PA CPA Spotlight: Accounting Firm Challenges – Modernization, Talent Gap, and More - Part 1

Jennifer Cryder [00:00:00 - 00:00:25]

First of all, it's always easier for a CPA to support you when they know early and they have more information. So, one piece of advice I always give is bring your CPA into the conversation sooner rather than later because it'll pay off in the end. I think sometimes people are worried about getting billed for a conversation, but in the end, it's going to save you because they're going to know throughout the whole transaction, whatever it is.

Announcer and Gene Marks [00:00:28 - 00:00:42]

Welcome to Paychex Thrive, a Business Podcast, where you'll hear timely insights to help you navigate marketplace dynamics and propel your business forward. Here's your host, Gene Marks.

Gene Marks [00:00:42 - 00:01:04]

Hey, everybody, it's Gene Marks. And welcome back to another episode of the Paychex THRIVE podcast. Thank you so much for listening or watching us on YouTube. I am speaking today with Jennifer Cryder. She is the CEO and executive director of the Pennsylvania Institute of Certified Public Accountants. Jen, first of all, thank you so much for joining me today.

Jennifer Cryder [00:01:04 - 00:01:06]

Gene, thanks for having me. Glad to be here.

Gene Marks [00:01:06 - 00:01:56]

So, listen, there's a lot of accountants that watch this podcast on YouTube and listen to the podcast as well. I want to speak to our accounting friends here on this conversation. I know that you're running the Pennsylvania States association, but our conversation really has a lot to do with any states association if you're an accountant. So, first of all, my first question to you is this. Leveraging the resources of your state's association, you guys provide a lot of stuff. What annoys you the most when it comes to your members not taking advantage of resources? What are some of the most underused resources that your chapter provides that you're like, man, people should know more about this.

Jennifer Cryder [00:01:57 - 00:03:21]

Yeah. So, you know, I think that there are a lot of challenges facing the CPA profession right now. And with each of those challenges, I'm so convinced that there are, you know, equal opportunities, or the opportunities often are greater than the challenge. So, I think if I had to point to one thing that annoys me, it is that we are at the Pennsylvania Institute of CPAs really committed to leading the profession from the front. And so if it's a challenge a CPA is facing in their practice or even a business owner within their company, we're probably thinking about it and we're probably thinking about how to solve it, and we probably have some great resources.

I really see PICPA as a force multiplier for those best thoughts and best practices, practices across the profession. Gene, I was in public practice for a long time, and so I know how hard it is to pick your head up from the day to day when you're trying to crank out the audit or the return or manage that client relationship. And so, I became CEO about two years ago, and I was really committed to this vision of, we've got to lead the profession from the front, and so we've got to identify what those opportunities are for you before you even know that they're there. Or, we've got to have solutions to those challenges before you even know it's a problem. So more than anything, I just, it's hard to cut through the noise of the day to day and make our members aware of all that we're doing.

Gene Marks [00:03:22 - 00:03:31]

Right. So, give me an example. I mean, like, you know, give me an example. Like a challenge that you see a lot of, you know, CPA firms are facing in the state and how you guys are helping them.

Jennifer Cryder [00:03:32 - 00:04:43]

Yeah, I'll give you two examples because they're each so, so kind of pervasive in the profession. There's a lot of challenges right now about attracting talent into our profession. That pipeline of new CPAs is quite constrained. So, we're doing a lot of work there, beginning in middle and high school, to make students aware of what a career in accounting can do for them. We're supporting them as they try to get access into the profession and through licensure. So, a lot to talk about there. It's a really thorny topic.

And then if you think about CPAs that are already in their career, a big area of focus for us this year is about accounting firm business model. How do we build firms today? Very similar to probably a lot of the small business challenges that you're talking about all the time, that really are sort of the next generation or the next model. How do we build firms to be a place people want to spend their careers? How do we build firms to be a place that are agile and able to adopt technology and respond to really complicated needs from clients these days? A lot, a lot to dig into there. But I would say a lot of our time at PICPA is split between those two things, pipeline and firm business model.

Gene Marks [00:04:43 - 00:05:31]

All right, so let's dig back into some of these issues. Let's talk about, first of all, I mean, you talk about recruiting and also about sort of like, the firm's model and how they can get ahead of some of these issues that firms have. Tell me what you think the firms of tomorrow - like younger partners of CPA firms, people that are in their 30s maybe, that are just taking the helm and having management decisions in these firms. Where do you think the firms need to grow the most, or what do you think that a typical CPA firm needs to be doing better? Now I have a lot of opinions on this subject, but I'm curious here yours are and how, you know how the PICPA can help them.

Jennifer Cryder [00:05:32 - 00:07:00]

Yeah, I also have a lot of opinions on this subject. So, I think that there's a couple things firms need to be focused on if they're really committed to building the firm of the future. I think historically firms were very compliance focused, and so we're seeing them shift in a big way now. Even the smaller firms still providing those compliance services, but very much thinking of themselves as professional services firm. So, really leading with kind of trusted advisor and strategy focus.

And then how do you plug in all those different services? And that is incredibly achievable at scale, even for smaller firms today because of technology. So, if you start with that as the charge of the firm, you get to vary different investments in employee experience, you get to vary different investments in technology, you get to really different career paths and continuous learning for people. All of those are essential ingredients in building the firm of the future. All of those require incredible investments of capital.

And so, we're seeing a lot more of these sort of alternate practice structures and different ownership models emerge, which is creating much more often professionalized management of the firm. So, you know, all of this, I think that traditional pyramid model of an accounting firm is far less prevalent than it was. I don't want to say it's totally dead, but it's far less prevalent.

Gene Marks [00:07:01 - 00:07:43]

Yeah, I agree. You know, I think, you know, there is an old guard in the profession that is used to doing things, you know, a certain way. And if you grew up in the profession in the 70s and the 80s, you're, you're still compliance focused, and the profession's changed a lot. I mean, H&R Block just announced this past week that they're having a whole generative AI model for their customers that can ask not only tax questions, but then we'll also prepare certain forms based on the information that you provide to them. Isn't it clear to you that all this compliance stuff is ultimately going to be done, at least 80% to 90% of it is going to be done by AI? And accountants need to understand that, right?

Jennifer Cryder [00:07:43 - 00:09:08]

I completely agree. I think I often get the question, is AI going to replace CPAs? And the answer for me is no, it's not going to replace them. It's going to replace the CPAs that don't understand how to use the technology, because just like computers or Excel didn't take away the need for CPAs, it just changed the work we do. So, I think that it does a couple really great things for us in our profession.

Students coming into our profession or early career professionals, they don't want to sit and foot a column of numbers, right? Like, I think back to my internship. When I joined the profession, I was adding up numbers on some days. Not terribly exciting for people.

So, the technology really will allow people entering the profession to get to the more interesting work sooner. In addition to just kind of looking at how a business operates and understanding it, those early career professionals then get to become that more strategic advisor and talk to the business owner, the CFO, whoever it may be, and say, okay, we've done the audit or we've done the tax return. Here's what the software showed us, and here's how that could be applied to your business. I think if we can be more effective in telling that story, we have a whole different game in terms of attracting talent into our profession. And I also think it really changes sort of what's the value proposition or the relevance for a CPA to a small business owner.

Gene Marks [00:09:09 - 00:010:21]

Right. You know, it's. It's funny that you say that. I mean. I mean, I got my CPA a thousand years ago. I don't practice, you know, accounting anymore because I, you know, my firm just doesn't do that. We provide technology services, but every two minutes I go through all the CPE to keep that CPA certificate. One, because I worked so darn hard to get it. I'm not giving it up. But secondly, there is a huge amount of credibility when you talk to somebody that is a CPA. There is this inferred knowledge that people take, that you understand business, you understand financials. And sometimes I think that so many accountants just do not leverage that credibility and are just stuck all day churning out tax returns, which, again, are going to be done by generative AI sooner than later.

Jen, obviously, you were in public accounting for a number of years. Now you're running this business. It's nonprofit, but it's a business. The PICPA. If you were to go back in time and today start your own accounting firm, what kind of firm would you have? What kind of a CPA would you be?

Jennifer Cryder [00:10:22 - 00:12:06]

I think this is something I've given some thought to. I think that there's an. I'm sure you have for smaller firms that are poised for high growth, because here's what we've seen in the profession, and just today, there's another one of these announcements coming out. The larger firms just keep getting bigger and bigger. So, because of M and A, they keep kind of gobbling up those regional firms or those smaller firms.

So, unlike any other country in the world, here in the U.S., we have this huge tier of very large national and international firms, and they're certainly serving public company needs and really large global company audit, tax needs, advisory, things like that. Here in Pennsylvania, what we've seen happen is that regional firm that used to exist, there's far fewer of them today. That market or firm that serves closely held companies, there's just far fewer of them today. Those closely held businesses are either forced to go upstream or downstream. I think that there's a gap there, especially in some markets across Pennsylvania. I think that applies across the country, not just here in PA.

So, one thing I'm keeping my eye on are those smaller firms that are built using technology, focused on a really different employee experience, probably leading with advisory and building in a year long relationship, perhaps with subscription billing. They have an immense opportunity to jump up to that middle tier because there is more work than ever at that tier to be handled. And frankly, people are having trouble finding CPAs to do the work, especially at a time where as those bigger firms keep growing, they keep having to call clients. And so, there's all this work out there with nowhere to go.

Gene Marks [00:12:08 - 00:13:25]

It is amazing to me as well, that even as the bigger firms grow, I mean, half of the employees in this country are employed by small businesses. Small businesses, for most cases, can't afford the fees that the big four charge, or even some of the bigger regional firms charge. And they also not only cannot afford it, but they don't get the level of service that they need. I mean, they really could care less about somebody filling out a tax return for them. They need a financial advisor. They need somebody on their team that will help them on a day-to-day basis with decisions, or maybe on a week to week or a month to month basis. But being somebody's ...

I remember, Jen, this is like 100 years ago, when I was putting in ERP systems, there were a couple clients I would encounter where we couldn't go anywhere further until the accountant got involved and they're outside CPA. And I remember encountering, there was a couple people that come to mind that were amazing. The business owner was like, I can't have you make a decision like this, or whatever. I need to get Bob involved. He's our CPA, and I run all my decisions by him. You know, and I was thinking to myself, like, that is. That's the CPA you want to be, right?

Jennifer Cryder [00:13:26 - 00:14:11]

Yeah, it really is. And I had, I can think of earlier in my career, a couple of examples of those sorts of folks. I think that those people were doing a lot of advisory work. They were probably billing it as compliance work, but really what they had was that knowledge of advisory where I'm going to support my client throughout all different phases of their life. At the core, what CPAs do is CPAs provide trust, growth, and opportunity. And I think that's an incredible role to play. And I think if we think of ourselves that way and talk about ourselves that way, not only can we bring value to the market in a really different way, but, you know, also it goes a long way in solving that pipeline problem.

Gene Marks [00:14:13 - 00:15:21]

Yep, I agree. You know, the other thing I was also thinking about as well, and then we'll get off this topic, but I'm just ruminating, is that if I was going to start up my own CPA firm, knowing what I know, I would totally verticalize, as well. I'd pick an industry and be like, I'm the guy for manufacturing, and I'd be focusing on the industry groups. I'd be going after manufacturing clients. I'd be just an expert in all things manufacturing. Taxes per se, but all things. And then I'd be compiling data from all of my clients with permission, but also to say, like, listen, when I go out to a client, I mean, the questions that accountants get asked a lot, Jen, are like, you know, hey, how am I doing compared to others? You know what I mean?

For a CPA to go out to a client and be like, hey, I've got 100 other manufacturing clients. Your margins are a little bit less than what they should be, or your T&E expenses are too much or higher than they should be, or, you know what I mean? Like, comparative stuff from somebody from the outside is so important. And I don't think. I don't think enough CPAs realize that.

Jennifer Cryder [00:15:22 - 00:16:29]

I completely agree. It really goes to that shift in mindset that firms are either going through right now or they're not going through. The reality is that accounting firms from 2020 to 2023 were more profitable than ever. They grew more than ever, and they were more profitable than ever. And this is nationally, this is not just Pennsylvania.

So, as much as we can identify the case for change and what needs to change that shift to more of a professional services advisory mindset, when you've got a partner group around the table, and decision making is distributed among that group, they're looking at the last couple of years and saying, well, gosh, we've been more successful than ever. Are you sure? We really need to change. And that's where it becomes really interesting for an organization like ours to. To sort of make that case and say, I know you have taken home more money than ever, but here's how the demographics are changing. Here's how the needs of clients are changing, and here's how you really need to position your firm for success into the future. It has so little to do with what built success in the past.

Gene Marks [00:16:31 - 00:17:27]

Okay. Recruiting is obviously, you mentioned this earlier about it being a big issue. And by the way, this is an issue that affects businesses in all industries is finding good people. You know, in Pennsylvania, the CPAs now need to have, correct me if I'm wrong, not only an accounting undergrad degree, but a master's in accounting, right? They have to go to get extra credits postgrad.

My son, who works at PWC, has got, like, the highest level of education attainment in our entire family, and nobody in our family can believe it because this is – the kid is a soccer player. So, you need those credits, and then, of course, you've got to pass the CPA exam and put in your years, you know, service and all of that. Is it too much, do you think that, you know, the industry has gone too far, the profession has gone too far, where they're now just exclude, you know, people are just turning away from it because it's, it's too much qualifications.

Jennifer Cryder [00:17:27 - 00:19:16]

Yeah, that's. That's the core of the question right now, and the professions wrestling with it. So, we did some research at PICPA. It's probably my CPA mindset, but I thought, let's get some data on this question. And we asked that essentially your question to not only students that had already chosen accounting as a major, but business school students, right? To see what either is attracting you or deterring you. And they said it is the return on the time invested for them that they're weighing in making their decision. So, you've got kind of a supply and a demand effect of that. There are really high bars to becoming a CPA. No question. You don't necessarily have to have a master's, but you have to have an extra year of education - 150 credits. That's a really high bar. And that goes back to the public protection element of the CPA license.

I'm in the middle of some really interesting conversations nationally about how to change that. So, glad to talk more there, but all of the stakeholders are coming to the table and really rethinking in some ways that are pretty radical for CPAs. But then on the other side of that equation, it is really incumbent upon accounting firms, businesses as well, but mostly firms, because that's where people are starting their careers, to make it worth the time that somebody's investing to become a CPA. If the employer is saying, I want you to have that skill set, I want the credential and all that comes with it, our research showed that they're really not making it worth it for the people. And that goes to a lot of different things. Certainly, that goes to salary. Our profession has lagged on that, but it also goes to work/life balance and all of those other factors that we know really matter to people entering the workforce.

Gene Marks [00:19:18 - 00:19:50]

Okay, so you've talked to, obviously, a lot of your member firms. You've seen some people that are doing some things really right. Tell me without naming names, but if you were running, again, take yourself back, say you were running a small or midsized firm. And by the way, again, for people listening or watching this that maybe aren't CPAs, this applies to any service-oriented firm, as well. What would you be doing to not only find but retain good talent? Let's assume that they've got the qualifications, but what kind of a partner would you be?

Jennifer Cryder [00:19:51 - 00:20:28]

Yeah, I think we are really focused on helping firms answer that question. So the first thing I would focus on is helping the individuals that come into the organization really understand the impact of the work, because all of the research shows when somebody understands the impact of the work, they're going to be engaged at a whole different level. The generations entering the workforce, they just care far less about what that salary number is. It's got to be right. They will know if it's wrong. But that's not what motivates them. What motivates them is the connection to the work. And I think ...

Gene Marks [00:20:29 - 00:21:07]

I got to stop you right there. I got to stop you right there. First of all, that is a lesson for anybody running a smaller company, and … because employees do have much more of an impact on the output. And I wish I knew that more when I started a KPMG, that even as a lowly staff accountant at a large firm, you're doing your part to make sure that these financial statements are correct. And then there are millions of people, shareholders and other people that have a stake in this. I mean, it reverberates through the economy, and they're employees of companies that, God forbid, there's anything wrong and their livelihoods are dependent on this. So, even at the lowest level, you contribute, right?

Jennifer Cryder [00:21:08 - 00:22:08]

Absolutely. No matter what your role is in a firm. It's sort of like that fable of, you know, Kennedy talking to the janitor at NASA and saying, what do you do? "I'm putting a man on the moon." Anybody in a firm is powering trust, growth and opportunity. It could be Wall Street, capital markets, or it could be, you know, helping a family navigate complicated financial decisions. Everybody is supporting that mission. So, I think that is the biggest thing that I would do for people entering the firm.

There's a lot of other things; you have to make sure salary is right, because there is no secrecy around salary these days, right? Like, forget about pay transparency laws. Social media has already taken care of that. So, you've got to make sure that's right. You've got to build the work in a way that it feels very manageable. The generations entering now have no interest in doing all the nights and weekends like I did when I started my career with, like, the stale bagels on Saturday morning, you know, like, forget it. They're just, they're not going to do it. So, I think it's about ... 

Gene Marks [00:22:08 - 00:22:46]

I'm going to stop you. I got to stop you there. You and I are the same on that. You know, I was, again, I was talking about that with my son recently, that it is, there's like this mindset that you have to be in the office, you know, you know, all overnight and checking numbers at six in the morning. Like, you know, and I don't. I'm sorry, but like, younger generations, Millennials and Gen Zers, they are smarter than us. Like, they get it. They can read the BS, you know, and they're like, dude, I do not. We don't have to be doing this, you know, so late at night. We can be doing this in a more normal schedule or even from home. And I think we, as owners, we have to be listening to that, right?

Jennifer Cryder [00:22:47 - 00:23:41]

Absolutely. For me, it was early. It was like a badge of honor for me to be like the first person to turn the lights on at the office in the morning. And you're right. The generations now have it right. I think we had it wrong. It just, it totally has to change the way that a firm is built, though, to make that shift, because if you try to fit that mindset into that traditional firm model, it doesn't work.

So, you've got to change the metrics by which you're evaluating people and their utilization and realization and all of those kind of metrics and levers that run the operations, they have to shift away from the inputs – how many hours am I sitting at my laptop? – to the outputs, right? What's the value of the relationship over time? Or how satisfied is the client or some of those other things? And that's really hard work to do to shift for a firm because it's so ingrained in the legacy.

Gene Marks [00:23:41 - 00:24:30]

That is great. I couldn't agree with you more. And I think that we all, as business owners need to better understand that, that it's just a different workplace and things need to be more balanced. So, it sounds like besides compensation, obviously good healthcare and retirement, that's obviously critical. But this is all has to do with flexibility in that work/life balance that you're talking about. What are your thoughts on some of the work/life balance trends and how they affect CPA firms?

For example, what do you think about unlimited PTO or the four-day work week? I mentioned these to groups of business owners and they roll their eyes at me and I don't know, what are your thoughts on them for people running CPA firms or service firms in general?

Jennifer Cryder [00:24:30 - 00:25:19]

Yeah. So, I think you'll find more and more firms these days that are offering benefits like you are describing there. The real question is, when the rubber meets the road, are people able to take advantage of those benefits? And I think that's where, if the firm is not doing the heavy lifting and rethinking the metrics and the measurements, benefits like unlimited PTO don't really have value. Because if, again, you're going to be measured and compensated based on the number of charged hours, one of those input metrics, then you're going to be completely disincentivized to take advantage of those benefits. So, if I was somebody looking at a couple of firms to join, I would look at, okay, great, how, how rich are those benefits? But then how am I going to be measured and compensated? And do the two align or are they misaligned?

Gene Marks [00:25:20 - 00:25:35]

That is a really great point. And you're right. In this business, like many service businesses, it's all about chargeability and chargeable hours. And the more time that you take off, the less you're going to have of that, and that could impact your growth at a firm. And leaders have to take that into consideration.

Jennifer Cryder [00:25:36 - 00:25:58]

If a firm does the hard work on that today, they're going to be way ahead of the game because technology is going to come in and change that landscape in a major way. So, with technology and AI, there's going to be no value to the number of hours that you're working on something. It's really going to go to what's the, the value of the output. So, there's a great opportunity to make that shift now because then you're ready for what comes next.

Gene Marks [00:25:59 - 00:26:47]

I think that's great. I also think in the accounting profession, I think that given the nature of the work, there are so many opportunities to offer flexibility, not only for your employees, but for yourself as a partner. Clients don't nowadays, as long as they get their answers or they know that you're available by text or by phone, you don't necessarily have to be there face-to-face. And when firms are doing audits or compliance work, I don't know how many clients really like to see bodies in the office anymore doing that stuff. I mean, their own employees aren't even coming into the office.

So, all of that creates opportunities for your own employees to just to measure them on getting the work done and making sure the client's happy rather than how chargeable they are. And I think smart partners in the future are going to be looking at that pretty hard, you know?

Jennifer Cryder [00:26:47 - 00:26:49]

Yep, I completely agree.

Gene Marks [00:26:51 - 00:27:18]

Okay, let me leave you with just the final question here, which has to do with more of the civilians here than the non-CPA firms. You know, businesses that are, that are listening to this. Give me some advice on getting along with your accountant. I mean, again, you've been a CPA all your life, and if you were on the other side of the desk, what would you expect from your CPA in 2024?

Jennifer Cryder [00:27:18 - 00:29:08]

Two things come to mind with that question. First of all, it's always easier for a CPA to support you when they know early and they have more information. So, one piece of advice I always give is bring your CPA into the conversation sooner rather than later because it'll pay off in the end. I think sometimes people are worried about getting billed for a conversation, but in the end, it's going to save you because they're going to know throughout the whole transaction, whatever it is. But more specific to 2024, we're seeing a lot of shortages in terms of talent at all levels.

So, if you are somebody that either personally or your business works with a CPA, you might be surprised to find constraints that didn't exist before. So, we're hearing a lot of organizations are having trouble finding CPAs to begin with and, or your CPA may be pushing harder on, "We've got to extend and shift around timing some of those sorts of things." So, if those are of concern to you, first of all, get out ahead of it early, because the longer you wait into tax season, the harder that's going to be to solve for.

And second of all, begin to entertain the idea of a year-round relationship with a CPA where they are getting updates on what's happening either with your business or your personal financial situation. A lot of CPAs are moving into that more advisory role, as we've been chatting about. That's becoming a year-round relationship, perhaps with like a monthly bill, like a subscription model, for example. But all of that is really supporting, "We can give you much better advice and provide a lot more value when we know throughout the year what's going, going on." And then the tax return is just a byproduct of that relationship, or the audit is just a byproduct of that relationship.

Gene Marks [00:29:10 - 00:30:25]

100% correct. And I think that the focus of the CPA profession is going to be getting more and more away from the compliance stuff because that's going to be done by technology and more and more on advisory. And the only other advice I would give, everything you said is absolutely right. And the only thing I would add to for business owners that are listening to this is, you get what you pay for. I mean, you know, if you really find a good CPA and you value that person's advice and trust that person's opinions, you know, don't nickel and dime. You know, that, you know, like anybody else, a good service provider will really pay attention to you as long as you're treating them well.

And it's a two-way street. And I think a lot of CPAs get frustrated just saying as part of the profession that clients, you know, question their fees or, you know, they cut corners or whatever, like, oh, am I going to be billed for this call? And it's like, that's not a way to have a relationship with somebody, you know? And if you trust that provider, they're not looking to take you to the cleaners. They just, you know, they're running a business, too, and we should all understand that, so.

Well, Jen, it's been great talking with you, and, yeah, I appreciate your time and your insights. It's very, very helpful to people in the profession, as well as people that are working with accountants, as well. So, thank you for coming on.

Jennifer Cryder [00:30:25 - 00:30:26]

Gene, thanks for having me. I enjoyed the conversation.

Gene Marks [00:30:27 - 00:31:02]

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