Assessing accounting skills before employment can be hard! First off, there are so many different specializations within the field, making almost every accounting job unique. This makes it virtually impossible to judge how competent a candidate would be in one role even if they have had experience working in accounting. In addition, while most candidates have probably taken a couple of accounting classes, how do we know whether they can actually translate textbook knowledge into applicable skills in the workplace?
With this question, we see that resumes can be misleading. In research conducted by Checkster, it was found that 78% of job applicants lie on their resumes.
Selecting the best applicant from among a pool of candidates holding appropriate degrees can be a tough job. This is a responsibility that will determine the future of the organization. Gone are the days when a similar question set applied for all kinds of candidates. With the demand for more specific job requirements, it is essential to change the way of screening. Analyzing various parameters will escort the recruiters to the best fit candidate for the job position. But how can you ensure that the parameters you are using are appropriate for that job position? Well, before assessing candidates, it is crucial for the recruiters to understand the right practice for judging the applicability of the candidate.
What are skill tests?
A test that measures the candidate's merit for bagging the job position. It provides the evaluation of the applicant's practical knowledge. The skill tests are designed to analyze the candidate's performance when they face real-life job scenarios. We classify skills into two components - hard skills and soft skills.
Hard skills that the candidates gain through learning are quantifiable. Through these skills, you can assess the job-readiness of the candidate. These are mostly aligned to the day to day activities that the candidate needs to perform daily. For example, the hard skill for an IT professional is the proficiency in computer and data analysis, and that for a designer's position is designing. For an accountant's position, the knowledge of Microsoft Office, SAP, etc., is a must-have. But he should possess the fundamental accounting skills - including preparing the book of accounts, hands-on experience in creating financial statements and balance sheets.
Soft skills are the interpersonal abilities of the applicant and are not quantifiable. People are from diverse backgrounds and possess diverse cultures and varied personality traits. Apart from being proficient in various hard skills, the candidate must be able to collaborate with the team easily. The different soft skills are communication skills, leadership skills, time-management skills, coordinating skills, etc. The recruiters can judge these skills while assessing the candidate's hard skills. You can monitor the time taken by the candidate to complete the task, his body language in addressing challenging questions. Also, you can judge the candidate's communication, including written and verbal skills, analytics, and problem-solving skills.
Assess candidates via skill tests
The skill sets of the employees affect the overall performance of an organization and sustainable employee engagements. According to a report, 82% of industry leaders use skill assessments to judge the suitability of the candidate for the job role. The ability of the organization to lead, manage, and grow depends highly on talented professionals. Ensuring that the candidate has the technical expertise needed for the job role is more accurate through skill tests. However, recruiting the right candidates based on the parameters of skill tests requires the knowledge of the hard skills appropriate for that job position.
Here at Adaface, to solve these problems, we have created screening tests to ensure that candidates’ skills fall in place with job requirements. There are separate tests designed for specific roles to address the high variety in accounting roles. For example, CPAs will have a unique test for their specialization while Financial Accountants will have a different test tailored to their positions’ requirements.
Fundamental concepts for accounting roles
Every accountant should have general knowledge of the fundamental accounting principles. These are the guidelines that must be used to ensure standardization across companies. Here are some of the most important ones:
- Revenue recognition
- Matching principle
- Accrual principle
- Full disclosure
- Historical cost
- Cost Benefit
In this case, we’re not talking about the thoughts we write down before going to bed - a journal entry is a documentation of business transactions. Candidates should be able to properly write a journal entry and understand the different types of entries: adjusting, compound and reversing.
All journal entries are posted into a book called a ledger. Candidates should be able to calculate the account balances of liabilities, equities, assets and expenses. They should also be able to understand the big picture of records to catch any mistakes and categorize transactions.
A trial balance is simply a self-check to make sure that all your ledger accounts balance out. Candidates must identify any errors and transfer final amounts into financial statements.
Profit & Loss Statement (Income Statement)
Income statements have a lot of different components that candidates must holistically analyze. Applicants should be able to prepare income statements, compare statements from different accounting periods, analyze where expenses are occurring and see how all sections of the statement are impacting the bigger picture. Ultimately, understanding an income statement can help accountants understand opportunities for generating profit.
Applicants must understand how to use this document to analyze how a company is doing at a specific point in time and calculate financial ratios. The balance sheet must also be analyzed in conjunction with the other financial statements.
Provisions for Depreciation
For assets that decline in value over time, candidates should know how to lower their value on financial statements and tax returns. They should also be aware of the types of depreciation to make the correct calculations.
Cash Flow Inventory
How good is a company at bringing in cash to pay debt and pay for operating expenses? Candidates should be able to answer this question by analyzing cash flow statements.
Valuation Ratio Analysis
To understand what a company is worth, here are some of the ratios candidates should understand how to calculate and analyze:
- Price-to-book value
- Price-to-cash flow
Technical skills required for accounting jobs
Knowledge of GAAP (Generally Accepted Accounting Principles)
These are the vital accounting principles that define general accounting practices globally. Both public and private firms view GAAP as a crucial requirement for anyone willing to work in accounting.
The accounting candidate must be an expert in Microsoft Office, as this skill is the most basic skill that the candidate must possess. Reading and analyzing data daily forms the basis of this job position. The formulas of excel, sorting, filtering work in the spreadsheet, the knowledge of the pivot table, and VLOOKUP are some essential hard skills that the recruiters must look for in the candidates. This skill becomes more crucial with the growth of the organization. The accountants have to deal with huge data forms with the expansion of the size of the firm.
This skill is mainly required by small or medium-sized businesses. Quickbooks is a software that offers various financial functions like payroll, invoicing and expense tracking. You can guess the popularity of this software with the number of subscribers, i.e., 4.2 million on the online platform.
Knowledge about ERPs
Planning is the foremost step for the proper organization of people and work. Enterprise resource planning software SAP enables the accountants to plan for the purchase of raw materials, for controlling inventory, and allocating work for laborers. This is specifically required for senior-level accountants. Tableau Software and Zoho analytics facilitate data visualizations that enable efficient decision-making for accounting professionals.
Proficiency in the taxation segment
There are complete software solutions dedicated to the taxation part of accounting. Recruiters looking for hiring candidates for this section must look for applicants who are well-aware of the software program for tax preparation. However, basic knowledge of the taxation part is essential for all the accounting candidates, as they would have to handle some of the other tax-related work. The most common software programs that the companies use are Drake, ProConnect, and Lacerte.
Proficient in developing financial statements
The three essential parts of financial statements are the cash flow statement, the income statement, and the balance sheet. The candidates must be able to prepare these three reports as it shows the financial position of any company. The candidates must be able to prepare clear reports that are easily understandable.
- Keeping abreast with the changing business scenarios and government norms on accounting and taxation is the key to stay ahead in the competitive landscape. The recruiters should look for proactive candidates who are eager to stay up to date by acquiring knowledge about various accounting related norms and use it for personal and professional advantage.
Testing skills with an assessment/ interview
Once you know the apt accounting skills, it is then crucial to test for the skills properly to derive an unbiased result and lets you find the most fitting candidate for this job position. For assessing the knowledge on various hard skills, you can follow few points such as -
- GAAP includes a wide range of topics like inventory costs, contingencies, capitalization of interest costs, convertible debt, stocks and dividends, income tax, an amalgamation of financial statements, etc. While assessing for GAAP, including questions from the subjects.
- To assess the candidate's knowledge of Microsoft office and excel, you can prepare scenario based multiple-choice questions that cover both easy and advanced level questions.
- To check the knowledge of Quickbooks, you can ask the candidate to navigate through the functions of this software and analyze the speed and process of the candidate. A well knowledgeable candidate will always use shortcut keys and will navigate fast. They can quickly navigate through all the functions that you ask them to scroll through. You may also ask a few questions like:
1. What would be the journal entry for prepayments of four months of insurance premiums?
2. What are the measures to balance the differences in the bank reconciliation statement?
The primary focus here would be to check the proficiency of the candidate in effortlessly using Quickbooks software.
- To assess the experience of the candidates with ERP such as SAP, the recruiters can design multiple-choice questions and check the understanding of the candidates in strategizing financial planning. You can prepare questions on account of receivables and payables. You can also include questions of topics from financial management, cash and document management, customer management, invoicing, vendor management, etc.
- You can test the job-readiness of the candidate by evaluating their knowledge of the taxation segment. Include questions from the topics like adjustment to income, income, corporate and tax partnership, etc. Evaluate the candidate's experience on Drake, ProConnect, and Lacerte. Ask questions to know their working knowledge on these software programs. For example, you can ask a question like - how can you generate a balance sheet on ProConnect? What are the exclusive features that Drake provides to manage taxation?
- To check the candidate's knowledge of financial statements, you can provide raw data and ask the applicant to prepare an easily understandable report and show that assets and liabilities are logically arranged and matched in the balance sheet. You may also ask questions and provide multiple options. Include questions like What is the profit-and-loss statement also called? Will you include cash in current assets? If not, then where should you include cash? Calculate the net profit on the profit-and-loss statement. (provide an income statement).
- To know the candidate's awareness about current affairs related to accounting, finance, and taxation, including questions on the change of norms or the government's new rules for accounting. For the taxation section, include questions from GST and its norms. They might not know all about the rules and regulations, so provide them the basis for searching them online and extracting valuable information.
After the assessments, for detailed evaluation of qualified candidates you can use a few subjective questions as well. This will enable you to judge the candidate's communication skills. Start with easier questions and proceed towards medium and finally tough questions at the end of the test. Do not ask too many questions; go for specific questions only. Allow sufficient time for the candidates to answer the skill test so that you know that the applicant has been given all the opportunities for success.
Subjective type questions to ask an accounting candidate
You should ask both simple and tough questions. Also, the questions will depend on the level of recruitment, whether it is for entry-level accountants or for a senior position. Test the candidate's fundamental knowledge as well as in-depth knowledge about accounting through properly designed questions like -
- What do you understand by the terms accounts receivable and account payables?
- Name some special journal.
- How would you estimate bad debt?
- What business intelligence software have you used? Elaborate your experience on it.
- What is the impact of purchasing equipment on the financial statement of a company?
- Have you made an error while preparing financial reports? How did you analyze and manage the error?
The skills required for an accounting job vary from workplace to workplace. Though we talked of a number of hard skills that are typically required for an accounting job, every company needs to prudently create the job description. This will help in finding out the perfect candidate who can seamlessly get onboarded to work and will need much less hands-on training. Moreover, nowadays, technologies can play a critical role in assessing the candidates. Various technology platforms help to enable the initial screening processes. Moreover, many psychometric tests are also a critical factor to judge the candidate's fitment in an organization and to check his alignment of thought process with organization goals and objectives. Thus, for the long-term benefit of the organization and sustainable employee engagement, it should create a holistic approach considering all the options discussed above and gain a competitive advantage in the market.
Looking to screen candidates for your accountant role? Check out the Adaface accounting test.