It was only a matter of time until the shortage of accountants finally caught up to the financial world. Recently, the WSJ published an article discussing how Advance Auto Parts cited “a lack of skilled accounting personnel” as cause for material weaknesses in their internal controls around financial-reporting (ICFR).
Here are the 3 main takeaways:
1) Advance Auto Parts is Not an Outlier
Since June of this year, nearly 600 U.S.-listed companies reported roughly 7,400 material weaknesses related to, at least in-part, “personnel.” This stat is up 41% from the same period in 2019. Foreign companies listed in the U.S. were disproportionately impacted — these companies saw a 5% increase in material weaknesses as compared to the prior year, and almost triple the number reported in 2019.
2) Material Weaknesses are Predictive
If material weaknesses (MWs) are identified, they must be disclosed in a company’s Financial Statements (FS). Doing so doesn’t look great to investors, but what’s more alarming is that MWs are highly predictive of restatements, which require an organization to correct already-published FS. The implications of this are significant, which is why it has become an area of focus for companies.
3) It’s Going to Get Worse Before it Gets Better
It is common knowledge in the industry that fewer and fewer people are seeking accounting degrees, creating more vacant positions which will remain unfilled for longer. What is uncommon knowledge is that the problem is likely going to compound as accountants retire without a pipeline of qualified replacements following behind.
What Can We, as Accounting Leaders, Do?
First, let’s examine the underlying reasons behind this mass exodus from the accounting field. If you polled accountants, consensus would certainly be that the profession has long been weighed down by:
- Long hours
- Low pay
- Mundane and redundant work
- Insufficient investment in technology and systems
- Lack of recognition and appreciation
No prospective student is going to sign up for that job description by enrolling in an accounting degree program. But it doesn’t have to be this way. As the WSJ referenced in their article, higher salaries will always attract good talent. Yet there are plenty of other tools an organization has at its disposal, including:
1) Seeking Out Technology Solutions to Automate Grunt Work
Audit files used to be made up of hard copy folders that accountants would have to physically carry to client sites. During audit sampling, they would photocopy supporting evidence and then manually plug results into Excel workbooks. And if they were lucky (or savvy), they might be able to Google a new formula to automate one small component within their workbook.
Today, there are myriad solutions that can do everything from expediting invoice processing to automating revenue recognition, accrual automation to sharing files electronically with safer data restrictions. Not only can accounting solutions eliminate much of the mundane, modern accountants have come to expect this in the workplace.
2) Saying ‘Thank You’
At various stops during your accounting career, your management teams likely rewarded you for the long hours you put in with open bar tabs. Undoubtedly, these were a lot of fun (unlike the following morning), but you’d probably still feel underappreciated the next day. What was really missing? Two simple words: “Thank you.” This small gesture can go a long way.
3) Empowering Accountants to Develop Strategy and Apply Analytical Skills
A common critique you hear from accountants is that the work they do is boring, unstimulating, or easy. But can you blame them? Eliminating day-to-day pencil-pushing tasks gives accountants more opportunities to apply analytical skills and use their energy where the most value can be added. Accountants shouldn’t just determine whether expenses are in line with expectations, they should also answer the “why” and the “how” so that you can be confident in any decision.
4) Providing Opportunities to Collaborate Cross-Functionally
Accountants generally operate as a siloed support function. They work behind the scenes to keep the lights on, but rarely partner with other teams. A great way to remedy this is to empower accountants to lead systems implementations. By doing so, accountants can showcase their results-driven mindset, organizational skills, and ability to effectively communicate while furthering their capacity to lead collaboration on cross-functional projects.
Conclusion
The growing shortage of accountants is forcing the accounting industry to evolve. Organizations must be proactive, rather than reactive, so that they can attract and retain the accounting personnel needed to be successful. And, hopefully, by doing so, this will be the last time the WSJ will need to write an article about material weaknesses resulting from the accounting shortage.
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About Gappify
Gappify, founded in 2016, is a cloud-based provider of accrual automation solutions for mid-market and enterprise accounting teams. The company is headquartered in New York City, with offices in Berkeley, California, Washington DC, and Manila, Philippines.
Its team consists of accountants and CPA’s from Big Four accounting firms and software innovators. Gappify is also supported by strategic advisors from some of the world’s most recognized technology companies and is affiliated with the top companies & accounting organizations.
