Meeting the US Accounting Shortage: A Southern African Solution
The United States is currently grappling with a severe shortage of accountants and auditors. In the last two years alone, over 300,000 accountants have resigned from their positions, and industry projections indicate that this trend is set to continue. As the CEO of the Chartered Institute for Business Accountants (CIBA) in Southern Africa, I see a unique opportunity for our highly skilled members to help fill this gap, utilising outsourcing models and remote working capabilities.
The US Accountant and Auditor Shortage
The American economy is heavily dependent on the expertise of accountants and auditors, professionals whose roles are crucial for maintaining fiscal integrity and business health across industries. However, there is a pressing deficit in this labor pool, caused by a combination of factors:
Retirement of Baby Boomers: Many experienced accountants are reaching retirement age and leaving the workforce, creating a significant vacuum in their wake.
Decline in Accounting Graduates: There has been a marked decrease in the number of students opting for accounting degrees, and consequently sitting for the Certified Public Accountant (CPA) Exam.
Unattractive Remuneration: Given the extensive education and rigorous exams required to become a CPA, many potential candidates are deterred by the relatively low starting salaries in the profession.
Impact of Accounting Software: With the increasing prevalence of cloud-based accounting software, traditional accounting roles are perceived as less necessary, causing many to pivot to different careers.
Perceived Stigma: Accountancy is often considered an 'uncool' profession, dissuading potential entrants.
The Impact of the Accountant Shortage
The dearth of accountants and auditors has had several negative effects:
Increased Workloads: Existing accounting professionals are forced to manage larger workloads, leading to stress, burnout, and further resignations.
Delayed Financial Operations: Lack of staff can lead to delays in crucial financial processes such as audits, tax filings, and financial reporting.
Risk of Errors: Overworked accountants may make mistakes, which could have severe financial consequences and potentially lead to compliance issues.
Exploring Alternatives: Outsourcing and International Support
One strategy to tackle this shortage is through outsourcing and leveraging international talent. This is where South Africa, and specifically the members of CIBA, can play a crucial role.
What is Outsourcing?
Outsourcing involves hiring individuals or firms outside of your own business to perform certain tasks or services. In this case, US companies could outsource their accounting and auditing tasks to qualified professionals in other countries.
Why South Africa, and why CIBA?
South Africa has a robust pool of accounting talent. As the CEO of CIBA, I can attest to the capabilities of our 5,000+ members, all of whom hold the Business Accounting Professional (BAP(SA)) designation. These professionals have not only demonstrated competence in core accounting skills, but they've also shown a commitment to maintaining the high ethical standards set by our organisation.
At CIBA, we offer training content from the American Institute of Certified Public Accountants (AICPA), helping familiarise our Southern African accountants with US laws, regulations, and practices. This is a critical advantage, as it smoothens the transition for our professionals to work effectively with US firms.
Becoming an IRS Agent: Registration and Examinations
South African accountants interested in working with US companies can consider becoming an IRS Enrolled Agent (EA), a federally authorised tax practitioner empowered by the U.S. Department of the Treasury. To become an EA, you must register with the IRS and pass the Special Enrollment Examination (S.E.E).
Registering with the IRS
Before you can sit for the S.E.E., you need to apply for a Preparer Tax Identification Number (PTIN) from the IRS. This unique number is required for anyone who prepares or assists in preparing federal tax returns for compensation.
Taking the Special Enrollment Examination
The S.E.E. is a comprehensive three-part exam administered by Prometric on behalf of the IRS. Each part must be taken and passed separately and covers:
Part 1: Individuals: This part covers the tax process, income and assets, deductions and credits, and retirement plans, among other topics.
Part 2: Businesses: This section tests knowledge of business entities, business financial information, and specialised returns and taxpayers.
Part 3: Representation, Practices and Procedures: This part covers practices and procedures, representation before the IRS, and specific types of representation.
Once you pass all parts of the S.E.E. and complete a tax compliance check, you can apply for enrollment and become an EA.
Reasons for US Firms to Consider Outsourcing to South African Accountants
Strong Language Skills and Understanding of Global Business Context:
South African professionals are proficient in English, the global language of business, reducing the risk of miscommunication. They also possess a robust understanding of international business contexts, having a clear grasp of both local and global economic trends.
Access to Comprehensive Training Material:
South African accountants have access to comprehensive training materials provided by esteemed professional bodies like CIBA and AICPA. This provides them with continuous learning opportunities, helping them stay abreast of the latest trends and changes in the accounting field, including deep knowledge of US GAAP.
In-depth Knowledge of Accounting and Tax Fundamentals:
South African accountants are equipped with in-depth knowledge of various technical accounting and tax fundamentals. This expertise extends beyond basic bookkeeping to include areas like tax planning, financial reporting, internal audits, and risk management, among others.
Highly Qualified Professionals: South African accountants often hold advanced degrees and professional certifications, demonstrating a high level of competence and dedication to their profession. Many possess a BAP(SA) designation, an indicator of their comprehensive training and adherence to high professional and ethical standards.
Capacity and Scalability:
With a sizable pool of accounting professionals, South African firms can quickly scale operations to accommodate the needs of US companies, whether it's handling high-volume work during peak seasons or managing specialised projects.
Cost-Effective Solution: Outsourcing to South Africa could provide a cost-effective solution for US firms. Given the lower cost of living and operational expenses in South Africa compared to the US, firms can gain access to high-quality services at a fraction of the cost.
Round-the-Clock Service:
Although not in the same time zone, the difference can work as an advantage as South African firms can provide services even during off-hours in the US. This ensures that work continues round-the-clock, offering faster turnaround times.
Economic Benefits:
In the face of South Africa's economic recession, outsourcing accounting services to this region would not only help US firms find the necessary talent but would also contribute to job creation and economic recovery in South Africa.
Overall, by leveraging the skills and talents of South African accountants, US firms can ensure they have access to competent professionals who can deliver quality accounting services while also contributing to a global cause.
Establishing an Accounting Firm in Southern Africa to Support US Companies
Having a local firm with the capabilities to support US accounting firms can provide a significant business opportunity. Here are some steps to consider:
Understand the Market: Research the specific needs of US firms and the accounting services they are most likely to outsource.
Build Your Team: Assemble a team of qualified accountants familiar with US accounting principles and laws. Utilise CIBA's training resources to upskill your team with AICPA content and prepare them for any necessary exams, such as the S.E.E.
Compliance: Ensure compliance with all South African laws and regulations for starting and operating a business.
Create an Online Presence: Given the nature of the outsourcing work, a robust online presence is essential. This should include a professional website and active profiles on relevant social media platforms.
Network: Build relationships with US accounting firms and businesses. This can be achieved through direct outreach, participation in industry events, or partnerships with business development firms.
The accounting shortage in the United States presents a unique opportunity for South African professionals to fill this gap and offer valuable expertise. Through organisations like the Chartered Institute for Business Accountants (CIBA) in South Africa and initiatives like outsourcing and creating dedicated firms, we can help bridge the gap, benefiting both our local economy and the US businesses in need.
