[00:00:00] Thank you to our sponsor, OnPay
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[00:00:23] Preview
David Leary: Doesn't make sense, right? If, they had- if a billion dollars that they made of revenue all came from fraudulent applications, they probably need to give that billion dollars back.
Blake Oliver: Womply did 1.4 million loans totaling more than $20 billion. And the total was about $800 billion. So, they did quite a good chunk. Blueacorn did 14 billion in loans-
David Leary: And we talked about Blueacorn before 'cause they were powering couple of the other services, and they came out of nowhere in one year. They didn't even exist prior to PPP. They- basically April of that year, they started as a company. It's bananas.
Blake Oliver: So, the question is who's to blame here?
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Today is Sunday, November 28th. This is The Cloud Accounting Podcast. I'm Blake Oliver.
David Leary: And I'm David Leary.
[00:01:05] Thanksgiving Afterglow
Blake Oliver: Happy. weekend after Thanksgiving to you, David.
David Leary: Yes. Good relaxing weekend.
Blake Oliver: Yeah, it was great. We'd just stayed here. Just stayed in paradise in Scottsdale and went out to a restaurant didn't even cook-
David Leary: drove to Phoenix. The weather was incredible this weekend.
Blake Oliver: Yeah, it was nice.
David Leary: Did a lot of driving. That's the only, problem. When you take a trip to Phoenix, you're just doing lots of driving
Blake Oliver: We drove a lot yesterday to go get my son's second COVID shot. So, he's fully vaxxed now. that was the last thing we were really waiting for as a family was that.
David Leary: That's it? No Christmas gifts. Like, "You got your second shot. good to go."
Blake Oliver: Well, he got a new iPad, and I didn't even wait until Christmas because he's the only kid in his generation so far. Like we're the first of our generation to have kids, so he's like the only grandchild; he's got like a bunch of uncles, and aunts, and grandparents, and he gets spoiled rotten-
David Leary: Oh, yeah, I hear you there. We got lots of things to be thankful for this week, right? We got lots, and lots, and lots of listener feedback.
Blake Oliver: Yes, we got listener messages, uh, some on our CPA evolution topic; some on a cloud versus desktop. So, we could start there.
David Leary: On cloud versus desktop-
Blake Oliver: Yeah-
David Leary: or just our feedback-
[00:02:12] We've Got Feedback!
Blake Oliver: Just with the listener mail, but the first message is an email I got from Peg who said, " Little behind on listening. I use both QuickBooks Online and Desktop; feel like you guys are quite anti-Desktop. Meanwhile, we are using it not because we are too lazy to learn new things - although definitely an old dog using Desktop for 20-plus years - but because Online sucks for extensive inventory. Got to give people a break for the things QBO does not handle." So, what say you, David, this?
[00:02:40] Defending Anti-Desktopness
David Leary: So, yeah, I'm a little anti-Desktop, it's very hard to do two things well. So, if you think about- even Intuit themselves; there was a while Intuit was trying to build one magic API for QuickBooks Desktop, and QuickBooks Online, and there was a time when they kind of put 50% of the resources into QuickBooks Desktop, and QuickBooks Online just kind of sucked. And until they put 90% of the resources in the QuickBooks Online, it never really took off.
But I've watched the industry. Like every third-party developer, they're building their app. They're working very, very hard, To build their app, and things like QuickBooks Desktop are a distraction. There's Oh, there's too many Desktop users, and they get pressure to build something and ... Building an integration for QuickBooks Desktop's harder. It's harder to do tech support. It costs more. It never really works great. it really holds back greatness from a lot of companies because you get distracted by QuickBooks Desktop. And my argument is the same for firms as well, right? I think it holds back firms.
Blake Oliver: Your argument is that it holds back the whole profession, the whole industry, because it distracts our focus, and our resources-
David Leary: Exactly.
Blake Oliver: -from Online. So, developers-
David Leary: Including Intuit's; I think it even distracts Intuit's resources and focus still.
Blake Oliver: Well, I'm just kind of surprised that the inventory still isn't up to Desktop levels. Like, why is that the case, when they know that inventory is the reason most people can't switch.
David Leary: But there's plenty of third-party inventory apps that work amazing with QuickBooks Online.
Blake Oliver: Right, but when you're trying to get people to switch from a single solution that solves all their problems, and then you tell them, "Okay, you can go Online, but you have to choose, now, at least two apps to work together and configure those." Like, that's not ideal-
David Leary: But -mean, people have been running their payroll separately from QuickBooks for- millions, millions, and millions of businesses run their payroll separate from QuickBooks.
Blake Oliver: I don't know, maybe it's easier to integrate payroll in the GL versus inventory in the GL. There's just a whole lot more complex stuff going on with inventory costing, so, that's why it's not as easy- two separate systems for it.
David Leary: You're right - why isn't inventory up to snuff, and- goes for Xero, as well, right? Xero just purchased an inventory product to hopefully bring that up to snuff.
Blake Oliver: Yeah, Xero has a plan, it sounds like, to fix inventory in Online, but I don't see Intuit spending a lot of money and resources on building it into advanced. They're doing all this other stuff. Maybe they just decided that the two-app solution is the way it's gotta be. If you have a lot of complex inventory, you just do it in a separate system. I'm kind of playing- advocate here. I still think that you're better off pairing online QuickBooks with a third-party inventory solution versus sticking on Desktop.
David Leary: But, but I could see out, like on an individual basis, you're going to have some client that they're already on Desktop; the effort to move to an ERP system or QuickBooks Online Advanced and adding an inventory system, all of that is- it's a hard call to make- because you have a system that's working just fine, in a way. So, I get this. On an individual client basis, I could see where you could make a decision for that client to be on QuickBooks Desktop, but, overall, the industry? I think it holds everybody back.
Blake Oliver: Peg, and I went back - a little bit - and forth via email on this. She said that they are actually moving off of Desktop. I'll read her email. She said, "Fine. Make fun of the old people. Someday, this will happen to you. Meanwhile, we are moving off Desktop to something that handles inventory great, but financial stuff horribly. So, if you ever hear of one that does both well, but does not cost as much as NetSuite, that would be a great podcast." And the solution that they're moving to is called Expandable, which is industry specific for medical devices. I never heard of that one before.
David Leary: So, it's inventory controls just for medical devices.
Blake Oliver: Sounds like it.
[00:06:22] Is the Customer Really Always Right?
David Leary: And I think, as you think about businesses becoming omni-channel- you have a warehouse, and you have a point of sale. like A lot of that inventory is going to live in that other omni-channel app. And really, you may only need a journal entry back to QuickBooks. Now, manufacturing inventory is different, but in those cases, even then, most people are using an app like MISys, or something to do manufacturing inventory. Right. You're not- you're not really tracking all that detail inside of QuickBooks, so- I don't know. I think it's just time, as an industry, to move on.
And I've been hearing rumblings that some of the top firms, this year, this is the year they're starting to implement like this. how would you describe the verbiage here? Uh, Identifying their ideal client going forward into the future. And for a lot of these top firms, one of the check boxes is they're on cloud. So, you might start seeing some of the big firms, over the next year to 18 months, start letting go of clients that won't move to the cloud and fit- their new business models. But Who knows, you know? Talk is cheap because I think there are a lot more billable hours in those Desktop clients.
[00:07:23] Feeding Pigs - The Stuff of Nightmares
Blake Oliver: We also got feedback on our CPA Evolution story from last week. This is from Eric. He said, " I think that I have an explanation as to why fewer young people want to be a CPA. My theory is that they were subconsciously scarred as children by the Feed the Pig Campaign in the early 2000s."
David Leary: What is this?
Blake Oliver: "I can't, describe it. Just look at one of the commercials." I watched the commercial, and it is one of the most bizarre things I've ever seen in my life. Maybe there are folks out there who remember this? I was not aware of this campaign. It was put on by the AICPA, and it's this guy chasing a man in a pig costume, trying to, I guess, deposit money into him. He's like a piggy bank; he has like a slot in his head, and he's like chasing him all over town, trying to put money in there. And it had something to do with personal finances and how CPAs can help ... I Honestly, I didn't, understand what the commercial was supposed to be trying to communicate until I-
David Leary: Oh, wow! There's a whole site - feedthepig.org. The AICPA created documents to teach you, as a firm owner, how to market and link to this. You should post this in your social media, and via your newsletter emails, and your company intranet.
Blake Oliver: The pig guy is kind of creepy. He's like wearing a suit, and he has a pig head-
David Leary: And you could even put a piggy bank on your desk with a sign that says, "Ask me about Benjamin." Wow! Geez! I didn't even know this existed.
Blake Oliver: I guess there was some pushback against this campaign because it was a little bizarre, and there's a whole AICPA response. They dug in and they said, "It's a great campaign," in a Journal of Accountancy article, or editorial in 2007.
Eric continues. He says, "I'm joking, partly, but it is a serious sign that the people leading our profession don't have a clue and they haven't had a clue for a long time. Also, if you follow the accounting subreddit, it's basically a giant negative Yelp tirade on CPA life. If I was leading the AICPA, I would be focusing on solving the issues cited by our new talent pool on Reddit, instead of focusing on creepy pig mascots, selling insurance, and fake new credentials, like CGMA. Anyway, keep up the great work. Eric."
For those who do want some insight into the minds of younger CPAs, check out r/accounting on Reddit. It is amazing. There are some threads about what it's like working in a Big Four firm; the, that you get, you get a lot of the real honest truth, I think, about how just awful it can be. And why would people want to become accountants, when you're a student, and you're going on Reddit, and that's what you read about accounting.
David Leary: This is the problem, right? So, the AICPA is talking to their members, who'd be older people probably that own firms, and it gives them specific instructions like this: "Organize a lunch seminar on the subject of saving, targeting the 24- to 35-year-olds at your workplace. So, you're a firm owner; you're trying to get credibility with your younger staff, and you're gonna come out and be like, "Feed the can't. I'm just trying to imagine how this did not go down well.
Blake Oliver: it's still up there, right?
David Leary: No, the website forwards to a new site. So, it's called 360financialliteracy.org. It's a free public service brought to you by the nation's CPAs.
[00:10:37] Theoretically Speaking ...
Blake Oliver: So, I continued with Eric on this thread. I asked him what he thinks about my idea to make accounting education more practical versus theoretical. And he said, " The best way I can describe how the old system worked well, if you were at a good office, is as follows: there was an implied agreement with new staff in CPA firms. Staff would work very hard for relatively low pay for a couple of years. In exchange, you would be subject to a very steep learning curve, see a variety of projects, and learn the right way to do most aspects of accounting. After a couple of years, you were making more, or at least equal to what you would've made, taking an entry-level position in private practice, and you would have much more knowledge. As time progressed, hours would get less demanding and pay increased significantly.
I was fortunate to work at an office that did this, but I saw many examples of firms that made that promise, but never delivered on managing their staff that way. Example: 4.0 GPA, Big Four staff does bank recs for two years. Really good small-firm staff can't get assigned enough audit hours to get their test credential. We would sit in scheduling meetings and discuss staff and how to get them the experience on a new section of the balance sheet or get them involved in planning, so we were developing future senior auditors.
And outside of the meeting, meeting, you are training on the job which takes extra time. Once management stops honoring that agreement, it becomes an 'every person for themselves' situation where everyone's just making short-term decisions to get through very tough projects. No one is taking the extra time to manage the development of younger staff in an on-the-job-training model; thus, you have people losing their minds on Reddit, or Glassdoor, and putting the whole CPA path down. And, yeah, if I start on the university system, this email will go way too long. That needs complete reorganization, but it won't happen. One idea - work internship for college credit - that will never happen because it cuts the professors out of the industry."
I love hearing from our listeners on this topic, and this implicit bargain between staff and firms makes a lot of sense to me; that this used to be honored, and now, it's not as much anymore. We've seen this in the whole world of work. It used to be people went to work for companies, and they stayed there for quite a long time. I mean, some people never left and would stay at their same firm for decades until they retired.
The tenure, the average tenure of an employee became shorter, and shorter, and shorter over time until now we're almost mercenaries. I can go work someplace new every year or two, and people don't even bat an eye anymore if I'm bringing enough value, but that also changes the incentive on the firm side, because why would they train you now, if they're going to train you for two years, and then you leave?
Something has to change here on how we train accountants. The universities aren't training accountants to be accountants. The firms have always been doing that. The universities have just been giving them the theoretical background. We need to find a way to train accountants that doesn't rely on the firms doing it. So, that's why we need ... You know, maybe we need like one of these coding boot camps, but for accounting, where you go, and for six months to a year, all you do is study the 'how to do it' of accounting. You know what I'm talking about?
David Leary: Well, half- these are bookkeepers. There's a lot of these smaller bookkeeping schools that are out there and they teach them to do bookkeeping. They teach them bookkeeping. They teach them how to start their own bookkeeping practice, and it's all real; real world. It starts with pretty much kind of an Accounting 101, but it's starts with using QuickBooks on like day one.
Blake Oliver: Right, and these-
David Leary: These don't really exist for the, for accountants. It's, It's really still professor-driven book theory.
Blake Oliver: Exactly, and then learning on the job in a bigger firm, or a midsize firm.
David Leary:
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Blake Oliver: I think we've got one more bit of listener feedback. You have that one, right, David?
[00:15:27] A Professor's Take on Real-World Experience
David Leary: Yeah. So, Jennifer Johnson, who- she is a professor- an accounting educator in Dallas, Texas, but I'm always confused. Is it the University of Houston at Dallas?
Blake Oliver: She's a professor at the University of Texas at Dallas, where she teaches accounting information systems courses, and related software courses, cost accounting, and seminars in Excel, and QuickBooks. And Jennifer had us do a live show for her class once a couple of years ago.
David Leary: We ruined a whole classroom of accountants for the future.
Blake Oliver: So, what did Jennifer have to say?
David Leary: So, she, This was a tweet, so she just responded right away after we released the episode, and she said, " Hey, Hi, I have lots of thoughts on your segment about the CPA exam, but David Leary mentioned the need for real-world experience." And then she goes on to say, " You need work experience, one year, under a CPA, to get your actual CPA license. While not all experience is equal, it must be "relevant." To which I just responded, "Like, that's good to know." But you said she also sent an email with more details.
Blake Oliver: She did, specifically on this experience- work experience thing. Well, it depends on the state, but you typically need a year of experience to get your CPA, which is yet another barrier to getting your CPA because what if you can't go work for a CPA for whatever reason, or you're- you don't want to change jobs just so that you have a CPA supervising you.
But again, it's like the fifth year, where it can be very loosey goosey, depending on the state. I kid you not, David, when I had my cloud bookkeeping firm, Cloudsourced Accounting, my business partner, Maria, was getting her CPA in Illinois at the time. She passed her exams, and because of the way Illinois' rules worked - I wasn't a CPA at the time - she was able to actually use her work experience as a partner in our bookkeeping firm to qualify for work experience in Illinois - I signed off on her- I signed off on it - because it was just, in the space of accounting. They were very broad. you just had to be working in accounting somehow. like, I don't, I don't actually see like- I don't know-
David Leary: To tie it back to the CPA license itself?
[00:17:29] Why Not Work AT School?
Blake Oliver: Yeah. So, anyway, the whole point is like, we need more practical work experience. And just saying, like, you need a year of work experience working for a CPA, some- you know, and it's "relevant ..." I mean, we need actual-
David Leary: In theory, you could be- you could be in the mail room and you're- CPA firm, but that's your quote. it'll probably qualify as your one year if you turn in the paperwork.
Blake Oliver: Or the more common situation is you're a 4.0 accounting student who goes to work for the Big Four, and they put you on auditing cash for a year, and that's your work experience? Did that really, teach you how to be a CPA?
David Leary: Yeah-
Blake Oliver: No. I mean, yeah, on that one little thing, right? Yeah. But Uh, Jennifer also said that she has thought about this idea of creating a, like, accounting services firm inside of a university before, but she's always been stopped-
David Leary: You kind of talked about this.
Blake Oliver: Yeah. Well, I think it would be brilliant if- like, why not, if you want to give people experience, create a firm, a services firm, inside of your university program so that people can actually work in it and get credit for it, learning how to do accounting for maybe other student organizations at the university, or the fraternities, and sororities, or like you could, ...? There's a ton of businesses inside of a university, or the entrepreneur club, right? If they're starting businesses, why can't you, as the accounting students, help them and formalize it in some way, and get credit for it?
One of the challenges is the logistics of the state board, and licensure. Jennifer says, "The school cannot be a CPA firm, and the state board rules get very particular about what services you can provide, and they need to be licensed to provide those services. So, honestly, no one in my school was willing to take the risk."
Of course, this is the problem in academia. Nobody wants to take a risk. I think there's ways you could do it, though. I mean, you don't have to be a CPA firm to provide accounting services. Texas is a little stricter. You can't call yourselves accountants, but you could just use some other euphemism. You could do bookkeeping for, for the entrepreneur club, or the startups that they're starting in the MBA program or whatever they're doing-
David Leary: Convince all the fraternities, and sororities to outsource their internal treasury controls to you-
[00:19:31] Thanks for the Excellent Feedback! Please Send More!
Blake Oliver: Yeah, you could- you could audit; you could do audits without calling them audits. You could practice, you know? I don't know. I really enjoyed all that feedback. Thank you all so much for sharing your thoughts, and if you want to share your thoughts with us, you can send me an email; I'm blake@blakeoliver.com, or better yet, you can share your thoughts in a voice memo; record a voice memo on your phone and email that file to me, and David, and I will listen, and we will likely play it on the air.
[00:19:57] Will Work for Beer, or Wine ...
David Leary: And just to tie back into this, I have two job postings because, you know, they kind of pop up now on my feeds. One of them is- it's on winebusiness.com. I'm not positive where this position's at, but if I scroll down, and I look at the knowledge, and experience, and skills, they require five years’ experience in a financial leadership position, preferably in the wine industry; they want a BA, or BS in finance, or accounting; MBA, or CPA desired. It's not required. Desired. And then they said they want you to be proficient in Microsoft Office, QuickBooks, Concur, and Dropbox. So, they're very specific about their app stack; and they want you to have experience in that. And this is for a director of finance position. And I have another position that- want to take, Blake-
Blake Oliver: What industry is that? I'm just curious-
David Leary: Oh, wines-
Blake Oliver: So, it's a wine director of finance position, and CPA is not required-
David Leary: Not required, these specific apps are called out.
Blake Oliver: QuickBooks; Concur.
David Leary: Microsoft Office; Dropbox. And then, there's another one that you might be interested in. It's a with Odell Breweries, which is- apparently, it's the 17th largest craft brewer in the United States. One of the benefits you get is a weekly beer allotment, which would be nice. Um, They are hiring an assistant controller, and when you get into this, no requirement of CPA listed anywhere. They want experience with ERP software, and excellent Microsoft Excel skillset is required.
Blake Oliver: I feel like if you're a Microsoft Excel genius that trumps everything. People will take that over any- like just show them your Excel skills, or your ERP skills; although that's harder to show off. Odell Brewing Company, odellbrewing.com. You could be the assistant controller, did you say?
David Leary: Assistant controller.
Blake Oliver: I might have to quit the podcast and just go work for a brewery, David? I think I would have a lot of fun. The manufacturing, or the, the inventory is really interesting for breweries because there's- it's a manufacturing business, like, and there's all these raw materials and the, the way that you convert those raw materials into finished goods, it's very unique.
David Leary: There's a lot of- also, you have to balance; like how much- how much of your production do you sell to a distributor to put in grocery stores? And you only make like a nickel a can on those versus you sell in-house at your own taproom for six bucks a can, and it's all profit, right, and you have to balance this-
Blake Oliver: Well, and then there's the merchandise and there's like all the other stuff that you can monetize - tours, special gift baskets, all that fun stuff-
David Leary: I was at a brewery here in Tucson; Dragoon Brewery, last weekend-
Blake Oliver: Oh, I love that. I love Dragoon.
David Leary: And some lady comes in and she's- they were there, and they left. She came back in, and she's like, "Yeah, my five-year-old just asked if he can do his birthday party here."
Blake Oliver: I like that kid.
David Leary: There's good times here. It's all science. You could have a science tour. There's lots do, but the point is, nowhere does it say, " I mean, We want you to be a CPA."
Blake Oliver: Right. Yeah. It's no longer the most desirable quality. That's the problem ....
David Leary: And I wouldn't be surprised if the- because of the labor market, they start they start pulling down "A bachelor's degree in accounting is required" off of these job postings because they want real work. They want real work. experience.
Blake Oliver: Well, and what you see is a bachelor's or equivalent.
David Leary: Yeah, so they can get around that.
Blake Oliver: Well, okay. Uh, that's all for the listener feedback this week. Thank you everyone. I give thanks to you, our listeners for making the show possible, and it's not just me, and David talking to each other. Although we do enjoy that, we like hearing from our listeners. What is top of mind for you in the news this week, David? With what? In our time remaining, what are we going to talk about?
[00:23:21] More Letters, More Crickets
David Leary: So, there's another letter to the IRS; this time it's from the National Society of Accountants.
Blake Oliver: Oh, yes.
David Leary: They sent a letter to the IRS commissioner and leaders of the Congress's main tax committees asking the IRS to speed up refunds for 2019, and 2020 and communicate better.
Blake Oliver: Did they specifically, uh, say how the IRS should possibly accomplish this? Because there's a bunch of people-
David Leary: Uh, it gets into funding- and more funding, blah, blah, blah. They don't have real- it's, it's more of a bitch letter, but it's also- they draw a line in the sand. They pretty much say, "Until the IRS can more efficiently communicate with taxpayers, the NSA," which is the National Society of Accountants, "is asking the IRS to stop all automatic collection notices, and actions of liens, and levies at least for certain categories that have low compliance risk until the agency has completed its backlog of unopened unprocessed mail, as well as provide taxpayers with targeted automatic relief from the underpayment of estimated tax penalties, and late penalties for the 2020 tax year." So, they're, They're not just complaining, they're like really trying to put a line in the sand of like, "Get your shit together, IRS."
Blake Oliver: And stop the machine of notices Yeah. They did say, " NSA strongly agrees with the Commissioner that there is indeed a crisis occurring involving the IRS, taxpayers, and practitioners, much of which can be attributed to insufficient funding." So, they do agree that the funding is too low, which is more than I could get out of the AICPA, when I spoke to, uh, spoke to them earlier-
David Leary: Oh, that's right. He danced on the line. I remember that- interview-
Blake Oliver: it was just like- yeah, that interview was bizarre because it was- the AICPA's position - and I think it's still this - is that they agree that the service levels are unacceptable, but they don't. Well, they also agree- I think they also agree in principle that funding is too low, but they don't- none of these associations will say what the funding should be-
David Leary: Or what the- what the acceptable standards should be.
Blake Oliver: Right. Like, okay, it's one thing to complain, but then give the IRS a goal, a target to hit, like how much better should they get? And what should the response times be? What should the mail backlog be? What should the phone call queue time be? If two hours is unacceptable, what is this acceptable?
David Leary: And this is what's- does the National Society of Accountants, or the AICPA actually have any true arm-twisting control over the IRS?
Blake Oliver: I don't think anyone is reading any of this stuff. I don't think it has any impact. The influence is just like non-existent, it seems like.
David Leary: I have- IRS news, but I think it could bridge us into app news, so, I don't know if you have other stuff to jump on?
Blake Oliver: Well, yeah, almost everything seems to bridge into app news these days.
[00:25:56] Thanks to our sponsor, OnPay
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[00:27:10] AmEx Fraud
Blake Oliver: I wanted to talk a little bit about this AmEx fraud case; AmEx tax debacle Did you hear about this story? [AmEx had]to fire a bunch salespeople-
David Leary: No, rewind here. I have completely missed this.
Blake Oliver: There was a story in The Wall Street Journal last week, and maybe it didn't get quite the attention it deserves because of the, the, the weekend-
David Leary: AmEx has good PR. You, you get these articles squeezed in on the Thanksgiving weekend when nobody's paying attention.
Blake Oliver: So, the story is- it's an in-depth investigation into AmEx by The Wall Street Journal. The headline is, "AmEx Pitched Business Customers a Tax Break That Doesn’t Add Up." Businesses were told they could deduct transaction fees while earning tax-free cash rewards. I thought this would be interesting for our listeners because it is a sales pitch that relies on a specific tax treatment of credit card rewards; basically, a tax shelter. It seems everyone agrees this is not gonna work. AmEx was selling this to customers, pitching this to them, despite every advisor coming back and saying, "Guys like, we don't think this really works."
So, here's how the tax math was described in an AmEx document viewed by The Wall Street Journal. "A business owner would use AmEx's wire services to send $10 million for a 1.77% fee, or $177,000. Assuming the business owner would pay a 42% combined federal and state marginal income tax rate, the owner would deduct the fee for a $74,340 reduction in taxes, lowering the transaction's net cost to $102,660. The business owner would also earn one point per dollar spent, or 10 million points. The owner could then transfer the points to a personal AmEx Platinum Charles Schwab card at 1.25 cents per point, generating a cash reward of $125,000. Subtract the net transaction cost of $102,660 for a net gain of $22,340."
So, basically, you're using your AmEx credit line to pay a bill; basically, putting it on a credit card. So, you're paying a credit card fee. You, the sender are paying the fee to pay your vendor this way. get to deduct that fee, so, that lowers the cost of the transaction because you get a tax deduction, but it's still going to cost you like a hundred grand to send the $10 million, and what you're doing then is you're taking the points that you earn on that business card, and you transfer them over to a personal card, and then you convert those points to cash.
So, you're getting money out of the business tax free, because - I should've probably said this at the beginning - credit card rewards are generally not taxed at the personal level, by the IRS. The IRS has issued guidance saying that your credit card rewards not taxable, but here's the catch. The catch is that's for miles, airline miles. If you convert those points to cash, the IRS is not saying you can do this, and pretty much the experts agree. All these AmEx salespeople were apparently aggressively selling this strategy, and they got caught, and a bunch of them got fired.
David Leary: I've seen this at Melio, right? 'Cause with Melio, you can pay your bills with a credit card, and one of the reasons people do that is because they want the points. They want to fly first class on Delta, or, you know, they want the American Express Black Card, or whatever the game is for that small business owner, but you can also pay bills with your personal credit card. I could pay all my bills using my personal Discover card, and that automatically connects into my Amazon. And I just use those points up on Amazon, and it's-
But I've done the math on it. because- and I look at it from a bookkeeping perspective, and this is where I think you, as our listeners, you're going to have clients. You're not going to win this argument. Because for me, personally, I do my own bookkeeping. When it's all said and done at the end of the year, okay, I might get $300 in like credits from paying my bills for the year with my personal credit card; I'll have $300 on my Amazon to spend on whatever I want, but every time I record this, I have to record double the amount of bookkeeping transactions because I have to record the spend, and then, I have to record a journal entry to move that money back out to owner's withdrawal, or owner's investment in the business, right?
And so, it's double the work from the accounting side, but as you- your clients are going to do this, and you're just going to have to do the work. You're not- be able to stop them.
Blake Oliver: I think the easiest way to do this is you just use expense management software, like Fyle, a sponsor of our show, or any of the other- CenterCard, or ...
Blake Oliver: CenterCard. That's another sponsor, right? And so, you get the- the business owner pays the bills on their personal card and then submits for reimbursement to the business, and then it gets reimbursed. The IRS doesn't really- I mean, technically, the guidance is only for miles, not necessarily for cash rewards, so, it's not clear how that whole thing works. What definitely doesn't work is if you try to transfer the points from the business to the personal and convert those to cash. That's going to be a problem at this scale.
It's this whole fuzzy area, right, and it's just another example of the ways- the tricks that we have to shift income and to get tax-free income out of the business. I mean, it's kind of crazy. Like if you, if you were running most of your bills on your personal credit card and then get reimbursed by the business, you can generate a ridiculous amount of cash rewards, like all your ad spend, for instance, going through your personal card and generating cash rewards, miles, all that stuff. I mean if you're getting 1%, 2% back on all that, it can add up. I guess this is an example of, you know, the IRS issued this guidance because they just wanted to simplify things for people, and then, of course, somebody goes and takes advantage of it and potentially ruins it for everyone else. And Hopefully, this doesn't result in us now having to report credit card rewards on our taxes-
David Leary: Yeah, I was just- I thinking of this, just like on the tax return, there's a little box to check mark that says, "I've touched Bitcoin or cryptocurrency." There'd be a check box right next to it that says, "I've redeemed air, a credit card points."
Blake Oliver: so, Uh, that was my AmEx story, and I guess the fallout of that was- let's see how many people lost their jobs as a result. CFO reported on the workers, finally getting fired.
David Leary: Oh, so, just to make sure I'm following this correctly- so, this is kind of like the wells Fargo model, where the management makes decisions and puts pressure on the salespeople. It gives them these guidelines. The salespeople just go out and start executing, and the salespeople lose their jobs. There's some, some manager somewhere that said, "Do whatever you have to do to maximize the AmEx usage, and here's, here's a selling point." Train them all to do it, and they're the ones that are going to go down.
Blake Oliver: Yeah, they turned a blind eye to it. It doesn't say how many people lost their jobs, but yeah, there's a whole bunch of fallout, but you know, that like up at the higher levels of AmEx, they all knew this was happening, and they just tacitly allowed it to happen 'cause It was making them tons, and tons of money-
David Leary: It was working.
Blake Oliver: Yeah. Yeah. So.
[00:33:43] App News
David Leary: Yeah. Let me, uh- I have a transition story here we can get into. So, the IRS is planning on awarding $2.6 billion in app development contracts in Q1 of fiscal year 2023.
Blake Oliver: 2.6 billion?
David Leary: $2.6 billion in app development. The Enterprise Development Operation Services (EDOS) contract will bring 400-plus systems in the IRS's Applications Development ( AD) portfolio under one vehicle while enhancing the Development, Monitorization, and Enhancement (DMV) services and reducing the Operation and Maintenance (OM) services.
Blake Oliver: That was a lot of word salad-
David Leary: Yeah. And it came out of that that said the IRS needs to modernize-
Blake Oliver: Okay. So, how do I get a- how do I get an IRS contract to build software for them?
David Leary: So, it- they have requirements to where it'll be bigger companies, and small businesses participating, and contractors. They're looking for people that have developing fraud detection tools; identifying tax fraud schemes; using network analytics; detecting tax-related ID theft. So, I think like they're really focusing on some of that stuff first. What's interesting about this, it's a ceiling, they say, of $2.6 billion, but I just- based on some of our other stories we've covered, as these government agencies try to modernize, these contracts- that $2.6 billion is gone in the snap of an eye. And I suspect this'll be a $15 billion project before it's actually even done if it ever gets done.
Blake Oliver: Well, considering the IRS is still operating on like mainframe computers for some of their main databases, right?
David Leary: So, if you're an app developer, and you're like, Hey, you to, know, I'm going to get some of this government money," that's the way to go.
Blake Oliver: Go for it?
[00:35:21] Congress Widens PPP Fraud Probe to More Online Financial Companies
Blake Oliver: Well, here's a throwback story that is app related. " Congress Widens PPP Fraud Probe to More Online Financial Companies." There's a congressional subcommittee that's been investigating fraud from the PPP program. representative James Clyburn, Democrat, of South Carolina, he's the chairman of the subcommittee on the coronavirus crisis.
He sent letters to Blueacorn, and Womply on Tuesday, requesting information about fraud prevention. Both emerged as major players that fused tech and financing to speed up lending through the government's Paycheck Protection Program. Womply had no lending experience before COVID-19, and Blueacorn did not exist; yet, together, the companies captured more than $3 billion in fees eclipsing their direct competitors. So, they made those fees on issuing the loans, but Clyburn says, "Unfortunately, many of these fees may have been earned by processing fraudulent, or ineligible loan applications." So, they're requesting all sorts of information.
David Leary: Doesn't make sense, right? If, if, they had- if a billion dollars that they made of revenue all came from fraudulent applications, they probably need to give that billion dollars back. I think that's acceptable.
Blake Oliver: Womply did 1.4 million loans totaling more than $20 billion. And the total was about $800 billion. So, they did quite a good chunk. Blueacorn did 14 billion in loans-
David Leary: And we talked about Blueacorn before 'cause they were powering couple of the other services, and they came out of nowhere in one year. They didn't even exist prior to PPP. They- basically April of that year, they started as a company. It's bananas.
Blake Oliver: So, the question is who's to blame here? Is it Congress for creating a Paycheck Protection Program that allowed for a lot of fraud because there weren't internal checks and controls? Is it the SBA? For the way they implemented it, or is it, you know, these, companies that created these, uh, these easy ways to get your PPP loan? It's hard to lay blame on them when the banks, the traditional banks weren't loaning to people, so they had no other option. So, if these fintechs hadn't cropped up, then who would have loaned to these small businesses?
David Leary: And there was some perfect storm of the opportunity to create. You could create a fraudulent bank account with bank routing numbers on Cash App or something. Fake business licenses. Push it through these loans, get the money. It goes through a fake bank account. Take out the money; it's gone; you never existed. It's like it never happened. It's just the perfect storm of technology hit with the money. You're just bound to have fraud.
Blake Oliver: And there's no way that a human being could be reviewing all these applications. Like even if you- it's just not possible. There were just too many. it's going to be one of those situations where there's no bad guy. There's nobody in a room full of, cigar smoke who set this up and stole the money.
David Leary: I suspect that these two smaller companies are going to take it hard.
Blake Oliver: They'll get the blame-
David Leary: They get the blame. They're going to take- 'cause they're going to have to make a scapegoat or an example from somebody, and they're not going to do it from the big banks.
Blake Oliver: Yeah. The big banks have too much influence. They're the ones donating money to Congress. What you got?
[00:38:16] Thank you to our sponsor Relay
David Leary: This episode of The Cloud Accounting Podcast is sponsored by Relay Financial. Do your clients use banks that make it harder for you to close the books? Do they make it hard to deliver financial visibility for clients? I'm guessing you said yes to both these questions, and that's because traditional banks aren't designed for your relationships with your small business clients.
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[00:39:09] European Spend-Management Startup Raises $112 Million in Series B Round
David Leary: App news. So, there's a B2B spend-management startup out of Europe called Payhawk. They just closed $112 million in their Series B. Um, and this is a, company card spend-management solution. We're seeing lots of these pop-up everywhere. They operate currently across 27 countries in Europe, and now with this new round, they do plan on eyeballing the U.S., Netherlands, France, Australia, and Singapore.
[00:39:36] simPRO Field-Service Management Software Raises $350 Million
Blake Oliver: Well, you brought up funding, so I'll share my story on the Australian side of things. simPRO has raised $350 million in new funding. according to Reuters. Yeah-
David Leary: Riches are in the niches.
Blake Oliver: What does simPRO do?
David Leary: Um, it's HVAC software HVAC- I think they, they have good traction with like solar-panel installers, but they, yeah, they are field-service software.
Blake Oliver: Okay. Field-service management end-to-end field-service management. They've got job management, project management, asset maintenance, reporting. Features include estimating, quoting, scheduling, and dispatch, invoicing, and payments. Then they've got their accounting integrations. Wow. $350 million. They didn't provide any details on their valuation, in a statement seen by Reuters, but a person familiar with the deal said the latest round would value the company at more than a billion dollars. Well, yeah, I mean, if they're raising $350 million, you'd hope that they're worth at least a billion. They have 200,000 users across Australia, New Zealand, and the United States, and the United Kingdom, and they employ 400 people globally.
[00:40:41] Crouching Tiger, Hidden ClockShark ...
Blake Oliver: simPRO is the company that bought ClockShark. Did we talk about that? Did we report on that? I didn't know that they had bought ClockShark. Maybe-
David Leary: I didn't know this either.
Blake Oliver: This is in the same announcement. simPRO said it bought ClockShark, a U.S.-based timesheet, and scheduling platform, as well as Australia-based job-management-software provider AroFlow (A-R-O-F-L-O). Those three platforms altogether are used by more than 17,000 businesses and service 320,000 users. Do they mean by that, that they have 17,000 businesses using all three?
David Leary: No, it's gotta be total together.
Blake Oliver: Well, but simPRO says it has 200,000 users. Yeah, no, this is, These are total user counts. So, 320,000 users across all three apps. Nice. Uh, the leadership teams of both ClockShark, and AroFlo or- is it (arrow-flow) or (are-o-flow)? I don't know. They're going to operate independently after the acquisition.
David Leary: Good, hidden story in these details. I did not know ClockShark was purchased by them.
Blake Oliver: Yeah, it was kind of buried in that. I didn't even notice until I read that
David Leary: I was ClockShark's first Twitter follower.
Blake Oliver: You should get some equity for that.
David Leary: So, I did not- yeah, I, I completely missed this. Maybe they didn't tweet it out. I don't understand.
[00:41:56] 6 Lessons from Audit Experts who Adopted AI Early
Blake Oliver: Here's an article: "6 lessons from audit experts who adopted AI early." I've been wondering, when would AI and tech, just any tech cloud, start to impact the audit profession? We've kind of almost forgotten about audit these days. So, this is a story about a firm that has adopted MindBridge for their audits. The firm is called GRF CPAs & Advisors. They're featured in Journal of Accountancy. Ricardo Trujillo- he's a CPA/CITP. He's talking about, in this article, how they've adopted MindBridge to add value to their audits. They're using MindBridge for 15% of their audits these days, and they tend to audit not-for-profits mostly.
MindBridge, by the way, is a cloud-based platform that analyzes transactions, and assigns a risk percentage based on 28 control points within the software. So, you connect MindBridge to the general ledger. It pulls in the transactions and then analyzes them all. So, the idea is instead of sampling a small set of transactions, you can sample them all, and then MindBridge will do a risk assessment.
Now, what's interesting is they're not using MindBridge to reduce the time it takes to audit. They're using it as a value add. They're saying if we use MindBridge, we can help detect fraud. For now, machine learning doesn't necessarily mean a faster, or cheaper audit. Instead, they tell clients that it makes for a much more effective audit.
It's an interesting way to position it. Do you use AI software to reduce the time it takes to do something in bookkeeping and CAS? We've generally used technology to save time; allows us to do more effective things. I think eventually that's, what's going to happen with audit, but in this case, they're using it as a value add to the client, so we can do a better audit for you.
[00:43:39] Sage (Words) for Accountants
David Leary: So, Sage launched a new platform called their Sage for Accountants. And what I found was interesting about this- essentially, it's going to be a dashboard in your digital hub for accountants to put all your clients on one dashboard across all your Sage And this includes some of the new acquisitions, so, GoProposal, and AutoEntry. And as you march down, you read this article, it looks like this is, um- 'cause right now, like AutoEntry has its own dashboard, and I suspect GoProposal has its own dashboard.
Every single app right. Has its own dashboard, and usually, to the accountant, or bookkeeper- it's a kind of a pain, right? Like, oh, it's time to work on my AutoEntry clients. I gotta go to the AutoEntry dashboard. They're going to really work to make this the starting point, so, regardless of where you start using a Sage product, all accounts will be driven to this one dashboard for that product. So, they'll, they'll share a dashboard stack of some type.
So, it's, it's pretty sure it's nothing Along with that, they actually have their Sage Accountant Hub, which is like advice, information, uh, learning topics, marketing support, things like that. But they're- It's interesting that they're not- this is beyond just a way to get to the Sage Accounting products, but it's going to be all the products on one dashboard, which is actually really smart. Um, We'll see. I can't imagine Xero, and Intuit don't hit that way, as well, especially Intuit, with the 55,000 products now they own on the small business side.
[00:44:53] Building Strong Relationships, Remotely
Blake Oliver: With more and more of us working remotely and looking like it's going to stay that way, one of the questions is how do you build strong relationships with colleagues? That seems to be one of the number-one reasons that managers, and business owners are asking people to come back to the office. It's because the argument is we can't build good culture, good relationships when we're on Zoom. There's some good news though, for folks who like remote working. According to a new survey, it is possible to build relationships with colleagues, strong relationships with colleagues remotely. You just have to work harder at it, and it takes longer.
This story in The Wall Street Journal talks about this survey and gives you some tips, some strategies for how to build better relationships. This study was done by Slack, by the way, which of course has a strong interest in helping folks work remotely. Although, I feel like Slack is one of those tools that gets used everywhere, regardless of whether or not you're in the office, or remote. Do you want to know some of these, um- some of these tips?
David Leary: I-
Blake Oliver: One of them- was that?
David Leary: I'd love to hear it. -has been a challenge of my own.
Blake Oliver: Okay. So, there are six tips. I'll just do like my, my favorite ones. So, this is the one that's counterintuitive to me: share sad experiences. People meeting others online for the first time may think they should present a positive self-image, but research by Anita Woolley, an Associate Professor of Organizational Behavior and Theory at The Tepper School of Business at Carnegie Mellon University, indicates that virtual teams can improve their connection and performance by talking about personal sad experiences.
In a study, Dr. Woolley and her coauthors divided 104 strangers into 52 pairs to work together over video conference. A control group was given six minutes for unstructured conversation; the remaining three groups of pairs were each given six minutes to ask, and answer personal questions designed to evoke sad, calm, or neutral moods. After answering the questions, the pairs were given a series of online games that they had to work together to complete.
The pairs who were given sad questions - such as, what is an important memory from your childhood that makes you feel sad? - demonstrated more connection and performed better at the collaborative tasks than any of the other groups. The pairs that were allowed to chit chat about anything felt happier but didn't perform as well on the collaborative tasks. So, the suggestion here is that remote workers should structure time to disclose meaningful things to one another, even if they're sad and it makes you work better together.
So, this is counterintuitive. We all feel that we need to present this positive image. Especially even more when we're working remotely, but that actually is not necessarily true. I guess it makes sense. People work best when they feel connected to other people. And we all have challenges in our lives. We all have sad experiences, as well as happy ones. And I guess when we share the difficult ones, the sad ones, it makes us feel more connected to others.
David Leary: I can see that.
Blake Oliver: Yeah, so ...
David Leary: You wanna rattle through the other five?
Blake Oliver: Well, the other ones are a little more, standard. Let's see ... See the full picture. So, learn about your remote teammates work and life context; understand their family; know who they're- you know, like this is stuff that you should probably know-
David Leary: Yeah. Like Dale Carnegie stuff.
Blake Oliver: Yeah. Post frequent, specific status updates. So, share frequently, and often. Have daily check-ins. So, for example, if you're a manager, you could easily do like a daily standup and everyone would share what you worked on yesterday; what you're going to work on today, and what you need help with. You don't even need to do that on a call. You could actually do that virtually. If everyone does it every day, that can really help. Ask for and give help; notice non-verbal cues. So, if you are doing a lot of meetings in groups, get a big computer screen so that you can see everybody in their square, And they're not just this like little, tiny icon that you can barely see.
So, the one I thought was interesting that I'd never thought about before and didn't realize: it was like it's sharing the sad experiences and actually figuring out how to make time for that is important. Of course, I can see a manager, totally taking the wrong approach with that, and then forcing everyone to share sad experiences about themselves and creating this really awkward meeting, and sorta like the virtual equivalent of a trust fall, and everyone just hates- hates it.
David Leary: Yeah, the execution of this, I could see-
Blake Oliver: The execution of it is important. So, then, I think that's all the time we've got today, David. You want to share a sad story about yourself before we go?
David Leary: Um, I'm going to take another business trip. I have to get off the podcast here and pack, and I'm going to New York where the temperature is like 40 degrees. So, the sad story is I have to carry a huge poofy jacket. And I'm that guy because I don't know how to- what to do with a big poofy jacket-
Blake Oliver: You've gotta take it on the-
David Leary: -being an Arizona, right? I don't know what to do with my big poofy jacket. It just sits in a closet. Yes, I now have to be that guy. I never know what to do with it at restaurants, or sit down- what do you do with it on the plane? I'm just- I don't know what to do with a big poofy jacket, and gloves, and scarves. I'm just sad. I'm emotionally upset. I don't-
Blake Oliver: Um, I'm very sad that you, I'm sorry for you, that you have to go to New York and, uh, in what is almost December and end of November.
David Leary: The temperatures, goes from 30, 30, the lowest 30 and the highest like 41 or something. It's going to be a fun two days.
Blake Oliver: We'll have enjoy yourself as much as you can. Uh, I'll keep, I'll keep Arizona warm for you until you get back. In the meantime, if our listeners want. Tweet at you while you're on the plane or catch up with you in New York. If, if, while you'll probably be back by the time this episode drops. Right.
But, uh, where should they reach you?
David Leary: I'm on all the socials just @DavidLeary. And if you're on LinkedIn, just be sure to say, "I'm not a bot."
Blake Oliver: I am @BlakeTOliver. You can email me@blakeatblakeoliver.com. Send us a voice memo. We love hearing those. Send us your emails, let us know your thoughts on these stories or anything else. That is top of mind for you in the world of accounting and technology until next week, David have a safe trip and I'll see you back here next week.
[00:50:49] Classified Ads
David: Time for the classifieds.
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[00:51:32] 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.
[00:52:32] 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.
