while Australia, Canada and the U.K. are also known for having world class, chartered accountants, according to Brady. 

“It’s a volume play,” said Brady in an interview. “With population growth, and capital formation growth, the demand side for CPAs is just going to keep growing, and I don’t think you are going to have a sudden surge of high school seniors going off to business colleges, and majoring in accounting,” he said. 

When Brady graduated from Bryant University on Rhode Island in 1981, he said there was a huge supply of CPAs relative to demand. “As a firm, you could actually have really high turnover, and that wasn’t your number one issue or challenge. Your number one issue was getting clients, people were plentiful,” Brady, a former chief talent officer of Deloitte, said.

Between the baby boomers retiring and fewer in the millennial and Gen Z generations choosing accounting as a career path, the demand for CPAs has skyrocketed. 

The explosion of tech startups within the past 15 years has contributed to this shortage as well, said Brady. “These kinds of places provide pretty sexy careers so you have a way more people going into marketing, digital marketing, and finance, and not so much accounting,” he said. 

SMEs to suffer the most

Despite the CPA career route not being as popular as it was years ago, and not being as “sexy” as some other now availble jobs in the finance sector, the need for CPAs and high quality audits is not going anywhere, and it is the small and medium sized businesses that will suffer the most, according to Brady. 

“Frankly, I think the biggest companies are always going to be able to hire internal control people,” he said. 

This supply and demand pinch will be felt further down the food chain, and it’s these firms that should consider the potential for international talent. 

“CPAs are the ones that audit the books of brand new startups and you need audited financial statements for the investors. You can’t just rely on the CEO,” said Brady.

Although layoffs at large companies like Microsoft, Salesforce, and other big name tech organizations have made headlines in recent months, small to midsize companies are still very much in a hiring mindset. 

“Companies like the Microsofts of the world, they are letting go of engineers, but if you ask mid market companies, or any company which is 300 employees to 1000 employees, they are still hiring and in that growth mindset,” said Tushar Makhija, founder and chief executive officer at TeamOhana, a headcount management platform, said in an interview. 

Makhija has worked closely with CFOs for several years — the executive has worked with startups since 2008 — and TeamOhana is the fourth company he has built from the ground up. 

In order to avoid operational lag as a result of hiring and onboarding, finance leaders need to be meticulous when it comes to hiring budgets, according to Makhija. 

The key to this, he said, is the marriage between operational reality and hiring reality. 

Tracking and measuring

“The beginning of the process of balancing headcount growth with cost efficiency starts with tracking and measuring,” he said. 

This comes down to not only deciding who it is that you are going to hire, but on determining exactly what all of the costs are associated with that hire. 

“As soon as you onboard someone you have to know, if there's an office space, you have to give them a desk. If you buy them a computer you have to get them access to basic tools like Slack and all of that keeps adding up and that multiple is where you can really run out of money, or you can actually make an operational difference,” he said. 

Between the hot labor market and current macro environment, finance leaders cannot afford to either not have sufficient staff to support growth, or not properly manage their headcount spend. 

Nearly a quarter (23%) of middle market businesses — those with revenues from $10 million to $1 billion — said that the current size of the workforce remains insufficient for market conditions, and over half (57%) plan to “aggressively hire” into 2023, according to the National Center for the Middle Market’s Year End Middle Market Indicator. 

“When you think about hiring budgets, you need to not just think, okay I have a budget to hire 10 people, because it matters who those 10 people are,” said Makhija, “Hiring someone in Latin America will be a different cost than hiring a different candidate in the UK,” he said. 

Getting these hiring budgets right really comes down to an incredibly strong relationship between the CFO and chief human resources officer, as well as the overall health of a business, and hiring plan, cohabitating in the same system, according to Makhija. 

“Once you understand the goals of your company for the year, you then start to say, ‘okay how many engineers do we need? How many salespeople?’... But then what happens is that when the real tracking and when real implementation of this plan starts happening, that decision-making sometimes moves from the CFO office to the recruiting managers, and that is where the discipline starts breaking down,” he said.

Keeping the human element in hiring

“If a company's hiring plan was, ‘I want to hire 10 people in this department or I want to hire five people in that department,’ that takes the human element out of it, and can wind up being more costly,” said Makhija. 

In order to hire effectively and avoid any operational lag, finance leaders need to really understand exactly what kind of hire their organization needs, he said. 

“Instead of looking at just rows in a spreadsheet, we need to start talking about, ‘okay this is our budget for hiring, do we have enough recruiters? Do we have enough managers? Do we have learning resources? What is our onboarding program looking like?’ These are the questions finance leaders should be asking themselves when creating a hiring plan,” he said.

CFOs in 2023 may want to think twice before planning for an end to the turmoil of the past two years.

A new variant of COVID-19 may flare up, inflation persists well above the Federal Reserve’s 2% target and geopolitical tensions, such as Russia’s invasion of Ukraine, loom large in even the most carefully crafted scenario planning.

The U.S. government is trying to curb many of the risks, with mixed results so far. One of its antidotes, as prescribed by the Securities and Exchange Commission (SEC), will require CFOs to spend more on compliance and plan for more disclosure and detailed risk management.

Other trends, such as a possible slide into recession, are beyond a CFO’s control.

Here’s a look at four of the trends for 2023. 

1. Close combat against inflation

Battling inflation is a core mission of the Federal Reserve. Since 2021, inflation has won.

Fed Chair Jerome Powell acknowledged early last year that policymakers underestimated price pressures.

In March, three months before the consumer price index (CPI) hit a four-decade high of 9.1% on an annual basis, policymakers began the most aggressive pullback in stimulus since the 1980s. Over the course of last year, they pushed up the federal funds rate by 4.25 percentage points.

Fed tightening reduced the CPI to 7.1% by November while also increasing the risk of recession. The probability of a downturn during the next 12 months is 65%, Goldman Sachs said Thursday, citing consensus estimates while adding that its own researchers see a 35% probability of recession.

Powell has repeatedly said the Fed will curb inflation even at the cost of setting back businesses and employment. But with price gains easing and the risk of a downturn rising, some economists fear policymakers in 2023 will pause or reverse course before bringing down inflation to their 2% target.

“What worries me is if inflation starts approaching 5%, they might let up and then we’ll see inflation shoot back up,” according to Aleksandar Tomic, director of the graduate programs in applied economics and applied analytics at Boston College.

Inflation this year will likely persist somewhere between 5% and 7%, Tomic predicted in an interview. “I don’t think there is any way we will get to 2% within 12 months without really bringing the economy down tremendously.”

Based on their median projections last month, Fed officials forecast that they will raise the federal funds rate by December to 5.1% — from a current range of 4.25% to 4.5% — before trimming the benchmark to 4.1% by Dec. 2024. They see the economy growing 0.5% this year and 1.6% in 2024.

Powell acknowledged that the forecasts are educated guesses at best. “No one knows with any certainty where the economy will be a year or more from now,” he said at a Dec. 14 press conference after the Fed released its projections.

Given the murky outlook, CFOs should avoid borrowing at variable interest rates or use swaps to hedge against rising rates, Tomic said.

Scenario planning is also essential when preparing for the future economic or monetary policy landscape, Tomic said, adding “whoever tells you anything with certainty is just lying to you.”

“This time last year, nobody thought Russia would invade Ukraine,” he said. “For many companies that turned everything upside down.”

2. Job openings go unfilled

Many CFOs eager to fill some of the economy’s 10.5 million job openings may need to keep “help wanted” signs posted well into 2023.

The tight labor market will probably persist for at least the next few months, according to Cristian deRitis, deputy chief economist at Moody’s Analytics.

“The dynamic in terms of demand exceeding supply is going to hold for a long while,” he said in an interview. “I don’t see a reversal of the trends there unless we go into recession,” he said, noting that Moody’s forecasts a “slowcession” of low growth rather than a downturn.

The unemployment rate in December fell to 3.5% from 3.6% the prior month as U.S. employers added 233,000 jobs, the Labor Department said Friday. The total number of available jobs was unchanged.

CFOs aiming to hire workers face several obstacles, including limits on immigration, an aging and shrinking labor force, and a trend of pandemic-induced early retirement, deRitis said.

Fed policymakers worry that the strong labor market will fuel wage pressures and worsen inflation by compelling companies to raise prices. Wages rose last year by 4.6%, according to the Labor Department.

“Wages are running well above what would be consistent with 2% inflation,” Powell said at a Dec. 14 press conference.

At the same time, compensation gains lagged inflation by more than 2 percentage points, prompting many workers to quit jobs for higher pay elsewhere and compounding wage pressures.

For some workers, “the only way for your salary to keep up with inflation is to change jobs,” Tomic said.

Eventually, as the Fed’s aggressive monetary tightening takes hold, unemployment will likely rise this year to 4.2%, deRitis said. Average monthly job growth will probably slump to around 75,000 from 370,000 in 2022, taking “some of the pressure off wage growth that we’ve been seeing that would certainly help the Fed’s case.”

Annual growth in wages may fall to between 3% and 3.5%, deRitis said.

CFOs leery of raising wages too much may want to consider providing workers with more job flexibility, including out-of-office work arrangements, deRitis said.

“It’s key for the employer to be creative in terms of the ways that they compensate employees,” he said. “I think you can build loyalty and high retention by having flexible policies.”

3. SEC demands disclosure

Since his swearing in as SEC chair in April 2021, Gary Gensler has laid out aggressive goals for increasing disclosure by public companies.

Investors need more information on companies’ cybersecurity, workforce diversity and vulnerability to crypto asset markets, Gensler has said.

Some proposed rules would shake up management by CFOs and their C-suite colleagues, compelling more detailed measurement of employee demographics and an overhaul in aspects of risk management, according to David Brown, a partner at Alston & Bird.

“We are forcing companies through disclosure to change the way they operate,” Brown said in an interview. “It’s extraordinarily ambitious.”

Gensler in March sparked criticism — and more than 14,000 public comment letters — after releasing a 490-page proposed rule that would require publicly traded companies to provide detailed disclosures on carbon emissions and climate risk.

The SEC aims to mandate that companies describe on Form 10-K their strategy toward climate risk, including plans to achieve any targets they have set for curbing such risk.

Companies would need to disclose data on their greenhouse gas (GHG) emissions, either from their facilities (so-called Scope 1 emissions) or through their energy purchases (Scope 2). They would also need to obtain independent attestation of their data.

Clear, uniform disclosures on the costs from climate change will benefit both businesses and investors, according to Gensler. Businesses will gain detailed insights into potential costs and opportunities, while investors will be able to better gauge risks at specific companies and compare risk levels across industries.

Companies, industry groups, lawmakers and asset managers — including BlackRock — have focused much of their criticism on the mandate that companies disclose in detail Scope 3 carbon emissions by their upstream and downstream suppliers and vendors.

Gensler has said the requirement would only apply to large companies that have already committed to Scope 3 measurement. Yet critics say the rule would impose onerous costs and challenges in measurement on small businesses, such as farmers, woven into the supply chains of big companies.

The SEC in coming months may sidestep opposition to the Scope III requirement and other controversial aspects of the proposed rule by rolling out the final regulation in two phases, Brown said.

In the first phase, the agency would require measurement and disclosure of Scope 1 and Scope 2 emissions and details on climate risk, including how the C-suite and board track and manage such risks, Brown said.

In the second phase, companies would need to gain external assessments of their GHG emissions and climate risk calculations, and report measurement of climate risks on their 10-Ks, Brown said. As part of this phase, large companies that made prior pledges to disclose Scope 3 emissions would be required to do so.

In a two-step approach, “people still may challenge it, but there may be less of a chance that the challenge is successful,” Brown said.

Despite opposition, the SEC will push forward with the regulation, he said. “I don’t think there’s any chance whatsoever that they’re going to shelve it.”

4. Sharper accounting oversight

The implosion of crypto exchange FTX and absence of financial controls revealed in its bankruptcy filings — such as the use of emojis in an on-line chat platform to approve disbursements — will sharpen scrutiny of the accounting industry and its standards this year, experts say.

While some accounting experts are quick to note that regulations won’t prevent those who flout the law from harming investors, others say the FTX failure will likely intensify efforts by regulators to avert failures in accounting and financial reporting.

Soon after FTX collapsed in December, the SEC called on companies to fully disclose crypto asset risks, joining efforts by lawmakers, investors and creditors to gauge the crypto market’s vulnerabilities.

“We don’t know where FTX is going to fall out … it’s a period of time where we’re trying to see where all these things are going to land,” Kecia Williams Smith, an accounting professor at North Carolina Agricultural and Technical State University, said in an interview.

The blowback from FTX, although big, will probably not prompt the same sweeping changes in accounting and financial reporting that followed the Enron accounting scandal, she said. “We’re tiptoeing on the precipice but I don’t think we’re back at Enron proportions.”

But the failure of FTX, which owes more than $3 billion to its top creditors, will undoubtedly spotlight for the Financial Accounting Standards Board (FASB) the problems it needs to address as it sets standards for crypto-currency this year, according to Kelly Richmond Pope, an accounting professor at DePaul University in Chicago.

“This fraud is so egregious it’s forcing you to see how bad it can actually be and how negligent founders and CEOs can be,” Pope said. FTX “gives [FASB] something to dissect … We need to see this so we can set up the right protocols for us to follow in the future.”

The FTX debacle played out late last year as CFOs and their finance and accounting teams were already facing sharper regulatory scrutiny of financial reporting and a push for more disclosure.

The FASB begins 2023 with many ambitious projects carrying over from 2022. In addition to crypto standards, it also plans to revamp outdated accounting for software and is poised to beef up the income tax information that companies would be required to disclose in financial reports.

The board is also making the most sweeping segment accounting change in 25 years — a move that would require companies to require more frequent and comprehensive data broken down by business units.

Meanwhile, the Public Company Accounting Oversight Board (PCAOB), under its new Chair Erica Williams, pledged in its 2022-2026 draft strategic plan to increase average penalties and enforce some rules for the first time.

Intensified enforcement will persist in 2023, Smith predicted.

“CFOs who are trying to have a good 2023 just don’t want to be on the bad actors list,” Smith said. To avoid sanctions, finance chiefs should work closely with their audit committees and keep in close communication over changes in disclosure requirements and other matters.

“The common theme … is making sure the company’s disclosures are transparent and not misleading to investors,” Smith said. “The preventative measure is to always have investors top of mind, because that’s the kind of enforcement actions we’re seeing.”

KPMG’s Greg Engel likens the accounting profession to the turtle in the proverbial race with the hare — a turtle that’s seeking to pull ahead even as it competes with flashier industry sectors for workers.

The shortage of accounting talent is one of the main concerns keeping Engel — vice chair of tax in the U.S. for the Big Four accounting firm — up at night as he assesses the new year’s challenges, even as KPMG has undertaken numerous initiatives to ease the talent crunch. 

At the same time, he sees a potential silver lining for his sector in the recent surge of layoffs in the formerly sizzling tech sector that has won over some college graduates who might have otherwise gone into accounting.

“A lot of people went to the technology sector because it was exciting. But now that Meta and Twitter and all these other companies are laying off people, kids going into college might go, ‘wait a minute, maybe KPMG sounds a little better than Twitter,’” Engel said in an interview. “Accounting is that boring, stable profession that doesn’t do as well in hugely expansive economies but does great when the economy’s on the downslide.”  

Making accounting’s case

Historically, the Big Four accounting and consulting firms have mounted robust programs designed to recruit and train accounting students right out of colleges and major universities. 

KPMG, along with PwC, Ernst & Young and Deloitte, hire thousands of graduates and students each year out of colleges, often training them through internships which lead to full-time jobs. Many of the certified public accountants go on to be controllers, tax directors and even CFOs. The entry level accounting salary range at such programs in the tax area can be roughly in the $70,000 to $80,000 range, depending on the market, according to some industry estimates. 

“The hallmark of the Big Four was to train people really, really well,” Engel said. The longer employees stay at a firm, the better their prospects after they leave, Engel said.

That means an employee who leaves after a couple years could probably join a company’s accounting department at a lower level, he said. But if the employee leaves after rising to the level of senior manager, he or she could join the same company as controller — and those who leave as a partner might join as a CFO, Engel said.  

CFO machine showing signs of wear  

But the machine generating CPAs and CFOs has shown signs of wear in recent years. For one thing, KPMG has not been immune to the Great Resignation. It was hit by the surge in turnover that weakened the middle ladder rungs of its workforce. “There’s a kind of battle in the middle,” Engel said. The company responded in part by hiring experienced accountants from companies like Apple and Home Depot, he said. 

At the same time, accounting has attracted fewer students in recent years. The total number of U.S. students completing a Bachelor’s degree in accounting fell about 8% in the 2019-2020 school year compared with the 2011-2012 period, shrinking to 52,481 graduates from 57,482, according to a 2021 report from the American Institute of Certified Public Accountants.

Priming the pipeline

Firms and accounting organizations have been taking deliberative steps in recent years to boost their case with talent and solve the talent shortage. For instance, the AICPA and the Department of Labor announced in November that they had teamed up to cultivate candidates and expand the pool of professionals, CFO Dive reported. 

If students are not deterred by the accounting profession’s long hours and subdued reputation, they may feel reluctant to put in the credit hours required before taking the exam to become a Certified Public Accountant. That typically means a student will need more study beyond that of a four-year degree. 

In an effort to make the extra course work pay off, KPMG worked with a number of universities to develop a Master in Accounting and Data Analytics Program that gives students the data analysis skills that are increasingly important in the field.

Recently, an additional seven universities were added to the program and KPMG has pledged to provide more than $7 million in scholarships. The schools added to the program included some historically Black Colleges and Universities such as Howard University School of Business and North Carolina Agricultural and Technical State University. Other universities that offer the program include Villanova University and The Ohio State University. 

Separately, KPMG has teamed up with Engel’s alma mater, the University of Northern Iowa in Cedar Falls, Iowa, to help strengthen the accounting program and opportunities for students attending Des Moines Area Community College.

The company will also aim to provide internships to the students who often attend school at night or part-time, which can make it difficult to obtain the credit hours needed to become a CPA. 

“We’re going to start adding people to the profession with two-year associates degrees,” Engel said, noting that similar programs are cropping up elsewhere. “We’ll give them a pathway to add the extra courses and programs they need.” 

Consumer confidence sagged in February for the second straight month as expectations dimmed for business conditions, wages and employment, the Conference Board said Tuesday. The Consumer Confidence Index declined to 102.9 in February from 106 the prior month, the Conference Board said, noting a large drop in expectations in households aged 35 to 54 and among those earning $35,000 or more.

A gauge of consumer expectations for the coming six months fell to the lowest level since July. Although the proportion of consumers saying jobs are plentiful rose to 52%, their view “appears considerably more pessimistic when looking ahead,” Ataman Ozyildirim, senior director for economics at the Conference Board, said in a statement. “Expectations for where jobs, incomes and business conditions are headed over the next six months all fell sharply in February.”

Consumer spending, which fuels nearly 70% of economic growth, rose 1.8% in January compared with December in the biggest increase in nearly two years. U.S. households felt emboldened by the hot job market, Ozyildirim said. The U.S. added 517,000 jobs in January, pushing down unemployment to 3.4%, the lowest level since 1969.

Yet persistent inflation and rising borrowing costs may erode confidence and begin to inhibit spending, Ozyildirim said, noting that fewer consumers plan to buy homes or autos. “Consumers may be showing early signs of pulling back spending in the face of high prices and rising interest rates.”

The Federal Reserve since March 2022 has sought to quash inflation by raising the federal funds rate in the fastest monetary policy tightening in four decades.

The Consumer Price Index — fueled by energy and shelter prices — rose 0.5% in January in the biggest gain in three months and the producer price index for final demand, a measure of what suppliers charge, increased 0.7% in the largest gain since June.

High inflation and plans by Fed officials to increase the benchmark interest rate at meetings scheduled for March and May have kindled concerns of a downturn this year, according to Alexander Salter, a fellow at the American Institute for Economic Research.

“Consumers are spooked by the prospect of a recession,” according to Salter, an associate professor of economics at Texas Tech University. “Rising rates do pose some challenges for consumer credit, investment and other economy-wide spending areas,” he said, adding that a recession would probably not lead to widespread unemployment.

Twenty-eight percent of economists predict that a downturn will begin before April and 33% expect a slump to start during the second quarter, the National Association for Business Economics found in a survey.

Half of the respondents (51%) believe the possibility that the Fed will excessively tighten monetary policy poses the biggest risk to the economy, NABE said Monday, citing the Feb. 3-10 survey.

CFOs should prepare their companies for a continued increase in borrowing costs, Salter said in an email response to questions.

“For businesses, the most important thing over the one- to three-year horizon is working towards a capital structure that is robust to rising rates,” he said. “Wages will rise too, but probably no more than inflation.”

TechTrans, a logistics company, has sought to adjust to ebbing consumer confidence by improving the quality of its service, President and CFO Len Batcha said.

“We have adopted quality as our main focus, always,” he said in an email response to questions. TechTrans has reviewed the needs of all of its customers and is “budgeting to bolster technology and invest in new hires through local institutions of higher learning.”