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Quantify the ROI from pre-employment testing

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10 months ago

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As accountants we love to measure everything. We measure ourselves in terms of productivity, recovery and time to close. We measure our firms and clients in terms of margins, investment analysis, forecasts, variances, etc. We know that analyzing these numbers will help us make better decisions. But when it comes to our most expensive investment — our people – why are we so casual? When we find a candidate who seems like a good fit, we tend to do very little analysis. A couple of interviews. A review of the resume. A reference check (if we’re lucky). And then we hope they work out.But as the old saying goes: “Hope is not a strategy.”

I know there’s a lot of competition for good people, but you wouldn’t advise your clients or your firm’s leadership to make important business decisions without hard data to back up those decisions. The same goes for hiring. 

That’s where pre-employment tests come in. There are three important types of pre-employment tests that can help bridge the gap between hiring hope and hiring success: 

  1. Skills testing: This helps you assess the degree to which a candidate has the technical skills and knowledge for the role. Skills tests are particularly important for midlevel roles such as controller or senior associate in which you need candidates to hit the ground running, and where lack of technical capability can be a huge drag on your firm.
  2. Critical thinking testing: This type of test helps you measure a candidate’s numerical and verbal literacy. A candidate’s ability to learn fast is important in all roles, but it’s especially important for recent college graduates and those coming to accounting from another career. You don’t expect them to have deep technical knowledge coming in, but you do expect them to build those skills quickly.
  3. Personality testing: We all try to assess a candidate’s personality in different ways when hiring. There’s no magic formula, but a thorough, accounting-specific personality profile can uncover a lot about a candidate’s working preferences. The profile that’s derived from the test gives you a starting point to explore in an interview. It allows you to assess how well a candidate’s work style and preferences will fit into your culture and work environment.

So, why wouldn’t every accounting firm and corporate finance department want to utilize pre-employment testing? For starters, many firms are slow to adopt it because they don’t think hiring success can be quantified or don’t know how to do it. Until now.

A recent LinkedIn post by Dr. Steve Blinkhorn, an occupational psychologist and psychometrician, unpacks this opportunity and highlights five important elements to measure when determining the return on investment from pre-employment testing:

  1. The starting salary of the position: The higher the salary, the more likely the benefit of testing will be high.
  2. The variability of the applicant pool: It can vary in terms of how well candidates fit the job description. 
  3. The validity of the test: The more likely the test can correctly identify the attributes of a candidate, the more useful it is.
  4. The cost of the test: In other words, what’s your investment?
  5. The number of tests you administer vs. the number of successful offers you make: What’s the “testing-to-offer” ratio? If you generally test many candidates before making an offer, the cost of testing will be higher than if you make offers to many of the candidates you test.

Our company’s experience is that the variability of applicants is quite high for accounting firms. The shortage of applicants means the testing-to-offer ratio is usually low. It’s generally higher for more selective senior positions, less so for bookkeepers and entry level roles, although this ratio seems to be improving. Here’s another way of looking at it. Let’s consider a hypothetical example of a senior tax associate position with a starting salary of $90,000. Let’s say you interview two viable candidates and give them both a technical knowledge test and a personality profile — costing $1,100 in total. Even with similar resumes, the variability between candidates with three years of tax experience can easily be 25%, which can amount to over a $100,000 a year difference in the revenue they generate for your firm. Spending a little over $1,000 to ensure you have the better candidate is a pretty good ROI, wouldn’t you say?
If you’re interested in diving deeper into this area, this study from the Journal of Occupational and Organizational Psychology has more data about the correlation between well-built tests and a candidate’s actual performance in the role.

It seems logical that choosing the best candidate will save significant amounts of money in terms of “bad hire” costs. Now there is a way to quantify it. Of course, the ROI will be less if candidates are very similar; it will be more if they are more diverse. But even with similar candidates, the testing will help you assess how far along through the professional development journey they are, and how smooth (or rough) their on-boarding journey will be. 

The other way to look at this metric is to think about the impact of a bad hire. The drag on your organization can range from moderately annoying to a complete trainwreck. If we’re talking about hiring the wrong senior tax associate from the example above, the cost to your firm or company could easily match their $90,000 base salary. Consider:

  1. Extended training and onboarding time trying to get the new hire up to speed;
  2. Manager and “buddy” time reviewing and reworking to meet client deadlines;
  3. Staff resentment as they watch the associate’s poor performance not being addressed by management;
  4. Team stress and management time wasted by dealing with conflict for which they are often not trained:
  5. The cost of starting the hiring process again:
  6. Projects not getting priority during this period while core work is prioritized: and,
  7. Perhaps the cost of a staff “celebration” on the day they depart.

For more about the cost of making a bad hire, see this free calculator and other resources.

Kayla Schaller-Greenwood, vice president of operations at Workforce Solutions, which helps accounting firms hire candidates ranging from bookkeepers to senior tax associates and controllers, told me that pre-employment testing improves retention rates for her clients because the candidates they end up hiring “fit in better and are more likely stay.” 

Luke Gheen, founder of Gheen & Co. CPA, uses pre-employment testing to vet qualified candidates and to “ensure that their skills match their resume and what they’ve told me in the interview.” He said he appreciates being able to compare the performance of candidates on similar groups of tests over time and to use that data to inform his hiring decisions. “I can hire with much greater confidence now,” he added.As Dr. Blinkhorn noted in his aforementioned post, a cognitive test is probably the best investment you can make to improve the productivity of your workforce. His research found returns of up to 5,000% annually per recruit for cognitively demanding jobs — even when candidates were preselected on academic achievement.

The old adage, “Measure What Matters” has never been truer. Better data leads to better decisions. It also lowers your stress level and allows you to get on with the tasks in hand. Pre-employment testing is not all about reducing risks — it’s also about building a stable, productive and highly performing accounting team.

Happy hiring!

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Accounting

Global ESG Reporting Standards and Double Materiality Compliance

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5 days ago

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August 9, 2026

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Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

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Accounting

Modernizing Internal Controls: Machine Learning and Continuous Monitoring in Auditing

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1 week ago

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August 5, 2026

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Internal audit departments and corporate risk managers are modernizing internal control frameworks by shifting from periodic sampling techniques to continuous monitoring and machine learning analytics. As operational data volumes increase across enterprise organizations, automated control testing ensures financial integrity, prevents corporate fraud, and streamlines annual audit engagements.

The Limitation of Periodic Audit Sampling
Historically, internal and external auditors evaluated internal controls by reviewing random samples of financial transactions—often analyzing less than five percent of total ledger entries. In complex enterprise environments, periodic sampling methods carry inherent risks of overlooking localized financial misstatements, unauthorized disbursements, or operational control breakdowns.

In 2026, progressive internal audit functions are utilizing automated continuous monitoring platforms that evaluate one hundred percent of financial transactions in real time. Continuous control auditing systems continuously monitor general ledger entries, procurement approvals, and expense reimbursements across all operating subsidiaries.

AI-Powered Fraud Detection and Anomaly Identification
Machine learning models trained on historical corporate financial data excel at identifying subtle transactional anomalies that indicate potential fraud or operational error. Automated systems instantly flag duplicate invoice payments, unapproved vendor creation, unusual journal entry timing, and unauthorized override of authority thresholds.

When an anomaly is detected, the automated auditing platform generates an instant risk alert, allowing internal audit teams to investigate root causes immediately. Early detection prevents minor operational errors from escalating into material weaknesses in financial reporting.

Streamlining External Audit Preparation
Continuous internal control monitoring delivers significant benefits during annual external financial audits. External audit firms can review continuous audit logs and automated control testing documentation, reducing the time required for manual field testing.

This integrated approach lowers overall audit compliance fees, reduces administrative burdens on corporate accounting staff, and provides senior management and audit committees with real-time visibility into the organization’s overall risk profile.

Core Implementation Guidelines
1. Transition to 100% Data Testing: Replace legacy sampling methods with automated continuous audit monitoring systems.
2. Deploy Anomaly Detection Algorithms: Implement machine learning models to identify unauthorized transactions and operational control overrides.
3. Align Internal and External Audit Workflows: Coordinate continuous control testing protocols with external auditors to optimize annual compliance cycles.

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Accounting

Automated Tax Compliance and Global Regulatory Harmonization in 2026

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1 week ago

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August 5, 2026

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Corporate tax accounting departments are navigating an era of unprecedented regulatory complexity as global tax harmonization frameworks take full effect alongside real-time digital tax reporting mandates. Tax directors and accounting teams are adopting cloud-based tax compliance automation tools to manage multi-jurisdictional tax liabilities and satisfy stringent reporting rules across international jurisdictions.

Implementation of Global Minimum Tax Provisions
The implementation of international tax reform agreements—notably the Pillar Two global minimum tax framework—has reshaped multinational corporate tax planning. Multinational enterprises with consolidated revenues exceeding established thresholds must ensure an effective tax rate of at least 15% across every jurisdiction in which they operate.

Accounting teams are implementing specialized tax calculation modules integrated directly into enterprise resource planning (ERP) platforms. These automated tools calculate effective tax rates per country, identify top-up tax liabilities, and generate standardized compliance documentation required by national tax authorities.

Real-Time Digital Invoicing and E-Reporting Mandates
Tax authorities across Europe, Latin America, and Asia-Pacific have enacted mandatory electronic invoicing (e-invoicing) and continuous transaction controls (CTC). Under these systems, corporate transaction data must be submitted electronically to government portals in real time at the point of sale or invoice issuance.

This shift toward continuous digital tax reporting eliminates traditional annual tax audits in favor of ongoing automated compliance monitoring. Accounting departments are upgrading invoicing software to ensure seamless XML data formatting, digital signature authentication, and real-time validation against tax authority databases.

Automation and Data Analytics in Corporate Tax Strategy
To keep pace with dynamic tax legislation, tax departments are transitioning from reactive compliance teams to proactive strategic advisors. Machine learning algorithms analyze corporate transactional data to identify tax credits, research and development (R&D) incentives, and cross-border transfer pricing adjustments.

By automating routine tax return filings and calculations, corporate tax directors can focus on long-term capital structuring, evaluating the tax implications of corporate mergers, and optimizing international supply chain networks.

Strategic Priorities for Tax Executives
1. ERP System Upgrades: Ensure enterprise software is capable of generating real-time, granular tax data required for global minimum tax compliance.
2. E-Invoicing Integration: Implement scalable e-invoicing platforms to satisfy regional continuous transaction control regulations.
3. Strategic Tax Analytics: Utilize predictive tax modeling tools to evaluate structural changes in corporate operations and cross-border trade.

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