A new study suggests that the talent shortage is hurting the audit and tax fields more than advisory services, at least in Pennsylvania.
According to The State of Pennsylvania Accounting Firms in 2023, CPAs who begin their careers in advisory services are earning as much as CPA seniors in the traditional fields of audit and tax, and they are out-earning non-CPA seniors in those areas. Entry-level CPAs in advisory practices are making $11,000 more than CPAs starting out in audit and tax, and $20,000 more than non-CPAs in advisory.
“We’ll see how those trends unfold overtime as the economy continues to shift,” says Adam Batechlor, chief strategy and innovation officer at the Pennsylvania Institute of Certified Public Accountants (PICPA), which conducted the survey of more than 300 CPA firms in the state with Hinge Research Institute.
The report says CPAs are generally paid more than non-CPAs, but the pay gap between the two shrinks when moving from entry-level to the manager level. The gap widens again at the upper levels. Nearly all firms in the survey raised fees.
The study says Pennsylvania CPA firms are offering flexible work arrangements more often than any other benefit to attract job seekers. Firms are hiking starting salaries and bumping up raises as well. Of midsize firms in the survey – those with revenue of at least $500,000 – 79.8% are offering flexible work hours and locations, 71.4% are offering bigger raises and 61.9% are increasing starting salaries.
“More firms are giving larger-than-usual raises than those increasing starting salaries, which speaks to the potentially greater short-term impact that the retention gap can have versus pipeline issues,” Batechlor says. “The talent lever we see firms pulling even more than compensation increases is a willingness to embrace flexible work hours and location.” Nearly all mid-size firms increased fees to pay the higher salaries and raises. Other findings:
Firms seek to lower dependence on new graduates. Firms are turning to technology, merging with or acquiring other firms, and offering services that can be done by non-CPAs.
Alternative billing is up. Of midsize firms, 66% are charging clients in different ways; flat-fee pricing and value pricing are the most popular methods.
Firms of all sizes are falling short on data security. A full 10% of midsize firms do not use secure file transfer and 1% do not use firewalls. The report says firms should do more when it comes to internal tests/training, penetration testing, anti-virus software, and internal or external data security teams. “The small usage rates of even the most basic methods – such as anti-virus software – paint a grim picture of firms falling far short of IRS requirements, potentially putting themselves in the crosshairs of a growing number of hackers.” The report says about 75% of midsize firms plan to increase their technology budget.
Mergers show no sign of slowing. Of midsize firms, 26% are “somewhat likely” to be involved in a merger, acquisition or transaction with another public accounting firm in the next year, and close to 10% of respondents were anywhere from “somewhat likely” to “extremely likely” to join with non-CPA businesses in the next 12 months.
“The latest insights from our report show that while a plethora of challenges remain for the accounting profession, it has never been a better time to be a CPA as firms put a renewed focus on compensation, digital transformation and work-life balance,” says PICPA CEO Jennifer Cryder.