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How To Take The Pain Out Of Busy Season · The Accounting Podcast

• Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! Blake Oliver: [00:00:04] Well, my point is that AI doesn't have to be perfect. It just has to be better than humans. And when you look at professions like audit, where we have really low audit quality and we have massive audit failures, I don't think it's going to take that much for current AI to do a better job than human auditors. David Leary: [00:00:27] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:32] Hello and welcome back to the show. I'm Blake Oliver. And I'm. David Leary: [00:00:35] David Leary. Blake Oliver: [00:00:36] I'm coming to you today from Chicago. David Leary: [00:00:38] David, you surprised me because I think the whole week you were out skiing and then. The next time you're in Chicago. I don't know how it happened. You weren't skiing in Chicago, though. That's not possible. No. Blake Oliver: [00:00:48] Chicago got a lot of snow, but, uh, I was skiing in Park City with some accountants, and, uh, you might wonder how that is possible. That we could all take off three days to go skiing. Well, you can. David Leary: [00:01:01] You don't have tax clients and busy season, but how did these other accountants do it? Blake Oliver: [00:01:05] Well, um, you know, it's a combination of they've either effectively delegated most of the client work to their teams, or they're going to catch up when they get back. That was one of the one of our friends there. He took just a day to ski. But yeah, I think it's it's. I don't know. This whole experience made me think, why do we why do we have busy season? And it's like such a shame because I feel like if you're an accountant who likes to ski, you just like you can't do it. Like they're not compatible. And they. David Leary: [00:01:36] Should be. Yeah. That's right. You can never have that as a hobby. That's true. Blake Oliver: [00:01:39] Right. Like February and March are the best times to ski. I don't know. I don't know what you do, but actually I, I, a listener, sent us a message that I think, uh, offers a potential solution. This is an email from Paul and Leanna White. Hi, David and Blake. My wife and I have a bookkeeping and fractional CFO advisory firm that serves small businesses in central VA. Our experience in the last three years of being in business is that most CPAs are creating more headaches and rework for themselves bookkeepers, and potentially costing clients money by not professionally engaging with their clients bookkeepers to ensure year end journal entries are made in a timely fashion, or that inventory assets, depreciation and capital asset lists are properly maintained in the accounting system for balance sheet reporting, etc.. With all the issues in the industry with burnout, overwork and less available talent, it would seem that most CPAs would be moving towards a deeper level of engagement with professional bookkeepers versus sticking their heads in the sand, not returning calls. Emails related to these basic and foundational items needed for clients to have accurate financials on a timely basis in the accounting system is the issue that CPAs working with small businesses don't charge clients enough to warrant the extra effort to do things right? Or do they feel that they are above talking to third party bookkeeping firms, or perhaps view them as a competitor? Would love it if you could do some episodes that explore both sides of this issue, from the CPA and the bookkeepers perspectives on this problem. Sincerely, Paul and Liana White, PNL Business Solutions. So I've got some thoughts on this, David, but I'm curious to hear what you think first. David Leary: [00:03:23] I mean, is it. A little bit of like a business model thing where the accountants, they're not valuing the bookkeeping, uh, experience. They're not valuing working with third party bookkeepers, not valuing the small business clients. It's just too much tax focus, like the business. Is it a business model thing like I'm not. Blake Oliver: [00:03:40] Yeah, I think you're on the right track. Right? Like a mix of products and services to diversify might solve this problem. If all you do is tax returns, then you're going to have a lot of workload compression. So one thing that differentiated the firms, the firm owners that I was hanging out with is that they have an emphasis on bookkeeping, accounting, client accounting, services, CAS, whatever you want to call it. And tax is there, but it's not the main thing. And if tax isn't the main thing, you're not going to have the same kind of compression. Sure, there's stuff that has to happen at the beginning of the year to close the books and all that, but it's not nearly as bad when, you know, 100% of what you do is tax. David Leary: [00:04:21] Yeah. And and we've talked about this the whole like surge pricing model. It's there's so many different models you could do to not have it be compressed. Yeah. Right. Automatically filing extensions for everybody. We beat this drum to death. Um. Blake Oliver: [00:04:34] The beauty of doing the bookkeeping is that you can collect a lot of the information that you need to do a return all year. And if you're closing the books for the client every month or every quarter, then there's just so much less work that has to happen. Um, the actual tax return is is taking the numbers you've already got and plugging them in in a lot of ways. And you can do the planning year round if you're meeting with the clients year round. I just don't understand. David Leary: [00:05:02] Why if you're going to do business returns, it's crazy not to do business accounting stuff. Yeah. Blake Oliver: [00:05:09] And I think one of the arguments against this is that, oh, my clients aren't willing to pay for it. Right. And I don't think that's true. I think there's plenty of clients that are willing to pay for it. Um, also, one of the arguments I heard in favor like or not in favor, but like a rationalization for doing it this way is that you get a lot of like cleanup work in tax season, in busy season, and you can charge very high rates for it because it has to get done. But if you actually do the math, the clients are getting a big discount when you do all the work at the end of the year instead of throughout the year, even if you're charging 250 an hour, whatever it is, right? They're still getting they're still paying less than they would if they paid you year round. Yeah. So you might feel good to be billing a lot of hours, but you're not actually making the money you could be making if you did it year round. David Leary: [00:06:03] Yeah. So I have two articles on business models that I saw this week, and I wanted to get your $0.02 a little bit on these. And, but it's really good because it relates to you kind of led into it. So I didn't know you were going to come to the show with some questioning business models on busy season. So do you want to talk about prom or coffee? Blake Oliver: [00:06:24] Prom or coffee? Well, I'm going to a wedding tonight, so, um, maybe prom. Okay, since I'm going to be dressed up, you know? David Leary: [00:06:32] So you've ever heard of David's Bridal? Blake Oliver: [00:06:36] Uh, yes. Yes. David Leary: [00:06:37] The, uh. Blake Oliver: [00:06:38] It's your side business, right? It's my. David Leary: [00:06:40] Side business. Yes. That I started in 1950. And they've provided wedding dresses basically to 70 million people for the last, you know, 70 years. And but they've had their ups and downs. In 2018, they filed for bankruptcy. Then they just this past April filed for bankruptcy again, but now they were purchased by private equity. And they've started a new program. They're playing the long game. So they've started a program called Diamond Prom Loyalty Program, and they're targeting high schoolers. And the way they do this, it's a it's a program, a discount card. And they bundle together, you know, accessories, your prom dress, the alterations give you a discount for future alterations if you need them. Right. And because ultimately they want that long terme relationship to turn into a wedding dress sale eventually. And I was just, you know, and they currently have 2 million members in this prom loyalty program. So they're setting the table for their 2 million future customers, essentially. So I was kind of thinking this, like, how do firms get lifetime customers early? You can't just do like tax returns for free when they're teenagers because those want free tax returns when they're adults. Right. But like, like how do you how do you get younger people as customers and keep them for life? If you're a firm. Blake Oliver: [00:07:56] That's a good question. I feel like there's got to be an answer. I wonder if any of our listeners have a have a solution. David Leary: [00:08:04] In the chat. Blake Oliver: [00:08:05] Yeah. Thank you. Thanks everyone who joined the live stream. Clearly you're putting in some hours on a Saturday as we record here. Um, since I was out of town. We're doing it on Saturday. Tyler says we are a BC first firm bookkeeping, first firm that offers taxes, and only 20% of our clients take us up on it. The clients that use us for taxes have better tax liability projections and have their returns ready first. Great to see you, Jesse. Good to have you here, Edgar said regarding the, uh, um, skiing. If you like to ski, that you should work in industry, and then you'll have February and March open. Deborah, happy weekend to you. And Tyler says Amen. I assume that was to the, um, I don't know what that was, but we'll take it. We'll take it. David Leary: [00:08:56] Tyler, you run on vacation. You went. Blake Oliver: [00:08:58] Skiing? That I went on vacation? Yes. Uh, I'm so sore. Um. Hey. But, David, going back to, uh, this busy season thing. Uh, part of the reason I've been thinking about this a lot is because, actually, KPMG was featured in the Financial Times. They are looking to take the pain out of auditing. Busy season. And. The way they're going to do this or. Well, actually, they say that they've made progress. Um, KPMG said the number of people working more than 50 hours in total across the eight weekends of busy season for public company auditors fell from almost one third three years ago to less than one fifth last year. And it is on course to reduce it further. In 2024. 29% of staff work no weekends at all last year, up from 18% two years before, so 29% of staff did not work any weekends last year. David Leary: [00:09:50] But just to. Before you go deeper in the article, I'm just stepping back and thinking about the big firms like KPMG, haven't they historically, over the last ten years, slowly been shifting more to just advisory and consulting and less like, is this a decrease because you're going to answer this hopefully. But my brain is already going. Is this a decrease because they have some massive efficiency or gain in busy season, or is this a decrease because they just don't do the work anymore. Blake Oliver: [00:10:17] They just stop. They just stopped doing, um, well, here's what caused the change. David Leary: [00:10:23] Yeah. Blake Oliver: [00:10:24] Uh, they, they put in place targets two years ago to finish certain percentages of audit work for large company, uh, large public company clients by deadlines in October and December. And they, they will cut the pay of senior executives if those targets are not met. So they're lining up the, uh, the the objectives with compensation, right? Yeah. So money talks money makes money changes behavior. Here's a quote from Scott Flynn, vice chair for audit at KPMG US. We needed to take some of the top off the mountain in January, February and March. Younger people think about work life balance differently than we did when I was starting out. And so we've tried to meet our professionals where we think they need to be met. Also, my work at 10 p.m. or 11 p.m. is not as good as my work at 4 p.m. and 5 p.m., especially not in January and February. I mean, I like the way this guy is thinking, right? Not every hour is equal. So. David Leary: [00:11:23] It's unbelievably logical, like to do this, right? Blake Oliver: [00:11:26] Right now they got a long way to go, right? 29%. Only 29% didn't work any weekends in busy season. So, you know, like, we need to flip that. Uh, but it's progress. I think as a profession, we're going to eventually get away from this. And there's also regulatory changes that we can advocate for to to do this as well. Uh, you know, for example, uh, moving the deadlines or allowing accounting firms to spread out the deadlines for their clients or change the tax years, like in New Zealand, uh, you can, uh, firms have flexibility to change tax years with clients in a way that we just don't, so that you could take your smaller clients that are less risky. And you can, you know, spread out that work. Like we could advocate for this as a profession. It doesn't have to be the way it is just because it's been that way every other year. David Leary: [00:12:18] Tax returns could be an interesting you know, you've cut the volume in half now. Yeah, for everybody. Blake Oliver: [00:12:23] But I'm not even talking about that. I'm just talking about like, not everybody has to file on the same deadline. Yeah. You know, we could there could be some way to, uh, change the payment deadlines, change the tax filing deadlines so that they're staggered throughout the year. Like this is doable. Other countries do this. So, um, and I'm very I'm very pro this now because I feel like the, the number one most damaging thing in accounting is that workload compression, because it means that you sacrifice everything for a certain time during the year, and you can't make progress on innovation during that time. And so it all waits until you have the time. And then when you have the time, you're burned out and you're tired, so you don't want to do any of that stuff. So that's what holds us back. The best time in my life has been now, when I've got this very steady schedule where it's kind of the same, you know, every week in and out, I can really make progress on my goals. I can really, you know, get physically fit. I can take trips. I don't stress out like it makes a humongous difference. David Leary: [00:13:28] Yeah. The more the more you stabilize things. You don't have these extremes, because if you have this extreme three months of working nonstop, you tend to dip and don't do anything to recover. Right. And yeah, staying keeping in that band of variability. Blake Oliver: [00:13:42] David says the IRS could stagger due dates based on your last name. It could be your birth date. It could be your Social Security number. I don't know, there's probably lots of ways to do this right. So I, I don't I don't know why we don't do this. What else we got this week, David. David Leary: [00:14:00] I can talk about the coffee because you like. You like coffee and you like some subscriptions. You like the subscription revenue, right? Blake Oliver: [00:14:06] I love subscription models, I love coffee. Tell me. David Leary: [00:14:10] So, have you been to the UK? Blake Oliver: [00:14:11] What does this have to do with accounting? David Leary: [00:14:13] Well, have you been to the UK? Blake Oliver: [00:14:15] Uh, I have never been. David Leary: [00:14:17] So they have a place called Pret a manger. And think about it. It's like a if a gas station got rid of the gas and merged with a Starbucks, it's like quick takeaway sandwiches, takeaway food, coffee. Well, they recently rolled out a subscription model for their coffee services. So essentially in the US you get five free barista made drinks for 40 bucks a month, basically using US prices. But what they've discovered since they rolled this out, their transactions growth has grown over 36% a month after launching because the average person that gets this membership is hitting the coffee chain approximately 28 times a month, compared to a person that's not a member who just hits the two, only has like two transactions a month. Blake Oliver: [00:15:01] 20 times a month. That's like they're going like every. David Leary: [00:15:03] Day, almost basically every day. Right? And then even Panera here in the States, because a couple of different US coffee places in the States have also done this model. And they have Panera has like an unlimited SIP club, which you get a free coffee every two hours for 12 bucks a month. But they've said what they've done is that's converted kind of casual customers to loyal customers. Yep. To where now they're coming in more often. So it's again, like this is like, you know, obviously we've talked about how a book keeping subscription could help keep people in the door to sell them a tax and advising. But like, are there other things accounting firms can do to offer a cheap subscription on a monthly basis to that you it'll benefit you in other places, right? It's just not the the subscription. Blake Oliver: [00:15:41] Absolutely. I mean, you could offer a subscriptions for virtually anything. I think the thing that firm owners are scared about is my clients will use it too much. They will take advantage of me. And unlike coffee, where the cost of that commodity is really, really low. So for me, serving an extra cup of coffee is incrementally nothing, right? Yeah, it's the rent. It's all the fixed costs. It's all the labor that I have to have that that makes a coffee shop expensive. But those are in many ways relatively fixed costs. So if I sell a subscription, right, I'm not. My costs aren't increasing that much when people use it more in an accounting firm, you think, oh, but if I, if I get more hours from all these people now, suddenly I'm going to be screwed, right? Well, there's a really easy way to solve that. And it's simply to make your prices adjustable on a monthly or even weekly basis. So if you have a client that signs up for a subscription, that starts to use it way more than you expected and take up a lot of your team's time, you have in the engagement letter that you can change their pricing at any time with X days notice. It could be no notice, right? You could say next week your price is going up. So there really is very little risk. What's the risk a few days you know one week. David Leary: [00:17:05] That's how you deal with it, and I imagine. It'll ebb and flow, because that client may have some situation going on in their life where they need a lot of extra help, but then for the next two years, they might never reach out to you, but they're still charging you every month. But yeah. And if you. Blake Oliver: [00:17:21] Have enough clients, then it all evens out. David Leary: [00:17:24] Yeah. And these models I mean, this is how, you know, Amazon, Costco, this is just gravy money. If you can get some sort of like $130 fee from your clients every year to be a member of your firm or whatever, it's just they're they're loyal to your business, but then you're just taking gravy money. It's it's like free money sitting on the table. So. Yeah. Blake Oliver: [00:17:46] Um, Edgar in the live stream asked our accounting technology jobs more balanced? It really depends. If you're working in payroll, then your December is is kind of a mess, right? Um, but, like, or a payroll tech company because you're signing up people. But I would say yes, on the whole, uh, when I made the leap into accounting technology, my schedule was much smoother, more spread out. Conference season can get kind of busy if you travel to conferences. I don't like that. I actually made a resolution this year to travel less for work. So we're cutting back on the number of conferences we go to, which makes sense, because we can just do this here, David, in the in the cloud from anywhere, right here I am. I'm in a hotel in Chicago. Can anyone tell the difference I. David Leary: [00:18:33] Can add on to Edgar's answer here? Um, this when I was at Intuit, I was on the payroll team. And again, like, payroll is like, every single week, the whole payroll team is moving $1 billion in payroll a week. At the time it was. And I was always jealous of TurboTax because TurboTax would, like, be really busy. They'd have a compressed, busy season, but then it would be quiet, and then they'd have like nine months to innovate and do all this cool stuff with their product and the payroll team, like, never got that that nice downtime for months at a time because you were just you just went from W2 1099 season to payroll, payroll, payroll, payroll 941 season and you just didn't have that. So it is depending on the the tech. Right? So I guess it comes down to. No deadlines. You want to get out of deadlines. That's how you have smooth, have a smooth life. Blake Oliver: [00:19:20] But we're a deadline driven profession, David. You know, that's that's the challenge. David Leary: [00:19:24] Even with the podcast we try to do it. We're doing it every week. There's always this deadline. It creates a little bit of stress every week. Blake Oliver: [00:19:29] Right. But imagine if we had to record like 50 of these in three months. Right. And then we didn't do worse. We didn't do the rest for the rest of the year. I feel like doing it every week is is not bad a bit easier? David Leary: [00:19:39] That's true. Blake Oliver: [00:19:40] Um, Brandon in the live stream really liked your idea of every other year returns. Hey, maybe for smaller clients. That makes a lot of sense, right? Why? Why not? Uh, he also said tiered subscriptions based on client needs would be ideal. No one size fits all. And Edgar asked if you started over in Accounting Tech today, where would you look for jobs? Ooh. Uh, probably I accounting apps. That's. That sounds like a great place to be right now. We just did a bonus interview with the guys at Right Works who are building that wrapper for ChatGPT for accountants, and that's a great interview. Go check that out. A lot of cool things happening over at Right Works. Maybe that team is hiring. David Leary: [00:20:28] I have an update because of that interview. We did the interview, released the episode, and then we said something in there incorrectly about Microsoft's new, uh, Copilot product. Apparently now they did release it. They're calling it Copilot Pro, and it's available to anybody now for 20 bucks a month. It used to be just more expensive, and they were only offering it to big corporations. But since we recorded that episode, Microsoft has released Copilot Pro for 20 bucks. Blake Oliver: [00:20:54] And since we released that episode, uh ChatGPT came out with their subscription aimed at small teams. It's called ChatGPT team, designed for small to medium sized teams of up to 149 members, it includes a dedicated workspace and administrative tools for team management and really importantly, for accountants. Anybody you put on this team plan, their prompts will not be used to train the model. So you've always been able to do that through the API, which is what right work spark does. It sends it through the API. The terms are different. That data is not retained by OpenAI. It's not used to train the model. This is now the same as that. So. If you've got your team using ChatGPT at $20 a month, you can now upgrade to ChatGPT. Team. It's $30 per month, or if you pay annually, it's $25 per user per month. So it's a little more expensive, but. Makes a lot of sense. If you get the. David Leary: [00:21:59] Management firm, we get administration, we get some extra security. If you want to call it, use the word security and privacy. So because right now I think as on our own company, we have seven separate ChatGPT subscriptions. So we we probably need to look into this for ourselves. Okay. Blake Oliver: [00:22:14] It's on my list to do as soon as uh, as soon as I get back home. David Leary: [00:22:18] And then I have a clawed one and now, yeah, it's starting to couple subscription to everywhere. Blake Oliver: [00:22:23] Speaking of I, David, I saw this really fascinating study, a comparison of Waymo rider only crash data to human benchmarks at 7.1 million miles. David Leary: [00:22:35] I heard about this. Blake Oliver: [00:22:36] Yes. So so Waymo, have you seen the Waymo cars driving around Phenix? Yes. Do they have them in Tucson? David Leary: [00:22:43] They don't have them in Tucson. I have a theory why they train these cars in Phenix. Blake Oliver: [00:22:47] Well, tell me your theory. David Leary: [00:22:49] If anybody who has not been to Phenix. Phenix is a master planned community. Every single road is a perfect square, straight road, one mile squares. And I'm like, if you I'm less impressed with cars that can drive around Phenix. Like, okay, well older the roads are crooked. It's like harder. Blake Oliver: [00:23:05] Okay. Yeah. That's true, that's true. Uh, but it's still impressive because I think they're using comparisons of Phoenician drivers to Waymo cars. So like the terrain may be easier, but we're still we still crash people, robots. We're still people. And, um, uh, so what's really fascinating about this is that it's, it's these these Waymo self-driving cars with the big cameras on top, the radar systems, they have now driven seven over 7 million miles. And this data comes from official National Highway Traffic Safety Administration reports that Waymo is required to submit on any crashes. And the human benchmarks come from research papers that estimate overall crash rates for human drivers in the same cities as the Waymo vehicles operate. So, like I said, comparing Phoenician drivers to Phoenician Waymo vehicles. David Leary: [00:23:58] And prior to now, they just didn't have enough miles to make comparisons worthy, I think. Is that right? Yeah. Blake Oliver: [00:24:05] You need you need a lot of of of data. And check this out when you consider all locations the Waymo cars, the automatic system had an 85% lower any injury crash rate and 57% lower police reported crash rate than humans. This means the Waymo vehicles had between 2 and 7 times fewer crashes, resulting in injuries or police reports compared to human driver crash rate estimates. So the Waymo system is way safer than human drivers. It's not perfect. They still crash, but they crash at a far less rate, far smaller rate, far lower rate. And, uh, what does it have to do with AI and accounting? David. Well, my point is that AI doesn't have to be perfect. It just has to be better than humans. And when you look at professions like audit, where we have really low audit quality and we have massive audit failures, I don't think it's going to take that much for current AI to do a better job than human auditors. David Leary: [00:25:16] If it only is only 50% good, it's still probably doing more. Blake Oliver: [00:25:21] Yeah, well, considering that like the PCAOB is coming out with a report soon that finds something like 40 to 50% of audits are extremely deficient. So. That's even with all the busy season hours that we're putting in. So I think I think the point is I doesn't have to be perfect. It just has to be better than a really tired human being at 10 or 11 p.m. at night. David Leary: [00:25:47] And I think this an article is almost a month old. It's been kind of hanging around. Um, but the IRS, as they spotted 37.30 7.1 billion in tax and financial crimes. And they basically because they've seized now 1.7PB of digital data from 3300 computer devices. And they found a lot of this using AI. So they're applying AI on top of financial attractions to help identify fraud. So you're right. It can't it doesn't have to catch all the fraud. But hey, if it can connect, catch billions. It's pretty good. Yeah. Blake Oliver: [00:26:20] What else we have in the world of AI. I've got a big list here. We haven't had a chance to get to it. Um, I've seen some very interesting, um, like, contradictory data. Here's a headline that was in accounting today back in November. Survey finds 37% of finance leaders have already laid off workers due to AI. This was a survey conducted by Resume Builder, which included 750 business leaders from companies that currently use or plan to implement AI by 2024. And it found that 37% of respondents have already dismissed employees due to AI adoption. That really surprises me. I wonder who are these employees that are getting laid off because I has replaced them. David Leary: [00:27:04] And I saw an article this week that said that the title was 25% of CEOs expect AI to lead to job cuts in 2024. Mhm. And this was a survey done by uh, PwC ahead of the Davos Economic Forum. And they said it would lead to job cuts of at least 5% this year. Um, and the leaders that are saying this are in the media and entertainment banking insurance and logistics fields. Blake Oliver: [00:27:31] So you know what I wonder? I wonder if, like, a lot of these are layoffs that are being done for financial reasons because we've seen, you know, a lot of layoffs this year due to the need to cut back. And I is just the excuse. David Leary: [00:27:49] I'm trying to think like the psychological part of this. So you get laid off, right? And you're going to go and tell people you got laid off. Isn't it nicer to tell people like, I got laid off bad luck. I took my job instead of just like those. They just cut me, right? Is it is this a psychological game on both ends, both sides? The people making the cuts and the people receiving the cuts? I don't know. Blake Oliver: [00:28:11] Did you see the news that the SEC approved crypto ETFs? So you can you can buy Bitcoin on the stock market now David. David Leary: [00:28:21] So instead of buying like I think an ETF something like the Q-q-q. And that automatically puts me into like the entire Nasdaq. Right. I can buy like something similar. That just puts me into crypto without me buying crypto. Yeah. Blake Oliver: [00:28:32] Same way you can buy, uh, like gold, right? You don't actually have to buy gold bars. You just buy the ETF, ETF and now you've got your you're you've got exposure to gold. Same thing with Bitcoin. Um. I was thinking a lot about this because we have been, you know, big crypto skeptics recently or not recently, over the last many years. And. I was thinking like, is this is this a good thing or a bad thing? And I actually think it's a good thing. I've come to the conclusion that the SEC did the right thing here, but not because it's a good investment. I still think it's a terrible investment. I think it's a good thing, though, because it's better to have people making this investment on. A regulated exchange in a way that protects them in some respects, right? It may not protect them from making a bad investment, but at least it protects them from frauds. David Leary: [00:29:38] Well, you know, I guess it, uh. Smoothed the curve because I think right now, prior to this, if you want to invest in crypto, there's 2000 choices and you hopefully you pick the right one. And now you're kind of in. If you believe in crypto overall, you now have a safe way to spread out your risk a little bit because you're investing. Yeah. And the category of crypto right. Blake Oliver: [00:30:01] You're also not investing on some like unregulated exchange. Right. You're investing on a regulated. David Leary: [00:30:07] Fraud to happen. Blake Oliver: [00:30:08] Much harder. Yeah. Much harder. Right. Um, Brian says I totally agree. Blake, thanks for thanks for joining us today, Brian. I do want to talk a little bit about why I think it's a terrible investment. You know. I still can't see the like to me the only the value of crypto. The reason people invest in it is because you believe it's going to go up in the future. Now, you could say that about any stock, right? But I cannot identify any intrinsic value in Bitcoin. So other than the speculative value, other than the idea that it will continue to go up because other people will buy it, the greater fool theory, right, there's somebody else will spend will pay more to me in the future than what I paid. Right. That's the greater fool theory. There's nothing. There's nothing backing the value. Of Bitcoin and well, except for one one thing. Which is criminal activity, right? The number one like real world use case of Bitcoin is not as a currency, which is what it was promised to be. It's is a way to launder money or to get money out of places where you're not allowed to move it normally, like China. And I saw this crazy story in the New York Times. This NYU student owns a $6 million crypto mine. His secret is out. David Leary: [00:31:43] And where does he own this at? Where is that? It's a physical picture you have here. Blake Oliver: [00:31:46] Yes. So this is a picture of a crypto mine. If you've ever wondered what a crypto mine looks like, it's a plot of land with a bunch of electrical poles. Uh, in Texas, kind of middle of nowhere, Texas. And it's a bunch of what look like. David Leary: [00:32:06] I would guess, chicken coops. Blake Oliver: [00:32:09] Except they're holding racks of, uh, of servers, servers of, like of of mining computers. And how did Jerry, you manage to own a crypto mine, a $6 million crypto mine in Texas? He's second generation Rich. He has a Connecticut prep school education. He lives in a Manhattan condominium bought for $8 million less. David Leary: [00:32:32] I'm less impressed now. Blake Oliver: [00:32:34] But basically, his we assume his family transferred, you know, the money to him. It's like Bitcoin right across state borders. And he he used that money not purchasing this facility with dollars. He bought it with cryptocurrency. So all this money is moving out of China now because China is having a I think China is headed for a deep recession. They have some serious economic problems, right. With the population decline, with the real estate bubble popping, and all of these wealthy people in China are trying to get their money out, and you can't do it through normal channels. So how are you doing it? You're buying crypto. So that's what's propping up the. David Leary: [00:33:19] Value they're using as a rail. Yeah. As a as a pipeline a pipe or rail. Yeah. And that's why I always thought the utility is I was like, but for me, like it was always like micropayments. And we've talked about this before on the podcast where maybe people could pay us, um, $0.10 per minute of listening to our podcast, something like that. But now that the fed now the Treasury has released fed now, and it costs pennies to send instant payments on the Fed now network, maybe that defeats the purpose of having to use. Blockchain or bitcoin to move money around. Blake Oliver: [00:33:50] Yeah well Bitcoin is the utility. Terribly inefficient. You know it costs I don't know. The last time I looked at it it cost you know tens of dollars to to make a Bitcoin transaction right. Not pennies. So it's not ever going to be a currency. It's the best it is is it's like a medium of exchange and. As soon as there's no longer this at some point, right? I don't know, maybe. Maybe there will always be this market for, like, illegal activity. But if it ever gets shut down, um, or there, there are better alternative develops, then what's the value? Right. What's the intrinsic value of a bitcoin? I mean to me it's zero ultimately long terme. I don't know when that's going to be but it seems like zero. So can you imagine though like if you live in this like tiny Texas town where, like the biggest business in your town is this crypto mine. That some, like NYU student, owns. David Leary: [00:34:48] Well, I think some of the arguments long terme that are opposite of yours, Blake, is that, oh, this is what's going to be important when you know, the US completely collapses. Collapses. You'll still have your bitcoin because the US dollar will be worthless. But I'm thinking if the US economy completely collapses, you probably don't have electricity to even access your bitcoin. Like like like we are probably at that point where you can't even utilize your bitcoin because there's no electricity, because I suppose society is completely collapsed. We are. Blake Oliver: [00:35:13] That's the other argument is like, yeah, you're you're betting on the collapse of the US dollar. But I wouldn't bet on that. Right. Like. You know, the US has a lot of problems, but we're still by far the most powerful country in the world. Right. Like the most eligible leper in the colony. Right. It's it's, uh, there's no other. There's no other country that can come close to offering the economic stability in the free markets and the, you know, rule of law that we have. I suppose that could all change, but it doesn't I don't see it happening even if Donald Trump is reelected as president. I just I just. I don't see it. You know, like the I don't I don't buy the fear mongering. I'm not I don't take I'm not, I don't take sides in this. I've decided to sit out this election. You know, I but I don't see that changing. David Leary: [00:36:16] So speaking of stock or investing, um, this a little bit of follow up from the UK postal scandal story from last week. Fujitsu shares have dropped nearly 4%. Um, and it's mostly due to their European CEO, Paul Patterson. He, uh. This January, so ever since his television show was broadcast. Blake Oliver: [00:36:37] So let's summarize what happened for those listeners who missed it. Right. David Leary: [00:36:40] So if you haven't listened, go back and listen to our episode from last week. I would argue it's one of the most shocking and important stories we've probably covered. Like it. And it's still like just weighing on my brain this story. But essentially what happened is in the UK for 20 years, there was a software bug that caused um, postmasters at these independent, I would argue, like kind of franchises of the US, UK postal service to be accused of theft. 700 people were put in jails. There's divorces, there's suicides. It's just a catastrophe of justice that's occurred for 20 years. And the accounting software that caused this, or the point of sale, is owned by a company called Fujitsu, who those of you probably know about the scanners, but yes. So go back and listen to the episode. But there was a TV show that recently came out and it's really surfaced this whole problem up to to the radar of millions of people. So now obviously the House of Commons in the UK, they're calling testimonies, bringing people in, trying to understand like, how did this go on for so long? And, uh, they took a 4% hit because they, um, it's looking like they're going to compensate hundreds of subpostmasters that were wrongly prosecuted. David Leary: [00:37:54] And he said that this is a moral obligation. So nobody knows how much this could be. But, you know, we talked about before, I think there's billions that have been paid to Fujitsu by the UK postal service. So they they have the money and I think they're a $40 billion year company anyway. So the money's there. We'll see kind of where that uh, cuts into. And then another piece of the follow up is now people are questioning the auditors. So of course, right. And in January they uh, they called them uh, EY and PwC were, um, accused of just not noticing this liability build up, this missing. Because when the cash register is short, that's a liability, right. Where's the money? Somebody owes it to us, etc.. Um, and during the whole entire time is ey right. And so now they're going to start facing scrutiny from an independent investigation. So this story is going to be going on. It's just amazing that it took a television show to cause justice to start being served over this. Blake Oliver: [00:38:58] So why would the auditors be. At fault in this. David Leary: [00:39:04] Well, the auditors, when you're using your job to assess the I'll use the quote truth and fairness. Right. Yeah. The UK postal Service in the report. So if you see like this balance for like I'm sure it would probably go to like something called cash drawer overages or shortages or something. Right. Wouldn't that like why is that so big. Right. Like because the. Blake Oliver: [00:39:25] Issue was that this Fujitsu software used at the point of sales and all of these Subpost offices was double counting transactions. David Leary: [00:39:35] Sales. Yeah. Sales. Blake Oliver: [00:39:36] So, so that that credit. It would not match up with the cash. David Leary: [00:39:43] And all they'd have to do is go to one location, probably for like a week period, and watch all the real sales, count the inventory. Yeah. And like, count the cash and figure it out like, yeah, they missed it. Well everybody missed this. Blake Oliver: [00:39:56] It's it's because that's not their mission. Their mission is not to. The mission of auditors is not to discover the truth. That's the problem. Uh, it should be, in my opinion. It should be closer to that. There should be more of a duty to that. But yeah. No, they weren't looking. They didn't want to know. David Leary: [00:40:15] My guess, considering the Post Office knew the UK Post Office knew horizon knew who was the company owned by Fujitsu. My bet is e knew. Some some some the words getting out, some intern, some some junior staff figured this out, reported it up, and nothing happened. Blake Oliver: [00:40:34] So going back to this, um, crypto and China thing, I have a stat on that. New York Times published an article. In December about the outflows of money. They're going it's going out of the country via crypto. Uh, but also small gold bars, real estate. Chinese buyers are becoming the main purchasers of high end apartments in Tokyo, and an estimated $50 billion per month has been moved out of China in 2023, 50 billion per month. So I guess that's that's what, $600 billion for the year. Now China's got a $17 trillion economy. So 600 billion out of 17 trillion. I guess it's not that large, but it is a lot. So this is a bad sign. David Leary: [00:41:35] I guess the question I would have when they're moving this money out is this 50% of their assets? Is this 10% of their assets, are they diversifying? Or is this like, I need to move 90% of my assets out because I'm scared, like. Blake Oliver: [00:41:47] I don't know. But I mean, if the. David Leary: [00:41:49] Economy is these numbers are humongous, right? Blake Oliver: [00:41:51] If the economy is, you know, 17 trillion and we've got 600 billion leaving in a single year, to me, that's a lot of profit, right? Or a lot of wealth that is is exiting the country. I wonder what the implications of that are for the global economy. Right. If China really entered a severe recession, they say they had 5% growth. But those are official numbers. So we don't know if that's true or not. David Leary: [00:42:18] That's the state run media, right? Blake Oliver: [00:42:21] It's interesting. What's so fascinating about this is that. Who I grew up with, this narrative that China was going to be the next global superpower that replaces the United States, and that is clearly not what is happening or what is going to happen. When you look at the effect of the one child policy and you look at the, the, the impact of, uh. She. And the policies that have been in place, put in place were the the political situation, the economic situation has become more and more controlled by the central government. Right. Who was the guy that disappeared all of a sudden? The founder of Alibaba. David Leary: [00:43:06] He vanished for a bit. Yeah. And so COVID hurt their manufacturing because the supply chains, everybody's it's too risky to have your stuff only produced in China right in one country. And so they so there's some percentage of manufacturing that's being distributed around the world now. Yeah. Only China had before. Yeah. Blake Oliver: [00:43:27] Hey, you know, I'm going kind of off topic, right, of the accounting podcast, but I feel like this is an important story that has gone unnoticed and it involves numbers, so I want to highlight it. Do you remember hydroxychloroquine, David? David Leary: [00:43:44] That's one of the Covid things like Covid. Blake Oliver: [00:43:49] Covid, misinformation, misinformation. Okay, so this is an anti-malaria drug that was popularized as a Covid treatment or preventative, something like people. Basically, people took hydroxychloroquine to prevent Covid because they heard about it online or from influencers. I think Trump was even talking about hydroxychloroquine. There was all this misinformation going around. And. Researchers have. Found in France. They've done a study, and they think that 17,000 deaths during Covid were caused by people taking hydroxychloroquine. 17,000. And that's only in six countries France, Belgium, Italy, Spain, Turkey and the United States. David Leary: [00:44:37] In lieu of getting a vaccine or in lieu of other medical treatment. They just took this instead. Blake Oliver: [00:44:43] Despite clinical evidence supporting its effectiveness, it was administered to hospitalized patients in those countries, and they estimate that 17,000 people died. Now, let's just put that in perspective, right? Like this is the power of misinformation. Um, you know, 3000 something. People died in 911. In Israel just in the in the attack in the recent war. Right. Um, it's been about what was it, one, 2000 Israelis died and now we're talking 20,000 Gazans, 17,000 people died taking a drug that had no. Clinical use. And that's only in six countries. Imagine what it could be globally. Yeah. It's like this is the power of, of of information. And I just, I, I constantly have to like look at these numbers and put this into perspective. Right. Going back to this whole Waymo thing. Right. We we hear headlines where like a Waymo car in San Francisco or I don't think it was Waymo was a different car like runs over somebody one person. Right. And they didn't even die. And we're saying like oh we can't we can't use cars. These these self-driving cars. Right. We have to put numbers into perspective. David Leary: [00:46:05] Yeah, it's the whole like people's fear of sharks, right? Like you're right. Like in general, people do not. Grasp numbers very well. Right? Blake Oliver: [00:46:14] That's right. The shark. David Leary: [00:46:15] Week. The odds of you getting bit by a shark are like basically zero, right? The odds of you getting in a car crash are much higher, right? Or even people do this with plane flights flying. Yeah, yeah. Blake Oliver: [00:46:27] Yeah. Driving is far more dangerous than flying. But people are terrified of flying and will drive instead. David Leary: [00:46:33] Yeah. Blake Oliver: [00:46:35] Yeah. Even with this, uh, recent Boeing thing where the door popped off. Right? Yeah, it's still way. It's still way safer to fly. What else? Blake Oliver: [00:46:44] What else? David Leary: [00:46:47] My, uh, personal information might have been leaked. Blake Oliver: [00:46:53] What happened? David Leary: [00:46:54] So, as you know, I have a framework laptop. Right. And so. And the reason I love it because I can take the pieces apart, put it back together. And last, and at the end of the year here, I had to buy a new keyboard because I tend to wear out my backspace key and my control C control V keys on keyboards, and I didn't. I wanted to replace the keyboard, and that's why I bought this laptop, because it's not. It's just screws. There's no glue. It's great. Mhm. Well turns out apparently they had a breach. Blake Oliver: [00:47:21] So the framework company. David Leary: [00:47:23] The framework company. So are you wondering why they had a breach Blake. Because the their accounting firm. Was tricked by a threat actor. Oh no. So the threat actor pretended they were the CEO and said, hey, can you send me on January 11th, send me a spreadsheet with, uh, everybody's outstanding balances and email addresses and names for the purchases and the person they sent the spreadsheet out to, a threat actor. Now, those those email addresses could always be used for other spamming in the future. I don't know for sure if I was in that or not. Um, I was right around the time I did do that order. So now framework says that the all the Keating Consulting employees with access to framework customer information will be required to have mandatory phishing and social engineering attack training. Um, and they want to um, audit their own internal standard procedures on information requests. But this is again, like firms don't send this stuff out. Like that's really dangerous. Like. Blake Oliver: [00:48:22] Well, David. David Leary: [00:48:23] It's an accounting firms fault. Blake Oliver: [00:48:25] Are you getting, um. What is the thing they, they do in this case is they send you an offer for, like, free identity theft. David Leary: [00:48:32] Monitoring that yet? But you didn't get that. I have 10,000 of those. But this one hit home a little bit. It's a little more personal. Blake Oliver: [00:48:40] Hey, so we were talking about self-driving cars, and here's a tax story related to that. Um, I mentioned that person that got ran over in San Francisco by the self-driving car just a moment ago. So that was a cruise car. Gm yes, owns cruise. And, uh, they've been testing these in San Francisco, which, you know, bad idea, honestly, to test these in San Francisco because San Francisco is is really, as a city, not very friendly to technology companies testing their hardware on city streets. And. Gm has now had to file a lawsuit against San Francisco. San Francisco is trying to tax GM for $108 million over seven years, despite the automaker having minimal sales and virtually no staff in the city. And the way the city is trying to do this is they're saying that the presence of the Cruze self-driving unit. Will link GM to San Francisco, and that San Francisco is entitled to a part of GM's global revenue. David Leary: [00:49:46] And it's a crazy number, right? Blake Oliver: [00:49:48] So? So GM's global revenue is $3 billion. So they're saying that $3 billion is subject to city taxes, which is $108 million. And GM is saying, of course, that cruise operates independently from GM and only started generating modest revenue recently. So. Seems like a reach to me. David Leary: [00:50:09] Right, a little bit. Blake Oliver: [00:50:11] No physical locations, no dealerships. They only sold $677,000 of retail goods in the city in 2022. Um, San Francisco must really be hurting if they're if they're stretching like this to try to get money from GM, I, I have a hard time imagining that a court is going to side with San Francisco in this case, but if they do, why would any major company want to do anything in San Francisco? David Leary: [00:50:38] Yeah, because they're not suing them because it was tricky accounting or they were playing some games the way Microsoft has done that, like this is just like, yes, we have a presence, but it's a subsidiary that only makes its $200,000 of revenue. Right? It's some ridiculously small amount. Yeah, like. Blake Oliver: [00:50:52] $700,000. David Leary: [00:50:54] Yeah, yeah, it's kind of crazy. Um, I have a city government story that's more of a feel good story. Blake. Blake Oliver: [00:51:01] Okay, let's do that. We could end with a feel good story. David Leary: [00:51:04] Hopefully. I say this correctly. The Pequea township in Pennsylvania. So they had their board meeting last month, and they unanimously approved their their budget for 2024 because all the expenditures and revenue were all in balance, but they were planning to raise taxes by 5%. But what happened is they rolled out a new accounting program, and the employees discovered they didn't account for $55,000 in revenue properly. And because of that, the last minute budget changes allowed them to have a budgeted, a balanced budget and no new taxes. So like accounting saved the day, like. Blake Oliver: [00:51:39] How much was it that they were off. David Leary: [00:51:41] By $55,000 in revenue? It must be this township must be really teeny. Blake Oliver: [00:51:44] But this is a story in the news. David Leary: [00:51:47] Yeah, they didn't have to raise taxes because they changed the accounting systems. Blake Oliver: [00:51:51] There you go. Accounting saves the day. Saves lower taxes thanks to an accounting system. Yeah. Well, David, that's all I got for today. It's been great to see you. I'll be back in Scottsdale next week. We're going to record on Tuesday, I think, and we'll be catching up on listener mail. David Leary: [00:52:09] And you're going to a wedding. So ask the bride where she got her dress at. Was she a member of their prom program first? Like how this worked out? Blake Oliver: [00:52:16] When did when did the prom program start? Because it started last year. I think my my peer group is is. Yeah, a little older than that. Past that. Okay. Yeah. Um, I'm just glad I could keep up on the slopes. When I was skiing, we got so much good snow. It was. We got so lucky. Everyone's been talking about how, you know, the Rockies haven't gotten enough snow and a series of storms just dumped on us the week before and during. So we got a we got a bluebird day. We got a powder day. Uh, right now is a great time to go to Park City and ski. So if you haven't made it out this season yet, it's now you should go. David Leary: [00:52:53] Yeah, it's trial extensions for all your clients and yeah. Blake Oliver: [00:52:56] Put all your clients on extension and check out for a couple of days. Brandon, thanks for joining us. Brandon says great episode guys. Glad I could catch it today. Thank you everyone who joined our live stream. We love interacting with you. You can send us your listener mail. Um, whether you listen live or not at the accounting podcast at earmarked me we've got a bunch of mail in the mailbag. We'll be catching up this week. And, uh, we really appreciate hearing from you and all your thoughts. I, uh, I hope you're having a great, busy season. If this is the busy season for you, and we'll see you around. Bye, David. Hi, everybody. Bye, everyone.