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CPA licensure evolves at an evolutionary pace · The Accounting Podcast

• Blake Oliver: That's the problem that we have in the CPA world. Everybody gets tested on everything; nobody really knows anything. Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: And I'm David Leary. Blake, happy Friday the 13th! Blake Oliver: Happy Friday the 13th. You know who was afraid of Friday the 13th? Arnold Schoenberg, the famous composer ... Well, at least famous in classical-music circles. [00:00:30] He wrote a bunch of music that nobody actually likes outside of the classical world. He was afraid of Friday the 13th, and he died on Friday the 13th. David Leary: Wow!!!!! Blake Oliver: Mm-hmm. David Leary: That's it. We're done. Wrap the show up. That was it. Blake Oliver: Fun fact of the day. There's a name for, actually, people who are afraid of Friday the 13th. It's called triskaidekaphobia. David Leary: So, it's a real condition. Blake Oliver: Mm-hmm. Stephen King is also afraid of Friday the 13th. He won't stop reading a book on [00:01:00] a page that is a multiple of 13. David Leary: Wow! Is there a fear of clouds, or a fear of cloud? Blake Oliver: There is. It is nephophobia. Nephophobia ... It's from the Greek 'Nephos,' clouds ... Fear of clouds. Presence of clouds or even taking pictures of clouds can cause anxiety. Many sufferers are eager to look at the clouds frequently, and when in panic will not go outside with clouds in the sky. David Leary: We have our show title. Perfect. [00:01:30] Blake Oliver: Nephophobia. David Leary: Paste it in. Blake Oliver: I like it. David Leary: Well, you posted on Twitter that you were above the clouds, I saw. You went to Seattle. I saw a picture of you landing. Blake Oliver: Yes. I was up at the Digital CPA Conference with Jirav. It's a small conference. It's grown a lot in the recent years. I think attendees number around a little over 600, when you include the speakers and the sponsors. I think there's something like 30-something apps that exhibit; small booths. I got a bit of news that came out of the conference. [00:02:00] Bill Reeb, the chair of the AICPA, announced the new proposed CPA licensure model. This is part of the evolution of CPA Project that the AICPA and NASBA, the Association of State Boards of Accountancy, have been working on in response to everybody's complaints that the CPA is no longer relevant. They put out a request for comment, saying, "If you have input, if you want to give input on [00:02:30] the future of the CPA license and how we're going to design curriculum or what's going to be on the exam, go to evolutionofCPA.org and put in your comments." Over 2,000 people responded, myself included. They have summarized the feedback in the website, evolutionofCPA.org. In general, the majority of people said that, yes, technology needs to be a big component of the new licensure model, but it also needs to go beyond that. The AICPA [00:03:00] and NASBA went back and consolidated these comments and came up with a proposed model. It's very high level, at this point. The devil, of course, will be in the details. Essentially, Bill Reeb described it at the conference- he announced it at the Digital CPA Conference as modeled after how engineers get licensed. The idea is, instead of having every CPA have to know the same thing about regulation, GAAP, and audit, [00:03:30] and tax, and business, that we have a core curriculum and then allow for specialization. You would still get a CPA. There's still only one CPA license. We're taking that core curriculum, or we're taking the current curriculum and sort of shrinking it into a core and then you can go specialize. The core would include technology ... The core is accounting, audit, tax ,and tech. Then, the three specializations are 1) tax compliance [00:04:00] and planning. Then, 2) business reporting and analysis, and 3) information systems and controls. David Leary: They have this nice little graphic of this, right? Blake Oliver: Yes. David Leary: The core is the middle of the donut here. It's your basic accounting, audit, tax, and tech. Then there's three spokes that go out to the three things you just listed - the tax compliance, the business reporting, and the information systems. So, is it going to be where you're gonna now pass the core, and you're a CPA, and then you'll get an additional letter of some type, or something with [00:04:30] an emphasis on tax, or ...? Blake Oliver: I'm not sure about the details, but the idea is every CPA will take the core, and then you will specialize, and that the exam content will relate to whatever specialty you're choosing. So, if I choose tax compliance and planning, for instance, I'm not gonna get ... I'm gonna get tested more on tax compliance and planning and less on ... I'm not gonna get the specialization testing on business reporting or on information systems and controls. [00:05:00] David Leary: But then, once you pass, and you get your designation, me, as a consumer of accountants, how do I know you're no good at reporting and analysis? Blake Oliver: I'm guessing- I think this is what should happen, that on your license, it would say what your specialty is. But it shouldn't really matter to the general public because you're still a CPA, and you still took those core- David Leary: Core classes, okay. Blake Oliver: -core classes, and you were tested on the core elements. Again, it's all in the details. The big question I have is what [00:05:30] is actually gonna get cut from the current curriculum to shrink that core to make room for the specialization, of what is gonna get moved from the current core, which is ...? Well, there's no current core, it's just everything, right? What is gonna get moved into these different specialization areas? I hope it's a lot, actually. I want a lot of specialization because that's the problem that we have in the CPA world is that everybody gets tested on everything; nobody really knows anything. So, you end up with a ton of new CPAs [00:06:00] or graduates from these programs who are superb generalists, and they don't know how to do any tax in real life or how to really do an audit or how to really do anything tech-oriented. Currently, there's barely any tech at all. With more specialization, we'll be more useful to our employers when we graduate. If I'm a tax specialist, I can go into a tax firm, I think - this is the whole point - and then actually be able to do a tax return. Maybe I even learn how to do them in school. Or, if I specialize [00:06:30] in information systems and controls, I can go into an audit, and I actually understand how an ERP system works. If I study business reporting and analysis, I could actually go work in a virtual CFO firm, or I could go work as a management accountant and actually know what I'm doing, as opposed to having to learn it all on the job. David Leary: All right. No, I mean, it looks so simple on the graph. It really does. Blake Oliver: And again, yeah, it is simple. It's a very high level at this point. So, it's a draft licensure model. They're gonna collect feedback and [00:07:00] then, continue down with this. Let me update you on the time frame, too. David Leary: I was just gonna ask that next. What's the timeline for this? Blake Oliver: That's the thing. So, they're gonna collect feedback through the end of 2019 and into 2020; build out more details of the model. The goal is to finalize the approach to the updated licensure model in summer of 2020. Then, after that is finalized, establish implementation plans for a multiyear effort to implement. It's gonna take a lot of work, too, because the CPA exam will have to change. There may be different [00:07:30] versions of the CPA exam now, and the university is gonna have to update their curriculum, and all of the test-prep companies are gonna have to update their curriculum. It's a multiyear effort, but this is a good start, I think. David Leary: We'll be talking about it because it's this summer. Blake Oliver: It's this summer. David Leary: There's gonna be updates, so- Blake Oliver: If you want to leave feedback on this, head to evolutionofCPA.org, or email feedback@evolutionofCPA.org. I've got one more thing from the Digital CPA Conference that I thought was funny. Now, I'm [00:08:00] gonna get a little more critical of the profession. David Leary: Oh, I know where you're going with this! I saw you tweet this picture. I saw this picture, yes. Blake Oliver: So, I was walking around the conference and looking at signs for rooms. There were like different breakout lunches on the first day of the conference. I walked past this room with, you know, probably a dozen tables. It says "Aging Partners Lunch." That was the name of the session. That was the name of the lunch, the Aging Partners Lunch. [00:08:30] So, I tweeted out the picture that and I said, "For anyone who thinks that the profession is not inclusive enough ..." because we're definitely very inclusive of aging partners. Actually, there was a related article on the AICPA blog about diversity that I was contemplating on the way back from the conference, because it's an AICPA conference, and it's a lot of larger firms, mid-sized and large firms, and they are not known for being particularly diverse in the upper ranks. This [00:09:00] report suggests we're not really making a lot of progress in diversity. A new report from the AICPA called 2019 Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits says that 44 percent of undergraduate students - 44 percent of undergraduate students - and 42 percent of accounting graduates, over four in 10, are black, Latino, American Indian or Alaskan Native, Asian, or Pacific Islander, multi-ethnic or [00:09:30] other foreign. Four in 10 undergraduate students and accounting graduates are minorities. This reflects a significant boost from 10 years ago when the numbers were only three in 10. So, that's increased 10 percent, or 10 percent more undergraduate students and accounting graduates are now in the minority groups; while total minority hiring by U.S. CPA firms has remained completely flat since 2012. So, we're not keeping up with the change in [00:10:00] the demographics, the makeup of the profession. We're not even hiring in- David Leary: So, bottom of the funnel if you wanna think about it that way, is- Blake Oliver: Incredibly diverse. David Leary: Getting more diverse, and then, instantly, straight out of hiring, it's already- the funnel is broken. It's not even broken ... He’s like, “people are like, ‘Oh, it's broken at the partner level,’ or people can't get to certain level,” but it sounds like it's broken at the hiring level. Blake Oliver: Yeah, exactly. It's not just about moving up the ranks. We aren't even bringing [00:10:30] people in that are diverse. So, how can you build diversity at the partner level, if you're not even bringing in the right proportion of people at the entry level? The article is actually titled, "How to Make the Accounting Profession More Diverse and Inclusive." Then, I read through it, and there's actually no real suggestions for how to make the- David Leary: There's no "how." Blake Oliver: There's no "how." I don't see anyone talking about dramatic changes to make it happen. So, we're just gonna keep, sounds like, bemoaning it. Meanwhile, yeah ... [00:11:00] David Leary: Step one is just to get people talking about it, right? That's all we can do [crosstalk] Blake Oliver: But that's the thing is people have been talking about it for years, and it hasn't changed. Since 2012, it hasn't changed, and we're in 2019 now. Anyway, just two of my takeaways from that conference. David Leary: Cool Blake Oliver: That's my top story of the week. David Leary: Your top story. I got- Blake Oliver: Top TWO. David Leary: Top TWO ... It's easy to sneak extra ones in, right? Blake Oliver: Yeah. Blake Oliver: There was an update for QuickBooks Live Bookkeeping [00:11:30] this week. It was on the 9th on the Firm of the Future blog. On December 10, they are going to launch a new service that's part of QuickBooks Live. I'm sorry, it's not really part of QuickBooks Live, but it's done using the QuickBooks Live marketing and tech stack. It says that if you buy this, you don't have to actually be a QuickBooks Live customer going forward. Blake Oliver: But the QuickBooks Live personnel will service it. David Leary: Service it, yeah. So, what they're launching is on December 10 - a QuickBooks Live Bookkeeping setup service for - get this, Blake - 50 bucks. [00:12:00] Blake Oliver: $50, not $500; not $5,000. David Leary: $50. So, if you sign up for QuickBooks Online and you wanna get your QuickBooks Online setup from day one, a QuickBooks Live Bookkeeper specialist will help you set up your QuickBooks for 50 bucks. Blake Oliver: So, what's included in that? David Leary: They're gonna set up your Chart of Accounts. They're gonna connect- help you get all your bank accounts connected up. They're gonna customize and help you create and send that first invoice, connect an app, and then help you categorize and reconcile any transactions, and get your reports [00:12:30] created that you need. Blake Oliver: Wow. David Leary: So, really get you ... It's just a simple- an onboarding to do this. Blake Oliver: Has there been any reaction from the ProAdvisor community? David Leary: People are just up in arms about this, right, because it's like, "How can they charge so cheap for this?" But they're getting people into the service. We talked about this with Amazon Prime, two episodes ago. Blake Oliver: You can lose money on setup if you get a recurring revenue customer. That's classic Software as a Service methodology. But it's competing. I mean, if I were still in business with my firm, Cloudsourced Accounting, which I sold, [00:13:00] we charged at least $500 to set up a Xero file. If I had to compete against Xero, I wouldn't have been very happy with- I wouldn't have done it. David Leary: Even though this is news for this week, this is not news for Intuit. I'll give you a little background on my history. Blake Oliver: Okay. David Leary: Way back in 1997 and '98, I actually launched something called QuickBooks Simple Start, and we did this exact thing. So, if somebody bought QuickBooks Desktop, when they were buying that, we were either charging anywhere from [00:13:30] $99 to $250 because it was hard to scale, and I think we kept creeping the price up to offer this as a service. Blake Oliver: Right. David Leary: Somebody would buy QuickBooks Desktop. They would sign up for Simple Start. We would send them- usually fax a paper form, and they'd fill out a bunch of information about their business. They'd send that back to us, usually via fax. We would basically create the QuickBooks Desktop file for them, create the whole backup file, send them the backup file. They would restore it in their QuickBooks on their local machine. Then we would [00:14:00] walk through like a two-hour training; show them where everything's at; here's your Chart of Accounts; here's your invoice template, blah-dee-blah-dee-blah ... It's exactly same service, but it just was not scalable in the Desktop days. So, Intuit was offering this service- Blake Oliver: What was the problem back in the day? David Leary: Cloud didn't exist. You're faxing paperwork back and forth to set up somebody's- Blake Oliver: Okay, got it. David Leary: There's no bank feeds ... It was not a scalable thing to do. But now, obviously, with QuickBooks Online, and the QuickBooks Live, the video call was in there- Blake Oliver: Right. David Leary: We didn't even have video conferencing. I [00:14:30] think we took regular old phone calls. There was no screen-sharing in those days either. Blake Oliver: So, now it's doable because of the technology, so they're trying it again. David Leary: Exactly. Now, I don't know if, $50, you can subsidize that with a subscription to QuickBooks Online, but it's always been a problem that customers have had. They get QuickBooks. They need help setting it up. That problem has not gone away. Intuit's probably been hearing about it for 20 years. It was there 20 years ago, and it'll be here 10 years from now. So, they're trying to solve it. This is not really new news, per se, from Intuit perspective, [00:15:00] but the $50 price point's amazing. Blake Oliver: Yeah. To me, this could be more beneficial, long term, for Intuit, and QuickBooks Online than anything related to the actual QuickBooks Live service because every customer of QuickBooks Online ... Well, not every, but the vast majority, I imagine, would need help with setup. Then, maybe they can wanna do it themselves; they're not willing to pay for bookkeeping. The Bookkeeping Live service is gonna be a much smaller segment of their user base; whereas everybody is gonna need help a setup, and it's [00:15:30] gonna help them actually get set up and reduce churn. David Leary: I imagine Intuit would probably try to do this for free. The $50 is just to make sure somebody has some table stakes in the game. Blake Oliver: Right, yeah. David Leary: Because the lifetime value of a customer, I imagine- if they buy QuickBooks Desktop, or they get QuickBooks Online, and they never set it up; they just don't use it and then, they cancel after three months, four months because they're like, "I've never used QuickBooks once, why am I paying for it?" That is way more expensive than helping them get on [00:16:00] it successfully and being a customer for three, four, five, six, 10 years, right? It makes sense why they're doing this. The problem exists, and they're just utilizing their tech stack they've built to solve it. Blake Oliver: It's a smart business move if they can figure out how to offer the service and not piss off their ProAdvisor community. That's gonna be the hard part, I think, with this; as it has been with the whole QuickBooks Live enterprise. Now, let's take a break from the news because we got to review. David Leary: You wanna read it? Blake Oliver: Sure! “A 'must listen' for small [00:16:30] business bookkeepers." Five stars. "I don't know exactly how I first stumbled upon this podcast a few months back. No matter, it has transformed my mindset and future vision for my accounting and tax practice. Very informative. Totally entertaining. Exceptionally insightful. Don't miss it!" That is from anchorman04, via Apple Podcasts in the United States of America. Thank you, Anchorman! David Leary: Stay classy. Blake Oliver: Stay classy ... David Leary: Stay classy. Blake Oliver: If you wanna leave us a review, you can do so ... [00:17:00] Well, where's the best place for them to do that, David? David Leary: Apple Podcasts is great, and Podchaser. It's podchaser.com. You can find The Cloud Accounting Podcast, or our links are in the show notes. Basically, if you're not an Apple person, and you're not on an Apple podcast, all the rest of you, you wanna go to Podchaser to write a review. Blake Oliver: So, thank you, everyone, for listening and for writing those reviews. It really helps us out. Appreciate it. David Leary: Quick small announcement about the merchandise store. So, we had those cassette-tape T-shirts that some people were getting and putting photos of on Twitter, etc. Those were limited edition. They are no longer available. As [00:17:30] of today, you can no longer get those, but stay tuned. In the future, we'll have some other limited-edition exciting designs that are out there. Blake Oliver: So, let's keep talking about technology. This was an article by Carlton Collins, CPA in the Journal of Accountancy. The question here is, in your opinion, what are the top three or four technologies CPAs should be using? 1) Microsoft Excel; 2)the internet; 3) smartphones; and 4) GPS. That's it. Those [00:18:00] are the top four technologies CPAs should be using, in the Journal of Accountancy Tech column, this month of December. I had to check the byline to make sure I wasn't reading an article from 2009, or maybe even 1999; although we didn't have smartphones in 1999. We did have- David Leary: So ... GPS? I really got stuck on this one. Blake Oliver: So, Carlton Collins [00:18:30] says that his fourth favorite technology is GPS, which has, "made my life immensely easier. Gone are the days of following poorly written directions or old paper maps. Whether it involves client locations, friends' homes, or faraway vacation spots, GPS technology helps me navigate the world more smoothly. For those youngsters who don't know what it's like trying to find a remote CPE venue in the Wisconsin countryside well past midnight without GPS navigation, especially with a 7:00 a.m. CPE presentation looming, you'll just have to take my word [00:19:00] for it that it's not much fun." What's funny about this, to me, is these technologies ... Microsoft Excel, great. Yes. Awesome technology. It's been around for 30-plus years. The internet also 30-plus years. Smartphones ... I don't know, how long have smartphones been around? At least 10? Longer? David Leary: Smartphones? Blake Oliver: I don't know [crosstalk] David Leary: I had a smartphone like '97, '98. They've been around a little while. Oh, smartphones ... Sorry! [crosstalk] Blake Oliver: Real smartphones with [crosstalk] David Leary: -'06, '07, '08, yeah. Blake Oliver: And then, GPS, [00:19:30] man ... I'm old enough to remember using MapQuest and Google Maps. So, David, what are your top four technologies for CPAs? David Leary: I quickly typed them out before you started reading this. One of the ones, though, just of his list ... I'm surprised time sheets aren't on there, or a time-clock system is not on that- Blake Oliver: Yeah, right!? And, actually, like paper-punching time clocks. I mean, those are amazing! David Leary: To track the billable hour. Blake Oliver: Yeah. David Leary: So ... It's cloud, OCR, or a data-entry-type tool to automate ... Workflow automation [00:20:00] tools of some type for your firm, et cetera. Then, something to manage your communications for your team - Slack, MS Teams, something like that [crosstalk] Blake Oliver: So, like, Team Chat [crosstalk] Cloud computing, right? Cloud GL. David Leary: Yeah, cloud. Blake Oliver: APIs; connecting apps together. We'll have to make our own list and submit it to the Journal of Accountancy. David Leary: Well, I think as we think about a prediction show towards end of the year, here- Blake Oliver: Yeah. David Leary: The news is slowing down, and we're gonna have to create up some filler material ... I found a great article. It's the 101 trends in AI we can [00:20:30] go through- Blake Oliver: Oh, boy! David Leary: Not this week. Coming up- Blake Oliver: Okay. Stay listening. Don't turn that dial right now because we're not gonna do that right now. David Leary: Yeah, 101 trends in AI should be a fun article to go through. All right. I have a lot of quick app news, but before we get into that, I have some government-related accounting news. Blake Oliver: Okay. David Leary: Or a contrast [crosstalk] Blake Oliver: Don't tell me that you're gonna talk about California again. David Leary: Well, that's what ties this together, though. So, we talked about this [00:21:00] in previous episodes and went off the deep dive on it about how California's been building their accounting system, and it now costs the state of California $1.8 billion, and it's still not done- Blake Oliver: Is it 1.8 billion? Wow ... David Leary: $1.1 billion, sorry, sorry. Blake Oliver: $1.1 billion. It's over a billion dollars. David Leary: Well, they can't even report what they've spent on it, actually. That's the gist of this article is they cannot produce proper reports on different divisions of the government- Blake Oliver: What kind of reports are we talking about? David Leary: There's the government accountability groups; they're basically press [00:21:30] organizations that are trying to request reports, and they're getting answers that are basically saying, "We can't even get to the data ourselves." Blake Oliver: This is an article on Forbes that you brought called, "California's accounting system costs taxpayers $1.1 billion and still can't produce a state checkbook." I guess this group, OpentheBooks.com, they published what they call a 'State Checkbook' for every state. The only one they can't get one from is California. That's because our state ERP [00:22:00] system still doesn't work, right? Our accounting system, after all these years, can't ... The state controller is saying, in response to a Freedom of Information request, that, "We don't even have these reports. There is no report that shows all the bills that we paid." David Leary: Yeah, and the funny part about this author of the article, he's based in Illinois, who is ... Illinois has been ripe with corruption in their government. He's like, "Even here, we're able to get ... We had less abuse and [00:22:30] more transparent spending than the state of California does.” Blake Oliver: Yeah. David Leary: It's just getting worse, but they're fighting them, and they're bringing litigation forward to really get them to open up this data. Blake Oliver: The importance of it is we need outside groups like this to hold government accountable and reduce waste. There's a great chart in this article that highlights the spending in California, which is $1.5 trillion of government spending- state-government spending. [00:23:00] The California controller, Betty Yee, has only identified $4.3 billion of waste, which is ... That's a lot of money, but it's still only 0.34 percent of all of our spending. How can we, as citizens, figure out if that's right without being able to ask for a checkbook? David Leary: And $1.1 billion of that is the accounting system that they're building from scratch instead of ... [crosstalk] They could've just bought Sage Intacct. The entire company- Blake Oliver: Yeah, they [00:23:30] probably could've bought NetSuite at a certain point, right? David Leary: Yeah, it's rather insane. So, that's state of California. But to contrast that, let's go to the other side of the globe and go down under to Australia. Blake Oliver: Okay. David Leary: So, the Australian governments have agreed on a national API standard. Blake Oliver: What? Wow! David Leary: These standards are gonna allow governments as well as third parties - this would be apps, other companies - to share and reuse enhanced data in real time. So, all [00:24:00] the government computers are gonna agree on some standards so they can talk to each other. Blake Oliver: That is so amazing, and I can't imagine that happening here. Well, because we'd have to build an accounting system before we can have an API. That's really impressive. David Leary: Yeah. They're co-designing this model together. They have a National API Standards Board, basically. It's just such a contrast, right? Actually, I think this is a good example for accounting firms. California's trying to build a closed system themselves from scratch, so this would be [00:24:30] like you need a tool in your accounting firm; like, "We're just gonna build it!" Versus I could just use an existing app that's out there. Maybe it's not perfect, but it's 95-percent there, and good enough, and I actually have something that's working, and I'm not wasting money. If I need to add on or build something onto it, I use APIs. I think that's a big difference of just building something from scratch. It's just ridiculous. Blake Oliver: Yeah, it just blows my mind that California decided to build their own accounting system rather than licensing Oracle, or SAP, or something. [00:25:00] Like what ... Why? What are the other states doing? They're clearly not doing this, or we'd be hearing about it. David Leary: Well, they're all gonna sit and watch California now. None of them are gonna ... It's a race, right? Is the accounting system gonna be done first or the train? That's the other boondoggle there- Blake Oliver: Yeah. This episode of The Cloud Accounting Podcast is sponsored by OnPay. Many times, when choosing a payroll service, you have to choose between a new startup with a great app, or an established company whose tech may feel a little behind the times. With OnPay, you get the best of both worlds - a great app from an established company that's been providing payroll for over 30 years in all 50 states. OnPay is an easy-to-use, full-service payroll with simple, straightforward pricing, and it includes all their features - employee self-onboarding, HR tools, health insurance, worker's comp tracking, and 401(k). With an accountant's dashboard and partner program combined with best-in-class integrations with Xero, and QuickBooks, OnPay is the right fit for all your clients, whether they have just one or 500 employees. They also handle all the complicated stuff that other payroll providers don't, like agricultural payrolls, including Form 943, multi-state payrolls, and employees with H-2A visas. I'm really excited to tell you that OnPay is offering an exclusive promo code only for the listeners of The Cloud Accounting Podcast to get three free months of OnPay payroll service for any of your clients that you set up by February of 2020. Head over to CloudAccountingPodcast.promo/onpay. That is Cloud Accounting Podcast dot promo forward slash O-N-P-A-Y, and use code "CAP3FREE," when you sign up your clients. That is C-A-P, the number 3, F-R-E-E. And to be clear, you cannot get this promo anywhere else. It's only available to the listeners of the Cloud Accounting Podcast. Blake Oliver: Well, hey, I mentioned Oracle, and I've got some news about them. They released their numbers. Oracle shares fell nearly three percent in extended trading Thursday - that would be December 12 - after they reported [00:27:00] their quarterly revenues, and they missed their expectations, although they did have strong growth with their Fusion and NetSuite cloud-applications business. So, like with Sage, it's another example ... The traditional on-premises ERP business is growing slowly or shrinking. The thing that's keeping them afloat really is this tremendous growth of their cloud segments. The acquisition of NetSuite was obviously a good idea. Fusion- Oracle [00:27:30] Fusion, which is the cloud version of their ERP software, grew 37 percent, and NetSuite, which is more the mid-market, grew 29 percent. So, really fast 30 percent, 40 percent growth. But the cloud services and the like to support revenue only grew three percent. Cloud license, and on-premise license revenue dropped 7.4 percent. Traditional segments shrinking; the new ones going gangbusters. David Leary: It makes sense. I mean, we've [00:28:00] seen this across the board with all the cloud software apps, right? QuickBooks and Xero were growing at 30 percent a year; Intacct was growing at that. I think even Sage reported out before, their cloud work is all up. Blake Oliver: Yep. David Leary: But the desktop stuff's not going as well. So, you said Oracle stock was down. Blake Oliver: Yes. David Leary: So, that's because all those investors are ... Obviously took all their money and bought Bill.com stock. Did you see Bill.com was up 60 percent on their IPO yesterday? Blake Oliver: It's crazy. They priced it at 22 percent, which was already above what they had originally [00:28:30] estimated, I don't know, weeks ago. Then, it closed at 35.50. So, if you got in early, you did very, very well in that first day. It's crazy. They raised over $200 million; $216 million if you round up, and they're valued at $1.6 billion now. David Leary: Wow. That happened quick. Blake Oliver: This is the maturity and growth of cloud accounting. I just love the fact- David Leary: That was a teeny little ... A teeny bit ... It [00:29:00] was an add-on app to QuickBooks, basically. That's all it was is an add-on app that solved a workflow problem for QuickBooks, and now it's a company. Blake Oliver: Amazing. Yeah. Now, they still haven't turned a profit, but their revenues are growing. In their most recent quarter, they reported $35 million in revenue, which is up from $22 million, year over year, and they had $5.7 million in losses. So, they're clearly spending to grow, but they got plenty of money out with that IPO. So, investors are bullish that they're gonna start making- raking in [00:29:30] big profits in the future. Really, really awesome. See, and as we spoke about in previous episodes, over half of their revenues - around half; might be slightly over - is from accounting firms. Accounting firms are a huge segment that have helped Bill.com go public. So, it proves that you can sell to accounting firms and build a big business that then IPOs. David Leary: Maybe it'll happen with the podcast. Blake Oliver: Yeah. Maybe we'll have an IPO someday. David Leary: That's true. Maybe one day. Blake Oliver: Yeah ... David Leary: I have [00:30:00] some interesting news around the whole bank feeds, in a way. That's the simplest way to talk about this. So, last week, I saw an open letter, or an opinion piece from the policy lead at Plaid, and the global policy- the head of global policy at Kabbage. That battle between banks and fintech is continuing. Just for some background, Plaid is really powering most of the apps we use. They connect to the banks [00:30:30] and provide those bank feeds to a lot of the apps that everybody's using. Blake Oliver: Right. David Leary: Kabbage uses those feeds, and Kabbage's entire business is basically based on giving you loans, based on how much cash you have in your bank account versus how much inventory you possibly have in your accounting system and your accounts receivable. They're adjusting your credit real time and offering you instant loans like that. Blake Oliver: That's what they're using Plaid for. They're connecting with Plaid, securely, to your bank account so they can see what is happening at [00:31:00] any- every day. David Leary: Exactly, right. Then, Kabbage also connects to your QuickBooks or your Xero and reads that data in. Obviously, the banks, in general ... Well, everybody's gone through this, right? Your bank feed stops working. They're screen-scraping. There's a lot of proposals. There's a lot of work being done. There's a lot of discussions being done about the banks don't want this to happen, but all the fintech companies need it. You need the bank data to build these apps. I mean, what good would cloud accounting be if there was no bank feeds? Blake Oliver: No, it'd be [crosstalk] Exactly. It's all about automating [00:31:30] the flow of the data. That's the value of cloud. There's other values, but that's what really speeds things up. David Leary: Yeah. So, basically, The Clearing House has proposed a data-sharing agreement, and The Clearing House is essentially representing the banks. These apps feel that it's too bank-oriented. The banks are arguing this is gonna give more control to the consumers; the apps are arguing that it's too bank-oriented, and it's not going to give control because they can block access to the 3,000 fintech solutions [00:32:00] that are out there. Blake Oliver: Like just for whatever- any reason? David Leary: Exactly. The heart of the proposal reflects a vision where your bank must pre-approve any fintech's apps before you use them. The bank could terminate access anytime if the service contradicts "the bank's business guidelines." This vague wording means your bank could stop you from sharing your own data with a company whose services you choose to use. Blake Oliver: Oh, and that is what the Plaid and- that's what Plaid and Kabbage are saying in response to this proposal. David Leary: That's [00:32:30] correct. They're concerned because the banks could be, "Well, oh, you're giving out loans. We're not gonna let you access the data because we give out loans." Blake Oliver: Right. David Leary: To force you to use their accounting systems. We can get into this ... We've talked about this a little bit in the past. The banks are trying to build out accounting systems now, right? They're trying to build these app stacks. So, that'll be interesting to see where that goes, but that ties into some news from this week. So, JPMorgan Chase, so, Chase ... They've signed an agreement with Yodlee. Yodlee is a competitor to Plaid. They [00:33:00] offer a bank-feed service for different apps. If you're like, "Hey, I don't wanna use Plaid, I'll go use Yodlee to get my bank information pulled down." Essentially, they're gonna offer more controls to you, as a customer. The article I have, it has a link to it, to a screenshot, actually, in the article, as well. The screenshot actually has Intuit, Mint, TurboTax and QuickBooks here. You can go in and choose which account specifically you're gonna share with Mint, which accounts you're gonna share with QuickBooks, and which accounts [00:33:30] you're gonna share with TurboTax- Blake Oliver: Ah, as opposed to me just handing over my log-in and them being able to access anything that I can. David Leary: That's correct. Then, this is actually, I think, more important, and I always think this is true of the apps, as well ... If you have QuickBooks or Xero, there should be some place in QuickBooks to go in and disconnect apps. On the bank side, you can go in and disconnect. You can say, "Stop sharing account info with Mint, or with QuickBooks, or TurboTax," because ultimately, you [00:34:00] may not remember all the places- companies you've gave access to your bank account. Blake Oliver: Yeah. David Leary: The banks don't give you a list of that. You can't see ... I don't think the banks know it, but there's no place for you to disconnect. So, they've signed an agreement to go a little bit deeper. Blake Oliver: But this is- again, it's just one bank and Yodlee. This is not all the banks. David Leary: That's correct. Chase is pushing people to use the APIs. They don't want people screen-scraping Chase, and they're trying to push the APIs out there more. That's probably gonna help them win in the long [00:34:30] term. People will just not use the other banks, eventually, if they can't get their data out. It goes to the Australian government example. If you have APIs, it's just gonna enable everybody else to win here. I have another article from AccountingWEB in the UK. They're having the same discussions there between fintech companies competing with banks in the UK, as well, and ultimately ... I thought there was an interesting quote from Carl Reader: "If the banks move quickly enough, they will own the lot. If not the likes of Intuit or Xero will find [00:35:00] a way to consolidate their service offerings, provide banking, and close the gate." Blake Oliver: That's exactly it. If Intuit can't get what it needs for its products, they'll just start their own bank. They'll figure out how to do it. David Leary: I fully agree with this because this is the American Express-Costco negotiation. The banks think the customers love them. They think like, "Hey, if we turn off access, Intuit and Xero are screwed.” Blake Oliver: No ... It doesn't work that way. David Leary: American Express thought that was true with Costco. Costco wound up dropping American [00:35:30] Express, and they didn't lose any customers. All those people just moved to the new Costco Visa. They just moved. American Express lost that bet, and this is the same type of thing happening. People will not switch off of Intuit, or QuickBooks, or Xero because they love Chase, but they will stay with QuickBooks, and Xero, and they'll switch banks in 10 seconds. They don't care. The banks aren't that important. The banks, they aren't that important, and if they don't figure out how to play nice with the tech companies - I fully agree - the tech cameras are just gonna figure out how to cut them out entirely. That's what Square's [00:36:00] doing. "Hey, we're just gonna not have any of the money leave Square at all." You'll pay your bills with Square; your employees'll get paid through Square. All the money'll just stay in the Square ecosystem, and the banks don't get any of it. Blake Oliver: I agree. I've got some more app news that came out of Digital CPA. Small new partnership that ... Well, actually, it could be a big new partnership that CPA.com is announcing. CPA.com, by the way, is the business arm of the AICPA that partners with apps to promote them to the CPA community [00:36:30] and also help them develop the apps to be more helpful for CPA firms. They announced, at the Digital CPA Conference, that starting in mid-January, an app called Lukka (L-U-K-K-A) will roll out Lukka Tax for Professionals - a virtual-currency tax-preparation tool built specifically for accountants in collaboration with CPA.com. Lukka is a New York-based crypto-asset software and data-solutions provider that built the world's first commercial virtual-currency [00:37:00] tax calculator. Why is CPA.com getting into this? Well, I learned something in a presentation at the conference. I think it was the president of CPA.com who said that eight to 14 percent of the U.S. population own crypto assets ... Eight to 14 percent. That's actually a substantial number. So, they own crypto assets, and the new 1040 Schedule 1 that we're gonna be using for 2019, the [00:37:30] first question on that form is, "At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?" So, now all those people who have been not really paying attention to their crypto, or not telling their tax preparer about their crypto, they're gonna have to have a conversation because their tax preparer is going to ask, "Did you own cryptocurrencies?" If you say no, [00:38:00] and you do, that's perjury. Now, the IRS has put taxpayers and tax professionals in a situation where they have to make a decision as to what is that answer? A good number of people are gonna have to start reporting this if they weren't. The IRS has also been sending thousands of compliance letters to people they believe have crypto who haven't been reporting it. So, we need a solution because crypto accounting is not easy, especially the tax components. The reason is that the IRS treats cryptocurrency [00:38:30] not as currency, but they call them digital assets. They actually treat them as assets. So, it's like every transaction that you have with cryptocurrency, you have to calculate gain and loss on it. David Leary: Yeah, it's like owning gold or stock, right? Blake Oliver: Yeah. That's very difficult to do because ... It's more difficult than gold, actually, because there is no one go-to exchange for cryptocurrency. First of all, there's a lot of different cryptocurrencies; there's a lot of different exchanges; the prices are different; and there's [00:39:00] no close of business. There's no close of business for any of these exchanges in a lot of cases, so the price is constantly changing. So, how do you choose what price for a particular ...? David Leary: So, what's the point of ... The part I'm not reconciling here is what does CPA.com have to do with this app? There's 10 other apps that do this, right? Blake Oliver: Right. So, they've chosen Lukka as the app that they are going to- that they are helping and that they are going to recommend, and that's [crosstalk] [00:39:30] David Leary: -equity in the app, probably [crosstalk] Blake Oliver: That's how CPA.com works. If people don't know this, CPA.com partners with apps ,and they earn a percentage of all of the sales of that app to promote it to the CPA community. Now, they're ostensibly creating value by helping the developers reach the community and then, also, improve the app to serve CPAs better. There's been [00:40:00] some criticism of this- David Leary: I would criticize that as a model because it's- they're too tied to the AICPA that it gives ... It will give ... In my opinion, it gives apps that are in this partnership with CPA.com, it gives them ... It looks like they're getting a blessing from the AICPA [crosstalk] and, 100-percent, they're not; they're only getting a blessing from CPA.com, right? Blake Oliver: Well, but CPA.com is owned by the AICPA. David Leary: Exactly. It's giving the impression that the app is blessed by the AICPA. Blake Oliver: And the argument in favor [00:40:30] is that there are way too many apps out there, so accounting firms, especially mid-sized and large ones, rely on the AICPA for guidance. This is a way that they can help point them in the right direction and do the due diligence these firms can't do themselves. David Leary: But it's also a double-edged sword because there's a lot more crappy apps out there than good apps. I've seen organizations push apps that are not good, and that comes back to bite you. Something you have to be careful about. Blake Oliver: Do your own due diligence. Don't just [00:41:00] take the recommendation of CPA.com. Obviously, do your own investigation, look at other alternatives, because that's just good business practice. David Leary: Yep, absolutely. Blake Oliver: Any more app news? I got a few more stories on the app side. David Leary: I have a lot of small app news, like one minute- 30-second stuff that are quick, if you want me to run through those? Blake Oliver: All right. Let's hammer them out. Yeah, let's do it [crosstalk] David Leary: -okay, Intuit QuickBooks Payroll, they have some announcements. They're adding an Elite Payroll level. It's called Elite Payroll. It's going to help small businesses that want to outsource and set up their [00:41:30] HR, other benefits, and more. So, instead of you just getting your payroll service done by an outsourced, you're gonna be able to be like, "Hey, I don't have time to set up my healthcare plan, and my benefits, and all that," and they're gonna set that stuff up for you. Blake Oliver: So, it sounds kinda like Zenefits, or Gusto aspects. David Leary: Yeah, they're getting into that full- Blake Oliver: Full stack - HR plus payroll. I have news from Xero. Now, Xero partners based in the U.S. can map their clients' Chart of Accounts to lines in U.S. tax forms that include Form 1040 Schedules [00:42:00] C and E, with one property, and also, Forms 1065, 1120, 1120-S. You can map those accounts in Xero and then export the data as a CSV file that you can then import into the tax software of your choice. David Leary: Hopefully, one day in the future, all the tax-software companies will get their API game together because that would be the ideal situation, right? Blake Oliver: Oh, that's gonna be a long time coming. David Leary: Like if even Xero could do an [00:42:30] API connection; could send this to ProSeries of Intuit, right? That would be the wonderful world, when Xero is using an API to talk to an Intuit tax product. That would be really cool. Blake Oliver: Speaking of Intuit tax products, I've got a small update for you on Intuit tax products. ProSeries, Intuit ProSeries, is now offering features such as undo and redo, making it easier to correct mistakes quickly. Returns can now be locked so they don't change while you're working on them, and the Professional version has expanded its range of standard client [00:43:00] letters to include one in Spanish, and an amendment letter, to name a few. I just thought the undo/redo thing was kinda funny- David Leary: Yeah, that's what ... My brain ... I stopped listening to you. I can't get over that. You couldn't undo and undo? I feel like that's just like copy/paste, right? Everything just has that. Blake Oliver: I mean with no undo/redo and no ability to lock of return, you could easily screw things up just with mashing a key by accident on your keyboard. So, I guess it's good, but it just shows the disparity in features available in modern cloud [00:43:30] SaaS versus traditional tax software. Or maybe it doesn't even have to do with cloud, it's just that tax software is so far behind everything else. So, ripe for disruption, right? This is what makes me sad that Canopy backed off from their tax product because, obviously, we need something. All right, what else do you got? David Leary: So Zencanna is a new point-of-sale that was released for the cannabis industry. It does all the stuff all the point-of-sales do. It's the one-stop shop to track ... They have to track everything from seed to sale. You can go back to ... We have that episode we did with [00:44:00] Bruce Phillips- Blake Oliver: Not Bruce Phillips- David Leary: Bruce Anderson [crosstalk] and his son, Tom Anderson, all about the cannabis industry. If you really wanna learn more about that whole seed to sale - the tracking, and the complexities with that, and the tax implications of all that, definitely do that. What's unique about this is because the company that owns Zencanna, Zenwork ... You may not know Zenwork, but many of you know Tax1099. What they're also doing is they're able to ... They're gonna offer your tax-filing services, [00:44:30] as well, inside this point-of-sale. So, instead of just having a point-of-sale, and tracking the seed to the sale, they're gonna track all your compliance for your government and the e-filing of that, as well. So, they're starting to get into that side of it. Blake Oliver: They're gonna do this themselves, or are they partnering with a service provider to do it? David Leary: From what I can tell, this ... Because they have multiple products. They have an eFile Assist, they have their Tax1099. They do different types of filings- Blake Oliver: Oh, got it. Okay. I understand now. So, they're using the Tax1099 [00:45:00] technology to e-file a lot of these compliance forms that the cannabis folks have to do because there's a ton of compliance around that. David Leary: Yeah. If you remember that episode, it's ridiculous compliance. Obviously, it's an app with one specialty here. They're basically launching a separate app, a point-of-sale for the cannabis industry. But what's gonna differentiate them from the other cannabis point-of-sales is that they have all this compliance stuff. Blake Oliver: Well, that's kind of it for my top stories this week, and we're getting toward the end. [00:45:30] I've got one last fun, fun story for the holidays. The holidays are a stressful time. One of the things that can make it a little bit more stressful is tipping. Tipping's difficult in general. Hard to know who you tip anymore, and often, we're not carrying cash, so how do we do it? I've never really known, other than asking folks, like my parents, who to tip during the holidays, and how to tip, and all that stuff. So, thank you ... Thank you to Brian Streig, CPA. He is @cbriancpa [00:46:00] on Twitter. Thanks for tweeting this out. It's the CNBC holiday tipping guide: "Here’s whom you should tip — and how much you should give — this holiday season." Check out the link in the show notes. How much do you think you should tip a housekeeper, David? David Leary: I don't know, but I'm gonna judge this article. Does it have newspaper boy on it? Blake Oliver: Newspaper boy? What's that? David Leary: That's what I'm saying. Is it on the list? Is this just a recycled article from years, and years, and decades ago, or is this ...? Blake Oliver: Well, now you're making me wonder if [00:46:30] I did enough research or if I just got click-baited. It's from Care.com's 2019 Cost of Holidays Survey. So, it is new data. David Leary: It is new data. Okay, got it. Blake Oliver: Yeah. According to that holiday survey, 80 percent of those polled said they give holiday tips, and 54 percent tip at least three people. It's not always clear, though, if you should tip a service provider for the holidays, and if so, how much? Here, you can learn how much should you tip a housekeeper, childcare provider, building staff, personal trainers, and massage therapists, hairstylists, [00:47:00] and barbers, pet caretakers, garbage collectors, newspaper delivery person ... Funny enough, Brian commented in his post that accountants should be on that list, right? Why not? Why don't we tip our accountants? David Leary: So, basically, you can give it to anybody you want. I mean, that list is pretty long. Blake Oliver: Well, the recommendation is that, "Look at the individuals who have helped you throughout the year," said etiquette expert Elaine Swann. "Individuals who helped to make your life easy, assisted you in some shape or fashion ..." Those are the people who deserve [00:47:30] a tip. So, I think accountants could be on this list, too. We might have to send a letter to the editor. David Leary: We have to get a jar, and accountants need a bell, so when they get a tip, they ring it. Blake Oliver: One thing that stands out about the people on this list is these are people who are helping throughout the year. These are people that - your housekeeper, your childcare provider, your building staff - you're interacting with these people on a daily or at least a weekly basis. So, if we, as accountants, want to get tips, we gotta interact more with our clients. See what I did there? David Leary: Yes, yes, yes ... Are [00:48:00] there any accounting firms that you've heard of that are just working on a tips model only? Blake Oliver: A tips model only? Like an "I'll do your tax return and then you decide how much you want to pay?" David Leary: Yeah. Blake Oliver: Hey, maybe that would work. I don't know. David Leary: Because, actually, I think ... My understanding of all this from listening to people like Ron Baker talk is that when people do this, people wind up tipping more. Blake Oliver: Well- David Leary: They wind up giving you more than what you would have charged. Blake Oliver: Right. Well, that's actually a critical [00:48:30] element of value pricing, which is you actually ask the client or the prospect, "What do you think this is worth? What would you pay for this?" Rather than giving them a price ... Then, oftentimes, you might find that the price that they say is more than what you would have said. David Leary: Yeah. Blake Oliver: Tipping is essentially an element of that, or there's some aspect of that in there. Another thing that I learned from Ron Baker's book is - or one of those books - implementing value pricing - is [00:49:00] that include a quality guarantee, where the client doesn't have to pay if they're not happy. Then, you can actually include tips in the proposal. You say, "If we deliver this to your total satisfaction, then you agree that you will pay this extra amount." It's more than you would have gotten if you hadn't included it, right? It's essentially building a tip into the proposal, or into the engagement. Why not try it, right? David Leary: Everybody put a little "Pitch In" button ... Send a "Pitch In" email to your clients this fall. Blake Oliver: That's all [00:49:30] I've got. We've got one more episode, I think, until the end of the year, so ... David Leary: We have two more Fridays. Blake Oliver: Okay, we've got two more. David, until next week, how do people get in touch with you if they wanna connect with you online? David Leary: The easiest way is probably Twitter. I'm @DavidLeary. Blake Oliver: And I'm @BlakeTOliver. As always, it was great talking with you, David, and I'll see you next week. David Leary: Bye, everybody.