Public Accounting or Industry Accounting, Which is the Better Choice?

IS PUBLIC ACCOUNTING OR INDUSTRY ACCOUNTING A BETTER OPPORTUNITY?

Hi, my name is Mike Smith, and I’m an Audit Recruiter at the public accounting firm Armanino. It’s my job to persuade audit seniors and managers at the Big 4 and other national firms to come to Armanino to pursue their dreams of making partner, instead of dropping out for an industry accounting position. 

Often I am competing against agency recruiters, who contact hundreds of audit seniors and managers daily to try to convince them to ditch public accounting for a back office industry job.

I know a thing or two about how agency recruiters work. I was one, before coming to Armanino, and I learned their tactics well. I’ll tell you more about that, but first, let’s look at the pros and cons of industry accounting.

WHY SHOULD AUDIT SENIORS & MANAGERS CHOOSE INDUSTRY ACCOUNTING?

In the short term, meaning the first 1 to 3 years, a switch to industry accounting is almost a no-brainer. You will earn more money (and maybe stock options) and work a little less than your public accounting counterparts who are still on track to make partner.

You get:

• A 10% - 20% instant pay increase compared to public accounting.
• Fewer hours and more work/life balance (in theory).
• Consistency. You only have to service one client year-round vs. multiple clients in public accounting.
• Stock options. In the Bay Area, many startups offer stock options in addition to salary + bonus.

More money, shorter hours and stock options―sign me up, right?  I think we can all agree that industry accounting is the better SHORT-TERM opportunity. But given that most audit seniors and managers are in the very early stages of 30+ year careers, I’m not so sure the focus should be on the short term. 

The industry accounting image of good pay with set hours is not necessarily the reality. Here’s what Accountingfly has to say about industry accounting jobs:

In truth, the initial salary bump usually is followed by small annual increases; every accounting department has a busy season (or seasons); and the position that looks so promising can turn into a routine job with little to no upward progression possible at the company.

Now let me give you a behind-the-scenes look at recruiting for industry accounting jobs.

WHY DO AGENCY RECRUITERS CONTACT YOU ABOUT INDUSTRY ACCOUNTING JOBS SO OFTEN?

Have you ever wondered why you get so many emails from agency recruiters, telling you they have a hot industry job that is so much better than your current public accounting job, and you need to jump on it now?

They’re not contacting you just because you are awesome, or because they are performing a public service. No, chances are they are contacting you because they’ve been hired by private companies on a “contingent” basis to find candidates for their open positions, ASAP. 

Contingent means that the recruiter works for free until a candidate they found takes a position with their client.  For most industry accounting positions, agency recruiters get a contingent fee of 25% of the candidate’s starting salary, payable on the day the candidate starts. 

So for an SEC manager position that pays $100,000 a year, the recruiting agency stands to make $25,000 if they can convince you to interview and accept that “hot” opportunity.

Private companies are happy to pay those hefty fees. Their alternative is having the job sit open indefinitely, since audit seniors and managers aren’t applying on their own. 

(Don’t assume that this is easy money, either. I worked as a contingent recruiter for a year, and I can tell you that they really earn their fee, because it’s incredibly difficult to make a deal happen.)

My question to you is this:

If industry accounting jobs are truly a better opportunity, why do private companies have to pay recruiters $25,000 per hire for qualified candidates?

[Side note: Agency Recruiting is almost exactly like public accounting, in the sense that in Agency Recruiting the 'Recruiter' is the star and main revenue generator of the firm, in the same way Public Accounting is where the 'Accountants' are the stars and main revenue generators...

Agency recruiters don't take internal recruiting positions at tech companies because then they will be in the backoffice and seen as merely an expense to the company. Not to mention Top Agency Recruiters can earn 5-10x what most internal recruiters make!  

Ask your Agency Recruiter why they chose Agency Recruiting over internal recruiting and their answer and reasoning will likely be a sales pitch for choosing public accounting over industry accounting.]

WHY DO INDUSTRY ACCOUNTING JOBS OFFER MORE MONEY?

Supply and demand determine compensation. So if industry accounting is a better LONG-TERM opportunity, it should pay LESS than public accounting. Instead, industry accounting pays more because they have to offer the initial salary bump as a carrot, to lure you away from public accounting.

That 10% or 20% increase you get when you take an industry job is your compensation for dropping out of public accounting. In other words, it’s the “opportunity cost” of what you are giving up.

WHY CHOOSE PUBLIC ACCOUNTING?

Here’s what you stand to lose if you leave public accounting:

• If you like to learn and do new things, you won’t get the chance to do so at an industry job. In fact, you may find yourself doing the same few tasks month after month, year after year.

• If a high salary is your goal, think about the long term. Industry accountants may earn more at first, and their pay increases somewhat for the first 5 to 10 years, but additional experience doesn’t boost their compensation much after that. If you become a partner in a public accounting firm, you can earn 2 to 3 times what senior finance professionals are making in-house at industry accounting jobs!
• A CPA firm has many partners, which means you have more career opportunities. There is only one CFO at a company.
• In addition to helping your clients, you can also enrich the culture of your firm and the lives of the auditors you help train and develop. This can be an unexpectedly rewarding part of life in public accounting.
• You get the opportunity to learn about different companies and help your clients operate better. In an industry accounting job, you only learn about one business.

WOULD YOU RATHER BE AN ASSET OR AN EXPENSE?

Perhaps the #1 reason to be an auditor at a CPA firm is that in public accounting, you are an asset, not an expense.

The partners are incredibly motivated to invest in your development, because by developing your skills, the firm adds to the only resource it has to sell ― the time of its public accounting professionals.

If you take a back office accounting job at a tech company, you are merely an expense to the company...

All companies want to increase the value of their assets and minimize the cost of their expenses.

Which would you rather be?

PUBLIC ACCOUNTING IS LIKE BEING AN ENGINEER AT GOOGLE

People join CPA firms for CAREERS, not jobs. You literally have the chance to go from being an intern to being an owner, within 10 to 15 years. 

It’s sort of a modern version of a medieval craftsman’s shop, where you serve an apprenticeship in your early years at the firm, and the partners repay your hard work by teaching you their craft, which enables you to progress and make partner yourself one day.  

If you are an accountant, public accounting is the place where you are the star and main revenue generator.  It’s like being an engineer at a company like Google, which makes its money from the technology its engineers develop.

Let’s pretend that Google has a formal training program, where they hire the best and brightest engineers out of college, and put them in a 10-year apprenticeship. 

Once hired, the apprentice engineers are mentored by the tech giant’s owners. If they stay and perform well, in 10 to 15 years they themselves will become owners and main decision makers at Google.

An agency recruiter contacts those engineers at years 3 to 5, to try to get them to come and work in the IT department at a non-tech company, where they will merely be support staff, not revenue generators.  

To convince them to leave Google, the recruiter offers them:

•  A 10% - 20% initial pay bump
• Shorter hours
• Less responsibility and pressure
• A profit-sharing plan

If you were an engineer, would you leave a Google apprenticeship for that back office IT job, all for an initial 10% or 20% pay bump? 

I didn’t think so…