According to Glassdoor, an average accountant makes an estimated $72,160 per year in the United States. This includes cash bonuses, commissions, tips and profit-sharing. Excluding those perks, the average accounting salary is just $55,957. Of course, there is a large range of accounting salaries from as low as $15,956 to as high as $332,501 — but these extremes are very rare, with the vast majority of being closer to the $70,000 range.
Thus, if an accountant only makes $50,000 a year, it’s quite plausible that they are underpaid compared to other accountants. Of course, other factors such as longevity, experience, skills, location, and other variables influence pay. Not all accountants are created equal. If, for example, a strong accountant is making $70,000 while another accountant with lesser skills and experience is making $80,000, you could argue one is overpaid, or the other is underpaid.
The real question is, assuming all things are equal (skills, experience, etc.), are accountants who make the average $72,160 underpaid? According to a Fishbowl survey, 62% of accountants feel underpaid given their qualifications and experience.
Search Reddit Accounting, and you’ll see posters complaining about the state of pay in the accounting industry:
“I'm an accounting major junior next semester, and now and then I look at job postings in my area to get a feel for what I'll be facing in a couple of years. I consistently see ridiculous salaries on some of these job postings. I live in Dallas-Fort Worth metroplex, so I have a medium to high cost of living. An example from this morning's browse: Accountant Business Manager with five-plus years experience- 46-52k a year…I'd expect the ability to make a lot more than what I see.”
Is it true? Are accountants underpaid, or are they paid fairly and just feel underpaid? Feelings can be different than reality, but even so, if you feel like you're underpaid…isn’t that just as bad as actually being underpaid?
The Solution For Accountants Being Underpaid
We first must distinguish between accounting jobs. There is a difference between a tax accountant, an auditor, a controller, and an accounts payable specialist, just to name a few examples. The issue is that so long as your job revolves around compliance work, what some have dubbed “glorified bookkeeping jobs,” and doing basic tasks that could be automated, you might always feel underpaid. The market will likely never pay much more than it is for those jobs.
Generally speaking, accounting jobs that center on compliance work will always leave many accountants feeling underpaid because they are working long hours with low-margin. A good rule of thumb is that data entry doesn’t pay well. On the other hand, with advisory, the sky is the limit. Too many accountants are limiting themselves to just tax preparation when they could quickly get started on advisory services such as tax planning. Firms can’t scale when they’re busy spending too much time on service delivery for items such as bookkeeping, tax prep, accounts payable, etc. The following is a good summary of the issue.
Low Paid Accountants:
- Low-priced preparation
- Seasonal work only
- Low-profit margins
- Complaining about never finding good staff
- Clients want to pay the minimum
Well-Paid Accountants:
- High-priced advisor
- Sales every month & quarterly
- High-profit margins
- Great employees that see working with the firm as a movement
- Clients that are grateful for paying because they know the value
As you can see, it’s quite a contrast. Since many “underpaid” accountants are busy preparing returns, they cannot charge enough even to start advising clients. To make matters worse, automation keeps driving down the value of their primary service (basic tax prep).
Accountants providing advisory services can charge five to seven times more even though it takes less time to deliver because they provide a more valuable service.
Easily Save Clients Thousands in Taxes
Scan client returns. Uncover savings. Export a professional tax plan. All in minutes.
How to Shift From Underpaid Accountant to Well-Paid Accountant
It’s simple math. We know a firm owner who struggled to earn enough revenue to grow his firm and even make ends meet. The issue was that no matter how many tax prep clients he added, the margins were low, which meant gaining new clients meant little pay and a lot of work.
Today, that same firm owner has just 42 clients paying on a monthly and quarterly recurring basis, and he is earning more than ever before (with just 42 clients). He’s making with 42 clients the same revenue he would be making with 1,763 tax prep clients!
How? On average, he has 28 recurring quarterly clients paying him $9,201 per year for tax advisory service. He also has 14 monthly recurring clients paying him $44,582 per year on average for accounting services plus tax advisory. That’s $881,776 in recurring revenue.
Firms with typical $500 tax returns require 1,763 clients to reach the same income. Which would you rather have: 1,763 tax returns to do or 42 clients paying you on a recurring basis?
This is the difference between unpaid accountants and well-paid accountants. It’s not just your revenue but also how much workload you have and how many clients you deal with.
If you want to change, the first step is deciding to no longer just focus on preparing tax returns or other compliance-based services. Technology allows you to automatically calculate tax strategies and create ready-to-send, finalized PDF tax plans.
Instead of doing 1040s for a few hundred, you can be doing tax returns in combination with tax planning (you can advertise it as tax advisory). By doing this, your clients will be willing to pay much more because the value you’ll provide will be much higher. For example, if you save a client ,000 in taxes, wouldn’t they be willing to pay you ,000? You’re selling money, which is one of the easiest sales.
Well-paid accountants make a lot of money because they provide exceptional value to clients. Nobody thinks paying $500 for a tax return is outstanding value — it’s a burden and only slightly more preferable to just doing the tax return themselves. The real value is finding tax savings when they have no idea it’s possible.
Software can find deductions and credits that each of your clients is eligible for. Even if you have no prior experience in tax planning, that is no excuse to delay getting started. To fully see how it works, schedule a demo today.
