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$95 Million Missing—and Still a Clean Audit? · The Accounting Podcast

• There may be errors in spelling, grammar, and accuracy in this machine-generated transcript. Blake Oliver: [00:00:05] Guess who doesn't know how much partners make at their firm? Partners at their firm? You read that correctly. Almost a third of partners admit to not knowing how much a partner makes at their firm. David Leary: [00:00:17] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:25] Hello, and welcome back to the Accounting Podcast, your round up of news in the accounting profession. I'm Blake Oliver. David Leary: [00:00:32] I'm David Leary Blake. Do you enjoy your holidays? Blake Oliver: [00:00:35] It's been great. We've just been staying at home, seeing family. Um, how about you? David Leary: [00:00:40] I we had some people over, kept it down, you know, kind of a open house type of Christmas Eve thing. But a discussion took place at my house that is really to the show. Mm. So family friend owns some gourmet sandwich shops here in Tucson, and he gave me the lowdown. How? They literally don't have any pennies left. And you can't get pennies from the bank? Inc.. Blake Oliver: [00:00:59] No, no. No pennies. Why? David Leary: [00:01:01] Because the government's not making pennies. Like there's literally no pennies. So you can't do retail transactions because the taxes and stuff. So you have to basically round everything to the nearest nickel. Blake Oliver: [00:01:13] Mhm. David Leary: [00:01:14] And because the federal government hasn't provided any guidance on this yet the way the rounding should be. Uh point of sale terminals like toast just has an FAQ and they basically are telling people to create a discount item. So so you ring up the item put a discount in. So that way when it calculates the tax it comes out to an even nickel either 0 or $0.05. Um, but toast might have to address this properly now because square is piloting a new cash rounding feature for its US sellers. So square apparently has experience because, um, Canada and Australia have already phased out their pennies in the past. I did not know this, so the square point of sale already knows how to do these adjustments. And but this is crazy. So square admits one fifth of all the transactions on square is still paid in cash. Blake Oliver: [00:02:00] Wow. One fifth. Well, that makes. David Leary: [00:02:01] Everywhere. Blake Oliver: [00:02:01] Because. David Leary: [00:02:02] There's a lot of square transactions. Blake Oliver: [00:02:03] It's a lot of like, uh, retail on the on the street, like street food, like. David Leary: [00:02:08] But a lot of it. Square's whole thing was the little dongle, right. Blake Oliver: [00:02:11] Like original. David Leary: [00:02:12] Tap. Blake Oliver: [00:02:13] Yeah. David Leary: [00:02:13] Yeah, yeah. And but one fifth is all cash. But this is just a lack of the government and it just doesn't. I think somebody screwed up here. Um, I saw another article where the Treasury said there are 300 billion pennies already in circulation, far exceeding the amount needed for commerce. But obviously this is not true because businesses all over America are listeners. Clients do not have pennies to use in transactions. Now, the tech companies like this because this drives people to credit card usage, right? Right. Ultimately. But do we benefit from that? What do we save a couple 100 and a couple hundred million dollars by not printing pennies? Americans paid $172 billion in credit card fees like transaction fees, swipe fees. Blake Oliver: [00:03:01] Yes. David Leary: [00:03:02] So are we really saving any money by not making the penny here? Blake Oliver: [00:03:06] Hmm. David Leary, penny restoration lobbyist. David Leary: [00:03:11] Well, I was thinking in this. Should this be a good riff off of you, they should treat it like the forever stamp. You know how you can buy a stamp? And if they raise the price of stamps, your stamp still good forever? Yes. Like maybe the penny. They could just say pennies are worth a nickel now. And just. That's just it. And that way people start using them again. I don't know. I don't know where this 300 million pennies is at on people's refrigerator count jars or something. And nightstands. Where's this money? Where's the where are the pennies? Blake Oliver: [00:03:38] Maybe, maybe the pennies were on Evolve Banks balance sheet, because evolve Bank managed to lose track of $95 million a couple of years ago, and still hasn't quite found it. That's my top story. This week is about the $95 million that went missing at evolve Bank, and how the auditors still signed off on the financials, even despite that. Um, we'll get into that has a lot of, uh, downstream. It had a lot of downstream effects on fintechs and, uh, all of the all the apps, the apps that are a bank now that we're using, uh, Synapse and Evolve and their relationship. I've also got a story about, uh, my top my favorite LinkedIn post of the year, um, about how much partners make at accounting firms. Should we do semiannual reporting instead of quarterly? Uh, a bunch of app news. But first, David, let's thank our sponsors, who are our sponsors this week. David Leary: [00:04:39] This week we have cloud account and staffing and on pay and earmark. Can't forget earmark. Blake Oliver: [00:04:45] Want to hire remote team members but dread high pressure sales calls and commitments before you've even reviewed candidates. The good news is you can now review potential candidates without any sales calls or commitments. Cloud Accountant Staffing has just launched their candidate portal where you can browse resumes, intro videos, assessment and personality test results any time of the day or night. No sales call, no pressure, no commitment. The candidate portal is updated daily and all candidates are available for an interview within 24 hours. You can browse candidates by both roles and experience. Want a bookkeeper that knows QuickBooks and has experience with nonprofits? You can drill down to find those candidates. How different would your firm look in 2026, and honestly, how different would your life feel if you could instantly add 40, 80, 120 hours of extra capacity every single week to explore the new Cloud Accountant staffing candidate portal? Head over to The Accounting Podcast Ohmydollar.com/support. That's The Accounting Podcast forward slash. Welcome to our livestream viewers. Giles says. Hi, Blake and David from New Zealand. Matt says I have a decent amount of those pennies in my kids. Save a penny bottle. Boring accountant says no pennies. Brick and mortar shops should stop pricing items base plus sales tax and instead price out at the final. Instead, price at the final out the door. Rounded price like in most places around the world. We've got Brandon watching from Goodyear, Arizona. Light Em Up is here live. Boring accountant had, uh, for coffee emojis earlier. Yeah. Great to see you all. Uh, this is our last live stream of 2025. We've also got some predictions. David. David Leary: [00:06:27] Predictions for 2026. I got summary our 2025 summary of what we spoke about, some of the things that came out of our mouth that there's one I want to really touch on, like, I think you nailed. And I think it's going to be the biggest predictor, uh, something you said. But yeah, we have our other predictions I do want to get into. You mentioned you have an article about salaries for partners. Blake Oliver: [00:06:46] Yes. David Leary: [00:06:47] Like I also have from workday, the 2026 Accounting Salary Guide. So be nice to riff on both those. Blake Oliver: [00:06:54] Well, we can hit both of those. Let's first talk about this evolve Bank audit mess, which I've been enjoying, uh, following this story for years now. And so has Jason McCullough of, um, uh, what's the publication he has? It's, um, a Substack fintech Business Weekly, and he did a Freedom of Information Act request from the Federal Reserve, uh, about the evolve Bank and trust, um, audits from 2021 to 2024. And he's interested in that because of the whole backstory about what happened with Evolve and Synapse, which we talked about on the show a lot when it happened. Yeah, when synapse collapsed. But I just want to give a recap of what what happened for our listeners who may not be that familiar with it. And I needed one too, anyway, because it's been a while. So, David, feel free to fill in the blanks here if I miss anything. David Leary: [00:07:52] But basically players, we have players, so we have evolved Bank, who's a tech bank that all the tech companies were trying to build off of. Blake Oliver: [00:07:58] They're a chartered bank. Yep. David Leary: [00:08:00] Chartered bank. You have synapse which made API's to help apps do this in a much easier way. And then you have the front end apps. Some of them are for personal finance, but some of them were apps we use in our space. Blake Oliver: [00:08:10] Correct. So synapse was not well known by the public because they were middleware. Banking as a service is what they called themselves, and they created those connections to traditional banks like evolve that allowed fintechs like Yotta and Juno, these apps that you could get on the App Store to then offer deposit accounts and transactions, and synapse facilitated all of that. Now, synapse wasn't a bank itself. They didn't offer FDIC insurance. It just passed deposits through to banks like evolve, lineage Bank, AMG National Trust, American Bank. So they are. David Leary: [00:08:49] If we wanted to add banking features to that earmark app, I wouldn't have to go make a relationship with a bank. I would use a tool like synapse to to do this. Blake Oliver: [00:08:57] Exactly. Everything was working great until April 2024, when synapse filed for chapter 11 bankruptcy and shut down operations. And because synapse had been the middleware and it was managing all the ledgers and the transaction data, the banks and the fintechs, all of a sudden they didn't know where the money was. They lost clarity on where the customer funds were actually held, because Yada and Juno, for example, had been trusting synapse to manage the money. So you would be in your app, yada, as a consumer, and you'd see your balance, but you didn't actually know what bank that money was at. Synapse took the money and put it with a bank, and they were supposed to be reconciling all this stuff. They were the the they were like a ledger. And evolve became the biggest bank involved in this scandal because they froze customer withdrawals from synapse linked accounts. So if you had Yotta or Juno, evolve was the bank that held those deposits. Evolve said, well, we don't trust what synapse is saying. We're going to just freeze all the funds. We're not giving you the funds back. And so tens of thousands of end users were unable to access their money, sometimes for months. Blake Oliver: [00:10:11] And for a lot of users, they had a lot of money in these accounts. Like imagine you just losing access to your personal checking account and not being able to withdraw funds. Tens of thousands of people, had that happen, they had no idea that this was related to a synapse issue because they never even heard of it. So synapse collapsed. The partner banks started looking into synapse ledgers and discovered major discrepancies. The balances that synapse was saying were in these banks didn't match the actual funds held by the banks. So your Juno account, David, might say $10,000. And the bank that's supposed to have the $10,000 says we don't have it. So evolve froze all those accounts, and the estimates at the time were that it was 65 million to $96 million of customer funds. That couldn't be traced to any bank. They didn't know where it was. Synapse had done such a bad job of doing the accounting that the banks, that they lost the money, they lost track of the money. So now there's all these. David Leary: [00:11:14] Lawsuits and reconciled. And I'm trying to find when I covered that months, it almost feels like a year ago we covered this. But yeah, the money never matched up the what what the apps thought they had at at the bank with evolve said they had what synapse said was there. None of it added up. And they just basically flat out had horrible record keeping at the end of the day. Blake Oliver: [00:11:36] So this reporter, Jason McCullough did a Freedom of Information Act request with the Federal Reserve and got evolve Bank and trusts part 363 audits for 2021 to 2024. Remember, they collapsed in 2024. So those 21, 22, 23 audits, uh, like those should give us some information like, you know. Right. Like where's the money? Right. That isn't that the job of the the bank is supposed to produce a balance sheet, and we're supposed to be able to, you know, confirm. David Leary: [00:12:11] Are these audits of evolve or the audits of evolve? Evolve. Blake Oliver: [00:12:15] Remember, because remember, evolve is responsible for for. David Leary: [00:12:19] The actual. Blake Oliver: [00:12:20] Fund funds. Synapse was just a banking as a service intermediary that maintained ledgers. So if you think about it, what it evolved done is they essentially outsourced the job of maintaining these subledgers to synapse, which didn't do it right and evolved just said, you know, here's this money. That synapse is essentially accounting for us. It's almost like they had outsourced the accounting right through a through a tech company. David Leary: [00:12:47] Yeah. We just have this lump sum over here. Blake Oliver: [00:12:49] Yeah. David Leary: [00:12:50] And we don't really know whose it is, but synapse does. Blake Oliver: [00:12:52] Exactly. So there's these subledgers for this account. That's how I understand it anyway. So despite up to 95 million in end user funds going missing or frozen, evolve had clean, unqualified audit opinions every single year, 21, 22, 23. And I guess even 24 after the synapse collapse when KPMG was the auditor. So what happened? How could this possibly happen? Um, like $95 million is a lot of money. Um, like, if it was in fact that much, then that would be I looked this up. It would be 6 to 7% of Evolve's total assets, likely over 100% of their annual net income, a double digit percentage of equity capital in some years. And typically, materiality would be 1 or 2% of assets. And this is way over that. Now I guess that 95 million that went missing might have been spread across a bunch of banks, but evolve was the biggest one. Yeah. So actually and it was 65 to 95. So it's that's on the high range. Right. But it's still a lot of a lot for a bank like evolve. So and like if it was in fact 6 to 7% assets that could threaten the solvency of the bank. So like it should have mattered. So anyway, going back to, you know, what? What, um, this reporter Jason McCullough discovered is that, um, you know, these type of audits, these three, six, three audits, they apply to banks and they include internal controls over financial reporting. Right. So the auditors are opining on whether the financials are fairly stated and whether the internal controls are effective. Blake Oliver: [00:14:44] So it's not just about whether the number on the balance sheet is right. It's whether the bank knows where the money is. Um, so apparently during the 2023 audit, this is the most damning detail in this LinkedIn post. Crowe asked synapse to confirm cash balances held at evolve. As of December 31st, 2023, Crowe was the auditor in 21, 22 and 23. I believe it's KPMG took over for 24. So in 23, Crowe is the auditor and asked synapse to confirm the cash balances at the end of the calendar year. Synapse responded with red flags or what should have been red flags. 113 accounts, uh, evolve listed that synapse didn't 29 accounts missing. That should have been their accounts not included in their daily data feeds, and synapse general counsel asked to discuss this with Evolve's leadership, but evolve never responded. And yet, Crow still issued a clean audit opinion. And then KPMG took over in 2024 and also issued a clean audit. So like what happened here? Right. This was just a regular bank. It's not crypto. It's not. It's just complicated in the sense that they had this fintech working with this bank. But like were these auditors confirming the cash. Like why didn't they follow up on this. They got all this bad data back from synapse and they never it seems like they never investigated it and they just issued the audit opinion anyway. David Leary: [00:16:21] Because arguably synapse is possibly one of their biggest partners vendors customer service. However, they define synapses, right? A partner, a business partner like usually you have to reconcile. Start with the biggest ones right? And make sure all those reconcile out before you move on to just a it's material right. This is a material. Blake Oliver: [00:16:41] A material amount. And and I think it's a fair question as to ask why didn't the auditors dig in further, and why did they issue clean audits for all those years? And why didn't they? Why didn't they point out this mess before it became a mess that impacted the end customers? So that's the story of the $95 million missing and how you got. They still got a clean audit. David, shall we thank our next sponsor. And that's us. That's earmark. Earmark CPE go to earmark CPE. Com check it out. You can earn free continuing professional education credit for listening to accounting and tax podcasts just like this one. You can get the earmark app on the App Store for free, or you can go to Earmark app on your web browser. Create your free account and earn one continuing professional education credit for free every week for listening to podcasts. All you have to do is listen to a podcast, open the earmark app, find the course, take a quick quiz five question quiz for one hour of CPE. Pass it and you get your CPE certificate emailed to you. It couldn't be easier. There's some incredible shows on earmark in addition to ours. David. Got any favorites you'd like to point out for our listeners. David Leary: [00:18:04] At this time of the year? Oh, my fraud is always super popular. People want to be entertained. Keep things light. Oh, my. Fraud is really big. Uh, we have if you have, if you need if you're an old agent, we have tax in action. We have I'm blanking out. Blake Oliver: [00:18:17] Federal tax. David Leary: [00:18:18] Update updates. Blake Oliver: [00:18:19] By. David Leary: [00:18:19] Paget. Blake Oliver: [00:18:20] She counts. David Leary: [00:18:21] She counts. Blake Oliver: [00:18:22] We've got, um uh. David Leary: [00:18:24] Unofficial QuickBooks podcast. Blake Oliver: [00:18:26] The unofficial QuickBooks accountants podcast. That's a great one. Tax chats. So many great, uh, podcast episodes, thousands of courses to choose from. If you have a CPE requirement and you've been procrastinating, you can get unlimited CPE with earmark for the low price of $170 per year. David Leary: [00:18:46] And a lot of you are procrastinating because we did 4200 completions last week. Blake Oliver: [00:18:51] 4200 courses were completed on earmark last week. David Leary: [00:18:54] Last. Blake Oliver: [00:18:55] Week. That's incredible. What do you think it's going to be for the year? David, do you have an idea? David Leary: [00:18:59] We're probably getting close to 100,000 completions for the whole year. I think we're about to break the 200,000 overall total for earmark. But, you know, those early years were small. But now the volume is crazy. Blake Oliver: [00:19:13] David mentioned, um, IRS continuing education. You can also get your IRS CE done on earmark. Make sure you filter for the courses that qualify. It's only federal tax topics and ethics topics that qualify for CE. So not every course. All the other ones though qualify for Nasba CPE. We are a Nasba sponsor. And so if your state accepts Nasba CPE, which basically all of them do, you can earn all or almost all of your continuing ed requirement with earmark. David Leary: [00:19:45] And if you've already gotten your CPE, good job. And next year just do a little bit every week. You don't have to wait till the last week of December to knock out your CPE, which is 10% of you listening right now are scrambling to get your CPE done. Blake Oliver: [00:19:58] All right, David, I have my favorite LinkedIn post. I've got this article or this discussion about semiannual reporting. Where do you want to go from here? App news there's a new Xero homepage. You've got you've got some stories. David Leary: [00:20:12] You said you had the all about salary. Well it's. Blake Oliver: [00:20:17] About compensation. Yeah. So salaries are tied to it. David Leary: [00:20:20] I have one as well. Do you want me to go first? Blake Oliver: [00:20:23] Yeah. Go for it. David Leary: [00:20:24] All right. So workday, which is basically enterprise level ERP arguably there's a slant towards hiring, right. Uh, employee management managing your review process and its accounting and payroll as well. They kind of do a lot. But they created a blog post. It's called the ultimate 2026 Accounting Salary Guide. Now, what's confusing about this? It doesn't actually say where they got the data from. You would think because they're an HR app, they could use their own data. It doesn't seem like they got it from there. They may have just kind of probably, if I had to guess, used AI to harvest this from across the internet. The article. But the way it's written the article and this is why it's important for the show, it's really written. Written to win SEO searches and AI searches. So this is even though this post, who knows where they got the data from. It's going to become the data in the fact. So let's go through some of these, uh, salary ranges. So a senior accountant they are saying is from 75,000 to 100,000 110,000. Oh, sorry. I skipped staff account. We should start at the bottom. Sorry. Blake Oliver: [00:21:27] Okay. Staff accountant. David Leary: [00:21:29] Staff accountant, they're saying is 60,000 to 75,000. Senior accountant is 75,000 to 110,000. And audit manager or tax manager is 100,000 160,000. Plus a comptroller or assistant Comptroller is 110,000 to 190,000. Plus a CFO is 200,000 to 300,000. Now it looks like this is all internal positions, right? Uh, industry positions. Not what you'd get at a firm, but, you see, you have some information on partner salaries. Blake Oliver: [00:22:00] This is my favorite LinkedIn post of the year. I've been saving this one for a while. Chase Berkey, CEO and co-founder at Dark Horse CPAs, blew my mind with this stat that he shared on LinkedIn. I'm just going to read his whole post because I think it's so great. David Leary: [00:22:15] Okay. Blake Oliver: [00:22:16] Guess who doesn't know how much partners make at their firm? Partners at their firm? You read that correctly. Almost a third of partners admit to not knowing how much a partner makes at their firm. We've even talked with partners who don't know how much they themselves make, other than what they got paid last year, per their K1. How the hell do CPAs not know how much they make? Isn't that sort of what we do? It looks like the author was also surprised by this finding in their 2025 Accounting Today Salary Survey. As you might have guessed, it's not because of lack of competence, although a lack of assertiveness is a contributing factor, but rather a lack of transparency and clarity at the top of the pyramid. There's a black box at many firms in which partner comp is calculated and trued up against guaranteed payments slash salary annually well after the fact. At these firms, even if you understand how the formula works, you don't have visibility into or influence over the variables in the equation. Homework. As if a partner at an accounting firm, you can't confidently and cogently explain to a significant other slash good friend who will give you honest feedback, how much you expect to make or how your compensation is determined. Then you need to call a timeout and start asking some tough questions of the firm and yourself. Blake Oliver: [00:23:36] If you're a tenured senior manager and you haven't been given a clear roadmap to making partner, nor an understanding of how partner comp works, post promotion, push hard for it. And if you get the runaround with the proverbial kicking of the can down the road, this is what you should continue to expect when slash if you become a partner there. This isn't conjecture, but rather is informed by many real life stories we've heard directly from people that all have a similar flavor of. Quote. It's too busy right now. Let's talk after tax season, unquote or quote will provide more details. Once you're up for promotion slash become a partner unquote. Leave crusty firms join found partner with progressive firms that will actually be around by name in a decade. And the stat that Chase shared from this Accounting Today survey is the. It's a graphic below this post. And the graphic says, do you know how much a partner makes it your firm? Here's how many answer no staff. 85% of staff 85% do not know how much a partner makes seniors. It's actually more. 87% don't know how much a partner makes managers. It's 81% don't know how much a partner makes. And even partners, 29% don't know how much a partner makes. David Leary: [00:24:54] Now is this going to change with PE? Like is P going to put everybody everybody's getting the same salary across the board. Like the little back door scratching back stuff. Politics probably won't influence salary as much. Do you think it'll get more standardized across the firm. Blake Oliver: [00:25:08] Well okay. Let's let's think of the pros and the cons here. Pe will lower partner salaries because PE private equity has to earn a return. So they have to suck out a certain percentage of profits that would normally go to partners. Those now have to go to shareholders that are not partners. Maybe that will simplify things because let's say you have a firm that's completely private equity owned like a corporate firm. All the profits go to the shareholders, none of the shareholders. Well, I mean, you can have a mix, right? But let's say some of the partners are shareholders or not, but but then the partner comp would be very clear because the partner comp would just be like salaries. Yeah. Right now it's all mixed up. Right. It's like you get some as a salary or guaranteed payment. You get like some for your services, some is like a equity owner can be the calculations can be really complicated. So maybe private equity would move to make it simpler, which would then be able to make it more transparent. David Leary: [00:26:08] Yeah. Maybe because. Because right now you just don't get a flat salary. You're getting some profit share. You're getting maybe some incentives. And nobody really. That's why people don't even know their own compensation. Blake Oliver: [00:26:22] So that could be it. Um, but yeah, I mean, I think the big problem is just that, like the partners, it's almost like. Like, do partners want the staff to know how much partners make when partners make so much more money than the staff? David Leary: [00:26:40] I imagine it's not motivating. Blake Oliver: [00:26:42] But you would. But but it is motivating if you're trying to get people to stick around at your firm to become partner. So if you're not telling senior managers, like if you're not telling your managers how much partners make and giving them a path to get there to envision it, they'll leave. Like me. That's I left because I got offered a job in tech that paid like almost twice as much. And I didn't know how much a partner made, and nobody could tell me what the path would be like. So it was either leave now. It wasn't twice as much, but it was a lot. Okay. It was a lot more. David Leary: [00:27:23] I mean, it was during the heyday of a lot of easy tech money. Blake Oliver: [00:27:26] Right. So it was okay. What's the path here if I stay and what's the path if I go? And the path here was completely, like, unknown. There was. There was no timeline. There was no idea of what I would make. Actually, the one thing I did know is that the one young guy at the firm who was like my age, who had made partner, couldn't afford to buy a house in the neighborhood around where the firm was. That's all I knew. David Leary: [00:27:53] So you could you could work backward from that math? Yeah. I just knew, buy a house. Blake Oliver: [00:27:57] I just, I just I was like, well, what am I sticking around for, right? If I have to, like, commute on the 405 and it's not optional. Right. If I have to do that because I can't afford to live on the west side. Anyway, thanks for that post. Great content. Um, and by the way, if check out Dark Horse CPAs, if you're looking for an accounting firm with a different model for how they compensate partners. All right, David, you're next. David Leary: [00:28:27] Um, I'm an accounting firm that, uh, they took 18 months to inform their clients that there was a data breach. So sacks, sacks and new Jersey based accounting firm disclosed that they had a data breach in July 2024 that exposed personal information of a nearly a quarter million people. But the affected individuals were not notified until 18 months later. And the firm says that they followed the standard cybersecurity response steps here, essentially insisting there's no evidence that the stolen data was misused. So because of that, they did not let people know. So your identity gets stolen. People could be doing fraud with your identity for 18 months before the accounting firm lets you know. And what's confusing about this to me is all these firms have to have a wisp. There's laws to have a wisp. Blake Oliver: [00:29:17] A written information security plan. David Leary: [00:29:20] Plan. Right. So you have to have this wisp. But the actual things you need to do are not law like, you don't actually have to have a law or telling you to disclose. So some states do have laws, but it's very like without reasonable delay it's like wishy washy. So so the like we're focusing on the wrong thing. We're focused on the having a wisp not actually executing the wisp is an issue right. With firms. Blake Oliver: [00:29:44] Right. And it's very easy to create a wisp. You just have to write it down. It's even easier now with templates and AI. Just create one, file it away. You have it. But what's actually say that you did it and that actually goes back to this evolve slash synapse issue. And a comment here from V47014 who said did synapse have a SoC? If CRO pushed this through without affirmation on the effectiveness of controls? A confirmation would still not be adequate to cover the risk. And my guess is going to be yeah, I'm sure. I imagine I'm guessing that synapse had their SOC two, because it's not that hard to get a SoC two and a SoC two, according to my understanding, is really just a lot of documentation of the controls. But there's not necessarily any confirmation that those controls are being followed. So they could have had all of the documentation complete in order to get through a SoC, but were they actually following it? And that's like what you just said, David, that you can write it all down. David Leary: [00:30:59] They paid the money. They got the badge for their website, right? Blake Oliver: [00:31:02] Either you filled out all the forms that allow the auditors to sign off on this, but the auditors aren't actually making sure that you are. David Leary: [00:31:12] But even that, just how synapse made it easy for people to create banking services in their app. There's all these other companies that make it very easy to get SOC compliance. These other apps. There's like these middleman apps to help you get SoC compliant faster. Blake Oliver: [00:31:24] So so v4 v7 you say they do test controls for SoC one type two. Right. But like how much like how much controls is it really like could you basically be like synapse where you get your SoC two but then like later your bookkeeping all falls apart and you start mismanaging all these subledgers like at what? David Leary: [00:31:44] Like you just have to show one transaction, go through the system successfully, right? Blake Oliver: [00:31:48] Like how how much are these controls tested and are they tested after you get your SOC two. Like could you get your SOC two Seal and then you know your badge and then fail later. So how useful are these SOC two audits, I guess, is my question. Like when you see that stamp on a website, it should mean something, right? That's my question as an outsider. David Leary: [00:32:12] In Soc2 as a result of, um, Enron. Right. That's why we had to do all this. That sucks. Was that around before? Blake Oliver: [00:32:21] That sucks. Sarbanes-oxley was. David Leary: [00:32:23] Oh, sorry. Sorry. Yeah, sorry. My bad. Blake Oliver: [00:32:24] These are different. This is different SoC. David Leary: [00:32:26] This is different. Blake Oliver: [00:32:27] Socks and SoC. David Leary: [00:32:29] Soc. Yes. Got it. Blake Oliver: [00:32:30] I don't even know what SOC stands for. I just I just know roughly what it is. Maybe somebody can educate me. David Leary: [00:32:38] Had compliance. You're just doing some quick research. They had compliance for SOC two. But the reality is the controls just weren't really there. Right. Or failed afterwards. Blake Oliver: [00:32:48] Max says to my knowledge, the tests are based on a few factors, like automated versus manual controls and frequency of the control, which sometimes can be tested once, and if it passes, we deem no deviations. And SOC is service organization controls. David Leary: [00:33:06] We're probably gonna have to do that for earmark one of these days. So we should we could go through this journey and document. Blake Oliver: [00:33:12] System and organization controls. It's a framework that was established by the AICPA for independent audits, assessing a service organizations internal controls over sensitive data. Now we're going to have to get one too. That'll be an interesting experience. Okay. Should we do semiannual reporting. David Leary: [00:33:33] Well since we're talking about yeah because it's tied to a you go from SOC to Sox to reporting. Blake Oliver: [00:33:39] So yes that's the transition. Uh, Donald Trump earlier this year made headlines in finance and accounting when he suggested when he argued that we should move to semiannual reporting away from quarterly reporting. The rest of the world does this. We do quarterly reporting here in the US every three months. Companies have to issue financial statements, investor calls, all that stuff. The rest of the world tends to do it every six months. And the argument in favor of moving to semiannual reporting is it is less work because you only have to do it twice a year instead of four times a year, and that it doesn't, uh, that investors still have enough information to make investing decisions and that it moves the focus away further away from short term results on Wall Street to longer term benefit of the company. So CPE journal, um, published an analysis of whether this would be good. Like, would it be good for public companies to go to semiannual reporting? This is an article by Alan Reinstein, CPA, and Natalie Tatiana Turek, PhD, CPA. And interestingly, they highlight research from the UK that found that when they changed the reporting frequency requirements, it had virtually no impact on companies internal investment decisions. So internally, companies made the same decisions whether or not they were doing quarterly or semiannual reporting. They also looked at studies that found that quarterly reporting creates noisier data. That's a, quote, noisier data that benefits sophisticated investors while hurting everyday investors. Isolated events in one quarter can cause overreaction and short sighted decisions. So sophisticated investors can make use of the quarterly information, because they're better at smoothing things out and figuring out what matters. And it's the smaller investors who are hurt by quarterly reporting. They would actually benefit from semiannual reporting. David Leary: [00:36:01] So the smaller, smaller investor there's a plus. So the companies themselves, it doesn't seem to have an effect. But I imagine for companies it's actually better because just you're out of that cycle of like the closed cycle internally of this close every quarter. Blake Oliver: [00:36:17] And, you know, um, the Business Roundtable is an organization that supports this. They support less frequent disclosures. And I think I have to say, if I'm going to pick a side on this, I would support semiannual reporting, because we're always talking about in accounting how we have too much work and we're pressed for time. And what better way to give ourselves more time than to make it two times a year instead of four. Give us some breathing room. It doesn't. It doesn't hurt. It doesn't. I mean, the evidence seems to say that it's just fine to do it semiannually. David Leary: [00:36:57] I imagine it's one of those, like when you go from one kid to two kids. It's like five extra work. But imagine this is like it's the opposite division. It's two to report twice a year. You're just going to have a teeny bit of work more than reporting once a year versus. But if you have to do four times like that starts to add up, right? Blake Oliver: [00:37:17] Well, it's just so quick. Right. It's like the cycle just starts to repeat. It starts again immediately. And yeah, why do we do it. Maybe we can rethink this. We could do better work less frequently, like just focus, doing a better job on the two times a year that we issue financials and audit them, versus four times a year. David Leary: [00:37:38] Now in any of that data, does it, um, did they have any data on like companies playing less games with their numbers every quarter because like a lot of like you get in that habit and it's like a drug, like, why did I hit our numbers for the street? Now, we could hit their numbers next quarter for the street, next quarter for the street. And then company. And I remember Intuit did this. We had a CEO that came from GE and basically, um, forced everybody to take a vacation all the same week because then that would take that, you know, liability off the books, create a bunch of expense and like, you know, make things look a little better. And they forced everybody take a vacation because they were playing games to hit it in that quarter. They want to shift those expenses around. So I think that would be interesting. Like, are there less games played with these six month companies versus the quarterly companies? Blake Oliver: [00:38:25] We have a comment from Anastasia on LinkedIn. She says when we issue reports, even with non publicly traded companies, we are already late. In a sense it is what happened already and things could have already changed yesterday and today. So I cannot imagine skipping Quarterlies for SEC clients. This is definitely an area I disagree. Even the smart investor has the right to see what happened more frequently, frequently, and make their own decision. We are pressed for time, but we are always late. This is why I cannot agree. Well, I agree. We're always late, so why not try not to be late? Like if we. If we didn't do the quarterly reporting, could we be quicker at the biannual reporting? Because we have more time in between. David Leary: [00:39:11] This goes back to. You've talked about this many times. Does anybody actually investing off of financials because you wouldn't have ever bought Amazon stock if this was the case you would not buy. There's all these companies you would not own stock of if you used the financials. Blake Oliver: [00:39:26] But that's because GAAP did not understand and still doesn't understand subscription businesses and e-commerce in a lot of ways. Like like what Amazon was building was not something that traditional accounting does a good job of describing. But what you're saying is, is like, it's true and not true, right? So the financials are still really important. But what's happened is there's now just a lot of other information that's not in the financials. That's even more important. David Leary: [00:39:53] Yeah. That drives the demand right. Blake Oliver: [00:39:55] So traditional financial. David Leary: [00:39:56] Statements drives the demand. Blake Oliver: [00:39:58] My view is this because whenever I talk about this, it really pisses off auditors and comptrollers and CFOs who are like their whole career has been around generating and auditing traditional financials, GAAP financial statements. And to say that they're not valuable is like an insult. And so the answer is that they're not. They are valuable, but they haven't changed in like meaningfully in since like they were regulated since regulation came about after the Great Depression to establish all that reporting framework, FASB issues all these different like standards, but GAAP gap itself has not really changed in 100 years. So the financial statements are just as valuable as they used to be 100 years ago, but they're not more valuable. They haven't gotten better. And if anything, they've gotten more complicated. So you could argue that their value has decreased to less sophisticated investors who can't read through hundreds of pages of financials and figure out what's going on. Um, so that's the failing, I think, of the standard setters and the PhDs who are doing all this research into accounting that have completely failed to miss the massive shift in the economy from tangible to intangible assets. And gap does a really bad job of describing the economic activity of a business that is generating value from intangibles. David Leary: [00:41:30] Yeah, it's not a railroad industry business. Blake Oliver: [00:41:32] Yeah. Subscription businesses in particular like gap, great for railroads, great for factories, not great for Netflix. Not great for Amazon. David Leary: [00:41:43] There's probably no hope of that teaser. I mean, do you see this ever getting changed or is it kind of like it's just is what it is now and we'll just live with it. This like because people are figuring out how to compare oranges to oranges and apples to apples. I think it cannot widget based. Blake Oliver: [00:41:59] Yeah. I think well, it's it's it's not going to change if the profession has to do it itself. Right. Because there's just too many people invested in the current regulatory environment, like the regulators are not going to say, let's do less reporting because, yeah, that means less work for them. And that, you know, could be perceived as reducing their value. Like you're basically saying, hey guys, this whole quarterly reporting thing you've set up, it's not helpful and we need to do less of it. And no organization ever wants to shrink itself or shrink its responsibility. So it's not like the SEC is going to voluntarily do this or it's not like FASB is going to voluntarily simplify accounting standards or rewrite the language of accounting to handle intangibles like they're invested in what's already been built. So it takes somebody from outside who has a different view to suggest it. And that's what I like about Trump. Sometimes okay. You don't have to like the guy. But you can like I can like how he steps out of the box and looks at things from a different perspective. And that's what we need to be doing. But it's going to take it would take somebody doing it from outside to make it happen, like the profession is just never going to do it itself. There's like like the people running financial reporting in this country. I don't think anyone has any clue about this problem. I think they're just completely obsessed with the rule making. And like the the nitty gritty, they have like no idea that any of this is going on. Or if they do, they don't talk about it. You know, they just FASB just makes like more lease accounting rules because that's what we need. David Leary: [00:43:43] Lease accounting more more complications. Blake Oliver: [00:43:46] Right, exactly. And meanwhile, Facebook is building like one of the biggest data centers in the world and figured out how to do it all off balance sheet, you know. Yeah. So like, what's your all your lease accounting rules. Facebook just figured out how to get around it. David Leary: [00:44:04] And I think that's that thing of moving to from quarterly to six months. The quarterly I think in my opinion probably puts pressure on people to get around the rules because it's so fast and you got to perform, you got to hit the next numbers, and there's no time to make actual business impact to move your numbers. So the only way you can move your numbers quarter to quarter is playing games ultimately, and skirting the rules and doing accounting tricks. Blake Oliver: [00:44:29] The smoothing out of earnings, which is like the primary thing that management is focused on, it seems like. All right, David, um, we got 40. We're at the 45 minute mark. We need to thank. We need to thank our sponsor. Right on pay. 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David Leary: [00:46:45] Yeah, I use it for my escort to pay myself. We use it for our earmark to pay our employees. And it works for one employee companies or much bigger companies. Blake Oliver: [00:46:54] All right, David, we're we're running low on time. I know you wanted to talk about, like, predictions and all that stuff, like, like I'm going to let you choose where we go and we can save whatever we don't get to for next time. David Leary: [00:47:05] Yeah. So we kind of I mean, if we were to summarize what we talked about in 2025, obviously it was AI, AI, AI, AI regulatory shifts, right? The rules to become a CPA completely changed, right. A lot of that influenced from you. Irs policy changes, PCO, PCAOB changes. Obviously. Doge was a big conversation for a lot of the year. So as we start to think about, you know, going into 2026, lots of people start publishing their articles. So I took all the articles and kind of summarized them up to try to get like, what is the not my predictions? These are thought leaders in the accounting industry who wrote blog posts on accounting today, etc., um, of what theirs are. So the number one accounting prediction for 2026 is that AI is no longer optional. That is the number one prediction. Blake Oliver: [00:47:56] Okay. David Leary: [00:47:57] Um, and that it becomes foundational to how accounting work is done. Uh, a couple other ones, there's, uh, smaller predictions that could make sense that are out there. Uh, pricing strategy gets smarter with AI. Uh, human centered client experiences will win. Data is going to drive strategic decisions. Um, and then the one that I love that just never goes away. It feels like it's been a decade. Advisory becomes the new cash cow while compliance becomes a commodity. This just never goes away. Everybody thinks advisory is the future and compliance is dead. Ten years we've been doing this show now eight years. Yeah. And like, compliance is not going away. That's what people want. That's what they're paying accountants for is the compliance. I know I have to do these things. I don't have the skills to do them. Will you do them for me? They don't. I arguably we don't want advisory. I don't need an accountant telling us how to run earmark. I don't need help with that. I need help, like, did I find my meeting minutes with the correct state agency and pay the tax on time? That's what I need help with. And like advisory. Like, I cannot believe people are printing articles and predicting how advisory is so important. Still, it's been a decade. Just give up on it. It's over. It's never happening. Advisory is not going to become the new cash cow. Like, let it go, people. Blake Oliver: [00:49:11] I'll take, uh, I'll I'll take a devil's advocate position on that a bit. Okay. So compliance will compliance is going to go away. But only for some firms. So if you are a firm that's just doesn't embrace new technology, it just keeps doing the compliance work the same way you've always done it, that compliance work will eventually go away because other firms are going to use automation and AI to automate that compliance more, use fewer hours, and be able to charge less while making more. And they will take that work from you because you will not be able to deliver it at the same price or quality. Just like bookkeeping work for 90 bucks an hour is gone. And that's what firms were charging in LA when I started competing with them and offering fixed fees and virtual work and tech and all that stuff. Right. So I think the compliance is going to go away. But, but but you're right, David, a firm that really wants to grow and build like a scalable practice should be focused on automating and handling compliance for clients, not trying to get away from it, and just doing advisory work like the advisory. David Leary: [00:50:31] If you don't control the compliance side of this, you don't control the numbers in the data. You can't do advisory. Exactly, exactly a replacement. No, it's a both. Blake Oliver: [00:50:40] Exactly. Yeah. You try you try to do advisory and the numbers are garbage. David Leary: [00:50:45] Or you got them from somebody else. Blake Oliver: [00:50:46] You got them from somebody else? Yeah. It's like every smart accountant I talk to says, I am not going to be your CFO unless I control how the books get done. You can't. David Leary: [00:50:57] And that was, I think, a learned position, because a lot of these people we know, they thought, I'm just going to do virtual CFO services. And they realized you just can't do it. Yeah. It's impossible. Blake Oliver: [00:51:05] You can't. I mean, you can do it, but it's not going to be like useful or helpful. It's going to be hugely painful. And you're going to be cleaning up data all the time. I mean, in a way, I think it's like doing tax returns without doing the books. Like, why would you do that anymore? Why would you do a business tax return and not also do the bookkeeping if you can do both. You make way more money, you spread out the work throughout the year and you can rely on the numbers. And so it just seems like that's what you would want to do. Fewer tax clients, more bookkeeping work. You still get the tax work. You can actually do tax planning because you have the books up to date all the time. Why would you do anything else? So it's like really easy. The strategy is out there. If you want to build a firm, just do it all for fewer clients. And that's your strategy. It's like not complicated. David Leary: [00:51:58] You do more for less clients. Yep. So I also went and had AI go and look at our old episodes and pull out anytime we made predictions in 2025 along the way. Okay. And so some of these were home runs. Blake. So this is the second episode of 2025. You said we're going to see states abandon the 150 hour rule over the next few years. So this is like a week after. Blake Oliver: [00:52:21] Uh, Barry Melanson. David Leary: [00:52:23] Melanson retired U. In this has happened, we are now done with the year and over half the states have now passed legislation changing to an alternative pathway. Um, one thing is, you said this. I still don't know if it's going to be true. You said AI will replace large parts of basic bookkeeping before most people are ready. Maybe. Blake Oliver: [00:52:44] Maybe not happened yet. David Leary: [00:52:45] I'm reflecting back. I'm doing bookkeeping and QuickBooks exactly the same way it was done last year, and the year before, and the year before and the year before. I just don't see that's one of my predictions I'll get into later. And the one that, um, I thought was really good of yours, and it's it's coming true. You said AI is going to expose how inefficient some firms really are. And in it's because you can't utilize the AI and you can't automate processes if you don't have paper processes and efficiencies already in your system. And there's proof of this is happening. I saw an article come out from Deloitte and the Deloitte CTO. He's talking about how AI spending is causing buyer's remorse, but he's arguing it's because the companies are bolting AI on to old processes. And this is exactly what you predicted months before this. Deloitte CTO, who has the data now is proving that to be true. Um, so that's some of the kind of that really kind of stuck with me on that. But I did come up with my own 2026 predictions. I don't know if you have yours. I have about eight of them. Some of them are easy. I can go through those and you can blow them up if you want. Why don't we? It's about. Blake Oliver: [00:53:53] Yeah, go for it. David Leary: [00:53:54] All right. So one is about, uh. I don't see me doing bookkeeping at the end of 2026 any differently than I did in 2025, 2024, 2023, 2022. I don't think AI is going to change bookkeeping in the same way that cloud and bank feeds changed bookkeeping. That's that's a prediction for 2026. Okay, you can agree or disagree. I don't know, like if you if you think it's going to be different. Um, I do think we're going to see even more conflicts of interest from PE firms that are buying accounting firms. And we'll see more examples of firms to use your quote, uh, not giving the impression of independence. I think we're going to see a lot more of that. That's kind of the issue, right? The the impression of independence was not present. Mhm. Um, I predict two AI girls are going to go under. There's just too much money, too much fast growth, not enough client traction. Two girls will probably shut down. Blake Oliver: [00:54:47] Okay. David Leary: [00:54:48] Um, I think this is my biggest prediction. I think I'm going to be right about OpenAI is going to do some OpenAI. The company is going to do some sort of multi-million dollar, multi-year deal with the AICPA, specifically the CPA comm branch. Like there's just too much money for the AICPA not in CPA not to go get their piece of this money. Okay. There's just too much, too much money and that's going to happen. I think a big ERP player that wants to go down market to compete with QuickBooks will, you know, somebody like a workday, for example, is probably going to buy an AGL, maybe a digit, something like that. I could see a big ERP going down market through an AGL. Now this is an easy one. Intuit will piss off accountants in 2026. That's that's a that's the easiest prediction I could make. Um, I think those 2.0 might come around because Musk loves to iterate. And I think he probably, ego wise, wants a second stab at this. So so don't be surprised if we see something like make Doge great again. I think we're going to see a Doge 2.0 in 2026. Blake Oliver: [00:55:51] After the falling out between Elon Musk and Donald Trump, do you think Doge is going to come back? David Leary: [00:55:57] I totally think Doge is going to come back. I think there's. Blake Oliver: [00:55:59] Why would why would Trump do that? He didn't actually want to cut expenses. He wanted to make a show of it. He didn't actually want to solve the budget deficit. That's not his priority. He doesn't care. He's kicking that can down the road. The deficit will continue to grow until it becomes unsustainable and the US has a fiscal crisis. And when that will happen, we don't know. David Leary: [00:56:23] Ellen now has perspective a little bit. He's like, I would have done it differently if I had a chance to do it again. I think he's going to push for a chance to do it again. I think like it wasn't executed very well. Blake Oliver: [00:56:33] You were so wrong on this. You're gonna. It's not gonna happen. David Leary: [00:56:37] He didn't quit after his first rocket blew up. He built another one. And another one. Like, I think he's gonna. Blake Oliver: [00:56:42] You only get one president every four years. You don't. You can launch rockets whenever you want. He blew that one up. David Leary: [00:56:48] He blew the president up here. And then I also think we're going to see the this kind of swing from. We're going to see officially the death of these open ecosystems and open APIs, and it's going to swing more towards closed platforms. Um, the Intuit CEO hinted at that loosely about, hey, you don't have to get all these apps. You can just use QuickBooks Online Enterprise to do all this work? Because I think I truly believe it's hard to do the AI magic if you don't have all the data. So if you have data in seven different separate apps, your AI can't do the work. And so we're going to see everything swing back towards closed platforms, these closed gels that control the data. You do all your work in the GL. Well that's stay closed forever I don't know, but I think that's the only way anybody's going to actually be able to roll out AI that actually works is you have to you have to do your banking through QuickBooks and your expenses through QuickBooks and your bill pay through QuickBooks every feet, your payroll through QuickBooks. It's the only way AI is going to be able to do anything. It can't go out to other apps. It can't work with other data. It's got to all be in one app. So we're going to see a swing of that. And that's kind of it. So that's eight predictions I made. Blake Oliver: [00:57:50] Okay. Um wow. That's a lot. Well, I'll take issue with your prediction that bookkeeping will be exactly the same at the end of 2026. I understand why you say that because it's exactly the same for you right now at the end of 2025, and we had all these AI apps or, you know, come out and we said, but but here's why. Because this was the year that Intuit and Xero started building AI reconciliations and automation into their products. And so the first year it's always going to be experimentation, not necessarily actually saving us time. We saw that with the QuickBooks, uh, coding AI. I have not heard great feedback about it. Like you have not experienced great accuracy with it, right? David. It just doesn't have enough context. However they implemented it, right? Not so great. So but I do think that we're going to start to see it because two reasons Intuit and Xero are going to continue to improve the AI assistants built into their products. And we also now have these browsers that the AI companies have released ChatGPT Atlas is the big one, and so you can actually go into your accounting system in your browser, and you can ask AI to accomplish tasks for you and click around like it's you and do stuff like it's you. David Leary: [00:59:16] But zero is going to not already has said you're not allowed to do that. Blake Oliver: [00:59:20] How? David Leary: [00:59:23] That's part of the terms of their developer agreement. You can't use browser plugins and well, that's. Blake Oliver: [00:59:27] For. David Leary: [00:59:27] Developers. Blake Oliver: [00:59:28] But I'm saying for end users, like I can go in, I'm in there right now and I've got Atlas open and I can use agent mode and I can ask ChatGPT to reconcile my accounts. So as these models get better, they're going to get better at understanding what to do, how to click on that button that says reconcile 29 items, and then how to do a web search to find out what that vendor is, or search my emails to find the invoice or the receipt associated with that transaction, and then code it like all the pieces are finally coming together for these eyes to actually do the bookkeeping, and we may not even need to wait for Intuit and Xero to build it, because it'll just happen at the. David Leary: [01:00:11] Operating system. Blake Oliver: [01:00:12] Level, essentially. 2027, 2027, I think we're going to start to. David Leary: [01:00:16] See I don't think it's happening next year. I don't think it's happening next year. Blake Oliver: [01:00:19] Um, well, and the reason I think that is because and it may be a little bit longer, but it's because of this time to complete a task metric. So currently these models like ChatGPT five can only complete tasks that are like 4 to 5 minutes long with 100% accuracy. You go longer than that 30 minute tasks, hour long tasks. The accuracy drops dramatically. And we can't benefit from that because if there's too many mistakes, they compound in accounting and you have to go look at all the transactions anyway, right? So we need systems that can be like 99.9% accurate. So it's currently only good at doing very, very short tasks like reconciling a single transaction. Maybe if it has the right context, but that time is doubling every seven months. And that's been the trend since 2020. So if that trend continues within like the next year, we're going to see AI able to complete tasks that take, let's say, uh, 15 to 20 minutes with a 100% accuracy. And there's a lot of 15 to 20 minute tasks in accounting and bookkeeping. Not a lot of four minute tasks. Right. That's why we don't track time down to four minutes. David Leary: [01:01:40] But they're complicated. And that's that's the issue. Like and this is where maybe because I'm anal and I have that that accounting bookkeeping mindset and it has to be perfect. I have a bunch of stuff that I could easily just reconcile out to subscription expense or subscriptions and just I'm done. I can be done in two seconds. Yeah, but I need to go out to these different websites we use and download the PDF of the receipt, upload it to QuickBooks so I can match. Right. And have that that attachment. It can't do that. It doesn't know like oh I know I got to go to 11 labs and log in and click here to get to the stripe checkout to go get my PDF. Like it can't do that stuff. Right. Blake Oliver: [01:02:16] It can. So these these browsers if given the logins can actually go log in and find the invoice. They're not very good at it right now. They fail a lot right. And it takes a long time. But you know I was able to get one of these browsers to enter my CPE certificates into the Arizona State Board of Accountancy website and do it for all of them without me having to do any data entry. Like it took, it took hours and hours and hours and it made a lot of mistakes, but it corrected them and got it in. So I think that will happen. David Leary: [01:02:48] It's like Hector Garcia's point of view on this. I heard him talk about it almost a year and a half ago. Does it matter if it's close enough? Like, can I just go and log all these to SaaS expense and not attach receipts? Like, does it matter? Am I. Blake Oliver: [01:03:00] Just. Yeah. David Leary: [01:03:00] Is it you creating work for me? Like. Blake Oliver: [01:03:02] Well, attaching the receipts. Yeah. I mean, you could just say, look, if I get audited, I know where to go. Find the receipts and I'll go do it. David Leary: [01:03:09] That's good enough. Blake Oliver: [01:03:10] It's good enough for now. I mean, that's but. David Leary: [01:03:13] But I'm sure I share the same emotional. It's a lot. Blake Oliver: [01:03:16] So there's ways around that. David. For instance, um, if we're using we're trying ramp for earmark ink. Yeah. Ramp has this feature that every, every AP app should have where you can connect it to Google Workspace. And every time a transaction comes in on a corporate card through ramp, it searches across all your inboxes in Google Workspace and finds the receipt or the invoice and attaches it to the transaction. David Leary: [01:03:47] Yeah, assuming you get a receipt right, and you're not, you're not just getting a random email. Hey, we received your payment. That's kind of like the data coming in is not great either. Blake Oliver: [01:03:57] But I would say like 90% of SaaS companies will send you a receipt or an invoice, or you can set that up on the billing page because that's what stripe enables, right? So it's like that that solves the problem for you. And I think it's just a matter of time before the edge cases get handled by like AI. So so I think bookkeeping is going to start. It will it will massively transform over the next few years. Just like tax just like audit. And the key is even though it doesn't really help that much right now, it's to start implementing it to automate these tasks. Because when it does get really good, it's going to be insane. Like all the stuff that I played around with and set up over the last few years with AI, I just they've gotten so much better because I just plugged in the new model, and the new model is instead 80% accurate, 90% or 100%. So if you can build it now to be 80% accurate in just a couple of years or less, it's going to be 100%. David Leary: [01:04:58] And I used to go to our old episode show notes for a couple hours and look for certain things we may have said to summarize our news. Right. And I think a year ago I tried like, hey, go to our website, check out all our episodes that are for 2025 and create summaries, or give me a rundown each. And I was able to get month by month rundowns I was able to get quotes from each episode. The things that you and I said could not do that a year ago. So yes, the models are getting better, better. It can do more. But I still think bookkeeping is, uh, more of a science. Right? And it just can't. It cannot like it can. It can be wishy washy about going and reading my show notes of the podcast. It can even be wrong. Yeah. Who cares? Like, it's just it's not there yet for bookkeeping and and maybe it is. And me as a bookkeeper or an accountant mindset have to let that go. It doesn't have to be perfect. Blake Oliver: [01:05:46] I think the issue has been the lack of the context with bookkeeping, so the agents have not been able to go search through your email to find the discussion threads related to the transaction you're trying to reconcile. Or they haven't had access to your calendar to see where were you on this day? What city were you in? Oh, you were in your calendar says you were at the AICPA Engage conference. So this is a this is a travel expense, right? Like the stuff that a bookkeeper would do, the questions they would ask. And these agents have not been good at like, going out and like, figuring out who to ask. David Leary: [01:06:20] Yeah. Blake Oliver: [01:06:21] And so I it's the tech is there. It's just like all the data sources need to be connected. The the context needs to come out of people's brains and the systems we use to enable AI software to do bookkeeping. But the actual bookkeeping, the clicking around and picking a an account like that's all doable. Like the these AI agents can now click around in the software and do it. So now we just have to get them the info they need. David Leary: [01:06:50] And that goes back to the closed ecosystems. Just to wrap this up. Blake Oliver: [01:06:53] So that's. David Leary: [01:06:53] The problem. If it doesn't have the data, the AI can't do the work, which is going to mean if, if, if zero and Intuit want to have really fully functioning AI Eagles, they need to control everything. You have to you have to be all into the ecosystem. It's like you're an Apple guy or you're a Google Android guy. You've got to be fully in the ecosystem. Blake Oliver: [01:07:11] The way we're going to get around it is we're going to have, um, virtual desktops. Like we're going to come back to that. David, like the era of virtual desktops and accounting firms, we're going to set up basically a computer that an AI agent has, like an employee in the cloud. Yeah, like on a write works system or whatever. And then that agent will actually like, work like an accountant in your firm. They'll have slack, it'll have email. And that's how it will communicate. And it will it will use the software not through APIs, but literally by clicking around on a On virtual desktop and driving the mouse, and that's how we're going to get out of this closed ecosystem problem, especially if somebody's going to figure it out. David Leary: [01:07:51] Worked like an employee and paused and be like, I need to clarify this with Blake. What about this? What should I do? If we pause and ask a question, pause and ask a question and could work all the time. But it's going. Blake Oliver: [01:08:01] To be expensive, though. That's that's going to be the thing is, like a a persistent AI agent that's always working and asking questions is using it's doing a lot of prompting all the time. So it's not going to be cheap. So it's going to be an interesting, uh, thing when this starts to happen. You can like rent, you know, an employee like you can hire an AI employee. When you can do that. It might be more expensive than outsourcing at the beginning anyway. David Leary: [01:08:30] Like I use. I'll admit, I use AI a lot, uh, with barbecuing and smoking things. And because there's wiggle room in that, right. You can go back and forth. But I have not done it for baking because baking, you need exact measurements and all it takes is a half a teaspoon extra of something and you've ruined your whole bake. Right. So I think it depends, but I think bookkeeping is more like baking and less like smoking meat on a barbecue where you have a three hour window of air management. Right. Mhm. It's just you can't. You have to depend on the bookkeeping to be accurate. And we're just not it's not even close yet. It's so far away. Blake Oliver: [01:09:08] Well David you and I are going to revisit this next year and see where we're at. Can't wait to watch where this goes in 2026. Thank you everyone who tuned in today who joined us live. Great to see you on YouTube. Thanks for listening on the podcast. Thank you to all our listeners. Thank you to our sponsors. It's been an incredible year. We're looking forward to another year with you all. David Leary: [01:09:32] Another 52 episodes. Blake Oliver: [01:09:33] Happy New Year, everyone. Bye.