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Big Accounting Firms Are Doomed · The Accounting Podcast

• [00:00:00] Thank you to our sponsor, ONCE Accounting. David: I suspect that you may be listening to this episode while working extra hours preparing tax returns, or you're listening on a Saturday while driving into the office to go work on more tax returns, or you may be listening to this episode well after the tax season because you and your team were swamped by the volume of work you had this busy season. There is a better way. Stay tuned to hear more from our sponsor, ONCE Accounting later in the episode. [00:00:27] Preview. David: Well, it's just, I think in general, and this is a problem, big companies have... It's just people tend to optimize for themself and the job they're doing Instead of optimizing for the customer experience. Blake: And this is why everybody's getting it wrong when it comes to technology and accounting, or most firms, I'm going to say everyone, but a lot, they're focusing on efficiency. Like let's do the work faster. Let's do the work faster and faster and faster, and we can be more profitable. And it's because they're thinking about hours and time. The way that you become more profitable is by raising your prices. And the way you can raise your prices is by delivering an amazing client experience. If you can raise your prices like double, you don't need to be efficient, you can be completely inefficient. David Leary: Coming to you weekly from the OnPay recording studio, this is The Cloud Accounting Podcast. [00:01:14] Welcome back. Blake: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David: And I'm David Leary Blake: David, you sound a little bit congested today. David: I'm not congested. I think the air is just dry. Let me get hot water here. Blake: Well, it's the first thing we do on Saturday mornings, actually Sunday, today. My son had his seventh birthday party yesterday. David: Congratulations. Blake: Thank you. Thank you. I guess I'm congratulated for keeping him alive for seven years. And it is no small feat. The thing I was really impressed with was back in January when his birthday party was supposed to happen, we asked him if he would delay it for two months because of COVID. And he's seven years old. That's a really hard thing to ask you to delay your seventh birthday party. And he was cool with it. He was great. He understood. Kids understand. They did the pandemic better than the adults. So, I was a proud dad because of that. So now I finally got to have it, and it was a blast. David: That's a good issue at birthday parties. There's fun stuff. You can still participate. One-year-old, two-year-old birthday parties are painful, man. Those are the worst. Blake: Yeah, no, this was great. The kids go off, they play, they're crazy. They come back. You don't really worry about them too much. It was good. Parents could relax a little bit. [00:02:33] David was solicited to have someone take his Xero and QBO certification tests for him. David: So, I had a kind of interesting thing happen this week. Blake: What's that? David: So, March 2nd at like 12:41 AM. I don't know if Facebook Messenger is really accurate on this. It's in the middle of the night. I got a message from Saba Tanveer, T-A-N-V-E-E-R. "I can help you in QuickBooks Online ProAdvisor Advanced and Xero ProAdvisor certifications. And so, the next morning I found this message on my phone, I said, "How?" And he's like, "Do you looking for QuickBooks Xero certification?" I said, "I probably need to get both soon." Essentially. I have a whole thread and I pitched it on Instagram and Twitter. But basically, somebody solicited me to take my QuickBooks and Xero certification tests Blake: For you on your behalf, as in for you. David: On my behalf. And the thread gets pretty funny because I kind of wondering like, do you have reviews? How do I know you'll pass? Do you have any guarantees? And then he sends me a contract for Upwork, but then he goes on to send proof of certification. But then he sends pictures and images of 1, 2, 3, 3 times 5, 15, 20, 25- Blake: Other people? David: ... images of other peoples- Blake: Who paid him? David: ... who paid him to get their certifications. Blake: Oh, wow. So, you know who's cheating on the test. David: Well, he blacked out the names, but I actually asked him before he sent that. I was like, "Hey, have you done this for any people?" I might know anybody famous. And then I go on to ask him if he could... Because he basically needs my QuickBooks Online Advanced username and login to get it. Well, first I said, when I noticed he blacked out the clients' names, I said, "Hey, I can't see the clients' names." He said he hit them intentionally. And I said, "Would you hide mine too?" And he says, "Yes, privacy of clients." And I said, "Oh, good idea, privacy and integrity." So, then he goes on, and I asked him about, "How do you not access my client's data? How do I know you're not going to do that?" And he said he's professional and mature. I think he's pushing me. So, I gave him an email address to send me his contract. And then I said, "Ah, can you take my CPA exam too?" And he said he might have to recall his studies. And then I kind of played like I wasn't interested, "Hey, my lawyer needs to review all contracts I sign," blah, blah, blah. And then I made the comments that like, "She's probably going to not want me to pay for something until I get the product." And he's like, "Don't worry, the money goes into escrow. And then when you get the certificates at that time, that's when the money changes hands," blah, blah, blah. And then I said that it might compromise my ethics because of my CPA. Mind you, I'm not a CPA, I'm just playing along here. And he said, "I'm just getting help, not deceiving anyone." And I said, "Like a tutor." And then he responded with, "As you wish." And then I just ever replied from that point forward, I just used quotes from The Princess Bride. Blake: David, clearly, you got too much time on your hands, I enjoy that. That's great. David: Well, the ironic thing was, is just the amount of integrity he says he has like, which is professional, his integrity, but you were doing something that's completely zero integrity. This is bananas to me. Blake: Well, honor among thieves. David: So then now he wound up calling me the next day. He tried not to pressure. Actually, somebody on Twitter said I should just sign the contract, pay a hundred bucks and see what happens. Blake: You should. That could be a business expense of this podcast. It's investigative journalism, David. I'm curious, you should ask him- David: A whole new QBO way account. Blake: Ask him how many QuickBooks Advisors or ProAdvisors he's helped cheat through their exams. I would love to know that. And you know what? You might want to suggest to him another business opportunity, which is helping the Big Four cheat on their internal training courses and ethics exams. We've been talking about this. David: There's probably a lot more money in that than taking this test for 50 bucks. Blake: Do you remember which one it was last time we were talking about? David: It was the Canadians, the Canadian one last week. Blake: Was it KPMG Canada? Because I saw a new article on Going Concern about how PWC Canada has gotten busted by the regulators for cheating on internal training courses. Is this the same one or a different one? I feel like it's a different one. David: Let me go to last week's articles here. Episode 268. Yeah, because I was basically griping about the little bit of a fine. 1200 employees cheated, and they only got a tiny penalty. So, this was PWC, Canada. Blake: Okay. It was the same one. David: Same one. Okay. Blake: Yeah, they were fined a million dollars, essentially, for cheating by 1200 PWCers on these exams. So, they're just passing around the answers to all these federal training courses that they're required to take. Stuff about like professional independence, auditing ethics, they were fined a million dollars, and the revenue for PWC Canada is something like a billion dollars. So, it's completely inconsequential for them. But that would be a better business. I think he could make more. David: Offering that service to the big firms. Blake: Yeah. Yeah, exactly. And one of the reasons that cheating is rampant as cited in this article from anonymous sources inside the Big Four is that they're overworked. They don't have the hours in the day to study for these exams, so they all pass around the exam answers because the firm doesn't give them time to do it. So ultimately, it's the firm's fault. I don't blame the individual employees, they're just inside a broken system and they're trying to make the best of it. Same thing with the timesheets. The people who fudge their timesheets, lie on their timesheets, distort their timesheets, whatever you want to call it, they're just trying to get by. David: It's just survival. Blake: It's survival. Because if you put exactly what happened down, you're going to get your wrist slapped or worse, or you're going to get a bad performance review, as one of our listeners said. [00:08:23] Blake got a call from a friend at a big firm. Blake: So, I've got a story for you, David. I got a call from a friend of mine. David: In the accounting industry, or is this just like, "Hey, Blake, you need to-" Blake: No, no. A friend of mine in the accounting profession, she is a tax senior at a big firm. And she just called me because... First, I got a text. She said, "I just need to talk to somebody." And so, I gave her a call. She's in tax. She's at a big firm. She's doing the job of a manager, even though she's a senior because there aren't enough managers. Staff are quitting left and right. She doesn't have enough people to push work down to. So, she's doing a ton of work. It was Friday when we spoke. She'd already done more than a full week of work and was now going to be working Saturday and was dreading that. And saw no hope because all of the people that the firm has brought in are super green and can't even do a 1040. They have like no idea what to do, and she's supposed to train them in addition to doing all her work. She's going to get out of there. Just a matter of time. And it's just an anecdote, but it's something that I've been hearing in the data. It's what we've been seeing in the data, and this is a real person telling me the story. I think it's real, these firms are falling apart. And this is a good firm, a really well-known one, a big one. So, I think this is a business model problem. The big firm, big accounting firms in general. And I'm not talking about small practices with a few partners or even like a few dozen employees. David: These are giant corporations. They are gigantic corporations. [00:09:59] The business model at a big firm. Blake: Yeah. The thousand people or more, a lot of these places. David: Tens of thousands. Blake: Hundreds of millions of dollars in revenue, maybe billions. These are big partnerships. And they only work as long as you have fresh bodies in the door every year to take the place of the people who leave. And you work them really hard for a few years, you're leveraging their labor, and you're still thinking about this on an hourly basis, billing them out to clients. And the way you make money as a partner is you survive 20 years or whatever it takes to get to the top, and then you get to extract the value of all the labor down below you in the pyramid until you retire. And then when you retire, you get to cash out. And during that time, you make a lot of money. Partners at big firms make half a million dollars or more. David: If you get to a finish line. Blake: Yeah. If you make it there. Because the whole way it works is you got to suck people into the dream of getting there. So, you get all the- David: It's like crypto. Blake: Well, and I've heard it described as a Ponzi scheme. And I wouldn't say that it technically is such a thing, but it does involve promising people future returns that they're definitely not going to see because the business model only allows one out of a hundred people to become a partner. But you also sell people on the idea of you're going to learn a lot and that's going to improve your career and all that. And I understand that. I can see why you would make that deal. You go say, "I'm going to go work for Deloitte, and I'm going to bust my butt when I'm in my 20s so that I can have a nice salary, good job when I'm in my 30s," kind of idea. That's a reasonable trade-off. But the thing is that's kind of falling apart because the firms don't have the resources to train you anymore, to teach you, and you're kind of on your own, who is going to buy into these firms, like who's going to become partner and buy out the partners that are there now. This is the other thing about traditional accounting firms that don't make sense in the partnership structures. Your capital, your equity, your ownership in the firm is locked up until you leave. And if you can't get more- David: You can only sell it to another accountant that's in the firm. There's no open market for this equity. Blake: No, generally no. So, you got to get people who are managers and directors to buy in to buy you out, and then you retire. So, if you can't recruit people to do that anymore, if they don't want to do that anymore, it doesn't work. You go upside down, you're basically like an underfunded pension. And I wonder how many firms are like that. How many firms are upside down and they're not going to be able to pay out the partners that are joining today when they retire? And this is all a failure to adapt to change because the model traps the partners too. I was thinking about this, like it's not really fair to bash the partners because they are just as trapped as you or me. Most of these partners don't actually have decision-making authority, they're really just highly compensated professionals. They have a job. And they get a share of the profits from their book of business, but they're trapped. They can't extract the value from the book of business until they retire, so they got to survive until then. So, they're just trying to get by until they retire, and they don't want to change anything because they don't know how and it's risky. [00:13:03] Is this model sustainable? Blake: So, the question is, how long can they keep going until it's not sustainable anymore? And I think we've already passed that point where it's not sustainable anymore, I suspect that. We don't know because none of these financials are public and whatnot, but I just feel like fewer and fewer people are buying into this traditional career pathway. David: Is that why like for a lot of people, the best way out is to merge a firm or have your firm get acquired because it may not really truly be an ongoing entity? Blake: Yeah. So, if you're a small firm and you don't have a succession plan in place, the only way out for you generally is merge up, merge into a bigger firm, they buy you out or they give you a package when you leave [crosstalk]- David: They, in theory, get labor because you have employees. Blake: You have employees. Yeah. But then again, fewer firms want to do that now. And there's these new firms that are using a corporate model, not a partner model, and they're more agile. And we see that with the pilots of the world, the benches. These accounting for startups- David: We've talked about this with the QuickBooks Live job postings. They're offering work-life balance from the number of hours. You're getting all your benefits, your health care, et cetera, et cetera, the Intuit package, which is amazing. And then on top of that, you're getting Intuit equity instantly. You don't have to work 20 years to become a partner to get equity and Intuit. You're getting Intuit stocked on day one. Blake: And like I've said, I- David: Or maybe not day one, but you know what I mean? [00:14:29] Why Blake chose to move to tech. Blake: I was a manager. I had partner track clearly that was open to me. It was ambiguous, but I knew that if I stayed long enough, I'd get there. But it didn't appeal to me compared to the offer from tech, which was come join us, we'll give you equity on day one and you'll start vesting it. And here's the upside. If we achieve our goals, you're going to be a millionaire for two to four years of work. What would you take if you're offered that? Oh, and they were giving me more compensation. So, I think the partnership model is what's holding us back in a lot of ways. And it's not like a problem in small firms. Partnerships are great when it's kind of family, when it's small, that makes sense. Partnerships are like the way a family operates. I mean, the word partnership, we call our spouse a partner, but I think when it gets big, when you have all these partners everywhere and you have to vote on everything and everybody has a say, it just bogs down, things can't change, they can't adapt. Because to adapt requires taking a cut. It requires taking a pay cut in the short term for a long-term gain. David: To be alive later on. Yeah. Blake: Yeah. But all of the incentives in a traditional firm are short-term, they're year to year. And no partner wants to cut their own compensation in order to invest in the firm broadly because they don't have a stake in that generally. They're like, "Why should I give up part of my paycheck to do this thing that's going to benefit the firm in 5 or 10 years when I'm gone?" David: I don't know why. I don't have an answer for this, people. [00:16:03] Thank you to our sponsor, A2X. David Leary: This episode of The Cloud Accounting Podcast is sponsored by A2X. Since 2014, A2X has helped thousands of online merchants and their advisors save ordinance amounts of time, reconciling the revenue for their online stores. A2X post tidy summaries of sales, returns, and fees from Shopify and Amazon directly into QuickBooks or Xero that exactly match the deposits that appear in the bank account, allowing you to accurately reconcile in just one click, giving you the confidence of knowing that your client's e-commerce financials are accurate. Cloud Accounting Podcast listener and e-commerce expert, Scott Scharf, said A2X is the gold standard e-commerce accounting. A2X has a partner program for accountants and bookkeepers that includes one-on-one onboarding, training for you and your team, and exclusive marketing opportunity. To learn more about using A2X and get 50% off your subscription for three months by using code CAP50, head over cloudaccountingpodcast.promo/a2x, that is cloudaccountingpodcast.promo/a2x. [00:17:06] Remote work changed things. Blake: I think another part of the problem is that we all went to remote work during the pandemic, pretty much in the accounting space. Especially the Big Four or the big firms had had to do this too even more. And in a remote work environment, you don't have the comradery that helps to mitigate some of the bullshit, the painful stuff. You can- David: Yeah, you're an island by yourself. And it's a struggle if you're not getting any of those other great benefits of actually being in an office, seeing coworkers, physically giving hugs. You know what I mean? You're not getting that. Blake: Yeah, yeah. So, I think the issue is that if your job isn't meaningful, if the work you're doing isn't that meaningful to you, then you can adjust for that, you can mitigate that as a company by having a good in-office culture. Because then people are like, I want to go to work to see my friends to hang out with people to have that culture, even though we're doing not the most interesting stuff, which, let's be honest, a lot of accounting is not that interesting. We have that culture. But when everyone goes remote, then you don't. So now the work- David: And then every job is the same. Like what's interesting for firm A and firm B, we're all on zoom or Microsoft Teams, and it's exact same identical job. [00:18:21] Can accounting jobs be more meaningful? Blake: Well, unless the work is more meaningful. That's why so many accountants are leaving big firms where the work doesn't feel meaningful because it honestly isn't very meaningful, and they're going to smaller firms, modern firms, where you get to work with small businesses and actually help them year-round instead of just doing audits and annual tax and all this stuff where you're not helping to grow the business. So, unless they can make the work more meaningful, they're screwed. And I don't think they can because if you look at accounting over the last 100 years, it hasn't adapted. So, look at audit, let's talk about audit for a second. What is the job of an auditor? The job of an auditor, big picture, is to protect the capital markets, it's to protect investors by making sure that businesses are reporting accurate results within a margin of error that we can trust the financials that we're seeing. David: And I would say my layman's definition of this before we started the podcast years ago, it's like they are the ones who... it's equalizer. It's hey, the financials from company A are accurate, there's no fraud, and now you can compare them with the financials of company B because those went through an audit process, some standard procedures, and you can compare these. You can compare apples to apples. Blake: You can compare them. Exactly. You can compare them. But there's two problems. One is that auditors have managed to reduce what they're actually responsible for through legal maneuvers to the point where they really aren't responsible for detecting fraud and they never do. I can't think of an example where an auditor actually found something and called attention to it and stopped a fraud. They're usually the last to figure it out. And- David: It's usually another second audit that somebody brought in because they thought something was fishy and that person discovers the fraud. So, auditors do find it. It's not the original firm brought in to do the audit. Blake: And you don't want to find the fraud as the auditor, because what happens if you take down the company, you lose the client. The incentives are not lined up for this. So, auditors aren't finding fraud. And then audit opinions, it's just a pass-fail in most cases. [00:20:27] Accounting standards haven't changed in 100 years. Blake: So, nobody reads the audits. And so, you're doing all these work papers to support an audit opinion that nobody's looking at. And then the other big problem is that accounting standards haven't changed in a hundred years, meaningfully. Like the current way that we learned accounting in school... It took me a long time to realize this. It took me working in technology companies to realize this. The way we learn accounting today still is completely wrong for most of the businesses that are generating the returns in the market, that are based on intangible assets, that are based on subscriptions. Our current accounting has no clue how to value intangible assets. And the economy has gone, from 1970 to 2020, something crazy. I don't have it in front of me, like 80, 90% of the market value of the S&P 500 is from intangible assets, not from tangible assets. But our accounting standards are still rooted in an industrial era where we made things with equipment, and we laid railroads down and our accounting was great for that. It helped power the industrial revenue. But- David: And investment decisions were made from these audited financials. Companies market themselves in the same way. People weren't buying the future dream of a company. Blake: Right. And now compare that with today where Baruch Lev, who seems to be like the only academic who's doing any research on this, who I learned about him through The Soul of Enterprise and Ron Baker and Ed Kless and their interviews with him. He's doing research into this, and he asked the question, "Well, accounting standards haven't changed. How useful are these financials that we're producing as accountants? And he found that only 4 to 6%, I think that's the number, 4 to 6% of investment decisions are made using financial statements. The rest is all non-financial stuff. Think about it, when was the last time you- David: I mean, Tesla Amazon? I mean, these companies basically have never had a profit. Blake: Right. Well, and they never had a GAAP. They didn't have a GAAP profit when they were growing because the accounting was wrong. The accounting didn't match the business model and right. David: But the stash grow because people are buying it based on all the other things, they can observe that have nothing to do with the financial. Blake: Yeah, customer satisfaction, sales orders, all this other stuff that is not tracked and reported in the financial statements, that's what investors actually care about. [00:22:52] Companies and investors don't care about the financial numbers like they used to. The metrics are changing. Blake: David, you like to listen to earnings calls most of the time. What are they? David: You really threw that on me. Ouch. Blake: Well, no, it's good. Because what are they asking about? When those financial analysts are on the earnings call, most of the discussion is around the non-financial metrics. David: It's customers, it's market fit. You're right. It's never specifically about a number like, hey, we noticed this ratio of this number is this, or that's increased. It's all about future forward-looking customer acquisition, that type of stuff. Yeah, you're right. Nobody cares about the numbers. We haven't really seen. Blake: Right. and I'm not saying that the financials- David: Everybody could just be a speck. Blake: Look, if you're manufacturing, if you're doing oil and gas, if you're doing one of these more traditional industries, that's great, the accounting is actually useful. But that's not where the growth in our economy has been. The big growth in our economy has been in software, subscriptions, intangible assets, social media, all this stuff that doesn't have a physical thing attached to it. Our accounting sucks at that. When I was at tech companies, we didn't even care. The accounting was an afterthought because GAAP accounting was useless for that. What you care about is stuff that... Here's one way we could make GAAP more useful. If you're a subscription business, your subscribers are actually an intangible asset. And one way to think about building up a subscription business is that you are creating an annuity. Every time you add a customer, that's an annuity, it pays you out monthly recurring revenue or annual recurring revenue. And so, the cost to create that annuity ought to be capitalized or at least disclosed in some way. What investors care about is recurring and non-recurring costs. And GAAP Doesn't address this at all. And Tien Tzuo, in his book Subscribed, actually has a subscription economy income statement that breaks this out. And this is how when you invest in a subscription business, you look at here's my recurring revenue, and here's the cost to support that recurring revenue. And then I have my non-recurring costs, which are designed to bring in new customers into my MRR machine. This is not complicated. It's something we could totally tackle as accountants. But instead of actually dealing with this issue, we're wasting our time on deciding whether or not we need to amortize goodwill or continue to write it down on a periodic basis. But meanwhile, the value of goodwill continues to expand. And Goodwill is just a plug for all the stuff that we don't know how to value. So, like 30% of balance sheets, 30% of balance sheets, and I don't remember this is S&P 500 or what, but it's just goodwill and goodwill is just what we can't value. It's like when a company buys another company and they pay more than the book value of the assets, or actually no, more than the market value of the assets as we can measure them, that's goodwill. And Ron Baker calls it the measure of our ignorance. Think about that. We, as accountants, are unable to explain 30% of the book value of public companies. That's terrible. That's unacceptable. I mean, we should figure that out. So anyway, getting back to this whole like Big Four big accounting firm, great resignation thing, if accounting can't do a good job of actually representing what is happening in the economy and helping give people information, your job is essentially meaningless. As an auditor, it doesn't matter because nobody cares about the financial statements anymore for these growing businesses. So, if you're not working in an office and you don't have a culture, it feels terrible. Why would you be there? Why would you do any of that stuff? And so, people are leaving and they're going to smaller firms where they can actually work with small business owners and make a deal and have human connection with their clients. That's my theory anyway. [00:26:39] People want a meaningful job. David: And people want more. Blake: Yeah. And it's not just some like squishy, snowflake, millennial thing. Everybody wants a job that is meaningful, don't they, that makes a difference in the world. That's what we would all like if we could have it. We want to make money too. Ideally, you do both. And now you can because there's such a talent shortage. So, it's great. I love this time for me professionally because can go start my own business and I know that if I fail, I can go get a job for like six figures as a controller anywhere. David: There's always going to be accounting jobs available. Blake: Oh, there'll always be. And you know what I could do, is I could do what that Wall Street Journal article was talking about and get two of them, and they wouldn't have any idea. David: I think I saw a separate Wall Street Journal article this week, just a headline that getting to jobs actually too much. You're better off just having one and doing nothing. That's the next model of that people are doing. So why quit? That's like a whole model itself. Blake: Just slack off. Yeah. I saw this story too. Where was that? It was good. David: Washington Post. It was one of them, the Atlantic. One of the big ones. Yeah. Blake: So yeah, unless you can make work more meaningful in a remote work environment, people aren't going to want to do the work because there's nothing else holding them to your company. So, you got to figure out how do you make the work more meaningful? I got one more and then I'll let you go, David, because this is connected. But the problem is that the big firms are completely clueless when it comes to this. And a great example is Grant Thornton. I was listening to the Accounting Today Podcast, and they had somebody from Grant Thornton on the show talking about this new, amazing employee benefit. You want to know what this amazing employee benefit is that it's going to help them retain talent? Can you take a guess? David: Whitespace time, the four hours every Friday to do whatever they want. Blake: Oh, that would be amazing. Wouldn't it? David: Free Earmark CPE subscriptions. Blake: Free Earmark... Well, so the first one I liked, but they would never do that because according to their timesheet-based cost accounting, they would be losing money if they gave people time off to do their own thing. No. it was this thing called lifestyle spending accounts. [00:28:45] Lifestyle spending accounts - what are they? Blake: So, what is the lifestyle spending account? You may ask yourself. David: And I'm trying to take some guesses here. I've had it Intuit, like a fitness spending account. You got like $600 a year to spend on gym membership, weights, whatever you needed to do to be in shape. And it makes sense as a business because it offsets healthcare costs for the company. So, a lifestyle spending. Is this where I get a little budget to spend on like cool shopping sites? I can get like a stitch fix and that type of stuff. Is that what it's for? Blake: So, it's basically what you said, but it's a little broader and lets you get stuff like pet insurance or, I don't know, even a vacation. It's like to improve your lifestyle. Think about this, think about how this idea is. Because if you pay me a salary, I get to decide what to do with my money. So, what is Grant Thornton doing? They're going to add money into people's lifestyle spending accounts. There's no tax benefit to this because it's not like an FSA or an HSA or something like that. It's taxable benefit. So instead of giving me like another thousand dollars a year, you're going to put a thousand dollars into an account for me, and I have to tell you what I'm spending on it. I have to give you receipts and then you reimburse me. This is worse than if you just paid me money. David: I guess I kind of see where you're coming from a little bit. But I can also give an example like Melio. They used to do in-house lunches. Then the pandemic came, and they basically gave every... Every employee gets a credit on Seamless, which is, I think, owned by GrubHub now or somebody. And so, every week, I can order a meal, have it delivered to my house. And yes, it's just income that's going to be on my W2. You're right. They could just give me the money. Blake: Why not just give you the money and let you get something to do with it? David: And your brain is like, "I'm getting free lunch this week." Blake: I know. We're accountants, David. We're smarter than that. David: Even still I get it, but there's something.... I give my wife my login on my Seamless and she orders something. And it just feels like you're getting something for free. It's a psychological benefit. And It's going to feel- Blake: It's not a real benefit. David: If I work for Grant Thornton and I take that $1,200 and I use it to pay for Orangetheory. I'll go to Martin Siri class and be like, "I'm going here for free." Blake: But it's not going to fix the fact that all your engagements are understaffed, and you're underpaid versus what you could do in any other profession David: Are you allowed to use that money to hire labor in the Philippines? Blake: To hire people. No, of course not. You're not allowed to control that. You have to use whoever's in the pool. You can't go out and bring in your own contractors. To me, it just indicates how clueless the big firms are. And I think that they're just basically on a trajectory that is headed toward a wall. And there's going to be a cliff at some point. I mean, maybe it'll just slowly die out. But I really think that there could be some structural issues, some problems if they can't recruit people, if people leave. I mean, seriously, like I don't understand why... Unless you're just ignorant of the opportunity out there, why would you stay? Why wouldn't you go work for a more modern firm? Because they're all hiring and they're all paying pretty well. [00:31:45] Schools aren't teaching accounting students about other opportunities. David: Well, unfortunately, if you're accounting major, and I can verify this with my two interns, the schools are set up as factories, to fill the bottom of the funnel, as you say. Blake: Yeah. The professor is brainwashing you. David: They have no idea that cast exists. And that in a lot of these firms, it's the biggest, fastest-growing part of a firm. And then there's all these firms that are just cast on their own. They're separating, they're doing the accounting stuff outside of tax, outside of audit, but they're conditioned to think a firm only does tax and audit. So, then they go in, and like how are they supposed to know what things exist if they didn't get taught that at school? Nobody knows these other things exist till they'd search it two years in of 80-hour weeks. Blake: And you know why they don't know, because the schools aren't telling them because the schools are funded by the big firms. David: The schools don't know. The schools don't know. Blake: They get donations from the big firms. Well, no, and the professors are former Big Four, big accountants. And so, they just push people into that traditional career path, and they don't really care. I mean, maybe they care, but they don't know any better. So yeah. I mean, I think traditional education for most people is a scam too. I think it's a giant waste of money. David: Everything's a scam. Blake: I mean, no. Look, unless you go to a top school that has like a really good brand name either in your region or your city or your state, if you don't go to one of those schools, I mean, that's what you're paying for. Let's be fair. And it's the same reason you go work for the Big Four. You're getting a brand name on your resume. But if you don't get that, you're overpaying. Because you can go get the same education almost anywhere that's cheaper. I mean, there's really good courses at community college taught by underpaid, adjunct professors that are really passionate about what they do. And you can do all this stuff online. Now you can learn stuff for free. You can go on Earmark CPE, and you can learn stuff for free. David: Yeah. If the importance is to learn, you can do it. Yeah, you're right. Do you want that on your resume? Do you need to have that logo on your resume or are you secure enough to just actually contribute and run a business and do all that? Blake: That's right. That's right. Well, I've spent enough time bashing traditional accounting firms. So, I'm going to turn it over to you, David. You can choose the next topic. [00:33:52] Thank you to our sponsor, ONCE Accounting. David: This episode of The Cloud Accounting Podcast is sponsored by ONCE Accounting. ONCE Accounting, formerly BaCo Tech is a client integration platform that puts CPAs in the middle of their client's data by becoming the hub to manage all their client's information in one single place. And has recently been selected for the 2022 AICPA cpa.com startup accelerator. ONCE Accounting gathers clients' data from accounting systems like QuickBooks, Xero, and Sage, and delivers it to CPAs in real-time, enabling CPAs to make adjustments to tax returns and address client accounting issues as they happen, not at the year-end. Then at year-end, CPAs can instantly and seamlessly integrate that tax-ready data into the preferred tax or accounting firms software like Drake, Lacerte, UltraTax, CCH Axcess and ProSystem FX. This allows your firm to plan, prepare for tax returns throughout the year, and allows you to proactively offer advisory services for all your clients instead of reactive planning services after year-end. To learn more about ONCE Accounting and to take advantage of their offer to trial 20 client files by using promo code Cloud Accounting, head over to cloudaccountingpodcast.promo/once, that is cloudaccountingpodcast.promo/O-N-C-E. ONCE Accounting, a touch it once solution for public accounting. [00:35:18] TikTok video saying do not use TurboTax. David: Yeah. I feel like there wasn't a lot of articles this week in general. I think it was a little bit of a slow news week. So, I was like, all right, I'm going to go out to Google and just do a couple more searches. This is about a half-hour before the show. So, one of the things that popped up is a TikTok video. And the video is titled, really across the top, which is the good branding of this TikTok video, it says, "Do Not Use TurboTax". And she says, "I spent five hours on the phone with TurboTax, the IRS and TPG to find out TPG is keeping most, if not all of people's tax refunds because of hidden fees." Blake: What's TPG? David: So, we'll get into that. So first I played the message. The vast majority of this is her complaining. She starts with TurboTax. She filed her return with TurboTax. TikTok Video: If you have not filed your taxes, do not use TurboTax. Do not, do not, do not. David: But most of her gripe is not about TurboTax. She's griping about the IRS and how long she waited on hold. TikTok Video: Not one single soul is working for the IRS. David: She's like, "Oh, if I don't take my social security number, they'll route me to a person faster. And like, her gripe is about not getting good service at the IRS. TikTok Video: They'll attempt to put you to an agent, but that even came to the point where it was like there were no agents available. Try calling back tomorrow. And I guarantee if I called back tomorrow, not a single soul would call me back tomorrow. Not a single soul would answer. David: But I also had the same question you had. [00:36:38] What is a TPG? David: Like what the hell is a TPG? I was like, this is weird. So, I started Googling and start searching. And it looks like, from what I can tell, and I'm surprised actually we have not seen them or heard of them before. So TPG, at a high level, is a company that you, as a firm owner, can use to process your returns through so that way when the IRS refunds the money, basically it goes to TPG, and then you could take your client's fees out of the refund. They provide a service like that. They've been around about a decade, maybe longer. But Intuit apparently started using them this year. Maybe they've used them before. One thing I did notice as I dug into them a little bit more, they are now owned by Green Dot. Are you familiar with Green Dot? Blake: I've heard of them. They are one of those FinTech banks, right? David: FinTech banks. And so, the QuickBooks checking account is actually built on Green Dot. So, Intuit obviously has some sort of partnership with Green Dot. And maybe Intuit wanting to use this company and whatever, Green Dot has acquired them. So Green Dot owns this company, TPG, for this product. So basically, it withholds the fees from the tax refund. And there's this huge TurboTax forum. On the Intuit website, there's the TurboTax community and huge posts. Everybody's less this money. And from what I can tell reading this, what's happening, and this is something I think for everybody to think about when they talk to their clients, yes, TurboTax is going to remove the fees for TurboTax, your e-file fees, your state returns if you have a bunch of state returns. They're going to re remove all those fees before you refund gets deposited back in your account. But what's happening, it looks like, so the IRS can withhold money. Like if you owe child support or you owe taxes to a different entity or taxes from a previous year, they can withhold that from your refund. What's happening this year is it's all related to the tax credit and the advanced payments. Blake: The child tax credit. David: Child tax credit. So, if you do your return, and you don't say that you received child tax credits because maybe you forgot to save all those letters you got last year, you run your return, it's going to look like you're getting a refund of X. Then the IRS is like, "We sent you tax payments already, those advanced payments." So, they deduct it. And so, then the only thing is you get the difference in your bank account. So, people are getting a third, two-thirds less than they expected. I mean, we've talked about some showing... Most of our listeners are aware of this, but you really have to be careful with whether or not people got these advanced payments. Because you don't want to be dealing with this headache like this. Blake: No, no. Yeah. Well, we talked about how this was going to be a mess, and it looks like it is turning out to be a mess. David: And the other thing with this video that went through my head is like, are we going to start seeing lots of TikTok of people and their crappy experience with the IRS? Like citizens. Remember we talked about this, like is this the year that completely tips? Accounting isn't bitching about the IRS for a decade, but is it like the citizens now they're going to be like, "What is this?" Because citizens are used to... I mean, Amazon, you open up the chat, you get your refund for your product. Customer service is pretty good. I think there's some levels of expectation of what customer service is, but if this is going to force people to interact with the IRS in ways they never had before, are we going to be having a TikTok to the week of somebody who's really on the IRS? Blake: Maybe that'll actually fix it. David: And basically, she's complaining about the customer service of the IRS. [00:39:56] What makes people choose DIY vs hiring professionals? Blake: Well, you brought up TurboTax. TurboTax is do-it-yourself, DIY, tax software, the number one. What makes people choose DIY versus hiring a profession? This is a really good question to ask in order to differentiate ourselves from stuff like TurboTax as tax preparers. A study recently published in the American Accounting Association Journal Accounting Horizons, as reported in Accounting Today, finds what motivates a decision to use either DIY tax software or a paid preparer. What do you think David? The number one reason is that people choose a paid preparer versus DIY. David: I think you're tricking me. I'm going to say price, but I think this is a trick question. Blake: It's not price. It's not price David: It's not price, it's something else. Accessibility. Easy- Blake: Well, no. Why would they choose a professional versus doing like TurboTax? David: Oh, opposite, opposite. Oh, oh. Those three letters. That's the only reason I can pick up CPA. Blake: And that means accuracy. So, 49% of people who are a tax pro said that their primary reason was accurate. And then it's only 25% for DIY. So, what does that indicate? It indicates the public perceives paid professionals as being more accurate. Which is good. That's what we're always telling people. We're always saying we are more accurate. So that's a good thing to focus on. We're not going to mess up. You're going to get it wrong if you do the DIY. Those are good things to use as marketing messages. The fear of messing up and then getting an audit or getting notices and whatnot. Here's what's interesting. At the end of this chart that I'm looking at based on the survey, there's a column called least effort. So, the DIY folks, 12% of them said that least effort was the reason they chose DIY such as TurboTax. Only 8% of people who chose a tax pro said least effort. This is flipped from what I would expect. You would expect that if you're paying a professional, it would be less effort than doing it yourself. [00:41:53] Working with tax organizers needs to be easier - bad customer experience. David: This is my argument of the tax organizer. I'm like, "Why do I have to do all this work? I think it's less work for me to type into TurboTax. Yeah. Blake: So, I would love to dig into this more because this is just one data point at the end of a survey. I'm willing to bet that if you asked people straight up what's easier, using TurboTax or working with a CPA, they would probably say TurboTax, in general. Because most accounting firms are horrible to work with from a client experience standpoint. And the software companies focus on this religiously. They are obsessed with customer experience. And that's one of the reasons I've always said customer experience is the great frontier of accounting services. If you can deliver an amazing customer experience, you'll beat all the competition, as long as you can say that you're accurate. You just got to be accurate, and then you got to have a great customer experience. You will win. So, you were right, David. I really think you're right. Your experience indicates something to me that's true, which is we do a bad job. Let's make it positive. I'm going to try to be positive here. We could do a much better job at creating a good customer experience. Now, of course, look, if you're listening, you create great customer experiences, fine, great. But I would ask you, do you measure that? Do you ask your clients how good is this customer experience? If you don't measure it, then maybe you should try, and maybe you'd learned something. David: Well, have you dark food today? Have you? Blake: Try doing it yourself. David: Yeah. Blake: Have you tried being your own client? David: Exactly. Blake: Have you ever hired a secret shopper? Somebody to come in, maybe somebody you trust that could come in and be a client and see what it's like and then report back. David: Well, usually the people you trust, or you like, they get like the nonstandard experience. Blake: That's true. David: Yeah, yeah. Hey, this is my nephew, Joe's taxes. And he bypasses the normal intake forms and goes in through a side route to get to that. Blake: So maybe hire somebody on Upwork to become your client. Or give away a free a return. David: Yeah. Do free returns. You'll for sure get feedback. Blake: Do some free returns for people who fill out a survey telling you in detail about how the whole experience was. I would love to do that for a firm. That would be fun to set that up. We could get so much interesting information. Most firms never want it. They don't want to ask. They don't want to know. [00:44:11] Companies need to raise their prices and focus on customer experience instead of speed. David: Well, it's just, I think in general, and this, this is a problem big companies have, it's just people tend to optimize for themselves and the job they're doing instead of optimizing for the customer experience. Blake: And this is why everybody's getting it wrong when it comes to technology and accounting, or most firms, I'm going to say everyone, but a lot. They're focusing on efficiency. Let's do the work faster. Let's do the work faster and faster and faster and we can be more profitable. And because they're thinking about hours and time. The way that you become more profitable is by raising your prices, and the way you can raise your prices is by delivering an amazing client experience. If you can raise your prices like double, you don't need to be efficient, you can be completely inefficient. David: And you can raise prices. I threw the article away, but I did see it. Dollar store is going to start charging $2, $3, $4, $5 for items. Even, if your company is called The Dollar Store, you can raise your prices. That's all. Blake: So, if you're not raising your prices- David: It's when I thought about firms. It's all that. Blake: No, that's a really good connection there. Yeah. I mean, amazing. Amazing. [00:45:13] Thank you to our sponsor, LiveFlow. David Leary: This episode of The Cloud Accounting Podcast is sponsored by LiveFlow. Have you ever exported a QuickBooks Online report to a Google sheet, spend time customizing the sheet, invited others to collaborate, then discover that the QuickBooks Online data is changed, forcing you to restart the whole entire process over again? An app has solved this problem. Introducing LiveFlow. LiveFlow connects QuickBooks Online directly to Google Sheets, allowing you to save sheets that automatically update with the most recent QuickBooks data. Accounts are using LiveFlow today to create automatically updating budget versus actual reports and consolidate reports. Yes, consolidate reports. You can connect one Google Sheet to multiple QuickBooks Online companies. My favorite feature of LiveFlow is how deeply it connects back to QuickBooks Online. If I drill down on a summary number in the Google Sheet, LiveFlow will open a new browser tab with the QuickBooks Online transaction detour report showing me the transactions that made up that number in LiveFlow. To learn more about using LiveFlow and how you can save 25% off your first three months, head over to cloudaccountingpodcast.promo/liveflow, that is cloudaccountingpodcast.promo/L-I-V-E-F-L-O-W. [00:46:29] AICPA and other companies press releases on Russia and Ukraine. Blake: Okay, where do we go next? David: This is not app news, but I don't even know how I feel about this. Do you remember when the pandemic started? Blake: I've blocked that from my memory, David. David: You've blocked it. Okay. And companies you bought car tires for from five years ago issued a press release and emailed it to you about how they wash their counters now. And we kind of talked about this. It was a little bit out of control and ridiculous. I kind of feel like the whole Russian-Ukraine thing is also kind of getting like that. People are using as an opportunity to create a press release. Blake: Oh, well, are you talking about the AICPA's press release. David: Yes. And then I saw that come out. I was like, "Oh." Now we have to talk about it on the show. Blake: All right. Let's talk about it. And then we've got some voicemails I want to get to. So basically, the AICPA is issued a press release saying that they stand with Ukraine. But then they didn't for anything beyond that. And to me, I feel like- David: We're going to monitor the situation and provide updates. Blake: Yeah. And to me, it's like if you're going to say you stand with somebody, then you really need to stand with them. You're not standing with them if you just issue a press release. To me, that was totally clueless. David: But lots of companies are doing it. Blake: I know. I know, and it's sad. David: The bar down the street and to somebody, we don't serve white Russians anymore. It's kind of crazy. Blake: You shouldn't do that. If you're not going to do something positive or advocate for something, keep your mouth shut, is my opinion. I think the reason they are not because who pays the bills at the AICPA, it's the big firms, the Big Four. And so far, they're still trying to figure out what to do. Are they going to pull out of Russia? David: I saw an article, like it's a very small amount in the grand scheme of their sizes. Blake: They could. They certainly could. David: It's very small, but they don't know what to do because like for some time, they need those people to work on things that are tied to companies that aren't there. And it's- Blake: Oh, yeah, yeah, yeah. No. So that's a good reason why not to pull out, which is like these are multinational corporations. You can't just stop auditing one entity in Russia. It doesn't work that way. But all the other stuff, they could very easily fire all the clients that are state-owned or Russian government. You could very easily- David: And I imagine the Ukraine, there's accountants, there's bookkeepers. I imagine some of these members of the AICPA customer there, spin up a fund, spin up. I don't know. But it feels like it's just the press release. Just so they can say, "Look at us too, we can emit too." And then on top of that, let's really step back. Does this even... Now Putin's like, "All right, that's it, we're done." The AICPA is now... This is the one that pushed me over the edge. [00:49:06] John Robinson's take on The Big Four, and Russia. Blake: Yeah. John Robinson, is an ex-Big Four partner, posted on LinkedIn, and his post has taken off. He said, "My view on the Big Four in Russia as an ex-Big Four partner from the CIS practice, six reasons why you should exit from your Russian business. One, almost all of your contracts are ruble-denominated under Russian law and are there for worth nothing. Two, any clients that are worth a damn are exiting to and therefore won't need your services. Three, your real estate rental contracts are hard currency denominated, and so this is your way to get out of these. Four, any taxes that you pay or any rentals that you pay are going towards the continued support of the war, which is morally reprehensible. Five, your Russian business is already worth zero, and your global brand diminishes every day that you do not make this decision. Six, it's the right thing to do, [00:49:54] Do the right thing - stop doing business in Russia. Blake: and you know it." it's the right thing to do. They should stop doing business with Russia just like everybody else. If the world stopped doing business with Russia, the economy in Russia would crater, Putin would lose his popular support, and unfortunately, people are going to suffer in Russia economically. But people are suffering in Ukraine because they're getting killed. So, if we don't want to go to war in Ukraine, if we don't want to do a no-fly zone with NATO and all that, then our only alternative is business sanction. Stop doing business. Stop trading with Russia, as much as is feasible. David: Visa and Mastercard pulled the plug and banks ATMs and banks. You can't use Visa and Mastercard network. Blake: Yeah, Visa and Mastercard, that's big. All the FinTech should do this right. Visa, Mastercard, your cards will no longer work in Russia. Russian Visa and Mastercard issued cards will not work globally. That's a big deal. I mean, it's a lot of money for them too. They each make like over a billion dollars in Russia and Ukraine. David: And so, this is the difference. Visa and Mastercard took an action. Blake: Yeah. They took an action. They didn't just issue a press release. Yeah. Here's a funny bit. There is actually some humor in all of this. This was an article in CPA Practice Advisor. Spoils of war. Ukraine says no taxes due on captured Russian tanks. I feel like this is because the- David: I swear, I think I heard the highlight of it. I was like, "This is like an accounting thing." That is interesting. Blake: Well, so the president of Ukraine, Zelensky, he's a former comedian. And I think maybe his sense of dark humor has sort of permeated the government. The article says that Ukraine's national tax agency has stated that its nation citizens do not have to declare receipt or pay taxes on captured Russian tanks. The quote is amazing. This is from Ukraine's National Agency for Protection Against Corruption. "Have you captured a Russian tank or armored personnel carrier and are worried about how to declare it? Keep calm and continue to defend the motherland? There is no need to declare the captured Russian tanks and other equipment because the cost of this does not exceed 100 living wages UAH2248100." I guess that must be the code that they're citing. Can you imagine the IRS doing something like this? Yeah. "Combat trophies are not subject to reflection in the declaration of the following reasons because they were not acquired as a result of a conclusion of any type of transaction, but in connection with the full-scale aggression of the Russian Federation against the independent and sovereign Ukrainian state. As a continuation of the insidious attack of the Russian Federation on Ukraine launched in 2014." And then they go on to thank the defenders of the state. And in case people don't know, like, all the men in Ukraine of fighting age, and it's like a wide range, anyone who's not a child or very old has been asked to stay in Ukraine and fight for the country. They cannot leave. They're not the refugees. The only people leaving are women and children. It's a totally messed up situation. So, we'll see. We'll see if PWC, Deloitte, KPMG. KPMG said it's going to cut ties with certain clients that are affected by sanctions. So good for them on that, but that's not everyone. So far, the other Big Four have not said what they're going to do. Grant Thornton, who I was just making fun of, they actually booted their affiliate in Russia, FBK. David: I think that's what I've seen. Some of them are cutting ties with affiliates they have there. Blake: But does that mean they're not going to still serve those clients from other countries. I don't know. I don't know what that means. David: And then on top of that, like if in theory, you're there to audit, whereas probably a lot of foolery going to happen right now. I mean, obviously like the US wants to seize Russian oligarchs’ boats and all this, but my understanding is us, as US citizens, if we suspect or we think we found like Russian-tied oligarch assets, like I don't know. I'm browsing around, and this house next door to me I think is Russian owned. I can actually seize it myself. That's my understanding right now. Some things are set aside. So, this is going to be messy. People are going to be just claiming other people's property. [00:54:02] Jack's voicemail on what makes app integrations successful. Blake: All right. We got three listener messages. Let's get to those. David: Great. Blake: This is from Jack Thiel in Australia. Jack Thiel: Hey, Blake and David, Jack Thiel here from Australia. Really keen to get your thoughts on the startup ecosystem that surrounds the accounting industry, and in particular, what products do you think have executed, I suppose, in their early stages, the best go-to-market for accountants. And what made the approach kind of stand out to you? What made them successful? And if you want, feel free to share maybe some bad experiences or apps that have done a terrible job working with accountants. Cheers. Blake: So, I figured that would be a perfect question for you, David, because you grow the QuickBooks Online ecosystem from like 6 to 600 abs. So, you've got to have an opinion on this. Who did the best and who did the worst at reaching accountants? David: Yeah. So, the best way to communicate with accountants is solve the problem for their clients. It's really straightforward. Solve the problem for the clients and don't screw up the data in QuickBooks and Xero. That's all you have to do, and you'll win. It's so hard to do, though. Apps can't gather their own way. Like, oh, we got to make the portal, we got to create SEO content for accountants, we got to do all this other crazy stuff. But if you just solve the problem for the client and don't screw up the data in QuickBooks and Xero, like as in you have a really good sync that saves the accountant time, you will win. So many apps will do the bare minimum to get the QuickBooks or Xero logo, but they don't actually have a good integration. And eventually, an accountant will see through that. So, you might win in the short term with all these other things you do, but what will keep them there in the long term is a good integration. And apps can't do it. Nobody wants to spend the time because it's not sexy. You can't go to your meeting with your VCs and be like, "Hey, we added these three extra fields that accountants love to the sync." It's not sexy. Blake: And the problem too is that they don't have the accounting expertise on the staff and then they don't go out and ask the accountants how to build the integration. So, they build it wrong. So, the data comes in wrong. It's not clean. David: Yeah. Yeah. Yeah. They don't build a good integration to the accounting system. And that will kill your app on lot of timeline. Because there's always going to be another app that's going to try to do the same thing. And they'll probably do it wrong because most apps do it wrong, that's why there's no long-term. Blake: Can you think of somebody who did this right off the top of your head? David: Melio. If you look at the integration in QuickBooks of that when you started there and we go down that path, TSheets. You'll get a lot of ones that have just embraced the community, they focused on the integration, fix the problems. You can't market your way out of a bad integration. You just can't. Blake: Now, I know you don't want to talk smack about an app that's still out there. Anyone that failed that you could tell us? David: Yeah, just go to apps.com, the QuickBooks app store and just look at all the ones that have two reviews. I don't even have to give the names. The vast majority fail. 95% fail. Blake: Because they're not solving the end customer problem. David: They're not solving the problem. They didn't do it very well and they can't communicate. If they did solve it, they're not good at communicating their value. Blake: Oh, that's enough said on that. [00:57:06] Joe's Voicemail - why people are leaving the accounting profession. Blake: Here's one from Joe. Joe Cangelosi: Hi, Blake. Hi David. I love the podcast. I love all your podcasts. I just wanted to make a quick comment about people leaving the profession and the profession not attracting new communities. I think there's two issues that we tend to make overly complex in our discussions about this. And the first one is that I think it's time to acknowledge that our current system of publicly-traded companies is morally bankrupt. And this Eighties, Reaganomics fetishization of shareholder value is not going to be the way forward for gen Z, like for sure. We need to embrace new modes of corporate governance, whether it's B corporations or other ideas that are out there about different types of corporate governance. And I don't mean this ESG greenwashing, like that's obviously a problem. People won't put or companies or brands won't put their corporate governance where their mouth is. People want to belong to something that aligns with their values, especially younger people. And that's just going to have to be the way forward. The reason why I started my business based around mid-market companies is because those were the kinds of companies that I wanted to see thrive in our marketplace. The second thing that I think we try and make overly complicated when we talk about it is financial accounting. The fact is no one cares about financial accounting. And what I mean by that is that no one cares about financial accounting to the extent that it can be operationalized or used for compliance or for financial planning and analysis. But meanwhile, our industry fixates on it, ignores the technology that's available to automate it, and forces college graduates to do bank reconciliations for two years. And the firms and the companies that are leaving that model behind are the ones that are going to succeed. And concurrent to that, I want to make a comment about timesheets. And that is, yes, I agree with everything that you say about timesheets, and I agree that people lie on them, but they can be useful as a tool. And when I say that what I mean is they can be useful as a tool if they're not tied to compensation. So, we don't bill by the hour, we do value pricing exclusively. But we do use timesheets. But what we use them for is to monitor people's workload and to make sure that they're keeping up with their professional continuing education requirements and firm innovation requirements. So, no one's compensation is tied to the number of hours they work. We use them to make sure that people are not working too much, and we also use them to make sure that people are maintaining innovation within the firm as a priority and not letting client work overwhelm them. So those are my thoughts on it. Thanks again for the podcast. Thanks again for your great work. And love you guys. Blake: Thank you so much. That was Joe Cangelosi. I really appreciate the thoughtful response on both those topics. The lack of purpose or the desire for purpose and work, so critical. And you can't get people... People don't want to work for companies that don't have a purpose. And this goes to the AICPA statement on taking a stand, but not really taking a stand. You can't just issue a statement. You've got to do something. That's what employees want. And that's why the failure for them to act quickly, these Big Four leaders, is a huge mistake. Because their employees are sitting there looking at all this stuff happening and thinking, "Why aren't we doing something? Why aren't we helping?" And then the timesheets side, I respect that. I think the timesheets are a tool. I still find issues with even using them without link to compensation. It's certainly much better if you don't. It's the budgets and the bonuses based on time and the pricing based on time, that's all like a big problem. I still think if you have people tracking time, it makes them focus on the wrong things, that we should find a replacement for that, which is metrics that create client outcomes. So, it's less focused on the firm, more focused on what are we doing for our clients. That's how we get better outcomes for the clients, that creates purpose for our staff. Billing time doesn't do that. There's a better way, and we'll figure it out. David: Yeah, I think it's interesting take on that. We use the timesheets to make sure, hey, I'm going to give you time for continuing education. I'm going to give you time for doing innovative type white space work. But using the timesheet to makes sure you're using that white space work. That's different. Blake: That's good. But do you really know if they're doing it? Maybe they're just putting down that they took some courses on Earmark CPE. But do you know that they did it? Who knows? Maybe they listened to two times speed, but they put down one hour. David: And that's where focusing on the solution, the customer experience result is really what you want to incentivize that behavior. Blake: Exactly. Focus on the result. Yeah, but that's hard. So, timesheets are easy, actually. Timesheets are easy for, as a management tool, but they're not very effective as a management tool. All right. One last one. This is a tweet from Jacob Oberlander. I have converted it to audio using text to speech technology. [01:02:09] Jacob's tweet about timesheets. Jacob Oberlander: We're not charging by the hour and not billing by the hour, but we're still tracking time. And no, no one works overtime. If I see any team member staying longer than 40 hours, I'd tell them to go home. We strongly discourse checking emails from home. We all need to have a life out of the office. One of the reasons for tracking time, we do monitor utilization. We want to make sure that there is a balance between client work and non-client work, such as learning new apps, writing blogs posts, etc., two-thirds. I don't see why someone would lie in this environment; I trust my team. Blake: So again, on a similar theme as to what Joe Cangelosi said, Jacob Oberlander tweeted at me in response to our previous coverage on this topic and said what you just heard, that they are also not using time to reward or punish people, it's to get an idea of what they're working on, to make sure that they're not working too much. If that's what you're using timesheets for, that's great. I would add in some other stuff, client outcome-based stuff, like we just talked about, but that's not how timesheets get used in big firms. And I think the bigger the firm, the worse it gets. David: I mean, on the whole, I think our listeners skew towards not doing it that way. Blake: Yeah, yeah, yeah. David: Okay. We're number one but like on the grand scheme of accountants or bookkeepers and the size of these firms, our listener base is pretty small. I would argue our listeners are in the minority. So, our listeners are in an echo chamber. Yeah. I know timesheets suck, timesheets sucks. I don't use timesheets. I don't really use them that way, I use them this way. I don't think that's the representative of the entire industry. Blake: Exactly. So dear listener- David: So, tell your friends, tell your friends that are doing it the old way. Blake: Yeah. Yeah. I would say like fewer than 10% of firms think the way that our listeners think and are thinking about client experience and are thinking about team experience. Most firms in this country, most accounting firms are still thinking traditionally, they're thinking about time inputs, even though time is no longer linked to the output. [01:04:01] Technology has changed the way time is measurable for work success. Blake: We'll talk about this in another episode, I didn't get to this this time, but I was thinking the other day about... Actually, I was thinking this morning about what the difference between cloud accounting and traditional accounting is. And cloud accounting is not actually about technology, it's about thinking about your firm in a different way. Technology is a component of that. And what technology has done that has allowed us to change the business model is it is de-linked time to what you achieve, to what you deliver. So, the deliverables in accounting used to be very tightly correlated to time. And it was very easy to see the relationship because we did things manually. Technology changed that. You can do something in one hour that used to take five hours, or you can do something in zero-hours that used to take time, a lot of time through automation. So that's why time is such a problem in our profession because it holds us back from adopting all this tech. And it causes us to completely miss understand what all this is about. When you no longer have to think about what you do for clients in terms of time, it frees you. It frees you to think about so many other things you could be doing for the client. David: Yeah. You almost think about time the opposite way. If you're truly cloud, all your stuff's in the cloud, all your clients are in the cloud, and you're taking advantage of some automation and bank feeds and data entry tools, what used to take you four hours might take you 25 minutes on a client now. So, if you're going to track something, track every time an app screws up, or you have to do something manual. If you think about there's this old world in the new world. And if you're going to track them, track every time you do something inefficiently in the old way. Track that, and then after you have enough people saying, "Oh, I did this the old way," now you go find the solution to eliminate that. Like staying in that new model. But tracking the time you spent working old-fashioned ways. Blake: And this is why the timesheets focus us on the wrong thing because the inputs are no longer linked to the outputs. So, when you ask your staff to record minute they work or every 0.1 hours for every quarter hour they work, they're focusing on their inputs. But really, we want to focus them on their outputs, which are not linked to their inputs. I can record a Loom video in five minutes that creates an amazing customer experience. A Loom video, for those who aren't familiar, go check it out, L-O-O-M. I can press a button on my computer, I can record a video, insert into an email in like five minutes. And I create an amazing customer experience because I've delivered them a personalized video response to their question. I can do that in five minutes. Or I could spend 15 or 20 or even 30 minutes writing a big, long email that they're never going to read. So, when I asked my employees to track their time, what's easier for them to do if they're tracking time. It's actually easier for them to write the long email than to go learn how to use this technology called Loom, which may make the email writing much easier, but will take them hours or days to master. Because it takes a long time to get comfortable with that and to be able to do it quickly. But if they do, it's so much better for your firm. But the timesheet doesn't incentivize that. I should just write big, long emails all day long because I can track that. So that's just one example. I'm sure there's better ones, but that's the one I thought of because I've been using Loom a lot to save myself time and to help personalize my interactions with my team, my customers, my members at Earmark, all the stuff I'm doing. In a remote work environment, that makes a big difference. And it's a multiplier. I'm not just saving 67% of my time, I'm also creating a better experience, which allows me to get more customers and charge more, whatever it is. [01:07:42] Thank you for listening. Blake: All right, David. That's all the time we have for this week. If people want to get in touch with you, where should they do that? David: The easiest way is on all the socials, I'm just at David Leary. Blake: I am at Blake T. Oliver. Send me your emails, send me your voicemails. You can record a voice memo on your phone, send it to blake@blakeoliver.com. I love listening to those. We love playing them on the air. It's a lot of fun. It's how we stay connected to you. I'll see you here next week. David: Awesome. All right, bye. [01:08:09] Classifieds. David: Time for the classifieds. [01:08:13] The Ambitious Bookkeeper. David Leary: Do you dream of starting a bookkeeping business, but you don't know where to start? Join the Bookkeeping Biz Workshops, a four-day live workshop series hosted by Serena Shoup, CPA. You'll learn where to start, what it takes, what tech to use, how to build a business, not in a job, plus how to get comfortable on discovery calls. The workshops begin February 23rd. So, register today at bkworkshops.online, that is bkworkshops.online. [01:08:42] Royalwise. David Leary: As humans, we're programmed from birth to learn watching others. Video has the power to engage, entertain, and educate without ever feeling like work. When you want to become a QuickBooks Online expert in the shortest amount of time, the Royalwise on-demand web-based learning solutions are the obvious answer. With 40 easy-to-understand QuickBooks classes designed to bolster your confidence and increase your accuracy. Alicia Katz Pollock training will take you from beginner to advanced user. Pick just the topics you need or save money by subscribing to their entire QuickBooks Online library and coaching program for one low monthly price. Listeners of The Cloud Accounting Podcast can enjoy their first month of silver membership for only $1 using promo code podcast. So, head over to learn.royalwise.com, that's royal like a king and wise as an owl. Register for a QuickBooks class, become a member for just a dollar, and make learning a hoot. That's learn.royalwise.com. [01:09:41] Oh My Fraud: A True Crime Podcast for Accountants. Blake: Hey, podcast listeners, it's Blake, and I wanted to let you know about a new show I'm working on with CPA/comedian, Greg Kyte, and blogger/former CPA, Caleb Newquist. It's called, "Oh My Fraud", and it's a podcast all about financial crimes. That's right, a true-crime podcast for accountants by accountants. Caleb and Greg are going to come together every couple of weeks to unpack their favorite frauds and explore the circumstances, psychology, and interpersonal dynamics involved. They also fully indulge in victim-blaming the defrauded widows, orphans, infirm, and feebleminded because who can resist? If you fancy yourself a trusted advisor or prefer your true crime with spreadsheets instead of corpses, listen to this show to learn what to watch out for and to keep your clients, your firm, and even yourself safe. To subscribe, go to ohmyfraud.com, or search "Oh My Fraud" on Apple Podcasts, Spotify, or wherever you get your podcasts. [01:10:42] 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.