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[00:00:28] Preview
David: But it's one of the favorite things I've read, and here's why. Unlike our favorite congresspeople, who just like to write letters and bitch, she wrote this blog post with like all these great suggestions in it.
Blake: Yes. Yeah, really good ones.
David: And the other thing I love is- and people should just take this- she had- she was using this an acronym MSPs, and I'm like, what the hell is that? So, I had to dig in.
Blake: Managed service provider?
David: No, it's most serious problems.
Blake: Oh. Most serious problems.
David: Which I love. I’m going to start using that. I love it. What are your MSPs? Actually, you could ask your clients that. What are- you’d be like very smart, what are your MSPs?
David Leary: Coming to you weekly from the OnPay recording studio, this is The Cloud Accounting Podcast.
[00:01:14] Introduction
Blake: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver.
David: And I'm David Leary. Blake, if you noticed, I moved my camera a little bit, because now that you're filming these things and putting them online. I almost asked- I almost reported them to like, get them removed, some of these posts. ‘Cause my other- in the studio, like, the camera’s too close to my face.
And so, I'm just trying to present a little bit better here.
Blake: Well, everything's about-
David: Put my [CROSSTALK] shirt on, you know?
Blake: Oh yeah, that's very nice. You’re branded up. Everybody is all about video these days, so I figured we should do it too. Why not?
David: A little bit, a little bit.
Blake: See if it helps. Yeah.
David: I don’t have a face for video, man.
Blake: Well, at least we're not doing this in person, right? That would be a lot more work. We'd have to dress up. I gave my first in-person talk in quite a while this week. I went and I spoke at-
David: I think I saw a tweet or something about you.
Blake: Yeah, I went and I spoke in Jacksonville, at the Padgett Business Services annual get-together franchisees. Padgett.
David: I saw that, and it looked like the speakers were all accounting slam people.
Blake: I think so, yeah. Because Amanda Aguillard is the COO there, and Jeff Phillips who founded Accountingfly is the CEO. And they have come into this franchise, Padgett, which has been around for a long time, and they are modernizing it, bringing the franchisees into the cloud. And so, this was a gathering of the top 50 practices.
And it was great. It was great going out to meet them and talk to them. And I talked a lot about subscription economy trends. I did my usual tech trends talk, but I focused almost exclusively on the subscription economy.
David: Did you talk about the car wash in Tucson?
Blake: I know I didn't mention that. That would have been a good one. Most of my examples were actually like, bigger technology companies, which probably wasn't that helpful, but I don't know.
[00:03:06] What's going on with Netflix?
Blake: I'm obsessed with the subscription economy now. So, I was talking about that and the news that I used as my jumping off point was something that will be perhaps interesting to our listeners - Netflix and their stock price cratering this quarter. Have you followed that, David?
David: I did see that, yeah.
Blake: So, Netflix. Let's see what it was or where it's at right now.
David: 'Cause they lost subscribers for the first time in a decade, right?
Blake: Yeah. They're down 67 percent year to date. And a big portion of that drop happened on a single day. I think it was like more than 30 percent happened on April 19th or 20th when they released earnings. And I find this fascinating because the headlines about Netflix were all, “Netflix loses 200,000 subscribers, stock price drops 30 percent.”
And so, I'm curious, what else is going on? Is that 200,000 subscribers number the real reason that the stock price fell so much?
David: Yeah.
Blake: I went and I looked at their financials, and their profits are good. They had a really good quarter. They had really good cashflow- better than many other quarters where they've been growing. And so, it really was the subscribers. That's what drove the stock price down.
I think this is fascinating because it shows just how much investors care about that metric now. And I think in the past, they didn't. They didn’t understand it.
David: What are you thinking about subscribers? But this goes back to these arguments of like, they don't care about the financials at all. ‘Cause they're logically stepping back and looking at this, like, “Okay, Netflix has raised prices.” Netflix is what, almost 20 bucks a month now. Maybe I'm paying 22 for the 4k plan with multiple devices, I dunno.
I'm paying like 22 bucks a month or something for Netflix. And well, if budgets get tight because of the economic situation here, people are like, “Okay, I can get Netflix that has kind of okay shows right now. Or I could get Hulu, Disney and Paramount for almost the same price together, or you know, add it up as one Netflix.”
And so, that's what I think investors should worry about, which is not the financials. Here we go, right? Like, they're not looking at- they're making- they’re pricing this on perceived future value based on the subscribers and the way the market is. Netflix grew for a decade with no competition, basically. Their competition was Blockbuster, but now they have real competition.
Blake: Well, and I happen to think that the investors are wrong about this. Like, people selling the stock are wrong because if you look at why Netflix lost subscribers, it was because they pulled out of Russia, and they had a ton of subscribers in Russia. And then they also raised prices in Q1, which is why even though they lost subscribers, they made more money.
David: Now they have more capacity as they raise the prices.
Blake: Right. I guess. Although like, does- how does that even work with Netflix? Like, I mean, they pay for bandwidth? But you know, I guess they can make more shows with that money. Right? They have more free cash flow to make more shows.
David: And the problem that if you want to compare them to HBO and the other ones, they've kind of depended on their algorithm too much. And this is the problem with algorithms, right? They started making the most basic- it's all true crime and average comedy. Like, that's your two winners, right? And so, it's like, “Oh, we'll just pump out Adam Sandler films because the amount of minutes it gets watched,” right?
They're not taking chances. In the meantime, HBO’s spinning up- what's that called- Euphoria and Apple's taking chances. And these other [CROSSTALK] are actually creating really, really great shows now, but the algorithms would not have made those shows. Like, they almost are like a victim of their own success. They keep pumping out like, [INAUDIBLE] kids views, so let's make more-
Blake: Of that.
David: It’s really like high-fructose corn syrup shows. Right? It’s gonna catch up.
Blake: Yeah, it’s a good point. I am a big fan of their new national park show. Our Great National Parks.
David: Wife’s been watching that. I have not watched it yet. The wife’s been watching that.
Blake: It's brilliant, but again, I bet you that one was developed because they saw, “Oh, so many people watched Planet Earth when we put that on Netflix,” right? And it's basically a bit better- the next generation of Planet Earth. So, maybe you have a point there. Even though they have competition though, David, their share of total U.S. time- U.S. TV time increased in the last year.
David: But that’s a famous quote from their founder that they're not- they don't have competition. Their competition is sleep. Like, that's kind of their [INAUDIBLE].
Blake: Yeah. They have 6.4 percent of total TV time now. So, to get back to the point about the stock price going down and in that, the investors really care about subscribers.
[00:07:56] The growth of the subscription economy
Blake: And so, I use that as my jumping off point to talk about why the subscription economy is important, and how accountants don't really understand the subscription economy. So, here I am, I have worked in tech companies for the last four or five years, where I've learned how the subscription economy works. ‘Cause that's how we sold our software. It was all SaaS subscriptions, and here's what you need to know about it.
And here's how you can apply that to your practice because all the really fast-growing practices are selling accounting services, tax services, as a bundled subscription. And I think the reason that most firms are unable to make that leap from selling hours and services to selling a subscription is because they don't understand the accounting.
Because the accounting is different. It’s different than GAAP.
David: Yeah.
Blake: Tech companies don't look at the GAAP financials. Unless they could become really, really mature, they don't even pay any attention to them. And so, I talked about the growth of the subscription economy. Like, if you don't know, the compound annual growth rate of SaaS companies or subscription companies, all subscription-type companies over the last 10 years has been 17.5 percent, which is crazy, compared to the S&P 500, which, you know, they've had like growth of 3.8 percent over 10 years.
So, the line is just up into the right, whereas-
David: And the valuations are even more ridiculous, right?
Blake: Yeah, yeah.
David: The- you know, 100 percent SaaS revenue or whatever, recurring revenue, your valuation is way higher, right?
Blake: Right. Right. Yeah. And that's the thing. Like, accounting firms that sell subscriptions can get two to three times their annual recurring revenue when they sell, as opposed to a traditional transactional practice, which is lucky to get one times annual earnings. Like, that's a huge difference when you retire or when you want to cash out.
David: I mean, there's a reason Intuit is- moved QuickBooks Desktop to monthly subscription, right?
Blake: Yeah, yeah. It's painful. It's painful when you do it. There's this famous fish chart that shows revenue dipping and costs rising for a period of time. And that's always what happens when you switch these models over. Because if you go from selling something upfront at a fixed price there for like a whole year or more, especially when it comes to software, people would buy one license of QuickBooks Desktop, and then use that for years and then they’d buy another one.
Well, once you switch to a subscription model, now you're not getting all that upfront as a company, you're getting it over months and months and months, maybe 36 months. So now, your revenue is down and your costs go up because now you've got to add more value to these customers. So, the classic case study is Adobe.
When Adobe made this switch, they got hammered quarter after quarter after quarter by the street because their GAAP financials look terrible. Now, they're a huge success story. They are doing better than ever. They're killing it with their unlimited monthly subscriptions to all their apps. It's just incredible.
They've brought so many more customers in now because of it that never used to use Adobe products.
David: Oh, if I was Intuit, I’d be doing this. You get the personal finance, you get tax, you get QuickBooks, you get ProSeries, everything Intuit makes: MailChimp, et cetera. You just- I’d do- like, that's the way to go.
[00:11:16] Tien Tzuo's "Subscribed" - and the subscription economy income statement
Blake: Yeah. So, I'm a big fan of Tien Tzuo’s book, “Subscribed.” And in that book, he has a way of describing how SaaS companies look at the world through what he calls the subscription economy income statement. And he basically rewrites, he moves around lines on the income statement to create something that makes sense for a subscription business, where a traditional P&L doesn't, and without going into it, ‘cause it's hard to visualize it without a visual.
It's hard to see it. Basically, it's the breakdown of your expenses into recurring and non-recurring costs. And what you try to do is you try to figure out, what are my recurring costs to support recurring revenue? And the difference between those is my recurring profit. And your recurring profit is what you have to invest in growth.
And so, the reason that subscription businesses will look really unprofitable on a GAAP basis is because they're taking all that recurring profit, investing it in sales and marketing, which is not viewed as a recurring expense. And that becomes future customers. That becomes future annual recurring revenue.
And so, if you have good economics, where your lifetime value of a customer is greater than their cost to acquire that customer, there's no reason not to plow all of your recurring profit into growth. Because you know that down that line, you're turning those dollars of sales and marketing into multiple dollars of recurring profit.
[00:12:46] It doesn't work with the old partnership model
David: So, in the partnership model though, it's probably not gonna happen.
Blake: Right. Because-
David: [INAUDIBLE] probably get their check, right?
Blake: ‘Cause partners are compensated based on their period profit, their profit for this quarter or this year. They're not compensated on future recurring revenue. Right.
David: Yeah, yeah, yeah. You have to change it into ARR and go from there. Yeah.
Blake: So, there's very little incentive. There's no incentive for an accounting firm. Like, the business model or the compensation model, just doesn't support this.
You'd have to rejigger the whole thing to support this. And actually, that's a really good point, David. Like, I think a firm that wants to move to subscriptions to change how they compensate people don't compensate them based on the profit for last quarter, compensate them based on recurring revenue that's been added.
So, I went through like, how do you calculate lifetime value? How do you acquire- how do you calculate CAC, cost to acquire a customer? And then that golden ratio, which is you divide lifetime value by CAC. And software companies try to get that at three. So, for every dollar of sales and marketing, you try to get $3 of future profit.
And the big thing is- and this is hard for accountants is- you don't view sales and marketing as a period expense. You view it as a CapEx, because think about it. What are you doing when you acquire ARR? You are building an annuity. It's an intangible asset. That customer that you just got by spending on sales and marketing, they're going to stick with you for X number of years and deliver X amount of profit over that time.
David: As long you keep providing value, they're going to not leave. As soon as you-
Blake: As long as you- yeah. And you can even build the churn. You build the churn into the lifetime value. So, you assume that they're going to leave you eventually, because every customer does. And so-
David: And even if they do though, usually, too, you leave, it takes you six months to cancel your subscription, right? You know, like how I’ve been giving this value to Netflix, “I'll give it another month try, I'll give another month try,” then it takes you six months like, “Finally, I'm just going to kill it.”
I'm not using anymore. I haven't watched it in six months, but it takes a long time. You just waste money on SaaS.
Blake: Yep. And so then, I also told the story about the Steve Jobs accounting change that we talked about last episode, and how if you try to like, measure your firm on individual P&L's for each department and each team, each job, you will never do this. Because software companies, subscription businesses, they think about the revenue first, and then the cost second.
You don't price based on costs, you price, and then you try to minimize your costs so that you achieve maximum profit. And that's really hard because it's backwards. Transactional accounting is all about building products, widgets, right? And you accumulate all these costs. You buy a machine, you make the widgets, you put in your labor costs, your overhead.
And now, you've got a price- a cost per widget after you make them, right? And then you've got you sell them. And your- the difference between your sales price and your inventory costs, cost of goods sold is your profit, right?
David: Yeah.
Blake: But in a subscription, you go out and you get the customer, and then you provide the service, and your cost comes second. And it's a total- then that was a realization I had recently that I- it’s my theory is that GAAP accounting, because it goes the other way, makes it really hard for us, as accountants, to understand and value the subscription economy.
Even when we see how successful subscription businesses are, and we use them ourselves, and we like them, right? We prefer them. Everybody prefers a subscription, versus paying one off. Like, who wants to go buy CDs again? I'd rather pay whatever it is, 10 to 20 bucks a month to get unlimited music.
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[00:17:43] More companies disappearing before the tax deadline
David: I have some other news that I can bring in here. A follow-up.
Blake: Yeah, like, let's get to the news, right? Let's talk about-
David: I have a follow-up on the- was it Osidon? Who is the world's first online accountant, blah, blah, blah that pulled the plug a week before tax deadlines?
Blake: Osidon.
David: Osidon. Yeah.
Blake: Or Osidon, or whatever you call it.
David: So, just to- you know, it's not just the tech companies apparently doing this. There was an article- so, this is a firm in Lambert, Michigan. And this is on, you know, that 13 ABC kind of a local news coverage, you know? Like the 13 on your side, where they're going to- so, they started getting calls and complaints.
Apparently, on the morning of tax day, April 18th, 2022, dozens were waiting outside the offices on Summerfield road for owner, Brandi Bunch, to finish the job.
Blake: I saw this.
David: They basically- so, there's Brunch Accounting and Tax. The doors were closed, lock, and everything's locked up, and these people can't get the returns. They just want, at least their paperwork back so they can give it to a different firm. I don't know why this has happened. There's not a lot of details on this, but yeah. but it's not just the tech companies.
I don't know. It's just sad, you know, in a way, because who know what’s-
Blake: I know.
David: -going on personally that causes a firm not to get these tax returns done.
Blake: I've never seen a news story like this. I've never seen a new story where like the tax prep shop just shut down and everybody's left in a lurch. I mean, I know it happens, right? Especially if somebody dies, but this kind of thing? Yeah, very unusual.
David: But it’s like this industry is like, “Hey.” And who knows, it could be a personal issue. It could- who knows, right? Whatever it is, but I think the industry is kind of open to like, “All right, I'll help you out. I'll get extensions filed for all your clients for you.” I just think that's the community we're in.
But it's a shame. But this was covered like local news. They get in, “Where's my, you know, where are my returns?” And obviously, something went wrong. It doesn't- this was not a, they just spun up this year and they vanished. Like, she's on LinkedIn, since she's been around for nine years, you know, offering your appointment six days a week.
So, something obviously went wrong.
Blake: This is the ultimate impact of burnout right there. Just straight up fled during tax season. “I'm done.”
David: And then just like two other things in this article. One is, they actually say that some of the clients were contacting the police to get involved, to try to get their documents back. And then one of the clients went to the IRS website and it says there hasn't been a tax return filed.
[00:20:12] Taxpayer Advocate article with suggestions to improve the IRS
David: But I saw a huge article from the Taxpayer Advocate this week. And I think you saw it too.
Blake: Yes.
David: About the IRS website- quote- I'm doing air quotes here.
Blake: Yeah. It’s kind of neat that that client was able to go online and see whether or not the return was filed. But that's one of the very few things that you can actually do online with the IRS. There's a whole bunch of stuff you can't. And National Taxpayer Advocate, Erin Collins, wrote a blog post this past week, urging the IRS to expand online services for taxpayers, tax professionals, and businesses, while reducing its reliance on paper to improve taxpayer service. So, what recommendations-
David: It's one of the favorite things I've read, and here's why. Unlike our favorite congresspeople, who just like to write letters and bitch, she wrote this blog post with like all these great suggestions in it.
Blake: Yes. Yeah, really good ones.
David: And the other thing I love is- and people should just take this- she had- she was using this an acronym, MSPs. And I'm like, what the hell is that? So, I had to dig in.
Blake: Managed service provider?
David: No, it's most serious problems.
Blake: Oh. Most serious problems.
David: Which I love. I’m going to start using that. I love it. What are your MSPs? Actually, you could ask your clients that. What are- like, it’d be very smart. What are your MSPs?
Blake: Yeah. I mean, ideally, the IRS could become very self-service if tax pros and taxpayers could plug into the databases and just ask- service themselves. A lot of times when you call up, you're just asking for information. Like, was this filed? What's the payment due on this? Where did you apply this payment? You know, what's the current amount due? All that stuff ,you could just expose that and we could go get it ourselves.
David: Yeah. And she really calls out, like in this article, how there was a couple oddball tools here and there, like Check My Return, these little apps for individuals. But really, it's complete inadequate for taxpayers’ businesses and tax professionals. Like, it's really just- for the professionals and businesses, it's super, super lacking on what you need to do with the IRS.
Blake: Yeah, yeah. Some basic stuff like the ability to send and receive messages with the IRS. You can't do that right now, other than fax and mail. The ability to upload or download documents or data, electronically chat with an IRS representative, receive emails of pending action items, and electronically access notices or correspondence, together with the ability to upload responses.
And she'd also like taxpayers to be able to obtain filing or payment reminders, and regular billing statements online, check the status of an original or amended tax return, receive notification of delays, and instructions on how to clarify an issue, and communicate with an IRS revenue agent, revenue officer, or appeals off.
David: And it's great ‘cause she frames this like, in a very, very smart way. Like she has a sentence here, “Whenever the online account application- and when she says application, this is like the app, right? The website- falls short of providing what tax paper- taxpayers want, need, and expect for service,” like it's just- this goes back to these conversations about like what your client's expectations are.
Like, solve for the client. The IRS is not solving for the client. For the customer.
Blake: No. But to be fair, they're just trying to keep up with that paper backlog. They don't have enough people to process that stuff, like we talked about in previous episodes. They're still keying in all the data into the transcripts tool in order to process anything. They have no way to scan documents and optically- do optical character recognition, and put them in the way we can with all of our stuff. It's really a shame.
David: And she argues that the lack of this is what's clogging up the phone lines. And she actually, in this, proposes, for lack of better words, a TurboTax Live model or a QuickBooks Live model called IRS Live. You're in the website, you can log in, you can check payments, you can check your status. You can chat, if you want.
Oh, I need a little- I have a teeny question. Maybe I can just chat it really quick with an IRS agent. Maybe they jump up on a video call with you. Like essentially, she's proposing IRS Live. And if you can self-serve most of your stuff and just get a 10-second answer while you're on the website right then, you're not going to call up the IRS phone lines.
Like, it doesn't have to be this face-to-face IRS phone line thing. I just really thought it was funny how she's thinking about this from a holistic- she used a holistic experience, right? This like, IRS Live. It's just, she's really thinking about the experience, which is just amazing.
I don't know if anybody's listening to her other than us, but-
Blake: I know. Well, here's my question is, this is a great idea. It's a specific project, which is creating a comprehensive online portal for taxpayers and tax professionals. Why can't Congress just fund that? They don't even have to argue about increasing audits, they don't have to argue about all that stuff – enforcement.
Just put money toward building this, or maybe just hire.
David: As a start, yeah.
Blake: Maybe just hire a company to build it for them. I mean, there's plenty of self-service portals that businesses of all kinds use. Really big ones so that, you know?
David: And she also came out and she said she strongly encourages the IRS to prioritize the ability for tax professionals to view this data for their clients, because that ultimately, will save phone calls to the IRS and et cetera. So, she’s solving for the bigger industry, which ultimately solves for the IRS.
Blake: You want to get to the app news? ‘Cause we didn't get that last week.
David: Yeah, there's a lot of app news. I’m just making sure there wasn't anything else. Oh, the only other thing she really suggested, which she basically describes, you know, like when you get a package from Amazon, you can watch it being shipped all the way to the truck when it's five stops away.
Blake: Yeah.
David: That should happen with your return.
Blake: Yeah. Well, most accounting firms should have that too.
David: Yeah. Right?
Blake: That would reduce the call volume during busy season, is if you could just automatically let your clients know the status of their return at every stage.
David: The last status I have is when I took a photo in the priority mail envelope I put it in at the post office before I mailed my paper return. That's it. I have no idea what's going on with my 2020 return. It's out the door. I don't even know if it was delivered. That's where I’m at.
Blake: So, let's get to app news.
[00:26:17] What did David think of Blake's Wayne Chang interview?
Blake: I want to kick things off with a comment on the Digits interview that I did with Wayne Chang of Digits. Did you see that? Did you listen to that?
David: I did listen to the interview. Yup.
Blake: Bonus episode.
David: Bonus episode.
Blake: What’d you think?
David: So, if anybody is listening, it'll be the one between episode 275 and 2 76. There's a bonus episode.
Blake: Yeah. What'd you think?
David: I thought it was short and concise. I also feel like- I don't know if naive is the right word. Like, there's some part of it that feels very naive of what this industry is like. But another way- another sense though I heard him- I mean, when he talked about like, “Oh, we raised all this money, ‘cause we know it's going to take a long time to like win accountants,” right?
Which I thought was kind of interesting. So, at some level, it's like- it feels like it's green, but at same time, he's like, “I recognize I'm green.” I don’t know.
Blake: Yeah. That was good. I liked that part about what Wayne said. I got a message from a founder who will remain anonymous. And I wanted to read that. He said, “Oh boy, do I feel better as a founder in the space after listening to this podcast. Not sure how he didn't have an answer for how he is different from Fathom or Reach.
I heard a lot of Silicon Valley jargon without any connection to actual accountants, or how people really work with clients. Maybe they do figure it out, given how much money they have. So, I'll stop piling on. Overall, really impressive job balancing, challenging him while going through the interview.” So, thank you to our anonymous listener who sent me that message.
I'm glad you liked it. It wasn't easy. We didn't have a lot of time either. I wanted to dig in more. And I've been thinking about that a lot- the answers, the questions. And I guess the question I still have is- and I don't think anybody has solved this in the reporting space. Or I suppose like, the opportunity is you can get all accountants to use this reporting tool to replace Excel for reporting to their clients.
Because that's what people are doing now. Most firms export to Excel, create the reporting package, PDF it, or send the Excel file to their client. And that's a time-consuming task. It's a big manual process, and you could save an hour or more per client per month, if you could automate that. Now, why hasn't anyone figured out how to do that yet? And I think the-
David: Well, I mean- and we'll have to talk about when we get to the Intuit app news this month for April’s updates.
Blake: Yeah, yeah, yeah, yeah. Maybe they'll figure it out. But like, I feel like the reason it hasn't happened yet is because reporting is a very customized thing. And so, if you're going to build a reporting tool that somebody can roll out for their whole practice, it really has to handle all the edge cases. Because what'll happen is you'll have this beautiful set of reports, and then a client will say, like, “Oh, I need this thing for my business, this additional report.”
And now, you're back in Excel having to build it, pull the data in from somewhere, build the report, send it. And Excel is the most flexible system there is for reporting. You can do anything with it. And so, that's what we all end up using. And so, that's why it's really hard to build a reporting solution for accountants because every business is different.
And I mean, even if you have a firm where all their clients are the same, their particular industry, chances are your solution, which is for all types of businesses, isn't going to have the thing they need for their particular industry. So, it's really hard to build an all-in-one reporting tool.
David: And I think if you go back to like, Kevin O'Leary said when we were at the Sage Intacct conference, right? Like, every business is an everything business. Like, it's not just a restaurant anywhere. It's a restaurant with an e-commerce store for their barbecue sauce and t-shirts. And like, no business is just a business.
So, like, how you [INAUDIBLE]? Every business is super unique at some level, right? There's not- unless it's, I think, dental offices I think seem to be very cookie cutter, but that's about it. No offense to- not all the dentists are going to let us have fun.
Blake: Well, I mean, I'm sure even they have like a variety of different services they offer.
David: Models.
Blake: Like, do you do the teeth whitening machine? You know, like maybe your dentist wants to see the margin on just that, right? And oh, if the reporting tool can't pull in some metric from the dental practice management software, you got to do it manually. So, that's the challenge of reporting is, and maybe that's what they'll do with all that money.
[00:30:52] QuickBooks announced their April 2022 updates
Blake: So, what's the QuickBooks tie-in you mentioned?
David: Oh, so, QuickBooks had announced their online April ‘22 updates. And the very first thing listed here is ‘Spreadsheet Syncs for QuickBooks Online Advanced.’
Blake: I saw that.
David: So, Microsoft Excel now directly connects with QuickBooks Online Advanced, making data transfer and reporting a lot easier. I'm assuming this is their DataDear acquisition. They've rolled it out.
Blake: Right. And DataDear is an add-on for Excel that connects to QuickBooks and then imports your data automatically.
David: And so, essentially, you have live Excel spreadsheets connected to data and QuickBooks updating real time, right? It goes back to what you said. Like, it takes a long time to create these reports. Well, maybe it's going to take less time.
And the second piece of this, and now, they have another announcement. They've now integrated FP&A software now. And this is a company called Centage Planning Maestro. How do you say this word?
Blake: Centage Planning Maestro.
David: Centage Maestro, Maestro. Got it.
Blake: Maestro, like, you know, Maestro of an orchestra. Yeah.
David: Maestro like musician. Yes, yeah. All right, everybody. Just to let you know, like, when you start recording these things and you see words on the screen, your brain does not process them correctly sometimes. You just see the letters and you're like, how do you say this word?
Blake: I think we all- we all forgive you, David. It's not easy.
David: But this actually, it's funny. Like, over here on one hand, like, oh my God. Connecting to Excel in real time, like very exciting. Then I went out to this other- Centage’s website and-
Blake: Centage.
David: Centage.
Blake: Like percentage.
David: And it looks like old-school desktop enterprise sales. Like, there's no screenshots. There's not really like- at least, like an old-school website. It doesn't feel like a SaaS type thing. And I’m kind of like, is this like a two steps forward, one step back on this? I don’t know. You were at Jirav. Like, what's your take on them integrating FP&A into QuickBooks Online Advanced?
Blake: So, I interviewed at Centage for a position, at one point in the past. And I really like the leadership there. Didn't end up joining, obviously. They are a product that's been around for years. Like, I want to say decades, and desktop-based originally. And they have migrated that software to the cloud.
They were, I think, big with QuickBooks Enterprise, right? Connecting your data into Centage and then doing FP&A pretty early, before others. But yeah, they definitely have that disadvantage of being a more legacy product that's being cloud modernized.
But some products like FP&A software can do that and be very successful because there's a lot to do with FP&A to build it from scratch. So, if you've been around for a while, you've already solved a lot of the problems that the newer companies are just encountering. So, you know, I imagine this deal happened because of that long-term relationship with the QuickBooks Enterprise.
David: Like they were deep with the Enterprise team originally. Yeah.
Blake: I feel like it. Yeah. Yeah.
David: That makes sense.
Blake: And again, when you do this sort of thing, you want- like, if you do a partnership with QuickBooks Online Advanced, you want a solution that can handle all the edge cases.
David: Yeah. Or has the 20 years of depth in the app, et cetera.
Blake: Yeah, yeah. That's what I mean by that, yeah.
David: And there's two other kind of interesting ones that were in the announcements. Usually, I blow off the Online- the announcements that they put out, but this one, all four kind of caught my eye. They are going to start opening up QuickBooks Early Pay for the employees.
And this one's really interesting to me because it really worked back to if I go back to View My Paycheck. So, when I built View My Paycheck, first, it would just- we'd have the pay stubs for employees available on Fridays. And we changed because most employers would upload on Wednesday, the direct deposit. So, we opened it up.
So, as soon as we got the pay stubs, we let employees view them. And we shifted the entire traffic on the website from Fridays to Wednesdays. So, even though people weren't getting paid till Friday, they're coming in on Wednesday to see how much they were going to get paid, because they're budgeting, basically, right?
They're trying to plan it. And so now, they can write inside that app, which is now called Workforce. It's not called View My Paycheck anymore. They can actually request early paychecks, essentially. And so, Intuit’s going to send them money.
Blake: Intuit floats the money.
David: It's similar to a lot of those other early pay services that are out there, where you can get your pay two days early. A lot of employers doing this.
Blake: Yeah. Yeah.
David: And so, it's built right in, which makes perfect sense. This is going to drive more traffic to the consumer side of Intuit, right? Eventually drives them to TurboTax and all the consumer products that Intuit has. But that's kind of exciting that that's out there.
And then the other one is, again, there seems to be another connect to Square app. Like, I think this is like the fourth or fifth connect to Square that's either been built by Intuit, Square. Together, they paid their parties to build them like- so, there's a legacy Square app’s going to retire May 15th, 2022. And you have to connect to the new Square app. Another one.
Blake: Another one.
[00:35:43] Thank you to our sponsor, Relay
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[00:37:05] Brex acquires PRY Financials
Blake: Did you see the news that Brex acquired PRY financials?
David: Yes.
Blake: They paid $90 million for the 10-person software startup, PRY financials. And I know about PRY because they were on our competitive radar at Jirav. They do proforma spreadsheets or they replace them, is what they say, right?
The forecasting - financial protection, scenario planning, hiring plan, KPI, dashboard, all that.
David: I never heard of them. So, I hooked it up. I connected it- seemed to like connect to my QuickBooks, but it seems, unless I really go in and connect it to payroll apps and project out employees, I don’t know what they normally use it for. I just try it out.
Blake: Yeah, you got to build like a financial model with it.
David: Yeah.
Blake: And I thought this was interesting because Brex is- how did they define themselves? I mean, they're basically online spend management credit cards and banking now.
David: Well, BillPay, banking.
Blake: BillPay, yeah.
David: They already started building dashboards. We talked about this. Like, they're going on the march to be a full financial tech stack, not just expenses.
Blake: Yeah. Which is-
David: Right? Everybody thinks they're QuickBooks. Like, that's maybe a t-shirt we'll- for the next two years. Everybody thinks they're QuickBooks.
Blake: Well, they want to be, right?
David: They want to be QuickBooks, yeah.
Blake: But it's like such an ambitious thing to do. And I mean, I always wonder when they start doing this thing, like, maybe you should just stay in your lane, rather than trying to be everything to everyone. But you know, if you can- if you can do it, then you're going to be-
David: I mean, I've always felt that like, nobody's won expense cards yet.
Blake: Right. Why not just win that first? Right?
David: Like, you have a very nice business if you just win that.
Blake: Yeah.
David: Just win it. Right? And then after you win that, now you can do anything you want, but like, it's- you're right. Does this distract companies when they start adding- I think we saw like that, Expense [INAUDIBLE], they want to do payroll, they want to do this. You know, everybody wants to add a GL.
Like, does that really distract and make the- and it's funny ‘cause I've seen Intuity even. The pendulum swings to where Intuit, in the past, acquired a construction app and a nonprofit app. And they- all these desktop apps and they eventually sold them all because it was just too distracting.
You ruin your core offering if you do these things.
Blake: So, here's where I think the PRY acquisition could be really, really valuable for Brex. And this is what I hope they would build. One of the problems with spend management is that often, the cards and the limits are not linked to the budget. So, you, as a controller or a CFO, you have to manually enter these amounts-
David: Genius.
Blake: -to restrict employees from spending too much. You know, set the budget. You have your budget over in-
David: ‘Cause that’s the biggest sell of all these new card startups. You can control the budget on each virtual card for each employee and all that, but where's that budget come from?
Blake: Right. You have to go and manually update it all the time. Every time your forecast changes, every time your budget changes, which in a startup and fast-growing company is if you're using FP&A software, can be every week.
David: And then it dynamically changes and updates people's budgets-
Blake: Spend.
David: -and their cards. That's genius.
Blake: You could dynamically update the marketing spend card for Google ads to set the limit so that it doesn't go over.
David: That's really, really smart. It's very, very smart.
Blake: You know. So, I think that's what they would be doing. And that’s what they should be doing.
David: And I think I talked about that before, when we did a webinar with Jirav and Melio before, where you make your plan, and it goes and it adjusts all the dates of the bills inside of something like the bill payments in Melio, right? Like, so there's- I don't buy into like a lot of reporting apps, and financial planning apps, and cashflow apps, unless they start doing stuff like that.
They actually do something with the data because it's so much work and you get no benefit from the data. I mean, maybe you do if you're a certain segment of the population.
Blake: It’s like, why can't I go into QuickBooks and have like a date for payment date, along with due date, right? And I could just set that for all of my bills and then it's hooked up to Melio or whatever my payment processor is. And then it just pays them for me without me having to go into some separate system.
David: I mean, that is Melio built into QuickBooks. I mean, it does do that. The QuickBooks Online built by Melio.
Blake: But you've got to go click pay when you want to pay it, right? Why can't I just like schedule them all out-
David: Well, you can.
Blake: -and have it do it automatically.
David: You can.
Blake: Oh, you can? Okay. See, I'm ignorant of this.
David: So, you can schedule those payments into the future.
Blake: Yeah.
David: But in general, you're right. Like, you want the calendar or you drag and drop and you move things around. Click-in used to have it. It was genius.
Blake: Or link it to my cashflow projection. Right? Like, my cashflow projection separate from my payments is like, much less useful anyway.
[00:41:43] QuickBooks Connect resuming as in-person event in 2022, but QB will no longer participate in Scaling New Heights
David: There's another major piece of news about QuickBooks that came out. And this is on the Woodward report. The headline of the article is, “QuickBooks connect resumed on-premise event in 2022.” So, if you haven't heard yet, QuickBooks Connect is going to be in Las Vegas, December 7th and 9th.
Blake: 7th through 9th.
David: 7th through the 9th. And it looks like it's just going to be accountants, bookkeepers, ProAdvisors, VARs at partners, et cetera. It's not going to be any small businesses. But the real key to this article, the real headline should have been this sentence that's in the third paragraph. “Intuit also announced that the company will no longer participate in the Scaling New Heights conference.”
Blake: We knew that was coming. I feel like that was coming.
David: I feel like it's been coming for years.
Blake: Yeah. Ever since Woodard opened up to not-Intuit products, right?
David: Well, Xero’s the sponsor this year.
Blake: Like, Intuit’s so big they can muscle around. They don't want to play in the same sandbox as Xero or any of the other GLs. And now, they want their own thing.
David: Yeah. So, it's kind of interesting, ‘cause I do feel like every year, a couple of weeks out of- before Scaling New Heights, Joe somehow gets in the news. Like, “Hey, it wasn't the bankruptcy. It was this, or Xero’s coming.” Like, it's just always- which is good, right?
Blake: Yeah, yeah, yeah.
David: Like, always is good news. And he gets in the news. If you start talking about his conference, it gets out there. But yeah. So, that's a big change.
Blake: For those who aren't familiar with these conferences, I would highly recommend if you're in the small business accounting services space, if you're providing accounting services to small businesses, you use QuickBooks or Xero, go to Scaling New Heights and go to QuickBooks Connect because they’re- and go to XeroCon.
David: XeroCon. Yeah, absolutely.
Blake: Those are the three best conferences to meet people building small firms, solopreneurs, solo CPAs, small firms.
David: And if you have your CAS team, and they need- you have clients on QuickBooks and Xero, I mean-
Blake: Oh yeah.
David: A lot of people go to the Woodard conferences because it's all about certification and training. Like literally, people are in classes at 7:00 AM getting training classes. It's kind of crazy. And he keeps it- and all of that, he starts it a day early. People go a day early to start doing training classes.
Blake: But make sure to leave time for the meeting people and the networking, because that, for me, was what-
David: And the fun stuff.
Blake: -launched- that launched my whole life in this space, was meeting people at- it was Scaling New Heights. That was my first conference ever.
David: Well, we'll see everybody, right? We're going to be at AccountingWEB in like two weeks, three, whenever that is. And we'll be at AccountingWEB, we’ll be at Scaling New Heights, we'll be at AICPA Engage. Of course, we'll be at XeroCon. Of course, we're going to be at QuickBooks Connect, so. Oh, and the other news related to this is, QuickBooks Connect tickets and more info comes out late May, apparently.
They don’t have any- you can't register for it yet. This is just an announcement.
Blake: Got it.
David: But if you watch this on accountingconferences.com, you'll know when it changes.
[00:44:27] Thank you to our sponsor, Canopy
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[00:45:36] "Formations" firm raises 8 million in Series A
Blake: I found a new accounting firm with engineers.
David: Another one?
Blake: Another one. Formations. What a great name. What a great name. I love it. Formationscorp.com is the name of the website- is the URL for Formations.
David: I’m typing that right now.
Blake: A couple of weeks ago, they raised an $8 million Series A led by Arthur Ventures. David, as you take a look at the website, you will see that they are an accounting firm that doesn't really look like a traditional accounting firm. They have their own technology, or so it appears from the screenshots on the website.
And they provide these accounting services. You can see that from the team, they have accountants, they have bookkeepers. And the thing that really strikes me is that they are super focused on the self-employed. Setting up S-corps for freelancers, self-employed people, and handling their tax planning, handling their saving for retirement, doing their bookkeeping, their accounting.
David: Are they offering a bank and a credit card?
Blake: They'll open a- they'll help you- so, here's- and how it works is actually quite good. And I would recommend everyone take a look at this if you're thinking about building a ‘how it works’ flow for your own website. Step one is incorporation. So, if you're an LLC, they'll turn you into an S-corp. If you already have an S-corp, good, they'll take over helping you manage it, or they'll set everything up for you from the beginning, if you don't have anything.
They will help you open a business bank account. They will then, you know, help you keep it separate from your personal finances. And it looks like from the screenshot, they'll help you do Chase, Bank of America, Wells Fargo, or Relay. Kind of cool. Then they'll track your income, your business income.
They'll help you with payroll, profit distributions. They'll help you with retirement benefits. The benefits you get now as an S-corp, and then they'll do your taxes at the end of the year, 10-99s, K-1s, W2s, file your business tax return, and they can do your personal as well. So, it's an all-in-one tax, accounting, banking solution.
David: And I imagine that the reason they took the raise is probably to eventually build out their own, in the same way Collective is, and all these other ones we've seen that are really going after that sole proprietor type, LLC, and offering the banking services, controlling the bank feed. They have one bank account, right? And building it from there.
But I think this is what people want. Right? Like, “Okay. You're gonna do my personal taxes and my business tax.” Yeah.
Blake: Yeah. Yeah. This is what all those, you know, business clients, the- what do you call them- micro businesses want. They just want one place that's going to handle their bookkeeping, help them plan for taxes, retirement, do the tax return, all in one place. And I was curious who their customers are, and it's a lot of real estate brokers.
So, it doesn't say that on their website, that that's only who they serve. But that seems to be where they've gotten started. Lots of real estate brokers, real estate owners. But they also have like a guy who does graphic design and web development on their customer's page. They've got a recruiter, they've got a consultant.
They've got a creative director. So, I don't know. I just- I love this. From a marketing standpoint, I love the focus on one type of customer, and really growing it. Because everything you do then, all your processes can be so streamlined to just serve that customer. And I'm going to bet you that it's subscription pricing.
David: So, it's probably subscription pricing. And if you go to their site, they have a calculator.
Blake: Formationscorp.com, yeah, what's the calculator?
David: And everybody should stop, pause the podcast, go there and just go through this calculator. It’s like you tell them your business entity, you tell them your revenue, your expenses, your benefits. And so, basically, what they're doing is they're figuring out what they're going to- what services you need and what they're going to sell you.
But it's beautiful. Like, I have been arguing- I've been on the client side of this space and I'm like, “This is super easy to use.” Like, everybody go there and look at this little interview you go through, and the questions you ask. Now, the one thing they're blowing, though, at the end, you get to this question that says, “What is your total annual cost for managing your business financials?”
And they- and you basically have a dropdown, like 500 to 1500, 1500 to 3,500. But they need to rephrase this question to your time, your effort. It's not just that cost, right? Like, it should be like, how much time do you spend working on your business financials instead of actually running your business, right?
They need to frame it into the cost. But other than that, it's beautiful. Right? Let’s see what happens when I go to the taxes tab. And then, how much did I pay in taxes last year? Let's make up some numbers.
Blake: So, I just- I blasted through it. And at the end, what you get is a ‘you can keep up to X dollars in your pocket every year.’ They estimate how much you can save based on all the stuff you could do. Get our recommendation.
David: So, if I use them, it says I can save $23,000, not assuming I typed in the answers correctly or not correctly. So now, if they sent- quote me a price of $5,000 a year, like, it seems reasonable price. Like, it's actually- I don't know how much tech dev in the background, but this onboarding interview thing is great.
Blake: Yeah.
David: It's well done.
Blake: And they don't have the pricing on their website, which means they might be value pricing, which you-
David: Yeah. You could request a consultation.
Blake: Right. Which you could do if you're very focused. You know, value pricing takes a lot of time, which is why a lot of firms don't do it. But if you only have one type of client with a very specific scope of work, you can value price easier. And I found a press release from 2020 when they launched.
And it said something about starting at $200 per month. Formations is available in a subscription model, starting as low as $200 per month, so.
David: But it's very clear. They're going to- ‘cause I can get the results of my little questionnaire I just did. And it's going to have all the recommendations, and it's going to run me into $700 a month, if not more pretty quickly. It's very clear.
Blake: They've already told you, you can save $20,000 a year in taxes with the right planning. Right? So, when they say, “We're going to charge you X thousands of dollars,” you think, “Hey, that's a good deal. I don't have to worry about this anymore. And you're going to save me this money that I'm paying right now because I'm not set up right.”
So, that's value. That’s value pricing.
[00:52:02] Sage has a new logo
David: So, did you see Sage has a new logo?
Blake: I saw that Sage rebranded and then I clicked through, and is it true that the only thing they did is the new logo or is there more to it?
David: Well, I mean, they're going to expand their Sage membership benefits. Right? They'll get automatic access to member benefits as members match their classes. Some things like that.
Blake: Okay, well, so, wait. We gotta talk about the logo. What do you think?
David: Yeah, the logo itself.
Blake: What do you think about it?
David: It feels amateur. And I don't know how [INAUDIBLE]. They probably paid lots of money for it, but if I think about like the Intuit logo, and it has the- like, there's the little hidden imagery. You know, like the FedEx logo has that hidden arrow and the Amazon as a smile, right? There's the hidden imagery in logos. Intuit has the heads on the Ts and looks like little people, right?
And then the hidden- it’s between the U and I, right? Like, there's a lot of hidden messaging in there. You can look at the Xero logo. It has the dot inside the zero, you know, like you're zeroing in on a target. Like, it's- there's those hidden imagery. Like, this one doesn't have it.
Blake: Well, what’s the hidden thing in the Intuit? What's the hidden thing in the Intuit logo?
David: Well, you have the two people.
Blake: Oh, the little people.
David: So, the odd- the dots are not on Is, they’re over at the Ts. So, they're like little people.
Blake: Ah. That's kind of cool.
David: And then the U and I is between the two people, right? Like, you and I, there's a relationship. It's got hidden messaging in there.
Blake: Yeah.
David: This, I don't think it really has any. Now, what they did is they took the S, and the S is essentially upside down, it becomes the G.
Blake: No, it's not upside down, is it?
David: Or flipped. Yeah. That's the same exact letter. They just flipped it.
Blake: Well, no, it goes the same direction.
David: Okay. So, they flipped it and turned it.
Blake: No, they didn't turn it. They just- it's the same exact letter, they just pushed it down.
David: Well, they just shoved it down. That's right. They just lowered it. That's right. They just lowered it. Okay. So, that's interesting between the two, but I think it just- I don’t know. It seems okay. But it's also feels like Canda, I don't know. Like somebody just- [INAUDIBLE] this is the font. Maybe it’s just the font.
Blake: Yeah. I don't think a rebrand is going to help Sage Global's problems. You know, like maybe focus on unifying your products into a single experience.
David: But this is going to- they're going to be the official supporter of the 2023 Rugby World Cup.
Blake: Okay.
David: I think I just saw Xero sponsoring women's soccer, some women's soccer league. I feel like that's the- all the sports sponsorships. Intuit, obviously, with the LA Clippers in that stadium. Like, all The Cloud Accounting apps are going after the sporty markets.
[00:54:25] Sage acquires Mateo
Blake: Well, I got some more news about Sage.
David: All right.
Blake: They made an acquisition. They have acquired Mateo cloud savings and loan software. So, non-profit and faith-based organizations can maximize donations. And so, I thought, “Oh, what is Mateo? I'm intrigued. Sounds kind of Italian. Fancy.”
So, Mateo is this niche software by a company called Mass Integrated Solutions, MAS, but guess what it does? It's a plugin for Sage Intacct, like, an add-on that allows you to record transactions like you're a bank, you're a savings and loan. Like, why would a non-bank want to do that? And I guess it's because Catholic dioceses act as savings and loans for parishes and schools.
David: Yeah.
Blake: So, you can- if you're a parish or a church, you can deposit money with the diocese that will take care of it for you and invest it for you. And then, you know, so, the diocese has to be able to give you a bank statement. And that's what the software does. So, the diocese uses Intacct, and I know that Intacct’s really big with Catholic dioceses, and then that's how they do it.
They can do withdrawals, deposits, all that stuff. I thought that was a really interesting niche application.
[00:55:50] Thomson Reuters acquires Gestta
David: Yeah. I saw another interesting acquisition here. Thomson Reuters announced today that they acquired Gestta, G-E-S-T-T-A. I'm like, what is this? It's described as an accounting automation software founded in 2016. Gestta’s accounting software solution enables customers to automate their workflows, people management, customer service, secure document archiving, among- and other capabilities.
Over 600,000 companies are on this. I'm like, what is this? Okay, I’m like- so, I find out- I Google it, I find it. I go to their website. So, it is-
Blake: Website’s in Portuguese.
David: Brazil. It's a Brazilian website. It's kind of like the QuickBooks of Brazil, in a way, for accounting firms or something. Then you start scrolling down and you really start realizing the size of it. And they have a- the largest WhatsApp group of accountants in Brazil, with 2000 accountants actively participating in that.
So, they- Brazil's hot. We talked about that other firm that took that huge amount. They had the little mall kiosk set up for self-employed. Like, Brazil is super hot. We should figure out how to get down there and do a show.
Blake: I know, right? I'd love to go visit. Oh my God.
David: So, I thought that was a really interesting acquisition by Thomson Reuters. And then-
Blake: So, wait, wait, wait. So, I'm just- I'm on the website. I just got to point out this feature. So, you said they have the largest WhatsApp group of accountants.
David: Yes.
Blake: Gusta. So, their website says they have a WhatsApp integration in their accounting system. See, that sort of thing would just be brilliant. So, instead of following up with customers on invoices via email, message- to be able to message them, right? Like, people read text messages, they read WhatsApp messages. Like, every system should do that. Every accounting system should let you text.
David: When the Melio founders were starting Melio, they set up a bookkeeping firm. And they basically had found a business, and that business owner only interacted with them through WhatsApp. And they’d take a photo of their bill into WhatsApp, and then they would obviously pay it manually on the backend, and then send a message back through WhatsApp saying, “Oh, your payment's been made,” right?
They actually built- the first prototypes of Melio were built in on top of-
Blake: It was just a messaging platform.
David: In WhatsApp.
Blake: Or just on top of messaging.
David: Yup. The kind of the very early proof of concepts were built on that.
Blake: That's right.
David: You said you have another story? I do have one more as well.
Blake: Well, I have one thing that we could finish with, which is why accounting software partnerships fail. And I want-
David: Okay. Let me do my story first then.
Blake: Yeah. ‘Cause I want to get your take on this.
[00:58:18] Stripe announced new partnerships program
David: ‘Cause this transitioned right into this. Okay?
Blake: Okay.
David: So, Stripe announces their new partnerships program. So, Stripe, you know, Stripe, they're gigantic. What, 35, 60 billion-dollar private valuation, they have another- they're part of so many apps we use. They are now offering a partner program. And what’s interested and what caught my eye about this, yes, there's the tech partners, right?
All the apps that tie into Stripe and utilize Stripe, blah, blah, blah. But the other interesting part of this, consulting power partners. So, just as you get certified and your name is listed in a directory for QuickBooks or Xero, you probably- and a lot of times with this, it's like, who's there first? Like, you had success because you were the first Xero consultant or the second one in the States.
I'd suggest if you have some expertise in Stripe, go sign up on the Stripe partners ecosystem website and-
Blake: Get those leads.
David: -get the leads. Yeah. Exactly.
Blake: Free leads.
[00:59:16] Article "Why Accounting Software Partnerships Fail"
Blake: All right. Let's finish up with this article I’ve been keeping here for a while. I want to get to it. I want to get your opinion on this, David, because the headline is “Why Accounting Software Partnerships Fail.” I want to know what you think.
David: Like, partnerships between the relationship with the accounting firms or like, I dunno where you're hitting on this.
Blake: Software companies that are seeking to partner with accounting firms. So, this is what-
David: The- I think the number one reason why is they don't approach it correctly. They look at accountants as salespeople.
Blake: So, here, that's number one. Building sales channels, not partnerships.
David: Two, they think that spiffing the accountants is the way to go.
Blake: That would be- yeah, well, so, I think that’s-
David: The financial incentives, right? When really, accountants, their main goal is to solve for their client.
Blake: Right. So, you're saying- this is part of the same paragraph or the same problem, which is that a lot of times, developers see accounting firms as sales channels. And they are terrible sales channels because accountants generally don't- like, they don't want to resell your software.
That's not the relationship they have with a client. So, they're not a sales channel. They are a partnership.
David: Yes, exactly. It's a partnership. And the best way to have a partnership with them is help them solve for their clients in the best way possible. And many are times, a lot of that is just support. A lot of app companies do not give the support accountants need. I still insist like, Expensify, if they had really good accountants support, Brex- these companies like Brex wouldn’t even be in the game. They would have won this a decade ago.
Blake: Yeah. And the problem with Expensify and any software that doesn't have good customer support is that the client has the long-term relationship with the client. The accountant has the long-term relationship with the client. They're not going to risk that to sell software licenses. And if you don't provide good support, they're really risking it because then they have to provide the support, or the client has a bad time, and they get blamed for it.
David: Yeah. And if you think about, you know, an accountant, you have your clients. Let’s say you believe in an app and you put all your clients on that app. It's a math- it's a numbers game. You're going to need support.
Blake: Yeah.
David: Like, it's just going to happen. There's just- so, basically, your best customers suffer the most if you don't have great support. And at the end, it Software as a Service taking this right back to the start of the show, right? Like, it’s Software as a Service, and if you don't earn that money each month, they'll just move the clients. And for most apps, for the vast majority apps, unless it’s a super niche app, you can be moved and replaced like nothing.
January 1st, payroll’s zero, New Year to-date totals are zero, new payroll app. Time sheet app, you can swap that out. Payments apps, you can swap payments apps out. So easy. Expense tracking apps, like all that stuff is you're all replaceable. So, the only thing you have is service. It's the only thing you have.
Blake: Number two is over-promising and under-delivering. Accountants are bombarded with an endless stream of apps promising to grow revenue, save time and kill Excel. These days, the more tech savvy accountants have developed sensitive antennae to detect vendor hype.
David: Yes.
Blake: We are cynical.
David: And that, I would say is not even like tech savvy, I think that's gone on for desktop days. It's been around for a very long time. Vaporware. And I've told vendors, you have to go to all the conferences in the summer. You can't just show up to one because they think you don't exist.
They're going to see you at three or four to know, “Oh, they're a serious business. Like, they exist.” Yeah.
Blake: Burning your bridges. So, getting penetration with a small group of early adopter firms and then bailing on them. You know, not delivering with them. That is guaranteed to sink you because those early adopters talk. And the other firms listen to them.
So, that's one. Negative comments in online accounting communities can be deadly. Ignoring accounting nuances. That's the last one. And I like this one in particular. That's building- to me, that's building integrations that didn't get input from accountants on how to actually account for what you're doing. And that happens all the time.
David: This is my biggest- like, I think is the most important thing for apps. Like, every app will integrate- and I've seen thousands of them- will integrate with QuickBooks to get the QuickBooks logo on their website. We integrate with QuickBooks. And pretty much all they're doing is taking a name and an address.
No actual accounting data is being synced in the right way to actually save the accountant time. So, the accountant connects everything up, tries to use it, the data doesn't get there. Then the accountant’s like, “Okay, this is a waste. Why do I want to use it?” And it's just- it's a mindset. Now, it's tough to do that, and it's not sexy.
It's very hard to go into an investor meeting and be like, “Oh, we're going to add these three oddball fields that are accounting to our app.” It's not exciting. But that's what keeps the accountants with you forever. This is why people use Intuit merchant service. Arguably, it's a rip off, but it's so beautifully integrated with QuickBooks the time you save makes it worth it.
Blake: It works. So, that was an article by Yohan Trougouboff, founder of Early Adopters Hub on AccountingWEB. Link to that will be in the show notes.
[01:04:36] Wrap up
Blake: David, loved your feedback on that. Great to talk to you, as always. If our listeners want to connect with you online, where can they do that?
David: I'm on all these socials, just @DavidLeary.
Blake: I am @BlakeTOliver. Send me emails, Blake@BlakeOliver.com. You can record a voice memo and send that to me. We'll play it on the air. I love hearing from our listeners. It makes everything worthwhile to hear from you and get your feedback on the show. And don't forget, you can earn CPE for listening to this episode.
Open up the Earmark CPE app on your Apple or Android device. Come back next week and the course will be available so you can get a CPE credit for listening.
David: That's the plan.
Blake: That's the dream. Let's make it as easy as possible. All right, David, have a great rest of your week or weekend. It's Friday.
David: Yeah. ‘Cause the accounting twins are here to record their episode. So, I gotta go let them in the house here.
Blake: Have fun.
David: Awesome. Bye.
Blake: Bye.
[01:05:33] Classifieds
David: Time for the classifieds.
[01:05:37] Future Firm
David: If you're looking to quickly grow a scalable, systematic, seven-figure accounting firm without having to work 50 plus hours per week, check out Ryan Lazanis’ says online coaching membership, Future Firm Accelerate. Designed around Ryan's experience taking his cloud firm from scratch to sale so that you don't have to reinvent the wheel.
You'll get online learning and topics that help you automate and systemize all aspects of your firm. You'll get coaching when you need help with implementation. And you'll also join a collaborative community of hundreds of other forward-thinking firm owners. For more details, head over to www.futurefirmaccelerate.com.
[01:06:13] GetW9
David: Tired of clients not remembering to get W-9s? getW9 automates and streamlines the collection and storage of W-9s. getW9 has a QBO integration and they have a partner program that pays 25 percent commissions. getW9 plans start at only $19 a year. Visit getW9.tax today to get started.
That is getw9.tax.
[01:06:37] Firmsta
David: Are you still using emails to exchange sensitive files with your clients? Maybe you're using that old complicated client portal that's painful to work with. Stop suffering and start using Firmsta. Firmsta is an innovative and secure client portal designed to help your accounting firm work more efficiently with your clients.
With Firmsta’s intuitive interface, you will quickly add your clients, easily create folders and securely share files in no time. Firmsta also allows you to add your staff members so that you can access all your client's information and collaborate effectively. Start your free 60-day trial now at firmsta.com.
You'll love it, or it's free. That's firmsta.com.
[01:07:14] Advisors For Change
David: Are you looking for a dream job in cloud accounting? We have the job for you. Advisors For Change delivers cloud accounting systems to small and medium nonprofit organizations. Join our team of friendly and collaborative nonprofit accounting professionals while working from home. Our systems associate will join our experienced systems manager to implement and support cloud accounting systems such as QBO, bill.com, Divvy, [INAUDIBLE], and others.
To learn more, head to our website at advisorsforchange.com/join-our-team. That's advisorsforchange.com/join-our-team. You’ll find a link to the full position description on indeed.
[01:07:51] Oh My Fraud: A True Crime Podcast for Accountants
Blake: Hey, podcast listeners, it's Blake, and I wanted to let you know about a new show I'm working on with CPA/comedian, Greg Kyte, and blogger/former CPA, Caleb Newquist. It's called Oh My Fraud, and it's a podcast all about financial crimes. That's right, a true crime podcast for accountants, by accountants.
Caleb and Greg are going to come together every couple of weeks to unpack their favorite frauds, and explore the circumstances, psychology, and interpersonal dynamics involved. They also fully indulge in victim blaming the defrauded widows, orphans, infirm, and feebleminded- because who can resist?
If you fancy yourself a trusted advisor, or prefer your true crime with spreadsheets instead of corpses, listen to this show to learn what to watch out for, and to keep your clients, your firm, and even yourself, safe. To subscribe, go to ohmyfraud.com, or search "Oh My Fraud" on Apple Podcasts, Spotify, or wherever you get your podcasts.
[01:08:49] How to advertise in these classifieds
David: Want to get the word out about your newsletter, webinar, party, Facebook group, podcast, e-book, job posting, or that fancy Excel macro you just created? Why not let the listeners of The Cloud Accounting Podcast know by running a classified ad? Hit the show notes for the link to get more info.
