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How much is that Bad Hire Costing your Accounting Firm (And How to Avoid It)
Accounting Firms
How much is that Bad Hire Costing your Accounting Firm (And How to Avoid It)
Imagine hiring a new accountant for your firm—everything seems fine during the interview, but within months, issues start surfacing. Missed deadlines, costly errors, and even compliance risks start creeping in. Before you even realize it, you are back again on the hiring cycle, spending thousands of dollars and your precious time for a suitable replacement.
Sound familiar? Bad hires aren't just frustrating—they're expensive and resource-consuming. Accountants are the backbone of a company, and bad hiring can have severe repercussions for your business. Let's break down the real cost of hiring the wrong person and how you can stop this problem before it starts with Pre-Built Accounting Assessments.
The Shocking Cost of a Bad Hire
A bad hire can incur substantial direct and hidden expenses that impact your financial stability and business growth. This cost increases with the seniority of the position. It doesn't just affect payroll—it severely impacts productivity, client trust, team morale, and, most importantly, the credibility of the firm.
1. Direct Hiring Costs – Wasted Salary
The visible direct expense is payroll, which completely goes in vain, the prime cause of frustration. Shocking but true: estimated by the U.S. Department of Labor, a bad hire costs 30% of their annual salary. What it really means is that if a CPA earns $80,000/year, that's $24,000 wasted if they don't work out.
Hiring is a tedious process that may cost around $4,700 to $5,000 per employee. A firm having dedicated HR or HR agencies to fulfill hiring functions is a fixed cost. To get more exposure, these expenses get higher.
Job ads: Running ad campaigns for hiring may cost hefty money.
Onboarding Costs: When onboarding a new employee, you need to make a competitive offer to keep them intact, even if they become a non-useful resource in the future.
Relocation Costs: Some employees are also granted relocation costs as a part of their package.
Termination Cost: Terminating an employee involves various costs such as Employee benefits and rights (e.g., severance pay, unemployment benefits, COBRA coverage). If any hire sues for wrongful termination, this may lead to a legal risk, and only legal fees for this can surge up to $50,000 or more.
These factors on recruitment and termination can make the number jump even higher.
Hiring a new one or a replacement is a real burnout. It takes an average of 36 to 52 days, delaying your team's efficiency and productivity. The process contains multiple layers of candidate interviews, checking references, running background checks, Negotiation, and performing hiring assessments, which consume lots of time and energy. Meanwhile, the search for a replacement is on the day-to-day functions of running a business impacting financial position.
Accounting firms operate on billable hours—when a bad hire is inefficient, it directly impacts revenue. Meanwhile, the search for a replacement is on, and the day-to-day functions of running a business impact financial position. Other team members must pick up the slack.
A poor-performing accountant may take twice as long to complete tasks. Financial Mismanagement, Missing IRS deadlines, late filings, and compliance violations can reduce overall team efficiency and morale.
5. Damaged Client Relationships & Reputation
A single mistake on tax filings, audits, or payroll can cost clients thousands. This is what an incompetent accountant and wrong hiring can cost: compromising a client's trust, a firm's reputation, and integrity.
As Forbes reported, 65% of clients who lose faith in their accountants won't return after one bad experience. A bad reputation costs you referrals from your clients, which is a major growth driver for business.
6. Team Morale & Employee Turnover
One bad hire can drive away your business's top talent. Losing one good accountant means losing their institutional knowledge, relationships, and expertise.
When high-performing employees pick up the extra workload, they get frustrated and may quit. 69% of employers report that bad hires negatively impact overall team morale.
A bad hire who misclassifies expenses underreports income, mishandles tax filings, or has any lag in compliance can expose firms to hefty paneity and even circumstances for audits.
Failing to non-compliance with SOX (Sarbanes-Oxley) alone leads to finesranging between $1M to $5M to firms. In 2021, Kraft Heinz was penalized $62 million by the SEC (Securities and Exchange Commission) for violating SOX compliances.
So, an employee can become fully productive in their job role.
Training an unqualified accountant wastes time and resources, taking up to 3-6 months. The accountant's role is not simply on-the-job learning; it requires specialized knowledge and experience.
Firms spend an average of $1,286/year on training per employee. So, instead of investing in a bad hire, we need to ensure quality hiring from the very beginning.
To minimize the risk of hiring mistakes, organizations should take a strategic and thorough approach to recruitment. Here are some key strategies:
Clearly Define Job Roles – Ensure job descriptions accurately outline responsibilities, expectations, and required skills to attract the right candidates.
Enhance the Interview Process – Implement structured interviews and behavioral questions to assess both technical abilities and cultural fit.
Use Assessments & Screening Tools – Skills tests and personality assessments can help determine whether a candidate is a good match for the role.
Conduct Thorough Reference Checks – Speaking with past employers can provide valuable insights into a candidate’s work ethic and performance.
Leverage the Onboarding Period – Treat the first few months as a probationary period to evaluate whether the new hire meets expectations.
By refining the hiring process and focusing on long-term fit, companies can avoid costly mistakes and build a more successful, engaged workforce.
Conclusion
The cost of bad hiring is beyond lost salary, affecting goodwill, team moral, legal circumstances and client relationship. A single wrong hiring and you will find yourself surrounded by the domino effect of monitory losses, inefficiency in operations and reputation damage.
However, following a strategic approach of skill assessment, clear defanging role and optimization of onboarding can significantly reduce the risk. Investing time on hiring not only saves your money and resources but helps to attract and retain top talent, foster a collaborative work culture and win client's trust.
Amrit has over six years of experience in continuing education, focusing on CPE for Accounting, Tax, Finance, HR, Payroll, and Technology in the US, Canada, and UK. Amrit simplifies compliance, creates easy-to-use solutions, and helps professionals stay updated while saving time on their education requirements
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