Small Accounting Firm Red Flags
It is no secret that I do not support nearly every accounting graduate going into a Big 4 firm as their first job. Smaller firms can align with people's career goals, working styles, and desired client base much better than a Big 4 firm, if chosen correctly. But not all small firms are created equal, with some being a great please to start your career while working with smaller clients, and others having potential career traps that are unique to smaller firms. Today, we are going to talk about some red flags that could indicate that your small accounting firm is not the best place for your career progression.
But before we jump into it, let's take care of a couple definitions to get everyone on the same page:
Red Flag 🚩: a red flag is an indicator that something could be wrong in each situation. Having a red flag does not guarantee that affirm will not be a good match for your career goals. However, if you identify one of these red flags at your small firm, I suggest you take a closer look into it and think critically as you do so.
Small Accounting Firm: for the purposes of today's discussion, I'm going to consider a small accounting firm to be one that has less than 200 employees. I picked this threshold because this is about the size where a firm can turn from a local firm into a regional firm. At firms this size, I feel that it's likely you might see one of these red flags but more importantly, I feel that with the smaller number of people, these red flags (and the environment they warn about) can have a bigger impact on your career progression.
Red Flag #1 🚩- Too many older employees
Having older employees and firm leaders is not necessarily a bad thing. However, most accounting firms need younger professionals to support a common client service model. If you walk into a firm and see more older employees than younger employees, it could mean that:
The firm is set in its ways and is slow to adopt new technology (ERP systems for example) and ways of doing things (Remote working for example).
Young employees are not offered enough opportunities to progress in the firm through promotions
Firm management is disconnected from the current recruiting landscape for young professionals and does not have a clear picture of what is needed to attract talent.
Again, these are potential issues that could arise from a small firm with too many older employees, but it is not guaranteed to be the case. If you are interviewing at a smaller firm and notice that the firm is top heavy in terms of seniority or professionals, I recommend asking some questions that could address these red flags to either confirm or quell your suspicions.
Red Flag #2 🚩 - The firm doesn't require or encourage staff to obtain certifications
At many firms, you can't be promoted to the manager level without obtaining the relevant certification for your service line. In most cases, this is the CPA certification. At larger firms (including the Big 4), employees at the staff and Senior levels are strongly encouraged to take the CPA exam and pass it as soon as possible. Obtaining the CPA certification serves both the employee (as it is the gold standard for public accountants, making the employee more attractive for promotions and outside opportunities) and the employer (allowing the firm to bill more and claim a higher standard of quality for work performed). Whether they know it or not, small firms that don't push its youngest employees to obtain the CPA credential are hurting their future career prospects. The CPA exam takes an immense amount of effort to complete, and it only gets harder as an employee grows older and gets more responsibilities at work and in their personal life. I've seen many small firm employees that weren't pushed to take the exam early and have still not passed it or made a decent effort to take it after 10 years. While the pressure that larger firms put on employees to pass the exam can add some stress, the alternative of not stressing and passing in the first few years of your career is much worse in my opinion. If you are interviewing at a smaller firm, you should ask how many staff and seniors have passed the CPA exam or earned their certification. If not enough lower level employees have made the effort, it could be a sign that the firm does not incentivize as much as it should or that the firm is understaffed and the staff don't have the time to study.
Red Flag #3 🚩 - Having employees that are "stuck" at various levels
Most public accounting firms utilize a defined career progression path that allows employees to work their way up the firm with the opportunity for regular promotions. Generally, it would look something like this:
After 2 to 3 years of experience at the staff level, the employee can be promoted to the senior level
After 2 to 3 years of experience at the senior level, the employee can be promoted to the manager level
After 2 to 4 years of experience at the manager level, the employee can be promoted to the senior manager level
After 1 to 3 years of experience at the senior manager level, the employee can be promoted to the director level
At the director level, the employee is at the highest level outside of being an owner of the company, typically called a partner.
Everyone's career path is different, and it's not necessarily a bad thing if an employee chooses to stay at a given level, especially if we are talking about a "forever director", which is someone who enjoys the work of public accounting but doesn't want to take on the roles and responsibilities of a firm partner. However, seeing someone stuck at the staff and Senior levels for more than 3 years could indicate that:
The employer tolerates poor quality work and won't terminate underperforming employees
The employer won't promote employees because there isn't "enough space" at the next level
The employer is not properly training employees or providing opportunities to support their growth to the next level
If you are interviewing at a smaller firm, I suggest you ask about the typical promotion timeline and whether or not most employees have followed that timeline. If they don't have a standard promotion timeline or if employees aren't held to that standard, I would be a but skeptical about the firm.
It's important to remember that these red flags are simply indicators of something that can be potentially harmful to your career progression at a smaller firm. A firm could have one or more of these red flags and still be a great place to work for you. But it's important to remember that working at a smaller firm has an entirely separate list of pros and cons compared to working for a regional, national, or Big 4 firm, and the red flags that I have listed above are indicators of some of the less obvious downsides of working for a smaller firm. If you find yourself interviewing and applying for smaller firm positions, keep these things in mind so you can reap the benefits of working at a smaller firm while avoiding some of the larger career pitfalls.