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Pushing Rocks Uphill: David Schnitt's Journey from Deloitte to Global Innovation | Tax Series · The Inspired Stories Podcast

0:04
Welcome to another edition of Inspired Stories, where leaders
0:07
share their experiences so we can learn from their successes,
0:10
how they've overcome adversity, and explore current challenges
0:13
they're facing. Welcome to another edition of
0:19
the Inspired Stories podcast where leaders share their
0:22
experiences so we can learn from their successes and be inspired
0:25
by how they've overcome adversity.
0:27
My name is Anthony Kotaspodi and today's guest is David Schmidt,
0:31
President and CEO of IQ Back Office, one of the leading firms
0:35
in the finance and accounting, outsourcing and staff
0:39
augmentation industry with approximately 1000 global
0:43
professionals. Now before finding IQ Back
0:46
Office, he was Co founder and executive vice President of new
0:50
ventures for resources Global Professionals, a publicly traded
0:54
spin off from Deloitte that provides outsourced specialist.
0:58
David helped grow the company from scratch to more than $150
1:01
million in annual revenue in four years with a senior.
1:06
While a Senior Manager with Deloitte Consulting, Mr. Schmidt
1:09
advised and assisted clients in re engineering their finance and
1:13
accounting functions, including the establishment of shared
1:17
service centers, improving their operations, developing new
1:20
strategy and business plans, and forming successful joint
1:24
ventures. Mr. Schmidt has been responsible
1:27
for the design, development and implementation of several
1:30
significant consulting projects with budgets of up to $11
1:34
million and staff numbering more than 8500.
1:38
If you listen all the way through to the end, you'll hear
1:41
about how to receive free process benchmarking from David,
1:45
which has a value of $2500. Now before we get into all that
1:49
good stuff, today's episode is brought to you by my company,
1:53
Add Back Benefits Agency, where we offer very specific and
1:57
unique employee benefits that are both great for your team and
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fiscally optimized for your bottom line.
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One recent client was able to add over $900 per employee per
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year in extra cash flow by implementing one of our
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proprietary programs. Results vary for each company,
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and some organizations may not be eligible.
2:16
To find out if your company qualifies, contact us today at
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AD Back benefitsagency.com. Now back to our guest today, the
2:23
President and CEO of IQ Back Office.
2:26
David, I appreciate you making the time to Share your story
2:28
today. Anthony, thank you.
2:31
I appreciate it. So David, you had a very
2:34
successful career with Deloitte where you were helping clients
2:38
re engineer their finance and accounting functions, work that
2:41
I'm assuming at least conceptually was kind of laying
2:43
the foundation for what you would later do with starting IQ
2:47
back office. But long before starting IQ you
2:51
Co founded a spin off from Deloitte.
2:54
Tell us about that venture. Sure.
2:57
So I actually kind of stumbled into it accidentally.
3:03
So when I was in consulting, as you mentioned, we were helping a
3:06
lot of companies re engineer and improve their back office
3:09
processing, counting, HRIT, all of those sorts of things.
3:14
And what we found in doing that was obviously those things are
3:18
not the core competency of any company.
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Those are things all companies have to do, but they're not in
3:23
business to do it. And so we found a lot of
3:26
opportunity to improve those specific areas.
3:29
And in fact, once we delved into it, what we found was that
3:33
there's huge economies of scale and knowledge in those
3:37
particular functions. And so I got the idea to when I
3:43
was at Deloitte to start working on outsourcing those particular
3:47
functions for companies using the scale and the innovation to
3:52
really drive orders of magnitude cost reduction and process
3:57
improvement in those areas for clients.
4:00
And as I was meeting with people in the firm at Deloitte, I met
4:06
one of the other partners and he said, hey, I really like your
4:10
idea. Let me show you my idea.
4:12
And his idea was to start this other company.
4:15
And so I kind of took the outsourcing thing and I put it
4:18
aside. And we, we started a company
4:21
which which later became Resources Global Professionals.
4:24
But at the beginning, we were a subsidiary of Deloitte and we
4:28
grew from scratch to about 180 million in revenue in just I
4:32
think about three years or four years, something like that.
4:37
And we found an unmet need in the marketplace for senior level
4:41
professionals to help clients with various sorts of finance
4:45
and accounting issues that they had.
4:48
And that was really a fun ride. And we we started from scratch
4:52
as a subsidiary. We ended up spinning out and
4:54
then a year after spinning out, we went public and we were one
4:57
of the best performing IP OS of the year.
4:59
So that was really a lot of fun. How did you guys grow so
5:03
quickly? As I said that we found an unmet
5:07
need in the marketplace. So we, we found that at the
5:12
time, if you wanted to hire somebody to do project based
5:16
work on the finance and accounting side, your only
5:19
option was to go to one of the staffing firms.
5:22
And they basically focused on clerical level people, somebody
5:26
to process invoices or, you know, pay bills, you know, stuff
5:30
like that. But nobody was really providing
5:33
senior level people that could help them do an S1, which is a
5:38
filing to go public or clean up a messy balance sheet that they
5:43
have or, you know, work on other sorts of projects.
5:47
And so, you know, we we found this and we actually started out
5:52
providing people at Deloitte who were not busy during the audit
5:56
season. And then we quickly found that
5:59
we could get alumni of the big four accounting firms who had
6:02
experience doing this work. And clients love that.
6:07
And as soon as we found that great niche in the marketplace,
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you know, things just took off and you know, we had, we just
6:15
were opening offices left and right and just found
6:17
opportunities everywhere. So I think you answered what my
6:21
next question was going to be, but let me make sure if I
6:24
understand it. So when, because I was going to
6:27
ask, how are you finding these high level folks to do project
6:30
based work? Like don't they want to be
6:32
employed, you know, full time at a really good job?
6:35
You know, clearly there's there's demand for their
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services, but I think what I'm hearing you say is they all have
6:39
sort of a slow season right outside of audit time.
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And so this is. Yeah, the auditors do, but the
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folks that we were hiring were really people who had been
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controllers, CF OS, accounting managers, things like that.
6:53
And we found two sets of really good people.
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So one was people that preferred to do project based work.
7:00
They didn't want a full time job.
7:02
They found that that was more interesting and more challenging
7:05
than doing the same thing every day.
7:07
If you're in accounting, you're closing the books every month
7:10
and it gets kind of, you know, monotonous to do the same thing
7:14
every month, every month, every month, and you're working very
7:16
long hours. That was sort of one group.
7:18
And the other group we found were younger professionals that
7:22
had small kids and young families, and they didn't want
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the same thing that they were doing.
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Again, same thing every month. They wanted more flexibility in
7:32
their schedule and so we found just some amazing, you know,
7:37
fantastic talent that really wanted the project based work to
7:41
fit better with their lifestyle. And so those two groups we
7:45
really found were great and, you know, that helped us really
7:48
grow. OK.
7:50
So if you found this unmet niche, this need that existed
7:55
that, you know, nobody had really figured out a good
7:57
solution for you figured out how to find the people that can
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provide the service, how are you so quickly finding the clients?
8:05
Is it just because you were able to tap into Deloitte's network?
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There's a big base of customers there.
8:11
And so you had a very receptive audience because to go from zero
8:14
to $180 million in three years, that's pretty good growth.
8:19
Yeah. I mean, a lot of it was being
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able to tap into the network at Deloitte, but it also kind of,
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you know, when you start a business, the the way I talk to
8:31
people about it is you're pushing a rock uphill.
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You know, there's there's no momentum.
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In fact, the momentum's against you, right?
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But once you reach critical mass and you're at the top of the
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hill, then that rock starts to go down the hill on its own and
8:48
you get some momentum. And in that business, in the
8:51
resources business, we were able to hit the top of the hill very
8:55
quickly and it started, you know, gathering its own momentum
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very, very fast. And the Deloitte network
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certainly helped a lot at the beginning.
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But then we did a lot of, you know, sales and marketing
9:06
activities as you would, as you would expect.
9:09
There was a lot of word of mouth as in our Business Today, you
9:13
know, we work with the CFO at a client, they go to a new company
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and usually the first thing they do was call us and say, hey, I'm
9:21
in this new company, can you help?
9:22
So there's a lot of that that goes on as well because senior
9:27
accounting folks don't stay too long at anyone place generally
9:31
and they move around. And so there's always a lot of
9:33
opportunity, you know, when they change job.
9:37
Got it. So you were involved in this
9:40
very successful spin out that went public, one of the best
9:44
IPOs of the year, but at some point you decide I'm going to
9:47
step away and do something else. What was behind that decision?
9:52
So as I mentioned originally, I had this idea to do outsourcing
9:58
and I kind of put it aside to help get the resources business
10:02
growing. And you know, after we were
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public, we had grown a lot and it was still growing.
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And I wanted another challenge. And I, I'm always been very
10:12
entrepreneurial and wanted to do my own thing.
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So I left resources and started IQ back office and I saw the
10:20
need in the marketplace, which has only grown since then.
10:25
And then that was basically it and I didn't look back.
10:28
And so you're starting in what year was it 2002?
10:34
1002. Two, yeah.
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How'd you get your very first client?
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Well, interestingly, we wanted to have a solution set in place
10:46
so we could really help clients grow and give them, you know,
10:50
better control over these back office processes.
10:54
So the very first thing I did was develop some software to
10:58
help manage all of the transactional activities across
11:02
clients. And my background before I was
11:05
in consulting, I was actually in the software business and I
11:09
designed, developed and implemented accounting and
11:13
what's known as enterprise resource planning or ERP
11:17
software systems for companies. So I built this software and
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then we started to go to market with it and we put out a website
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and put out some Google ads and just started to get people
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inquiring as to, you know, our services.
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And so our very first client that we got was a company that
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found us on the web and you know, we we grew from there.
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And how were the early days? Was it moving quickly?
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You know, was it kind of growing at a similar place to, you know,
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what the Deloitte spin off was doing?
11:56
No, nowhere near at the beginning.
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And if I look back, we were probably too early to market.
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And any good entrepreneur will tell you that timing is one of
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the most important things. And our timing was off in the
12:11
sense that we were too early to market.
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And so I think the market looking back wasn't quite ready
12:17
for what we were offering at the time.
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And so it was very hard at the beginning to get new clients.
12:24
I mean, we, we definitely got some and we definitely grew
12:27
quickly, but not as quick as I had hoped.
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But, you know, the, the market eventually catch, you know,
12:35
catched up with us or caught up with us.
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And so, you know, it all worked out fine in the end.
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But, you know, it was, we were pushing that rock uphill for
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quite a long time before it reached the peak and started,
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you know, going on a. It sounds like you were in the
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stage where not only did you have to convince a client why
12:57
you would be the best ones to work with, but you just had to
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even educate them on what it is that you were doing because it
13:03
was a completely new category of solution for folks.
13:07
Yeah, people really didn't understand what outsourcing
13:11
meant and why they needed to do it.
13:15
You know, when we were able to speak with them about it, they
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understood better. There's a lot of, there's a lot
13:23
of economies of scale in back office processes.
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And there's actually a great graph on our website that shows
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that mid size companies will spend 60% more than large ones
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as a percentage of revenue to handle back office functions.
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And not only that, they generally don't have the same
13:43
technology, they don't have the right controls, they don't have
13:46
the right infrastructure. And so when you compare midsize
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firms to large firms, and when I say large, I mean about 10
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million in 10 billion in revenue and above, it's just night and
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day in terms of what they're able to achieve.
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And So what we've always educated our clients on and
14:07
prospective clients is, you know, you can try and do all
14:11
this stuff internally, but at the end of the day, why are you
14:15
reinventing the wheel on something that everybody else
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does? And why aren't you leveraging
14:21
somebody that's got the scale and the technology and the best
14:24
practices and the experience who can do it?
14:29
You know the old saying better, cheaper, faster and give you
14:33
better control role over all of this stuff than trying to do it
14:38
yourself. So, you know, we're very
14:41
consultative with our clients and every client's different and
14:44
so we'll we'll always tailor things to them.
14:46
But, you know, once they understand the foundational
14:51
understanding of the benefits of using a company like us, then
14:57
they warm up to it and they get it.
14:59
And, you know, we've been growing, you know, since we
15:01
started. But that growth has picked up
15:04
steam, you know, over time. So help paint a picture.
15:08
Somebody's listening to this and they're trying to wrap their
15:10
heads around it. Maybe they're a business owner
15:12
that, you know, kind of fits that sweet spot of revenue.
15:15
Well, actually, why don't you explain what is sort of that
15:17
sweet spot of revenue? Do you find that it's a good
15:19
customer fit for you? So most of our clients, well we
15:23
let me explain, we have two service lines in our business. 1
15:27
is our outsourced finance and accounting business.
15:31
And so that is really if you think about in most companies
15:35
they have an accounting department with a, with a
15:37
controller and then that controller has a team of people.
15:41
And so we do everything from the controller on down.
15:45
That's one piece of our business.
15:47
The other pieces of our business we call off site office.
15:50
This is our staff augmentation division and this is where we
15:55
will provide somebody to work for the client, but they happen
15:59
to be sitting in our office in Manila and the Philippines.
16:03
So they're two different models depending on what a client wants
16:06
to do. So if you take the outsourcing
16:10
piece of the business, we do everything from a single process
16:14
solution. So we might just do accounts
16:17
payable or we might do accounts receivable or payroll or things
16:23
like that, or we might, you know, do everything under the
16:27
controller. So we'll produce financial
16:28
statements and close the books and all those sorts of things.
16:32
Those clients are generally between say 100 million in
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revenue up to about 5 billion. That's kind of our sweet spot.
16:41
We, we don't really work with too many small and medium sized
16:45
businesses below that. And we don't work with, you
16:48
know, Fortune 500 companies. We're really focused in, in the
16:51
middle, which you know, we consider to be the larger end of
16:54
the middle market and the, the, the large company market in our
16:58
staff augmentation division. It's really anything.
17:01
And we've got clients of all sizes from large public
17:04
companies to, you know, small startups that we work with, so
17:11
that those are really, you know, the market segments that we
17:14
serve primarily. So for the market segment that
17:17
is on the bigger side, 100 million to 5 billion, I think I
17:20
heard you say, do they generally know like what it is they're
17:24
trying to accomplish? And so you're not, you're not
17:27
having to provide them sort of consulting services on here's
17:31
what you guys should be doing kind of more like what you did
17:33
with Deloitte or, or are they looking for that kind of
17:37
assistance as well? Like, how do we kind of level up
17:39
our our back end? Yeah, they're definitely looking
17:42
for some guidance on the best way to approach this.
17:46
One of the big problems right now is that there's just a huge
17:51
lack of talent and people available to do this kind of
17:55
work in the US, in the US and Canada, UK, Australia, all of
18:00
those economies have been growing much faster than the
18:04
availability of talent. So that talent shortage has
18:09
really driven a lot of problems for companies.
18:14
And in fact, if you if you see a lot of public companies have
18:18
been stating that they can't get their financials done in time
18:22
because they don't have access to enough resources and talent
18:25
to do it. So it's become a huge problem.
18:29
And some of the statistics are really interesting.
18:32
There's 200,000 fewer accounting grads every year than there used
18:35
to be. 3/4 of all the Cpas are retiring in the next three to
18:40
five years. So the problem is only getting
18:43
worse. And so you've got issues where
18:48
there's a lack of talent, which is driving up the cost of
18:52
people. You've got because of all those
18:55
things, there's a lot more turnover and attrition.
18:58
And here in the US, you know, most people will stay at a job
19:01
one to two years now, whereas before they stayed a very long
19:05
time. And that turnover has a, a
19:08
really significant impact because, you know, somebody's
19:11
learned everything and all the processes and all their systems
19:14
and how to do it. And then they leave and that
19:16
knowledge goes away. And then they got to get
19:19
somebody in who's new and they have to, like, learn all over
19:23
again. And when we've modeled it, we
19:26
found that people don't really reach maximum productivity in
19:30
any of these areas until they've been at a company for at least a
19:34
year. OK.
19:35
So you've all these things together have made it very
19:39
difficult for companies to handle back office functions and
19:43
accounting functions in particular in the US.
19:46
So those things have really driven, you know, our business
19:50
as of late. But the other thing that's also
19:54
happening, which is really interesting is all of the
19:56
technology. And if you think about AI and
20:01
machine learning and things like that, companies are really at a
20:06
loss to how do you deal with that?
20:10
Is it usable? Is it not?
20:12
How do we make it work? When we've gone into companies,
20:17
we've found that almost every single time when they've
20:20
implemented some technology, they've had a negative ROI and
20:25
it's it's almost every size company.
20:29
So recently we were working with a a billion dollar retailer and
20:36
they implemented a lot of technology.
20:38
They re engineered their processes for best practices and
20:42
yet their productivity went down by 50% versus somebody doing the
20:48
same thing manually. So you know, it's very difficult
20:54
to leverage technology appropriately and get the
20:57
benefits of that technology when it comes to back office
21:00
functions. And it doesn't matter if you're
21:02
a little company, you're a larger company, they all
21:06
struggle with the same thing. And one of the things we say is,
21:09
you know what, we've already figured this stuff out.
21:12
We have all the processes pre designed, we have all the best
21:15
practices. We do all these things in a way
21:18
for each industry. We have basically process maps
21:21
for every industry and we've already layered on the
21:23
technology that we've built that's proprietary.
21:27
So we've made sure it it really makes us efficient and we've got
21:31
the scale to to be really efficient.
21:34
And so there's no way anybody can compete with us in terms of
21:39
efficiency, quality, cost and so on.
21:44
And so typically, you know, a client will come in and we'll
21:46
save them about 50% on average. And it's, it ranges anywhere
21:51
from 30% to some clients over 80% savings.
21:55
But at the same time, we're doing a higher quality job,
21:58
we're doing things faster and you know, that's, that's the
22:03
benefit that we're selling to that client.
22:06
So this is important, David, because this I don't think I, I
22:09
fully was wrapping my head around what it is that you guys
22:12
do. I was thinking, OK, you're
22:15
finding probably providing some training to the folks that you
22:19
know are are being placed to help with these companies.
22:22
But it goes way beyond just recruiting, retaining training
22:27
folks. It's also you guys have this
22:29
software, you have these processes that you can put in
22:33
place that allow for the people, the the staff augmentation
22:38
that's taking place to be so much more effective at what
22:41
they're doing. Because they're not just, I
22:45
don't know, they're not just sort of following the client and
22:47
what the client thinks that they need done.
22:50
They're they're kind of going in there with, with a game plan
22:54
that that you guys have used and refined over the years.
22:57
Is that a more accurate way to think about it?
23:00
For the outsourcing piece of our business, yes, that's exactly
23:03
what we do For the staff augmentation piece, we're really
23:07
providing talent to those clients and then they're
23:10
supervising those folks directly.
23:12
So those technologies and those processes in that case we don't
23:16
implement for those clients. But we've had plenty of clients
23:20
who started out doing staff augmentation and then they've
23:23
said hey, you know what can you help us with this or help us
23:26
with that? So, you know, that's, that's
23:29
ended up, you know, going that way as well.
23:31
It really just depends on what the client wants and what their
23:34
needs are. Is it possible to paint a
23:37
clearer picture on what the the elevated service is, where they
23:41
get the processes, where they get the technology kind of help
23:45
the the layman sort of appreciate more what it is that
23:48
you guys are delivering? Sure.
23:51
I mean, I'll give an example of, let's say the accounts payable
23:54
process, right? Every company pays bills, right?
24:00
So that is actually one of the most complex, if not the most
24:05
complex process in the back office.
24:09
Why? Because every bill that comes
24:12
in, it has to be coded. Somebody has to approve it, or
24:16
it has to be matched to a purchase order and a receipt in
24:20
their accounting system. And inevitably when it doesn't
24:23
match, there's a lot of exceptions.
24:27
About 30% of all the invoices that come in don't match the PO
24:31
and the receipt. And those exceptions have to be
24:33
dealt with one way or the other. And so because of that, there's
24:38
a huge amount of complexity and and cost associated with
24:43
managing accounts payable for companies.
24:46
The larger they are, generally speaking, the more invoices they
24:50
have and the more complex it is. And So what we do when we come
24:56
in is we look at their existing process, we assess it, we do a
25:01
gap analysis between what they're doing and our best
25:04
practice processes which are enabled by technology that we
25:10
have. And we tell the client, OK,
25:12
you're doing this. We typically do this.
25:16
Here are the things that we think you should start doing to
25:21
improve your processes in terms of efficiency management
25:25
controls, internal controls, you know, saving people time and so
25:31
on. And we talked to clients about
25:33
that. That's, that's a free assessment
25:35
that we do. And then once they say yes, then
25:39
we implement them in our environment and we're able to,
25:45
as I said, take a, a best practice way of doing things and
25:50
using our technology, which is layered on top of that.
25:53
And our teams which are offshore, which obviously
25:56
there's some labor arbitrage that's there.
25:59
But actually most of the savings company get and most of the
26:02
benefits they get are really coming because there's a better
26:06
process and there's better technology.
26:08
And they didn't have to spend their time sort of figuring all
26:11
this stuff out because we've already figured it out for them
26:14
and we've got it working at scale.
26:17
So that's essentially a good example of, you know, a process
26:22
that frankly, you know, my feeling is nobody should try and
26:26
do this themselves. Why bother?
26:29
It doesn't make a lot of sense to reinvent the wheel and figure
26:32
all this stuff out when somebody's already figured it
26:34
out and they're doing it at a fraction of the cost that, you
26:39
know, that a company, you know, is typically spending on it.
26:42
And like I said, most companies save 50% on average and some
26:46
have saved a lot more. So why, why do it right?
26:50
It just, it just doesn't make a lot of sense.
26:52
Hire the experts who have already figured it out.
26:54
They've got the software, they've got the processes.
26:57
You you've done it for years for, I don't know, dozens or
27:01
hundreds of clients perhaps. Yeah, hundreds.
27:05
You know, it's sort of like would you build your own phone
27:08
system in house? No.
27:12
Would you build your own Zoom technology to have webinars and
27:17
and meetings? No.
27:18
You know, why is this any different?
27:20
It's really no different. It's a great comparison.
27:23
You know. Now when when companies engage
27:27
with you to do that, do they have to replace their tech stack
27:30
with yours, or can you layer on top of what they're already
27:33
using and integrate with that? Yeah, we're completely system
27:37
agnostic. So our technology and our
27:39
process layers on top of whatever they already have.
27:43
So we've got clients that are on SAP and Oracle to QuickBooks and
27:48
everything in between. So it doesn't really matter.
27:51
You know what they have? We've designed it to work
27:54
seamlessly with them. How do you find and train your
27:57
team members? So that's really important in
28:02
what we do. So part of what we do that makes
28:06
us successful is we have very deep documentation on our
28:11
processes and they're driven by what we call business rules.
28:16
So if you think about somebody performing one of these
28:19
activities, in their mind they are executing a set of business
28:24
rules. So they're saying, and to use an
28:27
AP example again, which is a very common example.
28:31
Oh, it's this vendor. So I need to code an invoice
28:34
this way, or I need to make sure that this person approves it, or
28:40
I need to format the invoice number in a certain way in the
28:43
system. So when the vendor gets it, they
28:46
can apply the cash properly and I won't have a problem.
28:50
They won't cut me off because they goofed up something on
28:52
their end. So they're all of these rules
28:55
that people have. When we start with a client and
28:59
we put a rule book together, it's often in excess of 1000
29:03
pages. We go very deep into those rules
29:08
because a lot of them are automated within our technology.
29:11
And so we have to know exactly all of those specific rules.
29:16
Now a lot of them are common across clients, but a lot of
29:19
them are specific to clients. So for example, every client
29:23
codes their invoices in a different way.
29:25
And so we have to make sure that we are accommodating all of our
29:29
clients specific needs. Usually in the US if I go and I
29:35
meet somebody who's doing that, they, they basically have a
29:38
bunch of stickies on their monitor and that's their rules
29:41
and the rest of it's kind of in their head, right.
29:44
So we go way, way, way deeper in terms of codifying these things
29:50
because A, we're automating a lot of it and B, we want to make
29:53
sure that we're doing it right. And so when we do that, then
29:57
that leads into making sure we've got people.
30:01
So we're recruiting people who can follow those processes to
30:05
the letter and not waver. We don't want people taking
30:10
shortcuts or saying, oh, I can do it this way.
30:13
I can do it that way. There are folks that need to
30:15
follow the process and make sure that our quality is, is about as
30:20
perfect as it can possibly be. So recruiting is a very, very
30:24
important part of what we do. And fortunately, because we are
30:29
offshore, because we have offices in Chennai, India and
30:32
Manila in the Philippines, we're able to find some absolutely
30:36
fantastic talent that's there. You just can't find a lot of
30:41
good people to do that kind of stuff in the US anymore.
30:44
They don't exist. And so that really gives us a
30:48
leg up versus, you know, anybody trying to do it internally.
30:52
You know, for my own businesses in the past been big on
30:55
developing SOP, standard operating procedures.
30:58
And you know, I've often coached my team, hey, if you get to a
31:03
point in that SOP and you've got a question, that's great, ask
31:07
the question, but it's a sign that you know that SOP is not
31:10
complete, you know, and it can be refined.
31:13
And so once you get the answer to that question, add on to the
31:15
SOP. Some people take to that process
31:18
very naturally, they're very appreciative of it.
31:20
They like having sort of this, this rule based structure in
31:23
place. But there were some folks that,
31:26
man, it was like, I don't know, pulling teeth to try to get them
31:29
to adhere to that process of using our processes.
31:35
I'm wondering how you deal with that.
31:37
It sounds like at least part of it is because some of these SO
31:41
PS are encoded in the software. So the software's doing it.
31:44
You're not relying on a person. But certainly there are times
31:47
when you've got to make sure that the person's doing, you
31:49
know their step the way they're supposed to do it.
31:52
Yeah, exactly. That's definitely part of it.
31:55
But I would say also the fact that we're, most of our folks
31:58
are overseas, those folks in those countries tend to prefer
32:05
to follow an SOP versus winging it.
32:09
And you know, I would say generally speaking, a lot of us
32:12
as Americans, you know, and I'm, I'm a good example, right?
32:16
I never read an instruction manual, right?
32:19
I just go and I do something and I just figure it out and I wing
32:23
it, right? And a lot of people are like
32:27
that here, right? And we don't want that
32:30
structure. We don't like that.
32:32
But overseas people love that structure.
32:35
It's a cultural difference. It's a cultural thing.
32:38
Exactly. And so because of that, we're
32:41
able to execute at a much higher level of quality.
32:44
You know, we have, we have 99.97% quality in what we do.
32:49
And if you take an AP department as an example in the US, it's
32:54
about 98%. So you've got 2% errors.
32:58
Well, 2% errors doesn't sound like a lot, but if you get the
33:01
amount wrong on a check that's going to a vendor, that could
33:05
cost you a lot of money, right? And so those errors add up and
33:12
they become big problems potentially for companies.
33:16
And so having that kind of quality, you know, for our
33:18
clients really helps them, you know, get better control on
33:22
what's going on and, and just an overall better outcome.
33:25
You mentioned your quality is 99.97%.
33:28
How? How is that measured?
33:30
What does that actually mean? That's the number of errors
33:34
divided by the number of transactions processed.
33:38
So if you look at it another way, which is in terms of all of
33:43
the opportunities for error, so let's say to use an accounts
33:47
payable example again, if you've got an invoice, there's a lot of
33:52
fields that need to get into an accounting system.
33:55
There's a lot of characters associated with that.
33:58
Every character is an opportunity for an error.
34:01
So if you divided it by the total number of characters where
34:06
you could make an error, either somebody entering or processing
34:10
something and following a rule, we're probably more like 6 Sigma
34:16
quality, which is, you know, kind of Nirvana for a
34:19
manufacturing environment. And we do try and manage our our
34:24
business like we're a manufacturer, we're very focused
34:27
on quality controls, metrics, things like that.
34:33
When we go into a client and we ask them for some of the
34:35
metrics, invariably they don't have it.
34:38
And in fact, often they don't even know, you know, their
34:43
volume of things that they're processing.
34:45
So we're able to really, you know, give them some metrics
34:50
that they just didn't have before and help them really
34:53
understand what's going on with their processes.
34:57
I'm looking at your website here, which the name is exactly
35:01
what it should be, iqbackoffice.com and I'm seeing
35:05
a stat on here that's almost unbelievable, $6 billion in
35:10
duplicate transactions caught. That's old.
35:15
Actually, it's gone up to 13 billion.
35:17
We haven't had a chance to update it on the site.
35:22
But yeah, I mean, one of the interesting things is there is a
35:26
huge amount of duplication of transactions that occur with
35:31
back office processes. And it used to be, again, to use
35:35
an AP example, because everybody's familiar with that.
35:39
It used to be in the old days that, you know, if I was going
35:42
to send you a bill, I'd print it, I'd stick in an envelope,
35:45
slap on a stamp and send it, right.
35:48
And so when that happened, you know, I was very judicious to
35:53
make sure that I didn't send that same bill, you know, too
35:56
often, right? Well, Fast forward to today.
36:00
The amount of mail we get has dwindled.
36:02
Most things come in via e-mail or some sort of electronic file.
36:07
And what we find is the number of duplicate transactions
36:11
companies are sending to one another has skyrocketed.
36:14
And it's not uncommon. We find either 15% or sometimes
36:19
even 20% of all transactions are duplicated.
36:24
Because my cost of sending you the same thing multiple times is
36:28
effectively 0, right? It comes out of my system, so I
36:32
don't care, right? But you care because you have to
36:37
look at each one and figure out is this a new thing?
36:40
Is it a duplicate thing? If it's a duplicate thing, you
36:43
have to cancel it, right? So all of that noise has really
36:49
created a lot more opportunity for companies to pay things
36:53
twice, to make errors, things like that.
36:57
So we've invested a lot of money and controls to make sure that
37:00
we catch those things at the source.
37:02
And, and these days with our software, most things come in,
37:07
it's read by a computer, read by an algorithm.
37:10
The algorithm looks at it and if it sees it's a duplicate, it
37:14
cancels it and it goes. There was no further in the
37:16
process and we didn't even have to touch it in most cases.
37:20
So that's just some of the things that we try to do to make
37:23
us sufficient and to make sure that, you know, we're not
37:27
processing the same thing multiple times for our client.
37:30
What you're describing, David, sounds pretty incredible as I'm
37:34
sort of thinking through the logistics of how the interaction
37:37
between clients here in the States and, you know, the, your
37:42
overseas team might work. One thing that I don't know,
37:46
concerns me a little bit is the time difference, like how do you
37:49
account for that? Are they working, you know, when
37:52
I'm sleeping or how does that work out?
37:56
So it depends on, you know, what the client needs and what they
37:59
want. For the most part, a lot of our
38:02
folks will work US hours and but there's also a lot that we have
38:08
either on multiple shifts or they work during daytime hours
38:13
offshore. So there is some value in I come
38:16
to work in the morning and all the stuff got processed the
38:20
night before, right? That's sort of one advantage.
38:23
But there's also an advantage to have people, you know, doing
38:26
stuff real time and dealing with issues.
38:28
Certainly when we take phone calls or or answer emails from
38:32
our clients, vendors and customers and other parties, you
38:36
know we're going to work US hours.
38:39
But again, it really just depends on the client's needs.
38:42
We're we're a 24 by 7 shop for the most part, so things are
38:45
getting processed all the time. OK.
38:47
So you've got flexibility. You can meet the client where
38:50
they need to be, whether they need somebody that's working
38:52
their hours so they have that sort of real time dialogue back
38:56
and forth, or somebody who's like, hey, I don't need that.
38:59
I would love to wake up in the morning and have, you know, what
39:01
I sent in the night before. Just be, you know, sitting there
39:03
ready and waiting for me. Yeah, that's right.
39:06
And, and in our staff augmentation division, usually
39:09
the folks there will work for the client during US hours,
39:13
whether they're East Coast, West Coast, whatever, it's totally up
39:16
to the client as to, you know, what hours they want them to
39:19
work. And on the outsourcing side, the
39:22
Internet connection's good. So we can have a a quality Zoom
39:25
call or, you know, upload large files back and forth.
39:28
There's no no issue with the tech stack there.
39:31
No. In fact, especially these days,
39:34
everything is in the cloud and so our folks will access our
39:38
clients software directly. We use Google Drive for a lot of
39:45
things. All of our our phone system and
39:50
all of our video calls are on a a cloud based system.
39:55
So really everything's in the cloud and everything's secure.
39:59
All of the data that our clients have is domestic, so none of it
40:03
is like going overseas, so to speak.
40:06
It's all remains here and people are just accessing it remotely.
40:10
And so. Secure is fine.
40:12
Secure folders. Everything's locked down.
40:14
Clients don't need to worry about what's going on with their
40:17
data. Yeah, yeah, everything's, you
40:19
know, locked down secure VPNs if, if they need it.
40:25
So, you know, we have a lot of large public companies as
40:27
clients. So you can imagine the security
40:31
that they have that we have to meet and we have to support, you
40:35
know, we do that everyday. So as I think about growth for a
40:40
company like yours, David, I imagine of course you're trying
40:44
to find new customers that are good fit for the services that
40:47
you offer. Do you also think about trying
40:50
to expand the types of services that you can provide, or do you
40:55
feel like you've got a pretty good suite of things to provide
40:58
to clients as it is now? I think there's really two
41:02
things. So we are trying to grow in
41:04
multiple ways. So one is if you look at the
41:08
outsourcing business in and of itself still today, you know the
41:13
vast majority of companies do these things internally.
41:16
So that opportunity for us is still enormous.
41:21
And most companies are still reinventing the wheel, trying to
41:24
figure that stuff out themselves and spending too much time and
41:27
money doing it so that that opportunity is still there.
41:31
At the same time, there are other areas that we've expanded
41:35
into. So for some clients, we manage
41:38
all the orders from their customers.
41:40
We've set up HR call Centers for clients.
41:45
We have gone into other industries where we do a lot of
41:49
work within those industries, very specialized processes that
41:53
we've set up for them. One of our clients we were doing
41:56
some billing work for and they came to us and said, you know,
42:00
we have all these people sitting here in our office and you guys
42:05
have done such a really good job on the billing side with all the
42:09
the process thought and the process re engineering and the
42:12
quality and the controls that you've put in place.
42:15
We'd like you to do the same thing with this other process.
42:19
And so we took that on for that client and we've been doing it
42:22
now for years. We've got about 50 people
42:26
sitting in our Manila office handling that process for that
42:29
client and it's worked out really well.
42:31
So we've opportunistically looked at expanding into other
42:36
non accounting and finance areas typically which are back office
42:40
related areas. But then in terms of our staff
42:43
augmentation division that's really grown very quickly.
42:49
That's actually one of the fastest growing parts of our
42:51
business right now and clients are asking our folks to do
42:55
everything from our core accounting related stuff to
43:01
admins and marketing people and IT developers and call center
43:09
people and you name it. So we've been expanding into all
43:12
sorts of areas that clients are trying to find some good talent.
43:16
And so like the one client that you mentioned that first came to
43:19
you with something that was kind of outside the accounting and
43:22
finance realm. Once you guys took that on and
43:25
whatever that function that service was that you were, you
43:29
know, helping them to build a new outsource process for, did
43:32
you then say, hey, we now know how to do X?
43:35
Let's put that into our quiver and you know, go out and mass
43:40
market that to all of our existing customers.
43:44
In general, yes, we do that. In that particular case, it was
43:48
actually a very specialized thing for them and for their
43:52
industry. They have a very unique solution
43:56
in their industry and so we built a specific process for
44:00
them. But in general, yes, if you take
44:03
order management, which means taking in orders from customers
44:07
and processing them, you know, that is something that we had
44:10
one client asked us to start to do and then we started letting
44:14
our other clients know about it because that's another area
44:18
that's kind of untapped that a lot of clients are struggling to
44:21
find good people to do that work as well.
44:23
And again, it's also complex and there's a lot of opportunity for
44:27
improvement. What have you found has been the
44:30
most effective way to get in front of your target clients and
44:34
be able to explain to them what it is that you're doing and why
44:37
it's better than the way that they're doing now?
44:40
So we have a number of different avenues that we use to try and
44:43
find new clients. Our biggest source of new
44:45
clients is actually referral. So as I mentioned earlier, ACFO
44:51
at a client will leave, they'll go to another company and
44:55
invariably we're one of the first phone calls they make
44:58
because they'll go in and they'll say, you know what, this
45:02
is all a mess, right? You know, everything was working
45:04
well with you guys, everything was stable.
45:07
I need help to get this all cleaned up and, you know, to get
45:10
it operating as optimally as possible.
45:15
And I'd like to save some money too, by the way.
45:18
So that's the biggest source of our new business.
45:21
But we also have clients that we meet at trade shows, web ads,
45:27
you know, different things like that.
45:29
So we actually have some new marketing initiatives we're
45:32
undertaking right now, but you know, for the most part, you
45:36
know, you don't know who is interested in our kinds of
45:39
services. So marketing is a little bit
45:42
difficult. So traditionally word of mouth
45:44
and things like that have been the way that we've grown the
45:47
business over time. We're trying to, you know, get
45:51
away from that so we can grow even faster.
45:55
I mean, it says a lot about the quality of your work if the
45:58
majority of your business, new business at this point is coming
46:01
from referrals. But I also, I hear what you're
46:04
saying about the marketing is a little bit difficult because so
46:09
many different types of businesses are your potential
46:12
clients. In fact, people you know who
46:15
don't understand marketing haven't been through it before.
46:17
You know, sometimes that specificity really helps.
46:20
You know what you know exactly what trade show you should be
46:23
and you know what trade journal you should be advertising and
46:26
you know who you should be targeting with your advertising.
46:29
But the services that you provide are helpful and useful
46:32
for just about everybody. So you've kind of taken a
46:35
shotgun to a wall. Yeah, exactly.
46:38
And you know, I went to Business School and when I learned in
46:40
Business School was if you're doing marketing, you want to
46:43
take a rifle and shoot at something and hit it, right.
46:48
You don't want to take a shotgun and hope you hit something,
46:51
right. So it makes it difficult for us.
46:54
And as well, you know, there still are plenty of companies
46:56
that don't want to outsource. They feel like they have to keep
47:00
that internally for various reasons and that's fine.
47:03
So they can use our staff augmentation division because as
47:07
I said, increasingly they're under tremendous pressure
47:11
because they just can't find the talent to do that work.
47:14
So whichever whichever way they want to do it, you know we're
47:17
fine to support them and and help them achieve their goals.
47:22
We're not quite at the end of the interview, but I did promise
47:24
folks if they stayed towards the end that they would be able to
47:27
find out about the free process benchmarking that you offer.
47:31
Can you explain first what that is and then how folks can take
47:35
advantage of it? Sure.
47:38
So as I mentioned earlier, you know when we start working with
47:42
a client, we try to get an understanding of their existing
47:45
processes. So as part of our solution, and
47:52
this is true of any client, we will come in and we will look at
47:55
one or more processes that you have and give you a free
47:59
assessment. And So what we do is we try and
48:03
put some metrics around it. You know, what's the volume,
48:06
what's the cost, how long does it take, timeliness, what's the
48:10
quality of it, what's the impact on other areas of the business.
48:15
And so to use an accounts payable example, again, we can
48:19
come in and we can look and we'll say, OK, you know, your
48:23
cost per invoice is X, you're spending, you know, 2X or three
48:29
times what you should be spending.
48:32
And by the way, here, all the issues that we're seeing, you
48:36
know, things aren't getting approved properly, things are
48:38
taking too long, vendors are mad at you, you know, all of the
48:43
other things that we see that are potential problems.
48:47
So we do that. Obviously that helps us with a
48:50
client because they'll look and say, OK, well maybe we should
48:54
use IQ to do this stuff. That's possible.
48:58
But that's really the first part of our process and we're happy
49:02
to do that. It only takes a few hours of our
49:05
clients time to give us the information that we need and you
49:10
know, we can do an assessment, you know, pretty quickly.
49:13
And so how would somebody raise their hand and say, yes, please?
49:18
They can just go to our website, iqbackoffice.com and there is a
49:22
form that generally pops up or you can do contact us and just
49:28
let us know and we'll get in touch with you right away and
49:32
and see if we can put an assessment together for you.
49:35
So I've just got one more question for you, David.
49:37
But before I ask it, I want to do 2 things.
49:39
Actually, one of those things you just did, let people know
49:41
the best way to get in touch with you.
49:43
Is that how you would prefer people to reach out?
49:47
Yeah, going to our website is the best thing.
49:49
We've got forms you can fill out.
49:52
We've got a contact us page. So all of those are great ways
49:56
to get in touch with us. OK.
49:58
Also for those listening, if you enjoyed today's content, please
50:01
hit the like, share or subscribe button in your favorite podcast
50:04
app. And David, last question I have
50:06
for you today. I'd like to hear about maybe a
50:08
particular challenge that you've gone through, personal,
50:12
professional combination of the two, what you learn coming
50:15
through the other side of something like that.
50:18
So I alluded to this at the beginning, which was that, you
50:21
know, when we started the business, it was it was
50:25
difficult, right? We were pushing a rock uphill.
50:28
But at the time, back in 2002, the idea of outsourcing, the
50:33
idea of having work done overseas was still a very
50:37
foreign, you know, no pun intended concept, you know, for
50:40
companies. And so it was really hard to get
50:44
new clients at the beginning. And we did grow, you know,
50:47
fairly quickly, but we still had a lot of struggles.
50:50
I would say, you know, probably 80 to 90% of the companies we
50:55
talked to, you know, just the whole idea was very foreign to
50:59
them. They didn't know what to make of
51:00
it. They didn't think it applied to
51:02
them. And so that was really difficult
51:06
at the beginning. And there are many times when I
51:08
said, you know what, I'm not sure this is working, you know,
51:12
should I continue with this? But I persevered.
51:16
And I think for any entrepreneur, if you think
51:20
you've got a great idea and you think it's something that adds a
51:23
lot of value, as you know, we think what we do does
51:27
persevering is very important, not just giving up.
51:32
And a lot of people talk about entrepreneurs pivoting, which is
51:36
fine. That's changing your solution to
51:39
better fit the market. But from the get go, our
51:43
solution was a really good one for the market.
51:45
But there was a lot of education that needed to be done and that
51:49
took time and it took effort. And you know, as I said,
51:53
eventually we persevered and did well, but it was a struggle at
51:59
the beginning. Absolutely.
52:00
For Yeah, I have to imagine, David, that would be even more
52:03
difficult for Someone Like You who had just come from such a
52:06
successful venture that grew so quickly and reach just
52:11
incredible heights, you know, super successful IPO, about as
52:15
good as it gets. And now you start this new idea
52:18
and you're all excited about it. You you've connected the dots.
52:21
You, you see that there's there's a need for this, but
52:24
clients keep telling you over and over again, I don't get it,
52:28
not for me. And so, I mean, it's one thing
52:31
to kind of look in the rearview Mirror Now and be like, yeah,
52:34
like it. It's good that we persevered.
52:35
I'm glad we stuck with it. Like clearly people are are more
52:38
informed about it now and, and the rocks rolling down the hill.
52:43
But in that moment, you know when you're knocking on all
52:46
these doors and they keep getting shut, you know, what is
52:49
it inside of you that drives you to keep moving forward?
52:54
Well, what drove me was the fact that I knew the numbers.
52:58
I knew that we can do these things better and we can do it
53:03
at a lower cost and we have very happy clients.
53:08
So that told me that, you know, the market is there and the
53:12
opportunity is there. And as long as we have a lot of
53:16
clients who are very happy with our services and we've got some
53:19
clients that have been with us for over 15 years.
53:23
So those clients, you know, keep telling me, hey, you guys are
53:27
doing a great job. We're very happy with you.
53:30
And so we've got, you know, one client like that.
53:32
We know there are hundreds of thousands of other ones that are
53:35
out there that can also benefit from it.
53:38
And so that's what kept me going.
53:41
David, I want to be the first to thank you for sharing both your
53:44
time and your story with us today.
53:46
I'm grateful for it. Thank you.
53:49
I appreciate the time. Thank you very much.
53:51
Folks, that's a wrap on another episode of the Inspired Stories
53:54
podcast. Thanks for learning with us
53:56
today.