Latest / The Accounting Podcast / Intuit Grows More Defensive, CCH Gets an IRS Extension, QuickBooks Live Quintuples, and Xero Has a New Americas President

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Intuit Grows More Defensive, CCH Gets an IRS Extension, QuickBooks Live Quintuples, and Xero Has a New Americas President · The Accounting Podcast

• This episode of The Cloud Accounting Podcast is sponsored by Xero. Atlanta, Denver, Houston, Los Angeles, New York City, San Francisco, Seattle - this May, the Xero Roadshow is coming to a city near you. As an accountant, when you join Xero, you'll not only have access to essential practice-management tools, but you'll be joining a collaborative community of accountants, and bookkeepers. At the Xero Roadshow, you'll meet this community, learn how your practice can benefit from the full power of the Xero platform, and even earn CPE credit. To register for free to the Xero Roadshow USA 2019 event nearest you, head over to CloudAccountingPodcast.promo/XeroRoadshow. That is Cloud Accounting Podcast dot promo forward slash X-E-R-O-R-O-A-D-S-H-O-W. If you can't make any of the live Roadshow events, be sure to sign up for the free online Roadshow events in June. Blake Oliver: Welcome [00:00:30] to The Cloud Accounting Podcast. [00:01:00] I'm Blake Oliver- David Leary: And I'm David Leary. Blake, did you do anything fun this week? Blake Oliver: It was an exhausting week. I was in Boston on Monday; came back on Tuesday. I went to San Francisco on Wednesday, and we had our first user gathering, as a company, at FloQast on Thursday, down by Fisherman's Wharf in San Francisco. David Leary: Well, that's exciting. First user gathering ever. Blake Oliver: First one ever. We had 90 of our dedicated customers in a room at the San Francisco Brewing Company [00:01:30] for the day, and we did CPE on the product. We did some thought-leadership-style talks that we invited some of our customers, and a guest speaker in ... We had the former CFO of Yelp give a talk. That was really cool. David Leary: Cool. I did an escape room last night, for the first time ever. Blake Oliver: Did you escape? David Leary: That was kind of exciting. We did escape ... We did escape. We had about four-and-a-half minutes left, so that was so exciting. Blake Oliver: Oh, great. David Leary: We had to solve a murder, or something like that. It got me thinking, you could build [00:02:00] an escape room on accounting principles, right? Blake Oliver: That'd be a good way to teach CPE. David Leary: Right, because you have to get something to reconcile, and if it doesn't balance, and it doesn't come out to zero, you've gotta figure out ... You can use clues, and you have to ... It's genius. We should build a escape room just for accountant-themed- Blake Oliver: I like that. David Leary: If any escape rooms want to lease that idea from us, it's available. Blake Oliver: We'll have to create some content; maybe a cloud-accounting escape room. This'd be like the Zapier challenge - [00:02:30] you have to successfully integrate two applications, or something, before you can move on. David Leary: Yeah, and there's all these problems that could occur. Blake Oliver: Yeah. David Leary: There's something here. We'll just have to design it ... It could be virtual, right? People could play it online. Some downtime for people in the office. When we have time, we'll build that, and get that distributed to everybody. Blake Oliver: Well, David, there's a lot of news, and I'm so glad that you have been paying attention, because I've been traveling all week; I've been very busy, so I've been kind of doing [00:03:00] my best to stay on top of what's going on, but you have a ton of stuff to talk about this week. I'm just gonna let you take it away, and hopefully, I can offer some commentary. David Leary: Yeah, so we have some reviews; we can knock these off quickly- Blake Oliver: Oh, yeah, I almost forgot the reviews. Let's see the reviews, yeah. David Leary: A follow-up from last week's review. Do you remember last week, we got a review from somebody in the United Kingdom-. Blake Oliver: Yes, yes. David Leary: -and he gave us four stars? Well, he went back, and he edited his review, and [00:03:30] he changed it to five stars- Blake Oliver: How kind! David Leary: -and he said ... He added, it says, "Edit - changed to five stars. Enjoying the podcast more and more." Whatever we said last week was a huge improvement ... We increased 20 percent - that's amazing - in one week. Blake Oliver: Oh, yeah? David Leary: That was an update, and we thank you very much for going back, and editing your review. We did have a review come through on Twitter. I'll read that one quickly, here. This is from Don Cooley. "Since I refuse to install iTunes, let me give my five-star [00:04:00] review here to The Cloud Accounting Pod. What has my life become that I actually look forward to new accounting podcasts? Oh well, great job, David Leary, Blake Oliver. Best source of news in the industry." Blake Oliver: Thanks so much, Don. Here's another one. "This is a great podcast for general, and cloud-accounting news. Five stars. stars. Dang it, I'm very Apple averse, but this podcast is so good, I dug up my old Apple log-in info so I could leave David, and Blake a review. I look forward to this podcast every week and enjoy hearing their insights into the current accounting stories of the [00:04:30] day. If you're in the accounting profession, then you'll get a lot out of this podcast, even if you're not "in the cloud ..." [cross talk] I don't have a name for that, unfortunately. David Leary: That's a good one. Blake Oliver: Thank you, though. David Leary: All right, I'm gonna skip to this one: "Easiest way to keep up with the industry. Five stars. I'm horrible at staying on top of industry news, or any news, for that matter, but I love listening the podcast, so this helps. Blake, and Oliver are funny, so that helps even more. Keep up the great work." That was from Spotter86 [00:05:00] on iTunes. Blake Oliver: All right, thanks, Spotter. David Leary: Whoever Blake and Oliver are, great podcast. Blake Oliver: Here's another one: "Great podcast. Where should I start? Great, engaging, and informative podcast. The two hosts have great chemistry. This podcast is filling a void left by other accounting publications covering stories not covered anywhere else. Further, the podcast notes a great. Very well-written, and meticulously detailed. Keep up the good work." Jacob Oberlander, CPA, Oberlander & Co. Thanks, Jacob, really appreciate it. David Leary: Yes, the [00:05:30] notes are great. People should subscribe to those, if you don't already. Blake puts a lot to work into the show notes. Then, even now, puts in chapters, so if your podcast player supports chapters, the show notes, and the chapters are all aligned inside the podcast player, which is really cool. Blake Oliver: Yep. David Leary: Let's jump into the news ... Kind of a small one, but it could be very earth-shattering for all of us. Elon Musk, right? That's the Tesla guy ... He likes to do these projects. He's got an electric car. He's building rockets. Well, I fear that he might [00:06:00] be coming to our industry next. I don't know if you saw this, Blake. Elon Musk sent out a memo to his employees, because they're really trying to cut expenses, and control costs at Tesla- Blake Oliver: This is at Tesla. Okay. David Leary: At Tesla ... He is personally going to review all expenses - all travel expenses ... Any dollar that goes out of the bank account at Tesla, Elon is gonna personally review. Blake Oliver: Wow. David Leary: My thought on this is he's gonna experience such pain from doing this that the accounting industry is [00:06:30] going to be his next project. That's just my prediction. Blake Oliver: Hmm. Maybe he has never reviewed an expense report before, because it's gonna be a lot of work, given how many employees they've got a Tesla. Yeah, I am worried that he will get frustrated, and then figure out how to automate us out of business. Who knows? David Leary: Yeah, cuz his cars are gonna self-drive in three years. Blake Oliver: Mm-hmm. He does work between 80 and 90 hours a week, so he's got- he's got some time. I wonder how long it would take [00:07:00] him to review every single expense report? David Leary: I would love it if he starts live-tweeting about this. I might have to follow him on Twitter, just to see ... He's like, "I cannot believe this is another coffee at an airport somebody bought! I control these costs ..." Blake Oliver: Elon Musk is gonna go insane reviewing everybody's expense reports. Meanwhile, what's been going on ...? There's some major stories that we've been covering that we've gotta follow up on, right? What do you wanna hit first? Should we talk about this Free File? There's Wolters Kluwer. There's [00:07:30] QuickBooks Live. David Leary: Let's do the Wolters Kluwer, and the CCH, cuz isn't that small, and there's not a lot to discuss- Blake Oliver: Okay. David Leary: -it's more just an update, right? Blake Oliver: Yeah. David Leary: The IRS issued a statement, and instructions. The IRS, on May 14, said they've been working closely with CCH to ease the impact on taxpayers due to the recent software outage. They give instructions, and you have to go ... It'll be in the show notes, but depending on how you're filing, there's different instructions you have to do. Essentially, they're telling you to actually type in the text "late-filed return [00:08:00] due to CCH software outage," which I'm kinda surprised that they giving ... That sounds like somebody would try that, you know? Blake Oliver: Yeah. David Leary: Like, "I'm gonna write this on my return, and see if it slides by the IRS ..." For the IRS to be telling you to specifically write those words on your forms, and your e-filing is a whole new world for me. I wouldn't have imagined they would've done that. Blake Oliver: Well, yeah. Thankfully, Wolters Kluwer has enough pull with the IRS to get this extension, but it's not that [00:08:30] long; it's only an extra, what, seven days, something like that? Yeah, here it is: "Impacted filers now have until May 22nd - a seven-day extension - to file." As long as the filing is done on, or before the extension date, it will not be considered late by the IRS. David Leary: Got it. Seven days then. Blake Oliver: Seven days. David Leary: Perfect. That's about all I had on that, just a small update on them. Blake Oliver: We still don't know the extent of the malware attack, right? As far as I know, there hasn't been a statement from CCH on whether or not personal information was stolen; how [00:09:00] this happened in the first place; what was the means of attack - all that. Still nothing. David Leary: Yeah, the communication has not been very well at all. The opposite of that, though, is QuickBooks Live has updates. Blake Oliver: Yes! David Leary: I must admit, Intuit's releasing a great blog post now, and giving updates on QuickBooks Live. It's arguably making our job easier, right? You're not having to piece together a Facebook post here, with a rumor, or a screenshot from over here. The [00:09:30] notes are just all written there, and it's very clear. Maybe CCH should take a note from Intuit on what they're doing with QuickBooks Live, because they have a great blog post that's just calling out all the details, and the upcoming timelines for QuickBooks Live. Blake Oliver: The big news is that they're hiring, what, 40 more employees for QuickBooks Live? David Leary: Yeah, so they're hiring more employees, and they've actually put out what the requirements are. You have to have minimum one year's experience working with QuickBooks Online, and you're either a CPA, or a certified public bookkeeper, or- [00:10:00] Blake Oliver: Certified professional bookkeeper. David Leary: Professional, sorry, sorry. Blake Oliver: Actually, is that-. David Leary: They say public, though. That might be a typo on Intuit's part. Blake Oliver: Yeah, interesting. You have to be either a CPA, a CPB, have three-plus years of recent experience, or received a four-year business degree in accounting, or finance. David Leary: It feels like it's pretty broad at this point. Blake Oliver: Especially the three-plus years of recent experience, because you could've been doing it for three years, and have no idea what you're doing, still. That's not [cross talk] David Leary: -three years ago ... You're "I [00:10:30] did bookkeeping 25 years ago," and now you're jumping in ... Yeah, so, recent's ... They're finalizing those qualifications still, but they are really starting to build this into a real release, and a real product, and a real business model. Blake Oliver: Are these employees, these new ... There's 10 right now, in Boise, Idaho, running QuickBooks Live full time; full-time employees. Are these 40 new ones also going to be working there, or are they working from home? Because [00:11:00] I understand the program, ultimately, it's not going to be everybody in the office, right? David Leary: It looks like there's ... It's gonna increase from the 10 in Boise to 50, and then it says, "These 40 new hires will be remote staff. Some of them are tax experts who previously were part of the TurboTax Live team." They're utilizing some of the existing resources that they used with TurboTax Live, to reuse that staff. Blake Oliver: Mm-hmm. David Leary: I don't see a note, though, about it, cuz I think- Blake Oliver: Here it is ... David Leary: -Rich Preece said they were gonna do some payroll employees [00:11:30] in Reno, as well, but I don't see any note about that in this post. Blake Oliver: It says here, at the end of the section about the new employees, that the 40 new hires will be remote staff. There's gonna be 10 in Boise; 40 new ones who are working remotely. That's a pretty fast growth rate. It looks like they're still on track to launch the program in, what is it, very beginning of June? I think end of May is when they're going to start advertising it, right? David Leary: Yeah, it says May 28, they're launching. Blake Oliver: Yeah. David Leary: They're going much bigger, and it's gonna for [00:12:00] $400 a month, but they're gonna still limit who can see this, and who can purchase it through that test. Then, on June 3, they're going to launch a much bigger test on QuickBooks.com. Blake Oliver: It looks like the way it's gonna work is that they're going to be advertising on QuickBooks for both new customers of QuickBooks, as they sign up, and existing customers. As soon as they hit a certain number - which they haven't said what that is, but they'll hit a certain number of new customers - the [00:12:30] program will revert to the test, where they'll just collect contact information; you won't actually be able to purchase it. David Leary: I'm wondering what that number ... What do you imagine that number is? If you have, now, a total of 50 people doing QuickBooks Live, what do you think that realistic number is? It's not like a full bookkeeping service, so, what's the ratio, do you think? Blake Oliver: No ... I don't know. If I had to just guess, at $400 a month, maybe a bookkeeper could handle 30 clients? Probably [00:13:00] more. Again, it depends on the actual scope of services, which we don't really know what that is. We've seen what's been advertised, but I don't even think Intuit knows exactly what the scope is going to be. Well, I guess they must, if they're launching the program, but it's not really clear, so, it depends, right? If it's just helping people on demand, then, theoretically, you could have hundreds of clients per bookkeeper, because it's just a matter of making sure there's enough time in their day to help people. If [00:13:30] it's stuff like reconciling the bank accounts, when they're not online, and producing reports, and corresponding via email with them, that's a whole different beast. David Leary: That's what's interesting about this. How much of it's gonna be where you just pop in on video, ask a couple questions, get a little bit of assistance, and how much of this is gonna be it's kind of like a bookkeeping service? Blake Oliver: Yeah, but [cross talk] David Leary: That will just run with ratios. Blake Oliver: -my just guess, based on my own experience running an online bookkeeping company, doing similar stuff, is they could probably have at least 1,000 customers [00:14:00] with ... Well, actually, it's 50 employees, right? Maybe somewhere between 1,000 and 2,000 customers, that's my guess. Still small in the big scheme of things, but, hey, they could ramp up pretty quickly. I could see- in a year, I could see Intuit having 10,000 customers on this program ... 10,000 times 400 is a lotta cash, right? That's a pretty big business, already, there. David Leary: Yeah, and [00:14:30] part of this post, actually, is encouraging people that are reading it to go get your re-certification for QBO, because the date of July 31 is fast approaching, and it has all the links to Accountant University, ProAdvisor Training tab, virtual conferences, and then, the in-person trainings that you can do. They're really encouraging people to make sure your certs are up to date, because, you're right, I really suspect this is going to explode, and when it does, Intuit's gonna wanna onboard lots of ProAdvisors to this, as fast as possible. The last thing they wanna do is have a [00:15:00] hurdle of, like, "Oh, gosh, all these other ProAdvisors let their certifications expire, or this happened, or this happened ..." I can see why they're pushing people now, so when that demand has to be met, people's certifications are ready. Blake Oliver: Yeah, and if you are a part of this program, or you have applied, or you have information, the one thing that I really wanna know is how much are these ProAdvisors getting paid that are part of QuickBooks Live? I'm very curious to know what that is, so, let me know. All right, moving [00:15:30] on to more follow up, we just talked about QuickBooks Live- David Leary: There's more follow up for Intuit, and the Free File Alliance. I think you have some news on that? Blake Oliver: Yes, more Free File. ProPublica got a hold of an internal video from Intuit CEO Sasan Goodarzi to, it looks like, the entire company, talking about the whole Free File thing, all the coverage. David, I take it you have watched this [00:16:00] video. What's the news here? David Leary: A) I think the news is, in itself, this video being made, and this video being released. According to ProPublica, this is an 11-minute video sent to Intuit employees. It got leaked. Part of me wonders was this made specifically ... I'll rewind for a second, all right? At this point in the game, for Intuit, and the ... If ProPublica is reporting on people's meeting notes from a decade ago of somebody making a joke about Free File Alliance, if [00:16:30] you made a video like this, and sent it to your employees, aren't you under the expectation that it's probably going to get leaked to ProPublica, at this point? Blake Oliver: Yeah, I think that's a fair assumption. David Leary: Part of me wonders was this made on purpose, because knowing it was gonna get leaked? That way Intuit's kind of controlling their own message, at this point. Blake Oliver: Why not just make a video for the public? Why make an internal video? David Leary: That's confusing, because I think I saw a comment about this that- about the video. It says, "Intuit's spokesman said 'The [00:17:00] video is part of our commitment to an ongoing dialogue with our 9,000 employees and reflects our culture of transparency. We stand behind the video as a clear description of our actions - as being both appropriate, and consistent with our values.'" It's funny that the Intuit spokesperson here on this that's quoted didn't say, "Oh, this shouldn't have been leaked; it shouldn't have been this; it shouldn't have been this ..." It's just like, "Okay, it's out there, and this is what it is." You're right, it's this weird ... I almost feel like knowing this was gonna get leaked, probably, why make [00:17:30] an internal ...? Just make a public video to all Intuit customers, or something. Blake Oliver: Well, let's actually talk about what's in the video [cross talk] David Leary: What's in the video, because that's the yes ... Blake Oliver: That's what really matters. David Leary: That's the questionable part, maybe, possibly, yes. Blake Oliver: This is interesting to me. We only have- they didn't release the ... ProPublica didn't release the whole video. Oh, they did release the whole video, but they also have clips in this article on their site. They start out with a quote from Sasan about the context in which these accusations [00:18:00] are being made. He mentions a "single publication ..." Sasan Goodarzi: "... single publication that has written 22 stories challenging our company over the last five years. Each of these articles have been written and published in the context of a specific wider political agenda. That agenda is to create a centralized government system of pre-filled tax returns ..." Blake Oliver: "... tax returns." He's basically saying there that ProPublica ... We assume he's talking about ProPublica has an agenda- David Leary: He could be talking about [00:18:30] us. He could be talking about us How egotistical of ProPublica thinking it's about them. Blake Oliver: Well, let's give it to them. Let's just assume [cross talk] that Intuit's CEO is not listening to The Cloud Accounting Podcast. I think it's interesting, he starts out by attacking ProPublica as being a political organization. Look, I'm not that familiar with ProPublica. I don't read everything they do, but they do say they are a not-for-profit, and they do investigative journalism to hold the politicians, and [00:19:00] government, and big companies accountable. I don't think they have an agenda to create a centralized government system of pre-filled tax returns. That just doesn't sound very fair to me. David Leary: Well, that could be some of the play that's coming down from Intuit management, possibly, because if you go back, last week ... Was last week the phone call with the TurboTax support person, or was that two weeks ago? Blake Oliver: Yeah, I don't remember. We didn't talk about that, did we? Maybe we did. I can't even remember at this point. David Leary: Yeah, yeah, there was the [00:19:30] ... ProPublica had an interview. They called in, or somebody called in to get a refund for their- Blake Oliver: It was a grad student [cross talk] who made, I don't know, $18,000, or something, so he's under that $36,000 threshold; called into TurboTax Customer Support, and recorded the call, and was trying to get a refund. The call, it doesn't go very well, or it doesn't look very good for Intuit, because the customer-service rep basically [00:20:00] repeats a bunch of false information about the Free File program and denies this guy a refund. David Leary: One of the themes that was in it ... There was a bashing of ProPublica ... I don't remember the exact terms, but the support rep made a comment about ProPublica was either coming after Intuit, or is fake, or had inaccurate information. This could be coming down from the top, yeah, that there's this theme of, "Hey, ProPublica is out to get Intuit. They're bad [00:20:30] news ..." Whatever the story is, but it does feel like that's a theme, and, you're right, that's a good observation that he opened the video with that. Blake Oliver: Yeah ... They're calling it fake news, or they're calling it political agenda, or something like that, which fits in with the broader theme of this video, and the argument that Sasan Goodarzi makes, which is essentially, he says that he denies that Intuit was, in any way, trying to hide the TurboTax Free File product, which is called Freedom [00:21:00] Edition, from the public. Let's see if I can find it here. Here's the quote about why Intuit was hiding the Free File product from Google, and other search engines. He says, "We implemented a multifaceted marketing ..." Sasan Goodarzi: " ... multifaceted marketing campaign for the product we offer through the IRS Free File program. One important portion of the campaign was search, and that included spending [00:21:30] money on paid search, and syndicating large amounts of content we created, like product differences, eligibility, requirements, and FAQs. We did this so that the right content would be more easily found by eligible consumers, and that approach worked, with our IRS educational content showing up at the top of the search results. To avoid confusion between the IRS Free File program, and our own free product, we [00:22:00] also decided to have the landing page for the IRS product we offer not rank in ..." Blake Oliver: " ... not rank in the search results." It just doesn't make sense to me. If their goal was to make it easier for people to get to the right program, then why not have that rank in search results? The argument is that ... It still doesn't even make sense to me. I don't know. David Leary: Yeah, the whole video ... Again, with the quote ... The headline really has this quote. It says, "Hiding [00:22:30] the Free TurboTax was in the "Best Interest of Taxpayers." It just doesn't come out well. It just doesn't. This whole video, the story; it just continues not to come out well for Intuit. The funny thing is nobody's talking about it, and Intuit talks about in the video that they are the ... More than any other tax-prep company combined, more people have done their taxes free, using TurboTax, right- Blake Oliver: Right. David Leary: -than all the other ones combined. Nobody's talking about that, obviously, because it's still, in the grand [00:23:00] scheme ... We've seen the stats; I think we've talked about that. It's like what? Three percent are only doing it, of the eligible people ... The whole thing's still not adding up, right? Blake Oliver: The fact remains that something like 100 million Americans qualified for the IRS Free File program, but only 2.5 percent of those people actually took advantage of it. ProPublica has screenshots of Google searches for [00:23:30] the Free File stuff through TurboTax. When you tried- this was before, obviously, the news all broke, but if you searched on April 15 for TurboTax Freedom Free File - Freedom is the brand name for the Free File product - the top link in the search results directs users away from the truly free product, the link provided by TurboTax. It makes sense that a marketing team would do this, if they are tasked with directing people into the non-Free-File [00:24:00] product. That's what they're gonna do, and they did it very successfully. I just don't buy it, and I don't think this is the right strategy. I think it would be much better for Intuit just to say, "Look, we screwed up. We're sorry ..." and move on, but, I don't know, maybe that's not possible. David Leary: In the ending quote, he talks about this, and I feel like it's one of those like, "I'm sorry that YOU did not understand." It's kinda like Joe Biden was apologizing for making people uncomfortable. "I'm sorry YOU were uncomfortable for the extended [00:24:30] hug I gave you ..." He finishes it, and I'll read the quote: "Our choice ..." Sasan Goodarzi: "... our choice around search was intended to be in the best interest of taxpayers, so they were more fully informed about their options, and could choose what they felt was best for them. But given the misinterpretation of our well-intended actions, we decided to remove the limitations we put in place ..." David Leary: " ... we put in place." Blake Oliver: To me, that's [00:25:00] what makes them seem guilty. If what you were doing wasn't wrong, then why change the code to un-hide the page? David Leary: Well, it's because you misinterpreted it, obviously. Blake Oliver: Well, if I misinterpreted it, and you did the right thing, then don't change what you did. That's basically- David Leary: Yeah, because now, I've educated you how you were wrong- Blake Oliver: Right. David Leary: -and now I'm gonna leave it ... That makes sense. Blake Oliver: If they were really gonna say, "We didn't do anything wrong," then don't change the page. If you really aren't doing anything [00:25:30] wrong, then why would you have to change what you were doing? That's why this seems kind of, you know, two-faced. David Leary: The crazy thing is Intuit coulda made a good video, and just released a real statement, and a better video. Now this is out, and it's kinda got spiced up, and quoted. Maybe the message wasn't delivered the right way. Now, Intuit's probably gonna have to do another iteration of some release. The story just keeps going ... I think if you contrast this, I feel like that's what QuickBooks Live was, for about eight weeks. It was just like this mess of stories coming out, and rumors, and this, and this. Now, they [00:26:00] communicate really clearly on the QuickBooks blog, about QuickBooks Live. There are obviously a lot of battles they're fighting the same time, but ... It is what it is. Even Accounting Today picked up on it a little bit. Accounting Today actually had a headline, which, I was actually surprised, in Accounting Today ... They have their "Tech Take," and their headline in their article is, "Intuit Grows More Defensive." Blake Oliver: That's my feeling. That's what I took out of this video. They're defending their actions; denying [00:26:30] them to their own employees. David Leary: ... This is a battle Intuit has to fight on many fronts. There's the news, and the PR/marketing piece of this. They're having to deal with, obviously, Capitol Hill, and Elizabeth Warren, and Bernie Sanders are jumping on this. Now, I think I saw there's a class action lawsuit from somebody. It just keeps stacking up. Blake Oliver: Sorry, are you talking about the lawsuit from the City of Los Angeles, or are you talking about a new one? David Leary: I think we talked about that last week, but there's a new [00:27:00] one. Blake Oliver: Oh, yeah, you sent that to me. David Leary: I think this is more, really, a class action suit. Blake Oliver: Right, to get a refunds. David Leary: To get refunds, yeah. . Blake Oliver: That could be very expensive for Intuit, because we're talking about 100 million Americans that qualified for the program. We don't know how many used the wrong product, but I imagine it's quite a few, and those people were spending, what? I mean TurboTax range is something like 60 bucks to 120 bucks per return; something like that. [00:27:30] Multiply that by millions, and millions of taxpayers - that's a lot of money. David Leary: Yeah ... If you just do fed-only, I think it's like 40 bucks. Then, it's like 25 to add on a state. That's where you get your 60 to 70, but this has nothing to a state filing. It's just the original. This story is not gonna go away. Everywhere, there's gonna be some new add-ons to it, but it's a battle that's on many different fronts, and it's a headache for Intuit right [00:28:00] now. Hopefully, we'll get the clear communication about this, and it won't be, you know ... Blake Oliver: I feel like we've beat this to a bloody pulp, so what else do we got this week? David Leary: Yes, what else? We're starting to get into earnings season ... Intuit's earnings are next week, so we, for sure, will be covering those next week. I imagine the numbers are gonna be crazy-amazing. The reason why is - my gut instinct on that is - you wouldn't be raising prices for QuickBooks as [00:28:30] much as they're raising- Blake Oliver: If you didn't have a good year. David Leary: -if you didn't have amazing numbers, right? Blake Oliver: Yeah. David Leary: I imagine the numbers for QuickBooks are gonna be amazing. Sage had numbers come out. Sage actually increased profit. What was the note on the Sage thing here? Blake Oliver: It's something like 18- did you say 18 percent? David Leary: 16 percent. It's because they've been getting more of their customers ... Even though they might be on desktop software, they've been pushing more to subscription-model billing, so- Blake Oliver: Subscription billing for the desktop software. David Leary: Desktop software, yeah. Blake Oliver: I feel like that's cheating, you know? Not fair. You're [00:29:00] getting the benefit of subscription billing, and you're not actually innovating in your product the way you really ought to be doing. I think I'd be kinda pissed off if I were a desktop customer. David Leary: We'll deep-dive on the Sage earnings, I think, next week, because I really think the bigger story is to look at Xero's earnings, Sage's earnings, and Intuit's earnings, all side by side. That'll really give us a feel of where are we in this cloud-accounting journey, right? Blake Oliver: Yeah. David Leary: How's it all stacking up? How's it all playing out? [cross talk] [00:29:30] Blake Oliver: -that we can discuss is Rod Drury's family - they're now billionaires on paper, because Xero's profitable, finally. David Leary: Yes, I saw that. Xero hit a profit. Xero's stock went up [cross talk] Blake Oliver: Is this their first profit? I think? I think it is, right? David Leary: I think so, or positive cash flow, yeah ... We can look at the slides a little bit. Xero definitely released their numbers. I think the story there is they are now at 1.8 ... I almost said billion. Gees, that would've been the wrong number. 1.8 million [00:30:00] global subscribers. Blake Oliver: Wow. David Leary: They've increased another 432,000 in the last 12 months. I thought the other part of that that was interesting was how that was in revenue. Blake Oliver: Well, and they only had - four years ago - 475,000 subscribers. In the last year, they added almost as many subscribers as they had, total, four years ago. That just shows the incredible growth of cloud accounting. David Leary: They've [00:30:30] been growing 35 to 45 percent, year over year, and I think QuickBooks Online has, as well [cross talk] It's kind of amazing. Blake Oliver: -more depending on the market, yep. David Leary: That brought their US subscribers, and we can talk more about this when we get the Intuit numbers next week, about their ... Their Australia, and New Zealand is at 1.08 million subscribers; UK is 463,000 subscribers, which is doing very, very well; North America still has not broken 200,000. It's 195,000 in North America. The rest of the world is at 83,000. Blake Oliver: Got it. David Leary: They continue [00:31:00] to dominate Australia, obviously, and their numbers in the UK are growing. It's interesting, cuz I think they released all these numbers; then, in the meantime, I think Sage had their Summit this week. Somebody at Sage, on stage at Sage Summit, said Sage is not gonna push their customers to the cloud. For me, I see that, and I'm just shocked because that's not a good business decision, if cloud software is growing at 40 percent [00:31:30] a year. Blake Oliver: Right. Well, maybe it's reactive, in that a lot of these Sage desktop customers are seeing what is happening with QuickBooks Desktop, and people feeling like they're getting forced into online. This is a way to appeal to those folks, but it's not, I don't think, a winning long-term business strategy. David Leary: Yeah, and I understand forced migration, absolutely. You don't wanna force-migrate people. That's always the worst. It never works out- Blake Oliver: I think that's what she was [00:32:00] criticizing, or defending ... Or just avoiding- David Leary: And, very well, maybe on Twitter, the whole context was left out, but, yes, a forced migration, I totally agree with; that's always bad for everybody involved; but to not push, and prod your people along the way ... This is why I can't wait til we see earnings next week, because I know Xero had very strong UK growth; I suspect Intuit ... Because previously, Intuit had [00:32:30] pretty strong UK growth. It'll be interesting, because if Xero, and QuickBooks Online are growing in the UK, they're getting those customers from somewhere. and they're all new, which means their probably taking customers away from somebody. Next week's gonna be interesting. We'll compare all these numbers. Sage also announced, the same day, is that they have a new US president- Blake Oliver: No, Xero did. David Leary: Tony Ward. Xero? What did I say? Sage? Blake Oliver: You said Sage. Yeah. David Leary: Oh ... Scratch that; rewind. Sorry about that. Blake Oliver: Xero announced that Tony Ward is joining the Xero family [00:33:00] as their new President of the Americas, taking the- occupying the spot that was held by Keri Gohman, who came from ... What's the bank she came from? David Leary: You're the Xero guy. You should know this history. I don't know. Blake Oliver: She came from a bank. Can't remember what. I apologize. Keri is now going to be taking the role of, what is it, Chief Platform Officer? David Leary: I think so. Yeah, it's Chief Platform Officer. Blake Oliver: That's really interesting. I wanna learn more about what that is. Do you know [00:33:30] anything about Tony Ward? David Leary: I think Matt Paff actually says it best in a tweet, but I was looking at Tony Ward, and it looks like he ... Canadian, and he spent a lot of time [inaudible] Microsoft background, et cetera, but he spent a lot of time in Australia, and New Zealand. I think Matt Paff actually summarized it best in his tweet. "Interesting move appointing another ex-Microsoft executive from the antipodes as head of the US. Tough job given the number of presidents Xero has had, but resumé doesn't speak to understanding the US market, [00:34:00] nor how to compete with the giant ..." That's in reference to the hiring of Tony award. Blake Oliver: Yeah, and this has been my problem with Xero, as a partner, even as an ambassador, is that I feel like Xero is run from New Zealand, from Australia, from the Antipodes ... What a wonderful word. The US market is so different. The executives there just don't understand the US market and haven't. That's why they haven't penetrated it, in my opinion. [00:34:30] Hopefully this is not going to be another situation like that, with Tony Ward, but we don't know him, and I actually really look forward to meeting him, hopefully, in person at Xerocon. David Leary: Yeah, hopefully we'll ... Maybe, with a little luck, we'll get him on the show. We'll get a little in-person interview, with a little bit of luck. I mean, obviously, he's gonna be very busy, and very in demand, with people trying to meet, and talk to him. Yeah, we'll be there, and we'll try to interview while were there. I think that's it, as far as the big-player news. Sage released a [00:35:00] nice survey - their Firm of the Now survey. Blake Oliver: What's new? David Leary: What's new in the firm of now? I don't think ... I feel like the numbers are not exciting, or disappointing. What I mean by that is 90 percent of all the accountants in this survey believe that there's been this cultural shift in accountancy, and it's changes in- Blake Oliver: Cultural shift ... David Leary: Yeah, changes in how people are doing hiring practices, business services; just attitudes towards technology. Everybody really [00:35:30] believes there's a shift happening, but when it comes to the nitty-gritty, and the individual questions ... For example, US accountants - they still identify themselves as number-crunchers. Blake Oliver: Hmm, really? David Leary: An overwhelming majority - 71 percent - view themselves as number-crunchers that only focused primarily on reporting, versus consultative work. They said that the most common reason for remaining in that role of number-crunching is [00:36:00] there's internal resistance to change, and the lack of tools, and technologies to execute on such services. They surveyed 3,000 people. That's a lot of people saying they don't ... Tools, and technologies are not helping them get out of this number-crunching role into more consultative work. Blake Oliver: 90 percent say there has been a cultural shift in accountancy, but only 29 percent see themselves as something other than number-crunchers, so there's [00:36:30] a big gap there. David Leary: Yeah, and things are changing ... There's a lot of different stats that come out of it, and we'll have that in the show notes. The other one that really struck me was the diversity. This survey is really identifying that nobody's really addressing diversity in their practices. Only 30 percent of firms say they've actively- they're actively seeking to diversify their workforce. Only 28 percent have a written policy on diversity, and inclusion, and even fewer, 23 percent, have offered training, [00:37:00] or have altered any policies, or procedures to promote diversity, or inclusion. These numbers are really, really low, when it comes to diversity. We've talked about this on previous episodes, and I thought that was ... That's why I said this survey ... It's good numbers; it's good data; people should look at it, but it's kind of depressing numbers a little bit. Blake Oliver: Well, yeah, but I'm glad that this exists, because I think those of us who have spent some time in big firms, in particular, which tend to dominate accounting in this country, [00:37:30] and I imagine that those firms are well represented in the survey ... This isn't surprising to me. Here's another stat; I don't know if you've mentioned this one: 62 percent of respondents agree that today's accounting training programs will not be enough to run a successful practice by 2030. That's 62 percent; more than half say that we're not training accountants the way that we need to be doing it. It's good news, though, for folks who are listening to the podcast, who are investing in their own education, and training, because there's just a ton of opportunity, because the rest [00:38:00] of the workforce is not keeping up. David Leary: You're only competing with the forward-thinking 30 percent of the workforce. Blake Oliver: Yeah. I always say the reason that I enjoyed some success when I started my business is because everybody else was so terrible; not because I was so great, necessarily. It was my first business. I didn't know really what ... I'd been doing bookkeeping work. I was in school for accounting, going back to school to get my [00:38:30] CPA, so it's not like I even had my credential yet. Just because I was trying something new, and taking a different approach, my clients loved that, and we were able to grow very quickly. I always say that in a properly functioning market with firms that are actually doing the right thing, I shouldn't have been able to win business from them. Just both a good thing and a bad thing. David Leary: I see your point, because you're like, "Hey, I was playing the cello last week, but now I wanna do your books." [00:39:00] Blake Oliver: Yeah. David Leary: -and you got people's ... You got business. How is that possible [cross talk] Blake Oliver: You know how you like to point out those ads online, on Facebook, that say, "Doesn't matter if you don't have any credential, you, too, can run a successful accountancy practice!" David Leary: Did you take one of those courses? If not, you should create a course, actually. Blake Oliver: Yeah. There's just so many traditional accounting firms that aren't innovating in any way. I was competing against firms where the way that they did their bookkeeping for their clients was that the clients had to print out their bank statements, and [00:39:30] then write down, on the bank statement, in pen or pencil, what everything was for; then, to fax that into the office, where a bookkeeper would then code it into a desktop-accounting system. David Leary: Oh, so the minute you came in, and said, "Hey, I'm gonna put you on Xero," you just blew their minds, these clients. It's like, "What?!" Blake Oliver: Yeah. He said, "Well, how am I gonna code the transactions, or categorize them?" and I said, "Oh, you're not going to. I'm going to do it based on the bank-statement description, and a bunch of rules. Then I'm just gonna send you the 10 percent that [00:40:00] I don't know how to code." I could see his brain explode inside of his skull; he was so happy. Yeah, it's not like it's that hard to impress people. David Leary: These people in this survey saying they don't have access to this technology, is it just because the firms they work out aren't giving them access? Blake Oliver: I think so. I think that's probably part of it is that, at a lot of firms, it's still top-down. If you want to use something new, you gotta go to IT; you gotta get approval; you gotta get budget. It's not grassroots, [00:40:30] which is where the innovation happens. It's at the partner level, and those people are making lots of money. That's the problem is traditional accounting firms are still making lots of money. I think the guys - mostly guys - running those firms are just riding out their- until retirement. That's why they don't care that they're not prepping people to prepare them for 2030, because- David Leary: They're not gonna be around. Blake Oliver: They're not gonna be around. David Leary: Yeah, that makes sense. Blake Oliver: What they don't, I don't think ... What they don't realize is that they aren't gonna have a buyout. If [00:41:00] their firm doesn't continue to exist, I don't know how their retirement plan works. Maybe they're just not thinking that far ahead. David Leary: We talked about Rod Drury, and how he's a billionaire. Blake Oliver: Yeah. David Leary: He might have some issues, because you have an article about another billionaire, right? Blake Oliver: Yeah, which one are you referring to? David Leary: Warren Buffett, I think, right? Blake Oliver: Oh, yeah, Warren Buffett. We talked, maybe it was many months ago, I think ... Maybe it was in January, after Q4 earnings. Warren Buffett got a [00:41:30] ton of press because he was complaining about an accounting-rule change. When Warren Buffett complains about accounting, everybody listens, right? In the recent quarterly earnings for Berkshire Hathaway, net earnings came in at a whopping $21.7 billion. That compares to a $1.1 billion loss a year ago. Incredible change, right? Normally, you would think Warren Buffett's gonna be super-happy. He actually said, "No, this [00:42:00] is ... Don't pay attention to that number.". He actually told people to ignore that number, because, during the period with the $21.7 billion net earnings, $15.1 billion of that was due to unrealized gain on its stock portfolio. This new accounting rule that Buffett doesn't like is that unrealized gains and losses on these stock holdings have to be included in net income. [00:42:30] He says, "That's terrible, because I am I am holding these stocks long term. I don't think about this on a quarterly basis. When you include the unrealized gains, and losses, you're just distorting the true operating income of Berkshire Hathaway." So, every quarter now, he's telling people, "Don't look at that number. Just look at our operating revenue." David Leary: Yeah, he has an audience; he has eyeballs, right? Blake Oliver: Yeah. David Leary: He's very influential. Is this a political game? Is he starting to put [00:43:00] his money where his mouth is? Are there certain people on both sides of the aisle that agree with him on these tax policies, and he's donating to their campaigns? Is it crossing those lines yet, or ...? Blake Oliver: Well, accounting-standards changes aren't supposed to be political, and that's why we have non-political bodies that create the rules. I just think that they screwed up in this case. Accounting rules are supposed to exist to provide meaningful information to investors. When one of the world's greatest investors says [00:43:30] that it's a bad rule, maybe we should listen. Look, I'm not an expert. I don't- I just know enough GAP to pass the CPA exam, because that's not my thing. I do tech, but something feels wrong to me about this - including unrealized gains and losses in net income. Just think about it from the perspective of owning a house, which is something I'm relatively new to. If you look at- if you calculate your net wealth, and you look at [00:44:00] your home on paper, when the housing market goes up or down, if you included that in your ... If you look at that on a quarterly basis, that could distort your view of your wealth. A house isn't something that you're gonna sell when it goes up or down. You're holding on to it long term. It's not a short-term investment. It just doesn't ... It's paper money. Until you actually sell your house, you're not ... David Leary: Hence the name 'unrealized gains,' right? [00:44:30] Blake Oliver: Yeah. David Leary: Obviously, when they've created these standards, and they created this concept of unrealized gains, and named it that, they're not realized. Trying to slap taxes on it is ... Yeah, you're right, something's not reconciling in that decision. Blake Oliver: Anyway, the bottom line is useless at this point. It just makes things more complicated for people. If you are listening, and you know more about this than I do, and you have a particular take on it, I would love to hear from you, because [00:45:00] I just can't make any sense of it. Is there a good reason for this? Is Warren Buffett right? Is he wrong? Let me know. David Leary: Got it. I just have one more article; that's it this week. I finally feel like I have validation of my niche soapbox I've been on. I've always been like, "Going niche enables everything," right? Riches are in the niches. Blake Oliver: You've been preaching this for a decade now, right? David Leary: Eight year, nine years .... Yeah, it's been a long time. I was very, very proud, the Journal of Accountancy actually had - and this in the printed version - they [00:45:30] actually had a spread about developing your own specialized niche practice. The photo in the spread was Chris Farmand. He has a CPA firm out of Florida that only focuses on breweries. It's called Small Batch Standard. I've had Chris as my poster child, in every one of my slide decks ... It just feels like great validation that people are starting to realize that guys like Chris are crushing it. [00:46:00] Blake Oliver: That's awesome. David Leary: Right? When I says riches are in the niches, Chris is getting ... You can't fill out his Contact Us form on his website, if you don't put in your brewery name. Blake Oliver: Right, yeah. David Leary: He's limited it to just brewers filling that website out. He gets 40 inbound inquiries a month. He only takes one new client a month, because he's really specialized. They're not just doing the bookkeeping, and the accounting for the brewery, they're helping the brewery grow. He's [00:46:30] an expert in everything there is to run a brewery, and so, he's had a lot of success because of that. This article actually covers four niches that are in there. The other one that was in there is ... What is the name of their firm. They were- Blake Oliver: Genske, Mulder & Company? David Leary: Yes, that's the dairy one, right? Blake Oliver: Dairy-farm accounting? David Leary: Yes. They specialize in dairy farms. That's it. They've grown ... They have 80 employees, and 30 [00:47:00] partners. Blake Oliver: That's fantastic. David Leary: All of you have to ... If you haven't done the niche thing, go read this article. I would really encourage you to take those next steps, because that's where there's so much upside. It's probably a situation like yourself, right? You were saying nobody was doing anything, so the companies was easy. Blake Oliver: Right. David Leary: If I'm a brewer, and my accountant doesn't know anything about my brewery business, of course, somebody like Chris is gonna come, and steal our business; or if I'm a dairy-cow farmer ... I'm sure, if I'd go hire you, Blake, you probably don't know anything about dairy [00:47:30] cows. I don't know. Of course, I'm gonna pick an accountant that does. Blake Oliver: I couldn't agree more. Fantastic. This is called, "Developing your own specialized niche practice." It's in the Journal of Accountancy, and the link is in the show notes. David Leary: It's dated May 1, but I think the printed edition was May 1, and it took a little while for the e-version to get out, apparently. They publish first of their magazine, possibly. Blake Oliver: Well, David, that's all I got this week. If people want to get in touch with you online, where should they go? David Leary: Best way is probably Twitter. I'm @DavidLeary. [00:48:00] Blake Oliver: And I'm @BlakeTOliver. We look forward to continuing the conversation on Twitter, and on our Facebook page - Cloud Accounting Podcast. Just search for that in your Facebook search bar. I'll see you next week, David. David Leary: Yeah, and we have another Facebook Live Bonus Episode coming up, so definitely go to the Facebook page to check that out, and RSVP. Blake Oliver: Oh, yeah ... All right, see you soon. David Leary: All right, later, Blake. Bye everybody. Blake Oliver: Bye.