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CPA firms to profit from proposed SEC climate rules; half will quit if they must return to the office; financial literacy is now the law in Florida; El Salvador struggles to adopt bitcoin, and more!
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Show Notes
03:29 – Mister Car Wash Finding Loyalty Among Increasing Customer Base
05:51 – Voicemail from Nikole – Thank you!
13:08 – Intuit Rate Survey: COVID-19’s impact on accounting professionals and their clients
18:00 – Half of Remote Professionals Say They Would Quit if Required to Go Back to Office
20:27 – As more companies begin their return to the office, Facebook parent Meta Platforms is becoming more remote than ever before
24:30 – Rick Scott touts importance of 'bookkeeping' classes when asked about financial literacy bill
26:24 – Who stands to make and lose money if the SEC climate rule becomes law
New SEC proposal would ramp up climate-change disclosures
34:09 – Advisory Services Continue to Grow in Accounting Firms
35:54 – Madonna Becomes Latest Celeb Aboard Bored Ape
39:32 – Six months in, El Salvador’s bitcoin gamble is crumbling - Rest of World
42:52 – Digits books $65M on a $565M valuation to bring a more dynamic, automated approach to legacy accounting tools – TechCrunch
59:47 – Podcast 350: Wayne Chang of Digits - LendIt Fintech News
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The Accounting Podcast (formerly the Cloud Accounting Podcast) is the world's #1 accounting, bookkeeping, and tax podcast! Join us weekly for a roundup of accounting news, analysis, and interviews. Plus, earn free NASBA-approved CPE credits for listening with the Earmark app. Learn more at https://earmarkcpe.com.
[00:00:00] Thank you to our sponsor, Dark Horse CPAs
David: Creating a CPA firm from scratch is hard. Scaling it is even harder and doing it alone sucks. Why not join a firm that's built everything you know your practice needs to service clients better, and scale your book of business? Stay tuned to hear more from our sponsor, Dark Horse CPAs, later in the episode.
[00:00:20] Preview
Blake: You get these tech people coming in from outside accounting, and they think there's all this data locked up in QuickBooks; we can get insights from it. But what if there really isn't a lot of insight to be gleaned from the accounting data? Because most of it, when you're talking about running a business, most of the things that matter to the success of the business aren't in the accounting.
The accounting is what happens after all the transactions occur. And isn't running a business, isn't growing a business all about making those transactions happen?
David Leary: Coming to you weekly from the OnPay recording studio, this is The Cloud Accounting Podcast.
[00:01:05] Introduction, and rundown on what episode will cover
Blake: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver.
David: I’m David Leary.
Blake: Good morning, David.
David: Good morning. Good morning.
Blake: So, what's top of mind for you this week, David?
David: Well, I chilled out. I was in Mexico for a couple of days. Went down, did nothing, which is good. Popped into a- just as we were leaving town, you know, there's a lot of condos being built down there. And so, we popped into one, and they're in phase two, and there's only like two residents left in this, but it's literally the- you're starting at 600 grand, 700, 800 grand to get a super modern condo in Rocky Point, Mexico, if you think about that.
Blake: How much?
David: 600, 700, 800 grand.
Blake: Oh, so, like the prices around here.
David: Yeah, exactly. It's- I mean, it's always kind of been like that though. California money flows into Phoenix and Arizona, and then people in Arizona are like, “I got all this equity.” So then, they go build something in Mexico for cheap.
Blake: Buy a second home.
David: Yeah, buy a second home in Mexico.
Blake: Interesting. Well, I'm glad you had a nice time. That stands in direct opposition to my adventure vacation at Disneyland, which I will not talk about in this episode.
David: We talked about it last week. Right.
Blake: We got two- we talked about it last week. We got one listener voicemail, from Nikole. I would love to play that. We have news about the Bitcoin experiment in El Salvador, the crypto experiment in El Salvador, follow up on that.
Biden is proposing a new tax on the Uber rich. ESG rules are coming from the SEC.
David: I saw that.
Blake: That's probably one of the biggest changes in a long time. Who's gonna win, who's gonna lose in that? The Great Resignation continues. I've got some data points on that that might help firms survive. I know that our friends who run firms, that we talk to on a regular basis, are suffering from turnover.
Everyone seems to be suffering from turnover. It used to be that people wouldn't leave during busy season. That was considered a no-no. And now, all decorum has gone aside.
David: Nobody cares anymore.
Blake: And you could just quit- yeah, you just quit whenever you want. That's creating a mess. What about you, David? I mean, we got app news.
David: I mean, we have- yeah. So, Digits had a huge raise, Ramp had a huge raise, a company called Finally, which is really- I would say it's another accounting firm of engineers. They were backoffice.co, I think was the original company. We'll get into the news on that. They took a huge raise. A company that wants to get rid of spreadsheets took a raise.
[00:03:29] Mister Car Wash
David: I saw an interesting article about- they kind of bring the show just to tie things in- Mister Car Wash, which is based out of here in Tucson.
Blake: Mister Car Wash.
David: Mister Car Wash. And they're big. They're almost $800 million in revenue now. Car Wash is all over the country now, blah de blah de blah. But what's interesting about this- what caught my eye- their year-over-year increase for their unlimited wash clubs- so, are you familiar with the car washes that do this now?
Blake: Oh, yeah, this is one of those great subscription businesses.
David: Subscription models, right?
Blake: Something you thought you couldn't- yeah. Everyone thought, what would be the most unusual thing to turn into a subscription business? And car washes, nobody thought about that. It makes a lot of sense. So, this company-
David: Year over year.
Blake: 800 million- yeah, go ahead.
David: 800- year over year, it's up 343 percent. Their subscriptions to the unlimited carwash. They have 1.6 million members on their unlimited car wash now. So, that's 1.6 million people recurring revenue, probably what, 35 bucks a month, 29, who knows? It's crazy.
Blake: 1.6 million people, and they- do you know what they charge for their recurring subscription?
David: 29, 34 somewhere in- you know. Maybe it's 24.99, yeah.
Blake: So, the idea is, I want to wash my car. Instead of paying each time I go, I buy one of these memberships, and then I can just go get unlimited car washes. It's brilliant.
David: It's crazy. Cause it's just- it shows that people want this model, they desire this model.
Blake: Yeah.
David: Especially when, on their side- and I'm sure people aren't taking advantage of it, but the cost to wash your car for them is like nothing. Right? It's a little bit of water, [CROSSTALK].
Blake: Well, it's water, and the labor is generally going to be fixed, unless you increase demand so much they have to hire, but that's good if you do that. Right?
David: Yeah.
Blake: So, you've got this fixed cost to manage this car wash. Yeah, why not sell subscriptions? Who cares if somebody comes one more time than they normally would? You want that; they're getting value.
David: And it's probably like the gym model, where people buy it, and they don't even use it some months.
Blake: Right, right.
David: Like a gym membership.
Blake: Yeah, gyms are a great subscription business. They're probably the original subscription business, and they're super lucrative. Carwashes can be the same.
David: So, I just saw that. I mean, I always knew they had these, I just didn't know they were doing that kind of numbers in carwash subscriptions.
Blake: 800 million in annual revenue.
[00:05:51] Voicemail from Nikole - QB accrual vs cash
Blake: Well, that's really fascinating. Keep us posted on that. In the meantime, uh, before we get into everything else, how about we play this voicemail from Nicole?
David: Perfect.
Nikole: Hey, Blake and David. This is Nikole Mackenzie. I am the owner of an outsourced accounting firm called Momentum Accounting, and I am also the co-host of the Sons of CPAs podcast. Check it out. Anyway. I was listening to your most recent episode, 270, where you were talking about cash basis, versus accrual basis reports, and needing the cash basis to file tax returns.
And this is one thing that drives me crazy, because I am the owner of an outsourced accounting firm, and we do not prepare taxes, but we work with a lot of different tax preparers. And prior to starting my firm, I actually did work as a tax accountant. So, I've been on both sides of it.
And in my opinion, tax accountants should not be asking for cash bases financials. They should be using the accrual bases and be making what is called an M-1 book to tax adjustment on the tax return. So, your book balance sheet should always tie to your tax return balance sheet.
And it drives me crazy when I get tax accountants giving my team AJEs [00:07:04] to accounts payable and accounts receivable, co-mingled with depreciation AJEs [00:07:10], which we do wanna make. So, it's just really frustrating being on this side of it.
So, I'm just curious what other people, what the tax accountants think, and how we can sort of all work together on solving this problem, because it's a huge pain in the butt. Anyway, appreciate what you guys are doing. Love your podcast.
And yeah, again, check out Sons of CPAs podcast. Take care.
David: First off, that’s super high quality. I don't know how she recorded that, but for an inbound voicemail-
Blake: Well, I think it's just a voice memo on the iPhone, David.
David: Came out very, very-
Blake: You know, you might want to switch from that Android device.
David: Very, very good.
Blake: The microphones are quite good.
David: So, if I’m hearing correctly, I don't have to go into my QuickBooks and say cash when I write my reports and change that little toggle. In theory, she’d be able to deliver my balance sheet, and profit and loss to my CPA, and my CPA, the IRS has a place to account for this on some forum somewhere, when they file my return.
Blake: There's a reconciliation that you do; you convert from accrual to cash, and you put that on the return, and everything's fine. But I know why. I mean, I've been in Nikole’s shoes before.
David: It’s because QuickBooks has that stupid button. If they’d never put that button in there, this would not be- nobody would ever ask for this.
Blake: Well, it's two things that are causing the pain. It's that QuickBooks, as an accounting system, fails to keep the books on both an accrual and a cash basis. So, that cash basis button is very deceptive, because if you do any of a list of common things, your cash basis financials will no longer be correct; your balance sheet won't be accurate on a cash basis.
And so, it would actually just be a lot cleaner if you could send the accrual basis financials to the tax people, and they would make the adjustment. But I know why they don’t because it takes extra effort. And shockingly, shockingly, a lot of tax accountants don't know how to do these adjustments properly.
And I'm not- dear listener, if you are listening, you're like, “Oh, I know how to do that. I'm a good accountant,” I'm not talking about you. I'm talking about the millions of-
David: Just treat it, Blake. Treat it, Blake, let them know.
Blake: Yeah. Don't get mad at- don't @ me on this, ‘cause I'm not talking about you. I'm talking about these unlicensed, garbage, tax prep shops, where they don't know the difference between accrual and cash basis financials, and they just take numbers and they plug them into the return, and they couldn't do a schedule M-1 reconciliation if it- I think that's the term, if their life depended on it.
‘Cause I did- you know, I've dabbled in doing my own taxes, and I had to do one of those, and I thought, “Oh, this is actually kind of a challenge.” So, they don't do it. I mean, there's two solutions. One is that QuickBooks could actually do proper cash and accrual base, flipping between them.
And the other one is just- actually, my best recommendation, Nikole, is, as you grow, do the tax. Because if you can offer both the accounting and the tax in one place, not only will your clients be happier, but you will make a bundle of money, because you're already doing all the hard work for these tax repairs.
They're just capturing all that value from the return. I mean, this is from my direct experience. I had a bookkeeping company. We merged with a CPA firm. The realization on the tax work was insane. We could charge- yeah, we were charging $2,500 a month to do accounting for companies.
And that meant that we could charge them $2,000 to do the tax return. Because relatively speaking, the tax return was once a year, and was 112th of the total cost of their relationship with us. It seemed reasonable to spend that.
David: But if you-
Blake: It's price anchoring.
David: ‘Cause really, the theory is, you have their bookkeeping. You take a little bit of time every month making sure the books are in order. In theory, you have almost no work to do at tax season.
Blake: Yeah. You could even maintain that book-to-tax adjustment throughout the year, so that you just have the numbers to plug into the return. And there are companies that are working on automating this- the flow of the data from the accounting system into the tax software. So that, yeah, you just- you're done.
You lock it down, submit on January, whatever, when the processing opens, January 20th, is it? I think. So, that's my recommendation for all the people who are frustrated with working with tax folks, is like, form an alliance or just do it yourself, because- oh my gosh.
And this is why all the traditional CPA firms are trying to build cast teams, is because they see the light too, that if you don't have to clean up all the bookkeeping, your realization goes through the roof. And we could do returns in a couple of hours, and charge thousands of dollars for them, because we'd done all the work throughout the year.
And this is what most traditional firms miss when they look at job profitability, is they see, “Oh, bookkeeping is not profitable.” Well, yes, it is, if you're also doing the return for that same company, because we've been doing all the work throughout the year-
David: You can’t start [CROSSTALK].
Blake: -to make sure that the return is easy to do, you know? Yeah, you can't look at it from a department-by-department basis, or you miss the big picture.
David: Costco would not sell eggs, right?
Blake: Yeah, exactly.
David: If they only [CROSSTALK] profit on those eggs.
Blake: They don't make- they wouldn't- supermarkets would not sell milk if they looked at job profitability on selling a gallon of milk, because they probably lose money on the milk. So, it's whatever- it's all the other stuff people buy when they go into the store. So, yeah, thank you, Nikole, so much for that lovely voicemail.
And if our listeners want to let us know their thoughts on this, or perhaps, you are a tax firm that wants to partner up with an awesome firm like Momentum and create this holistic experience, or anything else, email me, Blake@BlakeOliver.com.
You can record a voice memo on your phone, just like that. Just send me an MP3 or a WAV file. We'll listen to it. We'll likely play it on the air. Love hearing from our listeners. Thank you, Nikole. So, where do we go from here, David?
David: Well, I think just encouraging folks to interact with this new product here, this new- can I paste in, in a chat? Uh huh, I'm going to give you a URL. And we can maybe dive into this next episode or chat about it more. Maybe our users can dive into this. It's a horrible URL.
[00:13:08] 2021 Intuit rate survey
David: So, I might have to get a good URL to give out to people, but this is the 2021 Intuit rate survey. It finally came out. And they put it in this cool tool. So, for example, if you want to know somebody that is registered as a ProAdvisor for QuickBooks Desktop Certified, they are charging an average bookkeeping rate of $90 an hour.
You want to know what somebody's charging in the state of Connecticut for a QuickBooks cleanup, 100 bucks. You could just drill down and drill down. Canada, you want to know what somebody’s charging in Canada, average tax prep, $97; average QuickBooks setup rate, $121.
Blake: Wait, wait, wait. Average tax prep is only $97. Is that per hour?
David: This is-
Blake: Are these hourly rates?
David: Yeah, hourly rates. This is [CROSSTALK].
Blake: Oh, no, it's all hourly rates, David. No. That doesn't tell us anything. It could take one hour, it could take 10 hours. I start to sound like Seinfeld every time I talk about hourly rates. David, we can't talk about the hourly rates.
David: So, I would love for our folks to dig in on this. 900 participants participated, right? Now, obviously, this is going to be your QuickBooks ProAdvisors, right? People that are in the Intuit world, probably. It's not- I doubt the service is going out to non-Intuit ProAdvisors. Maybe it is some of them, but it's- I would love people to-
Blake: I'm sorry, David, but this is meaningless. It's hourly rates.
David: This is meaningless.
Blake: If we don't know how many hours they're billing, it doesn't tell us anything.
David: Yeah, ‘cause it doesn't say how long they work on a product [CROSSTALK] around.
Blake: Right, exactly. I could work 10 hours, or I could work two hours, is I'm going to get a very different price.
David: But you can see the hourly rate, based on certification levels, I guess, maybe, and by states. But you're right. Overall, it doesn't tell you if people in West Virginia are doing tax returns in an hour.
Blake: It doesn't tell you the profit. It doesn't tell you the revenue. I mean, this is my problem with hourly rates. It's like, it's not helpful. For instance, average- and this is also why people- bookkeeping doesn't get the respect it deserves. Because let's see, for instance, in Arizona, the average tax prep rate is $128 per hour.
The average bookkeeping rate is $86 per hour. So, a traditional firm looks at that and they say, “We're not making as much money on bookkeeping.” Yes, on an hourly basis, you aren't. But in every other way, you could be making way more money. This is not-
David: And I think the other-
Blake: Sorry, David.
David: [CROSSTALK] and this is- we're in this world of cloud. And Intuit's Find-a-ProAdvisor site still asks you, right- before I speak, let’s findaproadvisor.com. Find a pro-
Blake: I think it still ask you for an hourly rate, right?
David: -advisor.com. No, I think it's ZIP code first, still.
Blake: I mean, here’s how I would-
David: But [CROSSTALK], it’s based on ZIP code and city. We live in this world of cloud accounting, right? And if-
Blake: Yeah.
David: -you start with your ZIP code. And that's kind of this rate survey, right? Actually, it doesn't matter. What would be more interesting would be, are you cloud? Do you take clients everywhere? What's your hourly rate?
Because you're not going to charge- if you're doing cloud accounting, you're not going to charge somebody in South Dakota a different price than somebody who may be in a different state, right? If you're kind of fixed pricing.
Blake: I mean, you could value price them, I guess- I don't know. But yeah, it's not- we live in the world of cloud. Geography is not important. Hourly rates shouldn't be important, but they still are what we are using.
David: So, we'll get it out in the show notes. And I'd love for people to poke around in this and connect with- give their thoughts.
Blake: Yeah. I guess it gives you an idea of the relative pricing between regions. It's going to be cheaper in the Midwest, versus on the coasts, in the big cities. But you know.
David: Well, folks that are QuickBooks Enterprise-certified are charging way more; almost double.
Blake: ‘Cause they're working with bigger businesses, right?
David: Yeah.
[00:16:46] Thank you to our sponsor, Synder
David Leary: This episode of The Cloud Accounting Podcast is sponsored by Synder. With direct connections to Amazon, Shopify, eBay, Stripe, Square, and 20 of the most popular, online e-commerce platforms, Synder automatically categorizes and accurately posts transactions into the accounting system, allowing you to easily prepare your client's data, and organize their consolidated P&L, regardless of the number of platforms they may be selling on.
Synder allows you to use the general ledger of your choice, QuickBooks, Xero, even Synder’s own GL, which is designed specifically for e-commerce businesses, and contains everything you need, out of the box, to make tax season a breeze. Synder can sync all the necessary details, like inventory items, tax, shipping, discounts, classes, and locations, even correctly handles the processor fees.
With tools like a duplicate detector, and rollback functions, you can rest assured your client's books will never get messed up, because you can undo and restore any synced data with literally, one click. If you need support from Synder, they offer free help using your favorite means of communication, be it chat, email, or a phone.
To try out Synder for free, head over to cloudaccountingpodcast.promo/synder. That is cloudaccountingpodcast.promo/synder.
[00:18:00] Remote Work Story
Blake: So, remote work, David. Quick story about remote work. A lot of firms are starting to pull their staff back into the office, but that may be a risky move, considering that half of remote professionals say they would quit if required to go back to the office. That's according to a survey by Robert Half, the temporary staffing agency.
It was a survey of more than 2,300 senior managers in the U.S. Two thirds of respondents, 66 percent, said they want their teams to work onsite, full-time, as COVID-19 related restrictions ease. So, lots of managers, two thirds, want their staff to come back.
This is down five points from a similar survey last year. So, fewer managers, slightly fewer, right? 5 percent fewer want their employees to come back. Only one in three senior managers support long-term hybrid schedules. That's where a staff can divide time between the office and another location; only a third support that and the abilities, you know, the employees ability to choose where they work.
Technology companies are more open to flexibility- 37 percent of them; still really low. And here's the problem, is that when you actually talk to the employees themselves, half of those employees- in a survey of a thousand employees, half of them said they would look for a new job if their company required employees to return to the office full-time.
And that's up 16 points from one year ago. So, the longer people work remotely, the more they want to stay working remotely. Working parents said- 55 percent of them said they would not go back to the office. And millennials, 65 percent said they would quit if called back. So, be careful if you call your people back to the office, you're going to accelerate the Great Resignation in your own firm.
David: Almost all the firms conspire to require it altogether. And there's really no option.
Blake: If they all do it, I guess, but you know, then what'll happen is these accountants will just go find jobs in other professions, which is already happening. It'll just accelerate the Great Resignation and the great- I don't know. What do you call that? The great transition of accountants into other fields?
David: You're going to coin a new term here. The Great Exit.
Blake: Yeah, the great exit. That's what it is. The Great Exit from accounting. I think you just coined that, David.
David: It’s like a reversing entry, reversing career.
[00:20:27] Are tech companies bringing people back to the office?
Blake: So, you know, that's not great. Meanwhile, a lot of tech companies like Google have been trying to bring people back to their campuses. Which I think is a little more palatable because they make those campuses like palaces; everything you could possibly need. They want you to live at the office.
But one company, one tech company, a very big one is not doing that. Facebook or as they now call themselves, Meta, is becoming more remote than ever before. And this is part of Mark Zuckerberg's bets on the Metaverse.
David: 'Cause he just wants them to put on those headsets and work that way?
Blake: Yeah, the VR headsets, right? His bet is Oculus is owned by Meta, Mark Zuckerberg bets that in the future, we will be working at home wearing VR goggles or augmented reality glasses or something. And that is how we will collaborate in the future.
David: Yeah, ‘cause your sales rep can't walk into a firm and say, “Hey, buy these Oculus headsets for all your employees, and have them work at home, in the metaverse,” unless he was doing it with his own employees, right? [CROSSTALK].
Blake: Yeah, right. And you know what, if I had to bet, between- if I had to choose between in-person in the office, and the metaverse, given what I'm seeing in the data about employees wanting to work from home, I bet you the employees would be happy to slap on a virtual reality headset as they get better, and better, and better, and more and more lightweight, and work in the metaverse, versus going to an office.
David: Then you should be buying tons of Meta stock, ‘cause isn't it crazy down, because nobody in the street thinks is going to happen. If this is your play, this is your exit, man, just double down Meta.
Blake: Well, I don't know if Meta is going to be the one to do it. I mean, they have the bullhorn, and that's- what mark Zuckerberg says gets a lot of attention. But I bet you, there's a bunch of other startups that are doing this. Maybe there's the next Facebook, is going to be in the metaverse.
But I'm saying this as a vocal critic of- what do you call it? It's like technology that just gets a lot of press, but it's all vaporware, you know?
David: Oh, boy. You mean like all the app news this week? You know I’m kidding.
Blake: Yeah, the app news this week is full of that, but I bought an Oculus. I bought a meta headset for $300, just to try it out because we talk about it so much, and I can claim it as a business expense. And I am really, really, really impressed with where things are going.
It's still not super comfortable to wear for a long time, but the quality, for $300, is incredible. And if they just get a little more lightweight, a little higher resolution, I could see people using that instead of a computer screen, because you could have your whole field of vision as your Excel workbook that's unending, that sort of thing.
Financial professionals could actually benefit from this. And yeah, the collaboration in the Metaverse could create this feeling of being there with people more than Zoom. Somebody is gonna figure it out. I mean, imagine the internet, the internet before the internet was the internet, we had bulletin board systems and people thought, “That's the internet?”
I mean, this is where we're at right now with the Metaverse. It's like we have BBSs, right? And some people are all up into it and loving it, but most people are like, “What is this? A bulletin board? I use the physical bulletin board down at my coffee shop, you know?”
David: I don't know. I got a kid that has it, and they’re basically, monkeys playing tag, and that’s the thing. That's-
Blake: Oh, yeah, yeah, the games. I mean, there's a paintball game that my son plays that is really fun.
David: Why not real paintball? Why not-
Blake: Real paintball hurts, man.
David: ‘Cause it’s cheaper; real paintball costs you more than 350 bucks to play.
Blake: That’s a lot of- that's right. It costs you like 100 bucks every time you play it, right?
David: Yeah.
Blake: Yeah. So, anyway, I just think there's a lot of potential for it. So, combine that with the Great Resignation, and then people wanting to work remotely, there’s going to be demand for this. If somebody cracks the code on it, if somebody can make the killer app for the Metaverse, then we'll all be in it. We'll be recording our podcast from the Metaverse Cloud Accounting Podcast recording studios someday.
David: Maybe, maybe. I'll be all along and retired by then, in the physical world. I'll be building things in the physical world.
[00:24:30] Florida financial literacy legislation bill passes
David: This is- speaking of future, take Florida politics out of this, but Senator Rick Scott, when he was the Florida governor, proposed a financial literacy legislation bill. And apparently, it just got passed now. It's called SB 1054 and pushing that accounting should be taught as a basic skill. Accounting, bookkeeping, those types of things.
And this is his quote- so, he was on some Fox business network interview; let me read- get this quote here. “What I always will tell everybody is that you ought to take two years of bookkeeping in high school, because you really need to understand how businesses work. Because whether you're going to build your own business, whether you're going to work for a business, you ought to know how it works, because you'll know where you fit in.”
And apparently, the host pushed back on him to define bookkeeping. And he said, “It's like basic accounting. It's knowing how balance sheets work, how income statements work, and how cashflow statements work. Because it's really, the basis of how business works. It's basic accounting.”
So, it's- this is a- the fact that somebody pushed younger people to just learn basic accounting, you know?
Blake: Yeah, that's great. Go, Rick Scott.
David: And where's the- you know, the funny thing is, I don't see, where's the AICPA’s endorsement of this? Or-
Blake: But they don't get political, remember, David? They don't touch politics, which makes them kind of useless when it comes to being in Washington.
David: So, we'll see, because now he's a Senator. So, maybe we will see him propose bills like this, federal legislation. But they’ll have to cut something else out. So, maybe it'll just be like, you know, “Periodic table’s done, cut it out.”
Blake: We don't need history.
David: Or science.
Blake: Just cut out the U.S. history and put in- or science- and just put in the Accounting.
[00:26:24] Impact if the SEC climate rule becomes law
David: Speaking of science, don't you have stuff about the environmental Sec impact stuff?
Blake: Oh, ESG, yeah.
David: ESG.
Blake: So, here's a story from CNBC: who stands to make and lose money if the SEC climate rule becomes law. So, the SEC has proposed new rules that would require companies to disclose their risks related to climate change, and their greenhouse gas emissions. It will be a while until the proposal becomes law, but if it does, the implications will be sweeping.
David: And this- because this is the SEC-
Blake: So, here’s the one that’s-
David: -it's going to be public companies?
Blake: Public companies will have to disclose more about their climate whatevers. I'm not really sure exactly what they're going to have to disclose. ‘Cause I didn't read the rule; we’ll read it when it becomes a law.
David: Yes. So, they’ll have to- they're going to have to report their own green emission stuff. They're going to have to report any risk of climate change, right? Which I always find interesting, ‘cause I don't know. Have you been to London anytime in the last half a decade?
Blake: I've never been to London.
David: Some of the most expensive skyscrapers in the world are being built in London right now. Massive, massive skyscrapers, spitting distance from the river, you know? All these maps where it shows- they're all going to be underwater because of global climate change, right? I’m always- I can't reconcile this. What- these are billion and billion-dollar projects being built.
Obviously, they're being financed. Obviously, they’re being- there's insurance. What do all the people with money know that the rest of us don’t know? Right? So, now, they'd have to disclose that, right? Maybe they'd have to disclose, or we figured it out, and there's actually no risk of our buildings being flooded. I don't know.
Blake: I don't know. I guess, yeah, it's a good question. So, I'm just reading this fact sheet about these climate-related disclosures, and right at the top, they say, the amendments would require domestic or foreign registrants to include the following information on their 10K. So, that would be climate-related risks and their actual or likely material impacts on the registrant's business, strategy, and outlook.
So, that rising sea levels would be an example of that. If you're building a skyscraper that could be flooded, then maybe you'd have to put that on there. Although a lot of this stuff contains a lot of judgment. So, then you wonder, “Okay, well, are they really going to disclose it? Or is it just going to become a formality?”
Here's one that's interesting. The registered greenhouse gas emissions, GHG, which for accelerated and large accelerated filers, and with respect to certain emissions, would be subject to assurance. So, the auditors of public companies would be auditing greenhouse gas emissions. And then there’s some other stuff.
David: Yeah. And that's the key here, is of this, right? This is an article in journal of accountancy. It's almost the last paragraphs in the article. It talks about, CPAs in public accounting should be aware that they may be requested to perform additional services for large companies under the proposal.
Well, yeah. It’s a whole business model here.
Blake: So, well, you're skipping ahead to the-
David: This is even more non-audit work to do, or non-tax work.
Blake: So, you're skipping ahead to the winners and the losers, right?
David: Okay, yeah.
Blake: So, the winners in this CNBC article are companies that control carbon emissions. They would look better under this. Losers, businesses with surprisingly bad carbon footprints, because you can picture institutional funds saying, “We're only going to invest in businesses that meet a certain threshold for carbon emissions, according to this new standard.”
David: But then you just buy those credits, right? Those greenhouse credits.
Blake: Yeah, you buy credit stops at them, I don't know. But the big winner that's relevant to us is compliance professionals and software. “Companies will need help figuring out how to track and report their climate risk. Advisors, consultants, and auditors who have that expertise will be in demand, including many big names in insurance and management consulting.”
That's according to Rich Sorkin, the CEO and co-founder of Jupiter, a climate risk analytics company. So, get into that business, and then invest in the software companies that help businesses automate their reporting of greenhouse gas emissions.
David: So, is this something the SEC should be involved in? Because is this just another distraction? Now, they have to deal with this when they should be securities fraud, right? Is this just another thing in the way of them doing their core function?
Blake: I think they haven't been doing their- well, I dunno. So, my problem is that GAP itself needs to be modernized, and nobody's doing that. So, we're getting distracted by ESG. Where GAP doesn't know how to handle intangible assets. And I think that would be something for the SEC to focus on, is work with FASBI, the Financial Accounting Standards Board, and figure out, how do we actually value in tangible assets?
How do we make GAP work for subscription businesses? Because everything I've learned in the last four to five years that I've been at tech companies is that nobody looks at the accounting, because the accounting isn't useful if your business is mostly intangible assets.
And audits aren't that valuable because if most of your assets are intangible and are not on the balance sheet, then what are you auditing? You're auditing something that's really not valuable to investors. They don’t really care what you’re-
David: And investors are making decisions not based on the financials. And this is just another thing that's not on the financials, that maybe investors will use in their decision-making. They did say they are seeking public comment on this. So, this is still ways off. This could be years. Right?
Blake: Yeah. Years away. But I do think it's good.
David: And I also imagine it ebbs and flows with the administration, right?
Blake: Yeah.
David: Whoever’s in control?
Blake: Oh yeah, we'll get a- if we get a Republican administration, and then it won't happen, right?
David: Yeah.
Blake: But here's what I like about this, is that investors are demanding this information. And so, it's good that we, as accountants, figure out a way to offer it to them, if that's what they want. But I think that we also need to look at what we already do and figure out, you know, is the- don't get distracted by the shiny object.
This is shiny object syndrome here. But there is a lot of money to be made, I guess, so.
David: Yeah.
Blake: I don't know, it just-
David: Firms are going to spin up divisions. They're going to create some blog posts.
Blake: We're going to neglect our core duty, which is to match income and expense in the period incurred. And we don't do that right now for most businesses. Anyway, I'm happy to talk at length about this with anyone who's interested, but I don't know.
It feels like nobody seems to understand or care. But when was the last time anyone in tech cared about GAP financial statements? I mean, there's a reason they don't, and it's because they're just not that useful.
David: Or maybe they just didn't get through high school education on it.
[00:32:56] Thank you to our sponsor, Dark Horse CPAs
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[00:34:09] Advisory services continue to grow in accounting firms
Blake: Meanwhile, advisory services continue to grow in accounting firms. This is a story in CPA Practice Advisor. “According to a survey by Spotlight Reporting, nearly 80 percent of respondents plan on offering or expanding advisory services in the future.” I feel like we hear that in every survey.
Everyone says, “Yeah, I want to get into advisory,” but then, how many actually do? 70 percent of respondents stated that they already performed mentoring forecasting or other advisory services. Nearly 60 percent of respondents identified themselves as a hybrid firm, offering both advisory and compliance services.
Only 25 of respondents identified themselves as a traditional firm, offering only tax and compliance. 10 percent of firm respondents indicated that there are roadblocks that are preventing them from offering advisory services. What are the roadblocks cited by firms? Lack of time, not knowing how to start, not sure what to offer, and unsure about pricing and competition.
Now, what areas do firms want to grow in when they add services? Number one, cashflow forecasting, two, strategic planning and coaching, three, virtual CFO and advisory services, four, ongoing accounting and assistance. And then five is budget creation. So, forecasting, budgeting, strategic planning, bookkeeping, all that is what people want to grow on.
David: It's the same at every conference.
Blake: And that was a global survey of accounting firms.
David: It’s every conference for the last six years we’ve ever attended. It's the same.
Blake: It's the same thing. Everyone wants to do it. I think the problem is finding the time to do it, right?
[00:35:54] Crypto news- Madonna buys a Bored Ape
David: I have a teeny little bit of your favorite stuff, crypto news.
Blake: Tell me.
David: So, we talked about Bored Ape a little bit before. It's an NFT thing, and it's all the celebrities are in there.
Blake: Bored Ape. Yeah, these are the ape- pixelated ape pictures.
David: And it’s all tied to some- the one modeling agency. They're all- yeah. So, anyways, the latest now is-
Blake: These are little- just for our listeners who aren't familiar with the insanity of this. These are basically, low-resolution GIF files that are being sold as NFTs, for lots and lots of money, as non-fungible tokens on a blockchain.
David: Yeah. So, now, Madonna just tweeted out, “I finally entered the Metaverse, my very own ape. Thanks, Moon Pay. We all need protection from evil.” I don't even know what evil that is. So, she treats us out. So, she acquired, basically, $500,000 on Friday afternoon. She spent on this- she planted a flag in her NFT land, you know, joining Eminem, Paris Hilton, Justin Bieber.
These are all these same people that are doing this. “I finally entered the Metaverse.” And then, so, this comes a few days after you Yuga Labs, who is the creator of Bored Apes raised $450 million in a funding round that valued the firm at $4 billion.
Part of their plan is to create a metaverse where you get seeking a $5 billion evaluation on the premise that it can raise $455 million this year, primarily on the sale of “land plots” and a gaming-focused virtual reality known as Meta RPG. It's like these celebrities are being used to pump this up. Right? I don’t know, it’s so crazy.
Blake: Yeah. Yeah. It's nuts.
[00:37:34] The reality of blockchain
Blake: So, let's talk about the reality of blockchain. That's the beanie babies of crypto, is these NFTs, these little GIF images. I think it's totally silly. They will have zero value in the future, or not nearly what they are now.
David: Now, the technology of NFT makes sense. So, I think I don't want to be like- you know what would makes sense for an NFT? Take it to a basketball game. Because you could only have one of those that exist.
Blake: Right.
David: It's audible, it's in the blockchain; that would make sense. But what's happening is it's being- the technology is being used to pump half-assed collectibles, basically.
Blake: The problem is the public thinks that when you buy an NFT, you're buying the image, but you're not buying the image. You're buying a link to the image. And so, that's what happens when people fraudulently duplicate NFTs. There's nothing to stop somebody from creating a second NFT of the same image, and then posting that online and selling it.
So, authenticity is impossible to manage because anyone can create an NFT for anything. So, you’re just buying a link. You're not buying the image. That's the thing people don't get.
David: Yeah. For an image that in theory, can be duplicated an infinite amount of times, because it's online, Ctrl+C, Ctrl+C, Ctrl+C. It can be everywhere, but you're just buying the rights to say, “Well, I have the link to the very first one.” It's just, is there value in that?
Blake: Yeah. And it's very easy to copy them and create confusion. So, it's like, you know- you still have to have some third party that says, “This is the original.” It doesn't get around the problem of needing-
David: Oh, like the price guide, like the beanie babies price guide or the Beckett baseball card price guide. You need to have somebody who authenticates all of these.
Blake: Or the museum that puts the plaque below the piece of artwork that says, “On loan from the family foundation of, you know, Getty, or whatever,” right?
David: Yeah.
Blake: That's the original NFT, was the name under the painting. And somebody has to still do that. You still have to have a curator, so it doesn't solve the problem.
[00:39:32] El Salvador and blockchain problems
Blake: You know who else is running into problems with blockchain? The country of El Salvador, which famously went big on blockchain, made it an official currency of the country. And six months in, six months since El Salvador's Bitcoin law came into effect, adoption of the cryptocurrency remains patchy.
This is according to a story in restofworld.org. Lots of anecdotes about businesses that tried and failed because of glitches with the app, because of currency fluctuations, lost a bunch of money, and decided not to use it. In January, the government endorsed to report that at least 4 million users- nearly the country's entire population- had been verified as authentic users of the government's crypto wallet over the past several weeks.
But in March, a survey released by the Chamber of Commerce and Industry of El Salvador reported that 86 percent of the businesses contacted said they had never conducted a transaction using Bitcoin.
David: I think I saw some stats like this. Yeah. They were forced to sign up. So, they have a list of email addresses, but nobody's used the app.
Blake: Well, so, they incentivized people to sign up by offering them the equivalent of three days’ minimum wage to sign up for the app. So, that would be like, you know, David, we give everyone in the country 100 bucks to sign up for a crypto app that the government put together. Of course, people are going to do it; it's free money, right?
But that doesn't mean they're actually going to go spend it on businesses, and they haven't. So, it's only been six months, but it doesn't look great so far. Part of the problem too, is that the app that the government put forth as a custodial app- which makes a lot of sense- meaning that you don't own your own keys to the crypto.
So, a lot of crypto people- some crypto people are criticizing it by saying, “It's just a bank account. It's the same thing as a bank account, because you don't own the keys to the crypto.” So, if the government wanted to, they could just go shut down your individual wallet. So, in many ways, it's worse, because the government of El Salvador is known as being authoritarian.
So, you’re worse off having a bank account directly controlled by the government than you are- it totally doesn't fit with any of the ethos of crypto. Anyway, they're still trying to go for it. Part of the problem though, is that the country of El Salvador is deeply in debt.
And I suspect, based on what I'm reading here, that part of the play here is to get investment in Bitcoin into the country, and then use that to pay off their U.S. dollar-denominated debt that they owe.
David: Then they get those celebrities involved.
Blake: Yeah, you know? So, basically, how much of this is just a sort of a scam to get Bitcoin money into the country so that they can pay off their debt, rather than having to be accountable to the international monetary fund and all that? It just doesn't seem real.
Are they going to create a Bitcoin city, where there's no taxes and people can come and live? And you know, it's sort of like an Ayn Rand capitalist paradise? But think about it. The El Salvadorian government is not exactly known as a decentralized kind of thing. They’re- it's sort of like the opposite of the kind of government you want working with Bitcoin.
Anyway, it’s worth a read; link will be in the show notes. Check it out. And we should talk about app news, David. We got to talk about app news.
David: We should get in app news, ‘cause I actually have some breaking news. It just literally- I hit refresh on my browser. So, I have some breaking news. So, do, you want to?
Blake: All right. Let's do it.
[00:42:52] David's live test of Digits dashboard
David: So, I have breaking news. I just finally- I hit refresh. I've been hitting refresh for the last 24 hours. I have access to my Digits dashboard. So, Digits- I know we've spoken about Digits maybe over a year ago. Digits’ kind of been floating around, they were going to solve all these things in accounting. And it was very red velvet rope, “We're not saying, we're doing.”
Blake: Well-
David: They have all these investors. And we can get a little bit more of their most recent announcement, but we've been following them for a while, right?
Blake: Yeah. So, they spun up this website where it was very mysterious as to what exactly Digits was, there was a wait list, and they're going to revolutionize accounting.
David: They were doing everything. They were going to reinvent accounting, and all of these types of things. So, we've been watching them from afar, right?
Blake: Yeah.
David: I think I saw one of their pitch decks a year ago. You know, people send you stuff, it comes through PDF. You look at it, I'm like, okay. There's not a lot here. At best, maybe it's bank feed accounting. Right?
Blake: And they've been raising money the whole time. And the big thing that got them on our radar recently is this article in TechCrunch: Digits raised $65 million on a- wait for it- $565 million valuation. $565 million valuation, and they don't really have customers.
I mean, its question is to whether or not they even have in the hundreds of customers, or any paying customers.
David: Well, they definitely have- because they made this thing so mysterious. Right? I think they've collected 14,000 email addresses. People type it in. I think I've put in 10 or 15 email addresses trying to- maybe it's different-
Blake: Get an invitation?
David: -and I’ll use a different email address, I'll get in. Right? So, anyways, it's really- you know, stepping back, what did they release? Part of this announcement, they've released this product called Digits Reporting. So, they have reports.
Blake: Digits Reports.
David: So, after all- Digits Reports. So, kind of some background. So, the founder- very established founder. So, him and his co-founder created an app called Crashlytics. They sold it to Yahoo- or not Yahoo, sorry. Sold it to Twitter. Twitter eventually wound up selling this- that team, and that product to Google.
And it powers the mobile apps, all the Crash data inside them, and all the data about a user, the end user on the mobile apps for Google.
Blake: And I don't think he mentioned his name, the founder of Digits, or co-founder of Digits is Wayne Chang.
David: Wayne Chang.
Blake: And he’s the one who created, Crashlytics, sold that to Twitter, and then Google, was it?
David: Correct.
Blake: Figured. Yeah.
David: And then he’s invested in a bunch of other companies.
Blake: So, Crashlytics, I just want to say Crashlytics was acquired by Twitter for over $100 million.
David: Yeah.
Blake: And then was valued at 259 million at Twitter's IPO. So, very successful-
David: Very successful.
Blake: -analytics guy.
David: And because he's successful, successful exits, investors love that. And most of the articles- it's kind of funny- the vast majority of the articles that are about Digits are all about how many investors they have, and how much money they're raising. Right? And how they-
Blake: Right. Well, ‘cause there hasn’t been a product until now.
David: Which hasn't been a product, right. They have 72 individual angels on their cap table. Right? And now SoftBank just did the latest big investment. Right? It's just, that's what a lot of the articles are about. And then you step back, and you can-
Blake: And you go on LinkedIn, and then you look at the employees, and a lot of these employees are former Google, former Twitter. These are tech royalty-type people.
David: Oh, it's very engineering heavy. There's no doubt. It's super engineering heavy. There's no doubt they prize-hired very, very smart people. But then you start digging in, and like, what is this product? Right?
Blake: Yeah. Tell me about Digits Reports. You got access to this first.
David: So, in this article in TechCrunch, it says, Digits itself is not a data integration tool. It essentially sits on top of Intuit, QuickBooks. So, you start digging more, I'm like, “Oh, it's just a reporting app. It is the same apps we've been seeing for a decade on Xero and QuickBooks Online.
It's a dashboard app, right? You drill down in your reports, you click on them. Now, this is a little bit slightly different ‘cause it- I think you were at QuickBooks Connect. Do you remember the whole- the chat thing QuickBooks had?
Blake: Well, they announced they were going to have a chat bot you could chat with and get information about your financials.
David: So, essentially, it'll take a sentence, compared to January, income, driven by an increase in this account, right? And so, it's kind of plain language, but it's not plain language. And so, they're taking the-
Blake: Well, you could say, “How did I do in January, versus last year?” And then it would translate that into something and come back to you with a number.
David: Exactly. Exactly. And then I've seen lots of mock-ups of this, built in hackathons over a weekend. A lot of this had been built. Anyways, I signed up. And for whatever reason, it takes 24 hours for them to turn it on, which doesn't make any sense to me, ‘cause it's all APIs; just turn it on and let me log in and start seeing- because it's really just eye candy. Right?
Blake: So, it took 24 hours to connect your QuickBooks file to Digits.
David: Well, it took two seconds to connect it, but for them to show me any results, it took another day. But literally, I had been hitting refresh like every hour, and it refreshed just now. So, I'm literally in here for the first time. I have a little menu on the left, it's executive summary, profit and loss, balance sheet, cash flow.
And it has my month-end report. And basically, it just has sentences with my data, which is- no, I cannot click on these and drill in, right? Oh, I can- oh, I'm in edit mode. Get out of that. But then has the balance sheet, the profit and loss. So, I'm on my profit and loss.
So, I could look at, let's say office supplies, and I can mouse over my office supplies- $224. And basically, it shows me almost- if you go back to the old QuickBooks Desktop days, you could double click on a number, and it would bring up a report showing how that number came to be. Instead of a click down-
Blake: So, in the transactions inside of that report, right?
David: Yeah. So, instead of a click down, you mouse over it and it pops up a hover over, and you instantly get the previous 12 months. And then you can click through and see who the top vendors are, and the top transactions.
So, you can get insights to your numbers. You drill down, if you move your mouse off, then it goes off the screen. It's a little bit of a- I don’t know what's better. Right? You drill down, and it opens something up that you have to close when you're done, or an instant slide over pop-up. So, anyways, it's just a lot of eye candy.
Blake: I prefer the new tab, but that's just me.
David: It's a lot of eye candy for something that is pretty much using the QuickBooks payroll reports APIs.
Blake: Okay. So, wait, you're getting your financial statements, your P&L, your balance sheet, your statement of cash flows. It's pulling that from QuickBooks and then you can mouse over and see the previous 12 months of transactions in any account. Is there anything else?
David: Based on their screenshot, there's kind of a chat area. I can chat with my accountant about something or add comments, which I think has already existed in some other reporting apps. And then they have a screenshot of it on their site, but I don't- it doesn’t look like it's on in here, but it'd be like a chat bot, right?
Where I could be like, “How much did I spend on office supplies last month?” And it could retrieve that data in series and then serve it up. The real thing is here is, it's just another reporting app, dashboard app. Right?
Blake: Yeah.
David: And there's so many of these have been on the market; so many. And so, the valuation is a little bit crazy to me, right? Because this probably doesn't do consolidated reports. It doesn't do, you know- there's probably a lot of things it doesn't do that the more powerful reporting tools do, but they have the buzz, right. They have all the tech buzz, the money.
Blake: Well, it's- so, founder, Wayne Chang has successfully sold a startup in the past. And so, this is how crazy VC money is right now. They're just betting on him to figure out how to do something in accounting. It's not there yet, but they're betting that it will be.
David: And he is apparently- in this TechCrunch article, this is quote, unquote, from the reporter. “Chang told me that since launching in 2019, Digits has already fended off three acquisition offers.”
Blake: I mean, this is just such bluster, right? It's all, “We've raised a bunch of money. People want to buy us,” but there's nothing there yet. There's no there there.
David: Oh, and the thing is, the early pitch decks and the early- basically, they pivoted themselves into a reporting app.
Blake: What was it before?
David: They were going to reinvent accounting. They were going to-
Blake: Automatically-
David: It was so pie in the sky, automatic accounting, all this stuff. And it's just, it's a reporting app. At the end of the day, it is Fathom Reports or Spotlight Reporting. It's another reporting app that just sits on top of the QuickBooks data. And so, the interesting about this- I'm going to get the tweet here, which I thought was actually really spot on.
So, I tweeted about this, ‘cause I was kind of joking about the- ‘cause the article talks about the headline. I'll read the headline and the title of the article here: Digits books 65M on a $565M valuation to bring a more dynamic, automated approach to legacy accounting tools. And I tweeted out that the headline should say: A QuickBooks reporting add-on app is worth a half a billion dollars. That should be the real title of the article.
Well, Alan Hettinger, @ALanHett on Twitter, he replied, and he said, “Sorry, I have a lot to say about this one. How are you on QuickBooks, yet you need AI to give you insights into your numbers? Those three ad expense transactions last February must be really confusing.” And I think he has a point, and he's nailing this.
There was an app that existed that basically did all of this, about three, four years ago in the QuickBooks space. And then eventually, they integrated with Xero. Well, it's called chata.ai.
Blake: Yes.
David: And it can read all your data. It would kind of put it into common language like this, and they just couldn't get traction in the QuickBooks and Xero market. They just couldn't do it. And now, if you go to Chata AI now, it's all on market. They're going after Nike. They're going after all those types of places.
[00:52:53] Thank you to our sponsor, Relay Financial
David: This episode of The Cloud Accounting Podcast is sponsored by Relay Financial. For those listeners that haven't been following along with my drama caused by PNC when they purchased BBVA and botched the migration, to quickly summarize, PNC bank feeds won't work with QuickBooks Online. The website had all my old BBV transactions just listed as debits and credits, with no vendors or payees.
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[00:54:07] What tech people think they get with accounting numbers
Blake: So, here's my take on this. You get these tech people coming in from outside accounting, and they think there's all this data locked up in QuickBooks. We can get insights from it, but what if there really isn't a lot of insight to be gleaned from the accounting data? Because most of it- when you're talking about running a business, most of the things that matter to the success of the business aren't in the accounting.
The accounting is what happens after all the transactions occur. And isn't running a business, isn't growing a business all about making those transactions happen? So, like in the QuickBooks file, there's really- by itself, there's not much. You’re not going to get a lot of insights. There aren't a lot of insights to be gleaned, especially when our accounting standards don't put any of those intangible assets on the books.
And the information that you need to actually make that data useful is in a lot of other places, too. So, this is why- like, when I was at Jirav, our big focus was on combining the people data, and the nonfinancial operational data into a financial model, that you could then use to run your business.
David: And I think they want to do that- they want to connect through a hub- Plaid. Connect the banks as well, employing data there.
Blake: Right.
David: So maybe, they’ll be doing their own machine learning on the back end, and re-categorizing transactions, which is what 50 other apps are all building. Everybody's building categorized bank feeds software. And they- that’s [CROSSTALK].
Blake: Right. Yeah. I mean, that's- there's nothing special about that. There's nothing special about what they've built here with Digits Reports. There's nothing amazing or groundbreaking. And there's this-
David: Well, for me, I really started thinking about how I use reports in QuickBooks as a business owner, you know? Definitely, you know, you're going to the bank feeds, screening, and matching transactions, and seeing what your cash balance is. Literally, the cash balance. Right?
Blake: Yeah.
David: And actually, QuickBooks should just send that to every business owner as a text every day. It would be super convenient. But you know what I really use the reports on, is Sandy checking my data. Did I post things correctly? I do a lot of transaction detail reports for the year, because every lot- so many things now are monthly charges. Right?
Blake: Yeah.
David: And I had Sandy check the data, then I'm like, “Okay, for Zoom, there's a monthly charge every month. So, it's all been posted correctly. There's not a second charge.” And almost like, I used to take almost audit my books a little less than just, reports are just there. Right?
Blake: Well, do you do any analysis on your reports, David? Do you use your reports for any analysis to see how you're doing?
[00:56:42] Small business owners don't need a dashboard app
David: Every so often, but not- and this is the biggest problem I've always had with all the dashboard apps. And I've sat through pitches of dashboard apps, 100 of them, 110, maybe 120. Never have I talked to a small business owner- and I've talked to thousands of them- where they said, “I really wish I had a dashboard.”
And so, the sale- trying to sell a dashboard app to a small business owner is very, very hard, right? Because-
Blake: Yeah, ‘cause they don't ask for it. They're not asking for it.
David: It’s not a problem.
Blake: They don't need it.
David: This is why the time sheet apps, when we started that journey, exploded every single small business. And I was like, “Oh my God. Every week, time sheets are nightmare at my company. Oh, for 40 bucks a month, TSheets, you're going to solve that for me. Okay, I'll pay that.”
Blake: Yeah.
David: But their dashboard problem is so low on their priorities, they're just not going to pay 60 bucks a month for a dashboard app.
Blake: Well, and here's also why they won't pay for it. Because a generic dashboard, something that is just assembled based on what every business might need, is not tailored to me, and therefore, is not useful. The dashboard has to be super specific to my vertical, to be at all useful.
And a great example is Geni Whitehouse, and her firm’s wine industry dashboard, where they take the data from all the wineries in Napa, and then they benchmark them anonymously against each other. That data is incredibly valuable. But a generic, small business dashboard, where it shows me, “Oh, here's your current ratio.” Business owners don't care about their current ratio.
Most of them, you know, unless they've got loan agreements or covenants where they have to track that very carefully, most don't, though. So, for most small businesses, none of that stuff matters. What matters is, you know, how many customers did I get last month? And I don't need to look at my accounting system to figure that out.
That's why CRMs are so valuable. And marketing automation systems are so valuable because cost per lead, and all those metrics are way more important to a success of a business, than the accounting stuff, which happens after the fact. So, the thing that I find is missing in QuickBooks and Xero is the ability to do really easy variance analysis, to see month-over-month, did I land on budget?
And if not, why? What's the reason for all these variances? And putting in explanations. And if somebody could figure out how to automate that better, that would be really helpful. But most of the time, you have to really dig in and ask people about the transactions. It's not obvious from the bank feed, why there was a big variance in one account, versus another. Why was my advertising expense higher?
You can tell me it was, right, but you can't tell me why it was. So, that's why all these automated analytics apps fail, I think. Because in the end, exporting to Excel and putting notes in Excel is what people do, because the data is in the heads of all the people in the business. It's not in the accounting data.
And until somebody figures out how to automate that, none of this analysis is really all that helpful.
[00:59:47] Wayne Chang interview clip
Blake: And David, I want to play this before we go, because you brought an interview to the show. This was Wayne Chang, Digits founder, on a different podcast. I think it just gives an interesting perspective on what- how they're thinking.
So, that was Wayne Chang of Digits, founder of Digits on LendIt Fintech, with Peter Renton, or is it Rendlin? Peter Rendlin.
David: Yeah. And they’re hiring a- this is always, like you said, you always go into the jobs, right? What they're hiring for, right? And if you look at the product manager, that role- I'm sorry, this is the product designer role. Hold on, their website’s actually very, very annoying You have to re-scroll to the bottom every single time the page refreshes. It’s messed up.
The product designer, let's see what they prefer. Nice-to-haves: previous experience designing financial or analytic dashboards. That's who they're hiring for, is somebody who builds dashboards. That's the designer they want. Now, here's the funny thing. Now that I've been here, I just clicked around.
So, you can go from your profit and loss, and drill down on my SAS expenses. And then the SAS expenses are by vendor, and I drill down again, and I could go all the way down to the transaction. And here's the best part. Are you sitting down?
Blake: Yeah.
David: So, their marketing and their claim, “Oh,” it's all eye candy, right? We're going to separate the difficulty of financial data for the business owner. So, if I- but if I drill in deep enough- so this is a bill. I drill in, eventually, to the transaction level. You know what they show me? Basically, a general journal entry that says debit, SAS subscriptions, credit, checking account.
Literally, it says debit and credit. So, I almost want to call bullshit on this. Like, “Oh, we've talked to so many customers and small businesses,” because there's no way a small business owner would be- you know what I mean? That's the beauty of QuickBooks and Xero. They kind of hide that a little bit, that whole debit and credit terminology.
Blake: Yeah.
David: So, it's kind of funny that this great revolutionary way to interact with my data, eventually, if I drill down enough, just displays debit and credit. I don't know. My hands are up.
[01:03:45] Dashboards without context are meaningless
Blake: I think you nailed it with the description to dashboards, David, where you said, no small business owner has ever asked for a dashboard. You know, maybe some have, but most have not. And the problem with dashboards- and I've seen this with firms who rolled them out- is that when you start presenting KPIs to small businesses, you can't just pick KPIs out of the sky and present them.
They're meaningless without context. So, you have to do the work to understand the business, and then you have to pick what key performance indicators are actually relevant to the business. And then you have to figure out, what is even appropriate? What- like, for instance, let's say Digits builds this dashboard, and it has all of these balance sheet ratios.
Well, my first question as a business owner, to my accountant, is then, “Well, what should this number be? Is this good or is this bad?” And that depends a lot on the individual business. And so, dashboards are meaningless without advisory services to go with them, and they have to be carefully curated and selected.
Otherwise, none of it means anything to anybody. So, you know, like, “What should my days outstanding be, as a business?” That depends on what everybody else's are, in my specific business size and industry vertical. And so, if you show me that number, it doesn't mean anything to me as a business owner, without context, without advisory services to go with it.
And I think this is what all of the tech people kind of forget. In accounting, the data itself is not that useful without an understanding of the business.
David: And I think the other thing, I think in general, sometimes with some of these dashboard apps is, usually, accountants have no control. And that's where I think some of these apps- was it DataDear that Intuit or QuickBooks bought, and you have live flow, right? These apps that are kind of like a Google spreadsheet, that are tied to QuickBooks?
Blake: ‘Cause you can customize.
David: And then you- they have a kind of similar functionality where you can drill down on the number, and it shows you what made up that number from QuickBooks. Right? So, it's kind of standard, but you can customize these reports and kind of build. So, it'll pull the live QuickBooks data and output it to a format you need to give back to your client, right?
But there's no real controls in this, other than the executive summary, which is like, “This is where I have to kind of edit it, and write a sentence that says like-” And even right now, the verbiage in this- I'll just read it, and you tell me what this means or doesn't mean, okay? This is the executive summary.
Compared to January, you generated 95 percent, $2,437 more income: driven by a $2,437 increase with Cloud Accounting Podcast, LLC. Compared to January expenses, increased 28 percent, $1,900: driven by $3,318 increase in payroll expenses, and an offset by a $2,645 decrease in information technology.
Blake: Yeah, that's all meaningless, right?
David: Yeah.
Blake: It just sounds like a jumble of words.
David: And then the verbiage is not even in small business talk.
Blake: Yeah.
David: So, I don't know.
Blake: It doesn't help.
David: I just like- it's crazy. And some part of this too, is in general. Everybody wants- all the VCs, they want to invest in the next QuickBooks. But then, I'm like, it’s a lot of gambling on a lot of companies, but why don't you just buy QuickBooks stock?
It's like a guaranteed return of 20 percent every year, for the last 30 years. Just buy Intuit stock, and then you don't have to gamble it all. So, I don't know.
Blake: Yeah. Well-
David: it’s just interesting, these apps, they pop up, but- I don't know. There's just nothing here I haven't seen, tried, or done, over and over and over again. but there's more- there's other races. You want to jump into other ones?
Blake: But there's lots of bluster. That's what there is. There's a lot of talk. There's a lot of promises. So, that's what makes this fun. Well, that's all the time we have for this week, David. We're over, so we'll have to save it.
David: We didn’t make to one app news. I’ve got so many other app [CROSSTALK].
Blake: That was app news.
David: That was app news that was-
Blake: That was app news, so save it for next week. I hope you enjoyed this episode of The Cloud Accounting Podcast. If you would like to earn CPE credit for listening, download my app, EarmarkCPE.com. It is not vaporware. You can actually earn CPE credits today. We put out a course about a week after the episode drops. So, head over to earmarkcpe.com.
Download the app and look for all of The Cloud Accounting Podcast episodes. You can get credit for all of the episodes so far this year. You could conceivably hit your entire CPE requirement now. We have over a hundred courses on the app from our show, and a variety of other shows in all sorts of fields of study.
We are working on adding more every day. And if you want to create your own course on Earmark, or you want to have a show on Earmark, it's free. It's free for you as a host, or as an author, to create a course. And it's free for everyone else to listen. We're all about sharing information in the accounting profession.
And yeah, it's been going great. We're up to like 300- or not 300- 1,350 members on the app, which means that we have more than Digits, which is valued at half a billion dollars. So, I look forward to all the VCs contacting me to offer to give me $100 million. We also aren't charging anything.
DIGITS is also not charging anything yet. I think that's really funny.
David: No, they have other plans, but there's not a lot to charge for it yet. Right? So, I mean, it's worth everybody giving you the test run.
Blake: Yeah. So, if people want to contact you online, David, where should they go?
David: I'm just @DavidLeary on all the socials.
Blake: And I am @BlakeTOliver. Look forward to seeing you here next week, and we'll chat about all that app news we didn't get to. Sorry, apps that raised money. You didn't get that glowing love letter in TechCrunch. So, we didn't cover you this week.
David: Yeah. You just have to raise more. Whoever is the most.
Blake: You just got to talk a bigger game, you know? Be-
David: Well, it's the ratio. It’s the ratio of raise, versus product, right? And if it's too unbalanced, we're going to talk about those ones first.
Blake: My favorite is the apps that barely raise any money, and have an amazing product, right? That's my favorite, the ones that went under the radar for all those years. Good for them.
David: Agreed.
Blake: All right.
David: All right. That’s it.
Blake: Talk to you next week.
David: Bye.
Blake: Bye.
[01:09:57] Classifieds
David: Time for the classifieds.
[01:10:03] Royalwise
David Leary: As humans, we're programmed from birth, to learn watching others. Video has the power to engage, entertain, and educate, without ever feeling like work. When you want to become a QuickBooks Online expert in the shortest amount of time, the Royalwise on-demand, web-based learning solutions are the obvious answer. With 40 easy-to-understand QuickBooks classes designed to bolster your confidence and increase your accuracy, Alicia Katz Pollock’s training will take you from beginner to advanced user.
Pick just the topics you need or save money by subscribing to their entire QuickBooks Online library and coaching program for one low monthly price. Listeners to The Cloud Accounting Podcast can enjoy their first month of silver membership for only $1 using promo code ‘podcast’.
So, head over to learn.royalwise.com. That's royal like a king, and wise like an owl. Register for a QuickBooks class, become a member for just a dollar, and make learning a hoot. That's learn.royalwise.com.
[01:10:55] 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 online coaching membership, Future Firm Accelerate. Sign 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.
[01:11:31] 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 started only $19 a year. Visit getw9.tax today to get started. That is getw9.tax.
[01:11:56] 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.
[01:12:58] 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.