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Beware
The Sirens – They Can Stunt Your Income Growth
A number of candidates
that my team and I have spoken with in recent months (especially
during tax season) have expressed an interest in moving out
of public accounting and into industry, and that’s not
unusual.
Many a ‘bright young
thing’ that might have recently passed the UFE, completed
their 30 months practical experience and become a member of
their provincial and national Institutes start to develop a
wandering eye.
The bigger salaries, ‘interesting
industries’, opportunities to travel and bigger bonuses
seem to have a magnetic power, almost like the effect of the
sirens on early sailors.
Opportunities in Industry
appear glamorous at first glance, and thus more attractive to
the newly qualified accountant, but on reflection, these opportunities
may not be all they seem.
So let’s look at
the options that the newly qualified accountant has:
1. Stay where you are
and develop your career in public accounting
2. Move to another firm and develop your career in public accounting
3. Hang a shingle and start your own public accounting firm
4. Move into industry
5. Move into local government
6. Move into a ‘Not-For-Profit’ organization
7. Move into academia
There are, of course,
many other career options, but these are the most common choices
facing the newly qualified. Indeed, I see a clear division of
this group of people; those whose sole focus is to go into industry
and who only went into public accounting in order to attain
their designation, and those who entered public accounting because
the role ‘spoke’ to them and they truly love helping
their clients achieve success.
Indeed, you may accuse
me of being biased, and I would be found guilty as charged,
but I found that public accounting provided me with a truly
enjoyable, financially rewarding and mentally stimulating career
before I moved into consulting to accounting firms.
The profession itself
does too little to promote itself as an exciting, fast-paced,
challenging and truly stimulating line of work, but if the truth
were told, it truly is. For example, where else could you, in
one day, help one business challenge an unfair tax assessment
from CRA, then assist another to complete an IPO, break for
lunch, and in the afternoon, save a business from receivership
and then help another to raise a million dollars from their
bank?
Variety, they say, is
the spice of life, and as far as variety of work is concerned,
public accounting is where it’s at!
Contrast this to the typical
cycle in industry for the newly qualified. Month end reports
to prepare, quarter end reports to prepare, year end reports
to prepare, help the auditors to complete their work, then back
to the month end, quarter end, year end routine again.
If your idea of excitement
is conducting an analysis of auto expenses for the auditors,
then be my guest, industry will provide you with a reasonably
well-paid and ‘exciting’ lifestyle.
However, long term, if
you truly want to have an unlimited earnings capacity, a really
unpredictable – but truly enjoyable - work day, and enjoy
interacting with clients who value what you do for them, then
you’re already in the right line of work – public
accounting.
You see, during the process
of learning the ropes (to go back to our sailing analogy) while
you are training, you do have to go through some pretty mundane
tasks as a part of your daily work routine.
Let’s face it, who
wants to go out to an inventory count on 31st December in the
snow?
But (and it’s a
big but) after qualifying, as a new CA or CGA in public accounting,
you will start to have more responsibility, manage a small team
of people, get more involved with clients and play a more central
role as a real business advisor to clients, and start to learn
new skills, such as business development, taxation, forensic
accounting or one of any number of new disciplines that open
up to you once qualified.
Let’s talk about
money for a moment. Initially, should you decide to stay in
public accounting, you might find that former colleagues who
went into industry take a small jump ahead of you in earnings,
but over time, those who make it to partner level in public
accounting (or who start their own firms) will leap-frog ahead
of their former peers, never to be caught.
For example, let’s
look at Janet. She qualified in 1997 as a CA with a big four
firm. After being approached by a headhunter when the UFE results
came out that November, she joined a large public company as
a financial analyst.
Her salary at the time
went from $43,500 to $55,000 overnight.
Nine years later she has
worked her way up to controller of a small subsidiary and is
making a salary of $140,000 plus a bonus of $15,000.
She’s worked hard
– she was used to that during tax season in public accounting
– but in industry, she is now working 60 to 70 hours a
week all year round. To add insult to industry, she’s
bored half of the time with the reporting routines and yearns
to be doing something more meaningful where her expertise was
put to better use.
Contrast this with Andy’s
situation. Andy also qualified in 1997. Indeed he sat next to
Janet in the examination hall when they took the UFE and trained
with the same firm.
After qualifying, Andy
left the ‘Big Four’ firm where he trained and joined
a smaller ‘boutique’ practice as Senior Accountant.
His salary did not change
too dramatically upon ’jumping ship’, he went from
$43,500 to $47,000.
However, the Partners
at his new firm were very smart. They saw the ‘spark’
in Andy and felt that he truly would make a good Partner in
a few years time. He steadily moved up the ranks, to Manager,
then Senior Manager and it was clearly just a matter of time
before he would make Partner.
Last year that time arrived,
when one of the Partners retired and as a part of a planned
transition, Andy became a Partner in the firm.
In 2004 he made $95,000
plus a bonus of $10,000 - still some distance behind Janet.
But oh, how things were about to change.
The firm he joined was
a very well run practice, and the average partner managed a
book of business around $1 million in size, with an average
net income per Partner of $420,000.
In his first few years as a Partner, he would not make that
much, probably nearer $220,000 but in time, he would move up
the ranks and achieve a substantially higher income level. (Figure
it out: if the average partner compensation was $420,000, the
lowest around $220,000, then some a the top must be making $620,000.)
There is never a dull
moment in Andy’s professional life. One day could comprise
of a round of golf with three Bankers in the morning (who refer
a substantial amount of business to his firm), and giving a
seminar to a room full of prospective clients in the afternoon,
is an example of how he spends his time.
Another day could be spent
starting with a meeting with the board of directors of a not-for-profit
client in the morning, lunch with a prospective client who runs
a $100 million revenue private company then back to the office
where he has a number of meetings with staff to monitor progress
on several client files.
On top of that his earnings
will do nothing but grow in the years ahead, and if he makes
senior Partner one day, he could be up in the $600,000 plus
income group.
Now who seemed to have
made the best career decision back in 1997? You be the judge.
MFA Group 2006
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