WINNING THE TALENT WARS

Making sense of public practice for the smaller CPA firm

In Canada small firms that do employ staff appear to be much less profitable than those that don’t.

From financial results compiled by STATISTICS CANADA for Canadian public accounting firms in 2017, we looked at unincorporated practices[1]. In this chart we can see that the most profitable 25% of firms had virtually no labour cost.

It sounds simply exhausting to us. It also means that practitioners can’t grow their practices, since they’re doing everything themselves.

In Canada the top 7 firms account for fully 47% of all the revenue in the industry. These 7 firms dominate our industry and are now “reimagining the profession” in their own image.

In 3 separate studies between 2013 and 2019, the AICPA asked practitioners to report on their biggest challenges. US CPA firms of all sizes have listed either finding or retaining qualified staff as their key

[1] since there was no issue distinguishing between profit and wages

since there was no issue distinguishing between profit and wages

issue. The only outliers are sole practitioners. If the economics of running a practice are the same in the US as they are in Canada, we imagine sole practitioners there have simply given up on getting staff.

PCPS Top Issues Survey Results

Source: The AICPA Private Companies Practice Section (PCPS).

While small firms are engaged in a talent war with large firms – and just about everyone else, demographics are working against us.

In 1984 when CGAs and CMAs introduced a university requirement for their new members, almost 8.5% of the population were aged 20 to 24, and only about 15% were going to university. The number of young people relative to the population is declining. At the same time many more are going to university.

Typically university-educated persons have higher expectations and more opportunities.

However wages in our profession have not kept up. According to WORKBC[1] the median income in BC for these highly-skilled occupations is as follows:

[1] WorkBC is the provincial government’s access point to the world of work in British Columbia. It was created with one key goal – to help all British Columbians to successfully navigate B.C.’s labour market.

Note that the median income of accountants and auditors as reported by WORKBC is much lower than the amount claimed by CPA BC of $108,000. Our analysis points to a median income earned by CPA members in BC of approximately $78,000 .

WorkBC is the provincial government’s access point to the world of work in British Columbia. It was created with one key goal – to help all British Columbians to successfully navigate B.C.’s labour market.

[1] We attribute the difference to 3 factors:

According to Statistics Canada the median income for all Canadian workers was about $47,000 in 2019.

Given the high expectations developed as a consequence of 4 years spent in university, and what amounts to 2 years of articling time, we need to do better.

However university graduates are not well-prepared for the practical side of what is required in public accounting. 

In fact many of the courses being taught are much more aspirational than practical. In a 2017 article in the CANADIAN ACCOUNTANT a university instructor explains how universities have shifted their focus:

“One of the questions my students ask me when we go through all the types of non-traditional services that public accounting firms offer is ‘Why do they do those things when they have nothing to do with accounting?’” says Chung. 

  1. Incomes reported by WORKBC include some non-CPAs
  2. CPA study was based upon self-reported data by approximately 10% members (the purpose of the study was to attract new recruits)
  3. Incomes reported by WORKBC were presumably based upon taxable incomes reported, and there may be a tendency to understate

She tells them that “the need to grow our profession is really strong. We don’t want to be a profession that is just accounting and auditing and tax,” and also notes that part of the appeal of the larger firms for her students is they can offer more services and therefore more career opportunities.”

So students come into the work force having built up debt and salary expectations, but without adequate practical skills. These practical skills, will need to be learned on the job. While the education they receive is geared to the largest firms which earn the lion’s share of revenue in the industry, the notion of ‘management science’ is really a fiction.

There really is no such thing as management science – and you certainly can’t learn it at university.

Sole practitioners don’t hire university graduates at least partly, because they aren’t worth it. In our view though, we do desperately need technicians in our profession.

In spite of this, it seems like the CPA Profession’s foray into technical courses for accountants completely missed the mark[1]. We need a better model for delivering that training.

Initially my accounting practice worked with CPAs from the Philippines. We developed the technology stack to facilitate the collaboration we required. Clearly we could have used online, university-level courses for at least some of that training. The problem with that is the cost. The cost of the 5 core

[1] The ACAF – Advanced Certificate in Accounting and Finance – was withdrawn. Despite the spin, it clearly was a failure.

[1] The ACAF – Advanced Certificate in Accounting and Finance – was withdrawn. Despite the spin, it clearly was a failure.

courses we wanted[1] is about $9,000 per student[2]. That more than pays one year’s wages for a new graduate. What’s more it still didn’t address the practical knowledge required.

And realistically, the bulk of training in IFRS and ASPE wasn’t really necessary for small business clients looking primarily for tax compliance.

So, in 2019 we began developing a technician level program designed for accounting graduates in the Philippines, who needed practical skills, as well as some grounding in Canadian taxation and regulatory compliance – in order to work remotely for Canadian CPA firms.

Eventually this resulted in the SMALL BUSINESS ANALYSTS SOCIETY OF CANADA in 2020.

[1] Income Taxation 1 and 2, Business Law and 2 Accounting courses for Canadian GAAP

[2] Canadian universities appear to have become complicit in selling ‘permanent residence’ to foreign students in exchange for much higher fees than they would charge to comparable Canadian residents.

Income Taxation 1 and 2, Business Law and 2 Accounting courses for Canadian GAAP

[1] Canadian universities appear to have become complicit in selling ‘permanent residence’ to foreign students in exchange for much higher fees than they would charge to comparable Canadian residents.

No.1 Concern for CPA Firms

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