It’s no secret that people are leaving the tax and accounting industry. They are retiring or just choosing another field. It’s also no secret that bringing new talent into the industry isn’t easy. This week, for obvious reasons, I’ve been thinking quite a bit about why this might be, and about the value of a “strong bank.” What happens when your team consists largely of highly compensated aging superstars and you’re not developing new talent?
Think about how long Aaron Rogers had to spend on the bench behind Brett Favre before he got a chance to start, and how long he’s stayed in his starting quarterback role. Think about what happens to other second-string quarterbacks or even young starters when Tom Brady decides to retire, again. Is there younger talent at his signing taking the bench behind aging superstars who can’t seem to let him go to make room for newcomers?
And what about compensation? Is the compensation for those superstars so much above your company’s “league minimum” that younger players are deciding to leave the game for other opportunities due to the beatings they have to take on a daily basis knowing there is little to no chance of get a starting position and the compensation that comes with it (become a partner or otherwise advance in the company)? Near the end of the 2022 tax season, social media was abuzz with stories of partners going on vacation while waiting for associates to remain chained to their desks doing a multi-week, 60-80 hour “two-minute drill.” processing tax returns and filing extensions in the hope that one day they may become partners.
Logan Graf, a CPA in Austin, Texas, posted a Youtube video after her first year as a freelancer who compared her salary at a CPA firm to what she earned in her first year, both before and after expenses. It got even better for him. Next year. Its results can be atypical but also impressive. Surprising because entry-level CPAs typically make less than $50,000 per year for a job that essentially requires a master’s degree to get hired.
Earning the CPA credential requires a bachelor’s degree in accounting and another 150 hours of post-secondary education, in addition to taking a four-part exam and, in some states, an apprenticeship in a company. In other words, being an “entry level” CPA requires a master’s degree and one to three years of work experience, so you will be compensated about the same as a fast food restaurant manager. And make no mistake, fast food restaurant managers earn their money. It’s not an easy job. But get that job it usually does not require the time and expense of earning a master’s degree.
Lori Hauck, CPA and owner of Run Your Wealth in Phoenix, Arizona, teaches tax and accounting to college students. She notes that her students are mostly entrepreneurship and marketing specialists because they find the credit hours required for the CPA credential “daunting.” Many “accounting-adjacent” majors lead to jobs that offer a lot more money for a lot less work (or a much better work-life balance). In fact, many experienced fast-food managers with an MBA can earn more money more quickly than young CPAs who have secured jobs with midsize and large accounting firms. It’s no surprise that talented professionals are deciding to start their own companies or put their skills to work outside of the tax and accounting industry.
The lack of a strong bank is also evident in the large national organizations that represent the accounting and tax industry. This week, as these organizations began setting up their summer conference schedules, I began hearing stories from seasoned tax instructors who consider themselves experts in their fields (digital asset tax, cybersecurity for tax professionals, real estate tax) to that they were being asked to work with no cash compensation, just a conference registration and some reimbursement for travel expenses.
When cash compensation is offered, it starts at around $300 per “contact hour,” which sounds great until you do the math. A two-hour class generally requires a minimum of five hours of work (two in the classroom and three reviewing and updating material and taking oral notes). That works out to $120 an hour, which drops rapidly when conference organizers demand unique material (an instructor can’t teach the same class he taught elsewhere) without a commensurate pay rise.
Tom Gorczynski, a nationally known tax speaker, has been turning down offers he considers low for his level of experience and ability to attract assistance. When he questioned travel stipends that in many cases would not cover the cost of airfare, let alone ground travel to and from a conference, he was told that “someone will” for the set amount of the stipend. Combine low travel stipends with little to no cash compensation and you’ll end up with talented instructors forced to pay out of pocket to teach in the hope of getting additional teaching work that might actually pay your bills. Sounds like the plot of a bad reality show: The Grapes of Wrath: White Collar Edition. Many talented new tax instructors are choosing to stop teaching because the return on investment isn’t there (as much as it isn’t for new CPAs). The money will support the careers of aging superstars, while high-quality bench talent will be replaced by less expensive and often less capable players (instructors).
What does all this have to do with taxpayers? Ask a Rams fan. Last year, the Rams acquired enough talent to win the Super Bowl, but they fared dismal this year when injury-prone starters and a lack of depth on their bench meant they didn’t even make the playoffs (their record was 5-12). ). They also paid for their talent by giving up future draft picks that may keep them from getting good bench depth for a long time.
Imagine that instead of being a Rams fan, you are a new business owner who made the decision in 2022 to invest in hiring a top accounting and tax firm in your area to ensure tax compliance and provide tax planning and business advice. In 2023, partners and skilled staff who provided services to or reviewed the work of less experienced employees have either retired, moved on to other opportunities, or are clearly not playing at the same level they used to. And imagine that instead of a strong bench, the company’s staff now comprises only less expensive and less talented players or talented but inexperienced players that the company hasn’t bothered to groom for a starting job.
Will your tax and accounting team continue to play at the same level? What if your business is struggling (falling behind the game)? Do the players on your tax and accounting team have the right mix of talent, skill, and experience to help you bounce back? Will your business continue to be a playoff contender or will inexperienced players combined with poor coaching (those replacement instructors who are teaching your team the skills necessary to play the game) result in suboptimal performance for one (or more) ) years to come?
No matter the organization, ignoring the bench means performance will suffer when the superstars are gone. Truly successful companies think long term and never underestimate the value of a strong bank.
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