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Michael Ly is the Founder and CEO of Reconciled—a virtual bookkeeping and accounting firm for busy business owners and entrepreneurs across the US. He is also a Co-Founder of PunchPay—a small micro-loan fintech startup that offers post-payment and micro-installment loans for small business expenses. In this episode, Michael shares how his family escaped Cambodia as refugees and relied on entrepreneurship to survive the new world, his introduction to accounting, and the entrepreneurial spirit running throughout his family.
Join Stuart McLeod as he interviews the world's top accounting leaders to understand their story, how they operate, their goals, mission, and top advice to help you run your accounting firm.
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Stuart McLeod 00:00:06.722 Hi, I'm Stuart McLeod, CEO and co-founder of Karbon. Welcome to the Accounting Leaders Podcast, the show where I go behind the scenes with the world's top accounting leaders.
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Stuart McLeod 00:00:21.261 Today I'm joined by Michael Ly, the founder and CEO of Reconciled, a virtual bookkeeping and accounting services firm for busy business owners and entrepreneurs across the US. Michael founded Reconciled in 2016, and it grew quickly to be recognized by Intuit. And it grew quickly to be recognized by Intuit in both 2016 and 2018 as a firm of the future. Michael is also a cofounder of PunchPay, a small microloan fintech startup that offers post-payment and microinstallment loans for small businesses and the underbanked. It's my pleasure to welcome to the Accounting Leaders Podcast Michael Ly. Ly, welcome to the Accounting Leaders Podcast.
Michael Ly 00:01:02.291 Thanks, dude. Thanks for having me on.
Stuart McLeod 00:01:03.145 Now as you're the founder of a couple of companies now-- yeah? It's just pretty interesting, firstly a bookkeeping firm and now a microloan facility. So why don't we go back to the start? What got you into accounting? What was your journey to founding businesses? And let's explore the founder's story, hey?
Michael Ly 00:01:27.997 Yeah, that's great. I started in accounting because my now brother-in-law was dating my older sister at the time. I was 12 years old, met him when they started dating. And he was an accountant. And so he actually-- at the place he worked, he actually hired me to go do data entry work during the summers at his company that he worked at. Yeah.
Stuart McLeod 00:01:54.611 I assume your sister is a bit older than you. Was she [laughter]?
Michael Ly 00:01:58.078 Yeah, yeah, yeah, they were older than me. And so they were dating at the time. So he would pick me up in the summers every day and I would go do data entry work. And then eventually he taught me accounting. And I took some accounting classes in high school, as well, and then in college studied accounting. But I ended up taking his job. The company gave me his job when he left. They promoted me and gave me his job. And so that was my first foray into accounting. I [crosstalk]--
Stuart McLeod 00:02:21.695 Was he [crosstalk]--
Michael Ly 00:02:21.914 --my brother-in-law [inaudible] for a long time. Well yeah, I think so. Yeah. I think he was excited that he was able to train a young person in accounting, and I was able to learn it and got excited about it. I mean, I was on my way to probably become like a doctor or engineer. That was the path that my parents wanted me to go on. But it was my brother-in-law who exposed me to kind of the world of business instead, so.
Stuart McLeod 00:02:44.347 And they weren't stroppy with him. They thought that that was a good path in the end?
Michael Ly 00:02:48.837 Yeah. Yeah, yeah. It was a good path [in the end?]. And I always knew-- my parents are both entrepreneurs, so I knew at some level I probably wasn't going to stay like a traditional accountant. I probably wouldn't stay in the profession traditionally. I really wanted to do something entrepreneurial. It was [innate in me?] just watching my parents. So really I think when I think about my identity first, I would introduce myself as an entrepreneur to most people. And then I would tell them, "I happen to be in the accounting profession." So it's probably very different than a lot of my peers who they think of themselves as accountants first.
Stuart McLeod 00:03:21.041 Yeah, yeah. Well, what did your parents do? How did they inspire your journey?
Michael Ly 00:03:26.070 My parents were refugees from Cambodia. They survived the killing field, the genocide that happened from '75 to '79 during Pol Pot and Khmer Rouge's reign. So they survived that and then came to the US in '81. So just watching them basically create skills and start businesses out of nothing with no resources here in America-- my father was a chef, and so he started restaurants and worked in restaurants. And then my mother is a seamstress. She learned to sew and then started sewing businesses and retired from that, as well. And so they're both retired. But of course, any person like them who's worked most of their life as an entrepreneur, even though they're retired, they still do some work in their same field. And I think they do it just because they'd be bored otherwise. When you meet most entrepreneurs, they're kind of entrepreneurs for life. They really don't want to stop. So that really was instilled in me and my siblings. Me and all my siblings are all entrepreneurs. So we all are in different professions, but we all have built companies and been able to do that successfully, which has been great.
Stuart McLeod 00:04:30.122 And the migration, the classic American immigrant story, although forged in pretty horrific circumstances, applies very much to your family. Where did they settle? It sounds like they've carved an amazing life for themselves after that journey and those circumstances. So can you share a little bit about your experience growing up in America and how they'd sort of reinvented themselves?
Michael Ly 00:05:01.292 Yeah. So they first applied when they were in the refugee camps. They first applied to go to France. That was their first preference. Yeah, that was their first preference, because Cambodia used to be a very French influence. It was a French colony before. And so they wanted to go to France. They ended up in the US in Arizona. And so I was born and raised in Tempe, Arizona. And so that's where my parents ended up settling, my siblings are. And then my parents, when they got divorced when I was younger, my father ended up in San Jose, California. So he's right in Silicon Valley. He's right near all the main tech company campuses. And he got remarried and raised a separate family. But my mom stayed here. And so this is where all my siblings are, here in Arizona. Watching them really leverage resources, leverage kind of the little that they had, was really, really I think a great lesson to watch and not have to be dependent on or solely rely on government support the whole time, but really climb their way out of that as fast as possible. That was kind of a value system that my mother taught me was to not depend or rely on government resources for your whole life but to really leverage it to get you out of a tight spot. And so that's what I watched them do.
Michael Ly 00:06:22.285 And then I think the other thing it taught me was even though I grew up in America, at home, home life was very different. It was very Cambodian, very Chinese. We're Chinese ethnically. So it was very Chinese, very Cambodian, very Asian at home, and a refugee environment. And all of the family we hung around-- I was always with the Cambodian community all the time growing up most of my childhood. I would see my relatives and my other refugee friends all the time. But then my school life and church life was American, was very white, very American. So that caused definitely-- it gave me the ability to really be a chameleon almost like. I had to switch. I really had to switch the way I acted and the way I was. And so it really taught me a lot. And I made a lot of mistakes probably through the process of like, "Oh, this is the way you act in this one space and this is the way you are in the other space," but. And so as an adult, I can look back on it and kind of think about the lessons I learned directly or indirectly from that experience growing up. But it's a common experience for most refugees and immigrants who go to a westernized country like America or Australia or New Zealand or wherever. That's a very common experience to have to go through that chameleon or that cultural adaptation, if you will, which makes it very good for me to enter new spaces, I think, because I can get used to new spaces and new cultures very easily.
Stuart McLeod 00:07:47.826 Yeah, there's coming of age movies that explore those clash of cultures, if you like. I can imagine that your story would write very well in Hollywood. But what did your siblings-- you said they're entrepreneurs, as well. I imagine that that journey has influenced them greatly, as well. What have they ended up as? And are they in accounting, as well, or different parts of industry?
Michael Ly 00:08:13.643 Yeah. They're definitely different. My older sister's a real estate entrepreneur. So she started in real estate very young in her early 20s and has done very well, been very successful in real estate. And so that's been a huge wealth builder for them. My brother, my younger brother, he got into home automation systems, so high-end-- if you have a big, big home or an industrial space, he actually had learned to install and program home automation systems. And now he buys and resells his own brand of home automation systems and audio systems and other electronic goods. So he's built a brand for himself for the high-end side. So they've both done very well in very different industries, which is awesome.
Stuart McLeod 00:08:55.399 Oh, that's fantastic. And do you do the books for both businesses [laughter]?
Michael Ly 00:08:58.930 Oh, no. Yeah, no, we definitely don't mix a lot of business with personal life with each other. So we've definitely stayed out of each other's lanes, not necessarily on purpose, but more just life took us there. And I was the only one to leave Arizona. So I left Arizona about a year after I got married. And so in 2007, I left Arizona, went to Seattle for 4 and a half years with my wife, and we started a family. And then after our first child, we moved to Burlington, Vermont, and spent basically the past 10, 11 years in Burlington, Vermont. And that's where I started Reconciled, my kind of most successful venture and first primary venture. I started Reconciled, which is a online bookkeeping accounting firm. Started that back in 2016. And so my wife's originally from Vermont. That's how we ended up there. So now we still spend a lot of time in Vermont and we also spend time in Arizona, as well. And we got three kids now, three great, healthy, young kids. They're wonderful. And so yeah, but we've-- my journey has kind of kept our entrepreneurial separate from my siblings. But we do talk about it and we give each other advice when we can and help each other out.
Stuart McLeod 00:10:12.464 And Burlington, Vermont, you got some good skiing and ice skating and snow shoeing in Burlington, yeah?
Michael Ly 00:10:22.303 Yeah, yeah. Burlington's four season place. And it does get definitely cold during the winter, and so a lot of weekends are spent on the mountain. And that's church for most people in Vermont [laughter] is weekends on the mountains.
Stuart McLeod 00:10:35.460 You got Sugarbush--
Michael Ly 00:10:36.570 And--
Stuart McLeod 00:10:36.943 --out there, right?
Michael Ly 00:10:37.702 Yeah. Sugarbush and Stowe, Killington, Jay Peak. I mean, there's a number of mountains out there. Vail Resorts has made a lot of investments throughout Vermont, so you can get an Epic pass and--
Stuart McLeod 00:10:51.406 Epic pass. Yep.
Michael Ly 00:10:52.004 --go both to Colorado, any of the Vail mountains in Vermont. So that's been great. Yeah, Burlington's a beautiful place. I tell people Vermont's one of the most beautiful places I've ever lived. And probably famous brands out of Vermont - Ben and Jerry's, Seventh Generation, [inaudible] - those are some of the things that have come out of Vermont. And then Bernie Sanders obviously is a big name and brand that has come out of Vermont. He's been a presidential candidate a couple of times and very well liked and known across the country and in the state of Vermont. Yeah.
Stuart McLeod 00:11:22.397 Yes. And how old are your kids? And the journey back to Arizona was to be closer to family, was it, or the hot weather?
Michael Ly 00:11:30.937 Yeah. Yeah. Yeah, so we decided during the pandemic we wanted to spend more time in Arizona so that our three kids could be around my mother more, who's getting older. And we just celebrated her 70th birthday, which is great. Yeah. So my kids are 14, 10 and 7, two boys and a girl. And they're wonderful and a handful, right? So [outside of them?]-- it's as hard as anything you'll ever do in life is to raise kids. So it's been definitely a journey. But we wanted them to make sure they got time with the Cambodian community here and got time with my mother. So it's been great to be able to split time between Vermont and Arizona. And COVID really created that opportunity for a lot of people, including for us. And since we had built Reconciled as a remote work company from the beginning anyways-- my whole team is remote. Everybody works from home or from a private office anyway, so it was easy for us to be able to split time and spend more time in Arizona with my side of the family.
Stuart McLeod 00:12:31.056 Yes. And let's talk about Reconciled a bit. How did you sort of-- after you worked in your brother-in-law's firm and took his job, of course, there must have been an entrepreneurial idea or a spark or motivation, inspiration, to sort of go and do your own thing. How did that come about?
Michael Ly 00:12:51.132 Yeah. When we moved to Vermont in 2011, I started doing consulting work on my own with [inaudible] companies. I built myself out as a part-time [CFO?], part-time controller for companies in Vermont. And I found the common problem is almost every small business that I went to, their books were a mess. Their books were just terrible. And so I spent my first 3 to 6 months as a [inaudible] bookkeeper, getting paid a CFO wage to do bookkeeping, right, to get the book straight and then be able to do [inaudible] CFO work. And so I thought about that [inaudible]. I went, "Well, I think I can solve [them?]. I should just [hire?] my own bookkeepers and create a reputable, reliable service." So [I got?] thinking I could more CFO work. And [inaudible] the demand for just that pure [inaudible] grew very, very rapidly. So I launched [Reconciled?] in the beginning of January '16 as its own business, January '16. And then we just grew very fast.
Michael Ly 00:13:46.449 So today we're at 70 plus team members scattered throughout the US. We also have full-time people in South America, [inaudible], as well. So we're [inaudible] operation and we're serving hundreds and hundreds and hundreds of US small businesses. And we're handling their [bookkeeping?], everything. You name it. So it really started in my journey of just trying to help small businesses out myself as I've been realizing bigger opportunity. And then at the same time, what was happening in the US, QuickBooks online and Xero were just growing exponentially here. So I really [rode the wave?] of the cloud adoption in the US, as well. So it was a good time. I mean, those mid 2010s were a good time to start a cloud accounting business here in the US, [the?] adoption rate of cloud technology.
Stuart McLeod 00:14:32.344 No, definitely. And the expansion of Reconciled, how have you managed the growth, and what's the tech stack look like in order to sort of be effective, efficient, make sure nothing slips through the cracks?
Michael Ly 00:14:46.173 Yeah. Well, I want to say it was a breeze. So I mean, obviously it's hard work and it's been hard work still. I [benefit?] now of having a leadership team and a management team layer. So I don't have to-- I do a lot of the things that I did in the early [inaudible]. We use [inaudible] internally for communication. We use Karbon for our workflow tracking and keep tasks in line. We use Listeo for client communication. We're a G-suite house, so we use [G?] for email communication externally. And then for [inaudible] clients, QBO primarily. Bill.com or Melio for [inaudible]. And then we've use Dext for [inaudible] [banking?] for a long time. So that's [our?] primary mix of tools [inaudible] [internally?] [inaudible] keep in touch with the team. We do a lot of video conferencing. So we're doing a lot of Zooms or Google Meets for a video call with the team. And we have a rhythm of meeting weekly as a company, orienting to make sure everyone's [getting?] engaged and connected. We have employees in [inaudible] states. So we definitely have to have that rhythm of connection whenever possible. And then we do try to get at least parts of the team [inaudible] together at least once a year for in-person meetings. So we usually do that in Vermont or we usually do that in North Carolina, because those are places where concentrated groups of employees is in the Greater Burlington area, Vermont, or Greater Charlotte area in North Carolina. We've been able to do that.
Michael Ly 00:16:07.955 The tech stack has been helpful, and we've introduced new tech [stack?] every single year. So Karbon, we've been a Karbon house [inaudible] about a year we started seriously using Karbon. Before that, we were on a previous tool [inaudible]. And so [inaudible] we find that because of our growth rate, we often are outgrowing or our needs change and we have to look for new tools. But [inaudible] and Karbon have been really [inaudible] [for the past year?].
Stuart McLeod 00:16:31.082 What about PunchPay? It's another service that you've operated or started recently. Tell me about that.
Michael Ly 00:16:38.059 Yeah. So PunchPay is a microlending platform. It's a completely separate company [inaudible]. We got together. We met in Vermont in the ecosystem there. And we set out to think about how [to?] leverage accounting data, because we were dealing with [inaudible] accounting data and I had been [inaudible] data. And [these?] APIs were available now to [most?] accounting systems. How could we leverage that information and help small [businesses?] get access to capital in a faster way and more efficient? And we really wanted to [inaudible] the types of businesses and the size of businesses that traditionally are [inaudible]. So in the US, they call them [inaudible] banking desert, where if you don't have the need for a 10, 20, 30, $40,000 loan or [line?] [inaudible], most banks and credit unions in the US don't want to review or work with you. So we really wanted to think about, "Okay, how could we serve what we call the microlending population?" They need a small amount of funds to get microbusiness or their solo business or their really small business going. They need that kind of access to capital. It's not the group that's going to raise venture capital [inaudible]. They need $5,000, right? They need $10,000, $500 for their bakery to inventory or for their restaurant or for their construction company.
Michael Ly 00:17:51.384 So it's an alternative to credit cards [inaudible] providing microloans, and it's doing it post-payment. So [inaudible] on expenses that the business has already spent on, we're basically [inaudible] those expenses into a loan and allowing the business to repay that [in?] 3, 6, or 9 month [inaudible]. So it's a little bit of a spin on buy now, pay later for small business. But it's after the purchase has been made and it's leveraging the accounting data from QuickBooks or Xero. It's downloading the expense data. [inaudible] if you want to finance any of these expenses you've already spent money on and you needed to spend that money, but maybe [inaudible] and you want that working capital back for a period of time. So that's really been the focus of PunchPay. And so we didn't launch that too long ago, lending actively out to small businesses in the market. And it's been great. Our customers are really leveraging it that use it.
Stuart McLeod 00:18:40.365 And the small business payments is a very-- or small business loans, small business facilities, are a pretty crowded space. Have you got a little sort of niche that you can go to and understand well where you see that service taken up perhaps more than in other areas?
Michael Ly 00:18:59.239 Yeah. The focus [inaudible] again is what I would call the underbanked or the non-banked small business. So it's the micro businesses. It's businesses doing less than 250,000 a year or less than half a million a year. They're not big enough where a bank wants to give them a [line or a?] loan because they don't need 25, 30, $40,000. They need $5,000. They need $10 for their inventory or a website update or whatever it is. So that's the niche. And that [makes?] a large chunk of the US small [business?] population, right? They're not going to be ever raising angel money or venture capital. They're not in that world. They are the core small business of most of the US economy.
Stuart McLeod 00:19:41.854 Yeah. And would you feel that that area has been starting to at least sort of see some kind of service? The stripes of the world are sort of coming down into their cabbage is another one that comes to mind, that service that perhaps the underbanked. Or you still feel like that the area is less than serviced?
Michael Ly 00:20:02.623 Yeah, I really believe it's less than serviced. And when you look at capital, at some of those providers currently playing, that I would call them the [inaudible] online lenders 1.0. And those players really leverage certain kinds of [inaudible] make their loan decisioning. They really want you borrowing a good amount of money in order to be lent to. We really wanted to focus on [inaudible] we know accounting data. We have access to [it?]. We know how to analyze it. We can see that there are a lot of healthy businesses out there. They're just not big and they don't need big amounts of capital. They need simple access to a small amount of capital. And so the market definitely has a number of providers, but it still wasn't serving that small kind of what we call microbusiness. And that's really targeted where we can make it convenient and easy, and it can be done through your accounting data.
Stuart McLeod 00:20:53.078 And what's next? So you got two businesses going now. You must be busy. Hopefully you still get to see your kids a bit. Do you see a big future for the PunchPay business? Are you going to perhaps set it up to sell into some of the other services in that space? What's your idea behind that?
Michael Ly 00:21:12.994 With Reconciled, I've been focused on acquisitions. We've been fortunate enough to do three acquisitions in the past 2 years, so that's been really, really great. So I've been kind of [spearheading?] that piece. Yeah. Other bookkeeping firms, accounting firms, that we've been able to acquire. Generally firms doing 750 to a million and a half in revenue, US based, we've been targeting. And then the PunchPay, we're still in the beginning phases. We're lending out the small business customers. We're creating accounting [inaudible]. So that's the focus that we're having at PunchPay. And we'll be doing that-- we'll be doing that for the foreseeable future, methodical [lending?], especially as both market and the fintech market has taken a pullback, right, in general [inaudible]. So we're being methodical about how we approach growth with PunchPay. And we want to [inaudible] really get through the next 12 months. And if we do that, we think the market [inaudible] level back here [at?] up to 12 months. And we'll see both the fintech environment and the lending environment improve. And so we feel like we're in a good position.
Stuart McLeod 00:22:14.301 So are you looking for more acquisitions for Reconciled? Has that been a successful way to grow?
Michael Ly 00:22:20.495 In [2000?], we decided that we wanted to add on acquisitions as part of our growth strategy. So that's been definitely a really wonderful experience for us so far. And we definitely are looking for more. Again, we're looking for firms doing at least 750 and 800,000 a year [inaudible]. And then we're now [inaudible] a little larger 2, 3 million, $4 million firms out there that are [US?] [inaudible]. And we have criterias that we evaluate every firm on. We're definitely looking for ones that are either [inaudible] or trying to [inaudible] cloud and have a strong brand. And so we did an acquisition recently, [inaudible] last month in Tennessee of [inaudible] HR Business Solutions. They first started out [as an?] HR consulting firm, but they ended up pivoting into a [cloud?] firm. So 89% of their revenue was cloud accounting and only [inaudible] was HR consulting. So they were great, because they were already in the same tech stack and on QBO like most of our clients. And they had a remote based team. So they had already made the full cloud migration. But we also have ones that are just on the [inaudible] cloud migration, and they [do it?] themselves. So they end up merging into us so that we could take care of that cloud migration and that remote work migration.
Stuart McLeod 00:23:34.673 Yeah, that makes sense. So it sounds like you're busy for at least the foreseeable future, expanding that through acquisition and carefully growing PunchPay into a service for the underbanked. And travel wise, have you taken the family--
Michael Ly 00:23:51.857 Yeah. It's been--
Stuart McLeod 00:23:52.506 --back and forth--
Michael Ly 00:23:53.057 --super wonderful.
Stuart McLeod 00:23:53.385 --between Arizona--
Michael Ly 00:23:53.882 We've been able to spend--
Stuart McLeod 00:23:54.586 --and Burlington, by the sounds of it.
Michael Ly 00:23:55.760 --[inaudible] this summer and just really enjoyed the weather and [inaudible] the best out of what Vermont has to offer. And then I try to during the fall-- and you obviously attend a lot of the accounting conferences that come up. And so I'll be at QuickBooks Connect this December. And I usually don't bring my family to those conferences, just because it's mainly accounting focus and not [inaudible] focused. So it'll be great. But we definitely enjoy traveling as much as possible. And I'll either attend [inaudible] speak or just participate and see friends in the [inaudible] industry. I'll be doing a-- I also do weddings on occasion. So it's something that people just randomly ask me to do weddings. So I'm actually doing a wedding in [inaudible] later this month, which is really funny. So these are friends in the accounting industry that I met. And, "Hey, we'd love you to do our wedding." "Oh, okay, sure. I'll do your wedding." [inaudible] to do your wedding, so. So that's kind of funny, as well. It's kind of a funny thing that people will just randomly ask me [inaudible].
Stuart McLeod 00:24:49.579 There you go.
Michael Ly 00:24:50.453 Exactly. Yeah. Yeah, it's kind of funny.
Stuart McLeod 00:24:53.491 The Wedding Accountant. I love it. There you go. There's a new brand for you [laughter]. Well, Michael, hey, it's been great catching up with you. I look forward to seeing you at QuickBooks Connect--
Michael Ly 00:25:03.734 Awesome. Thanks.
Stuart McLeod 00:25:04.082 --this year. And let's do this again sometime soon. Thanks, Michael. Cheers.
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Stuart McLeod 00:25:15.488 Thanks for listening to this episode. If you found this discussion interesting, fun, you'll find lots more to help you run a successful accounting firm at Karbon Magazine. There are more than 1,000 free resources there, including guides, articles, templates, webinars, and more. Just head to karbonhq.com/resource.
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Stuart McLeod 00:25:34.906 I'd also love it if you could leave us a five star review wherever you listen to this podcast. Let us know you liked this session, and we'll be able to keep bringing you more guests for you to learn from and get inspired by. Thanks for joining and see you on the next episode of the Accounting Leaders podcast.