How to Avoid Accounting Skills Gap

Is There a Shortage for Accountants?

Yes, there is currently a shortage of accountants in the US. With the number of accounting graduates declining and many Baby Boomers retiring, there is an increasing demand for skilled accountants. With this accounting shortage, finding qualified talent is tougher than ever before. 

But how do you attract and retain top-notch accountants when there’s a global accounting shortage? 

The solution lies in revamping your hiring process. Let’s explore why you need sharper screening tactics, which accounting skills are indispensable today, and how pre-hire tests can make your recruiting process more effective.

The Looming Accounting Shortage

The growing accounting shortage is a critical issue that has recently gained attention. This shortage has far-reaching implications for businesses, governments, and the economy as a whole. 

There are several factors contributing to the accounting shortage crisis:

1. Aging Workforce: Many accountants are approaching retirement age, creating a wave of departures from the workforce. The AICPA estimates that 75% of today’s public accounting CPAs will retire in the next 15 years.
2. Changing Demographics: Fewer young people opt for accounting as a career choice, leading to a shrinking pool of potential candidates.
3. Competition for Talent: Other industries, such as technology and finance, offer attractive career opportunities and higher salaries, enticing potential accounting professionals away from the field.

The Cost of Hiring Mistakes in the Accounting Department

The accounting department plays a vital role in a company’s financial success and overall health. Hiring the right accounting professionals is crucial. Mistakes in the hiring process for these positions can have significant financial and operational consequences.

Cost of Turnover

Because every company benefits from a strong workforce, a great team can offer the company energy, synergy, and originality. However, when a single unsuitable individual is added to the mix, things can take a wrong turn.

One study found that making the wrong hire can cost a company up to 15 times that employee’s annual salary. While hiring the “right” person leads to a positive ROI of at least three times the annual salary, hiring the “wrong” person damages an organization by creating a negative ROI.

When an employee leaves, the organization incurs expenses related to recruiting, hiring, and training a replacement. These costs can be substantial and disrupt the department’s smooth functioning.

Financial Losses

An unqualified or incompetent accountant may make errors in financial reporting, leading to incorrect tax filings, missed deadlines, and potential legal issues. These mistakes can harm the organization’s reputation and bottom line.

Operational Inefficiencies

While it may seem exaggerated, the ultimate outcome of an incompatible hire will affect the company’s performance. 

An employee who is not a good fit for the organization or lacks the necessary or basic accounting skills and knowledge can slow down processes, create bottlenecks, and hinder the department’s ability to meet its objectives.

Which Skills Do Accountants Need Today?

With today’s rapidly evolving technology, accountants need to know more than just basic accounting skills such as tax forms and balance sheets. The accounting shortage goes beyond the quantity of accountants; it’s also about the growing talent gap.

Even entry-level employees are expected to have broader accountant skills, including data entry, document management, and financial analysis. They need to handle any situation efficiently while staying up-to-date with the latest accounting terminology.

Communication Skills

Accountants often need to explain their data to clients, who may not have a solid comprehension of complex financial concepts. They may also spend significant time evaluating and optimizing financial records. As a result, accountants are essentially acting as ‘data interpreters’, for which strong communication skills are necessary.

Critical Thinking

Communications aside, critical thinking is an invaluable skill in the accounting field as well. Accountants are regularly confronted with errors, discrepancies, and inaccuracies, which, if not identified and corrected, can have major consequences for companies and clients. 

Therefore, these must be approached carefully, considering all variables and potential risks, to handle complex challenges.

Digital Literacy

Finally, today’s accountants use software solutions and tools to fulfill various tasks and responsibilities. Spreadsheets are most commonly used, and it’s considered necessary for aspiring accountants to be proficient in Microsoft Excel and other spreadsheet systems.

As we introduced in “Overcoming the Accounting Skills Gap with Applicants,” putting together a competent accounting team is critical to any company’s success. 

To help toward that goal, businesses should consider using a pre-employment accounting test, a pre-employment math test or other pre-employment tests to assess a candidate’s accounting skills, from basic bookkeeping skills to their management and professional success aptitude, to make the best possible hire right now.

How Pre-Employment Tests Can Help in Beating the Accounting Shortage

As the accounting shortage continues, optimizing the hiring process becomes ever more important.

Pre-employment tests have become the next logical step when companies aim to spot top talent while eliminating bias by measuring actual capabilities to find the best candidate. 

When used at the beginning of the hiring process, pre-employment tests can save a lot of time for hiring managers and applicants. Companies can filter out candidates before starting the time-consuming interview process.

Applicants who pass pre-employment tests will have shown enough interest to invest the time required to complete them.

After the best candidate has been chosen, pre-employment tests continue to add value because they can reveal what training is required for the soon-to-be new employee. This can reduce the time spent on training and onboarding new employees.

Which Types of Tests Can Be Administered to Accountant Candidates?

One definition of accounting functions includes examining and compiling financial documents for businesses and individuals. However, in-demand accounting abilities will vary by job title. Not all accountant applicants will have the same skills. 

A person working at an entry-level job at a small firm won’t need the skills needed for a CFO. This is why a mix of pre-employment tests can be used, depending on the position’s needs.

For example, junior accountant candidates might only need data-entry skills, which can be tested through the help of data entry and typing tests. Senior accountant candidates may also need math skills, attention to detail skills, and more. 

Accounting managers and CFOs may need accounting terminology tests, QuickBooks tests, or other technology tests, as well as financial analysis, management, and knowledge tests.

If you want to get a little more information on which tests to use depending on the position you’re looking to fill, we’ve explored this issue in more depth in our previous article, “Accounting Assessments: Which Tests to Use for Each Job Role.” 

If there isn’t an out-of-the-box pre-employment test that meets the demands of the position you’re hiring for, there’s always the option of creating a custom test, which can be adjusted on the fly.

Conclusion

With the accounting shortage and growing war for talent, employers should take a proactive approach to screening and hiring in their financial departments. This is especially true for accounting applicants, who will become such a key part of the organization’s success.

Unfortunately, work experience can often prove to be an insufficient measure of an employee’s overall value. Accounting knowledge is a starting point, but new employees will also need the soft skills necessary to be the right fit for the company.

Flexibility, responsibility, and great communication skills are all extremely beneficial for accountants to have, so testing for those skills is imperative.

To ensure that the best possible candidate is selected, businesses should consider screening accounting applicants with the help of pre-employment accounting tests.

Try out a free sample test to see if using this tactic will help create a more effective and efficient hiring process!