As we delve deeper into 2024, firms across industries are facing many challenges threatening their stability and growth. In the last write-up, we explored challenges related to “Moving to Advisory,” i.e., pivoting business strategies to explore new ventures.
This series’ last blog will look at the “pressure building” challenge. From economic pressures to technological disruptions, businesses must navigate an increasingly complex landscape.
The ultimate rival of any organization, this ‘Pressure’ results from all the mounting challenges an organization faces while going through the growth process to thrive in this turbulent environment. Rising expectations of the employee vs. lower cost to beat the competition creates an unprecedented circ*mstance for the employer.
Let’s look at the factors that create the stage for “Pressure” for accounting and CPA firms.
Factors Leading to Pressure Building
Here are some of the crucial factors that leads to pressure building:
Economic Uncertainty
The global economy continues to struggle with the aftershocks of the COVID-19 pandemic, supply chain disruptions, and geopolitical tensions. It is difficult for firms to predict market trends and optimal costs while staying profitable. Key economic pressures include:
- Inflation: Increasing goods and services costs are forcing lower profit margins while increasing operational expenses.
- Interest Rates: The banking sector is the most vulnerable. To maintain a country’s financial state, banks must fluctuate interest rates that directly impact borrowing costs, making it challenging for firms to finance expansions or manage debt.
- Currency Volatility: Exchange rate fluctuations are affecting international trade and complicating financial planning for multinational companies.
Solution
- Diversify Services: Expand service offerings beyond traditional accounting to include financial advisory, tax planning, and consultancy. This may result in additional revenue streams and reduce dependency on a single source of income.
- Cost Management: Implement strict cost control measures to manage operational expenses. It includes adopting continuous improvement practices and optimizing resource allocation to maintain profitability during economic crises.
Talent Shortages
The war for talent has intensified, with firms struggling to attract and retain skilled employees. There is a serious crunch of skilled accountants and CPAs within the country.
The U.S. Bureau of Labor Statistics projects an annual vacancy of 136,400 skilled accountants and bookkeepers between the years 2021 to 2030:
Key factors contributing to this pressure include:
- Skills Gap: Increasing technological advancements create a mismatch between available skills and job requirements, particularly in fields like AI, automation, cybersecurity, and data analytics.
- Remote Work Dynamics: The shift to remote and hybrid work models has reshaped employee expectations, making it essential for firms to offer flexibility while maintaining productivity and team cohesion.
- Employee Retention: High turnover rates increase recruitment and training costs, and losing top talent can significantly disrupt business operations.
Solution
- Invest in Training and Development: Encourage continuous learning through upskilling programs for current employees and keep them updated on the latest industry developments.
- Leverage Technology for Remote Work: Adopt cloud-based accounting software (such as QuickBooks Cloud) and collaboration tools that enable remote work. This will provide employees with the flexibility they desire while maintaining productivity. It also helps build a strong brand image, ultimately helping in employee retention.
Technological Disruption
Technology is evolving at an unprecedented pace, and firms must stay ahead of the curve to remain competitive. As more accounting employees take voluntary retirement, the limited inflow of skilled students can create discomfort within the organization, adding more to their misery.
Key technological pressures include:
- Digital Transformation: Adopting and integrating new technologies, such as cloud computing, AI, and IoT, is essential for improving efficiency and customer experience.
- Cybersecurity Threats: As cyberattacks become more sophisticated, firms must invest heavily in security measures to protect sensitive data and maintain customer trust.
- Legacy Systems: Many firms are burdened by outdated IT infrastructure that hampers innovation and agility and requires costly and complex upgrades.
The simple resolution to this problem is to embrace technological advancements in digital transformation. To stay on top of this highly dynamic landscape, implement robust security measures and adopt AI and analytics technology.
Regulatory Compliance
The regulatory landscape is becoming increasingly complex, with firms needing to navigate a web of local, national, and international laws. Trading past the country barrier requires organizations to adhere to numerous compliances and policies. Moreover, not all organizations can afford a legal advisor to guide them through the process.
Key regulatory pressures include:
- Data Privacy: Stricter data protection regulations, such as HIPPA, GDPR, and CCPA, require firms to implement robust data management practices.
- Environmental Regulations: The growing emphasis on sustainability is leading to stricter environmental regulations, necessitating investments in green technologies, green data centers, and sustainable practices.
- Financial Reporting: Enhanced financial reporting standards are increasing the compliance burden and the risk of penalties for non-compliance.
Solution
Stay informed and proactive by subscribing to industry newsletters, attending webinars, and participating in conferences to keep up to date with regulatory changes, which helps prevent compliance issues.
Market Competition
Competition is fiercer than ever, driven by globalization and the rise of new market entrants. Staying ahead of new competition with cutting-edge technology and battling already established market leaders with traditional practices while maintaining your business’s sanity and core values is something that creates the pressure to stay relevant in the market.
Key competitive pressures include:
- Disruptive Startups: Agile startups are challenging established firms with innovative business models and customer-centric approaches.
- Globalization: Firms must compete with local rivals and international players, necessitating a global strategy and operational excellence.
- Customer Expectations: Consumers are more informed and demanding, requiring firms to deliver exceptional value, personalized experiences, and high-quality products and services.
Solution
- Leverage Testimonials and Case Studies: Use positive client feedback and success stories to build credibility and attract new clients. Highlight how your firm has helped clients achieve their financial goals.
- Focus on Client Relationships: Build strong, long-term relationships with clients by providing personalized service and maintaining regular communication. Satisfied clients are more likely to refer your services to others.
Conclusion
The accounting industry will face significant pressures in 2024 from economic uncertainty, talent shortages, technological disruption, regulatory compliance, and market competition.
However, by adopting strategic solutions such as diversifying services, investing in technology, enhancing cybersecurity, and focusing on client relationships, accounting firms can not only tackle these challenges but also position themselves for sustained growth and success.
Let us know what challenges you are facing and how you are looking forward to tackling them.
