Navigating the CPA Shortage in North America
Imagine this: your firm just spent months searching for a Certified Public Accountant (CPA) to join your team. After offering an above-market salary to secure top talent, the CPA settles in and then leaves for another firm six months later. Sounds familiar?
The scenario is increasingly common as firms across the U.S. battle the rising costs of talent acquisition and retention amid a growing CPA shortage. Recruitment fees are skyrocketing, salaries are inflated, and turnover is more expensive than ever. But beyond the cost, these issues affect the firm’s client relationships and increases pressure on already strained HR and financial models, especially planned growth. Many CPAs with 20 to 30 years of experience are expected to take on more client-facing roles as their firms evolve, with associates handling much of the deliverables for senior and partner review. However, the current CPA crisis has left many partners and senior staff mired in manual work and data entry, resulting in a loss of strategic planning and execution, decreased morale, and the mass exodus from the industry we are witnessing today. The question is, how can CPA firms stay competitive without breaking the bank or alienating staff?
The Escalating Cost of Finding and Keeping CPAs
The CPA shortage has become a serious concern for accounting firms, especially in North America. According to a December 2022 Wall Street Journal article, over 300,000 U.S. accountants and auditors left their jobs in the past two years, resulting in a 17 percent reduction in the workforce since the 2019 peak.
Moreover, fewer students are pursuing accounting degrees. In the 2021-22 school year, the number of bachelor’s degrees in accounting fell by 7.8 percent, while master’s degrees declined by 6.4 percent, according to the 2023 Trends report. This talent shortfall has significantly inflated hiring costs for firms.
Here’s a breakdown of the financial strain:
- Recruitment Costs: The Society for Human Resource Management (SHRM) reports that the average cost per hire is nearly USD $4,700. However, many employers estimate the total cost to hire a new employee can be three to four times the position’s salary. For example, filling a USD $60,000 role may require an investment of USD 180,000 or more, considering both hard costs like advertising and soft costs such as lost productivity and training.
- Increased Salaries: With fewer accountants available and rising demand, firms are compelled to offer higher salaries to attract and retain top talent. The salary inflation is often coupled with enhanced benefits packages and flexible work arrangements, making the competitive landscape even more challenging.
- Turnover Costs: Losing a CPA affects more than just recruitment expenses. The total cost of replacing a CPA earning an average salary of USD 119,000 (according to BLS) can exceed USD $350,000, considering expenses such as lost productivity, onboarding, and the impact on team morale. Of these costs, 30-40 percent are typically hard costs like severance and recruitment while the remaining 60-70 percent are soft costs, including training and the loss of institutional knowledge.
Right Shoring: A Strategic Solution
So, what’s the answer to this costly dilemma? Enter right shoring, a strategic alternative to traditional outsourcing or offshoring. Right shoring combines the benefits of both, allowing firms to access skilled talent globally at a lower cost while maintaining operational control and quality.
With right shoring, many North American firms are turning to markets like India, where accounting talent is abundant, well-trained, and cost-effective. It allows firms to gain a competitive edge by lowering labour costs without sacrificing the quality of services. Right-shoring partners in regions like India offer competitive pricing that helps North American firms meet their financial targets while ensuring high performance.
Here’s how it works for CPA firms:
- Cost Efficiency Without Sacrificing Quality: By partnering with right-shoring providers in cost-effective markets, CPA firms can tap into a talent pool where costs are lower, but the quality of work remains high. With a trained workforce located in regions such as India, these firms benefit from both affordability and expertise.
- Mitigating the Impact of Turnover: Right-shoring follows a team-based approach, including senior reviewers and backup members. It reduces the need for constant training and oversight, while minimizing HR planning and replacement challenges. Unlike the direct-hire approach, where turnover can be costly and time-consuming, the right-shoring partner can quickly fill gaps with qualified talent, reducing downtime and recruitment costs. The model provides an easy way to scale the workforce efficiently without adding administrative burdens.
- Improved Collaboration and Control: Right shoring isn’t a one-size-fits-all solution. Firms can decide which tasks are best handled in-house and which can be done remotely, allowing them to maintain control over critical processes. The model also enhances collaboration, as right-shoring providers often work within similar time zones, ensuring that communication is smooth and timely.
Real-World Example: Leveraging Right Shoring to Navigate the CPA Shortage
Let’s say your firm in North America specializes in tax preparation and advisory services. During the busy tax season, you need extra hands-on deck but don’t want to pay inflated salaries, deal with high turnover, or micro-manage/train a stream of new hires on the deliverables needed. Through right shoring, you could hire a team of experienced accounting and tax professionals in a cost-effective region like India. The team could work the same hours as your in-house staff as well as when the US is sleeping, ensuring seamless collaboration, high-quality work, and a higher volume of output.
Meanwhile, your firm can allocate more budget towards retaining core, client facing team members with competitive salaries and benefits, keeping internal and client morale high while managing costs effectively.
Right Shoring vs. Traditional Outsourcing:
Why It’s a Better Fit for CPA Firms
It’s easy to confuse right shoring with traditional outsourcing or offshoring, but there are key distinctions that make right shoring a better fit for CPA firms.
Traditional outsourcing typically sends work to third-party providers in low-cost countries. While it can reduce expenses, it often comes with challenges: cultural misalignment and limited control over the quality of work. The “outsource and forget” model often leads to communication breakdowns, missed deadlines, and a lack of personalization.
In contrast, right shoring focuses on placing the right tasks in the right geographic location, offering greater customization and control. It’s not just about offloading tasks to the lowest-cost region; instead, it’s a strategic decision based on where the best talent is, at the right price, with fewer compromises on quality. Right-shoring partners usually operate in countries where accounting talent is well-trained and familiar with U.S. standards, offering a seamless extension of your in-house staff with the additional management review and HR services typically embedded in the service. The flexibility ensures that the outsourced team feels like an integral part of your firm, bridging gaps in geography and time, while maintaining high service standards.
Right Shoring as a Long-Term Strategy
As the CPA shortage continues to drive up recruitment and retention costs in North America, firms must explore innovative solutions to stay competitive. Right shoring offers a viable, cost-effective strategy for managing these economic challenges while maintaining a strong, scalable workforce that reduces partner and senior staff involvement in operational issues to allow more time with strategic and client-facing activities.
By strategically placing talent where it makes the most sense without sacrificing quality or control CPA firms can weather the talent shortage and emerge more profitable and efficient. So, the next time your firm faces a talent gap, remember that right shoring could be the key to solving it.
