There are a few telltale signs an organization’s cost accounting function has gone off the rails.
To the untrained eye, nothing appears out of the ordinary. It is only until the business leaders see a month or quarter undergo a drastic profitability drop-off that no one can quite explain that the importance of highly skilled cost accountants starts to resonate.
Suddenly, the alarm bells are going off, executives emphasize they need an answer fast, and the Sense of Urgency hits a 10.
However, at this point, an organization’s cost accountant starts to give off a confused stare. According to the information they review, everything seems ok… The GL balances tie out, the standard cost variance reports aren’t showing anything new, and the production reports show the factory’s volume looks reasonable.
Maybe it’s a journal entry that went the wrong way or something being set up incorrectly in the ERP system that caused what appears to be a massive miss on profitability? The profitability drop-off can’t really be true, could it?
Unfortunately, here’s what happens- The cost accountants don’t know where to look, what to do, or where to start.
Too often, it’s at a crisis point where metal meets the road, where the textbook technical cost accounting world collides with the realities of what’s now demanded of cost accountants. Too little, too late can be done to unwind the drivers of what caused the big miss and to get things righted again.
You see, for many organizations, hiring a cost accountant is just another requirement to meet, and no one really checks in on how robust, informed, and skilled the cost accountant is in understanding the organization, their processes/data, and looking to reveal insights to help decision-makers improve reality.
As we teeter on the edge of another recession amid a backdrop of war, disease, political buffoonery, and eye-watering inflation, the value of your cost accountant is about to reveal itself.
Is your cost accountant up to the challenge?
If you’re unsure, you might as well read through the article to take stock of your cost accounting talent.
Table of Contents
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A rapid change in technologies for cost accounting
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Limited Career Path in Cost Accounting
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Lack of appreciation for what cost accountants do
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For most organizations, an average cost accountant is all they need; most of the time.
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Why is it so hard to find a good cost accountant? Conclusion
A rapid change in technologies for cost accounting
Cost accounting and the tools at a cost accountant’s disposal have greatly improved and grown over the years. Twenty years ago, organizations had just about finished rolling out their ERP systems, and running reports into Excel was about the best you could do for state-of-the-art analysis.
The role of cost accountants was to input standard costs into the system, along with labor/machine routings and Bills of Materials (BOMs), push the button, and let the system calculate the standard cost, machine, and overhead rates.
However, if you jump ahead to where we are today, the tools, methodologies, and the role of cost accountants have shifted and grown in potential, variations, and the ability of a cost accountant to add real value to an organization.
As a result, in many organizations today, there is now a split world of talent; on the one hand, you have those cost accountants in the know who have kept up with professional trends and their own training. And on the other hand, you have cost accountants who still swear it’s 2002 and act accordingly.
If you think I’m being dramatic, then take a look at the list of Modern Tools of the Trade today that cost accountants must be skilled in to be relevant:
Modern Tools of the trade for cost accountants
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Integrated planning
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Business partnering methodologies
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Manufacturing knowledge
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Business processes
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Accessing data, data models, proactive reporting
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Driver-Based Analysis
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Zero Based Budgeting
Not just in tools and technology does the modern cost accountant stand out. The cost accountant of yesterday was a pure, old-school accountant. Processing debits/credits, reporting, journal entries, and reconciliations were the way of life.
Today, modern cost accountants see the above as table stakes of the job and focus much more on understanding the business, building relationships, and getting the systems automated and working for them, not vice versa.
Circling back to the header of this section, organizations have difficulty in finding good cost accountants because the rapid technology change created two types of cost accountants, one who “gets it” and one who, frankly, does not.
Limited Career Path in Cost Accounting
In many organizations, the cost accounting function only receives a small amount of attention and resources compared to the rest of the department. If we’re being honest, it’s not exactly a sexy profession to stay on top of an organization’s cost and profitability effectiveness.
In addition, even if someone is highly skilled, technologically-adept, and brilliant at what they do, there isn’t much “room to run” to continue growing as a cost accountant in most organizations. If you’re lucky, you can go from cost accountant to sr cost accountant.
Still, not many organizations have a whole cost accounting department where one can advance to a manager, director, and above.
The career path is one where you need to be satisfied in your corner of the world and hope you’re appreciated and rewarded for your work, but most cost accountants don’t have remarkable headliner careers.
For this reason of limited career paths, good cost accountants are hard to find. Those who are superb become consultants or work for larger organizations, while those who are mediocre and below sort of hang out for a while where they’re at.
Lack of appreciation for what cost accountants do
Take another peek at the list of skills and technologies required for cost accountants to become excellent in their craft. You’ll see it’s a pretty substantial list, requiring continuous career growth, learning, and inner drive.
Even if your organization’s cost accountant is up to par with best practices, the problem is cost accountants aren’t poised to be recognized for their hard work and determination.
In the best-case scenarios, a hallmark of a successful cost accounting career is that nothing exciting happens. No surprise profitability drop-offs, no analytical fire drills to understand why improving volumes leads to declining net income; just keeping an organization aware of costs, margins, and profitability day in, day out.
To be a cost accountant means being unseen to ensure critical aspects of a business align with expectations and not being recognized for not screwing up.
Woo hoo.
Thus, if you’re struggling to understand why good cost accountants are few and far between, you have to understand that it’s one of the most important, least recognized roles in an organization.
If you want to attract and keep incredible cost accounting talent, find ways to ensure those who keep complex, dynamic manufacturing organizations profitable receive a little love now and then.
For most organizations, an average cost accountant is all they need, most of the time
For most organizations, as long as results are consistent enough, there is no need to worry. If production volumes stay the same, customer bases are stable, and purchase and selling prices stay within a range, your organization can get by with a mediocre cost accountant.
Sure, your cost accountant never has all the answers to all the questions leadership has, nor do they provide illuminating insights, but the profits keep humming along.
Thus, the bar can be kept quite low for cost accountants trying to figure out expectations for what and how they need to do it. Sure, some cost accountants will learn and go out of their way to do more for an organization, but for most who can read a room, they can tell that mediocrity is all that is expected.
However, in periods of uncertainty like the one we are in now, the requirements quickly shift. Now to meet the needs of an organization, a cost accountant will be required to drastically upskill their approach and application of best practices and technologies that seem like a foreign language or someone else’s job. Not just that, but an impossible jump forward.
Thus, because cost accountants aren’t asked to do and be more in most organizations, they aren’t superstars. Those who start in these organizations and strive to become highly skilled recognize these same organizations probably won’t reward their initiative and skill, so they go elsewhere.
Why is it so hard to find a good cost accountant? Conclusion
Let me give you a final example of the challenges cost accountants face.
In every college class on management accounting, a portion of the curriculum covers activity-based costing as the basis for allocating overhead down to departments and products. However, those working in this field realize activity-based costing is irrelevant, with less than 5% of organizations adopting the practice globally.
Activity-Based Costing Failed – Here’s Why
Activity-Based Costing – Solving the Puzzle
To make up for this training through formal educational avenues, most accountants learn their skills and develop expertise working in organizations, mostly patchworking their training and development based on what they see and hear.
On the contrary, when professionals in, say, FP&A (Financial Planning & Analysis) begin their careers, they can find robust training programs teaching practical skills, multiple organizations sharing knowledge with a “practicality-first” emphasis, and a very visible and fluid career path.
Most professionals who take their careers seriously and are skilled in modern cost accounting adapt and remain elusive to the everyday employer. Excellent cost accountants become consultants, shift to a more lucrative career path, or stay where they are, being they are very well compensated.
Good cost accountants are tough to find and hire because cost accounting is unusual in that they solve a real problem but have trouble being recognized and rewarded for their work.
With such a gap between good-enough and excellent, the best talent calls the shots in their career and aren’t exactly begging to be hired by those in need.
Why is it so hard to find a good cost accountant? Recommended Reading
Updated: 5/20/2023
Summary- Why is it so hard to find good cost accountants?
There are a few reasons why it can be so hard to find a good cost accountant.
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The demand for cost accountants is high. The field of accounting is growing, and there is a high demand for cost accountants in particular. This is because businesses increasingly seek ways to reduce costs and improve efficiency.
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The skillset required for cost accounting is specialized. Cost accountants need to have a strong understanding of accounting principles and the ability to analyze data and make sound financial decisions. This skillset is not easily found, and it can be difficult to find candidates with the right skills and experience.
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The salary expectations of cost accountants are high. Cost accountants are in high demand, and they are compensated accordingly. This can make it difficult for businesses to find candidates who are willing to work for a lower salary.
Despite these challenges, there are a few things that businesses can do to increase their chances of finding a good cost accountant.
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Offer a competitive salary. Businesses need to be prepared to offer a competitive salary to attract top talent. This will show candidates that the business is serious about finding a good cost accountant and that they are willing to invest in their success.
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Look for candidates with the right skillset. When screening candidates, businesses should look for candidates with a strong understanding of accounting principles and the ability to analyze data and make sound financial decisions. They should also look for candidates with cost accounting experience, if possible.
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Offer a good benefits package. In addition to a competitive salary, businesses should also offer a good benefits package to attract top talent. This could include things like health insurance, retirement plans, and paid time off.
By following these tips, businesses can increase their chances of finding a good cost accountant who can help them to improve their bottom line.
