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Blake Oliver

Host, Editor & Producer of Cloud Accounting Podcast
#CPA accounting technologist • Co-host of the Cloud Accounting Podcast (@CloudAcctPod) • 40 under 40 • I also play the cello 🎻
Recent episodes featuring Blake Oliver
David & Blake get schooled!
Cloud Accounting Podcast
SponsorsBQE Core - Show Notes 01:01 – Jennifer is bringing more than debits and credits to her accounting courses at UT 01:50 – Aspiring cloud accountants, get yourselves acquainted with high-quality video-conferencing software, such as Zoom!  02:56 – New new reviews!  04:44 – News from beyond the Cloud Accounting Podcast Studios!  05:09 – Are smart speakers recording your every word? | Consumer Reports  07:15 – Have we sacrificed our privacy for the sake of technological convenience?  11:21 – Caroline’s article relates back to our Sock-puppet discussion 11:48 – Does connection equal increased creativity? | Knowledge 12:54 – It's the newness of the person, their new information and new perspectives that inspires creativity.  13:36 – A substantial piece of David's work over the past decade is due to meeting new people on social media, however, he has yet to find the best way to balance digital distractions and real-world productivity 14:51 – Despite the negative aspects of social, it has opened up a wealth of possibilities for people to share, create, serve, and advance their professions 15:54 – David continually boosts his creative powers by accepting every LinkedIn invitation that comes his way!  17:17 – Be smart about building your personal brand, in order to make the best connections possible  17:44 – David highly recommends reading The Cluetrain Manifesto, and the 95 Theses, to learn more about the human connection to marketing, and social media 18:30 – Wanna boost your career? Stop lurking, start talking!  20:41 – Miguel's articles focus on job searches and hiring practices, such as background checks, as they pertain to social media:                  - When your social media presence affects your ability to land a job | PR Newswire                 - Social-media screening is the new norm for employers | Business News Daily                 - Social doesn’t tell a candidate’s entire story | Workforce                 - How useful is social-media screening? | 22:26 – Saving face - If you wouldn't want the entire planet to see it, don't post it on social media, period.  23:51 – We're no longer able to lead separate work and personal lives anymore with the advent of social media. 27:33 – Think your private social channel is private forever? Think again, and then think about what you say there!  29:08 – Don't be afraid to talk about the things you do - hobbies, interests, activities - on social media. It gives potential employers a more well-rounded view of who you are and what you can do for them 30:01 – Accounting firms are looking for more than just accounting majors to build diversity within their firms | AccountingWEB  31:15 – Not to worry, though, up and coming accountants! As we discussed last week, there are still many accounting-related jobs available that offer top compensation and career opportunities!  32:36 – Are CPAs losing faith in the US economy? | AICPA 34:18 – Check out Sean Stein Smith's take on blockchain and accounting in episode 36]  35:05 – Cause for celebration? WeWork's failed IPO is proof that the free market system work |AIER  35:18 – Numbers don't really lie ... WeWork's S-1 filing | CNBC 36:35 – Since the trends are heading towards automation, aspiring accountants and bookkeepers should focus on the value-added services they can provide to clients 38:37 – Make learning the technology and the tools your side gig, if you want to get ahead of the game!  40:02 – Learn all the tech tools, not just accounting-related ... Calendars, social media automation, website design to build up basic skill levels employers are seeking 41:14 – Carpe Diem! It's never been easier to start your own accounting or bookkeeping business, with very little upfront expense!  42:14 – Get the itch for a niche ... There are countless opportunities for specializing in the accounting and bookkeeping realm 43:38 – Blake doesn't think regulation will hit the advisory specialty in the near future.  44:32 – When in Texas, don't bother calling yourself an accountant, unless you've got the CPA designation to prove it.   44:43 – In Cali, however, anything goes ... Anyone can call themselves an accountant, no degree required.  46:11 – Traditional accounting will stand the test of time, even though some may venture into more 'futuristic' areas. It's really a matter of personal choice 48:09 – No more snooze-fest - Accounting and bookkeeping can be as exciting and fun as you make it  Connect with Jennifer Email: LinkedIn: Twitter: Get in TouchThanks for listening and for the great reviews! We appreciate you! Follow and tweet @BlakeTOliver and @DavidLeary. Find us on Facebook and, if you like what you hear, please do us a favor and write a review on iTunes, or Podchaser. Interested in sponsoring the Cloud Accounting Podcast? For details, read the prospectus. Subscribe Apple Podcasts: Spotify: Google Play: Stitcher: Overcast: TranscriptBlake Oliver: Welcome to The Cloud Accounting podcast. I'm Blake Oliver. David Leary: And I'm David Leary. Class: And we're the University of Texas at Dallas!  Blake Oliver: Awesome. Well, I think that worked, but in case the audio wasn't quite clear to our listeners, we are joined today by a very special guest; many guests, in fact. Jennifer Johnson, CPA, and Senior Lecturer in Accounting has brought along her entire class as our virtual [00:00:30] studio audience. So, thank you all for joining us, and please give yourselves a hand. Class: [Applause and cheering]  Blake Oliver: All right. Well, Jennifer, thanks so much for bringing your class along and being our audience today. I understand this is Accounting Information Systems. Is that right?  Jennifer Johnson: Correct. Blake Oliver: We're really happy that you reached out to us and suggested doing something like this. What was it that prompted you to ... First, how did you learn about the podcast, and [00:01:00] what gave you this idea? Jennifer Johnson: I've been listening to the podcast for about six months. I just stumbled across it, and ever since I started listening to it, I thought it would be great to introduce your topics to my class. Of course, we get the chance to talk about accounting technology and how accounting is not just about debits, and credits, and audits, and tax returns. This semester, I'm assigning them all the opportunity to listen to various podcasts, of which yours is one. Then, they get to share [00:01:30] the recent news and technology with the course. Everybody's learning something new, outside of the textbook.  Class: Having this event happen is just a technological marvel of the cloud, because we have two different technologies we're using to record. We've never done this before, with a studio audience like this - a virtual studio audience. It's a testament to the cloud. Blake Oliver: Yeah, and for those who are interested in nerding out about the tech, we're using Zencastr to record the podcast audio. That's what we normally do, when we record, because David [00:02:00] is in Tucson, and I'm in Los Angeles. Then, we are now adding Zoom for the video-chat component so we can record locally to our computers to get high-quality audio. Then, we can also reach you through Zoom, which, by the way, students, if you're not familiar with it, I highly suggest you get familiar with the Zoom, because it's what it seems like all of the modern cloud-based accounting firms are using these days- David Leary: Especially if you're gonna be a cloud accountant because you don't wanna have to drive to your clients' offices and do face-to-face meetings. Blake Oliver: Yeah, [00:02:30] no, avoid that at all costs! David Leary: So, we've got news to jump into, which is great because Blake brought articles; I brought articles; you, the students, have brought articles to discuss this week. We do have a couple of reviews we should probably get through, and then, we'll jump into the news. Blake Oliver: This is from Johan Potgieter CA(SA), which I'm not sure what that means. David Leary: I think it's South Africa. Blake Oliver: Oh, CA in South Africa. Got it. He says - five stars - "I absolutely love this podcast! As the Cloud Accounting Manager and fully remote worker for Outsourced CFO, the insight, commentary, research, and witty feedback, regarding everything Accounting, Cloud, Tech, Xero, AI, and everything in between has become a staple source of knowledge and information in my week. For the past year and a half that I have listened to David and Blake on this podcast, I have not missed a single episode." Wow-  David Leary: Thank you!  Blake Oliver: "I can not recommend this podcast enough to any person that is even remotely interested in the wonderful world of Cloud Accounting. Even though they are based in the USA, I find that their content also relates to me as a professional in South Africa. They are truly Cloud Accounting Thought Leaders ;) Keep up the great work!" David Leary: Thank [00:03:30] you very much! That's a great review!  Blake Oliver: Thank you.  David Leary: "Great podcast!" Five stars ... This one's on iTunes. "Engaging and informative. I love listening and staying up to date on the latest accounting industry news." This is from horizon_view in the United States of America. Blake Oliver: TScottT said, "Love your podcast. I can’t get into a lot of podcasts, but I listen to yours on a regular basis. Always informative AND entertaining. I even made my husband listen to several episodes as we were driving home from XeroCon this summer! He’s not an accountant, but I think even he enjoyed it. Keep up the good work!" My [00:04:00] wife won't even listen to the podcast, so that's really a testament. David Leary: Yeah. It's even better if you can get your spouse or significant other to actually subscribe and download the podcast separately. That'd really help out our numbers.  Blake Oliver: Yeah, help our numbers out.  David Leary: One more review. "Hooked! Hey guys, I've been listening to your podcast for the last two weeks. I'm addicted. For anyone wanting to know how to disrupt their profession and stay ahead of the curve, this is mandatory listening. Keep up the great work!" That's from astetic - A-S-T-E-T-I-C ... [00:04:30] Blake Oliver: If you want to leave us review on iTunes or Podchaser, we'll read it on the air. But, let's get to the news, shall we, David? David Leary: Yeah, should we jump in with one of our stories? One of the students' stories?  Blake Oliver: I think, let's start with the students. We're doing this a bit different this week. We have our studio audience here, and I understand that some of you have brought articles to share. So, we would love to go ahead and do that. Who [00:05:00] wants to go first? Alex Dolan: I'll go first.  Blake Oliver: Go ahead and tell us your name. Maybe a little bit about yourself. Then we can get into the article. Alex Dolan: My name is Alex Dolan. I'm a senior student here, or a senior accounting student here at UT-Dallas, and I'm like one semester away from graduating ... All this exciting stuff happening in my last semester ... I found an article from, by Allen St. John and Thomas Germain about [00:05:30] smart speakers and how they pose potential privacy threats and are viewed as kind of invasive by some people. A little bit of a summary of it is that investigative reporting has shown that smart speakers are recording transcripts of voice recordings that are being screened by employees for the improvement of devices, "and not for marketing purposes." Critics say this policy is unfair [00:06:00] to consumers. Perhaps it is spelling a bad habit for big tech for surveillance without the consumer's knowledge. I just wanted to know what you guys thought about this.  Blake Oliver: I have smart speakers. How about you, David? David Leary: I have an unplugged Alexa. It's usually unplugged. Blake Oliver: Are you guys scared by this whole thing?  David Leary: No, I just plug it in when I wanna use it and unplug it when I don't. Just been doing that since day one. So, this is good. Now that we have an audience here, we can take a survey. How many of you are using- actively use a smart speaker?  Blake Oliver: Yeah, raise [00:06:30] your hands, if you've got one. Okay, so, it looks like ... Probably, what, 20 percent? A third, maybe. It's funny, when this article came out, I kind of got paranoid for a moment, because I have a smart lighting system in my apartment. I bought all those light bulbs, Philips Hue light bulbs that you can control with your voice through Alexa. It's kind of a pain to set up, but once you do, it's pretty awesome. Oh, and I just woke her up. Let me see ... [laughing] She's listening to our conversation. [00:07:00] Yeah, I got a little bit paranoid about this, but the good news is that now you can go in, and you can change your privacy settings, which is ... That's what's great about this article that you brought, is it ... Now we have options to control privacy and whether or not these recordings are gonna be listened to by human beings, right? I think there's a broader discussion, which is how much privacy are we going to have in the future? Because everything I read suggests that privacy might be going away, and we may not have a choice about it; in that there's all this- [00:07:30] big data companies now that can take in our credit card purchases, and our loyalty card purchases, and our location data from different apps. There's all these different- David Leary: We talked about that two weeks ago, about how much you tip; that's being tracked now. Blake Oliver: Yeah. Not to mention, there are cameras everywhere now. People have smart doorbells; there are public surveillance cameras. There are companies that just aggregate this data and can use AI to know an incredible amount about you, automatically. I'm not sure there's a way to really stop this. [00:08:00] There's legislation that's been proposed. I think San Francisco banned the use of facial recognition, in San Francisco, by the police department. Ultimately, how much can legislation do? I think it ties into some of the other articles that you guys are gonna share later about social media and presence there. We may just have to get used to a world in which we don't have as much privacy as we used to. David Leary: This article didn't touch on all the apps you use. Every time you turn around, you install some app, and it's asking for access to your microphone. This has probably happened to [00:08:30] everybody ... About three weeks ago, I was complaining to my wife about my teeth were hurting. I went to Twitter, and I got Sensodyne ads in my Twitter feed. I know I didn't Google search that. I've never clicked on a Sensodyne toothpaste ad. It's a little on the creepy side at this point. Blake Oliver: That's creepy. Alex Dolan: I used to work at a pet store, and while I worked there, all the ads on my Facebook  were all about pet food, and pet appliances, and stuff like that- David Leary: Oh because the location [00:09:00] tracking. Blake Oliver: Yeah- Alex Dolan: Well, just because I was always saying stuff about pets' food because I was the sales associate. It always thought I was talking about pets. David Leary: That's the thing with big data, right? It's so smart and so stupid. It thought you were just a person that loved dogs or pets. It's not smart enough to know, "Oh, he works there. He probably doesn't wanna buy any pet stuff," and they still advertise it. Or, it happens, like you buy something on Amazon, and then you see ads for that for the next two weeks ..." You already made the purchase, though.  Blake Oliver: So, what [00:09:30] is the tie-in to accounting here? If I'm gonna stretch here, I would say that we're talking about big data, and if you look at the future of audit, for instance, there's all these applications that are being developed now, such as MindBridge Ai, that ingest large amounts of data and then extrapolate risk on these data sets, without us having to manually do it.  That's essentially the same logic; the same systems are being applied to our personal data to find things out about us, but we can take that [00:10:00] technology, and we can apply it to accounting - to audit, in particular - to hopefully save ourselves a lot of trouble. Of course, the challenge is that we don't always know exactly how it works. Then, as an auditor ... This is one of the reasons that this AI in audit has taken so long to get into use is that we don't often know how machine learning works, because it's an algorithm that we don't understand. It builds itself. So then, how do you ... As an audit partner, how do you use that [00:10:30] tool, if you can't explain it, or if you can't look inside it? Interesting questions, right? All right, well, thanks so much for sharing. Is it Alex? Alex Dolan: Right. Can I ask one more question?  Blake Oliver: Oh, yeah, sure. Alex Dolan: Do you think that audit, in the future - like in the near future, with Big Data - do you think that privacy audit will be something that will exist?  Blake Oliver: That's a great question. If legislation continues to be passed, protecting consumer privacy, then a lot of these big companies are going to have to go [00:11:00] through audits of their consumer data to make sure that they're not collecting too much or that ...I don't know- that they're complying, right? David Leary: I can even see that as being a service you could offer as your accounting firm to your clients. We will help you secure your private data; starting with your financial data online. Blake Oliver: All right, who's next? Caroline Dillard: Hi, I'm Caroline Dillard. I am also a senior in accounting here at UTD. I'm set to graduate next May. Then, I plan to fast-track, because UTD has a fast-track master's program. So, I plan to do that [inaudible] sit for the CPA exam. The [00:11:30] article I brought today is somewhat related to the article you brought up a couple of weeks ago about sock puppets on LinkedIn, and the fake profiles that you wanna avoid making connections with. This article was published on It was written by Pawel Korzynski, and it's called, "How Making New Friends on LinkedIn Can Boost Creativity." Essentially, what it is, it's sort of [00:12:00] a summary of a paper that the author of the article co-authored. Basically it was a report of a study done on engineers. They found a correlation between the creativity and personal innovativeness of those engineers. Then, 1) their willingness to play with new social media technologies, and 2) their willingness to connect with new people that they hadn't previously known.  What I found was interesting is that there's a correlation [00:12:30] between making connections with new people - people you haven't met before - either face-to-face, or through another connection. But that same correlation with creativity doesn't exist, if you're just making connections with people that you've already met. Essentially, there's a correlation between creativity, and then a diversified network of [inaudible] Basically, the study put forth that the reason [00:13:00] for this is, if you're making connections with new people, you're getting access to new information, and new data, and this builds your creativity. I was wondering, 1) your thoughts on it; then, 2) if there's a benefit of connecting with new acquaintances through social media; but there's also the detrimental effects of connecting with sock puppets or fake profiles. What are some things that we can look out for to avoid, when [00:13:30] making new connections?  David Leary: One proof of this ... This podcast would not exist, if it wasn't for social media. Blake Oliver: Yeah.  David Leary: Chances are, I would have never ... I knew Blake through social media before I met Blake, or I knew of Blake, maybe is the better way to say that. I look at other projects and things I've worked on over the last five, six, seven, eight, 10 years, and a lot of these connections have been because of social media. So, it's totally valid.  But, equally, it's really annoying, right now, when I get 10 messages a day on LinkedIn, which I know are from bots, or fake things, or people [00:14:00] trying to sell me stuff that are not engaging. Sometimes, I feel like that sucks a little bit of your soul away. I don't know the best way to balance it. I don't know, Blake, if you came up with a great system, or if any of you, because it gets very distracting. I can't even imagine being a student nowadays with the amount of social media and the distractions. How do you study? Blake Oliver: Yeah, it's crazy. I wasn't a student that long ago, and I didn't have a smartphone. I met my wife in college, and I never had to text her when we were dating, so I can't even imagine what you all go through, having to interpret [00:14:30] a text message of somebody that you're ... We had to talk on the phone. It's amazing what's going on with social media. I would agree with David that our podcast wouldn't exist. We would not have met. Well, maybe we would've met at a conference, but we wouldn't have continued talking to each other, if it wasn't for social media. A lot of the people that I know who are really forward-thinking in the accounting profession, they'd be isolated, otherwise. Maybe you're one person in your firm who kind of is getting what's happening. In the past, you would have been that one person, and your ideas would have been [00:15:00] crushed, and you would have just gone along with what everybody else was doing. But now, you can connect with like-minded people in firms or in industry, all over the country, and you can come together.  There are these groups that exist, and David, and I are part of one together - people who work all over the place, all over the world, and we connect, and we share ideas as to how we can better run our firms, build our applications, serve the community, advance the profession. David Leary: If you think about that, it applies to school, right? It's the same model. You're in classes; you're [00:15:30] going to different classes every semester; you're constantly meeting new people. These collisions are happening. You're at your creative peak there, in college. Then you get out, and you take a job with a company, and you only talk to the same six people every day for the next five years if you stay there that long. Of course, your creativity is gonna get stifled. Blake Oliver: I think the key is use social media intelligently. David, I wanna know, do you still accept every LinkedIn invite that comes your way, or have you changed your behavior? David Leary: Well, apparently, I'll be more creative if I connect with more people, so I just accept them all. Blake Oliver: David, [00:16:00] and I are of different opinions. I won't connect with somebody, unless I can trust that they're real; that we have connection. You can't just look at connections in common, though, because there's lots of bots that are really good at connecting with many, many people, such as David, who don't look at their profiles ... I try to be smart about it. I think the key is just connect with people who you know are real and that you wanna continue conversations with. It's not like online is the future of everything. It's a hybrid, like many things. We take these meetings [00:16:30] that we have at conferences, for instance - maybe a technology conference - and then we continue talking and sharing ideas with those people throughout the year until next time. Whereas, in the past, it would have just been I see this person once or twice a year. I think it's important, too ... I like this article that you brought, because it mentions, at the end, employer policies about social media. One day, when you guys are running firms, or running accounting teams, or finance teams, I think it's really important to let your staff, especially if you have a firm, have their own identities [00:17:00] on social media. A lot of firms, I think they kind of ... They don't like it when the staff are out there on social media. They want the firm brand to be the only thing that's out there; but people don't buy from a brand, they buy from people, when it comes to professional services. You need to be out there building your own personal brand, and I don't mean this in a like a sleazy marketing kinda way. I mean this in a you are, to most people, your social media profile, because [00:17:30] you can only have so many one-to-one, in-person relationships these days, but you can have many, many more, via LinkedIn, or Facebook, or Twitter, or Instagram, or Snapchat, or TikTok, I guess. I don't know ...  David Leary: People wanna connect with other people. They don't wanna connect with companies or brands. There's a good book that you guys should all read. It's called The Cluetrain Manifesto. Even if you don't read the book, there's just the 95 Theses, if you just read that; takes you 20 minutes. It's all about how markets are conversations. [00:18:00] Those guys wrote that over a decade ago, now, and it's so dead on. This is pre-Facebook. I think Twitter was just becoming a thing, and social media was just becoming a thing. They really got that things are changing, and intranets were changing, internally, and the internet was changing the way communications were happening; it's not so much one way anymore. Yeah, being a face for your company is important because that's who people wanna connect with - other people, ultimately. Blake Oliver: The [00:18:30] tip I would leave you with is, as you get out into the professional world, and you start using LinkedIn, don't be afraid to post. If you read something interesting, share that on LinkedIn, and ask a question, and interact with your colleagues, and share ideas and information. It takes guts, I think. A lot of people- the vast majority people never post on social media; they're just lurkers.  I saw a study that, on Facebook, something like 80 to 90 percent of people never post. They [00:19:00] only look at other people's posts, and maybe 10 percent of people are out there commenting, and creating content, and that sort of thing. I can tell you, just based on my own experience, that getting myself from that lurker point into that 10 percent has made all the difference in my career. David Leary: So, let's get into the next couple stories, because I feel like this is the other side of the coin and pendulum here, Blake, of social media. This episode of The Cloud Accounting Podcast is sponsored by BQE Core. If you have niche clients that are architects, engineers, consultants, or lawyers, BQE Core is the app for them to best manage their firm, increase their staff productivity and ultimately increase their profits. Even if you don't have those niche clients, Core is a great tool to use in your own accounting or bookkeeping firm, as well. Core is an easy-to-use all-in-one platform for project management, but includes advanced functionality, like budgets, labor costs, forecasting, contract analysis, and approval processes. Core also includes a standalone accounting module. Even though Core is an all-in-one platform, it still works nicely with other apps offering you and your clients the maximum amount of flexibility. Core offers a full-function mobile app and recently launched a cutting-edge voice-based assistant for your smart speaker of choice. To learn even more about BQE Core, head over to That is Cloud Accounting Podcast dot promo forward slash C-O-R-E. Blake Oliver: We've [00:20:30] got another story from Miguel-  David Leary: Kinda three related stories. Blake Oliver: So, Miguel, same thing for you - your name, a little bit about yourself, and then go ahead and share that story. Miguel Calderon: My name is Miguel Calderon, and I'm also a senior here at the University of Texas at Dallas, and I graduate this December; so, a few more months. Being that we are college students, and our search for employment is a lot higher than probably the average person, I was looking at a couple of articles [00:21:00] for a survey done by It says, "Roughly seven out of 10 employers search for candidates using social networking sites for background checks, and about 43 percent of those employers continue using social media to check on current employees, once the onboarding process is complete."  Like everything, there's good and bad to this. About 37 percent of the background information supporting the professional qualifications that the employee had in his resume, and [00:21:30] 22 percent of the candidates had great references from the job candidates, probably through one of these bots or something. The bad part of all of this was that 27 percent of the people actually lied about their qualifications in their resumes, and 20 percent shared confidential information from their previous employers. I know you mentioned just on the last topic about using social [00:22:00] media intelligently, but probably saying it on private was my thought. According to this article, about 47 percent of employers said that they wouldn't call a person back, if they couldn't find them on social media. What kind of balance would you ... Can give us, so we can have a balance, or something?  Blake Oliver: I love that you brought these stats. These are fantastic. It really [00:22:30] shows a difference between when I was a student, and now. When I was a student, the advice was just don't be on social media; if you just avoid it, anything public, then you can't damage your employment prospects. But now, if you're not on social media, then the employers want to know why aren't you on social media? And it can hurt you. You're kinda caught. You have to be there. If you really wanna be safe, just don't ever post [00:23:00] anything, anywhere, that you wouldn't want the entire world to see - that's the safest thing to do, right?  David Leary: That's my policy, too. I don't use any of those "Only show this post to 16 of my friends," or, "Only show this to a certain audience," or, "This one's gonna be a private post," because all it takes is one mis-click and you're in trouble. So, I just assume every time I post everything, it's wide open to the world - everybody can see it - and it just keeps me safer that way, knowing I just choose not to put anything that should be private online. Blake Oliver: I [00:23:30] know that's hard, right? Because you wanna be able to have that close circle of friends that you share with. But depending on your ambitions, somebody might screenshot something, and that might come back to bite you someday. Is it really worth it? I agree with David that you should really be the same person you are online, that you are in person, that you are at work. I think there's a big shift happening in the world of work, where ... It used to be that you had this private person that you were at home and with your friends, and then, you [00:24:00] had this professional persona when you went to work. Those two things could exist separately and be completely different. If you've watched the show Mad Men, you see that. Most of the show, the drama is around people having these dual identities. Don Draper, perfect example, right? But now, with social media, with everybody carrying a camera around in their pocket, you can't do that anymore. We can see that there's actually some positive, I think, effects of that. If you look at the whole "Me Too" movement, I [00:24:30] don't think any of that would've happened if it wasn't actually for social media and people getting together online to talk about this kind of stuff. If you do something inappropriate, chances are somebody will pull out their camera and record you doing it. You can't do that anymore. We were just talking about privacy ... This is one of the - I think - good things about lack of privacy is that you can't hide. Either-. David Leary: Unless you're Michael Mann, with the MyPayrollHR fraud [cross talk]  Blake Oliver: That's right. Yes.  David Leary: That guy hid pretty well. Blake Oliver: The best thing to do [00:25:00] is, yeah, every time you post, think, "What it what if my parents saw this? What if my future employer saw this," and then don't do it if it's a question. Also, I don't think that means you have to be buttoned up, because employers, they'll look at your profile, and they'll figure out if it's not real. I think the key is to be yourself to the point where, "I'm not gonna work at somebody's office, if they're not okay with me being myself." It's the only way we all get to a situation in which our jobs don't suck. I [00:25:30] know that can be hard, but it can work out. David has made a whole career out of essentially being himself in a corporate environment. David, you wanna talk about working at Intuit, and your role? You stood out from the crowd there.  David Leary: I was maybe one of the first five or six employees at Intuit that were on Twitter and just started getting out there on social media. It took a big company like Intuit years before they kinda got good at it, or even knew what they wanted to do with it. In the meantime, I kinda saw [00:26:00] it as an opportunity, because if you look at historically ... You guys have probably heard of Guy Kawasaki.  Blake Oliver: He was the chief evangelist for Apple- David Leary: For Apple, for years. Some of you guys play Xbox; Major Nelson, who's on Xbox ... Even though Xbox, the brand,  and Xbox is a platform, there's still these people or these faces of those platforms ... I kind of saw that as an opportunity; like, "Oh, we have this platform, QuickBooks Online; we have a platform for developers - the APIs; but we don't have a face." People wanna talk to a face. They wanna think of a person when they think [00:26:30] about that product. I just went out there and started becoming that person ... A little consciously, but not really. Really, I just helped a lot of people, and it just kind of snowballed and built from that. Blake Oliver: David's being very modest, but he essentially was the face of the QuickBooks Online ecosystem for many of us, looking from the outside; at least that's how I perceived you, David.  David Leary: I was good at smoke and mirrors, huh? Blake Oliver: That's a big thing at a multi-billion-dollar company ... By the way, guys, if [00:27:00] you don't know Intuit, maker of TurboTax and QuickBooks - one of the largest developers of accounting- cloud-accounting software in the world. Yeah ... So, David did it. It may not be easy, but I think you were able to carve out a role for yourself because of it, at Intuit, and it has led to great things. David Leary: One thing, just to build off of these articles - yes, you as a student have to worry about - to get hired - what you post on social media. But I heard something this week, and I'm not sure what I [00:27:30] was listening to, so I’m gonna have to do some digging to get this link in the show notes ... Just the analogy would be this - you now have graduated; you work for accounting firm B, and it's a smaller firm; you guys have a Slack channel, and you guys are communicating on that. Maybe you're talking about all your competitors in there - good, bad, immature talk, whatever it is.  In theory, it's a private channel. Now, accounting firm A gobbles you up, and now you're part of that accounting firm. Slack lets them take [00:28:00] all those Slack messages and merge it into their instance of Slack. Now, every single person could just search all your old messages on Slack, so, even the "private" channels have some risk of not being private, now.  Blake Oliver: That's a really good point. We've kinda known this about email for a long time. When you send an email, that's like a postcard in a lot of ways. Would you put this on a postcard and send it in the mail? Somebody else could read it at the office where you're sending it to ... Same thing with Slack, with email. We have to be really conscious of how [00:28:30] we communicate. David Leary: How many of you have posted something on social media that you fear is gonna not let you get a job? Blake Oliver: I'll admit it, but that was back before anyone was warning anybody about that ... Let's talk about some of the positive things about posting on social media. First of all, I wouldn't have gotten my last three jobs if I wasn't active on social media, and posting, and all that stuff, so that's a great thing, for me, personally. In the last the last three jobs I've interviewed for, I have not had to submit a resume because my LinkedIn profile [00:29:00] and the stuff that I was posting on LinkedIn was plenty. They knew who I was. They knew what I could do. So, that's a big bonus, right?  Some of these other stats of reasons why employers hired a candidate because of what they saw on social media - that your background info supported your professional qualifications; it shows you were creative; that you conveyed a professional image; that you showed a wide range of interests. I think that's important, too. Don't think that because your employers are looking at social media, you can't post pictures of [00:29:30] yourself kayaking or something because you like doing that. That's great, actually. People want well-rounded employees. Especially if you're going into public accounting, they want people who are going to be developing business someday, and if all you do is accounting, you're not gonna be able to bring in business. You're not gonna develop relationships, and that sort of thing. David Leary: We could jump into some of the articles you and I brought, Blake. I have one that actually ties into exactly what you just said. Blake Oliver: Okay, let's hear that. David Leary: This is an article that was on AccountingWEB. "Why Non-Accountants are the Growth Engine for Accounting Firms.". [00:30:00] Blake Oliver: Oh, I saw that. David Leary: Obviously, with all of you being accounting majors, guess what? You didn't have to do that if you wanted to work for an accounting firm. arguably, as they're getting way from compliance work and going to more technology driven and advisory work, a different skill set's needed. What's good is it feels like Jennifer's preparing you guys for that, right- Blake Oliver: Yeah. David Leary: -beyond just compliance work. He goes into very specific thoughts about this, and how it actually even helps with the culture and the diversity, [00:30:30] et cetera. It really drives back to what Blake was saying, that they want diversity; they need different thoughts. Especially in accounting firms, I think there's just one marching order, and people- they need to stray from that more. Blake Oliver: Yeah, and I wouldn't like take this trend as like a bad thing for accounting. It's really a good thing because accounting firms are diversifying, and a lot of the fast-growing accounting firms actually don't describe themselves primarily as accounting firms. They describe themselves as either professional-services firms or consulting firms [00:31:00] that happen to be run by CPAs. So, there's a lot more opportunity inside of these firms that are growing to do a lot more than just audit and tax; not that audit and tax are bad. We had a story last week ... This latest episode on the podcast about how tax manager is one of the best jobs in the country, right? High compensation and tons of opportunity for career growth. David Leary: Well, I think, of the top 15 jobs in America, weren't four to five accounting-related? [00:31:30] Blake Oliver: Tax manager, audit manager, and accounting manager were all in the top 10 or 15. I can't remember. It was a list that was ranked by career prospects. The idea being that it's not really so important what you're doing as how much opportunity you have to grow inside of that field. If you can get to the manager point quickly, if you can get past that staff level and get to manager, then you've got a ton of options for career growth, [00:32:00] and it's a lot more fun. Let's see, what else should we talk about? I've got a story here ... How many of you subscribe to - just a show of hands - read the Journal of Accountancy? Is that something you guys are paying attention to? Yeah? Okay, cool, so, like half? That's great. That's awesome-  David Leary: Those of you who aren't, I'm not either, so, it's okay ...  Blake Oliver: Well, it is the most widely read publication in accounting, so if you don't have a student subscription or membership, I suggest you - and you wanna be a CPA - get [00:32:30] one of those with the AICPA. They're not expensive, and you get the journal as part of your membership. The article that I'm talking about now is the AICPA's Economic Outlook Survey. They do this every quarter, and it's a survey of CPAs who are AICPA members in business and industry holding executive positions in both public and privately-owned organizations of all sizes across a broad spectrum of industries - the CPAs in executive positions in business and industry. They [00:33:00] survey them every quarter. There's kind of a slightly worrisome trend ... CPA Outlook Index - this is the number between 0 and 100 that this survey uses to give you an idea of how positive CPAs are about the economy - dropped from 75 to 72, but the index component for optimism about the US economy dropped 10 points in the third quarter, from 70 in the second quarter to, now, only 60, which is 19 points down from the third quarter of 2018.  [00:33:30] If you've been following the news about a potential worsening of the trade war with China, about a possible recession coming, it seems that CPAs, who are in these leadership positions in industry, are also worried. Doesn't mean that necessarily it's going to hurt job prospects, because accounting is one of those rare industries in which it continues to grow, often, in recessions. Actually, here's the bright spot in here ... For the last five quarters, the number-one [00:34:00] challenge facing organizations has been availability of skilled personnel. If you are a skilled accountant, you'll probably be just fine. David Leary: Yeah. I brought an article for your economics class, I guess. It's written by, actually, another professor, Sean Stein Smith. He's been on the podcast before, really heavily focused on bitcoin and blockchain ... Everybody's familiar with WeWork, right? Blake Oliver: WeWork the co-working platform. Nod your heads ... Yes, no?  David Leary: It's like the library. You [00:34:30] go there to work, except for they have kegs and coffee. It's great ... You go into work [cross talk]  Blake Oliver: -and they have internet; high-speed internet ... Well, I guess they have that at the library, too. David Leary: Anyway, WeWork's had this dramatic rise and fall to where they were about to IPO. I think they had a crazy valuation. They wanted to IPO at $43 billion. Now, they've completely pulled back. They're not gonna IPO. Sean's article basically points out that everything about the failed WeWork IPO proves that free markets [00:35:00] work and that we should be celebrating it. The quote I really love in here, that he wrote, was, "To succeed, any company must create more resources than it consumes, and WeWork simply has not met that requirement." I thought that was just the perfect way to phrase it. Blake Oliver: Markets work and accounting .... It wouldn't be possible without accounting. This is one of those things that we don't talk about a lot, but like the entire capitalist free-market system relies on financial statements, and they worked, in this case. People [00:35:30] realized that you cannot run a real estate company with operating expenses twice your revenue, and go public, and expect people to invest money at this insane valuation. Check out their ... I think it's their S-1 filing? I can remember the name of the form but check out WeWork's filing. It's kinda crazy-  David Leary: Take that article to your economics class and try to get some extra credit. Blake Oliver: So, David, I think we should pivot now to the Q&A section. We've got a special segment here. If you want to ask us any questions, you're welcome [00:36:00] to do so at this time. Jennifer Johnson: We've got a handful of students who've got some questions in the classroom. I'll just pass the mic around to those guys and let y'all answer them.  Blake Oliver: We know that you've prepared questions, but if you wanna- if something has come up, based on this discussion or just is at top of mind, feel free to ask whatever you want. Student: Yes, hello. My name is [Olus Lavi]. I'm a senior here at UT-Dallas. I'm graduating in May. My question is - from the perspective of someone who is [00:36:30] aware of the global trends in cloud accounting, what can a fledgling professional do to put themselves ahead of the curve? Blake Oliver: The question is - from the perspective of someone who is aware of global trends in cloud accounting, what can a fledgling professional do to put themselves ahead of the curve? I could tell you that, based on my study of technology trends, that everything is headed toward more, and more, and more automation. That was true in my career, starting as a bookkeeper. 10 years ago, 80 percent of my job was doing [00:37:00] data entry. I was doing bookkeeping to put myself through school to get my CPA. Within five years, that had inverted, and maybe 20 percent of the job of bookkeeping today is data entry, and the rest can be whatever value-added services you want to provide on top of that. Maybe that's doing cloud-based bill pay, or payroll, or analyzing financial statements, even, if you've got those skills. That happened in the small business world. David, as [00:37:30] the ecosystem guy for QuickBooks Online, you saw that automation happening. David Leary: I saw it even before that. If I go back to early in my career, I'd gotten into quality assurance, testing QuickBooks, before we'd ship it. In those days, you'd have to test it, and make sure everything was perfect, because you were making a CD that you'd physically have to send and ship. If you shipped the bug, it's very hard to send a new CD; costs millions of dollars to do that. Now, with cloud accounting, if there's a bug, they just fix it; somebody refreshes their browser, they have the fix. What I saw, in those days, is things [00:38:00] started moving from manual automated testing, where you were clicking everything, and clicking every button, typing every field, deleting every field, you'd start using tools to automate that. So, I've been on this automation trend for probably 15 years now, I've seen it across the board. Blake Oliver: The accountants who learn to master automation tools and technology are gonna have unlimited opportunities, so that is my recommendation to you. You may ask me, "Well, how do I do that? How do I actually get experience? Because [00:38:30] when I go work for a firm, chances are, they're not gonna let me touch that stuff right away. Maybe I start in audit, or maybe I'm in tax ..." I would say do this on your own time, on the side.  Go find a small business that will let you do their bookkeeping and play around with the technology; build a QuickBooks Online general ledger that's hooked up to some sort of cloud-based bill pay system and try doing integrations. Play around with these different apps. Maybe do an internship in an outsourced accounting department in [00:39:00] an accounting firm. That's how I got all my experience doing this. You can't learn it in school because it's developing too quickly. You can learn the general principles of integrating information systems, but to really know it, you've gotta do it. Even if that's not your dream, say, working with QuickBooks or with Xero, and you wanna work in larger enterprises - you wanna go work for Coca-Cola or something like that - all the principles of integrating systems, and data flow, and automation, they all apply. It's the [00:39:30] same stuff, it's just more complex. If you're working with QuickBooks, or you're working with NetSuite, or you're working with SAP, or Oracle, fundamentally, these are the same principles, and you can learn a lot doing it on the small-business side to train yourself for that enterprise-level work. I would say the same thing about robotic process-automation technology. Companies like UiPath that build this incredible automation technology that you may not be able to get access to, right now, but you could learn how to do [00:40:00] basic automation with macros ...  David Leary: I think you could even just start on your own personal level with small tools, like calendar tools for scheduling. It sounds dumb, but ... "Oh, we're gonna go out for drinks tonight ... or what's the best time we can all go out for drinks tonight?" There's tools ... You can start incorporating these into your life now. There's also tools that can post to social media. You could have it automatically ... I'm just throwing this out there ... Automatically read the show notes in a Cloud Accounting Podcast, and then grab all those articles, and tweet [00:40:30] them out from your account. An employer would be like, "Wow, this person really finds great articles and tweets these out!" But there's all these tools, and just by using those, you're just gonna start building fundamentals on how to connect different apps together, and move data around, and sending data to where you want it to go. Even though it's nothing accounting-related, but if you just get those as a basic skill level, you're just gonna put your head on that path. Blake Oliver: All right, next question. Student: Hello. My name Heather Hoagland, and I very much appreciate you mentioning how important that is, because I currently work at a small company, and I'm doing bookkeeping, so I'm glad that that's giving me experience, and taking me somewhere. My question for both you and David is what would you say to someone who dreams of starting their own accounting business? [00:41:00] Blake Oliver: I would say it's never been easier. That's the beauty of it. I was kind of in your situation, where I was doing bookkeeping. I was getting to apply the skills that I was learning, or the theory that I was learning, in reality, I got to apply the theory in this business. Here I am making [00:41:30] journal entries, making mistakes. Luckily, with accounting, you can always undo your mistakes ... You can delete that journal entry, or you can post a reversing one. I would say you could literally, these days, probably graduate from school, and if you have enough work experience, you could start doing some basic work - bookkeeping, some tax ... You don't even have to go into ... If you're good at selling and marketing, you don't even have to go to a firm and get experience, these days. That's insane. That never used to be the case- David Leary: In this day and age, it's cheaper [00:42:00] than ever, right? You need a laptop, and a Starbucks with internet. If you're just gonna do cloud accounting for others, you can create an accounting firm for almost nothing; relatively cheap. Blake Oliver: You're talking few thousand dollars of investment. David Leary: Yeah.  Blake Oliver: What I would say is that, if you wanna own your own small firm, David always talks about specialization and niching, and becoming an expert in a particular industry, because that's where everything's headed. Accounting firms used to do everything for everybody, and you can see [00:42:30] it changing. Right now, there's a CPA firm just for breweries. There's multiple, actually; there's many. There's people who focus just on working with dentists because their needs are specific. It could go on and on. I worked with a lot of entertainment people here in L.A.  Getting experience in that industry is going to really strengthen you for owning your own firm someday, and I've seen that. Some of my colleagues worked as controllers before owning their own firms. Instead of going the whole public-accounting route, they got out of that as [00:43:00] quickly as they could. They got into industry, and then they learned their craft there. Then you can be a really great management accountant working in public. Student: Hi, thank you. My name is Colton [Irvey]. I'm a senior accounting student. My question is, I'm curious about the growth of the field of advisory, and if y'all think that that particular field is going to see a lot more regulation in the coming years? Or, if not, do you see there could be issues with lack of oversight of these consultants? Blake Oliver: Interesting. The question is, then, is advisory [00:43:30] going to see more regulation? David Leary: As far as like you have to pass some sort of certification, or testing, in order to provide advisory work? Blake Oliver: Because, right now, anyone can be an advisor. You don't have to be a CPA to do it. It's a good question. I don't think that's gonna happen anytime soon, because I think the AICPA has enough on its hands, just trying to deal with the changing CPA exam and requirements for education. They've got a whole initiative called CPA Evolution, [00:44:00] about how do we change the curriculum, the exam, to modernize accounting? Extending the accounting franchise into advisory, unlikely - or the CPA franchise into advisory is unlikely. David Leary: It's interesting, because I think Texas has interesting regulation on - you can't say that you're an accounting or bookkeeping firm, unless you're truly a CPA. Is that correct? You can't call your ... You can't use the word accounting in your company's name-. Blake Oliver: Unless you're a CPA firm? David Leary: I think that's true in Texas. [00:44:30] Would you guys know this? Jennifer Johnson: Yeah, that's correct. You can't technically call yourself an accountant, if you put your services out to the public, if you are not CPA. They do find people and ask them to cease and desist. Blake Oliver: That's interesting, because here in California, that's not the case. That's why I was able to start my "accounting services" firm as a student before I was a CPA. Anybody can call themselves an accountant, even if they don't have a degree here. It's kind of a total [00:45:00] free-wheeling situation in California.  I actually am not- I'm not a huge fan of regulation, in general. I think a lot of accountants and CPA tend to be a little more conservative, when it comes to that, because we see our business-owner clients suffering from overly burdensome regulation, especially here in California.  But in that one case, I think it's kinda confusing to the public that we have certified public accountants, but then, anyone can call themselves an accountant. Texas is actually ... It's funny. It's kinda flipped. Normally, [00:45:30] California is overly regulated, but in this case, Texas has more regulation and, I think, is doing the right thing. Jennifer Johnson: Great. I think we have one more question unless somebody else has got one?  Student: Hey, how you doing? My name's [inaudible]. My question is do you think professional accountants will be doing the same thing they do today, in five years, or in 10 years?  Blake Oliver: This is interesting, because it ties into this discussion that we have had over the last few months, this summer, about [00:46:00] the move to advisory from compliance. There's a lot of people out there saying, "Oh, compliance is getting automated. You gotta do something else." By compliance, I mean traditional service areas, like tax and audit. My view is that that's not going away. It's just a lot of the administrative and rote work in those fields is going away, which is actually great, because that's why being a tax manager and audit manager is gonna be a great job, because there's a lot less crap you've gotta deal with; a lot less boxes to fill in and all that stuff. What do you think, David? David Leary: I think [00:46:30] the answer is more of what kind of professional accountant are you? I guarantee you there will be professional accountants still doing stuff 10 years from now, the same exact way they did it 20 years ago. Blake Oliver: Yeah.  David Leary: So, I think it depends on who the professional accountant is, and that's gonna define that. Blake Oliver: We see that in surveys of growth rates of firms. 75 percent of firms are growing at about five to six percent per year, which is standard for the industry, and that's considered good. If you're a traditional accounting firm, if you [00:47:00] grow five-six percent, you're happy.  The firms that are leading the way are growing 20 to 30 percent, which is insane rates of growth for a professional services firm. That's what I saw, when I had my own firm, because they're doing things differently. Yeah, it depends, I guess, if you're part of one of those high-growth firms or if you're part of a traditional firm.  Maybe in the past, I would have been more critical of that traditional firm. But honestly, if that makes you happy; if that's what you wanna do, that's great. It's gonna be a good business for a long time, like David said. But if you wanna do [00:47:30] something completely different, there's a lot of opportunity now to rewrite the rules. David Leary: Hopefully, you all want to be accountants, still ... We're not ruining this ...  Blake Oliver: Yeah, yeah. Actually, can we see a raise of hands of who in the class is intending, at this time, on going into accounting? Okay, good, yeah. So, most folks. We haven't ... We should've taken a poll at the beginning and then at the end to really know if we made a difference. We're not statisticians. [00:48:00] Jennifer Johnson: I think the difference really is that they get to see all the different opportunities, now, and you're not just boxed in to having to do a tax, or audit, or just basic accounting-  Blake Oliver: I think that accounting is the biggest secret in school, right now, because it has this image that has ... Over the last hundred years, we've had this image of being this boring, stodgy profession. Now, you can pretty much do anything, and you can make a lot of money, and you [00:48:30] can have a lot of fun. I always tell people, I used to be a musician before I got into bookkeeping and then into accounting and got my CPA. I think that what I get to do as a CPA in technology is way more interesting than when I was a musician. People don't believe that, but it's true. It's changing so rapidly. If you're a lifelong learner, if you love learning new things and trying new things, there's plenty of opportunity for that. I guess, with that, we can [00:49:00] wrap it, right? David Leary:  Do we get to say "Class dismissed" or anything like that? Jennifer Johnson: Yes, you can dismiss the class.  Blake Oliver: So, as always, you can follow me on Twitter. I'm @BlakeTOliver. You can also connect with me on LinkedIn. I would love everyone in the room today ... Feel free to reach out and connect. If you do, though, just write me a note so that I know you're not a bot. How about you, David? David Leary: I'm really easy to track down on Twitter - @DavidLeary. I'm also on LinkedIn at David Leary, and you can find The Cloud Accounting Podcast on all the socials. We [00:49:30] probably need to get on Instagram. I imagine many of you are Instagrammers, and we're not there yet, so we probably- we should get on that here. Blake Oliver: Yeah, but it would be the same picture every week of just us talking. We'll have to figure that one out.  David Leary: I'd pick out random fashionable clothes on the closet and post those to the Instagram. Blake Oliver: So, thank you all, and thanks for joining us. Best wishes to all of you in your careers. David Leary: Class dismissed.  Class: Thank you! 
The best job in America... is for accountants!
Cloud Accounting Podcast
SponsorsBQE Core: Show Notes 01:44 – Another five-star review!  02:52 – Some familiar faces made CPA Practice Advisor's 2019 40 Under 40 list | CPA Practice Advisor 04:10 – AICPA held a not-so-time-zone-inclusive webinar on diversity and inclusion | Accounting Today 04:59 – David's Home Away from Podcast, AutoEntry,  just got acquired by Sage! | Sage 07:18 – Better late than never - Blake finally files is taxes!  10:15 – Fyre Festival - Accounting Version | Financial Post 11:17 – Testing, testing … Is this thing on? CPA Canada failed to test its test-taking software before unleashing it on test-takers | Going Concern 14:45 – Wanna play with numbers AND carry a gun? | Journal of Accountancy 14:56 – AICPA has released new standards for forensic accountants | AICPA  15:21 – Tipalti raises $76 million in a recent D funding round | CPA Practice Advisor 15:46 – Fundbox packs a bigger punch now with $176 million in Series-C funding |  17:23 – Speaking of Intuit, QuickBooks Online is now offering mileage tracking, and if adding some other performance-enhancing elements in its September round of updates | QuickBooks 19:31 – Not-so-thrifty glitch in TurboTax results in a $216 million tax bill for one probably very unsuspecting thrift-store employee | Forbes 21:53 – Out with the V, in with the X ... Microsoft ushers in a newer, shinier function for Excel | Microsoft  24:35 – Wells Fargo and Plaid's new data-sharing agreement gives customers even more data control | Bank Innovation 26:00 – BBVA wants to be a lover, not a fighter, using its Open Platform, and further innovation to help fintech startups | Bank Innovation  28:45 – Sharing the love, fintechs are pairing up with smaller banks to overcome the no-charter hurdle | L.A. Times 31:54 – It’s a numbers game – accounting-related positions are the best jobs to have in America! | MarketWatch  35:57 -  A position that allows you to learn and move upward leads to the highest amount of job satisfaction 37:57 – Tech is top priority … Really, it is! | Deloitte Controllership Digest  40:11 -- Make sure you come back next week for more important survey results, like the third-quarter AICPA Economic Outlook Survey!  40:36 – The moment you've been waiting for! More news and insight on the MyPayroll fiasco!  41:32 – Meet two of the frontline reporters in the MyPayrollHR situation - Chelsea Diana, and Michael Williams 47:44 – It's important to note that there is no indication that the employees of MyPayrollHR  knew what was going on.  49:16 – It's still not clear where all that money went, or if parties, like Cachet, who eventually covered the missing payroll, will be reimbursed 49:40 – Just how big of a tangled web did Michael Mann weave?  50:22 – At least three banks claim a combined loss of $36 million due to fraud, but did not name Mann, or MyPayrollHR in their disclosures 50:58 – This Michael actually laid eyes on that elusive Michael, and can confirm he is human, sort of ...  51:40 – The Big Chill - Mann's check-kiting antics resulted in frozen accounts at both Bank of America, and Pioneer Bank 52:55 – Mann, and MyPayrollHR's parent company, Valuewise, had their hands in a variety of business, ranging from staffing to healthcare, and beyond 57:22 – Though Mann has admitted to $70 million worth of fraud, it's up in the air what will happen next 59:27 – No matter Mann's motive for committing this fraud, the key takeaway for accountants and bookkeepers recommending payroll services to clients is to know exactly who you're dealing with!  Connect with Our Guests!Michael Williams Website: Twitter: Chelsea Diana Website: LinkedIn: Twitter: Get in TouchThanks for listening and for the great reviews! We appreciate you! Follow and tweet @BlakeTOliver and @DavidLeary. Find us on Facebook and, if you like what you hear, please do us a favor and write a review on iTunes, or Podchaser. Interested in sponsoring the Cloud Accounting Podcast? For details, read the prospectus. Subscribe Apple Podcasts: Spotify: Google Play: Stitcher: Overcast: TranscriptChelsea Diana: I think there's one really important line from the complaint that says a lot about what's happening here, and it's that Mann said he used almost all of the $70 million to sustain certain businesses, and purchase, and start new ones, which means that he was using his money on actual businesses, it just wasn't the business that he was saying it was for, essentially. Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver- David Leary: And I'm David [00:00:30] Leary. Blake, it's been another week. Blake Oliver: Another week. David Leary: More accounting news.  Blake Oliver: More accounting news, more coverage of MyPayrollHR. You secured us an interview with two of the reporters on this case, right? David Leary: Yes. We have a special interview we'll drop in towards the end of this episode, so stay tuned to the end, and you can hear that. It really ties into some of the articles I brought ... What else did I bring? I had some stuff tied into criminals and CPAs. Blake Oliver: I filed my taxes on TurboTax Live. I'll tell you all about that. We [00:01:00] have to talk about the Fyre Festival for accountants up in Canada. David Leary: I think I saw that go by on social. Blake Oliver: That was crazy. Some disaster with CPA Canada, the exam they do there. David Leary: We have app news, as always. We have some banking tech news. Blake Oliver: You've got a big announcement with AutoEntry. I'll let you share that. Excel has a new feature that's super-nerdy, super-cool. It's a new function, actually; we've got some QuickBooks Online updates. I wanna talk later about the number-one job in America-. [00:01:30] David Leary: Podcaster? Blake Oliver: It's not podcaster. It's not podcaster. David Leary: YouTube star?  Blake Oliver: Almost. David Leary: 40 under 40 came out. Blake Oliver: Oh, yeah, some people got 40 under 40. First, we gotta talk about the review we got. David Leary: Yes.  Blake Oliver: This is from Tom- five stars - "I really enjoy your Cloud Accounting Podcast. I am a CPA & CMA working in industry my entire career and I'm looking for ways to apply my background in accounting operations, process improvement, and process automation, [00:02:00] including RPA, to help others. Your podcast is a great way to catch up on current issues and challenges. Thanks, David and Blake." Thank you, Tom. We really appreciate that review and the feedback. David Leary: Like always, go to iTunes, or Apple Podcasts, and leave reviews; go to Podchaser and leave reviews. They really help spread the word and help us get new listeners. Blake Oliver: We will read it on the air. David Leary: The new listeners are important because if ... The 40 under 40 list was released this week. I don't know if you saw that at all, Blake?  Blake Oliver: Yeah, some friends [00:02:30] of the show on the list, who made it.  David Leary: Some friends of the show on the list. Blake Oliver: By the way, this is CPA Practice Advisor. They annually create a list of the top 40 accountants under 40. Then there's a separate list of 20 folks who are related to the accounting industry, often the vendor side, who are also under 40. David Leary: So, some of the people who have either been on the show, or we've talked about on the show before ... Caleb Jenkins is on the list. Hector Garcia's on [00:03:00] the list. Will Buckley from Xero. Ben Richmond from Xero, who we interviewed that time. Blake Oliver: Cathy Iconis is on there. Aaron Berson, great to see you on the list. Elizabeth Pittelkow Kittner-. David Leary: Joshua Lance is on there.  Blake Oliver: Ingrid Edstrom, Garrett Wagner, Lindsay Stevenson, Patrick Lee. Who else am I leaving out? So many names-. David Leary: Does Eric Green have the most additional letters behind his name?  Blake Oliver: Well, let's see- David Leary: He has five?  Blake Oliver: How many designations? [00:03:30] Five designations. That's a lot. David Leary: He wins. It's cool, because what I like about this, it's easy to click on people, and there's a small summary; especially for people you don't know, it's nice to click down, and drill down, and see who they are. One takeaway for me, and that I wanna thank everybody that's on the list that said the way they stay on top of accounting news, they mentioned The Cloud Accounting Podcast in their profile-  Blake Oliver: That is awesome. David Leary: Got the little chills from that. Thank you, everybody who threw out a plug and put us in their ... Maybe this is like a chicken and egg thing. Maybe they're on the list because they [00:04:00] listen to The Cloud Accounting Podcast. Blake Oliver: Yeah, it's possible ... David Leary: I have a teeny story, just to throw it out there, to get it out of the way, before we really jump into the big, big news. Blake Oliver: Okay. What's that? David Leary: AICPA held a free webinar on diversity and inclusion. Blake Oliver: Okay.  David Leary: I was like, "Very interesting!" I clicked on it. I was gonna RSVP to it, but guess what time it started at? 7:00 a.m. Pacific. Blake Oliver: Yeah, that's not very inclusive of the folks on the West Coast. Come on. David Leary: Or maybe- Blake Oliver: Or the [00:04:30] night owls-. David Leary: Night owls, exactly. So, I did not attend the webinar. I just thought that was a little entertaining, that it's an inclusion webinar, and it was done at 7:00 a.m.. Blake Oliver: Well, David, let's get to the news. David Leary: All right.  Blake Oliver: I wanna talk to you about the big news that happened today. It's Friday, and I woke up to news that AutoEntry, who you are affiliated with, who you work with ... People know you as- you're the resident thought leader at AutoEntry. They just [00:05:00] got acquired by Sage. David Leary: Yes, it's huge news, right? Because Sage is one of the big players in the cloud-accounting space we talk about all the time. There's Intuit; there, Sage; there's Xero. Now, Sage has acquired AutoEntry. So, as of now, I work for Sage; AutoEntry's a part of Sage. We're part of the Sage Family, the Sage team, which is interesting. Blake Oliver: There weren't a lot of details in the post. You probably can't say, if it's not public yet, but how much money this was for, what's [00:05:30] the nature of the deal, what's gonna happen to all the AutoEntry people?  David Leary: Yeah. As you can imagine, things have gone very fast. I don't know much more than what's on those- out on the official Sage press release that went out. Because this was done- It's in Ireland and England, right? This is 1:00 a.m., my time. My phone's been kinda buzzing all night. I woke up, saw it, went to the gym ... There's a lot happening really fast, and I don't have all the details, but I can definitely see the big takeaway [00:06:00] is how Sage is committed to AutoEntry being part of an open ecosystem. Blake Oliver: Mm-hmm.  David Leary: For me, personally, I feel like that was always a big kick I had when I was at Intuit about being committed to an ecosystem that's open. If you think about it, 15 years ago, an acquisition like this would just be- that would be it. AutoEntry, from that point forward, would only work with Sage, right?  Blake Oliver: Right.  David Leary: I think all of these players in this industry now have a more mature view to where it's okay, because maybe you're an accountant, or an accounting firm, and you have lots of clients on Sage; maybe [00:06:30] you have some clients and QuickBooks, and some on Xero, and some on other products. You can still use AutoEntry across all your clients. You're not gonna have to ... If you switch to these clients, now you have to use different software. It's just a more mature thinking by all the companies involved, nowadays. Blake Oliver: Yeah, I saw some of that speculation on Facebook; like, "Oh, now that AutoEntry is part of Sage, am I gonna be able to use it with QuickBooks? I think the answer is definitely- is gonna be definitely yes, right? It's not [cross talk]  David Leary: Yes, it's very clear. It's the same, in [00:07:00] a way, like how TSheets- when QuickBooks bought TSheets, TSheets still works with Xero, and other products. The same thing, when Xero bought Hubdoc, right? Hubdoc still works with QuickBooks. That open-ecosystem mindset is really, really still there. Blake Oliver: That's your news of the day. My news of the day is that I finally filed my taxes. I used TurboTax Live this year, and- David Leary: Did you talk to Claudell?  Blake Oliver: No, not Claudell. It was Clifton. [00:07:30] I talked to Clifton today ... I had procrastinated on actually filing, because I didn't owe anything. I'm pretty good about prepaying, so I'm not due until October 15th, because I did an extension. I scheduled my call with a CPA named Clifton. I didn't have any errors in my file, so basically, we had a 10-minute discussion, in which he said, "Yeah, you did a great job!" Then I filed my return. David Leary: Was it a video conference? Blake Oliver: Yes. David Leary: What was that experience [00:08:00] for you like, as the consumer, the customer? Blake Oliver: The way it works is I go inside of TurboTax, where I'm working on my return, and I say that I want a review, and it gives me some options for times. I select a time and day that works for me. It happened they were available today. Put in your phone number, and then, at that time, you get a call from the TurboTax Live hotline, or whatever it is, and it connects you to somebody via phone. Then, [00:08:30] from inside of the TurboTax application in your web browser, you can press a shortcut that then displays a six-digit code. You provide that code to whoever you're speaking with on the phone, and then they can see your screen. You can see them through their webcam, like a small version of them, like icon view.  David Leary: It's like joining a Zoom or a webinar, but it's right inside ... You're not getting extra software; you're not getting separate downloads; you're just doing it inside TurboTax, itself. Wow ...  Blake Oliver: Yeah, and it's [00:09:00] smart, because they're using the phone for the audio. Even if you lose the computer connection, or there's a problem with the browser, you can still talk. They don't see you; you see them, and then, they can direct you as to what to do on the screen. They can't actually control the screen, though. David Leary: So, you use the phone, which eliminates a lot of possible complications if somebody doesn't have the microphone configured right, or their computer- Blake Oliver: Very slick. David Leary: Yeah, that's a really smart idea. Okay. Blake Oliver: He went through some of the typical concerns with me. I [00:09:30] was comfortable that it looked right. They have an option where you can actually- you can upload the return to them and send in all of your documents, and they will actually verify that you put in the numbers correctly, but it takes three to five days, and I didn't really want to go gather all the documents again and send them, so I didn't bother doing that. I could have had a CPA sign off on my return and file it for me, if I'd wanted to, as part of the extra fee I paid, but I declined not to. I'm not sure if I'm gonna do it again next year. I think [00:10:00] I might just go it alone, because honestly, unless the return kicks up an error, or you have like a really complicated situation ... Definitely, as an accountant, I was pretty comfortable that I had done it right, but this time, I just wanted to see. I wanted to see how it worked. I had a very good experience. You know who didn't have a good experience recently? It was a bunch of CPAs, or wannabe CPAs in Canada, who were taking the exam to become CPAs, which I understand is called the CFE exam. That stands for [00:10:30] Common Final Examination. I don't know if you saw this article in Going Concern? The headline is, "Let’s Talk About How CPA Canada Totally F*cked Up Last Week’s CFE."  I don't mean to laugh at this, because it sounds like, actually, a terrible experience for these students and professionals. I didn't realize this, but in Canada, they still do their CPA exam in three days, and it's annually, which is way more intense than what we have here in the US,  where it's four [00:11:00] parts, and you can take them at different times of the year-  David Leary: Basically, this is like it happens in these three days; if something goes wrong, you can't, next month, just come back and take your test. This is the- it's an event.  Blake Oliver: Yeah, it's more like the bar exam here, right? Which is- David Leary: What went wrong?  Blake Oliver: Long story short, the CPA Canada started using new software this year, called Surpass, and apparently Surpass, or Surpass, didn't surpass expectations, because [00:11:30] they rolled it out, and it failed miserably. They had massive IT issues to the point where ... Just to give you one example, in Edmonton, the exam was supposed to start on day one at 9:00 a.m., and they couldn't get it to work until 1:00 p.m.. The exam test-takers had to sit in the examination center for four hours with nothing to do with very little food or water, because you can't leave. There are snack bars, but I guess there wasn't enough food-  David Leary: That is the Fyre Festival! There's [00:12:00] no food, there's no water; they just had to sit there. It's the same thing. Blake Oliver: It was described on social media and Reddit as the Fyre Festival for Accountants, which is a nod to the spectacular concert debacle in the Bahamas, where tents were provided instead of luxury accommodations-. David Leary: That's a Netflix special, right [cross talk]  Blake Oliver: -watch it on Netflix. If you wanna see ... If you want to feel better about your business, or if you feel like a failure, ever, just go watch the Fyre Festival documentary on Netflix, because it'll make you feel a lot better about that. Now, when anything gets screwed up [00:12:30] like this, then it's compared to the Fyre Festival. Yeah, apparently, it was just a terrible rollout. You can see how that could be a problem, right? When the exam's only given once a year, there's not really an opportunity to test if the examination software works very well, and there's a lot of room for risk. We have solved that, I think, in the US, because we use Prometric for our CPA exam, which is a professional testing center that tests a lot of exams; hundreds of [00:13:00] licenses and certifications ... You can go to a Prometric testing center. It's basically outsourced testing. They maintain the testing centers, the software; if anything goes wrong, it only affects the people at that center at that day, not everybody taking the exam. There's all these questions as to whether or not the students, or the test-takers are going to get another chance; if their scores are gonna be invalidated. Some people had to take the exam, writing it on paper. They couldn't actually write into their [00:13:30] laptops, and all this crazy, crazy stuff; miserable experiences. David Leary: So, the certifications, though, matter, right? We've been talking a lot about the MyPayrollHR.  Blake Oliver: Mm-hmm. Yeah, yeah. David Leary: ... Here's the plug, again - stay to the end for the interview ... Special Agent Matthew J. Wabby, of the Federal Bureau of Investigation, he actually wrote the affidavit for arrest of Michael [00:14:00] Mann, who was involved in the bank fraud - the MyPayroll bank fraud. What's nice about this, and I think it's exciting ... "Prior to becoming a special agent, I worked in public accounting for approximately seven years, where I became a certified public accountant. I am still a licensed CPA, and also a certified fraud examiner." Blake Oliver: This doesn't actually surprise me, David. A lot of the people who work in the FBI, in financial crimes, are CPAs. It's pretty awesome. You get to be a CPA and carry a gun. There's not a lot of jobs where you get to do that. David Leary: Yeah, and I hit him up on LinkedIn. I was like, "I should have him come [00:14:30] on the podcast!" That would be exciting.  Blake Oliver: Yeah, I don't think it's gonna happen. David Leary: No bite whatsoever, right now. There's two other things that came out, kind of related to this. The Journal of Accountancy has an article. It's a little older one, but Jeff Drew sent it to me, about criminal-pursuing agents. If you wanna see about some of this undercover work, or maybe you want a career change, check out that- it's an older article from October 1st of 2015, but it's all about CPAs that are pursuing criminals. Then, related to that, the [00:15:00] AICPA has just announced that there's gonna be new forensic standards to boost CPAs' credibility when they're actually on witness stands testifying in court. There's a lot of ... It all ties back to MyPayrollHR, which apparently ties to everything these days. Blake Oliver: Should we talk about some more fundraising/app news?  David Leary: Oh, yeah ...  Blake Oliver: Tipalti is a global payables automation solution. They have successfully raised another $76 million in capital, led by [00:15:30] Zeev Ventures. It's a D round of funding. The press release says that Tipalti's gonna use this additional funding to continue to set the pace for innovation in the payables automation space and solidify itself as the leading solution for fast-growing and mid-sized companies across the globe. David Leary: Did you see that Fundbox had a big raise? Fundbox, they raised $326 million, between debt and equity. They actually took on $176 million in equity, and then an additional $150 million in [00:16:00] credit, but they didn't disclose who's providing the credit. Fundbox is ... Before, they were in that instant-loan game. So, if you have invoices; your customer owes you $1,000; you need that cash now ... For a small fee, they'll provide the cash, and then, when you get paid for that invoice ...  Really, their goal is to eliminate that, because there's about $3 billion just locked up into net 30 [cross talk] putting air quotes up. They're really attacking that, and it's all about ... On [00:16:30] both sides of the fence, they're trying to play a middleman through a network - the big, huge company that needs to automate paying their vendors faster, and then they wanna attack it on the other side for the small business owners that need to be paid. This is a real problem that has to be solved. I remember, when I was at Intuit, Intuit changed their policy to pay all smaller vendors within nine days, because they used to ... Like big corporations, eh, whenever-  Blake Oliver: Stretch it out.  David Leary: 90 days ... Stretch it out. We need to maximize this ... It [00:17:00] really hurt small businesses, so Intuit really changed the way they were doing that for [cross talk] Blake Oliver: Look, if their mission- stated mission - is to grow and help small businesses succeed, then it kind of sucks if you're not paying your small business vendors on time, so that's a great policy. David Leary: Then, it looks like Fundbox is now gonna open up an office in Dallas. Blake Oliver: All right. You mentioned Intuit. I've got some QuickBooks Online updates for you. David Leary: Okay.  Blake Oliver: QuickBooks is now going to have mileage tracking, which was previously only available for QuickBooks Self Employed. It's [00:17:30] getting rolled out incrementally, so you might not see it right away, but all users should have it in the next several months. David Leary: I'm opening up mine right now, because I've been waiting for this, because I only do- I only need it once or twice a year, so I don't really need a standalone mileage app. I was dreaming of it being in my QuickBooks. I just unlocked with my fingerprint ... "Never miss a mile ..."  I got it! Blake Oliver: Awesome!  David Leary: I'll have to report on how this goes, next time I drive somewhere. Blake Oliver: It looks pretty cool, because you can have it use your GPS on your phone to record [00:18:00] your start and end points, and you don't have to put in the actual miles on your car that way. So, let me know how it goes. Also new in QBO, performance of reporting has been improved. There is no more need to click 'Load More,' and closing the 'View/Edit' screen will no longer return you to the beginning of a report. Additionally, it's just supposed to be faster overall, which is nice. Reporting is one of those things that has always been traditionally criticized in the online version compared to the desktop version. So, hopefully this'll [00:18:30] appease some of those folks- David Leary: Well, especially for accountants and bookkeepers. Did entry is one thing, but if you're really in there trying to run reports, and drill down on things, and run two or three reports at the same time, any report optimizing is gonna be efficient for accountants and bookkeepers. Blake Oliver: Absolutely. Finally, you can now send customer invoices in multiple languages; six languages are supported - English, French, Spanish, Italian, Portuguese, and Chinese.  David Leary: Wait ... Wow! That seems like it should be a much bigger announcement-. [00:19:00] Blake Oliver: Bigger announcement there? Yeah.  David Leary: I can create my invoice, as I normally do, in English, and then I can just hit a drop-down and say, "Send it in Spanish"?  Blake Oliver: You know, I didn't dig into that, so I'm not sure, but I'm curious to know.  David Leary: I'll have to experiment with that. I'll send you an invoice in Spanish- Blake Oliver: Yeah, send somebody an invoice in Spanish, and see-  David Leary: I'll track my mileage, and then send you an invoice in Spanish and see how this goes-  Blake Oliver: All right, do it. There's some more Intuit news. This is a story that Kelly Phillips Erb reported earlier this month, and [00:19:30] the headline is, "TurboTax Glitch Led to $216 Million Tax Bill for a Thrift Store Worker." It's actually related to, I think, my experience today. This is why it's important to have somebody looking over your return or looking over the work that you did in an online product. You shouldn't just be filing without double-checking. What happened here is that Donna Smith, from Aurora, Colorado, who is a part-time worker at a local thrift store, filed [00:20:00] her taxes using TurboTax last year. She got a surprise when she opened a tax bill from the Colorado Department of Revenue to find that the state claimed she owed $216,399,508 in taxes. Smith, who makes about $10 an hour, couldn't understand the tax bill. Apparently, what happened is that there was an error with TurboTax, where she actually entered the numbers correctly. A TurboTax [00:20:30] spokesperson said that, "For a small number of TurboTax Online customers that filed their taxes between June 13 and 16, there was an issue that caused select fields on their tax return to be incorrectly transmitted during e-file. The issue was quickly fixed, and we have been working directly with the affected Colorado taxpayers, and the Colorado State DOR to help resolve." Actually, I think I have to take back what I said, because apparently, even if it had been reviewed in the software, it wouldn't have been caught, because this was something that happened during the e-file [00:21:00] process. David Leary: It's just this one random person it only affected? Blake Oliver: Just a small number of people-. David Leary: Oh, so it did hit a couple of people. Okay, got it.  Blake Oliver: Yeah, but only people in Colorado, apparently, and only for a few days out of the month. These things happen, and obviously, you can fix that. Just sort of a funny bug. Can you imagine opening the mail and getting that tax bill?  David Leary: No big deal, just ...  Blake Oliver: Continuing along with app updates, Excel has an update that I think is very [00:21:30] relevant to our audience. David Leary: This is what we've come to now? The Cloud Accounting Podcast is back talking about Excel again-  Blake Oliver: Look, Excel is not going away, right? We use Excel- David Leary: No, no ... I prefer Excel. I'm totally- Yeah, I'm down. I'm down. Blake Oliver: So, David, are you a fan of VLOOKUP? You ever use VLOOKUP formulas in your line of work? David Leary: Yes. Yes, I have. Blake Oliver: All right. Well, VLOOKUP has a successor. There's a new generation of VLOOKUP, and it's called XLOOKUP. Microsoft [00:22:00] announced this on their blog, and they started out actually by giving a tribute to VLOOKUP, which is a formula that has been with Excel since the very beginning. It was included in Excel One for Macintosh, released in 1985- David Leary: It was a tribute or a funeral? Blake Oliver: Well, no, it's like a shout out to VLOOKUP- David Leary: Oh, okay, got it, got it.  Blake Oliver: For 34 years, VLOOKUP has been the first lookup function learned by Excel users, and it's their third most-used function. Do you know what the [00:22:30] first two are? Wanna guess? David Leary: Let's pause there for a second. You said 34 years?  Blake Oliver: Yeah.  David Leary: Is VLOOKUP older than you?  Blake Oliver: I'm 36.  David Leary: Oh, okay ... It's like Pre-VLOOKUP/Post-VLOOKUP; got it. Blake Oliver: The two most-used functions are SUM, and AVERAGE, and then, it's VLOOKUP after that. VLOOKUP is one of those functions that like - it's super-powerful. Everyone learns it, right? Then there's all those people that say, "Oh, INDEX MATCH is superior ..." Whatever ... Screw those people. David Leary: Great argument ... What team are you on? Blake Oliver: So, XLOOKUP, and I [00:23:00] don't know if this is gonna be superior to INDEX MATCH, or whatever ... XLOOKUP is named for its ability to look both vertically and horizontally. So, it also replaces the HLOOKUP formula, which I never even used. Basically, all you need are three arguments for XLOOKUP. You need a lookup value - the cell that you're looking for, or the value you're looking for - then you need to choose an array, a lookup array, and then, a return array - what to return. The formula is smart enough to figure out - if you give [00:23:30] it those three things - how to find what you're looking for and return it. It's pretty cool. Some of the benefits of this ... You might be wondering, "Why are we talking about XLOOKUP? What was wrong  with VLOOKUP?" The blog post does a really good job of talking about the limitations of VLOOKUP, which is- one of the big ones is you can't do column insertions or deletions; it'll break your formula, because VLOOKUP requires you to put in the number of the column that you wanna return. If you change the format of your spreadsheet, it breaks. It can't look to the left, [00:24:00] only to the right. It can't search from the back; can't search for the next larger item for an approximate match, which you can now do with XLOOKUP, with the two optional fields. Just an improvement. Spreadsheets are getting better every day. David Leary: Still, which is good. Blake Oliver: Yeah, still, and you still need them. Not going away. Not until we get some AI that can just make all our spreadsheets for us, right?  David Leary: I have some banking news. We talked about, you know, banks lack APIs, on one hand. Then, we're always talking about how these startups now are becoming banks. [00:24:30] Blake Oliver: Okay.  David Leary: So, three articles that are pooled together. One is Plaid. Wells Fargo's entered into a data-sharing agreement with Plaid. A lot of these apps that you use to connect your bank accounts or bank feeds, et cetera, use Plaid. But, what's happened is the way these aggregators have worked, they've always done screen sharing- not screen sharing; screen scraping to pull down the data from the websites, because banks don't have APIs; the banks don't have data-sharing agreements ... Wells [00:25:00] Fargo has entered into a data-sharing agreement with Plaid, but part of that agreement is giving the consumer a little bit more control over their account information on what information is available to Plaid, and then what information is, in theory, available to third-party vendor API- third-party app companies that are using Plaid's APIs. Blake Oliver: Plaid is basically becoming like an API of APIs for the bank, or it’s like [00:25:30] a central place where they can all connect to, and then apps can authenticate with Plaid and get the information they need?  David Leary: Yeah, because if you're an app developer and you wanna connect to 15,000 banks ... You don't wanna do that.  Blake Oliver: No.  David Leary: You can just connect to Plaid, and now, you're getting that scale of that. Blake Oliver: I can see how Plaid could be very, very, very valuable, then. David Leary: Big companies - Venmo, Acorns, Betterment - are all using Plaid to power their products. So, you have [00:26:00] that on that side. Then, BBVA has rolled out its open-banking platform, and it's gonna have four main APIs for startups to use [cross talk]  Blake Oliver: This is a bank? I'm not familiar with them.  David Leary: BBVA Compass - they've dropped the Compass.  Blake Oliver: They're based in Birmingham, Alabama- David Leary: Yeah, and they're actually out of South America, I think, originally. Blake Oliver: So, this is cool. As part of their open banking platform they're going to have four APIs for startup clients. Those include identity verification, a [00:26:30] way to move money, so you can execute custom ACH transactions, bill pay, and real-time transfers, account origination, and card issuance. Well, those are really powerful API calls you can make. David Leary: I've always said this, these banks that get it are gonna win small business. This is gonna be a good thing for BBVA, because they're gonna get a bunch of app developers that, right now, might have to use four different hoops to jump through to accomplish these things. Really, that's the four main use cases for [00:27:00] interacting with banks. It'll be really interesting where this goes next with those guys. Blake Oliver: The big hole, for me, has always been the fact that I can't pay a bill from inside of QuickBooks Online, or inside Xero and have that payment go out through the bank. I have to use some separate application or go into my bank's bill pay. Why can't I connect their ability ... Like Bank of America, for instance. I use Bank of America for my bill pay. Why can I not connect Xero to Bank of America, and when [00:27:30] I wanna pay a bill in Xero, I say, "Pay with B of A," and it pays it, just like online banking? David Leary: At one time, a long time ago, in Quicken, in the olden days-  Blake Oliver: You could do that.  David Leary: You could do this. You had to pay a fee, and the banks would charge Intuit, or you, as the consumer, to do that convenience. But, I think, as time went on, the banks got a little bit more, "It's our data. It's our stuff. We want customers to go to our website, because we wanna sell them other banking products ..."  Blake Oliver: Right. David Leary: I [00:28:00] think it's been a little of that. Now, this is an interesting move because, ultimately, you want people using your bank ... It's kind of in the way we talked about Stripe, last week, right? Nobody uses Stripe, but everybody uses Stripe. It's kinda that same thing. Maybe people will not actually use BBVA, but they'll be using BBVA ... That's where you wanna be, as a platform. You want everybody using you. That's how Facebook won. Facebook didn't care how you used [00:28:30] Facebook - just use Facebook. Blake Oliver: Right. David Leary: "We don't care what apps you use, and add-ons, and all the other stuff," and that's that same type of mindset. So, on the other swing, banks making some strides into tech a little bit. On the other side, there's really kind of a longer article from the L.A. Times. Essentially, the article's about how, "Oh, you don't have a bank charter? No problem.". What's happening is these fintech companies, the Squares of the world, et cetera, are partnering with small regional and community [00:29:00] banks to help them establish FDIC, handle the deposits, and giving them methods that they couldn't really do on their own. The big banks are not gonna go agree to a company like, Square, or Apple, and these companies that are becoming banks, right? Blake Oliver: Right. David Leary: What's happening is the fintech companies are finding these smaller regional banks that probably haven't grown in decades. They see this as a growth opportunity- Blake Oliver: Right, and they're partnering with them. Interesting.  David Leary: Then, in fact, there's actually a whole 'nother company called CAMBR, and [00:29:30] they're actually providing a whole service to play middleman between these. I'll just read kind of the how it works, so it's a little easier to understand. Here's how it works: "A tech company or startup might give CAMBR as much as $100 billion in customers' cash and could then ask the service to spread the money around to potentially hundreds of different financial institutions. As a result, spreading out those deposits, it's more in the fintech caches insured under the FDIC." Blake Oliver: Gotcha. [00:30:00] David Leary: Because you can- $250,000 per account. So, people are specializing in this service, instead of taking all that and just setting it in one bank account. Blake Oliver: Yeah, that makes a lotta sense. There's a lot of treasury management tools for bigger businesses that do something like this, too; a similar kind of concept. David Leary: Then, of course, as you know, as always ... We've talked about this with MyPayrollHR, and we've talked about this with the banking stuff, and we talked about this with the instant paycheck players - regulations wanna come. People [00:30:30] are starting to really pry into this and trying to stop innovation. This episode of The Cloud Accounting Podcast is sponsored by BQE Core. If you have niche clients that are architects, engineers, consultants, or lawyers, BQE Core is the app for them to best manage their firm, increase their staff productivity and ultimately increase their profits. Even if you don't have those niche clients, Core is a great tool to use in your own accounting or bookkeeping firm, as well. Core is an easy-to-use all-in-one platform for project management, but includes advanced functionality like budgets, labor costs, forecasting, contract analysis, and approval processes. Core also includes a standalone accounting module. Even though Core is an all-in-one platform, it still works nicely with other apps offering you and your clients the maximum amount of flexibility. Core offers a full-function mobile app and recently launched a cutting-edge voice-based assistant for your smart speaker of choice. To learn even more about BQE Core, head over to That is Cloud Accounting Podcast dot promo forward slash C-O-R-E. Blake Oliver: Let's talk about the number-one job in America. It is not YouTube star. It is not to-. David Leary: Podcaster host-  Blake Oliver: Podcaster, unfortunately, not yet. This is a story that was published in MarketWatch, and-  David Leary: I've got one more guess. Hold on! Blake Oliver: Okay. [00:32:00] David Leary: I wonder if this is like a satisfaction game ... Blake Oliver: Well, the criteria are important, right? Let me tell you how they define best job, because that's a good question, in and of itself. This survey that this article is based on defines the best job as the one with the best career prospects. Extrapolating that, if you have good careers prospects and the ability to move up that - assuming that you enjoy the work you're doing - you will enjoy your career. So, [00:32:30] what job in America has the best career prospects and also has a high income? And it's not software engineer. That's the surprising part. David Leary: Some part of me thinks you're gonna say CPA? For some reason, I feel like you're gonna say that-  Blake Oliver: Yeah ...  David Leary: -but I'm thinking maybe it's something healthcare-related? Some part of the healthcare field is highly rewarding financially, but also personally rewarding. I don't know what that would be ... That would be my guess. Blake Oliver: The number-one job is tax manager. [00:33:00] Tax managers have the strongest career opportunities rating according to employees in this position. They had a median base salary of $112,000 a year and 4,800 job openings on Glassdoor, as of July 5th. This is from a study that was released by Glassdoor, the salary/job site. I thought was pretty interesting because it's not software engineer. The article says, "With the infiltration of technology into [00:33:30] financial services, there's a renewed emphasis for tax managers to build closer client relationships," the report's authors said. So, basically, what's happening is that tax is becoming much less of a grind. If you're a tax manager, meaning you've gotten to the point in your career where you're allowed to actually talk with clients, then it becomes a fun thing, because you're working with the clients; you're solving their problems; you're answering their questions; you're creating a ton of value, because, as a tax manager, you're tending [00:34:00] to work with larger small businesses, folks who really could use some planning. I think this buttresses in a lot of ways what we are talking about here on this podcast, that technology can make our jobs a lot better, and it won't necessarily automate them. It's gonna automate the boring stuff, not the fun stuff, as long as you can move up into that role. If you're just churning out returns, putting numbers into boxes, no, that job is gonna go away, but-  David Leary: It means there's a change in skill [00:34:30] set, right? Blake Oliver: Oh, yeah.  David Leary: You just can't be a tax expert. You need to have some people skills. You need to learn how to do some presentations and storytelling. You need to really be a little bit more well-rounded versus just tax.  Blake Oliver: You wanna know who else is on the list, behind tax managers-  David Leary: Oh, this is like a ranking. Blake Oliver: It's a ranking, yeah.  David Leary: Oh ... Yeah, rattle off the top 10. I'd love to hear this. Blake Oliver: All right, number one is tax manager. Following that, we've got salesforce developer, product designer, strategy manager- David Leary: Salesforce developer is very [00:35:00] specific. Wow! Blake Oliver: I know, right? Everyone needs a Salesforce developer, because every company's got Salesforce now, and you need an admin for it. Strategy manager, HR manager ... Number six, audit manager - another accounting job, and traditional, right? Tax and audit - the traditional bread and butter of accounting are still great jobs. I think that's because audit is becoming more automated. If you're a manager, it's a pretty nice thing not to have to do a lot of grunt work anymore. Then, there's data scientists, business development manager, Java developer. Number 10, close [00:35:30] to my heart, marketing manager, which is basically what I've been doing for the last couple of years, now that I went from public accounting over to the software side; and product marketing manager, 11; right there, that's exactly what I was doing. I was doing product marketing.  David Leary: Where does CPA or bookkeeper fall into ... Is it on the list anywhere?  Blake Oliver: CPA is not a job title- David Leary: A title, okay, yeah.  Blake Oliver: -but you can assume that the tax managers and audit managers are probably almost all CPAs, most likely. David Leary: Yeah, yeah, makes sense.  Blake Oliver: Accounting manager is 15; also [00:36:00] a lotta CPAs in there. Dentists are 18. Physician's assistant, 19. You mentioned healthcare, David. Product manager, 20. Compliance manager, 21. These are jobs with a lot of career opportunity. The point is that it's not really important what you're doing, it's important that you have opportunity in your career, because that's when you have high job satisfaction, when you feel like you can learn, and move up, and make a difference. David Leary: I think that's a lot of the titles of the people that were in the 40 [00:36:30] under 40. So, full circle - you pulled it back to that. Blake Oliver: We experienced this, this summer, David, this debate as to ... Not debate, it's just this constant trope, or what people are saying at conferences, which is, "Oh, compliance is being automated and we have to move to advisory.". David Leary: Yep.  Blake Oliver: I think this shows that it's not true. It's not that compliance is going away. It's that some of it is getting automated, and what do you do with the extra time you have is you are more advisory. It's a fusion of compliance and advisory. That's [00:37:00] where the real opportunity is. Being that-. David Leary: You actually provide advisory based on the compliance work that you have done. Blake Oliver: Exactly, yeah. You're adding value to that traditional compliance work. David Leary: I got no more articles, Blake.  Blake Oliver: Oh, well, I got a few more things. Let's see how we're doing on time. David Leary: Oh, good, good. We're good. Blake Oliver: There's one other small thing I wanted to share here, and I'll save the rest for next time. You know that I subscribe to the Deloitte Controllership Digest, as I have been living in sort of the world of the mid-market in the last few years. David Leary: Yes. Blake Oliver: They did another one of their [00:37:30] snap polls, where they email out a polling question. The people who read the publication respond, and we can probably assume that most of them are in accounting jobs, and controller jobs. David Leary: Because nobody would be subscribed to this [cross talk]  Blake Oliver: Why would you? You'd have to hate yourself, I think, to do that, right? It'd be like if you were subscribed to this, David, you'd read it before bed. But, I read it with my coffee in the morning. So this flash poll asked, "As the final quarter of 2019 [00:38:00] approaches, what is the top priority you and your company will be focusing on?" The answer, according to 47 percent of the respondents, is, "Automation or system improvements." Almost half, their top priority is automation or system improvements. Next on the list? Only 15 percent is accounting standards implementation. So, tech is just crushing it, when it comes to top priorities, over traditional stuff, like lease accounting, and revenue [00:38:30] recognition, and all that stuff. David Leary: I wanna see, at the end of the quarter, how much you actually spent working on the automation, because I feel like this is one of those like, "I'm really gonna automate stuff next week. That's my top priority this quarter," and then, it doesn't happen ...  Blake Oliver: I don't know. I think it's happening. I really do. I think there's a lot of investment going on right now. You can certainly see it with the valuations and investment in these companies we talk about every week that are getting investment. They wouldn't be getting investment, if they weren't gaining customers, in an ideal-  David Leary: I [00:39:00] think it's obvious that so many departments are not automated, so, there's just upside [cross talk] Blake Oliver: There's a ton ... Half. There's at least half are just traditional. David Leary: I think this goes to what we were talking about before, when you were talking about different accounting jobs that have been outsourced, and that some of these departments, they're being funded to do the automation, and they're not doing it. Then, two years later, "Let's just outsource the whole thing ..." You're right; you probably need to automate your [00:39:30] systems and make internal improvements, or you're whole department's probably gonna get just wiped out. Blake Oliver: I'll read the other items on this survey, so that the folks who are saying, "Hey, this doesn't add up to 100 percent," don't get upset, because I would ... David Leary: Oh, these damned accountants! Blake Oliver: I know ... I said automation/system improvements as 47 percent; accounting standards implementation, 15 percent. Next, organization changes and talent acquisition, 14 percent. Interesting to see how that's fairly, fairly low. It's third, right? Cost reduction-. David Leary: Well, wouldn't you need the [00:40:00] talent acquisition to do some of the automation?  Blake Oliver: I mean, maybe ... I don't know. Maybe we'll see. Cost reduction, 14 percent; mergers and acquisitions or other transactions comes in last at 10 percent. Lots more to talk about next week. I'm gonna save this good stuff, including the AICPA Economic Outlook Survey for the third quarter. We'll dig into that next week, hopefully, and an idea that the Federal Reserve should create its own cryptocurrency; because we haven't talked about blockchain in a while. But, now-. [00:40:30] David Leary: Blockchain's back, because I think Bitcoin's up a little bit, right? Everybody's hot and heavy on that again.  Blake Oliver: But we gotta get to the MyPayrollHR story, which we are continuing our coverage of. David, you have secured two of the reporters in Albany, New York, who have been hot on this story and have been breaking all the news we've been talking about. I'm really excited to talk to [cross talk]  David Leary: They've been to the MyPayrollHR headquarters. One of them sat in court, and actually has seen Michael Mann, [00:41:00] himself. The other one had- they both have talked to Michael Mann's lawyer on multiple occasions. These reporters are heavily involved in this story. Blake Oliver: All right.  Michael Williams: I'm Michael Williams with the Albany Times Union. Chelsea Diana: And I'm Chelsea Diana, with the Albany Business Review. David Leary: Chelsea and Michael, welcome. Thank you for joining us on this special interview regarding the MyPayrollHR fraud. Chelsea, we wanna start with you. Can you explain a little bit who you are and what your role was [00:41:30] in the MyPayrollHR case?  Chelsea Diana: Sure. Like I said, I'm a reporter with the Albany Business Review. I've been covering the intersection of money and technology for the Business Review for about five years. We're part of American City Business Journals, which is a national network of business publications. We're in more than 40 cities across the country. My role in this story is that we got a tip a few weeks ago from a restaurant owner, saying that their direct deposits had been withdrawn. I [00:42:00] called their accountant to see what was going on, and, at that time, there were rumors that it could be some kind of fraud, but it was all real speculation. David Leary: At that time, yeah. Then, Michael, what you do, and what your role is in the MyPayrollHR case?  Michael Williams: Sure. I'm a business reporter with the Times Union. I've actually only been here for about a month, so I just kind of dived into the deep end with this story. Prior to this, I was a court and crime reporter for The Orlando Sentinel, down in Orlando. I [00:42:30] came into this story pretty much the same way that Chelsea did. We got a tip that payroll deposits had been reversed, and it sort of started from there. David Leary: Started from there ... The reason I brought both of you on, because I think both of you have written multiple articles, and I think we've used these on the previous episodes. I think we've referenced a lot of your articles, so I was like, we should have you two on, because you guys have probably done the most research and are probably the most prepared to speak to a lot of this. I'm hoping in the next couple minutes here, we kind of figure out how we went from four weeks ago, like you [00:43:00] both said, employees' paychecks getting un-deposited from their accounts to the latest news ... It's like high school basketball players are having to find new schools, but it's all tied to MyPayrollHR, so I think it's kind of interesting. Blake, did you want to give a quick recap of what we've talked about the previous episodes? Blake Oliver: Yeah. For our listeners who are not familiar with the MyPayrollHR fraud scandal, quick recap - earlier this month, shortly after Labor Day, the week after Labor Day, MyPayrollHR, [00:43:30] a small payroll processor in New York state with about 4,000 customers, suddenly shut down; sent an email to everybody who was a client saying, "We are no longer going to be able to process your payrolls."  That alone was worrisome, but what really started this whole mess was that employees who were getting paid that week saw their paychecks deposited into their account and then suddenly withdrawn, and withdrawn twice in many, many cases. This [00:44:00] was due to a problem with Cachet, the ACH payment processor that was partnered with MyPayrollHR. Basically, what happened is somebody at MyPayrollHR changed the account numbers in the batch file sent to Cachet Financial Services, causing that settlement account, where the payroll should have come out to the employees, to be underfunded- not funded at all. Cachet advanced the payroll to the employees without realizing what was happening. Then, when they realized that the employer money had not [00:44:30] been transmitted to that account, tried to take it back; tried do it twice because of an error causing huge problems for many of the employees in this case. Bank accounts overdrawn by large amounts; people unable to pay rent; unable to buy medication. It became a national story on NBC Nightly News, and CBS Morning. We've been covering it for a while now. The money is in a bank controlled by MyPayrollHR, which is frozen. Michael [00:45:00] Mann has been arrested and charged with a crime. We still don't have a photo of him. Michael Mann is the owner of MyPayrollHR [cross talk] David Leary: Yeah, Chelsea, you and Michael probably have dug just as much as we have. Did he not even take a selfie? Chelsea Diana: I don't know- David Leary: How is there no photos of him?  Chelsea Diana: Please send a photo, if you have one! Blake Oliver: We don't know what he looks like. We do know that he is working with the U.S. Attorney. He has been charged with, I believe, the crime with bank fraud. That kinda brings us up to date [00:45:30] with where we are. with the podcast, and following your coverage, Chelsea, and Michael. Thank you so much for all these amazing articles helping us figure out what's going on for our audience - many of whom are CPAs, who recommend payroll services, or provide payroll services, or bookkeepers who do the same thing. Yeah, so that's where we're at. David, what do we want to get out of this interview? What's next? David Leary: Yeah, I think one thing is just going back to the shutdown in the building, I think, in our brains, we're imagining [00:46:00] it was a little like that movie Boiler Room, where it was just, everybody vanished. They were gone. So, Chelsea and Michael, did either of you actually go to MyPayroll offices? What was that like there? Chelsea Diana: Yeah, I went to the offices a few days after it closed. The signs saying where the offices are had been taken off the walls. There were some paper taped to some of the windows looking in. From my understanding, the employees kind of came in for the day like normal and [00:46:30] were called into a meeting, and they were all let go and told to go home.  Michael Williams: Yeah, pretty much the same for me. I went there. The news broke Friday, September 6, and I went there later that afternoon. Pretty much like Chelsea said, the sign had been removed from the wall. Everything was dark inside. It looked like they had sort of started the process of moving out of their offices. I spoke with this one woman who worked for an insurance agency that shared the hallway with MyPayrollHR. She said that she [00:47:00] basically saw people moving stuff out of the office. She said that one employee came to her insurance office and inquired about open positions, and basically that all the employees at MyPayrollHR were sort of blindsided by this. I know that you all had referenced an email sent to MyPayrollHR employees on previous episodes that basically told them to pick up their belongings in a parking lot adjacent to a liquor store to sort of avoid any kind of attention from the fact that the company shut down. [00:47:30] Blake Oliver: Have either of you've been able to speak to employees that have maybe more insight into what went down inside of MyPayrollHR?  Chelsea Diana: I've spoken with a few employees. They all seemed very shocked and had no idea that this was going on. Michael Williams: Yeah, same for me. It seems like a lot of these employees had been getting a little bit of flack and a little bit of hate from everybody who's been affected by this. Just to be clear, there is no indication that the individual employees at MyPayrollHR had [00:48:00] any idea that any of this was happening. Basically, from the conversations that I've had with a couple of employees, they walked into work one day not knowing that they were gonna walk out and not have a job. Chelsea Diana: Their paychecks were pulled back, as well. They don't have a boss to cover their paycheck [cross talk]  Blake Oliver: Oh, wow. I didn't realize that they were affected, too. Chelsea Diana: Yeah, they were, and now they don't have a job, so it's pretty sad.  Blake Oliver: Where we left things, at least where the ... We've been following the [00:48:30] money trail through your reporting, and it seems that there is a frozen account at Pioneer Bank, which was the bank that was providing services, banking services, to MyPayrollHR. Do either of you have any more insight into where all this money went? It was something like $35 million total for this payroll; $26 million, I believe, was net paychecks to employees, funded by employer accounts; then another, I think, $9 million payroll taxes that were [00:49:00] supposed to be remitted to the IRS. Where is the money right now? Do you think that it's going to be recovered? Is Cachet going to get their money back - the ACH processor that essentially floated the payroll? Chelsea Diana: I don't think that's clear, at this point. The complaint said that the money had been transferred to Pioneer's bank account, and it had been frozen. Usually, in these investigations, [00:49:30] the money within bank accounts are frozen for quite a while, especially as the person whose name was on the bank account is out on bail. So, I don't think it's really clear at this point. David Leary: Michael Mann, he was the CEO of MyPayrollHR ... He hired a lawyer, and I think both of you spoke to his lawyer. Then, since that episode, he's been arrested, and he's confessed to $70 million in fraud, and this has taken place over nine years? What is his web? Blake Oliver: Yeah, help us untangle this, because we're hearing about [00:50:00] all sorts of shell companies. There's this school that he was funding down in Florida. Maybe you can ... Even though we don't know what Michael Mann looks like, maybe you can give us an idea of who he was and what was this whole web of lies he was weaving? Who wants to go first? Chelsea Diana: As far as the $70 million number, we know at least where $36 million of that $70 million has come from. [00:50:30] We know Pioneer Bank, Chemung Canal Trust Co., and Berkshire Bank have all filed disclosures saying that they had money impacted as part of a fraud. Blake Oliver: These are banks that were lending money to Michael Mann and his various companies. Chelsea Diana: None of them mention Mann by name, or MyPayroll by name in the disclosures, but they have been sent to reporters in response to questions. Michael Williams: Yeah, Michael Mann appeared in federal court [00:51:00] this Monday. I was actually in the courtroom and saw him there [cross talk]  Blake Oliver: Oh, so you have actually seen him? David Leary: Oh, oh!!! Michael Williams: I have. He actually does exist. He is a real person. He's not an international fugitive.  Blake Oliver: All right? Michael Williams: He looked pretty reserved; pretty quiet. I've been in the courtroom, several times, for several different cases, and he didn't really seem anything that out of the ordinary. Spoke very briefly, just sort of greeting the judge, answering short [00:51:30] procedural questions. All said and done, the hearing was only about 30 minutes long. Blake Oliver: I understand he confessed. What did he confess to, exactly? Michael Williams: What he confessed to, according to the FBI complaint, was basically- he said that he was going through some business and financial pressures. So, around 2010, he started basically ... What Bank of America is saying is that Bank of America froze Michael Mann's account, because they found that he had been kiting checks.  Basically, he was writing [00:52:00] checks to one account ... Say he was writing a check to a Pioneer bank account, but he deposited that check in the Bank of America bank account, and then he basically reversed that process by writing a second check from the Bank of America bank account to the Pioneer Bank account ... Basically artificially inflating his funds, according to the FBI complaint. Bank of America finds out about this, somehow; freezes his account at that bank. Pioneer also finds out about it; freezes Mann's account [00:52:30] of their bank. That's sort of the domino that got this entire situation rolling were the frozen funds in the account. David Leary: But he's been doing this kiting for almost a decade and using these inflated numbers to acquire other businesses and get other loans. Blake Oliver: Can you describe for us ... Chelsea, do you know what are the different types of businesses that he's associated with, at this point, that we're aware of? Chelsea Diana: Sure, there's a big variety. A lot of the way that I kind of [00:53:00] figured out the web of businesses that he's in is just looking at what other companies were incorporated under Valuewise, which was the parent company of MyPayrollHR. Under Valuewise - this parent company, which says it's a consulting company - there was a physical therapy clinic practice in the Midwest; there were several staffing agencies; there was a staffing agency called HireFlux, out of [00:53:30] North Carolina, that set up RNs with jobs at nursing homes and things like that. There's just all of these different businesses. A lot of them are staffing-related; a lot of them are not; a lot of them are healthcare related; a lot of them are not. It was just kind of fascinating to see how many different types of companies he had his hand in. Blake Oliver: Do we know if these are legitimate businesses, or just fronts, or shells? Any insight into that? [00:54:00] Chelsea Diana: Yeah. Of the ones that I have verified, some are definitely legitimate businesses. I always recommend, if you're looking to work with a business, and you go to their web page, if they list who their CEO is, with a picture of who it is ... If they if they have faces of CEOs and things like that, then it's pretty likely a legitimate business; if they've been quoted in other news stories, other media outlets, it's likely [00:54:30] a legitimate business. For a lot of those businesses, I found those details, but some of them, I couldn't. That doesn't mean that they weren't legitimate, it just means that they have less of an online footprint. Blake Oliver: What's the deal with this school? Is it a school in Florida that Michael Mann was funding? Chelsea Diana: Yeah, it was an elite basketball academy. He wasn't funding the school. He was just funding the basketball portion of it. So, essentially, [00:55:00] if you want to play D1 college ball for like Georgia or any of the big D1 schools, a lot of kids go to these prep schools. In this case, there were two schools created- two of these academies created under Michael Mann's name. One was in Georgia, outside of Atlanta, in 2017, and another was created - it [00:55:30] was essentially moved to North Carolina over the summer. The schools were connected with religious schools. What I learned is that he essentially paid a coach to- a former college coach to teach these guys how to be a better recruit and how to get on a D1 basketball team, along with paying for the tuition to the private school. Blake Oliver: Wow, so that's all shut down now? What are these kids gonna do? What happened? [00:56:00] Chelsea Diana: I saw a story from a paper in South Carolina, where one of the recruits lived. The kid had just planned on going to this school, this fall. After a few days, he was heading back to his old high school. Blake Oliver: Wow, so lots of people affected; not just the employees of the companies using MyPayrollHR, but employees of these other businesses, and of this school that Michael [00:56:30] Mann was helping to fund. David Leary: Do we know Michael Mann's background? Does he have ... He's a little bit in temp agencies, a little bit into payroll, a little bit into basketball camps ... I saw he's involved in some big national basketball tournament possibly, as well. Chelsea Diana: Yes.  David Leary: Then he's got some physical therapy business, I think you said. What's his background? Is he just an investor? What do we know about him? Chelsea Diana: He worked in healthcare consulting for a while, which is where the healthcare [00:57:00] connection comes in. Then, I know that he played basketball, himself, in college. I don't know where. That may be where the basketball connection comes in? Blake Oliver: So, Michael, you were in court when Michael Mann was charged with this crime, with the bank fraud crime. You've seen him. What is next in this story? Michael Williams: Yeah, that's a really good question. It's hard to say where the criminal proceedings are gonna go, although the fact that [00:57:30] he basically, according to the FBI complaint, admitted to committing a $70 million fraud is somewhat indicative of what might happen, but, really, it's hard to tell. Really, the big question right now is which businesses of his were legit and which were basically shell companies for this alleged fraud that he admitted to in this complaint? Also, who knew about this before it was revealed? He's had several business [00:58:00] partners. Right now, it's a bit unclear which of his companies were legit, and which weren't, and who knew about this in the 10 years that, according to the FBI complaint, he says that he was perpetrating this fraud [cross talk]. Blake Oliver: And he is- sorry, go ahead, Chelsea. Chelsea Diana: I think there's one really important line from the complaint that just says a lot about what's happening here. It's that Mann said he used almost all of the $70 million to sustain certain businesses, and [00:58:30] purchase, and start new ones, which means that he was using this money on actual businesses. It just wasn't the businesses that he was saying it was for, essentially. Blake Oliver: That brings us to the question of why change this ACH number in the first place? Why? What was the motivation for that? David and I have speculated that maybe diverting the money from the settlement account at Cachet to Pioneer Bank was a mistake; that [00:59:00] perhaps he was doing a search and replace on some other account numbers of ... Maybe there was fraud involved in the payroll with some of these shell businesses, or employees, and he didn't mean to do that, because it makes no sense. David Leary: Yeah, it's either he made a mistake, and he accidentally moved the entire payroll. Then, obviously, that raised red flags, or it was he just got in over his head, the opportunity was there, and he finally just pulled the trigger. Blake Oliver: Total desperation move or something. Well, thank [00:59:30] you so much, both of you, for joining us today. Really appreciate your insights and your coverage. It's been super-interesting to observe all of this happening. It's a real cautionary tale for accountants and bookkeepers who rely on payroll services for their clients, because most accounting firms outsource this now. So it's a lesson in know who you are working with. Like you said, Chelsea, if [01:00:00] you can't find the owner of the business on the website, maybe that's a sign. David Leary: So, if you had to take a guess, are we gonna be having you back on, nine months from now, 18 months from now, four years from now. When is there gonna be closure to this, to where there's a sentencing taking place and that type- the investigation will stop?  Michael Williams: It's really hard to say. I guess that sort of depends on what Michael Mann gives to the FBI, or to the U.S. Attorney's office, as part of a potential deal that he [01:00:30] might make with them. It really depends on what his level of cooperation is with the investigation. This could be a months-, if not years-long process to see the conclusion of the criminal case, at least. And that's not even to say the conclusion of all the civil cases, the lawsuits have been filed against MyPayrollHR, against Michael Mann, himself, against Cachet Financial Services. Yes, we're going to be reporting the story for months, [01:01:00] if not longer. It's definitely gonna be a really long process. Chelsea Diana: We don't know how he's going to plead yet, either. I think a lot of it depends on if he pleads guilty or not guilty. Blake Oliver: Right. Well, given that he already confessed, it would be a little bit late- Chelsea Diana: Right. You would think ...  Blake Oliver: -to plead not guilty, but you never know. Chelsea Diana: You never know.  Blake Oliver: Well, Chelsea, Michael, thank you so much for joining us. Chelsea, if people want to follow what you are writing and covering online, where's the best place for them to do that? Chelsea Diana: Yeah, the best place is probably our website, That's B-I-Z journals, with an 'S'. [01:01:30] Blake Oliver: And Michael, how about you? Michael Williams: For me, it would be, and I would definitely recommend anybody in the Albany area to subscribe to your local newspaper if you haven't already. Chelsea Diana: Yes.  Blake Oliver: Wonderful. Thank you both and have a great weekend. Chelsea Diana: Thanks so much.  Michael Williams: Thank you both for having us.
#AccountexUSA: Your accounting firm might be subject to sales tax
Cloud Accounting Podcast
SponsorRight Networks: Show Notes 00:53 – Meet Dena Oberst, CEO of Gable Tax Group 01:45 – Meet Diane Yetter, president of Yetter Tax, and founder of the Sales Tax Institute 04:11 – Diane gives a brief overview of the South Dakota v. Wayfair decision  | AICPA   05:26 – According to South Dakota, a business’s physical presence is less important than its economic presence  06:50 – You gotta get up pretty early in the morning to go hang with the Supreme Court crowd!  08:37 – Most states, except Kansas, have adopted the $200k/200 transaction threshold | TaxJar  09:55 – If a company sells through Amazon, or other major marketplace platforms, there's nowhere to hide.   10:45 – To be registered, or not to be registered – that is a huge question right now  14:50 – States are attempting to ease the burden on smaller sellers through Marketplace Facilitation laws | Bill Track 50  17:10 – With the constant changes to the sales tax laws, which can vary state by state, it’s imperative to constantly monitor thresholds, and transaction counts 21:47 -- Who has to file? Who doesn't? Who knows? All states have yet to reach a consensus regarding the particulars of the new sales tax laws  25:38 – While it’s a mess right now, Diane believes things will start falling into place in the next five years.  26:21 – Business is definitely booming for sales-tax specialists, and firms, such as Gable Tax Group as CPAs scramble to help their clients meet these new and ever-changing sales tax requirements   28:39 – Diane doesn’t foresee any interference from the federal government, because it would only cost them more money to jump into the fray 32:06 – While the states are mostly self-policing the workings of the sales tax laws, there are some states that still want to forge their own seemingly senseless paths  33:46 – Economic nexus applies to all companies, not just sellers of physical goods  34:35 – Accountants and bookkeepers might want to exercise some caution with add-on products and bundling, as it can create additional confusion, and taxation  38:22 – With the shift from a manufacturing to a service economy, states are on a mission to replace lost revenues 39:57 – As accounting and bookkeeping practices continue to expand services, education, and understanding of the sales tax laws is critical Connect with Our GuestsDena Oberst:  Diane Yetter: Get in TouchThanks for listening and for the great reviews! We appreciate you! Follow and tweet @BlakeTOliver and @DavidLeary. Find us on Facebook and, if you like what you hear, please do us a favor and write a review on iTunes, or Podchaser. Interested in sponsoring the Cloud Accounting Podcast? For details, read the prospectus. Subscribe Apple Podcasts: Spotify: Google Play: Stitcher: Overcast: TranscriptDiane Yetter: Here's the thing that you have to remember - economic nexus is not just for online sales, and it's not just for sellers of tangible personal property, it is for all companies; even a company like Dena's and mine. We have to monitor, because I have clients all over the country; I think you have clients all over the country. So, we have to monitor - do we exceed the economic thresholds? Blake Oliver: You're saying that I have an accounting practice. I'm in the cloud. I'm serving clients everywhere. I have to start counting, too. Diane Yetter: Yes. Blake Oliver: Oh ... Welcome [00:00:30] to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: I'm David Leary. Dena Oberst: I'm Dena Oberst. Diane Yetter: And I'm Diane Yetter. David Leary: Thanks for joining us. We're at Accountex USA in Boston, here to talk sales tax. Do you wanna introduce yourself? Basically what firm you're with and some background, and then we'll jump into sales tax, sales tax sales tax ...  Blake Oliver: We wanna learn. So, how about you go first, Dena? Dena Oberst: Ok, great. Well, I'm Dena Oberst. I'm the CEO of Gable Tax Group. We're a sales tax outsourcing provider. [00:01:00] What we do is we do multi-state sales and use tax returns for businesses, and we mostly support CPAs. We're usually working direct with accounting firms and bookkeepers to be their in-house sales tax department. Blake Oliver: Got it. So, I have a client that does e-commerce in like 20 states. I do not have the expertise to do those returns, so you guys will take care of those for me? Dena Oberst: Exactly. Usually, CPAs may do their sales tax return for the one state that they're in, but once you go multi-state, most CPAs say, "I hate [00:01:30] sales tax returns," and we love them. I've been doing this for 28 years. Blake Oliver: Gotcha. David Leary: It's like outsourcing your payroll, in a way. Dena Oberst: It's like outsourcing your payroll. Exactly. We handle all the payment processing, journal entries, everything; just like as if you had it in-house, but outsourced. David Leary: And Diane? Diane Yetter: I'm Diane Yetter. I am the president of Yetter Tax, and the founder of the Sales Tax Institute. I am the sales tax nerd. We provide sales tax education and resources through our Sales Tax Institute division, including [00:02:00] online classes. In fact, later this month, we're launching our next round of Sales Tax Jumpstart, which is a nine-week online live class. Accountants that need to know more about sales tax, that's a perfect venue for them to learn about that. Then we have tons of free resources on our website all about this economic nexus that I know we're gonna talk about, white papers, and things like that. Then, through Yetter Tax, we are an advisory firm. We don't do compliance, like Dena does. We help people [00:02:30] understand where they have to collect tax, what's taxable that they buy and sell. We can negotiate settlement agreements, help with audit defense. Then, we also our technology partners with the largest providers of sales tax technology. We partner with them and help our clients find the best solution for them, not just a one- we're not just a one-person or one-firm partner. David Leary: Got it. I randomly- not randomly ... I consciously go and I pick people that I wanna bring on to interview on the podcast, but, apparently, you [00:03:00] two knew each other from the past already in your career. Diane Yetter: We did. Dena Oberst: We did. We both- Well, I don't know if you started at Arthur Andersen, but ... I didn't start at Arthur Andersen. I started at Arthur Andersen as an experienced hire doing sales tax, because back in those days in the SALT group, there weren't a whole lot of sales tax people. Maybe did state income tax, but not SALT. Yeah, Diane and I go way back. We actually used to train on software together for a software provider back in the '90s. Blake Oliver: I'm gonna make a big ask of you, Diane-  Diane Yetter: Sure.  Blake Oliver: -which is David [00:03:30] and I had a brief episode/interview, post-Wayfair, like the week after that decision came out. Since then, we haven't talked about sales tax. Diane Yetter: Oh, gosh. You guys have missed out a lot. Blake Oliver: I know. I'm wondering if you can ... I know you just did a three-hour class, and we don't have three hours, but if you could kinda give us - for the uninitiated - what is the landscape of sales tax in the United States, post-Wayfair? David Leary: Or, even just talk about what the Wayfair decision [00:04:00] was. I think people have heard about it, but, even in those days, when we brought in somebody to talk about that, we had 200 downloads at the time. We have lots of new ears and new listeners and maybe they haven't heard of it yet. Diane Yetter: Briefly, what the Wayfair decision did is ... How I describe it is it turned the sales tax world upside down and inside out. Prior to June 21st, 2018, companies were required to collect tax where they had physical presence. That physical presence could be through their own people, through independent contractors, [00:04:30] through paying commission payments, or referral payments, through ...  States had enacted what we called click-through nexus. A lot of people referred to it as the Amazon tax, because it was the Amazon model that they would pay people that referred people to buy things off of Amazon. They would pay them a commission. That's what the states went after. That started in 2008, in New York. But you had to have physical presence. Things like having inventory in a warehouse, which has caught a lot of Amazon FBA sellers with physical presence. That [00:05:00] was the rule - over two major court cases going back to 1967 - that you had to have substantial physical presence. Blake Oliver: So, for example, I'm selling something out of my house in California, and I'm shipping outside of California. In the past, as long as my operations were all in California and my inventory was there, I didn't have to deal with collecting sales tax from Wisconsin or something like that-  Diane Yetter: Correct. You'd collect for California, but that was the only state you had to worry about- Blake Oliver: That was it. Okay.  Diane Yetter: What happened in the Wayfair decision is [00:05:30] South Dakota passed a law in 2017 that said, "We don't think physical presence is a requirement. Rather, it should be economic." So, South Dakota passed a law that said if you make more than $100,000 of sales or 200 transactions into the state of South Dakota- Blake Oliver: Which, are very different things, right? Diane Yetter: Very different. Exactly, exactly ... That constitutes substantial presence. They said, "We don't think physical needs to be part of that." The [00:06:00] way the South Dakota law was written, it was able to be fast-tracked, so we've saw the fastest movement from a law being passed to a U.S. Supreme Court decision. The other kind of little nerdiness of it is the case is South Dakota v. Wayfair - most tax cases are taxpayer v. state, because it is the result of an audit. The South Dakota law required a proactive registration, as of May 1 of '17, and anybody that did not register that South Dakota believed met that threshold, South [00:06:30] Dakota sued. That's why the case is the reverse, and it was initiated-  Blake Oliver: Because they sued Wayfair. Diane Yetter: They sued Wayfair for not filing that proactive registration that was required. Blake Oliver: Gotcha. Diane Yetter: So, the Supreme Court, fast forward ... I was at the oral arguments; didn't get to see the whole thing. Blake Oliver: That's still super cool. Diane Yetter: I got in line at 4:30 in the morning, and I was seven people too late to get in for the whole thing. I saw the first two minutes and then just hanging out and doing [00:07:00] all that. It was quite fun to be there. It was exciting-  Blake Oliver: So, you tailgated-  Diane Yetter: I did, I tailgated. Hint: if you wanna go, you can actually pay homeless people to go and get in line. So, next time, I will go find a homeless person and pay them a hundred bucks to go get in line at midnight. But what the Supreme Court came out, June 21st - it was actually in the middle of our Basics of Sales Tax class, which was kind of exciting - what they said is the Commerce Clause, which is what it's based on, [00:07:30] actually does not have the word physical in it. It requires substantial presence. Blake Oliver: So, what is that? Yeah, that's the question, right?  Diane Yetter: Exactly. What the Court said is, "We believe that South Dakota's law meets the Commerce Clause requirements." So that has now become the standard of $100,000 or 200 transactions. There's some other nuances, like no retroactivity and not an undue burden on taxpayers. There's been a lot of discussion about what [00:08:00] is an undue burden, and then, also, as you compare state sizes from South Dakota to a state, say, California, New York, Texas, is $100,000 or 200 really equivalent in those states?  Blake Oliver: Right. Wisconsin just picked that as the threshold. Diane Yetter: That's what most of the states picked was the $100,000 or 200, coming out of the gate, correct.  Blake Oliver: Okay, and the Supreme Court ... They didn't weigh in on whether that was appropriate or ...? Diane Yetter: What they said was, for South Dakota, it was appropriate. Blake Oliver: Oh, South Dakota, okay. So, for South [00:08:30] Dakota, it was appropriate, but they didn't actually say it's appropriate for every other state. They just said it's possible-  Diane Yetter: Correct.  Blake Oliver: It's possible, now, to do this. Diane Yetter: Correct. What most of the states have viewed, except for Kansas, is that that is the threshold. You shouldn't go below that threshold. Blake Oliver: Okay, but that threshold can be very low, if you're selling $10 widgets. Diane Yetter: Correct. Blake Oliver: 200 of those is not that many- not that much volume ... Not that much in terms of dollars. Diane Yetter: Correct. Blake Oliver: So, that's creating ... I'm [00:09:00] thinking to myself, if I have- if I'm selling a low-dollar-value item, maybe I just stop selling to those states, because I'm not making enough money to pay for the compliance. I guess, Dena, we can talk about this - how much it actually costs now to comply. Dena Oberst: Right. Blake Oliver: The big-picture implication of all this is, now, I'm a small seller in California, and I'm selling to people in every state. What [00:09:30] do I do? It's overwhelming, right? Dena Oberst: It is overwhelming, and a lot of businesses that are selling in multiple states, whether it's just e-commerce ... Sometimes, that's just one of the revenue streams - it's not their only revenue stream - is to use one of the big marketplace platforms. But the number of transactions, like Diane said, that has come out, a lot of people are like, "How do I comply with that, and what happens if I don't?"  Now, if you went back prior to this last- I would say the last 12 [00:10:00] months, the states had the list of inventory. They knew exactly where Amazon's customers were. Those customers were actual- those businesses were getting letters, so they knew who they are. It's not like you can just hide. Again, you sell whatever, 200 coffee mugs- Blake Oliver: So, people who are using Fulfilled by Amazon, I understand that's where Amazon takes your inventory and distributes it around all of their warehouses. There's like 26 states, or ...?  Diane Yetter: It's growing. Missouri, [00:10:30] Idaho, and Oklahoma have warehouses that just opened or are due to open in, and those are three brand-new states that had not had warehouses before. Blake Oliver: Basically, if you used FBA and you wanna be compliant, you kinda have to ... You were already filing in pretty much all those states [cross talk]  Dena Oberst: Well, that's- Diane Yetter: You should have been filing.  Dena Oberst: That's kind of the confusion. That's where people like Diane and I come in and say the economic nexus, the revenue threshold, is the newest thing since the Wayfair, but the physical presence is not dead. If you were selling on Amazon and had goods and inventory, [00:11:00] you still have to register. It has nothing to do with the number of threshold- the number of transactions.  That's where a lot of businesses are confused. They call me all the time ... "But, Dena, maybe I have 200 ..." I'm like, "Yeah, but you had physical presence there. You need to register. There's a lot of other nuances I won't even get into. You don't have time. I'll talk about the Marketplace Facilitator law, which adds even another layer of confusion to businesses. But I would say, on the compliance side, for sure, the volume of returns for any business has grown [00:11:30] substantially, and I would say probably by 2020, most of those companies should be filing in every state. Blake Oliver: You touched on, or you mentioned the risk of noncompliance. What are those risks, if I just ignore ... I'm in California ... What's South Dakota gonna do to me? Dena Oberst: Well, this is what I tell, and then definitely let Diane opine on it ... I always tell businesses, all the time, "Do you wanna lose 10 percent of your gross revenue in taxes that belong to your consumer?" They're like, "Well, no!" I'm like, "Well, you [00:12:00] are now taking the responsibility for it. Why not just find a solution to implement a process, whether it's technology and outsource, and collect it from the consumer?" It's a consumer's tax. These businesses shouldn't be absorbing that as a liability, and it's really risky. If they're not gonna do it, I always say, "You better prove something on your books ..." because 2020 is- we're gonna be a second year into this, and it'll be really interesting to see how the states enact- David Leary: You wanna basically build the [00:12:30] proper system and have the proper system procedures, so all you're doing is you're just collecting the tax and passing it on. You wanna eliminate the burden. It's not your tax, as a small business owner. It's just, you just have to create a process to move that money through, and when you do that- Blake Oliver: Remit it properly.  David Leary: -you just can forget about it. Diane Yetter: Correct. Blake Oliver: But that's not- that's easier said than done, right? Diane Yetter: It is.  Dena Oberst: Well, that's true, but that's why there's- David Leary: That's why there's cloud accounting, right?  Dena Oberst: Yes, that's why there's platforms out there that can help. There's a whole host of them, as Diane mentioned. They do a lot [00:13:00] of implementations. There's definitely a lot of options out there for businesses, large and small. David Leary: I think I've seen some of the e-commerce conversations where people are- they're worried about the big companies, like Amazon, turning over data to the agencies or being forced to collect it on their behalf. It gets very, very messy, because then, if you're shipping some stuff on your own, and some stuff through Amazon, Amazon can't file your return for you. It's very complex-  Dena Oberst: Some of it can, right? I know [00:13:30] Diane's gonna have a whole topic on it this afternoon about the Marketplace Facilitator, and how Amazon and some of those other platforms are now gonna be required to collect and remit tax on behalf of the sellers. Being on the business side, I don't have one client that just sells on Amazon. Blake Oliver: Yeah, how does that even work? Dena Oberst: They sell on their own website, and they have other platforms. If it says $100,000 in gross sales, that's gross sales; that's not taxable sales. We go back to that discussion, right, Diane? Is that really [00:14:00] gross sales, meaning the marketplace sales, and including the ones that you have from your own website? I tell my clients, "Yes, if you've met the threshold on gross sales, completely, whether or not Amazon's reporting on your behalf and you have the remainder, you need to register." Again, do you wanna lose 10 percent of your revenue? I don't think so. Diane Yetter: The states are starting to come out ... On our website,, we've got a couple of great remote seller charts, and economic nexus charts. We are [00:14:30] tracking whether or not the state has enacted Marketplace Facilitation laws. What that is, is it is the state's attempt to reduce the burden on the very small sellers. So, sellers that exclusively sell on marketplaces - Amazon, Etsy, eBay, Walmart, Google, all of those platforms - that the states are saying, "Individual seller, you don't have to be the one to register and collect. The marketplace will do that." They file a [00:15:00] single return for all their sellers. It lessens the confusion of the consumer. If you go on Amazon, and you buy the same thing, you could have three different situations. You could be buying direct from Amazon, in which case, they're collecting tax in every state. You could be buying from a third-party seller that does FBA, so they're registered in a number of states, or should be; or you buy from somebody that self-fulfills that maybe is only registered in their [00:15:30] home state. You can buy the same thing from three different vendors and get three different tax results. Confusing for the consumer, right?  Blake Oliver: Yes, right. Diane Yetter: What the states are saying is if you're selling through Amazon or any of the other marketplaces, the marketplace will take that responsibility. If you're a seller, you go on to the marketplace. You can't even turn those marketplace states on or off. Today, we're up to 37 states that have passed that. Blake Oliver: The market- So, Amazon is gonna collect ... When does that start? Is that already happening? Diane Yetter: It's already happened. Of the 37, there's 14 [00:16:00] that are not yet effective. We got a bunch coming on 10-1, and we've got a couple January 1. A bunch just came on July 1. That is gonna reduce the burden, but where the complexity comes in is, just as Dena was talking about, if you're multi-channel, which many sellers are - you sell through Amazon, eBay, Etsy, Walmart, and your own website - when you're figuring out if you've exceeded that threshold, what do you include? Some of the states say you have to include everything, like Washington. But there's [00:16:30] some other states that say ... For example, Arizona says if the marketplace is collecting, you exclude those, even though they otherwise say your gross sales. Now, as long as you can confirm - which all the big players have lists on their website that show, "Here's where we're collecting as of what date" - you get to exclude those sales. Now, if you're below the threshold, in Arizona, they go into effect 10-1; they're the only ones that's doing a phase-in for 2019. It's $200,000 in [00:17:00] sales, no transaction count. Exclude your marketplace. If you're below that, you don't have to register. In January, it drops to $150,000. In 2021, it will drop to $100,000. It's an ongoing exercise to continue to monitor your transactions, especially as we've seen a number of states ... We've had seven states change their thresholds. We had six of them originally enacted with a transaction count and then realized they caught a whole lot of [00:17:30] tiny sellers, so they've eliminated the transaction count and now just have a dollar threshold. Blake Oliver: That's good, because that transaction count seemed ridiculous to me.  Diane Yetter: Right. We're seeing that. Big states, like California, Texas, and New York are all at $500,000. Texas and California are dollars only. New York has an "And" test. So, it's $500,000 sales and 100 transactions." They're saying if you make one $500,000 transaction, you don't have to register. You still have to have 100 transactions in New York. But most states are an "Or" test. David Leary: If I'm [00:18:00] selling ... Amazon's gonna now remit and pay my sales tax for me, for some portion of my business. Is their official ... I know this is not the right analogy, but a 1099 ... It's kind of standard, right? You're gonna get a 1099, and it's very clear of what you need to do with that on your own personal income taxes or your business income taxes. Is there kind of that equivalent, where if Amazon pays this on these different states, you're getting a real form, or is it just gonna be like, "Here's the report ..." "Amazon - I'm doing air quotes here - Amazon created this [00:18:30] special sales tax report," and that's kind of what you get, and now you've gotta backwards figure that in? Maybe this is a question for you, Dena- Dena Oberst: Well, in the Amazon Marketplace platform, when you run the reports to do your tax returns, it'll actually list which transactions were reported by Amazon-  David Leary: It's broken down by each state, or ...  Dena Oberst: Right. They still wanna know the revenue. A business still would wanna know their revenue. They still need to know their products. From the tax perspective, in that column, it'll say Amazon reported the tax on behalf of the seller. Then, there's the other states [00:19:00] that still have tax turned on. Because, like Diane said, this is kind of a rolling thing, this Marketplace Facilitator law. It's not all states now. Some are in October, some are January 1, 2020. It's not all states, but probably by next year this time, it'll be all the states. I can't imagine not. It's actually listed on the report the sellers can see. This episode of The Cloud Accounting Podcast is sponsored by Right Networks. In a perfect world, everyone would have 100 percent of their clients on a cloud-based accounting system using cloud-based apps, but the world isn't perfect, and clients have a wide range of needs. For some, this means using desktop-based software. That's where Right Networks come in. Right Networks is your 100-percent accounting-focused desktop in the cloud that also includes an ecosystem of over 250 connected apps. As you and your clients take the journey to the cloud, Right Networks will be at your side innovating the best ways to leverage the true cloud future by investing heavily in cloud apps, like Transaction Pro and Autofy. They've created an always-on environment that supports 24/7 data transfer. Right Networks also offers no scheduled downtime for maintenance or application updates and meets the industry's highest security standards. To join the more than 50,000 firms that use Right Networks daily with their clients, head over to That is Cloud Accounting Podcast dot promo forward slash R-N-C-L-O-U-D and be sure to visit the Right Networks booth in San Jose at QuickBooks Connect 2019.  Blake Oliver: Even if I'm exclusively selling on Amazon and some of these other- all these other marketplaces that are now going to collect and remit on my behalf, I still have to register in the states where I have exceeded the threshold?  Diane Yetter: Maybe- Dena Oberst: I was gonna say, maybe. If it was a gross receipts state, maybe. Diane Yetter: The states are starting ... If I can just answer your question quickly, some of the [00:21:00] states in their Marketplace legislation require like a 1099 form, though it's a certificate. Think of it as almost even a reverse exemption certificate that the marketplaces will need to provide to the sellers. That is one of the things that the states are putting in there. There's a lot of crazy liability issues that are being worked through. There's a task force that the Multistate Tax Commission has put together on marketplace facilitation. I'm on that task force. We had our first call last week. We're [00:21:30] working on trying to figure out how to come to a happy medium between the states, and the sellers, and the facilitators, in terms of shifting that liability and responsibility, and who will have to issue certificates or not. All of that is kind of evolving. What the states are seeing is, now, to your question about do I have to file if I'm strictly on a marketplace and they're collecting? Some [00:22:00] of the states say yes. A state like Washington that you have to file the Business and Occupation tax, which is their gross receipts tax on the same form, they definitely want you there. Some of the states want you to include the sales, and then there'll be a deduction line.  Some of the states- New Jersey has come out and said if you're strictly a marketplace and it's collecting, if you're already registered, we're gonna put you on inactive status. Then, if you start making sales that you need to collect, just call us, and we'll make you active again. Some of them are saying cancel your registration and then [00:22:30] re-register. We have the same question if you drop below the threshold - what happens? The states are figuring it out, but they're ending up with a lot of zero returns, or very low dollar returns that are very expensive for them to process, so the states are still figuring it out [cross talk]   Blake Oliver: It's expensive for the businesses to file- David Leary: It's a burden for both sides, right? It's expensive for both sides to track zero-  Diane Yetter: Right, it is. It's a burden for both sides. Exactly. Dena Oberst: Which I would say is why it's the greatest change, I would say, in the sales tax since I've been doing it. This has been the greatest change where it happens- probably every week, every month, there's some change. It's really hard to advise [00:23:00] clients. Like we were talking about earlier, you get clients to register because they met the threshold, and then they come up with a Marketplace Facilitator. Now what? They're already registered. What do you do? Some states say you can cancel your registration. Some say you can't. Blake Oliver: Yeah, and do you have to file separately? Like, I sold everything on Amazon. They're gonna report/remit. Do I file my own sales tax return, too?  Diane Yetter: In some of the states, because the states want to see the revenue, and then, you take your deduction. Blake Oliver: Oh, you [00:23:30] take a deduction, got it. Diane Yetter: You take a deduction. You file a zero return, but it's a way for the states now to get data that, when they go to audit the marketplace, they know these are the sales that should have been reported, because they're getting it that way. It's a lot of data analytics that the states are trying to use the information for-. Blake Oliver: But not every state does it that way. They're all different. Okay-   Diane Yetter: But not every state does it that way, exactly.  David Leary: Is there an end to this? Every month, every quarter, somebody's discovering something - "Oh, this is kind of broken in this new system," and they're adjusting, changing the laws ... Is this gonna- three years down the road, things ... Is this gonna stabilize [00:24:00] here? Diane Yetter: I think it will. We're definitely getting- we're getting close. We have all but two states that have enacted economic - Missouri and Florida. Florida has all already pre-filed legislation for next year. Kansas came out with an administrative; they tried to pass it twice. It got vetoed by the governor because it was bundled in with some other issues that she didn't want to sign. Kansas came out, administratively, and said, "Under our existing law," which a number of other states did, "we're [00:24:30] going to impose it, except we do not believe we can authorize thresholds, because that would be granting an exemption which requires legislation." So, Kansas has a zero threshold, starting October 1. People have appealed to the attorney general. The attorney general of Kansas has said that they will come out with an opinion before October 1, when it's effective, so we'll see on Kansas. But otherwise, Missouri and Florida are the only ones.  The marketplace, as I said, we've got 37 that have passed it. The only two that are possible, yet this year, are [00:25:00] Michigan and North Carolina that have it proposed, but they're still in legislative session. Most of the legislative sessions have ended, so were waiting til next year to see what's gonna happen. But we do have cleanup. We have administrative rules. Illinois passed some goofy rules that go into effect next July. Switching the sourcing rules; how they wrote it, it's unconstitutional, under the Illinois Constitution. We're hoping there'll be some cleanup legislation in the [00:25:30] veto session this fall; if not, early next year, if there'll be ... There's coalitions of people getting ready to file a lawsuit against Illinois. Right now, yes, there's a lot of turmoil. It's hard to stay on top of it, but I think it'll slow down after next year. Then, I think the next stage will be as audits start happening. So, three to five years out, we'll probably now see some of the administrative things get worked out a little bit more. Blake Oliver: So, Dena, [00:26:00] your business must just be booming at Gable. Dena Oberst: It is booming. Blake Oliver: To me, this resembles payroll. Like David said earlier, a lot of firms used to do payroll for their clients. Pretty much everybody that I talk to has gotten out of it and outsources that now to a payroll provider. So, do you see that- is that where sales tax is headed? Dena Oberst: Well, absolutely, because small companies ... It's the small businesses, the e-commerce businesses that are impacted the most. The ones that are well-established are already filing sales tax [00:26:30] returns everywhere, based on physical presence, and they just don't even have a tax department, let alone, sometimes, an accounting department. You're usually working with the CEO or the founder and some salespeople. They're never gonna have that in-house. Yeah, it's definitely been a good solution for the e-commerce businesses to have an independent, because, quite frankly, people like me usually sit in the Big Four accounting firms, and it's kind of untouchable for a startup company to have a sales tax compliance team. Yeah, we've definitely been [00:27:00] popular in this last year. Blake Oliver: I know you're working with CPA firms. I'm a CPA. I have clients that have nexus, all this stuff, and I wanna pass it off to you guys. You guys will take care of that. Do you also work direct with a lot of businesses [cross talk]  Dena Oberst: Oh, absolutely. Absolutely. Yeah, we work direct with businesses all the time, but really, since the Wayfair decision last summer, we've just been focused on working with the CPAs because that's where all the businesses go. They go to their bookkeeper and their CPA, saying, "Help, what's going [00:27:30] on with Wayfair?" or, "I got a letter. How do I comply?" Most CPA firms, again, don't specialize in sales tax, so where do they go? Are they gonna go to their competitor and refer their client to a competitor? No, they're not. Gable Tax Group is gonna be the sales tax guru for them to go to keep the competitors out from poaching their clients-  David Leary: So, I can pretend I have a sales tax department. I'm like, "Oh, great, I have a sales tax team. We can handle this ..."  Dena Oberst: That's right.  Blake Oliver: It's just like I handled payroll for my client, right?  Dena Oberst: Right. Blake Oliver: To them, I'm doing it, but really, it's [00:28:00] a payroll provider that I'm working with. Diane Yetter: Exactly. Dena Oberst: That's right.  Blake Oliver: Here's a question - what do you think the odds are that the federal government ever gets its act together, and Congress unifies the states? Why can't we have a system where we just file with one- David Leary: That's called the Avalara Short. They were short on Avalara, and then pushed for that decision? Diane Yetter: Yeah. I get asked this question all the time. There are, I think, it's three [00:28:30] current federal bills pending. Dena, object if you disagree? Dena Oberst: Nope.  Diane Yetter: Don't hold your breath. Dena Oberst: Yeah, that's what I would say.  Diane Yetter: It's not gonna happen. At this point, a couple of things to keep in mind. If the federal government is going to eliminate a revenue source for the states, the federal government must reimburse the states for the lost revenue. All but two states ... Well, we've got three that come on 10-1, but basically all but two [00:29:00] states already have a revenue stream. So, to repeal something that is already in place is not gonna happen. The only other time that I've really seen that happen is the Internet Tax Freedom Act. When that came out, there was legislation that said states cannot tax internet access, if they didn't have it in place at that time. There were eight states that were grandfathered in when the bill went permanent, under [00:29:30] President Obama. It gave them until 2020 to eliminate it. We've got a couple of states that that's their legislation to eliminate it. That's really the last time we've seen the federal government go in and take a wholesale change to that. But keep in mind, that bill was passed when the internet was in its infancy, and when you paid AOL to have online access. Today, [00:30:00] it's kind of- it's your phone bill. It's a general commodity. I almost feel like the Internet Tax Freedom Act and no tax on internet access is almost not needed today, but that's in place. So, no, I do not think ... The other reason that I don't is the states all came together in setting that threshold, setting the $100,000 or 200 transactions and not going retroactive ... Nobody [00:30:30] has made it effective earlier than June 21st of 2018, other than a couple of- Blake Oliver: Knock on wood. Diane Yetter: Well, there's a couple of weird things called [cross talk] cookie nexus, but we won't get into that today. Blake Oliver: Is that with the internet browsers, like an internet cookie? Diane Yetter: It's a digital cookie. You guys drop cookies on all of your listeners' computers so that you can track them, and they come back. Blake Oliver: Oh, no. this is [cross talk] This is the problem with podcasting is it wasn't designed to track well. Diane Yetter: You don't.  Blake Oliver: Other than people [00:31:00] downloading, you have no idea- Diane Yetter: That people are listening. Blake Oliver: Yeah.  Diane Yetter: I drop cookies- Blake Oliver: Yeah, every website, pretty much-  Diane Yetter: Every website. That was considered physical presence, because in the states that did that, which were Massachusetts and Ohio, that was a physical presence. What is happening is the states all said, "We don't want the feds to get involved. We gave the feds ..." There has been federal legislation pending since- I remember the first one in 1988, and it goes back even [00:31:30] before that. The federal government has done nothing to that, and what the states are saying is, "We are doing this in a measured, appropriate way." There's arguments as to what is appropriate, "but we're being somewhat consistent; we're being reasonable. We're not going retroactive. Feds, stay out of it." What Kansas has done, that's kind of tipping the apple cart a little bit. Hawaii attempted [00:32:00] to go back to January 1 and, within days, got slapped down by all of their fellow states, changed it, and said, "We'll make it July 1." The states are self-policing on that, and the bills are getting passed. The only really goofy thing is New Hampshire with no sales tax. They've passed a law that now any state that wants to require a New Hampshire business to collect their tax must apply to the New Hampshire Department of Justice to be certified that [00:32:30] they're not putting an undue burden on a New Hampshire business. Blake Oliver: The state's having to register with another state. Diane Yetter: Right. Blake Oliver: How does it even work?  Diane Yetter: It's crazy- Dena Oberst: Yeah, it's crazy.  Diane Yetter: It's crazy. We haven't seen how that's gonna work. Blake Oliver: Can they do that to ...? [cross talk] the constitutional question, right?  Dena Oberst: That is the question.  Blake Oliver: So, more court cases coming, I imagine- Dena Oberst: Yes.  Blake Oliver: How are we doing on time? Because I have one more big question, I'd love to-  Diane Yetter: I'm good. Dena Oberst: Yeah, I'm good.  Blake Oliver: Okay, so, tax on services ... We've [00:33:00] been talking about ... I think we haven't said explicitly, but mostly about goods, right? That matters to our clients of CPA firms, but CPA firms, and CPA-firm owners are probably very interested to know what's going to happen. David Leary: Well, especially our Cloud Accounting Podcast listeners, because a lot of them have cloud-accounting-based practices and they're having clients now in multiple states. Blake Oliver: Yeah. We had clients, when I was in practice, in like 26 states, and not to mention, different countries. What do we have to look forward to, in [00:33:30] terms of the states passing ... Well, I guess, how many states collect tax on CPA services, or accounting services, or bookkeeping services? Diane Yetter: One, it's South Dakota-  Blake Oliver: South Dakota is the leader, here. Diane Yetter: Yeah. Here's the thing that you have to remember is when ... Economic nexus is not just for online sales, and it's not just for sellers of tangible personal property - it is for all companies. Most of the states use a gross [00:34:00] sales threshold. There's a few that use taxable sales, and a few that use retail, which means if you're a wholesaler, you exclude your sales for resale. Even a company like Dena's and mine, we have to monitor because I have clients all over the country. I think you have clients all over the country. So, we have to monitor do we exceed the economic thresholds? Now, in most states-  Blake Oliver: Let me hold you there, just for a second. You're saying that I have an accounting practice. I'm in the cloud. I'm serving clients everywhere. I have to start counting, too. Diane Yetter: Yes. Blake Oliver: Oh ... I [00:34:30] feel like a lot of accountants and bookkeepers don't know this.  Diane Yetter: Don't realize it. Blake Oliver: Yeah. Diane Yetter: Here's why - most accountants don't just do accounting services. In my workshop, yesterday, I had a mix of people that say, "I'm a reseller of QuickBooks Online, Xero ..." name your platform - because a lot of them do that, so that they get an additional revenue source. They are a reseller of cloud applications. There's a number of states that tax cloud software, and cloud applications- Blake Oliver: Oh, wow ...  Diane Yetter: Now, if it's [00:35:00] a gross sales state, you have to include your professional services revenue to see if you're above the threshold, and then you have to tax those. In my business, I've stayed out of selling on-demand webinars, because those are considered digital audio/visual, and that's taxable in a bunch of states. Blake Oliver: Wow. I did not know this. This is [cross talk] Dena Oberst: -about 12 or so states-  David Leary: This is why we aren't gonna charge for The Cloud Accounting Podcast. It's too much work.  Blake Oliver: Let me get this straight. This could [00:35:30] change, depending on how I structure my engagements, right? Diane Yetter: Exactly. Blake Oliver: Let's say I purchase the software. Let's say it's QuickBooks Online. Then I just bundle that with my services, but I'm not explicitly charging the client for that subscription. I own the subscription, and I'm just ... That's different than if I resell- Diane Yetter: Resell it.  Blake Oliver: So, I get the subscription; Intuit charges me; and then I resell to the client, and it's as if it's their subscription- Diane Yetter: Correct.  Blake Oliver: That's two different situations- Diane Yetter: It is. Dena Oberst: Be very careful about bundling, right? [00:36:00] Blake Oliver: Yeah. Dena Oberst: Because if you bundle things that are not taxable with things that are taxable, the whole thing could be taxable, so just be very careful. Blake Oliver: I wanna own ... I don't wanna be reselling software, really, if that's not my main business, I wanna be owning-  Diane Yetter: Turn it into a commission. Get a referral fee, something. Let the software company do it, because the trick also becomes if you buy it, and then you provide it as part of your monthly recurring fee, Intuit has to charge you the tax on that, and they have to [00:36:30] know where your client is, because if you're giving your client access to that QuickBooks license, or subscription, then they need to know. So, they're gonna charge you the tax based on where your customer is. Blake Oliver: I don't think they do that [cross talk]  Diane Yetter: But that's what they should be doing. Blake Oliver: That's what they should be doing.  Diane Yetter: But here's the thing, if they don't, because they've considered it to be you, and you're in California, and California doesn't tax SaaS, but you're having a client in Washington use it, you now potentially owe Washington use tax on that, because you're using it-  [00:37:00] Blake Oliver: Yeah, yeah-  Diane Yetter: -in Washington. It adds a lot of complexity. Blake Oliver: Washington use tax is no joke, I understand.  Diane Yetter: It is not. It is not. Blake Oliver: There are some hefty fines if you don't comply. Diane Yetter: A 39-percent penalty Washington imposes if they catch you. Blake Oliver: Wow. David Leary: This could be a session you guys should do at one of the future conferences - just a how to be sales-tax compliant in your own [cross talk] and what's the best strategy for bundling, doing webinars, if you're doing bar work, any of that.  Diane Yetter: Yeah.  Blake Oliver: You mentioned only South Dakota collects a [00:37:30] tax on services- Diane Yetter: On professional services- Blake Oliver: Professional services-  Diane Yetter: -accounting services, but [cross talk] lots of other states tax computer-related services. If you're doing installation of software, you're doing a training on software, digital goods ... D.C. and Iowa just started taxing those products, those types of digital services, effective January 1. I think that's where we're gonna see more movement, because states went from taxing physically delivered software. Then, when it was electronically [00:38:00] downloaded, it was like, "Oh, it's exactly the same thing." I go into the store, and I buy QuickBooks on a disc, taxable everywhere. I go to QuickBooks Online, and I downloaded it. I install it on my computer, not taxable everywhere, but moving ... California, it's not taxable. Now, I'm accessing QuickBooks Online, it's taxable in fewer states. You've got the exact same product sold in different mediums taxed differently. We're seeing states kind of move [00:38:30] along that continuum to start charging or start imposing tax on more of those types of things, more services ... The economy has shifted. We used to be 70-percent manufacturing. Now we're 30-percent manufacturing and 70-percent service. The state revenues are plummeting, so they're trying to figure out how do we do this? Economic nexus is one way but broadening their tax base is the other. They can't raise the rates higher than they are. Blake Oliver: Do you think that professional services, that it's inevitable they'll get taxed someday? I feel like ... I mean, NASBA, AICPA have [00:39:00] been doing a good job of clamping down on that and stopping the legislation before it ever gets to a vote, most of the time, along with other professional groups, but to me, as we move more to a services-based economy, a digital economy, it seems kind of inevitable that the states won't try to grab that money. Dena Oberst: Well, I know, because California, right? I mean, California comes up all the time. They wanna know-  Blake Oliver: Yeah, every year it seems like there's an effort- Dena Oberst: They wanna know ... Really, let's just see the impact of the Wayfair. This is just my opinion on it, but as the states are trying to even deal with new businesses registering and [00:39:30] all the tax that they're gonna get from the product sales, I just think service is gonna be a little bit further out there right now. Not to say that it's not gonna happen. People [inaudible] comply. States need revenue. They're gonna tax it. But professional services is definitely- it's not off the table, but I'm just- I can't see in the next 12 months at that [cross talk] That's just me, but [cross talk]  David Leary: So, our listeners have 12 months ... Dena Oberst: Well, I'm just saying, the Wayfair ... It'll be ... Wayfair, the decision will be two years old by then. Diane Yetter: I think what's important for [00:40:00] your listeners to keep in mind is, I was in the keynote this morning, and Dan, Gary and Jeannie talk about how the accounting firm of today needs to diversify and start doing more than straight compliance business. So, as you move into doing different things like providing education, providing different sorts of things, those are not necessarily accounting services. If you are in the technology space, and you are doing [00:40:30] analytics; you're building RPA; you're doing different sorts of artificial intelligence- Blake Oliver: Technology consulting, implementation work- Diane Yetter: That's taxable in a good number of states- Blake Oliver: Really?  Diane Yetter: So, as you start expanding your practice to start doing different things, you have to be aware that it's considered a different thing under state law, and you need to know what you're doing. If you're an accountant, and you're not doing your taxes right, kind of can impact your reputation, you know? [00:41:00] Blake Oliver: Yeah, and you can't exactly claim ignorance- Diane Yetter: Right. Exactly, exactly! Dena works with a lot of CPA and bookkeepers. We do, too; not on the compliance side, but on the advisory side and help them help their clients understand what they need to do. Then we refer to people like Dina, when they're like, "Okay, now we need help doing the returns. What should we do?" Because we just don't do that. Dena Oberst: Like Diane mentioned, if you're an accountant or a trusted advisor, and you're not doing your own taxes correctly ... But [00:41:30] the one thing that I will say that comes up a lot is - and I'm not an income tax person - but what happens on the income tax? Now that these businesses are registered for sales tax everywhere, have they just increased their income tax footprint? Just something- Diane Yetter: A whole nother topic. David Leary: Another ripple-  Dena Oberst: -that CPAs ... For you guys to make sure that you cover. David Leary: So, I'd love, if there's a major decision, to try to get you guys back on again to educate us, but we're kind of running out of time today. Anybody who's listening and wants to get a hold of you, Dena, what's the best way? Dena Oberst: You [00:42:00] can just  Blake Oliver: What's your website?  Dena Oberst: It's Gable Tax-  Blake Oliver: Dena Oberst: Mm-hmm.  Blake Oliver: All right-  Dena Oberst: Or, if that's easier to remember.  Blake Oliver: SalesTaxGurus ... Gotcha, and Diane? Diane Yetter: The best way to find all of our great resources, We have a special landing page for Accountex - my presentation. So, if you're not here, and you wanna see what I talked about, you can go to We've got a lot of our [00:42:30] resources pooled together there. We'll have my PowerPoints for my presentations. Once this is up, we'll put that out there, too. David Leary: We'll get it in the show notes, all the links- Diane Yetter: Yes, definitely. Blake Oliver: All right. Well, thank you both so much for joining us. It was a real pleasure, and I learned a lot today. Thank you-  Dena Oberst: Thanks for having us.  Diane Yetter: Thanks for having us. David Leary: Thanks a lot.  Dena Oberst: Bye-bye.  Diane Yetter: Bye. 
Lawyer up! The MyPayrollHR fraud saga continues
Cloud Accounting Podcast
Sponsors BQE Core: Rewind: Show Notes 01:46 – Reminiscing with Will   03:03 – Will talks about life after YouTube and living life with Gusto!   04:12 – It's time for reviews!   06:37 – MyPayrollHR 101 - The nutshell version  07:31 – Catch up on our recent coverage in episodes 112 and 114  07:55 – Mum's the word, Mann | Albany Business Review  08:34 – It's always important to be proactive, especially AFTER committing fraud ...   09:03 – The fallout begins ... Two class action suits filed against Cachet | Albany Business Review 12:12 – The misgivings of MyPayrollHR may shine a bad light on the accountants and bookkeepers who recommended the company to their own clients  14:05 – Will explains how Gusto protects itself from payroll tampering 16:21 – According to Will, a payroll provider's level of transparency dictates the level (if any) of notifications whenever something changes in the system.   19:01 – Is this call for regulation of the payroll industry going to put a damper on innovation? | New York Post   22:01 – The MyPayrollHR debacle has exposed just how risky the ACH system really is   24:02 – WeWork - how something so right is going so wrong | Wall Street Journal   25:04 – A few flaws surfaced when WeWork went under the microscope    28:15 – WeWork's weak Wi-Fi woes | CNET 29:14 – Data security at WeWork isn't free. It'll cost you between $95 to $195 a month to keep your internet stuff to yourself!    30:35 – Guy Pearson’s Practice Ignition revs up with a $15 million raise and Stripe scores BIG with a $250 million round | TechCrunch   35:48 – Straight from Will's mouth - The Cloud Accounting Podcast - all the accounting and bookkeeping news you need to know!    38:53 – Stingy with your tips? POS terminals are tracking your tipping habits | NYT  41:46 – According to Toast's 2019 stats, tipping is not practiced by the majority of patrons at cafes, and fast casual restaurants   45:42 – Ride-share customers tip significantly less than their dining counterparts  47:40 – Can your firm's client-retention rate make or break selling the firm? | The Canadian Accountant   49:00 – Jump over to Episode 110 to learn more key factors for successfully selling your accounting or bookkeeping firm  49:35 – How small, rural firms possibly compete in the cloud accounting universe without reliable high-speed internet? | LinkedIn  50:22 – It'll be another decade before the FCC implements the fourth wave of broadband internet to some 36,000 'unserved' homes and businesses across 16 states | Business News Daily  Connect with Will Website: Twitter: @Zewillster LinkedIn: Will Lopez YouTube: Get in TouchThanks for listening and for the great reviews! We appreciate you! Follow and tweet @BlakeTOliver and @DavidLeary. Find us on Facebook and, if you like what you hear, please do us a favor and write a review on iTunes, or Podchaser. Interested in sponsoring the Cloud Accounting Podcast? For details, read the prospectus. Subscribe Apple Podcasts: Spotify: Google Play: Stitcher: Overcast: TranscriptWill Lopez: I remember when I first read just the announcement that something like this happened. I was thinking to myself, I'm like, just as an accounting professional, I know firsthand how difficult it is on clients when a resource that you're using for a client or the client, themselves, are using doesn't perform as hoped. When I read this, I thought to myself, man, that brings that experience to just a whole new level. Not only did it not perform as hoped, but it aggressively accentuated an experience that no [00:00:30] one desires. This episode of The Cloud Accounting Podcast is sponsored by BQE Core. If you have niche clients that are architects, engineers, consultants, or lawyers, BQE Core is the app for them to best manage their firm, increase their staff productivity, and ultimately increase their profits. Even if you don't have those niche clients, Core is a great tool to use in your own accounting or bookkeeping firm, as well. Core is an easy-to-use, all-in-one platform for project management, but includes advanced functionality, like budgets, labor costs, forecasting, contract analysis, and approval processes.  Core also includes a standalone accounting module. Even though Core is an all-in-one platform, it still works nicely with other apps, offering you and your clients the maximum amount of flexibility. Core offers a full-function mobile app and recently launched a cutting-edge voice-based assistant for your smart speaker of choice. To learn even more about BQE Core, head over to That is Cloud Accounting Podcast dot promo forward slash C-O-R-E.  Blake Oliver: Welcome [00:01:30] to the Cloud Accounting Podcast. I'm Blake Oliver. David Leary: I'm David Leary- Will Lopez: And I'm Will Lopez of Gusto. Blake Oliver: So, Will, when did that happen? We've known each other for quite a long time. I think I met you at one of the first conferences I ever went to. I think it was the old-  Will Lopez: Yeah, I think so.  Blake Oliver: -maybe SleeterCon, back in the day. David Leary: I barely just met him at the last Accounting Salon. It was the first time ever. Will Lopez: Yeah, [00:02:00] I think that was SleeterCon's last conference in Las Vegas, and that's where we officially met. Blake Oliver: We met. We bonded there. That was when you had your own firm in Florida called AdvisorFi, which I very much admired. You were doing that for quite a long time. Now, you have moved to Denver and ... What are you doing with Gusto? David Leary: Wait, wait, wait, you skipped the whole YouTube channel he had.  Blake Oliver: Well, yeah, that was quite ... You [00:02:30] were creating all these great videos for business owners, accountants,  taking the crazy, elaborately produced YouTube video concept and applying that to our profession. I think you were [cross talk]  Will Lopez: Yeah, it was an extreme hodgepodge of personas oozing out of my channel. Blake Oliver: It's still there, right? So, if people wanna go check it out, you've got that AdvisorFi YouTube channel there; but you're no longer a YouTube star, or maybe you're gonna keep doing that, but you sold your firm- Will Lopez: Right.  Blake Oliver: -and now [00:03:00] you are ... What are you doing with Gusto? David Leary: Relocated, as well, right? You moved? Will Lopez: Yeah. I relocated from south Florida. Born and raised in south Florida, by the way, so relocating anywhere is going to be my first-time experience, because I was born down in Hollywood, raised in the south Florida area; with college there; got married there; had my family there - all life there. Recently took a leadership position with Gusto to help them lead the accountant community side to Gusto. No regrets whatsoever. Absolutely love [00:03:30] Gusto. Gusto was one of the few companies I thought to myself that if I ever had an opportunity to work with one of these pretty amazing fintech apps, I think Gusto would be it. I'd love to say it's one of those once-in-a-lifetime opportunities, if any, in a lifetime, so, yeah, I just couldn't pass it up. Blake Oliver: Awesome. Well, we're very lucky to have you on, given the ongoing drama with payroll and fraud. I'll look forward to getting your take on that. Will Lopez: Oh, yeah. Blake Oliver: We've got [00:04:00] some other stories, of course. I want to assure our listeners, even though the last two episodes have been very focused on MyPayrollHR, we're gonna have more than that in this episode. We're gonna not dwell on that too much. But first, we have some reviews, right, David? David Leary: Yeah, we'll jump right in. This review is five stars. It's from Melissa Wasgatt. "Amazing podcast! I listen through Spotify while I work. Excellent full coverage of everything accounting! Thank you so much!"  Blake Oliver: David Schingler said - five stars - "I currently work at ADP in the small business market and partnering with CPAs is the sole role I have here, so keeping up to date on the newest information and trends is key for being a valuable asset to the firms I work with. I love listening to Cloud Accounting to keep me updated on the industry, growth for firms, and anything I can obtain knowledge wise to best partner with the CPAs I work with. Their podcast makes it easy to listen to and is extremely informative, especially for someone who does not deal with the "ins & outs" that many CPAs deal with on a day-to-day basis. I highly recommend this to all accounting practices and anyone curious about the updates/trends within the CPA world!" Thanks, David. [00:05:00] David Leary: This is five stars from Trevor McCandless (trevormccandless) - "Great podcast. Blake and David live accounting industry news and updates and share their insights in a way that I do not hear or read anywhere else. Keep up the good work!"  Blake Oliver: Awesome. Thanks so much! Finally, "The single best source for digestible news in the accounting world. As a partner advisor at Gusto, I speak with dozens of accounting and bookkeeping professionals from around the country weekly who are all asking how I’m keeping up with the latest tech and changes in the industry. The number one resource I recommend outside of the Gusto Partners Blog is the Cloud Accounting Podcast. I listen weekly and am able to often times bring up relevant news and happenings with my partners to ensure they’re maximizing their profits and offerings to their clients. The recent episode on the MyPayrollHR scandal was the best source of information I was able to find on the tragic situation because Blake and David put in the time research to provide us with a clear explanation on the situation as we know it. Thanks for keeping me and our partners a Gusto up to date!" Matt [00:05:30] Woodson. Thank you, Matt. Thank you, Trevor, David, [00:06:00] and Melissa, for your reviews this week. A reminder to our listeners, if you wanna write a review, you can head over to our page on Apple Podcasts or on, as David said, and leave us a review, and we will read it on the air. David Leary: It's like a free commercial, right? ADP got a free commercial; Gusto got a free commercial. So, Paychex, or any of you other payroll providers that are out there, go write us a review. Blake Oliver: Yeah. David Leary: Love to read it on the air.  Will Lopez: Well, you know The Cloud Accounting Podcast is part of our toolkit over here. That's how we stay up to date, right? Blake Oliver: That's [00:06:30] awesome. That's great to hear. David Leary: It's in the new hire manual? Will Lopez: Yeah, it should be. It should be, officially ... Blake Oliver: Let's get on that- David Leary: Get on the news, yeah ...  Blake Oliver: So, yeah, we've got lots to talk about. Some updates on MyPayrollHR, and for those who are not familiar, we're talking about the $35 million payroll fraud. A small payroll processor in New York, at the beginning of this month, shortly after Labor Day, just up and shut down, went out of business, disappeared, leaving 4,000 employers, as [00:07:00] many as a quarter-million employees in the lurch. For some of them, their payroll didn't process, and, in fact, they ended up having negative account balances, because of a whole mess that occurred with the payment processor, Cachet. We've got an in-depth interview with the chief legal counsel for Cachet Financial Services. That was our most recent episode. Check that out for a full, almost like True Crime episode about what happened [00:07:30] with this fraud. David Leary: You wanna listen to episode 112 and then episode 114. Episode 114 is the interview. Blake Oliver: We're not gonna go back into the whole thing of what happened. Let's just talk about the latest updates, David. David Leary: So, since the last two days, there's a news article that Michael Mann has hired an attorney, and there was even a- Blake Oliver: So, he's alive! David Leary: He's alive.  Blake Oliver: He exists. Okay ...  David Leary: The attorney made a statement. Where did we-  Blake Oliver: This is Michael Koenig now representing Michael Mann, the owner of the now [00:08:00] closed MyPayrollHR, and the parent company, Valuewise Corp.  David Leary: He's the guy who's been missing along with the money. I'll read the quote here, "Almost two weeks ago, through me, Michael Mann contacted the U.S. Attorney's office. Michael has since voluntarily and proactively met with and is cooperating with the U.S. Attorney's office in order to fully and accurately address recent events. He will continue to do so but will not be making any public statements." Blake Oliver: So, he's cooperating ... We still don't know if he's in the country, but [00:08:30] we know he's got an attorney and is cooperating with the U.S. Attorney's office. David Leary: Yeah, and he went on to reiterate that, "We affirmatively reached out to the U.S. Attorney's office before any law enforcement or regulatory agent came to him." Blake Oliver: So that must've been then before the raid on his home that was, what? A few days ago, right? David Leary: Yeah, or before Governor Cuomo announced that he's launching an investigation, et cetera, et cetera. Either A) it was guilt, right? Like, "Oh, I made a big mistake. I shouldn't have done this," or, like [00:09:00] I said before, is he compromised? I don't know. Blake Oliver: Another story - breaking news - two class action lawsuits have been filed against Cachet Financial Services, the third-party processor that handled payroll direct deposits for MyPayrollHR. A Los Angeles-based law firm filed a complaint on Thursday against Cachet in the U.S. District Court for the Central District of California, where Cachet is headquartered. Then another firm, a Las Vegas-based firm filed in Nevada against Cachet, and also named MyPayrollHR in that lawsuit. [00:09:30] I think they're representing the employees, as a class, who reported having their direct deposits pulled back from their accounts when the money was missing from the settlement account. Cachet, really ... They bungled that. I think we can we can all agree - that's not a complicated analysis - that causing the payrolls to go twice was a bit of a problem, and it caused some major issues for some of these employees. People couldn't pay rent; they couldn't buy medication. Big problem. So, there may be more consequences to this, [00:10:00] to Cachet, and possibly the banks, too, than MyPayrollHR, than just the missing money. David Leary: I get it, right? If Cachet was able to possibly eat $26 million, the lawyers are probably like, "Hey, what's another $5 million to sue them for?" Nobody's gonna be able to sue MyPayrollHR, because it's pretty clear that money's gone. Nobody has that money. Blake Oliver: Well, but there is a frozen account with $19 million in it, at- Will Lopez: Yeah, I was going to say, is it really gone? Blake Oliver: Yeah- Will Lopez: Because I read the same thing. Blake Oliver: It may take a long [00:10:30] time to figure out where it went, I guess. We still, of course, don't know what Michael Mann intended to do with the money. Speculation, if he hasn't fled the country with it, then maybe he was just trying to keep other businesses afloat by moving money around? It's very strange. We'll find out ... I'm really happy that we have Will on, because Will - being at Gusto as a connection to the accounting community - I wanna learn from you, what is the insight [00:11:00] from somebody inside a payroll company, watching this happen? What is your takeaway from this? Then I've got some more follow-up questions as to how do you ensure, at Gusto, that this doesn't happen?  Will Lopez: Yeah, I remember when I first read just the announcement that something like this happened. I was thinking to myself, I'm like, just as an accounting professional, I know firsthand how difficult it is on clients when a resource that you're using for a client or the client, themselves, are using doesn't perform as hoped. Public accounting is riddled with those kind of experiences, where some things work, some things don't, just in a very broad way. When I read this, I thought to myself, man, that brings that experience to just a whole new level. Not only did it not perform as hoped, but it aggressively accentuated an experience that no one desires. This episode of The Cloud Accounting Podcast is sponsored by BQE Core. If you have niche clients that are architects, engineers, consultants, or lawyers, BQE Core is the app for them to best manage their firm, increase their staff productivity, and ultimately increase their profits. Even if you don't have those niche clients, Core is a great tool to use in your own accounting or bookkeeping firm, as well. Core is an easy-to-use all-in-one platform for project management, but includes advanced functionality like budgets, labor costs, forecasting, contract analysis, and approval processes.  Core also includes a standalone accounting module. Even though Core is an all-in-one platform, it still works nicely with other apps, offering you and your clients the maximum amount of flexibility. Core offers a full-function mobile app and recently launched a cutting-edge voice-based assistant for your smart speaker of choice. To learn even more about BQE Core, head over to That is Cloud Accounting Podcast dot promo forward slash C-O-R-E. Blake Oliver: We've [00:11:30] been talking a lot [00:12:00] about the employers, the employees, but what about those accountants and bookkeepers who recommended MyPayrollHR to their clients who partnered with them? It looks like they don't know what they're doing. Will Lopez: Yeah, or it pins them in a light where they made a bad recommendation. Blake Oliver: Yeah.  Will Lopez: Or, even look at the accounting professional - what processes do you have to make sure that the resources that you're recommending are good resources or resources that have longevity to it? Obviously, [00:12:30] at Gusto, one of our pillars, or our mission here is obviously to create [inaudible] work empowers a better life. Something  this does not empower a better life. So, no doubt, it's a sad day in the land of accounting and business. One of the pillars associated- our mission is peace of mind. There's very little peace of mind going on here for those who are affected by the MyPayrollHR situation.  Blake Oliver: The way this happened, as it was explained to us by Wendy Slavkin at Cachet, is that somebody [00:13:00] at MyPayrollHR messed with the payment file, or the batch file that was sent to Cachet, instructing them on how to move money around. Basically, an account number got changed in a file. Is that something that is an industry standard practice, where it's possible that any payroll service could be the victim of this? The other one was, as well. There were two, actually. NatPay was also a victim of MyPayrollHR. How does it work at Gusto? Do you guys partner with a payment processor? What's [00:13:30] the workflow for you? Is it the same? Is it different?  David Leary: Yeah, because I think - to elaborate on that - that's what goes off in my head is you have ... Somebody like Gusto, or a modern SaaS application is all based on APIs; making API calls to QuickBooks; making API calls to Xero, et cetera. There's error controls in all that, but the ACH system sounds like it's still just a text file. How does Gusto bridge that world of, on the front end, on one end, we're this high-tech SaaS company; on the back end, we're still dealing with technology that was designed, and procedures [00:14:00] from 1975. Blake Oliver: Why should accountants trust Gusto? Will Lopez: Yeah, no, great question. Obviously, Gusto has dedicated risk teams that oversee all this kind of activity. In general, though, Gusto's payment systems, they're designed in such a way so that if any changes happen to a bank account that's initiated, then that change is screened for either fraudulent, or suspicious behavior, using our proprietary machine learning model systems [00:14:30] that we have internally. Any transactions that are flagged as suspicious are then blocked until our dedicated risk team manually reviews them and approves the transaction. On top of all that, though, our payment system not only automatically notifies the customer every single time, anytime,  a change is made to their bank account information, which is kind of not the story you heard on the MyPayrollHR front; that is, you had MyPayrollHR obviously doing something with employee bank account information and no one knew it. There [00:15:00] was no transparency on that side; whereas,. on our platform, there's full transparency. Anytime something triggers where any kind of changes are happening at the bank-account level, every single time, the customer is notified.  David Leary: Everybody had that covered- Will Lopez: And the accounting professional gets notified, as well, if you're working with a Gusto partner. David Leary: The employee account number stuff, everybody's handling those use cases. It's expected, right? It's expected when employees move banks. Maybe an employee got phished, and they're contacting the HR department, and then somebody manually [00:15:30] changing the bank accounts- of the employee bank accounts. That's not really what happened here. What happened here is the file of the source account got changed - the actual main, main ... Where the real money was. That's the one that got redirected. Blake Oliver: The money was diverted from the employer accounts. Instead of going to a settlement account, went to a MyPayrollHR account, an account controlled by Michael Mann.  David Leary: Exactly, yeah. Blake Oliver: How do you prevent that? Will Lopez: From personal experience, I remember, even before Gusto, I used to be a controller for a not-for-profit [00:16:00] that did a lot of batch payments for payroll. The way we would run employee files is we would create just this batch file that gets submitted into the payroll company. Generally speaking, there is always a front-end software that you upload this batch file to that gets associated to the payment processor. Same thing at Gusto, where, if there are any changes that happen to bank account information or batch files, the front end of that is Gusto. In [00:16:30] conjunction with changing anything, it always triggers something. You can't go into the payment processor's end and manipulate data there. It's always front-end-software-driven. Depending on whether or not the payroll company is as transparent as they should be versus want to be, that drives notification, as far as who gets notified of the change.  On our side, any changes that happen, whether it's singular [00:17:00] changes or even batch changes, the employees get notified; the partner gets notified; if they're working a Gusto partner, the company gets notified, because that front-end activity is what's happening on the Gusto platform.  Blake Oliver: Does Gusto go through internal controls, audits, security audits? How do partners- how can they be reassured that the controls are in place, as you say so? Will Lopez: Great question, and you're kinda speaking to my heart here, right? I used to be a former financial-statement auditor; love this side of the [00:17:30] business, just never sold it as a practice. Obviously, Gusto's built to be a durable company that serves small businesses, hopefully, for many decades to come. Even recently, we got our Series-D financing from leading investors, like Fidelity, T. Rowe Price, General Catalyst. It goes through substantial due diligence process.  Doing due-diligence work prior to AdvisorFi, at my old firm called Daszkal Bolton, it's really, really heavy stuff. We [00:18:00] look at financial-statement integrity, financial health, burn rates, cash flow, the whole thing. Because we've gone through regular series- regular rounds of funding, we constantly go through those due-diligence reviews by not only just one party or two parties, but by multiple parties, because each of these investors have their own due-diligence teams. If we get investments from Fidelity, T. Rowe Price, and General Catalyst, that's three due-diligence teams coming in and reviewing the same [00:18:30] thing over, and over, and over again. They're not utilizing each other's work papers, so-  David Leary: And now, because of this use case, what's happened here, Cachet wasn't ready for this. NatPay ... Was it NatPay, Blake, or NetPay?  Blake Oliver: Yeah, NatPay was the other one. David Leary: They had all the tax deposits. They weren't aware of this possible fraudulent use case, so now, all the payroll players are, and they're going to put in controls around this, because ultimately, it would be somebody internally at Gusto, or [inaudible] like this, but now, [00:19:00] it's led, though ... If you saw the article, the New York State Senate is considering putting regulations on the payroll industry. My thing on that is I get why, what's gonna motivate that, but I also think it would kill things. Imagine if there was high regulations around, eight to 10 years ago. Would we have a Gusto, or a Wagepoint, or an OnPay, or even would Square be able to get in the payroll game, if we have this heavily regulated environment, from an innovation standpoint? Will Lopez: I think regulation is good. I don't think any [00:19:30] payroll company should think this is a bad thing. I know that New York has put forth those two pieces of legislation, which is ... The legislation that they're putting forward is a little more after the fact [cross talk] I think one of the bills basically just makes it- or creates a criminal penalty for any intentional misappropriating of payroll and payroll tax funds. That's one bill, and that's an after-the-fact thing. The other bill is basically making payroll processor [00:20:00] companies responsible for paying up to three times the value of a paycheck, if an employee misses a paycheck. That's an after-the-fact thing. I know, at Gusto, we're as transparent as we can possibly be, not only to our partners, but also our 'Gustomers' - our Gusto customers - so, I don't think regulation is bad in making sure that companies are very transparent when you have a tremendous amount of users and their employees very dependent on you as a resource. We would welcome it. I would [00:20:30] welcome it. I think it's a good thing. David Leary: To me, it's almost unimaginable in the payroll industry ... If lawyers get that money from clients, that retainer, they have to put it in a trust account. Those trust accounts cannot be commingled with their operating accounts for running their actual law firm practice. The trust accounts are completely separate. But apparently, in the payroll industry, the deposits - this money that's moving back and forth - you can commingle that with your company finances. Blake Oliver: Wow.  David Leary: It [00:21:00] does not have to be handled separately. There's no legal reason to handle it separately, and that seems insane. Blake Oliver: Yeah. Will Lopez: Yeah, I would totally agree. I remember just even having these conversations with clients at AdvisorFi. People would ask me all the time, "Should I have a separate bank account for my company, or is it okay for me to commingle my business funds with my personal funds?" It's the same argument. At Gusto, we have completely separated customer funds [00:21:30] from its own corporate funds. We include any money Gusto holds on behalf of customers for purposes of tax payments. Like I said, a lot of the behaviors that ... A lot of the good habits and the good things that one should do as a business owner, we're already doing at Gusto. The question is - is there a law that forces you to do the good things? We try to be as intentional as possible; but will there be legislation that mandates good business practices to happen? [00:22:00] Blake Oliver: I think one of the security risks that this whole episode with MyPayrollHR exposes is the weakness of ACH, as a system, and the risks associated with it. When you give somebody your account number and routing number to make direct deposits or to withdraw funds from your account, that could be misused. The company might screw up and take out too much money or do it twice, as it happened with Cachet. One of the things that I've always done that [00:22:30] I think everybody should do, if it's not too expensive, is just have a separate bank account that you use for ACH deposits; then move the money, as soon as you receive it, into another account, and you don't give out that number. That way, you're protected from somebody scamming the ACH system and tying up your money for potentially months; because it can take months to resolve some of these issues with banks, which is part of the pain these employees are going through is that there's been a hold [00:23:00] on the funds that have been drawn out of their accounts, and they have to work with the banks to get that unfrozen. That is a very- They have up to 60 days to decide what to do, and you don't exactly have 60 days to pay your rent. David Leary: It's a very low-tech process. I talked to somebody who is involved in technical support recently for payroll. If something happened, an employee didn't get paid, you'd have to investigate. A lot of times, it's because somebody mistyped an account number somewhere. Essentially, it would be the payroll company would be [00:23:30] doing a Ctrl+F and searching in a text file for this employee's name, social, bank account numbers. Then, on the other side of the phone call, would be the bank doing the same in their text file, trying to figure out where the typo is, and then get it fixed, and then resolved, going forward. But it's very, very low-tech in the grand scheme of where we are in 2019.  Blake Oliver: Unless there's anything else you guys wanna talk about with MyPayrollHR, I'd love to move on, because there is other news that has happened.  Will Lopez: There is?  Blake Oliver: Will, I think you wanted to talk a little [00:24:00] bit about WeWork, right? Will Lopez: Yeah, WeWork is notoriously known in the startup community. I cannot imagine a world, at the moment, without WeWork. Any startup knows about WeWork. It's such a great coworking space, as a business owner, to kind of get yourself into without committing to any real real estate- David Leary: Like Starbucks. Will Lopez: Yeah, like Starbucks. WeWork has really become known as connecting entrepreneurs and others who, in the past, would have worked from home [00:24:30] or, like you said, David, a coffee shop. The company just kind of became known as bringing a new way of working to a changing world. Recently, in The Wall Street Journal, or recently, WeWork, themselves, have thought about going public, and want to go public. They've built this office-rental giant at an amazing private valuation of, I think, $47 billion.  What has happened is obviously the founders' behaviors, while it worked as a privately [00:25:00] held company, has not worked in its initial public offering last month. The New York Times article made a really good case, where WeWork, themselves, has just been besieged with criticism over its governance; even tying back to good governance - does a company have good governance? When others get involved, does that good governance just  break, because they're not really performing good governance ... Not only is their good [00:25:30] governance, or their governance being questioned, but their business model, their ability to turn a profit. Now, they're expecting  an IPO valuation as low as one-third of the original $47 billion sticker price [cross talk]  David Leary: -I think I saw their biggest investor, SoftBank, is also their biggest customer. It's like 10 percent of the revenue. Will Lopez: Well, having a concentration, a revenue concentration, is not a bad thing. It just needs to be disclosed in the financial statement. Now, you're talking to an auditor ... Having concentration [00:26:00] is not bad, it just needs to be disclosed, because if you have a concentration of revenue and you lose that one client, it could materially impact [cross talk]   David Leary: But the concentration of revenue is from the main investor. Blake Oliver: Well, and potentially one that could help prop up IPO valuation, right, because they've talked about putting in hundreds of millions of dollars into this IPO. To me, it shouldn't be [00:26:30] necessary, if there's real value there, for them to do that. The banks underwriting the IPO are the ones that are also invested in the company, currently, and also a huge tenant. Then, there's all the self-dealing with the founder. Is it Adam Neumann is his name, I think?  Will Lopez: Yeah. Blake Oliver: He has all these loans and he has  ... He owns buildings that WeWork is leasing. That's been a big issue. Entangling that has been an issue. Will Lopez: There's [00:27:00] definitely a lot of related party activity going on there. Blake Oliver: I think even his wife had the  ... I guess they're changing this, but she could designate his successor, if something happened to him? That's a little bit unusual; the board doesn't get to do it, she gets to do it? Will Lopez: Yeah, well, like I said, in the land of a private business, almost anything is free range. I think what's interesting about this case is realizing the long-term health of a business, when [00:27:30] you're not only staying as a private business, but if you're even considering about going public and getting other people involved in making sure that you're doing good business ... Things worked, beforehand. Things are not working so much, after the fact, when investors, and auditors, and everybody else gets involved. Blake Oliver: Now, I may not be a huge fan of the WeWork IPO and what's been happening here, but I'm a big fan of WeWork. I was a customer, or a member, I should say, because they call them members. I was a member for three, four years, [00:28:00] when I had my own firm. I loved using it. I loved that you can travel around and then book conference rooms in the cities you're in. I would go to New York, and I needed to record a podcast episode. I'd just go to WeWork and book a conference room and do it. That's pretty awesome. There's been a downside to all of this attention with the IPO is that it's drawing attention to other aspects of WeWork that may be a little problematic. One of them, which I was aware of, when I was a tenant there, is their Wi-Fi. This is based on an article I spotted in CNET. The [00:28:30] title is "WeWork's Weak Wi-Fi Security Leaves Sensitive Documents Exposed." Will Lopez: Interesting. Blake Oliver: Apparently, if you're just a member, and you're using their free Wi-Fi that comes with your membership, it's super high speed; it's great; but they deliberately do not - to keep it fast - they deliberately do not protect that Wi-Fi network. It's like you're using the Starbucks Wi-Fi, or Wi-Fi at the airport. A lot of people apparently don't realize this. A security researcher has been going around to all these WeWork offices in [00:29:00] New York and finding many sensitive documents just exposed on the network. People who have shares on their on their computers ... These are companies that- it may be financial companies, and a lot of big businesses are using WeWork now. What you need to know is, if you're a tenant, or you're thinking about being a WeWork tenant, is that you need to pay extra for a VLAN - a virtual local area network - that then separates your company from everybody else in the WeWork building, so you're not sharing a network with them. That [00:29:30] costs an additional $95 a month with a $250 setup fee. A private office network costs $195 a month. I don't know the difference between those. I'm guessing different levels of security ... That can add to the cost of having an office at WeWork, which, the whole point is that it can be as low as a few hundred dollars a month to have a membership there. Will Lopez: Yeah, the beauty of VPN, right? Talk about trying to protect your data on your computer, when you're bouncing from Wi-Fi to Wi-Fi ... Blake Oliver: Yeah. And it slows things down, right? That's [00:30:00] the thing about VPN. You could use that with WeWork, just a VPN client on your computer, but then that slows down Zoom, or any video chat, or gaming, or whatever you're doing. Will Lopez: Yeah.  Blake Oliver: You gotta pay extra. Yeah, just something to watch for. So, David, what else do we wanna talk about this week? I've got some stories about Intuit, and TurboTax, tipping at the counter ... All these point-of-sales that now let you tip - who tips, who doesn't. We can talk about broadband- David Leary: Two companies took some [00:30:30] pretty big rounds. Practice Ignition-  Blake Oliver: Oh, yeah, Practice Ignition raised what, like $15 million US? David Leary: Yeah. Guy Pearson was on the podcast way back in our early days, going back to October of 2018. They took a $26 million raise to really ramp up their team. They wanna ramp up to almost 200 employees, and really make their global push now, and add new features and more functionality. It's helping them make that next step. It's a really good story, because Guy was an [00:31:00] accountant. Blake Oliver: Yeah, I love this ... David Leary: He started on his own practice, an accounting practice, and now he has a well-funded SaaS-based startup. Blake Oliver: I love it when accountants found companies to solve their own problems. Those always tend to be great, great companies. David Leary: Will, did you use Practice Ignition at your firm, when you had your firm? Will Lopez: Actually, funny story there. I actually built a mini version of Practice Ignition before I knew Practice Ignition was PI. David Leary: You could've took it to market. Will Lopez: I could have took it to market, but I totally built it for [00:31:30] my firm, specifically, because in the beginning, when I first started my practice, I didn't realize Practice Ignition was around. I think, at the time, they were in Australia, and they weren't really in the United States making a lot of noise, or ground, or just trying to get market share here in The States. So, I built a solution that allows my prospective clients to select plans with me, to onboard plans with me, to capture their payment information securely through Braintree [00:32:00] and everything. So, I built, actually, a mini-onboarding solution. I remember having a conversation long ago with Guy Pearson, when I first ran into him, and he wanted to see what I had built. At the time, I thought to myself, he just wants to see if I'm competing against him; but it was just genuine interest, because he ... In his mind, I think it validated what he was doing. While I felt like [00:32:30] I was slightly ahead of the curve by doing something like that and building an onboarding solution, I didn't have the power that he did on his platform. I wasn't able to customize the plans. They were just kinda pre-baked 1-2-3 plans. I'm really excited for Guy. I mean, Guy has worked very hard on PI, and I think a Practice Ignition is such a great solution not only for accounting pros, but just anybody who's in the professional industry; anybody who's thinking about selling plans, needing recurring engagement, wants to capture payment upfront, [00:33:00] scaling that whole onboarding pain point, PI is such a great solution for that. Kudos to Guy for locking that in. I'm excited to see what they're gonna do in the future. Blake Oliver: Who else? Somebody else raised money, you said?  David Leary: Yeah, some gigantic company called Stripe. Blake Oliver: Oh, yeah. We know them.  David Leary: So, Stripe took a $250 million round, bringing its total valuation to $35 billion dollars. Blake Oliver: Wow. Will Lopez: Wow. Blake Oliver: Man, it's amazing. I wish [00:33:30] I had a business where I could just take 2.9 percent of every transaction in the global economy. That'd be great.  David Leary: Well, Gusto's a unicorn, now. Gusto's got a ... Is Gusto a $2 billion valuation now, Will?  Will Lopez: Well, no ... They received $200 million, and I think that puts our valuation up into ... Man, what did I ...? David Leary: I think you're a unicorn. I think Gusto's a unicorn. I'd be safe to ... I don't know if you're a 2X unicorn, but I think Gusto's a unicorn. But, if you think about that, this is like 35X of whatever Gusto's at. [00:34:00] Blake Oliver: The unicorn of unicorns.  David Leary: It's very, very insane. Yeah. It's pretty insane. They're now the most valuable private financial technology play that's out there. Will Lopez: There's no doubt Stripe is a game-changer out there. They've done some incredible stuff. Some of the solutions that they've rolled out are pretty amazing. That's what's kinda cool about being on the other side of the fence and not doing accounting full-time anymore but being on the app side. Maybe, Blake, you [00:34:30] can speak into this, but it's interesting to see more closely just the passion of the industry and just pushing innovation forward, forward, forward, forward, as much as possible. Then, the market responding with validation. What Stripe has done is pretty incredible, and the market's validating their success. David Leary: What they did is they solved one problem really, really well, because previously, if you were an app developer, and you wanted to, on your website, take somebody's credit card, you [00:35:00] basically had to create the code yourself. Like, this field has to have 16 digits. This field only accepts dates. This field is for the three-digit verification code. This is the name on the ... You had to do all this work. What's the billing address? You had to do all this work yourself. They basically developed it so you could just, as a developer, copy nine lines of code and paste that into your app, and now you can take credit cards. Of course, every developer, if it was gonna take you three weeks to build a credit card charge system, and you got a nice [00:35:30] secure one in 10 seconds, you were gonna do this. They just solved one thing really, really, really well, and look what's happened because of that. Blake Oliver: So, Will, I know that you've gotta drop off now. David and I will continue. I just wanna say thank you so much for joining us and offering your insight into this issue and the stories that we've talked about today. Will Lopez: Oh, absolutely. Thank you guys so much for just everything that you do. Believe it or not, here on the partner side at Gusto, a lot of the partner advisors that work [00:36:00] with the accounting partners out there, they're always constantly asking what are the podcasts to listen to? Obviously, top of mind is Cloud Accounting Podcast; so much so that I think I'm actually gonna work on a toolkit for our partner advisors of all the top podcasts for them to listen to, so that way, they could stay up to speed. Blake Oliver: If people want to connect with you online and learn more about what you're up to, Will, where's the best place for them to do that? Will Lopez: Yeah, two places. Twitter, first. You can follow my handle: @Zewillster, and [00:36:30] you can just friend me on ... I was gonna say 'friend me on LinkedIn ...' It's more like connect with me on LinkedIn, right? You can connect with me on LinkedIn/WLopezJunior, I think, is the actual landing page. Get in touch. Follow me. I still do my quirky videos on YouTube. Still kinda do all of that, so still pretty involved out there. Blake Oliver: Awesome. Thanks, Will.  Will Lopez: All right, thank you, guys. This episode of The Cloud Accounting Podcast is sponsored by Rewind. For years, Rewind has been successfully backing up thousands of small businesses' data that is stored in cloud apps like Shopify, Big Commerce, and MailChimp, saving these small businesses from CSV importers, employee mistakes, and app integrations that didn't go as planned. Rewind has also been backing up QuickBooks Online company data, too. That's right, Cloud Accounting World. I did say "back up QuickBooks Online company data." It only takes seconds to install what is essentially an insurance policy against major disaster, or just those small business owners that like to get "creative" in the accounting system. Rewind works automatically in the background, capturing all the changes to your QuickBooks Online in real time. If something does go wrong, Rewind is the only service that gives you 100-percent control over what you need to restore, be it one transaction, multiple transactions, or all the data. To learn even more about Rewind and access a special offer just for listeners of The Cloud Accounting Podcast, head over to That is Cloud Accounting Podcast dot promo forward slash R-E-W-I-N-D. Blake Oliver: All right, we're [00:38:00] back, and Will is gone, so now we can talk about him ... I don't anything to say, because Will's such a nice guy, and I think Gusto's really lucky to have him. David Leary: I honestly could say I did not know Will. I only knew Will from his YouTube videos. I was always like, "What is this guy?" Because he would edit crazy emojis that were on fire in his videos. I was like, "What is this guy doing? Does he have his real accounting firm?" It was a little bit confusing. I only knew him from that. Then, I got to meet him, and got to know him pretty well at The Accounting Salon. He's totally legit; really like him ...  [00:38:30] Blake Oliver: Continuing on, sort of related to what Will was talking about, or what we were talking about together, about Stripe - Stripe's biggest competitor in the payment space is Square, on the retail side. Everybody's familiar with those point-of-sale Square ... The Square dongle or the actual iPad screens. We all have- at this point, I think everybody has purchased something with one of those. Well, I spotted an article in The New York Times titled "Counter Service Tipping - Who Gives?" The [00:39:00] subtitle is "Those Customer-Facing Touchscreen Payment Systems in Restaurants are Confounding Customers in the U.S. and Beyond." I was so happy to read this article, because I feel this way, and I feel very passionate about it, and I hate it. This is the thing I-  David Leary: Confounding, as in confusing people.? Blake Oliver: Yes. David Leary: Okay.  Blake Oliver: I love Square. I love their app. I love their hardware. I have implemented it. I have installed it for people. I think it's fantastic, but the one thing that I really, really, really dislike is now, wherever I go, when I'm buying coffee, when I'm getting a sandwich at the counter, I'm constantly [00:39:30] being asked to give a tip - 15-, 20-percent, sometimes even 25-percent, and I have-  David Leary: Oh, yeah, and this is not just Square. This is every one of these is e-point-of-sale, iPad-type terminals. When they swing it around for you to sign, there's three huge buttons there, and everybody's watching you. You've gotta pick one. Blake Oliver: Everybody's watching you ... You know that the person behind the counter is gonna see if you left a tip. You know that the people behind you are gonna see. So, then you have this ... I have this, every time I buy something, this moment of frustration, or [00:40:00] anger that I'm being asked to tip, because I - don't know about you, David - but I firmly believe, out of principle, I do not believe in regular counter tipping, meaning tipping when I am going to the counter and buying something. I understand having a jar for money, and change, and maybe occasionally giving a tip, or, if I'm a regular, maybe leaving a tip ... I've always believed that tipping should be reserved for table service, for waiters. David Leary: I've always thought when you go up to [00:40:30] counters, it's how much a pain in the ass am I being? Maybe my order's complicated, and I'm making a lot of like, "Hold this," or, "Do this ..." Then maybe I'll tip. If I'm forcing more work to happen, I kinda wanna tip something, but, yeah ...  Blake Oliver: I agree with you on that, but it should be a regular thing. Tipping a waiter is a regular thing, to me. If you're a decent human being, you tip your waiter; you really should be tipping them closer to 20 percent. At least that's what I understand as being kinda common practice [00:41:00] here among my family in L.A.. I know everybody's different, right, and this is the problem with tipping. Ideally, actually, we would not tip at all, but that's a lost cause. That's like trying to argue against time sheets. It's just not gonna ... It's not gonna happen.  David Leary: There's plenty of other podcasts, like the Planet Money podcast, et cetera, that have deep-dived on this 'no tipping' stuff and the experiments around that-  Blake Oliver: Now, there's data. Researchers have collected data to find out who is tipping. Am I in the minority? David Leary: Because, when you just put cash in the jar, there's no tracking- Blake Oliver: Right, you don't really know- David Leary: -and now, everybody's being [00:41:30] tracked ... Okay, this'll be interesting, because I would love to hear this data, because I've not seen this article or heard anything. Blake Oliver: This article is based on data provided by Toast. It's a Boston-based company that provides point-of-sale platforms to thousands of restaurants and cafes around the country. This is 2019 tipping statistics they provided to this New York Times reporter. In cafés, 58.5 percent of customers left tips. For fast casual restaurants, the kind where you go up to a counter and order and then the food is brought to your table, it was 46.5 percent. [00:42:00] So, close to half, but not half, but close to half of people at cafés and fast casual restaurants are tipping on those digital point-of-sale systems. The average tip for both was around 17 percent. So, half of people are tipping 17 percent, and the other half are like, "No ..." like me. This is a clear split here.  David Leary: But I wonder if it's higher than it was prior to the almost forced opt-in. Before, you would have [00:42:30] to remember to do the tip, think about doing the tip, versus it just being in front of you, and just clicking, and signing; just, you press the button and sign ... Fundamentally, from a use-case perspective, it has to be increased ... The tipping has to be up, overall. Blake Oliver: Here's the thing. Clover, a Toast competitor -another point-of-sale system - they collected data for tipping at tens of thousands of American restaurants under the category fast food, which includes cafés and fast casual restaurants. In May 2019, customers [00:43:00] paying with cards tipped 42 percent of the time that tipping was available to them. So, then, if you add the customers that throw in cash into the jar, it's looking like we've got a 50-percent tip rate, and a substantial tip ... More than just dumping the change they give you into the jar, which is kind of what I always used to do. This is a lot. Of course, the business owners are very happy because this allows them to not raise wages. This is the weird thing about tipping is that when we tip, we [00:43:30] are subsidizing ... Theoretically, economics would tell us that we are helping business owners not pay a higher wage because we're making up for that. Is that a good thing? It's weird, too, that 50 percent of customers end up tipping, and the other 50 percent don't. Some of us are paying lower prices just because we choose to, and some pay more because they choose to. What I don't like is the cognitive dissonance I feel. I don't know if that's the right word for it, but I definitely feel this little pain [00:44:00] in my- right behind my eyes, every time I see that, and I have to choose 'No Tip,' because it makes me feel like a bad person. I wanna know if it actually causes discontent among the customers.  David Leary: Well, it'd be more interesting to get a email report of your tipping after the year and find out where I fit in. Maybe I'm over-tipping. I'd like to know where this all slides in, because those scales, too ... If you've ever noticed, sometimes it's 17-19-22; it's [00:44:30] not 15-17-20, because they can make those numbers whatever they want. Blake Oliver: Right.  David Leary: This is an interesting- this data is very, very interesting.  Blake Oliver: Then the question is, what about ride-share car services, Uber, and Lyft? Do you tip on Uber and Lyft on a regular basis, David? David Leary: Yes-ish ... Blake Oliver: What does that mean?  David Leary: Unless I don't remember being in the car, then I don't tip. I'm like, "I don't even remember that ride," and I don't tip, but if I remember who it is, usually I tip. [00:45:00] Blake Oliver: Uber used to not offer tips, and I actually really liked that. I thought that was a differentiator versus a taxi, where you're obligated to give a cash [cross talk]  David Leary: That awkwardness of the taxi ride, yep.  Blake Oliver: -handed tip. It's like, how much do I tip? Taxi drivers never seem to be happy, no matter what. They always seemed unhappy. David Leary: It was never enough. It was never enough.  Blake Oliver: Uber held off on tipping until 2017, but then they made it available, and it's available in the U.S. and 48 other countries. So, there's data now on tipping. Lyft provided data- they didn't provide- they couldn't provide data on [00:45:30] the percentage of riders tipping, but they did say that their drivers make an average of $30.84 per hour, of which $2.27 cents per hour is tips. That's well under 10 percent of their income. While tipping is widespread, it's either in extremely low amounts or not yet the norm. Uber wouldn't provide the data, so we don't know about the U.S., but we do know about Europe. FREE NOW, a European ride-share service that's a joint venture of Daimler and BMW was [00:46:00] formerly known as MyTaxi. They have data on tipping across Europe. So, in Germany, 83 percent of riders tip; 83 percent in Germany; 53 percent tip in Britain; 48 percent in Poland; 46 percent in Italy; 39 percent in Spain, and 35 percent in Ireland. How much people tip is lower than in the United States. Poland is on top with an average of 12 percent. I'm torn about that, too, right? Should tipping for a ride service be regular? Should it not? What's [00:46:30] normal? It's not like you can just look this ... Things are changing so rapidly, it's not like there's a ... What was that column that used to be in the newspaper where people ask etiquette tips? We don't have that anymore. This is one of those things that I find troubling- David Leary: I think this is a soapbox survey that you should do for yourself on Twitter. Just finding out how people [cross talk] Blake Oliver: Do you tip?  David Leary: They're not automatic tips, but they're kind of these social- you're kind of being forced ... Not even forced. It's like opt-in, or you can't- it's hard to opt out. You're just [00:47:00] forced to do it. Blake Oliver: Here's what I don't like about this is. It's like, okay, I'm tipping at the counter for service. I'm tipping my ride-share driver ... As an accountant, I never asked for tips, but maybe I should. Maybe all of us should be asking for tips when we collect our invoices. Check here to give me an 18-percent tip on this service that I provided to you. Why shouldn't we do it, if everybody can do it? Fair game, right? David Leary: Yeah. Blake Oliver: That's my rant, and [00:47:30] the one thing I don't like about these modern point-of-sale systems ... We've got more to talk about, if we've got some time here. David Leary: I have a 'selling your firm' article. Blake Oliver: Yeah, okay. Everybody wants to sell their firm. David Leary: This article's in The Canadian Accountant. This is Canada's independent news source for the accounting profession. This is the number-one factor for an accounting practitioner looking to sell. The article touches on ... Everybody always talks about percentage of total billings. What's the going rate? What is your percentage of total billings? She's [00:48:00] kind of arguing that the most important one is client retention. Blake Oliver: I don't know if you mentioned the author. It's Bridget Noonan. David Leary: My bad. Sorry, yes.  Blake Oliver: No worries. What'd she say is the most important factor?  David Leary: Her argument is, really, the most important factor is retention. Blake Oliver: Retention. David Leary: What's the current retention rates of an accounting firm - are clients leaving? - and your ability to retain the clients, once you buy the firm- Blake Oliver: Absolutely. David Leary: -because they might not like you. Maybe it's not the right fit. Now you've lost those [clients], so now you've completely overpaid for a firm. So, it's not what [00:48:30] the current billing rate is. There's other numbers to look at. Blake Oliver: I agree. That's why it's really important to also have a clawback provision. If you're buying a firm, you want to ensure that the clients are with you for at least four or five years, so that you can make back the profit that you would be paying out to the partner who's departing; definitely always include something like that. You want to have at least five years. If they leave before then, then you get to reduce the price, and there's a formula [00:49:00] for that. David Leary: Then the other piece of that is we had an episode- episode 110 that really ... There was a panel we did, and we talked about selling your firm. There's a lot of really important bullets in there, if you guys wanna jump in and listen to that episode. Blake Oliver: The last thing that I've got today is something that was sent to me by Jacob Oberlander, CPA. He was in a LinkedIn group and forwarded me this message ... A CPA who is in a small, rural, and isolated community, and [00:49:30] they still don't have high-speed internet. He was asking the group, "How do we embrace cloud accounting and all this stuff, when we don't have reliable broadband internet?"  It just reminded me that living in a big city like L.A., where we have gigabit Ethernet ... I can get that in my building here, right? It's still a problem in a lot of the United States, where there's not reliable high-speed internet. I think that is gonna be one of the big barriers to cloud adoption in this country. [00:50:00] Thank you, Jacob, for pointing that out. He also said that he was reminded of it, in his own experience, because he was traveling on the New York State Thruway to Canada, and there was a stretch of 80 miles that they didn't even have cellphone reception. David Leary: That's true. I've driven from Tucson to San Diego, or Tucson to L.A.; there stretches in the Arizona desert here where you don't have cellphone reception. Blake Oliver: The good news is, though, that the FCC is aware of this issue and has been working on subsidizing [00:50:30] the expansion of broadband into rural areas. The FCC has authorized $121 million in funding to bring broadband service to 36,579 "unserved rural homes and businesses in 16 states," over the next decade. This recent announcement was in August, and it represents the fourth wave of support from the 2018 Connect America Fund Phase II auction.  Providers will receive funding this month, subsidizing [00:51:00] the expansion of broadband into rural areas. Approximately 17 percent of businesses are in rural parts of the country, despite the fact that 97 percent of the U.S. is classified as rural. I think this is a great thing because, just from an economic/political perspective, as we move toward a services-based online economy, if you don't have broadband internet, you're left out. The jobs are disappearing, like at your local hardware shop. How are you gonna get [00:51:30] a job as an online ... I don't know, an online bookkeeper, or something, or whatever, if the best you have is a slow, terrible DSL connection. David Leary: What I've noticed, too, is in my experience, where there's nobody at and there's no economic activity - empty parts of the desert - there's no service. Some part of the forest, there's no service. It's not so much big city technology based, because you can go across the entire Midwest, where population densities are very low, and you can get very good cellphone service and internet service, because [00:52:00] all the farming equipment now is all online. Between GPS maps, and online and ... People are monitoring their farming equipment from their iPad, sitting in a truck two miles away. It's really where there's economic activity, that's where you're gonna have internet access. Then I'm kind of ... "Well, if there's no economic activity there, is there even somebody with the need for cloud accounting?" Blake Oliver: Well, yeah, there's businesses out there. Here's the thing, in California, it's well known, I think, that we have a housing crisis. [00:52:30] There's a reason that half of the homeless population in the country is in California. I just read that stat recently, which is depressing. A lot of those people are in L.A., and San Francisco. The reason they're homeless is because it's a supply and demand mismatch. We have too many people, and we haven't built enough housing. Unless we're gonna build more housing - which doesn't seem there's a political will to do that - people are gonna have to leave and go elsewhere to find affordable housing. Actually, given that I can work in the cloud, I've talked about this with my family ... It's like, "Why don't we just go out somewhere more rural [00:53:00] and set up shop there?" But then, one of the constraints is a lot of these cities that are very appealing, that are out in the mountains that are beautiful, don't have broadband, believe it or not; or, if they do, it's just not very fast. We're talking one megabit is the best you can do and it costs a fortune. I can't operate on that. I need 100. I need 1,000 to do ... To do what we're doing right now, David, where you're broadcasting from [00:53:30] Tucson and I'm here in L.A., and we're doing ... These are high-quality files that we're sharing back and forth. This is a must-have. So, it's actually the lack of broadband has limited our choices. David Leary: We'll do a challenge here. Next [inaudible] to Mexico ... I'm on the road somewhere. Blake Oliver: Yeah, we'll try ...  David Leary: We'll try to record something, see how it goes.  Blake Oliver: All right, well, that's all I've got for this week. As always, you can reach me on LinkedIn. Please send me a message and let me know that you're a listener when you connect with me there, and [00:54:00] on Twitter: @BlakeTOliver. How about you, David? David Leary: You can find me on Twitter: @DavidLeary. You can also find me on LinkedIn at David Leary. You can find The Cloud Accounting Podcast as Cloud Accounting Podcast on all the socials. Please follow us. Please go to Podchaser, write a review. Write a review on iTunes. Blake Oliver: We will read it on the air. David Leary: If you haven't, if you tend to be one of the listeners that listens to the news episodes and skips the interview episodes, definitely go listen to the episode we did with Cachet's lawyer- Blake Oliver: Wendy Slavkin. David Leary: It's [00:54:30] excellent. It's almost shocking how much she tells us about the whole ... It's the only end-to-end full-experience view of what happened. Blake Oliver: Yeah, that was really a fun one. Well, David, until next week, have a great one. David Leary: All right, bye, everybody. Blake Oliver: Bye.
Going deep on the MyPayrollHR fraud with Wendy Slavkin of Cachet Financial Services
Cloud Accounting Podcast
SponsorPodchaser: Show Notes 01:41 – General Counsel Slavkin describes Cachet Financial Services as a sort of third-party vendor for payroll processing companies.   05:59 – Every ACH provider has their own patented process for payroll  06:45 – How MyPayrollHR’s owner, Michael Mann, did the deed, in technical detail   09:03 – Slavkin claims the  assorted employee banks are to blame for the whole payment reversal fiasco  10:32 – According to Slavkin, banks have 60 days to either accept or reject reversal files  11:29 – Cachet eventually decided to return all funds to the affected employees, using their own funds  12:10 – Though Cachet covered the payroll, some employees have yet to receive their funds back  13:32 – Slavkin notes that employee banks are waiving overdraft and other fees related to this incident  14:18 – NACHA’s statement re payroll-deposit reversals | Personnel Today   14:38 – Slavkin doesn't agree with NACHA's claim about reversing payroll deposits.   16:21 – Lesson learned: ABC - Always Be Cautious ... Before the MyPayrollHR event, Cachet never had controls in place to detect fraudulent activity from the client side. Now, after the fact, they do.   18:56 – According to Slavkin, Pioneer Bank is holding at least some of their money "in trust" ... They just have to find a way to get it.  23:18 – Timeline of the aftermath – from discovery through contacting FBI and more  24:38 – Wall Street Journal reports that Mann is cooperating with the U.S. Attorney and FBI ... | The Wall Street Journal   25:02 – Where in the world is Michael Mann? Either nobody knows, or they're not saying 26:30 – Blood and turnips - Slavkin was unable to accomplish much of anything when she contacted the FBI for help  31:50 – Pioneer Bank – another victim? | Times Union   33:30 – Was this a crime of desperation, or a crime of greed?  Connect with Cachet Financial ServicesThe Cachet Crisis Hotline number is 877-579-8557Connect with Our Guest, Wendy Slavkin, General Counsel for Cachet Financial Services Get in TouchThanks for listening and for the great reviews! We appreciate you! Follow and tweet @BlakeTOliver and @DavidLeary. Find us on Facebook and, if you like what you hear, please do us a favor and write a review on iTunes, or Podchaser. Interested in sponsoring the Cloud Accounting Podcast? For details, read the prospectus. Subscribe Apple Podcasts: Spotify: Google Play: Stitcher: Overcast: TranscriptWendy Slavkin: First of all, the file got manipulated by MyPayrollHR, prior to uploading into our system. They were a client of ours for 12 years. Michael Mann purchased it, I think, about six years ago; had a great relationship with them, never had any problems. So, there was not an alarm when he manipulated that account number. This was something that we just could not foresee. This was our client. David Leary: So, Blake, [00:00:30] I have a special guest interview for us right now. We have Wendy Slavkin. She is the attorney for Cachet. They are the ACH money movement company that was involved with the MyPayrollHR fiasco/mess. I don't know ... Wendy, what would you say is the best way to describe this, at this point?  Wendy Slavkin: First of all, I'm general counsel for Cachet. We have many attorneys, but I'm the general counsel. I've kind of been overseeing all of this. How would I describe it? I would describe [00:01:00] it as - from our end - a $26 million fraud. David Leary: So, I imagine your last 21 days or 20 days have been a little insane. Did you wanna walk Blake and I through that, and then, we'll ask any clarifying questions along the way maybe?  Wendy Slavkin: Can I give you a little background about my client- David Leary: Absolutely.  Wendy Slavkin: -and how they kind of played into this whole disaster? Cachet Financial Services is a company located in Pasadena, California; been around for 22 years. One of the things we do is we get involved in the movement [00:01:30] of money through the ACH - automated clearing house - system. Our clients are hundreds of payroll processors all across the country, much like this particular one we're dealing with, MyPayrollHR. Typically, what we do is we enter into an agreement. We call it a re-marketer agreement, but it's kind of like a third-party vendor agreement with different payroll processing companies. These payroll processing companies, back in the old days, or the 1990s, as I like to call it, they [00:02:00] printed hard checks, paper checks that they would typically mail or messenger-deliver to different employers for their payroll. Nowadays, a lot of employers are going the way of direct deposits, meaning they deposit the money directly into the employee's account, and we're doing away with paper checks. These payroll processors, for the most part, are unable to do the direct deposits themselves. They're just not set up. They don't have the proper licensing, [00:02:30] and facilities, and bank relationships. They'll enter into an agreement with somebody like us, like Cachet Financial Services, to do the direct deposit part of it. We're, in a sense, like a third-party vendor for these payroll processors. David Leary: Got it. So, me, as a payroll processor, I have my expertise, which is calculating paychecks. Wendy Slavkin: Right. David Leary: Having relationships with small businesses, but you do all the money movement and the bank relationships on the backend side. Wendy Slavkin: Exactly. What most people don't understand is the ACH process [00:03:00] is a two-step process. The first step is the collection step. Typically what'll happen is employers will go into whoever their ... In this case, MyPayrollHR system. They'll upload all the information for the payroll for their various employees. They upload that into MyPayrollHR system. MyPayrollHR, in turn, will upload a file into our system, Cachet's system, that may contain various [00:03:30] and many different employers with their employee information. The collection part of the first step is that the file that MyPayrollHR sends to us will say, "Take money out of A, B, C, D, E, F, G employer; take money out of their accounts to be used for payroll." That's the first step, the collection step. When it goes the way it's supposed to go, we will then- Cachet ... It's all done electronically. It's [00:04:00] not like there's somebody sitting in front of the computer watching all these numbers go by. It's all done electronically, through our patented system. Our system will then take the money out of the employers' accounts. The way it's supposed to go is we move it into what we call our settlement account or a holding account if you like. All the employers' money would be moved into that one account. That's if it goes the way it's supposed to go. The second step to this ACH process is disbursement. That file [00:04:30] that MyPayrollHR uploaded into our system would say, "Okay, now you have all this employee money. Direct the money to these various employees across the country." That would be the disbursement. That's how the employees would get their direct deposit. That's how it's supposed to work. Are you with me so far? Blake Oliver: Help me understand. I've heard about a file. What sort of file are we talking about? What is it? Wendy Slavkin: It's a huge computer/electronic file. We sometimes call it a batch file, but it's got all [00:05:00] kinds of information in it that MyPayrollHR, or any payroll processor, would upload into our system that contains the payroll for that particular payroll processor's employers. Then, the second part, again, the disbursement, would be all that money is now in our holding- our settlement account. What we're gonna do with that is we're gonna follow the second part of that file that was uploaded and put it into all these employee accounts. That's how it's supposed to work. What happened here- David Leary: These files ... If [00:05:30] I'm using Cachet as my ACH service provider today, and next year, I get a new contract with a new company, do I just use the same file, or do I have to create new files to their standards? Wendy Slavkin: No, you would have to create new files to their standards. We provide the payroll processor with specifications; call 'em specs. Those specifications say, "This is how it has to look. This is our settlement account where the money has to go." Every ACH provider [00:06:00] has their own patented system. If you recall, there was another one of our competitors was involved in this mess, NatPay. NatPay has their own patented proprietary system, and they were able to do the same thing to NatPay's system that they did to our system, which I'm just about to explain to you. David Leary: When we say NatPay, NatPay was handling the [cross talk] tax deposit from MyPayrollHR. Wendy Slavkin: -from MyPayrollHR's employers, right; their quarterly tax payments or whatever. [00:06:30] David Leary: Okay.  Wendy Slavkin: We do that, too. Cachet does that, too, but we weren't contracted- we didn't have a contract with MyPayrollHR to do that part of it. NatPay had that contract. David Leary: I understand. Wendy Slavkin: Although we do that for other employers- other payroll processors, I should say. What happened in this case is when ... Before MyPayrollHR uploaded the file into our system, remember I talked about the specifications that are required for the payroll processor to upload the file? [00:07:00] They went in and manipulated the account numbers so that instead of the money going into our settlement account, it went into- it was diverted to a different account at MyPayrollHR's bank, which is Pioneer Bank, and that was controlled by MyPayrollHR. Our system went and gathered all the money from the employers; instead of it being moved into our settlement account, it was diverted into an account controlled by MyPayrollHR at Pioneer Bank. That's where the glitch happened. [00:07:30] When our system went to find the money to pay to these employees, it saw there was no money in our settlement account. it kind of, I guess, follows the money. I don't know exactly how it works, but the program is set up ... It found the money in this account at Pioneer Bank, and it went to grab that money to pay all these employees across the country, and that account came back as frozen. David Leary: But, in the meantime, Cachet is starting to put money into [00:08:00] employees' bank accounts all over the country. Wendy Slavkin: Right. It kinda happens a little bit simultaneously. This was two weeks ago, actually, today. Cachet got in the office and found out this bank account came up frozen, and we were $26 million in the hole. Blake Oliver: Negative $26 million balance in that settlement account. Wendy Slavkin: Right. Blake Oliver: Okay. Wendy Slavkin: Because we, Cachet, guarantee these ACH transactions, our bank requires us to do that. When [00:08:30] that bank account came back as frozen, it went ahead and advanced the money into all these employees' accounts across the country, but it was Cachet's money it was using to fund that payroll. What happened is because it was our money, and we have no obligation to make payroll for these 400-plus employers, 1,000 employers across the country, we went ahead and we initiated what's called a reversal file as part of our fraud protocol to get the money back from the employees, [00:09:00] because it was our money; it wasn't employer money. The first reversal file that was created was done improperly. It didn't comply with the protocol necessary to do a reversal file. We assumed that the banks, the receiving banks, which would be the employee banks, would automatically reject that reversal file because it was improperly formatted. The banks should have automatically rejected that first reversal file. Because we assumed the banks would do that, we [00:09:30] created a second reversal file. So, what happened is, then, a week ago Monday, that's when all hell broke loose, so to speak. All these employees' accounts were not only being debited for the direct deposit they received from us, but a second time, as well. If there was $500 dollars put in their account for that direct payroll, they were getting debited $1,000.  When we found out what was happening, we contacted our bank and had our bank reach out to all these receiving [00:10:00] banks, more than 100 banks - receiving banks being the employee banks - and personally instruct them to reject both reversal files and put the money back in the employee accounts. David Leary: This is all electronic, and it's happening very fast, so by the time you realize these things ... You're manually contacting, I'm assuming, by telephone and email, 100 banks. Wendy Slavkin: Our bank reached out to all these banks by telephone, fax, e-mail, however they could, and instructed them to reject both [00:10:30] reversal files. Now, something that's little known in the banking industry is when a bank receives a reversal file, they actually have 60 days to accept or reject it. So, in other words, when an employee's bank receives a reversal file, they may conditionally accept it, but that doesn't mean they're sending the money back to us. They never sent ... No bank has yet sent money back to us, to Cachet. They conditionally [00:11:00] accepted ... They, in a sense, put a hold on that money. When they got the second reversal file, they put a hold on another amount of money. But it doesn't mean that they sent the money to us. They just put a hold on it. By law, they have 60 days to decide, are they going to accept the reversal or reject it? Even though they conditionally accepted these, it doesn't mean that, ultimately, it would have been accepted. The first one, ultimately, would have definitely been rejected. Why [00:11:30] we had our bank reach out, a week ago Monday, was to make sure that both reversal files were rejected, and the employees would get their money back. We saw the extreme heartache this was causing on all these employees, so we made the decision - we're just gonna let them keep their money, even though it's our money. So, in effect, we funded the payroll, and paid 8,200-and-some-odd employees across the country; we would try to get the money back from Pioneer Bank and other sources. [00:12:00] Blake Oliver: So, it's September 18th, right now. Have all the employees been made whole, at this point? Do they all have their payroll and those reversals cancelled? Wendy Slavkin: From what I've been told, not every employee. The majority of employees have been made whole. The ones that haven't been made whole; I've gotten calls from some of them. My client's gotten calls. We've instructed them to talk to their bank to see what's the delay in getting the money back. If their bank doesn't [00:12:30] cooperate, I've been referring them to an email of a person on our end that has been designated to handle all these and to try to interface with the banks to get that money back into their account as soon as possible. I know the majority have been made whole. There's still some that haven't. If they haven't been made whole, it's really their bank that's holding up the process. Understand, a lot of times, these smaller banks, they're gonna hold onto the money as long as they can. They [00:13:00] earn interest on that money. They're sometimes a little more reluctant to release the money than some of the major banks are. But I've been told that even, in some cases, B of A and Chase Bank, in isolated instances, have been reluctant to release the money. Hopefully they're in the process of doing so or will be doing so. Our goal is to make every employee whole, and that's what we've been working on to accomplish. Blake Oliver: What about the overdraft fees, the bank fees? They could add [00:13:30] up to hundreds of dollars for some of these employees. Wendy Slavkin: Right. What we understand is that the banks are waiving those fees. That's what I've been told. Blake Oliver: There must be hundreds of banks involved. Are all of the banks?  Wendy Slavkin: From what I've been told, they are waiving those fees, and we're doing whatever we can to make sure they waive those fees. Blake Oliver: I was reading an article on Personnel Today that talks a little bit about the NACHA rules. This is the way that all the banks move around money with ACH- Wendy Slavkin: The National Clearinghouse Association- Blake Oliver: -and the federal government administers [00:14:00] this thing. That's what you guys are licensed with, or you have an account with them? Is that how it works? Wendy Slavkin: They're governed by the NACHA rules, yes. Blake Oliver: Gotcha.  Wendy Slavkin: It's not that we do. We have a relationship with our bank, and our bank is governed by those rules. Blake Oliver: So, in this article, there's a statement from NACHA, which says, "Reversing a valid payroll deposit is not permitted under the NACHA rules that govern the ACH network. NACHA is investigating the responsible parties and is working with financial institutions to undo or remedy any invalid transactions." [00:14:30] Wendy Slavkin: Yeah, I saw that article. Blake Oliver: So, is that the reason why Cachet reversed its [cross talk]  Wendy Slavkin: No, no, that's not. Blake Oliver: Okay ...  Wendy Slavkin: I don't necessarily agree with that. There's actually a recent case that came down that disputed that statement. I don't have a cite for you, but I'm in the process of finding out about it. We decided to reverse it because we saw the hardship it was causing to the employees, basically. I was getting calls, and my client was getting calls. People couldn't [00:15:00] pay their rent. They couldn't provide for their children. That's why we decided to have the banks reject those reversals. NACHA did not get involved in helping us. From what I understand, and this is my own understanding - there may be something more to this - but it was our bank that facilitated in getting these reversals rejected by the banks. Blake Oliver: So, let's go back to this file and the process or the workflow by which these ACH transactions [00:15:30] are initiated. When the file was manipulated and uploaded, did any alarm bells go off in the Cachet offices? It seems like this just got executed, and then only after this started to happen was somebody alerted. What are the controls in place to make sure that this doesn't happen? Wendy Slavkin: That's a great question. First of all, the file got manipulated by MyPayrollHR, prior to uploading into our system- David Leary: Just because we haven't talked about this yet, MyPayrollHR has [00:16:00] been a client of yours for how many years? Wendy Slavkin: Well, they were client of ours for 12 years. Michael Mann, the guy who is the owner, purchased it, I think, about six years ago; had a great relationship with him; never had any problems. Just like we've never had this happen over the last 22 years. There was not an alarm, when he manipulated that account number. Trust me, there's been an update to our system. [00:16:30] There is now an alarm. I have to say, Cachet is great about ... We update our security protocols all the time, Most of our clients have had their systems hacked, and cyber terrorism, and the Russians, and this and that. We continuously update our security protocols. This was something that we just could not foresee. This was our client. At the beginning of the conversation, [00:17:00] if you recall, I said we have our own patented system, and we didn't catch it. NatPay has a completely different system, their own patented system, and they didn't catch it. It was something that was very extraordinary and out of anything anybody could foresee. History is our great lesson about protecting us in the future. So, now we have something in place that would prohibit a client from ever doing that again. It was kind of the farthest thing from [00:17:30] our minds, because usually it's not the payroll processor, it's a third party who hacks into a payroll processor system. We've been parties to those kind of situations, but never this, where our own client decided that they were gonna manipulate the system. Going forward, it will never happen again; I'll tell you that. History, in this case, has been our great teacher, but there was nothing in effect that would have alerted us to it, until what happened, once they got to work a week ago, Wednesday- or two weeks [00:18:00] ago today, I guess, and we found out that we were $26 million deficit. Then we started looking at the system. You can print out the reports, and we were able to find out that they had manipulated the account numbers before they uploaded to our system to divert the money to Michael Mann's company's account at Pioneer Bank. Blake Oliver: Yeah, let's talk about that. The money should be all sitting in an account at Pioneer Bank, [00:18:30] right? Wendy Slavkin: Well, we hope so. From your mouth to God's ears, as we say. Pioneer Bank has not been very ... Of course, we immediately called Pioneer Bank, and they won't give out any information. It would be like me calling your bank and asking for information about your account. Unless you're a named account holder, the banks legally cannot give me any information. David Leary: We see that with accountants and bookkeepers. They have to ... The owner of the business has to give the accountant or bookkeeper access.  Wendy Slavkin: Exactly, and I'll go back to that in a second. Pioneer [00:19:00] Bank filed, with the feds, a form called an A8, I believe, and it disclosed that they had $19 million dollars in that account that they had frozen. We look at it as that $19 million dollars is, in a sense, trust money, because it was money that came from an employer for the purpose of paying payroll that Cachet ended up paying. So, that $19 million belongs to us.  Of course, we are in [00:19:30] the process of filing a lawsuit against MyPayrollHR and Michael Mann, and subpoena those bank records, and trying to get that money back to us. Now, where the other $7 million is, I don't know yet. We don't know what other accounts Michael Mann has there; what kind of assets we have there. What I heard was that Pioneer Bank loaned Michael Mann a great deal of money, like over $30 million dollars, and they suspected something fishy going on, so they just were trying to put a hold on as much money [00:20:00] as they could. But again, that money in that particular account does not belong to Pioneer Bank. It belongs to Cachet. So, interestingly, and I said to you I'd get back to you on this, when we got to work that ... It was interesting that Michael ... This was very well-planned because the payroll was right before the three-day holiday if you recall. The chances of us finding out about it was gonna be delayed a day, because banks were closed that Monday for Labor Day. When we found out Wednesday, there was a slight delay [00:20:30] because of the bank closure. I think Michael Mann probably planned on that happening. We immediately called Pioneer ... Excuse me, we did call ... Pioneer Bank wouldn't give us any information.  We called MyPayrollHR and tried to speak with Michael Mann. He wasn't available. I don't know who my client spoke with over there, but they couldn't give us any information. Michael Mann finally called us back that Wednesday. That'd be two weeks ago, about 2:30 in the afternoon. He said, "Oh, it's all gonna be ..." He reassured [00:21:00] us everything was gonna be fine. Our request was that he conference call us and his bank with him to give the bank permission to talk to us and tell us what had happened [cross talk]  Blake Oliver: -sorry, can we go back to ... I wanna make sure this is really clear in my head because I'm confused about the timeline.  David Leary: So, 2:30, right, Pacific, for you, Wendy?  Wendy Slavkin: Yes.  David Leary: Which is East Coast, 5:30, which means- Wendy Slavkin: After the bank had closed-  David Leary: After business hours. Okay.  Wendy Slavkin: Exactly. Don't [00:21:30] you think it's interesting that he called us after the bank closed? Blake Oliver: I'm sorry, what set this off on Wednesday? Take me back to the beginning. Wendy Slavkin: My clients came to work Wednesday morning, and they started getting notices, computer printouts, that that- what had happened; that the account was frozen at Pioneer Bank- Blake Oliver: Oh, gotcha.  Wendy Slavkin: -and the system had looked to our accounts and us, personally, to underwrite that payroll.  Blake Oliver: So, the file got uploaded on the 3rd, in [00:22:00] the evening. Is that how it happened? Wendy Slavkin: What day was it? it got uploaded before the three-day holiday? What was the [cross talk]  Blake Oliver: Oh, it was before the 3rd, okay.  Wendy Slavkin: Yeah, that's what my point was, was that three-day holiday, the Labor Day holiday-. Blake Oliver: Labor Day was the 2nd of September. Wendy Slavkin: Right. So, they must have uploaded at the end of the month, which would have been the 30th, I'm assuming; that Friday. Tuesday was a holiday. That was the 2nd. I mean, Monday was a holiday; the 2nd. We didn't find out til [00:22:30] the morning of the 4th, because there's usually like a two-day delay. Whereas, before we might have found out on the 2nd or the- but we didn't, because a bank was closed, or maybe the 3rd. There was a further delay to the [cross talk]  Blake Oliver: Got it, because it took two days for the money to go from the employer accounts into- Wendy Slavkin: Well, I don't know if it took two days for the money to go to the employer's accounts. It took two days for us to be notified that the account where the employer's money was, was frozen-  Blake Oliver: Yeah, okay-  David Leary: -because when banks are closed, banks are closed, right. They just don't operate [cross talk]  [00:23:00] Wendy Slavkin: -we might have gotten notice late Tuesday night, when nobody was there. I don't know. But it was Wednesday morning that everything fell apart.  Blake Oliver: So, Wednesday morning, they come into the office. They realize what has happened. Now, take me through on the day on Wednesday.  Wendy Slavkin: We tried to contact the client, MyPayrollHR. I wasn't part of this conversation. They spoke with a couple people there who didn't know what was going on. Left a message from Michael [00:23:30] Mann, who is the owner, is the sole shareholder, to call us back. We also called Pioneer Bank, who wouldn't release any information to us. Michael Mann finally called us back that afternoon, the 4th, at about 2:30 our time, Western time. It's interesting he called us back after the banks closed on the East Coast ...  We had a couple questions. One, is everything gonna be okay? He assured us it would [00:24:00] be. Then, our main request was that, "We want you to get on the phone with your banker and us in a conference call so we can talk to the bank to find out exactly what's going on and why that money is being frozen." His response to us, and he was calling, I think, from a cell phone, and I was on the phone along with representatives from Cachet ... His response was, "I'll call you back in 10 or 15 minutes." Well, needless to say, he never called back, and we could never reach him again despite attempts to reach him. [00:24:30] Blake Oliver: Since that call, you have not been able to reach him, two weeks later.  Wendy Slavkin: We haven't spoken with him. I just read an article. Not sure if it maybe was The Wall Street Journal that said that Michael Mann has an attorney, and he's working with the U.S. ... Because the U.S. attorneys opened a case out in Albany, New York, along with the FBI back there; that he's working with the U.S. attorney, cooperating with him. I don't know what that [cross talk] David Leary: I saw that article, as well, this morning. Between this morning and your conversation with him, he pretty much fell [00:25:00] off the face of the earth. Nobody could contact him. Nobody knew where he was. Wendy Slavkin: Right. Exactly. My conversation with him was Wednesday. By Thursday, if you recall, they posted something on their website, the company had closed its doors. Then, Thursday afternoon, I heard, as part of the rumor mill, that he had fled the country. Then Friday morning, I had heard that he had been arrested. So, of course, I reached out to my FBI contact, and the FBI ... Their [00:25:30] response is, "We can neither confirm nor deny." He wouldn't tell me anything. You know, the FBI, they wanted a lot of information from us, but they were not- so far, have not been very forthcoming on what they know. Blake Oliver: I feel like if he was in custody, that would be- we'd know about it, at this point. Wendy Slavkin: Right. That's what we had heard, in the payroll industry rumor mill ,or whatever. Then I had spoken with a reporter that morning from Albany, and I don't remember who; this was Friday morning, and said, "I [00:26:00] heard he was arrested. Do you know if that's the case?" because she was back there, and she goes, "I can tell you; he hasn't been." I said, "Well, how do you know that?" She said, "Because I know people who know him." I said, "Really? Can I have their names?" She said no. Then I figured, okay, he wasn't arrested yet. Then, when I heard that, I don't know, was it a day or two ago,  that his house had been raided, but they didn't arrest him ... So, I don't know if he was there. It mentioned his wife being there. I [00:26:30] don't know. The FBI plays it very close to the vest. We, by the way, when that Wednesday, two weeks ago, when this all happened, I reached out to the FBI office here in Westwood. You know where that is - Wilshire and Veteran - because I had this image that I told them what had happened, and they would immediately go to my client's offices like the white knights and want to help us. That's not how it works. Apparently, they get a lot of crank calls. They said to me, "The only thing we can do is for you to [00:27:00] arrange for a walk-in interview on Friday [mind you, this was Wednesday] and bring all the documents that we have." I said, "But you don't understand. This guy could leave the country. Aren't you gonna do something?" "Well, we don't work that way." They had to do a background check on me, on my client's representative. We ended up meeting with them Wednesday, met with a woman ... Basically, it was I thought it was gonna ... They call it interview room, but basically it's like a plexiglass [00:27:30] window, like you're at a bank, and you're talking to her through that. She just happened to be the duty agent on call. I think she understood maybe five percent of what I was trying to explain to her, because it's a very complicated process, and unless you're involved in financial crimes, you really don't understand it. By that time, two other FBI agents had reached out to me - one from Boston and one from Pennsylvania - that apparently employers had reached out to them. So, it lent a little bit of credibility [00:28:00] to what I was telling her. My message sure was, "I'm not telling you how to do your job, but I know the FBI has resources and is able to have things accomplished that I cannot. If they do anything before the banks close today, Friday, please have somebody reach out to Pioneer Bank and tell them not to release any of that money."  Whether they did that or not, I don't know. I know that I sent a cease and desist letter to Pioneer [00:28:30] Bank, telling them not to release any of that money and have since also sent a similar letter to Bank of America, because we found that Michael Mann has some accounts at Bank of America under different names that we thought might be involved in this fraud.  Blake Oliver: There's so much going on here. It's incredible. I feel like this like a true crime financial ... A Financial True Crime episode [00:29:00] right here on our show. David Leary: Is there a little bit more background on Michael Mann. Blake Oliver: Yeah, who is this guy? David Leary: He purchased MyPayrollHR, but I tried to Google for him. I went deep-diving, deep-diving, 10, 30, 40, 50 pages in. It's almost like he doesn't exist. But he has another company, apparently, that owns MyPayrollHR- Wendy Slavkin: From what I know, that company is called ValueWise. Is that the name you came up with?  David Leary: Yes. Yes. Wendy Slavkin: ValueWise, I was told, and [00:29:30] our other attorneys who are working on this, I think it's like a parent company. He also- they also go by the name of Cloud Payroll. We've since found out a bunch of other entities that he has something to do with. There's a senior home care company, a bunch of other companies that he ... I don't know if they're shell companies. I don't know if they're valid companies. I've gotten calls from attorneys outside of California and inside California that represent people that factored [00:30:00] some of Michael Mann's accounts with these other entities. I don't really know the extent of it. I thought the FBI, when the story broke, about the FBI raiding his house, that nobody has any pictures of him. They couldn't find any pictures of him. I don't know really anything about him. I know that for six years he's ran this company, and everything has worked like clockwork. But apparently, what we've learned after the fact is that ... The rumors started circulating that [00:30:30] he had some big financial problems. All these other entities have come up that he is associated with. I don't know how it all plays into this or not. I know that I really don't want to complicate the story more, but what I understand is that he's been, I think, moving money to different places that we don't know about. Blake Oliver: Let's talk about Pioneer Bank and their involvement in all of this. You mentioned that you weren't able to get a hold of them back when [00:31:00] this initial- Wendy Slavkin: It's not that we couldn't get a hold of them. They just wouldn't give us any information. Blake Oliver: Since the 5th, the 6th, when this all happened, have you been able to talk to Pioneer Bank? Have they given you any information? Are they being helpful? Wendy Slavkin: No, they're not helpful to us. I'm assuming they're cooperating with the FBI and the U.S. Attorney's office, and I think some of the reports even said that when [00:31:30] they filed this A8 form, they noticed some sort of fraudulent occurrences in the account. They're claiming that's why they put a freeze on it. Whenever there's some sort of fraudulent activity at a bank, they have to disclose it, and they do that through, I think it's called an A8 form or an 8A form. That's where we found out that they're sitting on $19 million. Blake Oliver: In this SEC filing, Pioneer Bank reported that they originated a loan to MyPayrollHR for $36 million dollars, and $16 million [00:32:00] of that had already been provided. Going beyond the-. Wendy Slavkin: What did you just say? I didn't understand what you just said. Blake Oliver: They originated a $36 million loan and $16 million had been provided-  Wendy Slavkin: Had been provided?  Blake Oliver: I don't know what 'provided' means exactly, but I'm guessing that means they had advanced the $16 million out of a potential $36 million. I'm just trying to figure out what is going through Michael Mann's head? Like, what is the point of all this? [00:32:30] Why did he do it? We don't know where he is. Nobody knows seems to know - or maybe the FBI knows, but they're not telling us - but nobody knows where Michael Mann is. Wendy Slavkin: He could have been at his house when they raided it. We don't know that. Blake Oliver: Yeah, I feel like they would have arrested him, right?  David Leary: The interesting thing in this conversation ... We're in this industry. It's very interesting to us, but CBS's Morning Show, the host of that show was asking that question, "Where is Michael Mann?" [cross talk] They were asking that this morning. Wendy Slavkin: -yeah, I spoke with them, as well. Oh, they were asking that this morning? Yeah, I [00:33:00] don't know where he is. I don't know if the FBI knows. I know that article in The Wall Street Journal said that Michael Mann was cooperating with the U.S. Attorney, which would indicate to me that the U.S Attorney or the FBI knows where he is, but we don't.  Blake Oliver: Just to clear things up, this is not the same Michael Mann who directed The Last of the Mohicans. Wendy Slavkin: No, it is not.  Blake Oliver: That also confuses the Google searches. Wendy Slavkin: Yeah, no. This guy has nothing to do with the entertainment world.  Blake Oliver: Now, I'm just talking out loud. Why would Michael Mann do this? [00:33:30] Wendy Slavkin: Well, he obviously ...  It seems to me, why anybody does this kind of stuff is because they need money. He saw a way to grab some cash or maybe to pay off his obligation at Pioneer Bank. I don't know. I can only guess. I think he obviously had some financial difficulties and was trying to, however he could, get money, and he thought this was a good idea. Blake Oliver: It's interesting. Maybe he was trying to get the money out of Pioneer Bank, and they froze the account, which would mean [00:34:00] that he didn't get it. But then there's the question of what happened to the $16 million that Pioneer Bank loaned him. Maybe that's gone, and Pioneer Bank will end up being on the hook. Wendy Slavkin: Right, and there should be $26 million in that account; which Pioneer Bank declared in writing, there was only $19 million in that account. So, we don't know where the money went. Blake Oliver: Maybe he was able to - and I'm just speculating here - maybe he was able to get some of it out before they froze the account. Wendy Slavkin: Perhaps/ Your guess is as good as mine. David Leary: The ripple effect of the impact of this crime. It's Pioneer [00:34:30] Bank, possibly. It's Cachet. It's the bank in Florida-  Blake Oliver: It's also legislation. David Leary: -thousands of employees. Thousands of employees. You have possible legislation coming down the pipe. Even the MyPayrollHR employees were affected. I saw that email where they told them to meet in a liquor store parking lot to pick up their personal belongings. The ripple effects of who this has impacted is really, really far-reaching. Blake Oliver: David, you found that story about how the New York state legislature is now [00:35:00] considering legislation to more- well, to regulate payroll companies like this, payroll services like this, which have never been regulated [cross talk]  Wendy Slavkin: Well, the payroll services is a pretty unregulated business. Again, we've never had a problem like this with a payroll provider, ever. 22 years, this has never happened. And I assume it's not happened to our competitors, like NatPay, or they would have protected themselves against it. You know what I'm saying? The whole thing [00:35:30] is very enlightening. It's just horrible. Like I said, the employees will all be made whole. If they haven't already, they will be. Like the FBI said to me, "We realize that you're the victim here, once the employees are made whole ..." but at a tremendous cost to both the employees, the employers, and to us. Blake Oliver: David, I don't have any more questions. David Leary: Wendy, I feel like you filled in [00:36:00] a lot of gaps that we were [cross talk]  Wendy Slavkin: I hope so.  David Leary: -because we were trying to piece along this timeline, ourselves, based on ... Every day, there was two new pieces of news [cross talk] it's nice to hear the whole story. I think our listeners will really appreciate hearing this whole entire story. Wendy Slavkin: Yeah, it's important to walk through the process. People don't understand how the ACH system works. A lot of people think the money automatically goes from the employer account to the employee account. It doesn't work that way. It's a little more complicated than that. Again, Cachet's, [00:36:30] personally, for me ... I've spoken with a lot of these employees directly, and the stories are- they're just awful. One woman's child had an asthma attack and she couldn't get medication ... My heart goes out to them. This man has created so much havoc. He does belong in jail. I don't know what's gonna happen, but that's where I think he should be. But I appreciate your time, and thanks for having me on. David Leary: Maybe we'll have you on again- Blake Oliver: When we finally figure all this [00:37:00] stuff out. As always, you can connect with me on LinkedIn. I'm on Twitter: @BlakeTOliver. And you, David?  David Leary: I'm @DavidLeary. Blake Oliver: We will continue on covering the MyPayrollHR fraud- payroll fraud story for you. Thank you, Wendy, again for your time. Appreciate it. Wendy Slavkin: My pleasure. You're welcome.
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Los Angeles, CA, USA
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2 days, 19 hours