The Future of QuickBooks

(Originally recorded on February 15, 2024 on Earmark Webinars+)

Hector and Blake recount a brief history of QuickBooks Desktop vs QuickBooks Online through the end of 2023, the state of Intuit’s current offers and posturing in the market, and where they think QuickBooks is moving into for 2024 and beyond.

Chapters

• (01:11) - Hector's Journey: From Tax Practice to Tech Innovator
• (03:16) - A Deep Dive into QuickBooks' Evolution
• (07:12) - The Shift to QuickBooks Online and Its Ecosystem
• (11:41) - Predicting the Future: QuickBooks Desktop's Demise
• (12:08) - QuickBooks Online: Aiming for Total Workflow Control
• (14:03) - The Role of AI in Shaping QuickBooks' Future
• (16:08) - Intuit's Strategy: Moving Beyond Desktop Versions
• (25:21) - The Controversy Around QuickBooks Live Bookkeeping and Tax Services
• (30:15) - The Impact of QuickBooks on Accounting Professionals
• (31:16) - QuickBooks' Strategy for Tax Services
• (33:07) - The Evolution of QuickBooks Live and Assisted Services
• (35:14) - The Challenges of Running a Service Business vs. Software Company
• (37:22) - Intuit's Strategic Shift Towards Assisted Services
• (42:08) - The Future of Accounting: AI and Automation
• (48:02) - Listener Questions and Insights on QuickBooks Features
• (54:37) - Exploring TurboTax Verified Pro and Its Implications
• (57:08) - Closing Remarks and Resources

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Connect with Our Guest, Hector Garcia, CPA

LinkedIn: https://www.linkedin.com/in/hectormgarciacpa/
Website: http://www.hectorgarcia.com
Twitter: https://twitter.com/qbkaccounting

Connect with Blake Oliver, CPA

LinkedIn: https://www.linkedin.com/in/blaketoliver
Twitter: https://twitter.com/blaketoliver/

Creators & Guests

Host

Blake Oliver, CPA

Founder and CEO of Earmark CPE

Guest

Hector Garcia, CPA

Hector M. Garcia is a CPA and QuickBooks Trainer for Quick Bookkeeping & Accounting LLC. He has over 10 years of experience working with small business finance and accounting, along with 3 Post-graduate degrees from Florida International University (FIU) in Accounting, Finance and Taxation.

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Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Blake Oliver: [00:00:10] Hello, everyone, and welcome back to earmark. I'm Blake Oliver, and I'm joined today by Hector Garcia to talk about the future of QuickBooks. Welcome, Hector.

Hector Garcia: [00:00:20] Hey, Blake, how are you?

Blake Oliver: [00:00:22] It's great to talk to you again. It's hard to believe it's been a year since we last talked about QuickBooks on earmark. And we are recording live today on the earmark webinar platform. So if you want to get notified of future webinars, if you're listening to this on the earmark podcast feed and you want to join me live for earmark episodes, go to earmark Cpcomm and enter your email address. You'll get emails about our upcoming webinars like this one, and you can chat with me and Hector live the next time we do this. So let's get into it. Hector, I am so excited to talk to you today about what's going on with QuickBooks in 2024. But first, uh, what's new with you? What's going on in your world? Yeah.

Hector Garcia: [00:01:10] So thanks for asking. So I think I mentioned to you last year that I was in the process of transitioning my tax practice, and, uh, I have two business partners that helped me carve away the tax portion of my business, which has given me more free time to engage into other endeavors. Uh, one of those endeavors was an app company called Right Tool, which is, um, over 10,000 users already. We have, uh, with the free version and over a thousand users with the paid version. So we're very happy about the progress of of the app right tool for QuickBooks online. And also, um, together with Earmark Media, we started a podcast called the unofficial QuickBooks accountants Podcast with my friend Alicia Pollock. Uh, we're both co-hosts, and every week we talk about where our opinion about the new things that are happening with QuickBooks, including some of the things that we're going to talk about today. And, uh, we do that in a weekly basis. And the the latest of, uh, me doing something productive with my time as, as an ex tax preparer is I built, uh, I built a conference. It's called reframe. Uh, we had a conference in Miami last year in 20, in 2023. It was a massive success. We're having it again in the Hollywood, Fort Lauderdale area in October in Miami. And, uh, if you want to learn more about that, go to reframe 2020 4.com reframe 2020 4.com. Thank you for letting me plug that.

Blake Oliver: [00:02:38] Of course. And we should also direct listeners to where they can, uh, find your podcast, the Unofficial QuickBooks Accountants Podcast. Go to Ucb's show and you will get weekly biweekly updates on what's going on with QuickBooks. And we're going to summarize a lot of that here for you. So if you want the details, do subscribe to that. And I believe we've got a bunch of those episodes up for free continuing professional education credits on the earmark app as well. So you can also earn CPE for listening to that in addition to this today. So let's get into it. Uh. The history of QuickBooks. Hector, you are going to give us a quick history of QuickBooks, because I take it that will give us some context for the discussion that we're going to have.

Hector Garcia: [00:03:29] Yeah, so into it. The makers of QuickBooks is over 40 years old in 1983. Uh, Intuit essentially launched the first app that inspired the whole QuickBooks ecosystem, which is called quicken. Uh, the big thing about quicken was that you could physically see the check on your screen. This this was in a DOS machine. Of course. This is this is the 80s. Um, then in 1992. So just nine years later, uh, QuickBooks replaced quicken, uh, because they noticed that sort of by accident, business owners were using QuickBooks. Uh, quicken, which was only really meant to be sort of a personal checkbook, personal financial management software. So that came out for, for for DOS as well. And just a couple years later when windows came out, uh, QuickBooks 3.0 came out and we finally had a more graphical version of QuickBooks and QuickBooks 3.0. This is 1994. Then in 1997, Microsoft, Intuit and a company back then called Checkfree, which is now um, been acquired by multiple companies and is now a company called Fiserv. They actually developed this is a very interesting joint venture. They developed something called the Office Standard, which was the underlying technology that banks use to transfer bank transactions to accounting software. Uh, quick reminder, in 1997, Microsoft was also developing a small business accounting software, which is no longer a thing. But this is why, you know, Microsoft was involved back then.

Hector Garcia: [00:05:04] So in 1998, we started seeing, uh, QuickBooks for windows, have features like email integration, uh, downloading updates immediately. So it wasn't this whole production of putting floppy disks and CDs in a computer, like you just download your updates, which means your accounting is a bit more connected to sort of the internet and the outside world. And also, uh, bringing the SDK, the software developer kit, which nowadays that's just what we call the API, which is the tools that developers could use to talk to QuickBooks back and forth. Finally, in 1999, we see QuickBooks have this concept called Bank feeds and QuickBooks Online Banking. Now bank feeds was actually two things. It was one connecting to the banks and downloading the transactions from the banks. But two QuickBooks was able to initiate. Bill payments. So when when the bank's first, uh, moved to uh, websites where they were basically getting people that were very skeptical about having their banking online or whatever the big selling point was, you could log in to Bank of America. Com or Chase.com or whatever, and you can click Bill pay and you can choose what vendors to pay you. And all that stuff has been partially replaced by Venmo and and Cash App and all these things. But this was the big innovation that you didn't have to write the check yourself, that the bank would write the check for you, or they would do the ACH payment for you.

Hector Garcia: [00:06:34] So the really cool thing that QuickBooks did with bank feeds is not only downloaded transactions, this was used to be actually bidirectional, and QuickBooks would send the the information when you created the bill in QuickBooks and click pay bill, you click a little checkbox that says pay online and bank feeds would send this information to the bank to pay. Now, nowadays you don't see that with QuickBooks online. Actually, that's never existed with QuickBooks online, which we could discuss a little bit later on about the apps and the ecosystem and that sort of thing. But that was huge. And that was the first iteration of having your QuickBooks and your and your internet and your bank just kind of working together for a real purpose. Then in 2001, QuickBooks, uh, introduced the first version of QuickBooks online. It was truly atrocious. It was kind of like a mini experiment inside into it. I mean, only like really strange, weird people would actually use QuickBooks online because they want it back in 2001. And, uh, you know, Intuit was learning, you know, basically 12 years to learn what the strategy was. And in 2013 and 2014, those two years were pivotal because that's when Intuit made the switch in their head that said, hey, we no longer are a desktop accounting software company. We are a cloud based, uh, solution provider.

Hector Garcia: [00:07:55] So they redesigned QuickBooks and they have, uh, largely what the new design looks like now. It's inspired by that original redesign from 2013, which they called the Harmony initiative. Together with that, Intuit acquires apps.com and launches apps.com, which is the ecosystem of third party apps that connect with QuickBooks online. And also they created a huge campaign to educate accountants around the country with this system, with this thing called freedom and the Crowd Tour. This is where I met Michelle Long and a lot of the QuickBooks trainers, where we were going to different cities, bringing accountants in at no cost, feeding them, spending a day or two with them, teaching them all about qbo and showing them how to pass the Qbo ProAdvisor exam, which was another huge innovation. It's free like to be certified with QuickBooks. Online is free. So all this stuff came from 2013 2014 and then shortly after in 2015, Qbo hits their first million subscribers and all of a sudden, it just felt very real that Intuit was shifting in this direction 2016 into a divest from quicken. So they no longer are have the quicken product. As you know, they created this Mint.com and these other personal financial products that never really caught on. I mean, QuickBooks small business was really the core of what Intuit could offer. 2017 Intuit acquires two major companies that are sort of part of what QuickBooks is now.

Hector Garcia: [00:09:27] And you really at this point, if you don't know the history, you don't know it wasn't a big acquisition. They acquired a company called Exactor for sales tax automation. And this is all built in into sales tax now. And a company called Tsheets for timesheets for integrating timesheets. So these two things are now just part of the QuickBooks product pretty much built in. In 2018, Intuit introduces QuickBooks Online Advanced as a, quote, mid-market product. And even today, it's not even there yet. We could maybe discuss that as well. That's a whole nother conversation in 2019, QuickBooks introduces Live Bookkeeping, which is an additional service, um, to QuickBooks online customers, which essentially, uh, quintupled or tripled the potential revenue that QuickBooks Intuit can get per customer by adding this sort of elevated tech support. That's also kind of a bookkeeping service, and it's getting a lot better now. But when this first thing launched, it was it was basically something that mostly accountants just hated its existence. But it is pretty interesting because live bookkeeping is a pretty big service now, and it has evolved to live tax and that sort of thing. So we can chat about that too, if you want to in 2020. This is during the pandemic. Intuit acquires Tradegecko, which is now QuickBooks Commerce, which is a huge indication of Intuit trying to capture the e-commerce market, mostly because most analysts and even accountants and professionals in this area were thinking that Shopify wanted to get into this business.

Hector Garcia: [00:10:56] So Intuit. It was looking to protect themselves by being known as a sort of e-commerce friendly software company, and it's still kind of not there yet, but at least it created the impression that there were tons of resources. And there are tons of resources on integrating QuickBooks online with Shopify, Amazon, that sort of thing in 2021. Uh, Intuit makes a huge move, which it moves its desktop products. Quickbooks desktop, uh, Pro Premier, uh, the core products that they sold to millions of people in the past, they move it to an annual subscription only. So the product still exists, still gets updates, but you could no longer buy a permanent license. You are now in an annual subscription. And last year in 2023, they made the biggest announcement of all, which is something they're calling a stop sale, which basically means that starting October 1st, 2024, no new subscribers can get into QuickBooks Pro or Premier. They still can get into enterprise, but not into Pro and Premier. This signals the the demise of desktop at some point at least it signals this the starting of that process. Okay, so today, 2024 uh, QuickBooks online continues to strive for total workflow control. And this is a huge change from the sort of 2013, 2014, uh, QuickBooks Online days, where the apps.com and the third party app ecosystem was such an important piece of it.

Hector Garcia: [00:12:28] Today, it's looking like this is not the direction they're going with. They're actually doing the opposite, which is to get more control over the entire workflow process. You see things like QuickBooks checking, which is a checking account inside your accounting software. Uh, QuickBooks finance. So they're offering, uh, early pay for invoices to their customers, uh, capital advances, which all get underwritten with your own QuickBooks data. Uh, QuickBooks payroll being the only integrated payroll system you can use with QuickBooks online. I mean, yeah, ADP and gusto integrate, but it doesn't integrate the job costing and the reports and none of that stuff. Uh, you saw recently, Intuit exit the partnership with Melio a couple of years ago, exited the partnership with Bill.com to have an additional paid service called QuickBooks bill pay. Uh, of course, we talked about QuickBooks Live bookkeeping, which is very, very, um, obvious that it's there. And many accountants report that sometimes their customers get offered that service. Now QuickBooks Live tax, where they cannot be offering, uh, tax return preparation services to um, uh, their QuickBooks online customers. And they might even, uh, do that to customers that have an accountant attached, uh, attached to QuickBooks, because not all accountants attach to QuickBooks do taxes.

Hector Garcia: [00:13:48] That's the philosophy from Intuit. And of course, a huge acquisition a couple of years ago from MailChimp, uh, now built into QuickBooks is, uh, CRM, customer acquisition, uh, promotions, all the sort of marketing part of accounting that Intuit has never really, uh, had a good solution for and for tomorrow and, and today a little bit is the integration of your QuickBooks online data and AI. But one really important piece about integrating QuickBooks online and I, I believe, is going to be the total control of the workflow, because I think it is so difficult to get AI to do something that people trust, especially when it comes to finances, numbers and math. That adding third party apps, feeding information into QuickBooks, or potentially changing and transforming that information is probably not the most optimal way to train your AI. So I think that these two things go hand in hand. Getting Intuit assist, which is what QuickBooks is calling their AI and controlling the workflow a lot more, which means having less third parties, uh, touching QuickBooks. It is part of tomorrow's strategy. Again, this is not official. I don't work for Intuit. This is how I how I feel the direction is going and what is required. So that was my 5 to 10 minute quick history of QuickBooks. To give you backdrop of where we are now.

Blake Oliver: [00:15:09] That's great. Really helpful for understanding where Intuit has been so that we can figure out where QuickBooks and Intuit are going. It's amazing to think that I'm the same age as into it. I was born in 83, so I was born in the year quicken was born. And, uh, what became QuickBooks basically was born. And for the first 20 years of Intuit's life, it was purely desktop. And then we started to get QuickBooks online. But it was never really taken seriously by accountants until maybe, I want to say, five, ten years ago when it started to have feature parity or at least some feature parity with QuickBooks desktop, especially with the introduction of quick. Online advanced, we finally see into it taking inventory and e-commerce seriously. And that was always a big barrier to adoption with online and now. By deciding to stop selling new subscriptions to QuickBooks desktop. Intuit as effectively announced the end of life of this product, we can assume that, uh, as with other products, they will they will stop supporting it after a certain number of years, eventually. Right. So how much life does desktop have left? Maybe five, ten years probably. That's my guess. Anyway. What do you think, Hector?

Hector Garcia: [00:16:35] Yeah, it's still a bit of speculation. So let me just reiterate one more. One more thing, just in case I got the dates wrong. August 1st is the official day that if you are not already paying an annual fee to be part of QuickBooks Pro, uh, Mac, QuickBooks Pro Premier for windows, or QuickBooks for Mac, you as a new small business owner or an existing business owner that were not already subscribed to QuickBooks desktop cannot purchase a new subscription. Okay, so that's a really important piece if you are using QuickBooks Desktop Pro Premier, um, already and past August 1st, you were not a payroll user of QuickBooks Desktop Pro Premier. You will not be able to add payroll afterwards. So very, very important to to be on QuickBooks Desktop Pro Premier or on QuickBooks Desktop Payroll. You have to be a subscriber by July 31st. Now, that will cause a rush of people going out there frantically and getting subscribed to QuickBooks Desktop Pro Premier, because some people still want to be in desktop, and some people could be in an older version of QuickBooks 2020, 2021, whatever it is. And maybe they didn't see a reason to to upgrade yet, but now they do. But very important. It's still going to be an annual subscription. Now I'm going to make the wild assumption that they will not be a QuickBooks Desktop Pro Premier 2025. This is a very wild assumption that I have no basis for this. Well makes sense. That's the case.

Blake Oliver: [00:18:08] If they stop selling it, then why would they have a new edition?

Hector Garcia: [00:18:12] Yeah, not not not necessarily. But just making that assumption. You asked about the life that QuickBooks desktop has or could have. So I'm making the assumption that there isn't a 2025 version of QuickBooks Pro or Premier. If that's the case, then QuickBooks desktop 2024 will be supported until May 31st, 2027, because that's part of their official sunset policy. You grab the year version of QuickBooks, you add three years May 31st. That's the official date that they stopped supporting. Stop supporting means that they will no longer, uh, connect to the internet. So no payments, no payroll, no sending email through the QuickBooks servers, that sort of thing. And it also means, yeah, it bank feeds. Uh, and, um, any anything that has to do with connecting with QuickBooks online, downloading updates, or if you call and say, hey, something's broken with my QuickBooks and it's past May 31st, um, they won't support it. Now, the challenge with that is that if anybody subscribes to QuickBooks desktop on, let's say, July 31st, 2024, they would have to announce way prior to, uh, May 31st, 2027, the fact that they they won't be supporting this path. So you you will get some time to do this. Now, it wouldn't be strange to me at all that, uh, after July 31st happens, it's August 1st, that at that point Intuit will say, by the way, we will no longer be creating new versions, which still gives people over two and a half years to prepare for the transition to QuickBooks online. But that's just making that wild assumption. So if that's the case, then these versions of QuickBooks will essentially stop existing in 2027. However, sometimes we say the death of QuickBooks desktop, but we forget that there's another product called QuickBooks enterprise, which is their, quote, mid-market product. And QuickBooks enterprise is not part of this. Right. So QuickBooks enterprise will continue to exist. And new subscribers to QuickBooks enterprise even past, uh, July 31st, 2024 will still be able to get into QuickBooks enterprise.

Blake Oliver: [00:20:27] We had a question from one of our live stream viewers. Nathaniel wants to know if the. Subscription sales ending is true also for QuickBooks Desktop Accountant Pro and Premier. Will the accountant versions continue to be sold?

Hector Garcia: [00:20:46] Great question. So. In the announcement itself, accountant wasn't mentioned. That means that it has the same fate as QuickBooks and enterprise, which means they will continue to sell QuickBooks Desktop Accountant. However, I would tie QuickBooks Desktop Accountants Life to QuickBooks Pro Premier Life because QuickBooks Desktop Accountant is actually part of the Pro Premier family. As a matter of fact, you can open a file in accountant and then open it in Pro and open it in Premier, and they all open regardless of where the file was created. So they're part of the same database or infrastructure. So I would say as long as QuickBooks Desktop Pro Premier still are supported, QuickBooks Desktop Accountant will probably continue to be supported. The big question and the follow up question to Nathaniel is Will Intuit sell new QuickBooks Desktop Accountant subscriptions to brand new accountants after July 31st? That we don't know and that that's still up for grabs.

Blake Oliver: [00:21:50] And if they do, that could be the workaround for those who want to continue to purchase subscriptions after the after that date of August 1st, is to get the accountant version for your client somehow.

Hector Garcia: [00:22:05] Yeah. So the challenge with quote getting the accountant version is that that's that's not going to be physically on the website being shown if you call one 800 QuickBooks. That's not a real number, by the way. I'm just saying if you call one 804 into it the number and you say, I want to buy QuickBooks, a desktop accountant, probably most people will be like that little part of their brain will be deleted. So they'll go, I don't know what that is. Right. So one of the very important things is QuickBooks Desktop accountant is not a very simple thing to go by. It's typically purchased through some what's called a ProAdvisor subscription, which is currently 7.99 a year, $800 a year. And and that workaround may not be as obvious for some people. And then maybe Intuit will get a little bit smarter about verifying that the people actually getting into a ProAdvisor subscription are an accounting professional of some sort. But as you know very well, the accounting profession is not regulated as such, where you can verify that with a license or something like that. So there might be a short period of time where that, that, um, workaround could be exploited. But I'm sure when Intuit uh, figures that out, they'll figure out a way to backstop it, because this is not what they want. They don't want new people in desktop. That's not what they want. Their strategy is, you know, when somebody says, I want QuickBooks, that they don't even know desktop exists.

Hector Garcia: [00:23:24] That's what Intuit wants. Like QuickBooks. Uh, the name should be associated with the web cloud based platform, period. The only reason why they, quote continue this game of of of little by little chipping away at it and still, um, supporting desktop Pro Premier. And you know, the reason why this is happening is because they never want to give the impression that they're leaving users behind, and some users are not ready to move to QuickBooks online. Maybe half of them is because they're skeptical of cloud based stuff, and the other half is because they just don't like the experience of working on the cloud versus working natively on desktop. I mean, I work with Excel, I work with Google Sheets. There are situations where I love Google Sheets to collaborate with my team, and the situations where I feel I am so productive and slow in Google Sheets compared to desktop. I mean, uh, Excel for for desktop, just because working natively on desktop is just a lot faster and more efficient. And it's true for, um, you know, for like Photoshop users versus Canva users, you know, Photoshop users will tell you, you know, I can't design in Canva. It's too slow. Uh, Excel users versus Google Sheets users. Quickbooks desktop versus QuickBooks online users is very similar. The feeling of feeling more productive in desktop, it's a very real thing and some users just don't want to let that go.

Blake Oliver: [00:24:49] Thanks everyone who's joined us live. Hello Chayton and Dan and Ian, Nathaniel Monoral appreciate having you here with us. We got a comment from Chayton. We'd love to hear about how Intuit plans to use AI in QuickBooks, and I'm glad you asked, because I was planning to ask Hector that as well. Um, I also want to talk to Hector about the QuickBooks Live bookkeeping and QuickBooks Live tax, um, offerings from Intuit. We saw recently that QuickBooks Live tax is now being advertised, uh, in the tax tab to end users of QuickBooks, including those who are attached to an accountant, which has created a bit of controversy in the community, a bit of discontent. Um, so I want to talk about AI, but first I want to talk about these Intuit assisted offerings. Quickbooks Live Bookkeeping started about four years ago, but this new QuickBooks Live tax offering is is brand new, uh, at least from the accountant perspective. So, Hector, tell us a bit about these offerings. What is Intuit doing? What does this mean for the future of QuickBooks and how QuickBooks relates to accountants who are not working at Intuit?

Hector Garcia: [00:26:16] Yeah, this is a very complex one because in many ways this is sort of a moving target, okay. And it is very easy to take the position that Intuit doesn't like accountants into it. Money grab into it once complete control of the market. And in many ways, I completely sympathize with with that point of view, I think. I think it's important. I want to take you back maybe like five years or maybe six years, where the CEO of Intuit in a, in a in one of those annual investor calls, first, uh, laid out this concept of AI plus experts, AI plus experts. Okay, this is before ChatGPT. So whenever you hear AI plus experts, okay, so you're thinking, oh, awesome. You know, the the the AI will be developed to automate things. But QuickBooks will still count on experts. Okay. And that made accountants feel very good because us accountants, we are the experts right now. About two years ago, uh, QuickBooks trademarked QuickBooks expert in such a way that no external person can call themselves a QuickBooks expert. Only internal people can call themselves QuickBooks experts. Okay, so that started that's that was sort of the canary in the coal mine where you can start going, wait, wait, what's going on here? Then we have QuickBooks Live bookkeeping, which is into it. Went out there and recruited a whole bunch of accounting professionals, some existing proadvisors.

Hector Garcia: [00:27:49] They're on payroll, they're not contracted, they're on payroll, and they're given a particular set of customers that go online and turn on the option to pay an extra two for $600 a month for bookkeeping. And essentially, they they are their bookkeeper for that small business. It's not a real personal relationship like you would have with a local bookkeeper. Um, you're still dealing with a team, and then most of the times it's one employee that works the file. But sometimes there's more than one, because some of these employees are part time and people go on vacation and that sort of thing. And like, you know, Intuit as a company can never say, oh, sorry, your bookkeeper is on vacation. It doesn't work like that. Right? So you work, you're dealing with a big multi-billion dollar company. The customer is the customer of the big company. The company has to have a team of bookkeepers sort of in the background. So this service, um, generally is a bit limited. Uh, whereas, you know, they're not going to go in there and make corrections to your invoices. Now, they may have done that in the past because they've been learning, but they'll go back and tell you, hey, you got to correct your own invoices. Our job is just to reconcile and match things. And Intuit has very much been learning how challenging it is to create a limited scope to like, what is the external bookkeeper do and, uh, versus an internal bookkeeper, that sort of thing.

Hector Garcia: [00:29:11] But the biggest single problem that Intuit has, which is why I was completely against this in the first place, is because the experience of a professional service provider and the experience of your software company should technically be two separate experiences, like if the bookkeeper mess messes up. The idea is that that that QuickBooks customers don't think into it as an entire company or QuickBooks messed up. Or if your software messes up, the idea is that they don't now place blame on the professional that you know has has their hands tied because there's some glitch with the software. So they effectively combined the brand of your bookkeeper and your software company into one. And now they have they have this huge undertaking of trying to be best in class in both at the same time, which is why he's made it so difficult for you to hear anybody out there saying, hey, QuickBooks does my bookkeeping and I love them, right? So that's something that you don't hear anybody say. Um, just because it's very difficult to separate the two once into it has effectively, um, combined them. So that was sort of the the preface to this. Uh, of course accountants didn't like this. Um, you know, most accounting professionals charge a lot more than what Intuit charges and provide a lot more that were Intuit charges.

Hector Garcia: [00:30:28] And QuickBooks and leaders of QuickBooks have admitted that this is supposed to be a band aid, supposed to be a bridge for those who cannot afford a sort of really decent professional book. Separate bookkeeping practice yet, but at least get you over that hump so your business doesn't go bankrupt because you don't know where your money is. And then when you're ready to hop to a professional, QuickBooks still needs that network of proadvisors to have a natural, um, stepping from that launching point. So like the what Intuit has told us and the world, and obviously we don't know what's going to happen, but it's that they're trying to fulfill that space of the market. Is the brand new startups, the ones that can't afford a professional bookkeeper yet, and they're trying to just get people over the hump until they go with a professional. Same thing. It's happening now with the QuickBooks tax strategy, right? Where many, many, many QuickBooks online users have been surveyed by Intuit and they asked, do you have a professional do your taxes? And sometimes they say, I'm too small for a CPA, or CPAs are too expensive, or CPAs never answer their phone or whatever answer they give, which leads into it to to believe. And they already have TurboTax right that there could be a a happy medium where Intuit offers their TurboTax platform to QuickBooks online users that do not have a CPA or a tax preparer professional that does their tax returns.

Hector Garcia: [00:31:56] So what's happening is two things. One, in product, people are seeing an experience where they ask you, do you have a professional that does your taxes? And if the user says no, then it sends you through the sales pages of enabling TurboTax. And it's as easy as getting the data from Qbo, putting it in TurboTax, answering a couple questions, and being being able to preview your tax return right there and then without even having to speak to a human being, you have the option to get this assisted type service where you can call them and they can answer some questions, and then you can essentially. And Blake, I know you're a, you're a customer of of of TurboTax live um that you can eventually. Upgrade to a more live type of product and then get an advisor that helps you along the way. That's the part that makes accountants the partners of Intuit Pro Advisors, very wary, because they they feel like there is kind of a stepping stone into live tax preparation, and it doesn't feel like live bookkeeping where there's a very, very, very natural stepping stone from the band aid and bridge to a professional. The tax part is not very clear at the moment.

Blake Oliver: [00:33:07] Something that's very interesting to me about all of this QuickBooks Live and Live tax is that Intuit recently has been promoting their QuickBooks Live assisted offering more prominently than anything else on their pricing page. For $50 a month, you can get assisted bookkeeping help, which is very different than the $200 a month full service live bookkeeping that originally came out four years ago or five years ago. And. What you get for the $50 a month is you can ask questions. You can schedule video calls, one way video calls with the Intuit bookkeeping team to answer your questions and work with you in the product, but it doesn't include doing work for you when you're not there. They will help you in the moment, and it seems like that's what they are promoting. That's what they're. Really focusing on it makes me think that perhaps. Doing full service bookkeeping was a lot harder than they thought, and we all know this to be true. Those of us who have done client accounting services or bookkeeping or who do this kind of work for clients, it's very difficult to do for $200 a month and do it well. So maybe that's a clue as to where Intuit is headed with the bookkeeping aspect of this service business that they have built is really focusing on the assisted, which to me is a great sign because that leaves all the full service offering to us accountants. And, you know, for me, I built a practice in the accounting space, not the tax space. So that to me is is a really encouraging sign. There's a lot of room for bookkeeping practices, accounting, outsourced accounting practices to grow. And I feel like into it, um, is not going to be a real competitor in that realm because it's just it's so complex as anyone who's built a practice doing that knows.

Hector Garcia: [00:35:14] Yeah, I think not just that, Blake, if you were able to go back 15 years and and give yourself advice about what to do with your career, you probably would have said start a software company. I think I would have done the exact same thing. Why? Because software company margins. And, you know, obviously in the long terme after your software is developed, it's a lot higher per employee or per hour put by an employee versus in accounting, which has great margins. But there's still a lot of hours, individual human beings that have to work a lot of hours. So it was very interesting into it. Already had the great formula. They were selling software and there was super profitable. Now they're going backwards and they're inserting the cost of of manpower, the cost of having employees, um, and trying to make the same level of margin with, with, with the staff requirements. That requires live bookkeeping and live tax preparation. It's it's a very strange thing that this is the direction that they went in.

Blake Oliver: [00:36:14] And and to put a point on that, it's extremely different your costs running a software company versus your costs running a service business are almost inverted. Where a software business, especially a subscription business like QuickBooks, can generate 90% gross margins, whereas a service business, if it's not being run efficiently, uh, like a like many firms unfortunately, may only generate 10% gross margin. So Intuit doesn't want to be in the business of running an accounting firm because they already have a great business with software. Uh, which makes me think they're going to be focusing on this assisted product, both for tax and for bookkeeping, because that's where the money's at for them, is just adding extra support to the products that they're already successful with and making their customers more successful. It's it's essentially as as my podcast co-host David Leary has said, it's it's just enhanced customer support.

Hector Garcia: [00:37:21] I'm gonna go back to one of those weird conspiracy theory level predictions I made back when QuickBooks Live was created, and I still strongly believe that everybody at Intuit, all the executives, they understand that a software company, it's a lot more profitable than professional service provider company, period. And I don't think that the long, long, long terme plan of this is to go from a software company to a service provider company. Okay. I think that's not in the long tum.

Blake Oliver: [00:37:53] It doesn't make sense financially.

Hector Garcia: [00:37:54] In in the short terme. In the short terme, there could be uh, because you think about it, QuickBooks online simple start is $30 a month. You add $50 to that, you've doubled the amount of revenue. Okay, fine. Quickbooks Online Advance is $200 a month. You add $50 a month, uh, $50 to that. It only adds up a small percentage to that. But the assisted product might be one of those, like quasi insurance products where, you know, some of them use it, some of them don't use it. Most people just get it for the peace of mind. And then and there, maybe just there and there, there is the potential additional profitability you can get. However, you're paying these professionals 25 bucks an hour plus benefits. Um, one phone call already pays the $50 for Intuit. A phone call that goes a little bit too long, or two phone calls a month. It's already a losing proposition. So $50 a month for assisted for assisted services is actually not a money maker for internet. If anybody thinks it's a money maker, they're absolutely dead wrong. Trust me when I tell you I could not run a business for $150 a month support subscription, how is it going to do it for 50? Especially when the when the lines are so blurred about what is a bookkeeping error and what is a software error or glitch, which makes this even more complex to support.

Blake Oliver: [00:39:22] Yeah, it's a, um, it's getting your customers to pay for what used to be free customer support. As Dan so insightfully pointed out in the comments, Dan DeLong said support has always been a cost center, not revenue assisted is paying for support and to be fair, it is more support than we used to get or end users used to get because, uh, as far as I know, Hector, correct me if I'm wrong, Intuit has never helped with accounting questions. They've only helped with product questions. And like you said, the lines can get blurry. But my understanding with the assisted bookkeeping service is that if you're not sure how to categorize a transaction, which is an accounting question, that is something they can help with.

Hector Garcia: [00:40:10] Very true. The problem lies in, hey, how do I account for this transaction? But it requires you sending an Alta HUD closing statement for a piece of real estate to the assist person who's never seen this before. And it says, oh, by the way, I'm also doing, um, section 1031 exchange. And there's a, there's a trust that has some movement of money. And my accountant said, make sure that you book it this way, that way into it. I mean, the QuickBooks assist is just not going to be able to help with that sort of thing. So.

Speaker3: [00:40:37] Well, maybe maybe I.

Blake Oliver: [00:40:38] Mean, they do they do say they have CPAs and enrolled agents that are working on not.

Hector Garcia: [00:40:43] For 50 bucks a month. Okay, look, this is the reality, okay? Before this additional $50 assisted service, it was very easy for him to go. Sorry. That's an accounting question. Talk to your accountant if you need to know how to press, you know, a sequence of buttons in QuickBooks to get to reconciling or whatever. We can help with that. I think they've shot themselves on the foot with this thing, because there will be some customers in which they cannot answer the questions, and Intuit is going to have to refund the $50, sometimes retroactively, because some people will pay 50 bucks a month for four months, they won't use it. And then when they need it, they realize that they can't answer their question. Maybe there'll be a couple of, let's call it rogue employees inside into it that understand the accounting and will attempt to answer the question. But then it's another challenge, because sometimes an accounting question requires to triangulate with the tax person, with the attorney to understand, you know, what's happening. So this is going to be very interesting to see how it how it pans out. Probably 99% of the cases is just, hey, my this thing is not reconciling. Can you help me find the difference? That could be like 99% of the issues, but there will be a very voiceful few that will, you know, run into a little wall here with the assisted, uh, bookkeeping or whatever that's called. And, and they would be very vocal on the internet about, hey, I paid all this money and they couldn't help.

Speaker3: [00:42:08] Well, and.

Blake Oliver: [00:42:08] I would agree with you, Hector, except I is a very powerful tool that we now have and that I'm sure Intuit is using internally with its experts to help clients. And I want to get to Jason's request that we talk about how Intuit plans to use AI in QuickBooks. And I want to speculate and say that I think that actually it will be more useful for the internal experts who, like you said, may never have encountered that closing statement, but can use AI tools similar to ChatGPT and Claude to help create the journal entry, help figure out what should be the way to record this transaction in QuickBooks, and help the end customer do that as part of a $50 per month offering. And let's let's remember that Intuit doesn't think like accountants do, where we try to allocate that $50 to the hours that these support reps are working, that these experts are working. All they care about is that they have. Thousands or tens of thousands, or perhaps hundreds of thousands of QuickBooks customers paying $50 a month. And that total revenue just has to support that cost center of the experts being available. So I think you mentioned the sector. It's like an insurance policy in a way. Maybe many months. I don't have any questions. But then I do have that complex transaction I can't figure out. And I go and I ask for a meeting with the QuickBooks Live bookkeeper. I get on and we have this really complex question. Well, Intuit doesn't care if one expert spends several hours with me working on that. You know, they're not going to look at that as a loss, because all they have to do is make sure that there's enough experts available to help. They're not trying to do cost allocation on every hour because they think like a software company, not like a not like a traditional firm.

Hector Garcia: [00:44:01] Yeah, I agree 100%. So I think it will be a good, uh, way to sort of end the webinar talking about what AI does now and where we think AI is going to be and how it's going to transform the software companies and the and the accounting industry as well. So the point I was making before we went down the rabbit hole of like whether or not Intuit should be doing this or not is that when we go back to, uh, AI plus experts, right. That was the strategy, AI plus experts. The true strategy really is AI automation. And go back to being fundamentally a software company. However, what I think is part of the plan is for Intuit to be able to automate certain bookkeeping tasks they might need to understand in an intimate level, what is it? What does it feel like to be the person that's making the decisions to, um, to to automate this or to enter these tasks in the first place? So Intuit could have read the metadata of all the accountants doing work with Qbo. And it's also part of my conspiracy theory that with Qbo, Intuit can basically watch people work. Not not in a creepy way. What I'm saying in metadata, they can kind of watch how people behave and how they categorize certain things. And having that history helps train the AI on how to do it automatically later on.

Hector Garcia: [00:45:21] But accounting is a lot more complicated than just categorizing things that come from from the bank. So by Intuit having their own accounting firm built in with live bookkeeping and their own tax firm with, uh, with Live tax, now QuickBooks or Intuit can now understand why there is a third party company, a middleman that stands between the small business owner and financial statement understanding or small business owner. And, you know, being good to go with the IRS that, you know, the accounting firms are middlemen, essentially. And I think a true visionary software company would want to eliminate that, that that middle person and want to control the entire process from beginning to end. This is not the evil Intuit wanted to destroy the accounting industry. This is Intuit being 99% right, that a lot of what accountants do is useless, mundane work. And we use we we don't tend to use our brains in the full capacity that we could. So we spend 99% of our time categorizing and cleaning up QuickBooks files instead of advising our clients. So as much of a label you want to give to Intuit for this is what they're doing, right, they're going to become an accounting software that uses AI, that learns from accountants, that learns from the internal experts, and all that learning will feed the machine and feed the machine until 99% of the bookkeeping work can be done automatically by, by by QuickBooks.

Hector Garcia: [00:46:55] And then the accountant only steps in to kind of put that finishing 1% touch as a human always needs to put the finishing touch at the end. But obviously the QuickBooks by itself was only 10 to 15% of, of of uh, of uh, of the power. And the whole 90, 85% of the power would be given to the bookkeeper and the accountant. I think Intuit wants to reverse that role a long time and eventually do away with live bookkeeping, do away with live, live tax, and structure the company in such a way where you don't need all these staff to run it. So I think this is just again, it's my conspiracy theory. This is just where they are now as a as a stepping stone to really where they need to be, which is go back to being an accounting software company, in this case with the direction they're going. Accounting plus banking plus finance plus marketing plus. Okay. Yeah we get it. But but at its core they're going to go back to being simply just a software company. And I would be will be what enables them to do that.

Blake Oliver: [00:48:00] We got ten minutes left. I want to get to some listener comments and questions. Let's see if we can get these up on the screen as I read them out. Ian said QuickBooks is only suitable for small, simple companies. Hector, that's red meat for you. I want you to take on that comment. Quickbooks is only suitable for small, simple companies. Well, we know that Uber was on QuickBooks for quite a while before they made the switch and so was Grubhub. I spoke with Brant Kucharski, who was the chief accounting officer at Grubhub, and he said when he came in to become their controller, uh, they were doing like a million, 2 million in revenue and they were still on QuickBooks.

Speaker3: [00:48:41] Yeah.

Hector Garcia: [00:48:42] Um. You know, diapers are also for small, simple humans, right? Yeah. Yet it's an incredible industry, right? An industry you want to be on. So. So first of all, what if that's 100% true, right. That small, simple companies are the vast majority of companies in the United States. According to the Small Business Administration, there's 33 million, uh, small businesses in the United States. The large businesses are really a small percentage. Now, granted, large businesses pay millions and millions of dollars for accounting software. Small businesses pay thousands. Okay, but but that being said, Ian, if you actually add an ERP software, um, not a full ERP software, but an ERP software that's designed to work alongside with QuickBooks. So for example, for a medium sized, uh, manufacturing, they can add fishbowl, run the entire manufacturing inventory management operation in fishbowl connect to QuickBooks. And QuickBooks becomes simply just the source of truth for your general ledger. Quickbooks is used to reconcile your banks. Make sure your are your AP is correct. Generate PNL, generate balance sheet. No details on on on inventory items and the process of particular, uh, manufacturing, uh, steps or whatever all that stuff gets gets omitted from QuickBooks and you use a third party app to do that.

Hector Garcia: [00:50:06] So yeah, you're, you're you're right. If you just grab QuickBooks and compare it to SAP or compare it to NetSuite, you're it's that that's that's true. It's only for quote, small simple companies. But I have a few clients on QuickBooks enterprise that are 15, $20 million a year, uh, small mom and pop manufacturing shops and many of my other clients that are real estate professionals that only generate $300,000 a year, I have no employees. They look at this $15 million a year small manufacturing company and say, but that's a huge company, right? So I think it all matters depending on what those small company mean, what a simple company mean? What does mid-market mean? So so Ian, you're right. Um, you know, compared to obviously large companies, very large stock market traded companies. Yeah, QuickBooks is only good for that. But with, uh, third party app integration, I think you can you you can get really far.

Blake Oliver: [00:51:03] Monaural wants to know, are we going to see any new features in desktop in 2024, or do you think they're done with new features?

Hector Garcia: [00:51:12] There will be new features. Uh, and the reason why I can tell you that without breaking any NDAs is because for many, many years, uh, a lot of, um, product managers are Intuit email me and say, hey, we're thinking about doing this for this year. We're thinking about doing this for that year. What are your thoughts? And we've already had active discussions about what should we see in QuickBooks desktop 2025 with regard with inventory and that sort of thing? Now, the long answer to that question is probably QuickBooks enterprise only. So so the only place where you're probably likely to see a new feature, something groundbreaking like what was released last year, which is prepayments on sales orders, which is kind of funny that we call that groundbreaking. But it was groundbreaking because for years and years and years, we wanted to have prepayments on sales orders, and we just had it last year. So something big like that will likely only to see in in probably enterprise. That's my that's my thought.

Blake Oliver: [00:52:13] Michelle says. I see posts from Intuit advertising that they offer banking. Is that an overt simplification?

Hector Garcia: [00:52:23] Um, I think it depends on what you call banking. And, um, and it's probably an oversimplification for good reasons, because non I would say traditional brick and mortar banking, it's already kind of complicated. Right. If you kind of think about it and you pin this against the relays of the world. Right. Like the the quick QuickBooks checking, which I think QuickBooks checking aspires to be like relay relay is sort of like the I think, the gold standard for an online bank that was built to be a really amazing software company that happens to be a bank in the back end, I think. I think QuickBooks aspires to be that, where it doesn't matter who banks them in the back end. You know who who talks to Treasury, who does the HS, who talks to FDIC like where the where the money physically is or who's legally responsible for like holding those funds doesn't really matter. What matters is that the front end, what users see, that the balance is how they generate payments and how they see the money coming in. It's really the secret sauce of banking. So QuickBooks checking aims to be that, um, there is a, an option to have QuickBooks checking, but some of the back end transferring systems and, and bill payment systems are not as robust. Uh, to be able to really, truly compare them with, quote, a bank. So yes, you're right. It's it's been oversimplified, um, probably by design because it's a real simple solution. For now.

Speaker3: [00:53:53] I'm going to.

Blake Oliver: [00:53:53] Read a few comments. Dan says accountants will be the receipt checker at Costco, where everything else is self checkout. Michelle says, I was at my BNI meeting yesterday doing my eight minute presentation, trying to describe all these changes. Well, I wish this discussion had been available prior. I would have sounded much smarter. Well thank you Michelle, I'm glad that we could, uh, help educate you on QuickBooks. Uh, and hopefully it'll come in handy in the future.

Hector Garcia: [00:54:25] Michelle, there would be a lot more BNI meetings to come because I know those things are done weekly. Yeah, and also go to another chapter and have the discussion over there. Practice a little bit about preaching what's going on in the QuickBooks world.

Blake Oliver: [00:54:37] And lastly, an anonymous LinkedIn user said, it makes sense what you are saying, Hector, as I think that is why they are contracting people like me as a TurboTax verified pro and I uh.

Speaker3: [00:54:49] Okay, I.

Blake Oliver: [00:54:50] Believe that comment.

Speaker3: [00:54:50] Regarding about that. Okay.

Blake Oliver: [00:54:52] Let's talk about we.

Speaker3: [00:54:52] Haven't real quick. Yeah.

Hector Garcia: [00:54:53] We haven't talked about that. So QuickBooks Live tax or QuickBooks or TurboTax live and QuickBooks Live tax or assisted tax. Uh, they are TurboTax products being offered to QuickBooks, uh, users and small business owners. And the the assisted and the live employees work for Intuit. They're part of TurboTax, their internal employee. Maybe they have other gigs that work for their. This other concept called TurboTax Verified Pro, is an entirely different world, and it's a current experiment that they're running where they are looking for CPAs and enrolled agents who will not work for Intuit. They they're not going to be employed at Intuit. They will be listed in a ProAdvisor style directory. And when somebody says, I need a local pro, not TurboTax live, I need a local pro. It will go to this website. For TurboTax Verified Pro, they'll put the zip code and it'll list all the people that will that will be there. They're experimenting with pricing. I think for the most part, they're using standard TurboTax pricing. And then if that Verified Pro assists the user on preparing the return inside TurboTax, they're going to get a cut or a commission, uh, on that. So that's that's much different than working for Intuit and getting a whole bunch of, uh, returns to do or being responsible to, to, to file them versus assisting people to use TurboTax on their own. That's what Verified Pro is. It's like the the preparer can input stuff in TurboTax all day long. But the the filer, whoever files the return is TurboTax is Intuit. And Intuit controls the customer. The entire process is controlled by Intuit. It's just assisted by an outside person, because maybe they can't employ enough internal live bookkeeping people. Or some people like to be face to face and see the person that does their tax return know that they're local, you know, meet them in Starbucks, whatever it is. Some people still like that, that they don't want to deal with a faceless company. So this TurboTax Verify Pro is a very interesting alternative to the live, uh, products that they're offering.

Blake Oliver: [00:57:08] Hector, thanks so much for your expertise sharing that with us. Before we go, I want to, uh, mention your podcast again, the unofficial QuickBooks accountants podcast. Let's get that up on the screen. I mean, you go to Ukb. That show. It's Uqba show and you can subscribe. You can listen. Find it wherever you listen to podcasts, Spotify, Apple Podcasts. It's a weekly update. I think you're doing weekly. Right? Right. Hector?

Hector Garcia: [00:57:43] We're in weekly now. Yeah.

Speaker3: [00:57:45] So awesome weekly.

Blake Oliver: [00:57:46] Updates about what's going on with QuickBooks. So if you're in QuickBooks a lot, uh, you got to listen to that. And don't forget to check out Hector's tool. Right tool. Hector, you want to give us the quick 32nd pitch on that.

Hector Garcia: [00:58:00] Right tool is a Chrome extension that you install into your browser the minute you launch QuickBooks online. This right navigation bar opens up and it opens up narnia's closet of possibilities of things you can do in QuickBooks online that you couldn't do it with, with with built in tools. Awesome, right? Tools app is the website right tool dot app.

Blake Oliver: [00:58:21] Hector, thanks so much everyone. Thank you for joining us. Hope to see you again on a future webinar. And let's roll the outro.