#CPA accounting technologist • Co-host of the Cloud Accounting Podcast (@CloudAcctPod) • 40 under 40 • He also plays the cello 🎻
Recent episodes featuring Blake Oliver
We've Got No Goodwill for Goodwill & the Pentagon Sucks at Accounting
Sponsors Bill.com: https://cloudaccountingpodcast.promo/bill Timesheets.com: https://cloudaccountingpodcast.promo/timesheets OnPay: http://cloudaccountingpodcast.promo/onpay Show NotesComing soon! LinksGoogle’s ads just look like search results now https://www.theverge.com/tldr/2020/1/23/21078343/google-ad-desktop-design-change-favicon-icon-ftc-guidelinesThis Japanese Company Charges Its Staff $100 an Hour to Use Conference Roomshttps://www.bloomberg.com/news/articles/2019-06-20/charging-employees-for-conference-rooms-helps-disco-boost-profitGoodwill Sparks Deep Division, at Least on Balance Sheetshttps://www.wsj.com/articles/goodwill-sparks-deep-division-at-least-on-balance-sheets-11579613906KPMG Unveils $450 Million Tech Training Center in Orlandohttps://news.bloombergtax.com/financial-accounting/kpmg-unveils-450-million-tech-training-center-in-orlandoAudit fees keep rising, thanks to new accounting standardshttps://www.accountingtoday.com/news/audit-fees-keep-rising-thanks-to-new-accounting-standardsWhat CPAs and Clients Should Know About Tax Zapper Softwarehttps://www.accountingweb.com/tax/business-tax/what-cpas-and-clients-should-know-about-tax-zapper-softwareAutomated sales suppression devicehttps://en.wikipedia.org/wiki/Automated_sales_suppression_deviceFormer Wells Fargo CEO Banned From Bankinghttps://www.cfo.com/regulation/2020/01/former-wells-fargo-ceo-banned-from-banking/Cachet Financial Services, involved in MyPayrollHR collapse, files for bankruptcyhttps://www.bizjournals.com/albany/news/2020/01/23/mypayrollhr-cachet-collapse-bankruptcy.htmlCompany involved in MyPayrollHR collapse files for bankruptcy https://www.bizjournals.com/albany/news/2020/01/23/mypayrollhr-cachet-collapse-bankruptcy.htmlPentagon Racks up 35 Trillion in Accounting Charges in One Yearhttps://www.bloomberg.com/news/articles/2020-01-22/pentagon-racks-up-35-trillion-in-accounting-changes-in-one-yearNew Orleans Hack Causes Vendor Payment Delayshttps://www.pymnts.com/news/b2b-payments/2020/new-orleans-hack-causes-vendor-payment-delays/Digital Dollar Project Envisions a Fed-Issued Digital Currencyhttps://www.cfo.com/payments/2020/01/digital-dollar-project-envisions-a-fed-issued-digital-currency/China To Test Its Own Digital Currency. Will It Rival The Dollar Someday?https://www.npr.org/2020/01/13/795988512/china-to-test-digital-currency-could-it-end-up-challenging-the-dollar-globallySeattle-Area Election Puts Mobile Voting to a Testhttps://www.wsj.com/articles/seattle-area-election-puts-mobile-voting-to-a-test-11579694405The sad state of Intuit’s Minthttps://www.fastcompany.com/90453586/what-the-hell-happened-to-mintWhat Tax Anxiety? 95% of Americans Feel Confident About Tax Prep [Survey]https://financebuzz.com/taxes-surveyVCs Place More Than $1B With B2B FinTechshttps://www.pymnts.com/news/b2b-payments/2020/b2b-fintechs-start-2020-strong-1-billion-venture-capital-funding/Charleston software firm seals $9M funding round, brings total to $30Mhttps://www.postandcourier.com/business/charleston-software-firm-seals-m-funding-round-brings-total-to/article_3ba70000-3632-11ea-babd-e39c91cc9215.htmlAccounting Managers Apparently Have One of the Best Jobs In the U.S.https://goingconcern.com/accounting-managers-glassdoor-best-jobs-2020/Best password managers 2020 - Lastpass vs. Dashlane vs. 1Passwordhttps://www.tomsguide.com/uk/us/best-password-managers,review-3785.htmlGet 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, and NOW, you can see our smiling faces on Instagram!            Limited edition shirts, stickers, and other necessities.TeePublic Store: http://cloudacctpod.link/merch Subscribe Apple Podcasts: http://cloudacctpod.link/ApplePodcasts Spotify: http://cloudacctpod.link/Spotify Google Play: http://cloudacctpod.link/GooglePlay Stitcher: http://cloudacctpod.link/Stitcher Overcast: http://cloudacctpod.link/Overcast   Classifieds FutureFirm.co: https://futurefirm.co/cloudaccounting/ Elefant: https://elefanttraining.com Go here to create your classified ad: https://cloudacctpod.link/RunClassifiedAdTranscriptComing soon!Did you know that you could use AP automation as an entry point to offering client accounting services in your firm? A successful transformation from clunky manual processes to automated processes can lead your clients to wanting even more of the services you provide at your firm. Stay tuned to hear more from our sponsor, Bill.com, later in the episode.____________This episode of The Cloud Accounting Podcast is sponsored by Timesheets.com. Any guess to what Timesheets.com does? If you said employee time tracking for small to medium-sized businesses, you are partially correct. If you said robust time tracking for payroll, billing, or job costing with mobile access and real-time reporting, you're even more correct, but Timesheets.com is way more than time tracking. It includes employee HR records, paid time off, mileage, and expense tracking. It's all included. There aren't any monthly base fees. You just pay per employee to get all the Timesheets.com features - time, expense, and HR - in one place. Timesheets.com is offering listeners of The Cloud Accounting Podcast two free months of service. Head over to cloudaccountingpodcast.promo/timesheets. That is Cloud Accounting Podcast dot promo forward slash T-I-M-E-S-H-E-E-T-S.____________This episode of The Cloud Accounting Podcast is sponsored by OnPay. OnPay is an easy-to-use full-service payroll that's the right fit for all your clients, whether they have just one or 500 employees. They handle all the complicated stuff, like agricultural payrolls, Form 943, multi-state, and H-2A visas. OnPay even makes it easy to switch from other payroll services by doing all the data entry for each client that you set up. Right now, Cloud Accounting Podcast listeners can get three free months of OnPay payroll service. To learn more, head over to cloudaccountingpodcast.promo/onpay. That is Cloud Accounting Podcast dot promo forward slash O-N-P-A-Y. ____________This episode of The Cloud Accounting Podcast is sponsored by Bill.com. Small businesses want client accounting services, and here's proof. In the 2019 Bill.com Hire/Fire Index survey of small businesses, more than half prefer to hire accounting firms that offer a wide range of accounting, tax, and financial services. Another 40 percent said they would hire a firm based on its ability to offer proactive advice about their businesses, and 48 percent said they would stop referring their accounting firm if it could not offer strategic advice. An easy way to offer profitable client accounting services in your firm is to start with accounts payable. Using Bill.com, accounting firms can take clients' time consuming, clunky, and manual AP process and transform it completely with automation, tracking, mobility, and transparency, setting the stage for more conversations about what else your accounting firm can do to help the client. To learn more about how Bill.com can help your firm offer client advisory services, head over to cloudaccountingpodcast.promo/bill. That is Cloud Accounting Podcast dot promo forward slash B-I-L-L. Bill.com - the intelligent business payments platform.
Visa acquires Plaid & Intuit makes ChronoBooks exclusive to QBO Advanced
Sponsors QuickFee: https://cloudaccountingpodcast.promo/quickfee AccountingSuite: https://cloudaccountingpodcast.promo/asuite OnPay: http://cloudaccountingpodcast.promo/onpay Show Notes 01:52 – David can see clearly now, just in time to admire the cracked screen of his smartphone 02:42 – Blake's upping his skills game at Jirav, learning financial modeling 03:08 – Blake's second webinar - Webinar Recording: How to Build a Financial Model for an Accounting Firm | Jirav 04:25 – The most effective way to master a new tool or software is to use it for yourself, or a client 05:24 – Is there life after The Cloud Accounting Podcast? Blake reveals his retirement plan 06:57 – Side hustles can help you understand your clients' pain points 07:42 – American remote-worker ranks have nearly tripled in the past two decades! 08:02 – Business on top, PJs on the bottom - just one of the reasons why remote work rules!  08:18 – Reviews! Thank you, I <3 smilies, Aassas, and Glafollette!   13:43 – Visa changes it stripes, with some $5.3 billion Plaid | Bank Innovation 14:30 – Is data the new oil?  15:46 – Everything old wants to be new again, when it comes to fintechs, at least | Advisorhub 16:30 -- Visa's Acquisition of Plaid Presentation | Visa 17:42 – No QuickBooks Online Advance? No ChronoBooks for you! | Intuitive Accountant 19:16 – Perhaps Intuit killed the wrong tool? The ChronoBooks backlash begins 23:38 – Who needs a one-percent reward, when you can boost your Karma with every purchase? | Expensify  27:12 – Dave Barrett makes a case for Karma | Expensify 27:23 – Do you Concur? Emburse wants to change your mind! | Accounting Today 29:19 – Google ups its productivity game with the acquisition of AppSheet | AppSheet  31:16 – Stand up and shout  - FASB is the villain! | Accounting Today 33:02 – While it might delight CPAs and auditors, this 10,000 page codification, for mere accounting mortals, is a bit much 33:28 – The End of Accounting by Baruch Lev and Feng Gu | Amazon 34:32 – There's really no place for GAAP-basis financials in a subscription economy 37:11 – The CCPA implementation comes with a pretty hefty price tag - $55 BILLION |The Hill 39:11 – Could the CCPA be more trouble, and new risk than it's actually worth?  41:00 – Email still poses the biggest security threat for small businesses | PYMNTS 42:17 – Deepfake audio fraud is the new risk in town | Axios 43:28 – Are Google and Facebook too big to fail? Apparently not when it comes to invoicing scams | Fortune  44:19 – While paper check usage declines, check fraud continues to rise | WSJ 45:09 – UK small businesses are just not that fond of open banking |  PYMNTS 46:29 – Be afraid; be very afraid of the Buffett Indicator | CCN 47:05 – Mr. Buffett buys low, and sells high, or holds ... Be like Mr. Buffett!  49:41 – Time to move to Finland? | Quartz at Work 51:44 – Eliminating useless and constant meetings might be even more useful than a four-day workweek 52:28 – Who needs humans when you can hire an Alphabot? Walmart's trying to stay in the game with warehouse automation | Gizmodo 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, and NOW, you can see our smiling faces on Instagram!   Limited edition shirts, stickers, and other necessities.TeePublic Store: http://cloudacctpod.link/merch Subscribe Apple Podcasts: http://cloudacctpod.link/ApplePodcasts Spotify: http://cloudacctpod.link/Spotify Google Play: http://cloudacctpod.link/GooglePlay Stitcher: http://cloudacctpod.link/Stitcher Overcast: http://cloudacctpod.link/Overcast   ClassifiedsFutureFirm.co: https://futurefirm.co/cloudaccounting/ Go here to create your classified ad: https://cloudacctpod.link/RunClassifiedAdTranscriptRight now, if you currently have one client that's past due, you could be using QuickFee to get the immediate benefit of freeing up that cash flow. Stay tuned to hear more from our sponsor QuickFee later in this episode.----------This episode of The Cloud Accounting Podcast is sponsored by AccountingSuite. AccountingSuite offers exceptional cloud-accounting software that includes a robust set of inventory management tools to track inventory levels, orders, sales, and deliveries from anywhere at any time. AccountingSuite even handles multi-channel online sales. In one integrated dashboard, you can control inventory orders and sales across various stores at the same time to avoid product outages and lost sales. AccountingSuite lets you start out with just the features you need today, and as your business grows, and needs change, you'll have the peace of mind knowing that AccountingSuite offers an upgradeable path for your firm and company's future. AccountingSuite is offering Cloud Accounting Podcast listeners 50 percent off forever by using promo code “CAP_50_2020.” Head over to cloudaccountingpodcast.promo/asuite. That is Cloud Accounting Podcast dot promo forward slash A-S-U-I-T-E.----------This episode of The Cloud Accounting Podcast is sponsored by OnPay. OnPay is an easy-to-use full-service payroll that's the right fit for all your clients, whether they have just one or 500 employees. They handle all the complicated stuff, like agricultural payrolls, Form 943, multi-state, and H-2A visas. OnPay even makes it easy to switch from other payroll services by doing all the data entry for each client that you set up. Right now, Cloud Accounting Podcast listeners can get three free months of OnPay payroll service. To learn more, head over to cloudaccountingpodcast.promo/onpay. That is Cloud Accounting Podcast dot promo forward slash O-N-P-A-Y. ----------Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: And I'm David Leary. Blake Oliver: Another week, David. David Leary: Yes, it's very eventful for me. I got bifocals, so that way, I could actually look at my phone. Then, this morning, I dropped my phone and cracked the screen. So, now [00:02:00] I can see my phone very crisp and clear with my glasses on, and now it just makes the cracks in my phone screen really, really stand out. Blake Oliver: So, are you gonna stick with Android or are you gonna buy an iPhone? David Leary: Oh, I'm sticking with Android. Are you kidding me? I'm even gonna buy my Chinese HUAWEI phone, too. Blake Oliver: I hear those are really affordable. Must be subsidized by the Chinese government spying on you. David Leary: Value for the dollar, man. Blake Oliver: Well, what's new with me? Yesterday, I did my second webinar with Jirav on CPA Academy. It was very exciting [00:02:30] for me because I've been at Jirav now since October, and I have made it my mission, since then, to actually learn how to use the product, which is financial modeling. I've always wanted to be able to do financial modeling; I've never done it, so that was part of the reason I joined the company is, selfishly, just learn how to do this cool thing that all the CFOs I've ever worked with have been doing. So, in order to actually make that happen, because it hadn't happened - I was getting distracted by so many things - I scheduled a webinar where I would have to build one live so- [00:03:00] David Leary: Ah, for public accountability. Blake Oliver: Right. So, I had no choice- David Leary: I should've tuned in for that. I shouldn't have missed that. Darn it!  Blake Oliver: You can watch the recording. I'll put the recording link in the show notes. It was called How to Build a Financial Model for an Accounting Firm. It's very basic - basic monthly bookkeeping; build out the revenue model; and then the staffing plan; and do drivers to relate those things. You can do cool things, like, for every 25 clients, you need to hire a new bookkeeper, and you can do it two months in advance with that. Ten building [00:03:30] out the OPEX, and he CapEx for their laptops. Some simple stuff ... We couldn't  do a lot in an hour, but it was really fun to actually do it, and it forced me to learn how to do it. David Leary: So, would this be a technique you suggest when people are like, "I need to train myself how to do advising of clients ..." Like, "Just go get it. Just show up to a client and start doing some advising."  Blake Oliver: Even more than that ... I use the mad scientist approach for everything. Ever since I started doing bookkeeping ... My background was not in accounting, it was in music. So, I had to teach myself everything [00:04:00] about bookkeeping. Then I went to school for accounting. But when I was a bookkeeper, I had to learn it all myself. So, what I would do is I would buy the software, or join the Partner program, and then setup the account for myself. When I didn't have my business, I used my personal finances. So, I'd put myself personally on the software and then reconcile my accounts. That's how I learned QuickBooks; that's how I learned Xero. Then, when I had my business, I would just plug that app into my business. I'd start using Expensify for [00:04:30] expense reports, or I'd start using Bill.com for paying my own bills. Then I would see how it actually worked. That, in my opinion, is the only way to really master something is to either use it for yourself or use it for a business you're working on. But I always prefer to use it for myself, first, because I don't wanna screw up my client's process, if I don't know the thing's gonna work right. David Leary: Oh, I completely agree with you on that. I mean, that's my big learning over the last 18 months of being on my own small business journey is moving from using apps, in theory, [00:05:00] or playing with apps, or putting fake data in apps, to moving my real money through these apps, and my real data through apps. It just changes your complete tolerance level, and your point of view on it. Blake Oliver: That brings me to my retirement plan or my business after the podcast - once our podcast become so successful; we're just filthy rich ... I wanna start-  David Leary: Is this a 2020 plan, or is this a 2022 plan? How soon is this gonna happen? Blake Oliver: You're head of business development, so you tell me. I want to set up an accounting firm; [00:05:30] maybe my own CPA firm. It would be in a retail location, and the office would actually be like a coffee shop. You know how they have- Capital One has those bank branches that are now coffee shops, and you sit down? David Leary: Okay, yeah.  Blake Oliver: So, it would be a coffee shop/fast-casual kind of restaurant situation. People could come in off the street. They don't have to be clients. They could eat, and they could have coffee there, but clients could also come and work, so it'd be kinda like a co-working space. Then, the reason I want [00:06:00] that element of the coffee shop/food is that I could have all the apps running that business, so I could try out all the point-of-sale systems in my own subsidiary of my firm ... Do you know what I mean? I could actually demo the software-  David Leary: I totally get that. Clayton Oates told me this story ... He's down in Australia ... I do the same thing; when I see different point-of-sales, I ask the restaurant employee, or the restaurant owner, "Hey, you like that app you're using, or the point-of-sale?" Whatever they're doing, I talk to them about their tech. I guess Clayton did that with [00:06:30] a restaurant owner about some point-of-sale. I don't even know. The restaurant owner's like, "Yeah, and because I figured out how to use it, I have a whole side business. I've implemented in 40 other restaurants, and they all paid me to implement it." So, you're right, because you're using it, you become an expert on it, then you have a little ... This guy has this- he's in the restaurant business, but he had a whole side hustle implementing this restaurant software because nobody else knew how to implement it.  Blake Oliver: That's great. David Leary: So, all you accountants and bookkeepers out there, create a small business- Blake Oliver: A side hustle.  David Leary: A side hustle, so you can actually really [00:07:00] understand the pains that your clients are going through. Blake Oliver: So, if you're a brewery CPA, that means you gotta start brewing beer and selling it, as well, so that you can implement the point-of-sale in your own business. CPA-IPA. David Leary: I think it's been done now a couple times, but I've been wanting to try it [crosstalk]  Blake Oliver: It should be a real brand, not just promotional. Anyway-  David Leary: Promote ... Yeah, that's true - permanent brand.  Blake Oliver: -enough about random business plans and dreams. Let's talk about what's going on in the real world. I think we got a review, right? David Leary: We did get a review, but before we go away, I [00:07:30] do have something about your dreams I could tag on that's actually news- Blake Oliver: Okay.  David Leary: -from a tweet. So, there was a tweet that went out from- his name is @hunterwalk. His tweet had a really nice graph in it. His tweet says, "The number of Americans working from home full time has nearly tripled over the past 20 years. The trend is accelerating." Blake Oliver: It looks like we're at three percent now, and 20 years ago, it was closer to half a percent, yeah.  David Leary: Exactly. So, I just- I know your dream is more people working from home; more people working remotely. [00:08:00] We're well underway- Blake Oliver: I am working from home today, David, and I am business on top and pajamas on bottom. It's the best! David Leary: I have to work at home to record the podcast because it's the best quality studio here in the closet. Blake Oliver: Exactly. David Leary: All right, we can jump into the reviews. I just wanted to ... That was a news thing that was related to your dreams. Blake Oliver: All right. Well, we got two reviews, so I'll just read the first one here. The headline is "2020 Predictions." "Loved this conversation. I am usually nodding my head in agreement. Got to participate in your podcast [00:08:30] at QBConnect 2019 in San Jose. Hope we can reconvene in 2020 to follow up on pricing value, et cetera. I am now a fan, just like @MaryHambeleton.😃🌟"  That is from I <3 smilies, via Apple Podcasts. Thank you so much!  David Leary: We have another review related to predictions, as well. This was on Podchaser. This is from A-A-S-S-A-S-  Blake Oliver: Aassas.  David Leary: Aassas ... This person actually gave [00:09:00] us predictions in their review. It's a five-star review. "I have a few predictions of 2020. Accountants will become more app advisors, giving Xero or QB app add-ons advice against a small fee. Secondly, vendors will start emailing receipts just like how Squarespace ..." I think he meant to say, "Square's cash-machine app works," He thinks Worldpay, SumUp will ask for an email at the point-of-sale, as well. Blake Oliver: Mm-hmm.  David Leary: Which, I argue, every single SaaS app needs to be emailing receipts out [crosstalk]   Blake Oliver: Oh, it's great.  David Leary: I hate the ones that don't do it, [00:09:30] and I have to go get the receipt, download it, then upload it to AutoEntry. Just email me the receipt, and it saves me a bunch of work. Blake Oliver: Yep.  David Leary: Clients'll start to use Xero [crosstalk] Blake Oliver: David, you should tell that to Xero because they email a link, and you have to go in, and download your invoice. They don't just email you the invoice. David Leary: QuickBooks didn't either until I- until recently. I publicly bitched about it because ... I'm like, "Why do I have ..." It was annoying.  Blake Oliver: Right.  David Leary: Send me a receipt that I can enter in. "Clients will start to use Xero, QBO themselves more, [00:10:00] and use accountants for advisory and compliance work." So, this person sees a shift back into DIY with the accounting systems. Then he said, "I hope you my prediction. I really enjoy listening to The Cloud Accounting Podcast." Blake Oliver: Yeah, thank you.  David Leary: So, Aassas, thank you. Blake Oliver: Last one. This is also an Apple Podcasts, from Glafollette. "These guys are the real deal! So I’ve been around the accounting technology world for a VERY long time and launched the very first podcast in the space way back in 2005! (Big thanks to my friends Randy Johnston & Doug Sleeter for making “Intersection Live” so much fun! We thought it was good back then —- but quite honestly it pales when compared to what David & Blake produce week after week after week in 2020. Smart, funny, insightful, edgy (occasionally even snarky) but always interesting and pretty darn accurate. CLOUD ACCOUNTING PODCAST is high on my list of weekly “must listen” programs. Just a hint for the guys —— you know we’re going to soon stop using the term “cloud accounting,” right? In the future it will be called “ACCOUNTING. 😉" I [00:11:00] didn't really future-proof the podcast very well when I named it, did I, David? David Leary: Well, I think we've got a good 30-year run, possibly, here. That's my bet.  Blake Oliver: Thank you so much, Greg LaFollette, for listening. It's a real honor, actually, to have you listening. For anyone who does not know this man, he is probably the ultimate thought leader from the AICPA/CPA.com.  David Leary: I think he was number two on the- when Accounting Today did that list of influencers; that [00:11:30] all the influencers say who's the most influential - I think he's number two of what all the influencers think, so ...  Blake Oliver: Yeah, so, really, really cool. So, David, what do you-. David Leary: Hopefully, this is real. It's not fraudulent; like somebody's not just pranking us, right? This is a real-deal review. Blake Oliver: So, what's top of mind for you in the news this week? David Leary: Well, so we had ... What did we have? We have a big, huge acquisition - Visa bought Plaid for $5.3 billion. Blake Oliver: That's a big deal. David Leary: That happened. Intuit is shutting down access to ChronoBooks [00:12:00] unless you buy QBO Advanced. So, that exploded, and there's a firestorm online about ... I have some opinions on that. Blake Oliver: Yep.  David Leary: So, some banking-type stuff ... Open banking; more open-banking news, but I think those were the two big ones. Blake Oliver: So, for me, I've got this article. The headline is just the best: "FASB is the Villain," in Accounting Today. That does such a good job of explaining everything that I feel is wrong with FASB, and accounting regulation right now.  David Leary: Did you write this under a pen [00:12:30] name? Is this your article?  Blake Oliver: No, I wish!  David Leary: Okay, okay ...  Blake Oliver: But, no ... This is great. Another update - Expensify has a new feature in their Expensify card to help donate money to people in need, which I thought was interesting. We'll talk about that. Walmart is automating their warehouses in their stores. It's pretty futuristic. Then, I'm kinda worried that we're headed to another really bad stock market downturn, or recession based on the Buffett Indicator, [00:13:00] which I just learned about this past week. David Leary: This has been a theme of yours. This 'go short on the market;' things are gonna slowdown in the economy. You've been detecting different articles that are pointing that direction there.  Blake Oliver: Well, I'm just ... The expansion has been going on so long, it's inevitable. Now, I don't think you should take your money out of the market because I think any good wealth manager, or financial planner will tell you that you have to stay in it to win, and if you try to time things, you're gonna fail. But, yeah, I'm a little concerned based on this indicator, so we'll talk about that. Then, finally, [00:13:30] the new Finnish prime minister has called for a four-day workweek. David Leary: For everybody on the globe, or just ...? Blake Oliver: Everybody in Finland, anyway. David Leary: Okay ...  Blake Oliver: So, what should we start with?  David Leary: Why don't we just start with the big one? Let's start with the Plaid/Visa-  Blake Oliver: So, for those who don't know what Plaid is, basically, it's one of those apps that lives in between your business apps that helps connect, oh, Mint to Bank of America, or ... David Leary: It's kind of technology that enables all the bank feeds. Blake Oliver: Right. It enables bank feeds. It enables [00:14:00] verification for instant deposits, so you don't have to do this multi-day thing to verify ACH. Visa bought Plaid for $5.3 billion! That's a lot of money! Why is this a big deal? David Leary: A) The acquisition number's a big deal, right? That's gigantic. Visa's very hard about pointing out that this is not a short-term game. This is a decade-long thing for them. This is a payments consultant that said this - Plaid's APIs give Visa a new pathway to data-driven revenue streams. [00:14:30] Blake Oliver: Data is the new oil. David Leary: On two fronts, right? It's not just the grease that makes things work together, it's black gold oil.  Blake Oliver: Right. There's value in data. You can sell the data, and you can mine it for information. That's the whole history of Google, right? David Leary: One in four consumers now, with a U.S. bank account, have used Plaid. If you use Venmo, you're using Plaid. Half of the apps that connect to QuickBooks and Xero are probably using Plaid, if not more. It could be 70 to 80 percent, actually. It might be 85 or [00:15:00] 90 percent. All of you listeners, I 100-percent believe 100 percent of our listeners have all used Plaid. They might not know they've used Plaid, but they have used Plaid. Huge, huge, huge opportunity for Visa. It's a little scary because how long is Visa gonna keep an open-API mindset? Let's say I'm an app that's using Plaid, but I'm a ... Maybe my app also uses MasterCard APIs, and I've been using Plaid independently, but I'm also kind of in bed with MasterCard. Does Visa come along one day and just say, "Sorry, you don't get to use Plaid anymore because [00:15:30] you're also a partner with MasterCard ..."? That happens all the time. I think Walmart did that. They stopped dealing with partners that used Amazon Services- web services. So, this happens, and that's a little scary. My thing is where is this gonna affect the open ecosystem, and the trickle-down effect of that. I saw another article related to this - how this could start the wave of fintech deal-making. Right now, there's 60 financial fintech companies between the neo banks, the lending companies, companies like Plaid, and Stripe. There are 60 that are valued at over [00:16:00] $1 billion, and this could be the domino that just starts the acquisition of old fintech buying new fintech. Blake Oliver: It makes sense. The banks are waking up to this whole new world of fintech, and they've gotta catch up. Acquisitions are really the only way they're gonna do it because they just don't build stuff themselves like this. David Leary: You're gonna have to see consolidation. I mean, the online lending spaces, there's 5,000 players in that: all the payments players ... There's just a lot of players in this space. So, we'll see. Right now, it doesn't have a lot. There's a slide [00:16:30] deck that- I'll try to find the link so we can put it in the show notes. You start looking at that slide deck, and the one chart I kind of looked at ... The only thing it's missing is a GL. Again, it's like, geez, everybody's one step away from owning the full end-to-end, from transactions to the invoicing payments, assets, liabilities, down to the GL. That's the last thing missing from the tech stack and now, Visa is a competitor with Intuit.  Blake Oliver: Yeah, if I were a bank, I would buy a GL application and integrate it along [00:17:00] with bill pay into my online banking. I'd own the whole stack. David Leary: Yeah, well, I think last year we saw two banks buy two very small SaaS cloud-accounting GLs. So, you're right. We're probably gonna see more of that. Blake Oliver: So, you mentioned some of the possible negative impacts of this acquisition. It's a little bit abstract, though, because Plaid is not something that we use ourselves, day to day. It's one of those cogs in the machine of cloud accounting. Let's talk about an acquisition that really is [00:17:30] making a big difference, right now, for some of our listeners, which is the ChronoBooks acquisition. Intuit bought ChronoBooks back in November, and what just happened this week, David?  David Leary: Intuit announced that they are going to shut down ChronoBooks for any external users. So, if you're a ChronoBooks customer currently paying for ChronoBooks, that is gonna be shut down and disabled-. Blake Oliver: Unless you are a QuickBooks Online Advanced user.  David Leary: Which, in that case, you just get it as part of your QuickBooks [00:18:00] Online Advanced subscription. Blake Oliver: What is ChronoBooks? David Leary: ChronoBooks will do a backup of your QuickBooks Online data. One of the things people have always had a knock against online software, like QuickBooks and Xero, is there's no backup. In QuickBooks Desktop, every day, you could back up your data to floppy diskettes or a CD-ROM, put it in the safe, and if there's a catastrophe, you could restore your backup. Well, great ... For natural disasters, QuickBooks Online and Xero are great for backing that up, but if you have an employee do bad data entry into your app all day, or [00:18:30] you have an app, a rogue app, do bad data entry into your app, you can't fix that without manually fixing it. There are products that ChronoBooks ... Remember one of our sponsors, Rewind? There's been products that have popped up on the market that will use the APIs of QuickBooks or Xero to back that data up, so you can restore the data. Now, they're only as good as the APIs available, so there's not 100-percent backup because these products don't have all the data exposed through APIs. But, in most cases, if you can restore [00:19:00] invoices, the things that people are entering, or deleting from your software-  Blake Oliver: That's enough. David Leary: These tools are really, really pretty valuable, I think. I totally agree. It's got a lotta traction. These tools, surprisingly, are more popular than I think even myself would have imagined. Blake Oliver: Yeah, and this is really impacting at least one of our listeners. who we know personally. Caleb Jenkins uses ChronoBooks with his clients who have ... He calls them clusters of companies - all these different entities and subsidiaries, he [00:19:30] backs them all up. Now, he's going to have to migrate to something else, but none of the other applications support that particular type of billing and functionality, so he doesn't know what he's gonna do. He's a QuickBooks power user ... I just don't get this-  David Leary: The Facebook groups are on fire about it. Everybody's complaining about it. Twitter people are complaining about it. I actually- my opinion is Intuit shut down the wrong product.  Blake Oliver: What should they have shut down instead? David Leary: Should I explain more on this?  Blake Oliver: Yeah.  David Leary: Okay. Well, let's talk about some assumptions [00:20:00] we can agree on, okay? A company the size of Intuit, no matter what decisions they make, a certain percentage of customers are gonna be pissed off. That's just the fact with everything.  Blake Oliver: Right. Of course.  David Leary: Uber changes something, some people are gonna be mad. McDonald's changes the size of the French fries, people get mad. You're always gonna make ... That's just gonna happen. We can agree on that, right? Can we agree, too, that QBO is the future for Intuit?  Blake Oliver: Yes.  David Leary: Okay, we can agree on that. Can we also agree that Intuit's a public company, and they have a financial incentive or obligation to push customers to QBO Advanced? Blake Oliver: Yeah. Well, to [00:20:30] QBO, I think the way they're doing it with QBO Advanced, as somebody pointed out on Twitter ... Trying to find who said it ... The way they're building QuickBooks Online Advanced is buying apps, adding them into QuickBooks Online Advanced, and then shutting them down. That appears to be the strategy. So, it's not innovating, and building into QuickBooks Online Advanced; it's forcing people to upgrade by taking away stuff from the regular product. David Leary: Yeah. By shutting down ChronoBooks, they've pissed off the QBO users, which is your future, right? [00:21:00] Those users are bought into your dream. They're bought into your future. So, you're pissing off your QBO users. Then, now, what you've done is you've actually pushed them not to QBO Advanced, but to go find a different third-party backup program. My argument is they should've shut down QuickBooks Desktop. You would have pissed off a percentage of users, but it's okay to piss off the Desktop users because they're not the future. Then, yes, there's options, but the vast majority would just move to QuickBooks Online. If you really want- if you really [00:21:30] want to get people on QBO Advanced, kill QuickBooks Desktop. The wrong product was killed here. That's my opinion. Blake Oliver: Well, David, maybe it's coming, someday. There's always chatter every year that Intuit will end support for Desktop [crosstalk]  David Leary: I'm slightly surprised at Intuit did this, too, because if I go back like 15 years ago, when Intuit bought PayCycle, at that time, they had like two online payroll products, and they just ripped the Band-Aid off and killed one. I remember the mantra ... It felt like, for at least 10 or 12 years at Intuit, it was like, "We [00:22:00] will never discontinue and just kill a product like that.". Obviously, anybody who was around for that type of history, and that learning experience, and the blowback from that ... People were in tears from that blowback; senior managers, VPs that had to go into support groups, and the online channels, and respond to comments, and customer complaints. Those people aren't around anymore. The Band-Aids were ripped off, and they killed the product, what, 12 weeks after they acquired it? Less than that? Now, the blowback's [00:22:30] happening online.This episode of The Cloud Accounting Podcast is sponsored by QuickFee. As you know, accounting firms don't have trouble getting paid; they have trouble getting paid on time. QuickFee allows your clients to pay outstanding fees in up to 12 monthly installments, while your firm gets paid upfront and in full.QuickFee was started by accountants for accountants with a mission to ensure that firms are never paid late again. For almost five years, QuickFee has been helping CPA firms reduce their outstanding AR. In fact, accounting firms that are partnered with QuickFee are seeing a minimum of 32-percent reduction in their AR. Think of your firm. What could you do with that additional operating capital?QuickFee is offering Cloud Accounting Podcast listeners to waive sign up fees, three free months, and quick setup just in time for your firm's busy season. To join the 1,200 CPA firms globally, and over 20 percent of the top 200 U.S. accounting firms in benefiting from QuickFee payment plans, head over to cloudaccountingpodcast.promo/quickfee. That is Cloud Accounting Podcast dot promo forward slash Q-U-I-C-K-F-E-E. You've already done the work, QuickFee gets you paid on time.Blake Oliver: I got another app update from Expensify. We reported on when they released their Expensify card, right?  David Leary: Yes.  Blake Oliver: That's the credit card that's linked to Expensify. You don't have to take pictures of receipts and then get reimbursed; you actually just spend on the credit card. It syncs the receipts into your accounting system, and then, no [00:24:00] expense reimbursement has to happen. It just draws from your account every single day. One thing about these cards, these credit-card apps, is that they don't have the rewards points that you might be used to. So, the question is - how do you motivate people to use Expensify card, or businesses to start using Expensify card, when they're gonna lose out on the points that they could be getting - either the business owners, or the employees, themselves, who are getting reimbursed? I kinda liked doing that when I had my business. I do that, right now, as [00:24:30] an employee; I'll put a big purchase on my personal card, get the points for it, get the cash back, and then get reimbursed. David Leary: It's funny because what's always interesting about an Expensify announcement of a new product is Dave Barrett will write this stream-of-consciousness email, right?  Blake Oliver: Yeah. David Leary: It's usually ... I have a policy - I do not read below the fold. If I have to scroll to read your email, I will not read it. I always read Dave's because he gives their whole thought process on why they decided not to do a points card- a typical [00:25:00] points card. Really, you start following the logic is, it's like, yeah, I get it ... People are chasing one percent; spending hours to chase a little one-percent discount.  Blake Oliver: Right.  David Leary: If you're driving your car, and a furniture store says, "One Percent Off!", you're not pulling over to go buy furniture there. Blake Oliver: Right.  David Leary: The whole one percent is stupid! It's insane! It really, truly is ... That's what evolved, as they worked through this ... It's great to read Dave's brain dump about this and what they worked through. Blake Oliver: So, he said, basically, that rewards [00:25:30] programs are stupid. The benefits are minimal for the amount of work it takes. "So, instead of doing that, we're gonna create this thing called Karma Points," where they're donating 10 percent of all revenue from the Expensify card to one of five funds supported by Expensify.org, which is their new charitable arm. Depending on what you're spending, it donates to that cause. If you buy a meal, it'll donate to hunger; or if you're traveling, I guess that probably goes to climate. [00:26:00] It's kinda cool, and you can just opt into it. Instead of getting one percent back, you're giving back to the community. It could generate millions or even, I guess someday, billions of dollars. David Leary: The other thing that I thought was interesting is the way they even looked at how Amazon does Amazon Smiles. Essentially, what Amazon's doing is, when it's all said and done, the average nonprofit gets a check from Amazon for $130 or something ... It's not that it's useless, but it is. If you're a non-profit, and you get a check for $130, that [00:26:30] is not gonna move your needle in any way, shape, or form. What they've done is instead of letting people specify a bunch of individual charities and then, each individual charity basically gets almost nothing, they're lumping these together. One's an environmental one; one's for homelessness; one's for like relocation, or something? Blake Oliver: Mm-hmm.  David Leary: What were the five categories? Do you remember? Blake Oliver: Yeah, so they've got homes, which covers the costs of reuniting a person experiencing homelessness with their family; a climate fund; a hunger fund; a youth fund; and a reentry fund, [00:27:00] which is- that reimburses the costs of a journey home for an individual just released from incarceration, so they have a fair shot at transitioning back into society. It's all based on what category of the expense that it was. David Leary: I'm not sure that email is just a blog post somewhere, right? It's only an email ... Because it'd be great to link to that for everybody. Blake Oliver: Oh, yeah. Well, if we can, we will. Otherwise, we'll link to the product update, and you can learn more there. David Leary: I have a related - since we're talking about expense management - article, if you wanna do that. "Expense [00:27:30] Management Vendors Unite to Form Emburse." Abacus, Captio, Certify, Chrome River, Nexonia, and Tallie, a few years ago- almost a full year ago, if not two years ago, all merged together to form a new- Blake Oliver: They were all acquired by a private equity firm that, for what reason we didn't know, was buying them all and had not yet combined them. David Leary: During this time we missed it. Apparently, in September, Chrome River and Certify actually purchased another similar startup called Emburse. So, seven apps have all been combined [00:28:00] now as one holding company, and they're gonna brand it as Emburse. They wanna take on Concur. They have 750 people around the world. They're valued at $1 billion based on all these things added up individually. I just don't know if there's a migration path because they're all trying to get slices of the market, and-  Blake Oliver: Right. Is it gonna become a single app, or are they gonna stay separate? What is the long-term strategy? David Leary: This feels a lot more like a Thomson Reuters, or even a Sage-type strategy - acquire a bunch of products and [00:28:30] then rebrand them all similar. But it's ... I don't know. It's an interesting strategy. I just don't know how - for me, being at a big company, before - how you manage, and divvy up resources, and which one ... "Well, I'm the important app!" "No, I'm the important app." I've even seen that- even Intuit, right? There's resource strains between QuickBooks Online, QuickBooks Desktop. That's two products. Blake Oliver: What happens when the sales teams from the different apps owned by that same private equity company are competing with each [00:29:00] other for business? David Leary: Which they are because you'll go to a conference ... I think when we were at Sage Intacct, Abacus, Certify, Nexonia, and Tallie, four of these companies all had a separate booth. Blake Oliver: Weird. David Leary: Yeah, it's this weird strategy. But, anyways, just pointing that out that they've grown by one more app, and now, they've rebranded to that app. Blake Oliver: Any more app updates today? David Leary: Not on expense management, but I did have ... Google made an acquisition of a smaller app called AppSheet. Have you ever seen AppSheet, or have you used it? Blake Oliver: No, never [00:29:30] heard of it. David Leary: Long story short, it can take a spreadsheet, like a Google Sheet, and take all your column headings, and data, and then turn that into an app for your mobile devices. It almost feels like a very, very, very fancy Google Form. Blake Oliver: Got it. David Leary: I guess that's possibly were Google's heading down this path, or maybe  like with Airtable, you can build more mini apps on top of Air Table. Maybe it's to power Google Sheets more powerful; but, yes, they did acquire a product called AppSheet. Blake Oliver: Gotcha.  David Leary: I just never could really [00:30:00] get into it though. Blake Oliver: These apps that are super-super-general-purpose, and you could conceivably do a ton of things with them, it's kinda hard to get into it, if you're not a developer, because where do you start? Sometimes it's too powerful. David Leary: Well, and this is a no-code app, right? That's the theory - it's a no-code app. Yes, I might have a spreadsheet set up to track time; clock in, clock out, total hours, employee's name, or something. I've been using that spreadsheet. Then, I discover AppSheet, and [00:30:30] I turn it into an app, and now every employee can have this on their mobile phone. But it feels like all the apps that people could make themselves are half-assed solutions of something you could just get on the market. They exist already [crosstalk]  Blake Oliver: Right, and it might be no-code, but it's still ... You've still gotta basically build a product, which is just as hard as coding. Designing an app is hard. Maybe Google can buy this, and then ... It's a really powerful feature in a suite, like a Google Apps. David Leary: I think Microsoft has some things [00:31:00] like that. That Microsoft Flow: these no-code app things that'll take some spreadsheets, and different Microsoft tools, and compile them together into a working thing. Maybe that makes the most sense for something like this. Blake Oliver: Like a Zapier kind of situation, but internally for that system, or whatever for that ...  David Leary: Yep.  Blake Oliver: Okay, so, we're done with app news. You wanna talk about why FASB is the villain?  David Leary: Why is FASB the villain?  Blake Oliver: So, the Financial Accounting Standards Board sets all the accounting laws, if you will, the accounting standards that govern how we do generally accepted [00:31:30] accounting principles. We talked about it in the show about how ... I think we just talked last week about how I'm a bit skeptical of what they're up to, and the value of it, and we're kinda wasting our time, and-  David Leary: Even the prediction episode, we talked about how there's a prediction of things they were gonna do, and we were like-  Blake Oliver: It's really not that amazing, right? David Leary: Important, yeah. Exactly.  Blake Oliver: So, Peter Margaritis wrote this blog post on Accounting Today- an article on Accounting Today that is called: "FASB is the Villain," and basically does just a fantastic [00:32:00] job of kind of summarizing the main issues, right now, in accounting, and especially accounting as it affects larger companies, and public companies that have to adhere to GAAP.  He said that he speaks to CPAs around the country, and, "It's becoming clearer and clearer to me that many accountants and business owners view the Financial Accounting Standards Board as something of a villain. Three different audience members, all mild-mannered accountants, at different events, have actually said out loud to me, 'FASB is the villain.' After the third [00:32:30] time, during a keynote at the University of Nebraska at Omaha, I realized I was, perhaps, onto something. David Leary: Oh, is gonna now be a trend? Like, when you're at a conference, and somebody's doing a keynote, if you're in the audience, just yell out, "FASB is the villain!" This would be amazing!  Blake Oliver: Maybe. David Leary: Please, please, please! Everybody jump on this!  Blake Oliver: Maybe we'll start a movement here. I don't know. He continues on talking about how the guidance from FASB has been getting more and more complex. In 2018, the entire codification was over 10,000 pages in five volumes that were more [00:33:00] than a foot high.  This is great news, I guess, if you want a job as a CPA, or an auditor, but for business owners and stakeholders, it doesn't really add value. It creates a lot of complexity, it's incomprehensible, and it increases costs. We were talking about this a few weeks ago that accounting standards have gotten four or five times more complex than they used to be 40-50 years ago, and what have we gotten for it?  The author here talks about the book, "The End of Accounting," by Baruch [00:33:30] Lev and Feng Gu. That is an excellent book, laying out all the problems with public company accounting and the issues with accounting standards really not improving financial reporting the way they could because our economy is changing.  The most important things for investors and analysts today aren't on the balance sheets. You're not gonna find lucrative contracts with customers, proprietary know-how, and employee knowledge, except as an afterthought [00:34:00] in the notes. We're in a knowledge economy, but our accounting is setup for an industrial economy.  The example cited in this article - that's also in the book, The End of Accounting - is the financials for U.S. Steel. The 1902 financials for U.S. Steel, side by side with the 2012 versions are almost identical. The financial statements haven't really changed, but our economy really has because we're dealing in intangible assets.  Then, he also mentions the subscription economy in the book, by Tien Tzuo, who's the founder of [00:34:30] ... What's he the founder of? Zuora. How, now that we're in this subscription economy, you're not gonna find numbers that are important to the SaaS company in GAAP-basis financials. You don't see recurring revenue. You don't see customer churn rate, not even the number of subscribers. Not in there at all. Those are numbers that are way more important to investors than any of the stuff we report on.  Just one more example here, like an actual example of an accounting standard that makes no sense – ASC 606 for revenue recognition. ASC 606, changing [00:35:00] how we recognize revenue from contracts with customers, and recurring revenue, makes sense at first, but then, the way it's implemented is with this 500-page rule book.  One of the problems is that you now have to take the revenue from the implementation phase of a contract. It used to be recognized upfront. So, David, if I sold you software with a subscription attached to it, and I had a setup fee of a few thousand dollars ... Let's say it's a setup fee of $10,000. Then I'm gonna charge you $1,000 a month. I [00:35:30] would recognize the $10,000 for that implementation upfront. Now, I have to take that $10,000 from the implementation, and I have to spread it out over the expected life of the contract. I have to defer that revenue, even if I did all the work upfront, okay? So, there's a kind of a mismatch there between revenue and expense right there. Then, the really screwed-up thing is that let's say you churn, as my customer. Because I've deferred all that revenue, I now have to recognize it all in the month that I lose you. So, we have this perverse [00:36:00] situation, where you leave, and my revenue goes up that month.  David Leary: But you've lost a customer.  Blake Oliver: But I've lost a customer. So, it's a complete mismatch between what is happening on the financial statements and what happened in my business. It was a bad thing for my business, but a good thing for my net income. It's bizarre. It doesn't make sense.  David Leary: Yeah, yeah.  Blake Oliver: So, anyway, I feel very strongly that this is something we're gonna be talking about because this trend is continuing. Businesses are about subscribers. They're about intangibles, and financial statements. [00:36:30] Just don't ... You don't see that. SaaS metrics are not on a financial statement. How useful is that to investors? It's just not that useful anymore.  Anyway, go check out the article. If you have thoughts on this, let us know. If you write a review, you can tell us what you think. We'll read it. It's like a letter to the editor, right? We'll read it on the air. I wanna start a conversation. David Leary: People are gonna start yelling this out of keynotes. This is coming. I can see it. This is gonna be ... This is gonna be awesome. This is my new prediction for 2020. Everybody's gonna yell out, "FASB is the villain!" at keynotes.  Blake Oliver: All right.  [00:37:00] David Leary: If you do that, please, please videotape it, and put it up on Twitter, so we all can see it. That'd be great to see. What do you think you wanna jump into next? Blake Oliver: Let's talk about one follow-up item. David Leary: Okay. Blake Oliver: So, I've talked a lot about the California Consumer Privacy Act that requires businesses with over $25 million in revenue, or information on 50,000 California residents to do all this stuff, like allow me, as a California resident, to ask you what information you have [00:37:30], download it, and then tell you to delete it.  It's creating huge compliance costs, and we now know ... Well, we have an estimate of what that's gonna be. The Department of Justice here in California estimates that the CCPA will affect between 15,000 and 400,000 businesses, which is a huge range. Up to 50 percent of those businesses are small businesses, even though the bill was supposed to exclude small businesses from its scope.  A related assessment that the DOJ paid for estimated [00:38:00] - and this is the big number - initial compliance with the CCPA- the cost of initial compliance is going to be approximately $55 billion dollars, which is equivalent to almost two percent of our California gross state product in 2018.  So, a single law about California consumer privacy is gonna cost businesses - and not just California businesses; this is spread out over any business that deals with California customers, and is of a certain size - it's gonna cost them, collectively, two [00:38:30] percent of our California gross state product - $55 billion.  David Leary:To track this-  Blake Oliver: It's a lot of work-  David Leary: -and to comply.  Blake Oliver: -and it's gonna cost a lot of money. That's why you were talking about how compliance ... A lot of businesses are just saying, "We're gonna wait, and not do anything, and just see what happens." To tell you how complex this is, the CCPA is 10,000 words. The regulations to go along with it are another 10,000 words. So, it's 20,000 words. This is why it's expensive because you've gotta hire lawyers to do it. I guess this was actually a fitting [00:39:00] follow-on to the FASB stuff because here we are talking about complexity in law, and regulation just creating more barriers to people doing business. David Leary: Yeah, and it's not- it may not be helping anybody in the long term. Blake Oliver: Think about it this way, there's actually some crazy potential ways that hackers could use the CCPA. Every business that has data on me, of a certain size, has to give me the data when I ask for it. Well, how do they know that it's me asking for the data and not somebody else? They just have to have [00:39:30] a reasonable certainty. I think the word is 'reasonable' that it's me.  So, a lot of businesses are just saying, "Okay, send us your driver's license, and some other verification," and this is stuff that a hacker might be able to get - a driver's license number, and a name, and a social security number. So, what you can do now, David, is if you wanna get information on somebody, you just get a little bit of their personal information – enough to-  David Leary: Because they have to give it to you [crosstalk]  Blake Oliver: And then they'll send you more. So, you can basically go around to a bunch of companies and get people's personal [00:40:00] information sent to you now because you're pretending to be them. David Leary: The other part of this, I think's not well thought out is, in order for me, as a company, to service you when you do request your information, I gotta have some sort of database that pulls this information in from all the places I might have your data. So, now, I've just created a whole new database with your data.  Blake Oliver: Something else to hack.  David Leary: The guise of trying to give you less data out there, I'm gonna have to create a bunch more data about you. It's kind of insane because the principle of it is to have less data tracked, have [00:40:30] it be open and honest about what's being tracked, and now it's just gonna lead to more tracking.  Blake Oliver: Yeah.  David Leary: This is gonna flop ... It'll be in California and the rest of the country is gonna make fun of it. So, that's kind of how that'll go.  Blake Oliver: What if other states start passing laws, but they're not the same? So, now you've got a compliance cost to figure out the different rules in the different states, just like with sales tax. David Leary: You want me to continue on this kind of old-school thinking while we're at it? Blake Oliver: Sure.  David Leary: Okay. I have three articles, and I can tie them all together in this old-school thinking. One of [00:41:00] them is email is the small business's biggest security threat still. So, Business Email Compromise – BEC - scam is a cyber security threat to businesses of all sizes. This is when, Blake, I maybe send you an email. "Hey, Blake, pay me this bill," and you just pay it. Blake Oliver: Right, you pretend to be somebody else. You pretend to be my CEO, right?  David Leary: Exactly, and we've talked about this- incidents in the past. According to the FBI, more than $26 billion in losses were reported because of this, between July 2016 and [00:41:30] September 2019.  Blake Oliver: Wow.  David Leary: The Better Business Bureau says 80 percent of businesses received one kind of this scam in 2018. Blake Oliver: I received multiple of those at my last company and we were only 160 people. David Leary: The reason it's happening so much ... It's the biggest risk to small businesses. This is according to Tim Sadler, a co-founder and CEO of cyber security firm, Tessian?  Blake Oliver: Mm-hmm.  David Leary: Basically, it's the most significant risk, and it's the easiest for fraudsters to achieve. It [00:42:00] doesn't take much to send somebody a fake bill. It could be a paper bill in the mail. It's just easy to do. Then, once that money is gone, it's almost impossible to get ... That's that old-school email is still a big threat. Should we talk about checks? Blake Oliver: Well, no, I wanna follow on to that. David Leary: Okay ...  Blake Oliver: So, it's not just email. It's getting more sophisticated. At least three private companies have fallen victim to deep fake audio fraud. In each case, a computerized voice clone of the company CEO called a senior financial officer to request an urgent money transfer. So, [00:42:30] they're faking people's voices. If you've got a call, David, and it sounded like me, and I told you to send money somewhere, you probably wouldn't question that necessarily. David Leary: I just reply back and say, "I'm a podcaster who has no money." Blake Oliver: But that's crazy, right? David Leary: I mean, the easy solution for this- it's really easy. The solution's like Bill.com. One layer of approval is all you need, until people figure out how to do that, but that's just more work. Somebody's gotta figure out how to [crosstalk]   Blake Oliver: -yeah, exactly. [00:43:00] You need a notification on your phone and then you approve it. . That's the only way to verify this. You can't go on verbal, on email approvals anymore. It's gotta be in an app. David Leary: Especially not an email approval. That's actually very, very, very dangerous. You should be very skeptical of that, especially ... If you're not the one who sent the email, first, saying, "Can I pay this bill?" Right?  Blake Oliver: Yeah.  David Leary: It should never come down the other way. Ever.  Blake Oliver: Right.  David Leary: That's something to be aware of.              Blake Oliver: You mentioned invoice scamming - sending fake invoices? David Leary: Yep.  Blake Oliver: In 2017, Google and Facebook were victims [00:43:30] of an invoicing scam. They lost $100 million dollars between them to a single scammer. David Leary: I think we talked about that in the show. Yeah, it's ... Those are ridiculous numbers. It's so simple ... It's very preventable. Maybe Google can build an app now that they AppSheet - a very simple app that looks at all the bills they're about to pay, and somebody can type through there, and then approve them. Sticking on fraud, there's a rise in check fraud that could [crosstalk]  Blake Oliver: Oh, yes. Been going up and up for years, yep.  David Leary: It's been going up. Check fraud was $15.1 [00:44:00] billion in 2018, up from $8.5 billion in 2016. So, it doubled in two years. Blake Oliver: Wow. David Leary: So, 60 percent of all attempted fraud against deposit accounts in the U.S. banks is check fraud. Blake Oliver: A great stat to tell your clients when you're trying to get them to switch to a digital payments platform. David Leary: Now, check usage is declining, but it's kind of crazy, for as much as check ... Check usage is down. It used to be 81 percent in 2004 to last year, it was just 42 [00:44:30] percent. So, check usage is down as half, but the amount of fraud is up. Blake Oliver: So, it's worse than it even ... Combining those two stats, you realize it's worse than it seems. David Leary: This could be $30 billion, if it was still the same percentage of checks going through. What I liked about this article is there's a quote from - not an accountant, or bookkeeper, or us - this is a quote from Robin Helms. He's the company finance and chief of Hansel Auto Group, which operates a network of car dealerships in California. He said that some of his suppliers [00:45:00] just insist on being paid by check. "There's a lot of stubborn businesses that want to operate with checks." Blake Oliver: Well, they've got their workflow, right? They don't want that disrupted. David Leary: So, it's not just people like us, and cloud accountants, and forward-thinking people saying, "Hey, stop using the checks." Now, the small businesses that have to deal with it are starting to push against it, as well, which is getting out of that ...  The last kind of stuck in old thinking is a survey by the UK Federation of Small Businesses. It's been two years since [00:45:30] open banking has been introduced in the UK. They surveyed 1,000 small businesses about their open banking habits or share data habits. What they found is two-thirds of the people surveyed would not consider sharing their bank account details electronically with other financial providers. Blake Oliver: Two-thirds.  David Leary: 40 percent believe it's unsafe. Are you digesting that for a second?  Blake Oliver: Yeah.  David Leary: So, this is a country that has government-implemented open banking regulations, and people don't wanna do it. The FSB, this Federation [00:46:00] of Small Businesses, is calling on the UK government and banks to raise the awareness with the community and reassure businesses that the APIs are absolutely watertight.  That's actually really scary because- I'm not saying ... Nothing is perfectly watertight. It's very secure versus a paper check, but for the government and banks to go out and just ... I don't think that's what's gonna encourage people to use it. Blake Oliver: Well, fear is a powerful motivator either to action or inaction. So, let's talk about my fear of [00:46:30] a pending stock market collapse. I learned about something recently - the Buffett Indicator. Have you ever heard about this, David? David Leary: Is it based on his liquid assets versus what's in the market? I really don't know what the Indicator is.  Blake Oliver: It's pretty simple. It's the total stock market capitalization of the United States relative to U.S. GDP. So, total value of the stock market divided by gross domestic product - what we are producing as a country. David Leary: Okay, so it's some [00:47:00] ratio where ... That gets out of whack, right?  Blake Oliver: Right. So-  David Leary: Like how could it be worth more than what we're making? Blake Oliver: Right. So, the idea is that long term, stock market capitalization can't be that much more than GDP because, ultimately, what are you investing in? You're investing in products being made and sold. So, right now, it's near an all-time high, or it's at an all-time high. Right before the Great Recession, at the end of 2007, the U.S. market cap was 137 percent of GDP; just before the Dot-Com [00:47:30] bubble collapsed, the U.S. market cap was at 146 percent of GDP. On the first day of trading in 2020, that indicator - the Buffett Indicator - hit 153 percent. It rose 14 percent in Q4, and corporate earnings growth is flat.  So, the question is, are we due for another significant market correction? This indicator says that we're overvaluing the stock market. I guess it's called the Buffett Indicator [00:48:00] because Warren Buffett uses this as a personal way of determining whether the stock market is overvalued.  He's hoarding cash right now. He has $128 billion dollars in cash. Why would he be holding on all that cash? Well, he thinks the market's gonna drop, and he's gonna buy.  Buy low, sell high. That's Warren Buffett's strategy; or just really buy low, and hold. That's what he does. David Leary: One indicator of this ... I like that article you found five, six, eight weeks ago [00:48:30] about the restatement of earnings and how that's been rising; people just restating their earnings, after the fact, over, and over, and over again. Blake Oliver: Oh, yeah, exactly. Maybe accounting has something to do with this, right? Pumping up earnings? David Leary: Exactly.  Blake Oliver: Companies not really being honest when they restate; not really telling people, "Oh, by the way, we actually ... Our revenue was lower than we reported. Our net income was lower than we reported." Not notifying [crosstalk]  David Leary: Yeah, there's not a lot of requirements about them reporting it [crosstalk Blake Oliver: Right. Well, it's [00:49:00] to their discretion, in a lot of cases. If it's not ... We don't even have a set threshold, so it's really just do they think they can get away with it or not? So, and [crosstalk]  David Leary: That's at all-time highs now, as people are ... They're restating their revenues, not telling anybody they did it, and so-  Blake Oliver: Right, ever since the requirements started, after Enron, it's the lowest percentage.  David Leary: Well, that's what the FASB is for, right?  Blake Oliver: Yeah. Well, that's what the SEC is for, and FASB is part of that. So, yeah ... What do you wanna talk about next? I've got Walmart's roboticization, or [00:49:30] automation, and I've got the four-day workweek. David Leary: I have a little bit on [inaudible] discuss with online lenders, but the more I read it, there's not much new news in there, so we can skip that. Just jump into yours.  Blake Oliver: All right, so real quick, the Finnish prime minister is the youngest female head of government worldwide, and it kinda makes me feel old because she's 34. Sanna Marin is 34, and she leads a Center-Left coalition, which all five government parties have women at the top. That's pretty cool. One of her platforms, one of her goals, [00:50:00] is to introduce a four-day week and a six-hour working day in Finland.  In her position as Minister of Transport and Communications, prior to the election, she said, "A four-day workweek, a six-hour workday. Why couldn't it be the next step? Is eight hours really the ultimate truth? I believe people deserve to spend more time with their families, loved ones, hobbies, and other aspects of life, such as culture. This could be the next step for us in working life." So, yeah-  David Leary: Will there be ripple effects of that? Because if [00:50:30] you think, that's only 24 hours, and I think you tweeted out, or put on Facebook something about the amount of hours a year a dad spends in the bathroom to avoid their families. Blake Oliver: I did. It's seven hours a year, according to [crosstalk]  David Leary: Which I feel is very low. It'd be interesting to see, in Finland, if that number increases based on these new working hours.Blake Oliver: Yeah, and I'm a big fan of the idea of a four-day workweek, or a shorter working day. But, see, I think the thing that is not really talked about, or the thing that we're missing here is that it doesn't mean [00:51:00] that you don't work- at least for knowledge workers, it doesn't mean that you're only working four days a week, or you're only working six hours a day.  To me, it just means that that's when you either go into the office, or that's when you're supposed to be online. That way, it gives you more flexibility - be with your family; take care of your kids. You don't need to actually be on, "working," at your desk eight hours a day because we're in the knowledge economy, and it's really just about getting things done. If you can get things done, by [00:51:30] all means, check out at 3:00 p.m.  David Leary: It would be better ... What would be a better law is not putting a requirement of how much people work; it's putting a limit on how many meetings you have to attend. That could actually change the entire world economy. Blake Oliver: That's the thing, too, and why I'm so glad I'm not in an office anymore, is just the wasted, pointless meetings that people would have just to fill up their day, and make sure their calendar looks busy. You can spend a whole day in meetings, and get no work done. When you're at home-  David Leary: You can't. That's [00:52:00] all that happens. You get no work done, yes.  Blake Oliver: Right. Anyway, I'm excited about this because we'll see ... If they actually do it, then we'll see if it makes a difference. It's gonna be a case study, someday. Because we've seen this in certain cities.  In Sweden, the city of Gothenburg, they did this. They reduced working time to six hours a day in old people's homes and at their municipal hospital, while still paying their employees a full salary. The results were good. So, if that whole country does it, I'm gonna be really curious to see what happens.  Now, let's talk about [00:52:30] technology that might enable us to work four days a week, which is automation and robotics. Walmart is rushing to catch up with Amazon. They don't have nearly the automation that Amazon has. We've talked about Amazon's warehouses; there's robots going and picking items and bringing them to workers. This is really super-futuristic and pretty cool, right? I mean, there's robots zooming around the warehouse, and going, and getting stuff, and bringing them to the Amazon people who pack the boxes; because we still don't have robots that can pack [00:53:00] the boxes without breaking stuff yet.  Well, at Walmart, it's, in general, not as sophisticated. When you order something online on Walmart for a store pickup, the order gets printed out, and a person takes it, and then they run around the store, and they get the items, and they pack them up for you, and you go pick them up. They bring them out to the curb.  They have that in a lot of stores, thousands of stores now, but it's not very efficient because a human can only pick about 80 items per hour, and it's really hard to keep your inventory accurate because you've got stuff on the shelves, [00:53:30] and people are trying to order stuff on the shelves. It's hard to keep track of that stuff. It gets moved around the store; people pick it up; they put it somewhere else. You need a better system. That's why Amazon's been beating Walmart. David Leary: You gotta get rid of the humans.  Blake Oliver: So, Walmart has purchased a system from a company called Alert Innovation. It's an automated warehouse system that they can build in the back warehouse of their stores; it's called Alphabot. So, think of this as a 24-foot tall vending machine with 20,000 [00:54:00] square feet of space. It's designed to collect 800 products an hour per workstation.  So, trucks come and deliver items to Walmart. Workers put the items into Alphabot. They put them into bins, and then push them into the machine. I guess they scan the items to say what they are. They put them in the machine. Then, Alphabot goes and stores them somewhere in that giant cube.  Then, when somebody orders it online, it goes and fetches the item and brings it [00:54:30] to a worker who's standing in one place at this counter where all the items come out on conveyor belts in these bins. The worker takes the item out of the box, or the bin, puts it in the bag, and then the bin goes away. This way, the machine can bring 800 items an hour to that worker, so it makes the worker able to do 10 times the work. David Leary: So, are we seeing a shift back to an older model of retail - of stores that died? In the '80s, you had stores like Service Merchandise, Circuit [00:55:00] City, where they were kind of just showrooms, and then all the products were in the back. Then, when you were ready to buy, you'd go up to the counter, and it would come off a conveyor belt, and it'd be on the counter for you to purchase - whatever products you were buying at that time.  Blake Oliver: Right.  David Leary: It's almost like the pendulum's swinging right back. Then, that makes me think, if you're in the accounting industry, if something's being automated, are there throwbacks to old business models that may have died 10 years ago, 15 years ago, that almost can be relaunched because of these new automation and technologies that we have available to us? Blake Oliver: Well, and it being relaunched [00:55:30] with a twist.  David Leary: Yes.  Blake Oliver: In this case, now I'm gonna go on walmart.com. I order the items online for pickup at the store. So, on my way home from work, I drive by the store; I park in the special part of the lot upfront, and I let them know I'm there, and they bring out the items, and put them in my car.  I can get same-day delivery essentially just by going to the Walmart, instead of waiting for Amazon to bring my box. That should give Walmart a big competitive advantage. Imagine a future in which the entire [00:56:00] warehouse is automated. This isn't just part of a Walmart. What if the entire store is one of these automated vending-machine warehouses, essentially?  If they can figure out how to make the machines pack the boxes, or put stuff in bags, then you would order online, your bags would be packed by the machine, and just there in a locker waiting for you to pick them up. Now, they need humans, but eventually maybe they figure out how to automate that part.  Currently, the system [00:56:30] is in, I think, three stores - one in Oklahoma, another in California. There's one at their headquarters, or near their headquarters. They wanna have it go to thousands of stores eventually. David Leary: I think I read an article, and this was a while back - eight months ago ... An argument, or point of view. So, just like how Amazon got really good at building servers, infrastructure, cloud computing, and then they launched Amazon Web Services, which is a huge income-maker for Amazon. It's that really their play is - with all this automation they do with warehouse automation [00:57:00] and retail automation - is a play to provide this for others.  So, Target will be like, "Hey, we wanna have robots ...." They'll basically build what you were just talking about. Target could build it from scratch, or they could just spin it up as needed from Amazon, and Amazon will actually just empower all of this for a bunch of other retailers instead of just themselves.  Blake Oliver: It's a thought. David Leary: Because then they win all retail. They win all retail without having to win retail. Blake Oliver: Well, I think we're out of time this week, David. The hour just flies by. So, if people wanna get in touch with you, where can they do [00:57:30] that? David Leary: The easiest way is on Twitter - @DavidLeary. What about yourself, Blake?  Blake Oliver: I'm @BlakeTOliver, and you can email me at blake@blakeoliver.com. If you wanna let us know what you think, do us a favor, write us a review. We will look for that review. We will read it on the air. You can tell us what you think about what we're talking about; any stories you think we missed. We always check our Twitter, and email, but we don't always remember to talk about stuff on the show. But, if you write a review, we will definitely mention [00:58:00] that.  David Leary: Yeah, we have a process for that. Those don't get missed.  Blake Oliver: We have a workflow.  David Leary: All right.  Blake Oliver: Until next week.  David Leary: We'll see everybody next week. Time for the classifieds. Looking to modernize your firm? Ryan Lazanis started and sold his own accounting firm in just five years. Now he helps firms like yours stay on the cutting edge.  Get access to his free weekly email curating the top five pieces of content that will help your firm modernize by visiting futurefirm.co/cloudaccounting. That is futurefirm dot co slash cloudaccounting. Want to get the word out about your newsletter, webinar, party, Facebook group, podcast, or that fancy Excel macro you just created? Why not let the listeners of The Cloud Accounting Podcast know by running a classified ad? Hit the show notes for the link to get more info.
It's tax season! (and the best time to steal your competitors' clients)
SponsorsQuickFee: https://cloudaccountingpodcast.promo/quickfeeAccountingSuite: https://cloudaccountingpodcast.promo/asuiteOnPay: http://cloudaccountingpodcast.promo/onpayShow Notes 05:31 – Fresh back from the Sage Accountants Advisory Council, in Dallas, Blake is basking in brisket afterglow and ready to talk cloud accounting! 06:21 – David takes a field trip to a real accounting firm!  07:53 – It’s tax season! Yay … | Accounting Today 08:41 – Are IRS audits becoming an endangered activity? | CNBC  11:51 – When the IRS fails to collect from cheaters, it costs everyone else up to $3K | Accounting Today  15:25 – Wanna get new biz for your firm? Start during tax season! | CPA Trendlines 17:08 – IRS calls open season on tax-prep competition, and gives the Free File program a makeover | ProPublica  19:43 – Straight from the source - Free File: File Your Taxes Online for Free | IRS 23:16 – According to a recent survey, accountants are upping their tech game and their advising skills! | AccountingWEB 29:56 – Hello Pot, this is Kettle – Is Amazon feeling too much heat from Honey? | PYMNTS 31:28 – California – Land of Confusion – When it comes to the new privacy law | Fox and Hounds Daily   35:42 – Way to keep that private info safe, Facebook! | Bloomberg  37:35 – No time like the present – the California Board of Accountancy switches to email distribution of its newsletter, just in time to let everyone know they raised their fees | CBA 39:30 – New Year's Bug Takes NYC Parking Meters Offline | PYMNTS 41:53 – Virtually screwed –Thomson Reuters’ Virtual Office goes down for the count … But at least they’re providing status updates!  | Thomson Reuters  47:49 – What’s your favorite way of dealing with client 1099s? | CPA Trendlines 49:51 – “Hey, you! Get off of my screen!” Chase just says no to screen-scrapers | Bank Innovation  51:51 – Do banking consumers really want to know who owns their bank data? | CNBC  54:43 – What is open banking, anyway? | American Banker  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, and NOW, you can see our smiling faces on Instagram!   Limited edition shirts, stickers, and other necessities.TeePublic Store: http://cloudacctpod.link/merch Subscribe Apple Podcasts: http://cloudacctpod.link/ApplePodcasts Spotify: http://cloudacctpod.link/Spotify Google Play: http://cloudacctpod.link/GooglePlay Stitcher: http://cloudacctpod.link/Stitcher Overcast: http://cloudacctpod.link/Overcast   ClassifiedsFutureFirm.co: https://futurefirm.co/cloudaccounting/ Go here to create your classified ad: https://cloudacctpod.link/RunClassifiedAdTranscriptRight now, if you currently have one client that's past due, you could be using QuickFee to get the immediate benefit of freeing up that cash flow. Stay tuned to hear more from our sponsor QuickFee, later in this episode. ______________This episode of The Cloud Accounting Podcast is sponsored by AccountingSuite. AccountingSuite offers exceptional cloud-accounting software that includes a robust set of inventory management tools to track inventory levels, orders, sales, and deliveries from anywhere at any time. AccountingSuite even handles multi-channel online sales.  In one integrated dashboard, you can control inventory orders and sales across various stores at the same time to avoid product outages and lost sales. AccountingSuite lets you start out with just the features you need today, and as your business grows, and needs change, you'll have the peace of mind knowing that AccountingSuite offers an upgradeable path for your firm and company's future.  AccountingSuite is offering Cloud Accounting Podcast listeners 50 percent off forever by using promo code “CAP_50_2020.” Head over to cloudaccountingpodcast.promo/asuite. That is Cloud Accounting Podcast dot promo forward slash A-S-U-I-T-E. ______________This episode of The Cloud Accounting Podcast is sponsored by OnPay. OnPay is an easy-to-use full-service payroll that's the right fit for all your clients, whether they have just one or 500 employees. They handle all the complicated stuff, like agricultural payrolls, Form 943, multi-state, and H-2A visas. OnPay even makes it easy to switch from other payroll services by doing all the data entry for each client that you set up. Right now, Cloud Accounting Podcast listeners can get three free months of OnPay payroll service. To learn more, head over to cloudaccountingpodcast.promo/onpay. That is Cloud Accounting Podcast dot promo forward slash O-N-P-A-Y. ______________Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: And I'm David Leary. Blake, I saw you were doing some traveling. You're in Dallas? Blake Oliver: I escaped. I got out of Dallas before the big storm hit. I was there for the Sage Accountants Advisory [00:02:00] Council. This is my first year being on that council. David Leary: Who did I see that was there? Garrett Wagner. Blake Oliver: Garrett Wagner. We recorded a little LinkedIn video about our takeaways from the conference. Trevor McCandless was there. Got to see Ed Kless, who was presenting on behalf of Sage, and Rafael was there from Sage, as well. David Leary: Obviously, some of it's probably private, but what was the gist of the event? Blake Oliver: Yeah, I can't recall exactly what I'm … You know, these NDAs - what I can say and  what I can't. Basically, they were presenting [00:02:30] what they plan to do with the Sage Partner program over the next year and some different options and wanted to get feedback from the partners. I am not a Sage user, so you might be wondering, like, why …? What was I doing at that event? I think-  David Leary: That could be valuable, right? Like, why don't you use Sage products? That could be a good question to ask, right? No, it makes sense. Blake Oliver: Yeah. At my previous firm, we were big Sage Intacct partners. Now, Sage Intacct and Sage [00:03:00] North America still are not combined. They're still separate groups in many respects. What I was hearing about was the Partner program for applications such as Sage Cloud Accounting- I think the full name is Sage Business Cloud Accounting, Sage 50, Sage 100 … The partners who were there, who are actual users and big partners of Sage North America are mostly those who have 200 clients on Sage 50. [crosstalk] David Leary: When you had your bookkeeping practice, I remember [00:03:30] you said you started on QuickBooks Desktop, but then you discovered Xero, and you were doing Xero Cloud stuff. Did you have any Sage clients back then? Blake Oliver: I never used the Sage Cloud product, but it was different at that time. It was called Sage One, and it did not have a reputation of being very good. They killed that product, so now there's a new one at-  David Leary: Even the Sage desktop products, you didn't …? Blake Oliver: I had a client on MAS 90, I think was what it was called, which is a very old version of what is now Sage 100, I think. I could be wrong about that, but [00:04:00] it's basically in the same family. David Leary: Okay. Blake Oliver: I ended up converting that client not to a Sage Cloud product but to Xero in the past. So, I know the product that I was working with, at least an older version of it. By the way, these products used to also be called- Peachtree was the big one that, I think, became Sage 50. Again, I'm very ignorant about this. David Leary: I think most people at Sage can't keep track of it. I mean, they've made so many acquisitions over time of different- Blake Oliver: There's so many products, yeah.  David Leary: Yeah, so many products. It's very, very hard for anybody to-  [00:04:30] Blake Oliver: For me, it was great learning because I was very ignorant about, especially the on prem products, which are still very big. There's still a lot of users on those products, and the plan’s to get people to move to Cloud and give partners both Cloud and desktop options for their clients.  So, it was great. Thank you to Sage North America for bringing me out there. Again, I go to these events for the opportunity to hang out with other accountants because I work at home; I'm in my home office, right? This was great. We went out to amazing barbecue. I had the best [00:05:00] brisket at Hard Eight; it was the name of this barbecue place we went to in Dallas. It was like … You go in there, and you come out smelling like barbecue. David Leary: Those are the best barbecue joints [crosstalk]. Blake Oliver: Because it's just a pit, and you wait in line to go to the pit and just get what you want. That was really cool. We don't have that in Southern California, as far as I know. David Leary: I'm a little jealous. I’m a little jealous. Blake Oliver: The brisket is pouring out of my pores. The smell of barbecue is still on me, and I'm ready to talk about what's new in cloud- cloud accounting. [00:05:30] David Leary: I don't have a lot of articles, but I have some good ones. Maybe one big story to tease is remember all our talk about Free File? Blake Oliver: Yes, we gotta do follow-up on Free File! David Leary: There's follow-up on that. There's some news on that that came out. Then I have some small- kinda a funny follow-up on … Remember PayPal bought that app Honey, the browser extension? Blake Oliver: Uh-huh. David Leary: I have a little follow-up on that that I think's interesting and kind of funny. What about you? Blake Oliver: I have lots of news about tax season and the IRS, which is very appropriate; 1099s; a survey [00:06:00] from AccountingWEB that's very interesting; follow-up about the California privacy law. Facebook lost something like 30,000 employees’ personal information. That kinda ties into privacy there. I don't know where to start. Should we start with tax season? Maybe that's the most relevant. David Leary: Actually, I have some small news- a small news update of what I did this week. Blake Oliver: Oh, yeah. What's new? David Leary: I went to an accounting firm for only the second time in my whole entire life!  Blake Oliver: Like, [00:06:30] to their office? David Leary: To their office. I went and visited a friend that's at BeachFleischman, here in Tucson. Blake Oliver: Oh … What was your impression? David Leary: It was funny. He actually noticed I was talking like I was in a museum. Blake Oliver: Looking for the calculators on the desks and stuff like that? David Leary: No, it didn’t … It felt like a typical company office environment, but they're a little bit more forward-thinking. They built the buildings at BeachFleischman; they're leasing out the whole bottom floor; a bank is leasing space from them in the building.  Then there's [00:07:00] something called the Sun Corridor, which is like a technology leadership … Almost like a commerce- like how the cities have commerce centers trying to bring business into the city. It's kind of like that. I think it's a collaboration between Phoenix and Tucson. They call that the Sun Corridor to bring … All these are California companies. They're luring them away from California. They rent space there. So, it's a little bit more forward-thinking of a firm. Yeah, I just thought it was funny that … I was in the lobby and I was like, "This is the second time I've ever been in an accounting firm," and I've been in this space for 20 years [crosstalk]  Blake Oliver: That’s great, because you’re always … It's [00:07:30] not that you don't talk with lots of accountants, but you do it at conferences. David Leary: Exactly. Blake Oliver: When you were at Intuit, you went to … I mean, how many conferences did you go to every year? David Leary: Lots. It's just that it's just really, really funny that I've just never stepped foot in an actual accounting firm …  Blake Oliver: Well, I'm glad you got to before they all- all the physical offices disappear. David Leary: Well, that's what he talked about. A lot of people work remotely. Blake Oliver: Well, let's talk about tax season, shall we? David Leary: Yeah. Blake Oliver: Tax season begins for individual filers on Monday, January 27, 2020, when the IRS will begin [00:08:00] accepting and processing 2019 returns. I spotted some information from CNBC, an article in CNBC about how your chances of getting audited have fallen significantly. David, do you wanna hazard a guess about what your odds are of getting audited this year by the IRS as an individual taxpayer? David Leary: Just straight up, not like, "Oh, if I do the home office [crosstalk] it increases by X"? Blake Oliver: Just overall. David Leary: Overall? Slim [00:08:30] to none … Super-low? One-third of a percentage point? One-third of a percentage point. Blake Oliver: You're actually really close. The agency audited 0.45 percent of individual tax returns in fiscal 2019, and that's through September 30 of last year. That figure is down by more than half from what it was in 2010. So, 10 years ago, slightly over one percent - 1.11 percent - [00:09:00] of taxpayers were audited. In other words, you have a one in 220 chance of getting audited, and a decade ago those odds were closer to one in 90. You may be asking why have the odds gone down? David Leary: Why have the odds gone down? Blake Oliver: Budget cuts. This is specifically called out by a government report. The IRS budget of $11.4 billion in 2018 is 20 percent less than it was in 2010 when adjusted for inflation. [00:09:30] Meanwhile, we have more tax returns than ever. These are the biggest budget cuts the IRS has ever had, and they've been over the past two decades. They lost nearly 30,000 full-time jobs at the IRS, including among enforcement personnel, between 2010 and 2019. To put that in perspective, they lost 30,000 people. They only employ 78,000 people, right now. David Leary: It seems insane because this is your revenue-generating department. Blake Oliver: Yeah. [00:10:00] David Leary: If anything … In private enterprise, you'd be like, "Let's double the size of that department!”  Blake Oliver: Right. David Leary: "Triple the size of that department!" You'd be investing as much as possible in the only revenue-generating portion of your business. Blake Oliver: I think there's previous reports out there that say that every dollar invested in the IRS has significant multiple times ROI. David Leary: The IRS should just go out and get some VC money because that has the opportunity [00:10:30] to be billion-dollar returns … Trillion-dollar returns!  Blake Oliver: Yeah, if we privatized the IRS, I bet you audit rates and collections would go up dramatically. David Leary: I think we talked about this, though, six months ago or so, that this lack of staff and lack of audits is causing a disproportionate amount of low-income earners getting audited because it's easier to audit them, and nobody has the time, the effort, or the skillset to audit the one-percenters who might be …  Blake Oliver: Yeah, so that's actually … I'm [00:11:00] not sure- I remember we talked about that before, but, according to this article, that's not what's happening. Maybe it is happening within a narrow band of income, but people who make a lot of money are much more likely to get audited. About half a percent of people between $50,000 and $75,000 in income get audited, but, if you make over $10 million dollars, 6.66 percent of returns are audited, which [00:11:30] is a huge difference, right? Still kind of not bad odds. Less than a 10-percent chance; closer to five-percent chance of getting audited if you make over $10 million.  This all has actual real-world consequences, like you said. We're not collecting as much revenue. A report from the Taxpayer Advocate, which is an independent branch of the IRS, has quantified that for us. Per person- per [00:12:00] household, I should say, in the United States, it is costing each household $3,000 to subsidize taxpayers who aren't paying all they owe, according to the Taxpayer Advocate service. The gap between what they should be collecting and what they are collecting comes out to $3,000 per household. Basically, we're paying for people who are cheating. David Leary: Yeah. Blake Oliver: The actual total amount of uncollected tax that they should be collecting is $381 billion dollars, on [00:12:30] average, each year, from 2011 to 2013, which is 14 percent of taxes never being submitted to the agency. It's kinda crazy that we are not funding the IRS properly. We should be doing it. To me, this is just dumb. David Leary: But this is what makes America great, right? We [00:13:00] don't fund the tax [crosstalk] Blake Oliver: Right. The odds of getting audited are so low that cheating has very little consequence, or you’ve got very low odds of actually getting caught when you cheat, and the penalties are - unless you get accused of fraud, if you just get a penalty for … Let me find this. The penalties are- there's accuracy related, and there's fraud.  Accuracy related, the penalty is only 20 percent on an underpayment of tax [00:13:30] due to negligence or disregard of rules. Basically, you can be really, really aggressive, and the IRS can come back, and there's a tiny chance they'll audit you. If they do audit you - that 0.5-percent chance - they're only gonna penalize you 20 percent. If you're just doing the numbers there, right? David Leary: Yeah. You could run this like a hedge fund, your personal- your tax returns. Blake Oliver: Yeah, it makes sense to cheat. I mean, if you're unethical, it makes sense to cheat every year a little bit, in different places, because [00:14:00] the odds that they catch you are slim and, if they do, they only penalize you 20 percent. Then, if you haven't done it consistently, year after year, they're probably not gonna accuse you of fraud. Oh, and by the way, the penalty for fraud is only 75 percent of an underpayment. Even if you get accused of fraud, as long as you don't go to jail, you're only gonna pay 75-percent penalty. With the accuracy, really, of penalties, they can only go back so many years, but for fraud, they can go back forever. So, you just don't wanna get accused of fraud. That's [00:14:30] why people are cheating so much. 14 percent of taxes never get collected. I think, to tie this back to a previous discussion, we talked about … What was that tax retail franchise group that got in trouble? David Leary: Liberty Tax. Blake Oliver: Right, so Liberty Tax … They had a bunch of their biggest franchisees doing this systematically - cheating on taxes. Why would they do that? Well, because the odds of getting caught are so low, and the penalties are very low. Kinda sad [00:15:00] news about tax season, right? Because if you're an ethical accountant, and you're doing things the right way, you know that your clients are paying more than all of these clients that are- or all these tax pros who are cheating; their clients are paying less. It’s sad that this situation is this way. David Leary: Well, it makes it hard for you to value bill, right? Blake Oliver: Yeah … I do have one positive story about tax season. David Leary: Okay. Blake Oliver: This is from Ed Mendlowitz. It's an article he wrote on CPA Trendlines. We've talked [00:15:30] about some articles that he's written in the past; partnered with him; very, very prolific writer. I've never seen anybody churn out so many articles every week. David Leary: AI. He's the AI … . Blake Oliver: He says that tax time … I'll just read the headline, “Why Tax Time is the Best Time to Get New Business.” He says, "Tax season has always been the best time of the year for me to get new business. The reason is there is much less competition." He says that if you are a partner, or an owner [00:16:00] of a tax firm, or just want to get more business for your firm, clients who need our services, they don't care about taxes season, especially if they need something right away. They don't understand why their call is being put on a queue. They don't understand that we're busy. The best thing to do is to simply, even if you're busy, don't appear busy. Respond ASAP in your normal manner, as if you weren't in tax season, and then they're happy because the other guy is not getting back to them. David Leary: That's very smart. Blake Oliver: Showing up is the best way to get new business and keep an existing client happy, and I agree with that. I think [00:16:30] way more important than tech, or anything, is just being responsive. David Leary: That makes a lot of sense, right? Just invest in having somebody for … During the busy season, just pay somebody on your staff to do nothing but keep that front-facing "we're not busy" look. Blake Oliver: Yeah. David Leary: Right? Even though, behind the scenes, there could be a big fire, but on that front end … Because I'm sure that, you're right, they call other firms … "Hey, we can't take new clients right now,” [click] You get hung up on, right? Yeah, that's a really good strategy. That's really, really smart. [00:17:00] Blake Oliver: That's my tax season update for this episode. What else? David Leary: I think we should jump into the TurboTax thing, then, since we've been talking tax. Blake Oliver: The Free File. David Leary: The Free File. For those of you who've not listened to the podcast the last year, there has been a lot of chatter and exposure. There's a propublica.org- there's a writer on ProPublica who has been really digging into the Free File program and really going after Intuit the most because Intuit's the biggest horse in the show. Almost [00:17:30] two decades ago, the tax-preparer software companies - this is the H&R Block, and Tax Slayer, and Tax Cut, and-  Blake Oliver: TurboTax. David Leary: TurboTax. There's about 20 of them, and they came to an agreement with the IRS to, "Hey, we will offer, for lower-income earners, a free service. They could use TurboTax for free," and in exchange, the IRS said, "We're not gonna build tax software." So, this agreement was there two decades ago.  What [00:18:00] happened over time, at all these companies - H&R Block, Intuit - they got a little confusing in their marketing, where you could get TurboTax free, but there's also this thing called TurboTax Free File. The free is not the Free File. The free kind of pumps you into a funnel to … It's like a ‘freemium’ model, right? You use it for free and then you upgrade. It puts you into an upgrade channel, where you're gonna spend money. The Free File, you have to get to through the IRS website through a special link. It's [00:18:30] a little bit of a dance [crosstalk 18:32] Blake Oliver: Very confusing from a marketing standpoint  David Leary: Very confusing. As it's evolved over 20 years, obviously, these companies got very good at understanding how to confuse people the most. It got as far as they would hide things in search results. They would tell Google not to find the sites. It got a little ugly, and it got exposed by ProPublica.  What this has resulted in is there's a new deal. The IRS has came out and said that if they want to create something, they can. Now, Blake just [00:19:00] said they don't have any resources, so it probably won't happen, but they can do that. That's off the table. The other thing they specifically expressed that they bar them from engaging any practices that hides this. Blake Oliver: Right, can't put that code on your site that hides it from Google or any other search engine. David Leary: What I noticed, just between social media, and some blogs, and even a commercial from H&R Block, all these companies are now going out of their way to really drive people to the correct products. [00:19:30] I think I saw TurboTax said military families is free, and … Don't quote me on this. You see these things come through in social media, but there's a reaction to this investigation that took place the last eight or nine months for this tax season. Blake Oliver: I saw another article about this on Accounting Today, just recently, about how these vendors have agreed to redirect taxpayers to the correct Free File program at the earliest feasible point in the preparation process if they don't qualify [00:20:00] for a different free program. It's just all about making it less confusing; being more honest in [inaudible]. David Leary: Well, and doing the … Yeah, I get there's marketers; there's people that have bottom-line business results to deliver at every company, and it's very tempting to … It’s not super-unethical, but it's just not keeping things clear. Then, somebody thought they were signing up for the free, and [00:20:30] next thing you know, they're spending $150 to get their simple tax return done that they thought they were doing for free. Blake Oliver: This is just ethically wrong. I mean, it was wrong to be doing this. I understand why it ended up happening because there's always pressure from above to get more and more revenue, but we're talking about people … By the way, we should remind everyone, the people who qualify for this Free File program have to make adjusted gross income less than $69,000 in 2019 – $69K or less. These [00:21:00] are not people that are generally going to CPA firms to get their taxes done. They don't have the money to pay for tax preparation, and they generally don't have a complicated situation. It's like a W-2 and some deductions; some standard deduction. David Leary: I was kind of thinking about it; let's say the IRS does get in and builds their own product of some type, right? It actually could be better for somebody like Intuit because Intuit could just offer a TurboTax Live type service for the government program; because, if it's anything like the healthcare sites [00:21:30] that were buggy, and hard to use, and nobody could navigate them, I imagine the IRS’s tax one would be the same way. They would just, “Hey, pay us $200, and we'll walk you through the process," using their site. Everybody could still make money, even if the government built their own website. Blake Oliver: I'm gonna revise my predictions from our last episode. My prediction is that the IRS will not build their own Free File program this year because they don't have the money. David Leary: They still don't have the resources to do it. Yeah, exactly.  Blake Oliver: One more thing [00:22:00] to add to this story is, existentially, this is … Let’s say the IRS were to do that, which we know they're not, but if they were eventually to do that, this is a significant threat to Intuit's profits at TurboTax because a good chunk of their revenue is from the people who do qualify for Free File. It's unlikely, but, if the IRS did get its act together and make this thing, it would be a problem. I bring it up because an analyst at J.P. Morgan mentioned this specifically [00:22:30] in a report from JP Morgan to investors. David Leary: Well, it gets people in the door, right? It's free. The word ‘free’ - it gets people in the door. Then, there's also confusion because I think as soon as you have business income, or you have a 1099, or you have stock, or anything like that, you don't qualify for that program.  I think there's just a lot of confusion because I think people go in … That's the problem, right? You go in thinking you're gonna get something for free, and when it's done, you're paying 160 bucks. What [00:23:00] if accounting firms were like, "Come do your taxes here for free," and then they do your taxes; then they’re like, "Sorry, you gotta pay to take this paper out the door. You gotta pay now for that.”  Blake Oliver: Hey, so survey time. AccountingWEB- David Leary: Good, because I have a survey, too. Oh, you [crosstalk]  Blake Oliver: Okay, cool. Yeah, so AccountingWEB did a survey of their readers. 500 responses were received, and the majority of the audience either own or manage a firm with 10 staffers or fewer; 82 percent [00:23:30] of readers are in small firms, and they either own or manage them. They asked some questions. I’ll just go through those results and talk about them.  What services does your firm offer? Select all that apply … Over 80 percent of firms offer, no surprise, bookkeeping and tax preparation. About 75 percent of firms, three-quarters, offer tax planning; payroll is almost 70 percent; and financial reporting, it's 65 percent [00:24:00] or so offer financial reporting. Which, I'm not sure exactly what that means, but I take that to mean more than the bookkeeping; like the controller-level financials/reports. Now, what is surprising- that's not really surprising to me … What is surprising is that 60 percent of the respondents said they offer or perform business planning. Only 36 percent do cash flow forecasting, and only 27 percent perform some form of technology consulting.  Lots of opportunity, for [00:24:30] most firms, to grow that cash flow forecasting aspect of the business, and even the business planning; because I hear stats every single year from all of the vendors talking about how businesses are always having trouble with cash flow. Cash flow is what puts 80 percent of businesses out of business. Even though they may be profitable, they just can't handle their cash. That is what services firms are offering. David Leary: Seth Feinberg, who is the managing editor at AccountingWEB, he was actually surprised, I think. He admittedly was surprised about [00:25:00] the results because people were a little more technologically advanced - his readers - than he even thought they were. One of the indications was that almost 80 percent are claiming they're using some sort of online accounting software in their firm-  Blake Oliver: Right, but the question I have is how many clients are on the online accounting software? If it's just one client and the rest are all on desktop, then is that really meaningful? David Leary: Well, that's what … There's a secondary question a little deeper. About 18 percent [00:25:30] of the firms are 100-percent cloud; 60 percent are a mix; but still, 25 percent are 100-percent desktop still. Blake Oliver: What percentage are desktop? David Leary: He doesn't have exact number, but I followed the graph and made … Eyeballed it as straight as I could, and it looks like just almost 25 percent; maybe 24.9 or something. Blake Oliver: Are still all desktop. David Leary: 100-percent desktop. Blake Oliver: Fewer than 20 percent. Yeah, I'm looking at the chart here, too. It looks- could be 18 percent or so are fully cloud, but [00:26:00] then 60 percent are a mix. Let's talk, before we move on, about the tech- the specific technologies that firms are using. David Leary: Yes, yes, all right …  Blake Oliver: We could take turns with this. It looks like … We're looking at a chart here. We don't have the exact numbers, but it looks like slightly over 80 percent are using tax preparation technology. I don't know what they're doing if they don't use tax prep tech. Does that mean they're doing it on paper? David Leary: What was the percentage of that? Blake Oliver: Like over 80 percent, slightly; somewhere [00:26:30] between 80 and 90 percent. David Leary: I mean, maybe they don't do any tax at all and that's why- Blake Oliver: Maybe that's what that means. David Leary: - that's a no answer, but you're right. What is the option here?  Blake Oliver: You mentioned that something like 80 percent are using online accounting, but a mix, obviously, of online and desktop is the primary situation. Expense management is just 30 percent. David Leary: Yeah. I was shaking my head, like, how are accounts tracking their own internal expenses? Blake Oliver: Excel spreadsheets, probably. That's my guess. [00:27:00] David Leary: Just 30 percent? Like this seems so- it seems crazy low!  Blake Oliver: We're talking Expensify, or Receipt Bank for expense reports, or whatever- Abacus; whatever you're using for that. Another one that is kind of shocking is workflow. Only 30 percent use a workflow technology. Although, if you're a sole proprietor, you can get away without having workflow software. David Leary: Well, they have practice management, too; so, yeah, I think that's a gray one. I think if people are answering that, it's gray, right? Because I think there's workflow practice [00:27:30] management for your team, but then there's workflow to … Data capture, OCR-type tools.  Blake Oliver: Right, right.  David Leary: It's gray. I don't think those were very easily answered questions. One that was very clear, though, is CRM, and only 20 percent say they used a CRM-  Blake Oliver: Less than 20 percent are using a CRM. David Leary: How do they track their customers? What are people …? If you have an accounting firm, how are you tracking your customers? Just in your practice management tool, maybe? Blake Oliver: Yeah, probably. I mean, again, I think it would be interesting to segment these responses by the size of the firm because, if [00:28:00] you're a sole proprietor, a lot of this stuff's unnecessary. You generally don't need a CRM if it's just you. You can keep track of that in a spreadsheet, or in your contacts, or whatever [crosstalk]  David Leary: - I can look at the Intuit Accountants Edition, or QuickBooks Accountant’s Edition Blake Oliver: Yeah, exactly. David Leary: It has just good enough … Everything you need to know about your client, you just keep in there, yeah.  Blake Oliver: Portals, less than 50 percent of clients- of accounting firms use a portal. David Leary: I would love to see the number of what percentage of their clients use the portal. Blake Oliver: It's probably 10 percent. Then, reporting [00:28:30] in dashboards - just over 30 percent are using reporting/dashboards, which, actually, I think that's kind of exciting given that I work at Jirav, where we make reports, and dashboards because it shows there's room to grow. This episode of The Cloud Accounting Podcast is sponsored by QuickFee. As you know, accounting firms don't have trouble getting paid; they have trouble getting paid on time. QuickFee allows your clients to pay outstanding fees in up to 12 monthly installments, while your firm gets paid upfront and in full. QuickFee was started by accountants for accountants with a mission to ensure that firms are never paid late again. For almost five years, QuickFee has been helping CPA firms reduce their outstanding AR. In fact, accounting firms that are partnered with QuickFee are seeing a minimum of 32-percent reduction in their AR. Think of your firm. What could you do with that additional operating capital? QuickFee is offering Cloud Accounting Podcast listeners to waive sign up fees, three free months, and quick setup just in time for your firm's busy season. To join the 1,200 CPA firms globally, and over 20 percent of the top 200 U.S. accounting firms in benefiting from QuickFee payment plans, head over to cloudaccountingpodcast.promo/quickfee. That is Cloud Accounting Podcast dot promo forward slash Q-U-I-C-K-F-E-E. You've already done the work, QuickFee gets you paid on time. David Leary: Wanna do a kinda funny story? Blake Oliver: Yeah, let's- David Leary: To lighten the mood a little? Blake Oliver: Yeah, let's lighten the mood. David Leary: Okay, so remember we talked about PayPal bought Honey, and [00:30:00] we discussed that. Honey is a browser add-on to your browser. When you go anywhere shop- actually, every website you go to, if you're shopping, it goes and finds a code for a discount and automatically sticks it in the shopping cart for you, so you get that code. At some level, hey, great. In order for an app to do that, they have to watch every single thing you do on the internet, right? Everywhere you shop, et cetera. Blake Oliver: Yeah, they scrape all of your data. They know so much about you. David Leary: Yes, and it's [00:30:30] okay, if you and I on our podcast are like, "Hey, maybe Honey's not a great idea,” because we aren't in that business, but I think it's very funny when Amazon told users of Honey to uninstall it because obviously Amazon's the only one who's allowed to track how we shop on the face of the earth. I just was shocked by this. Blake Oliver: Why is Amazon not a fan of Honey? David Leary: The obvious reason why is Amazon [00:31:00] has their own Alexa plugin. They have plugins for browsers to track what you're shopping for on the internet already. Blake Oliver: Right. David Leary: That's the real reason. They're in Amazon's game, and Amazon doesn't want them in the game. Now, they played it up as security, which, yes, if any browser extension you install, you have security risks, and we talked about that with the Honey thing. If you're using that and then you're doing your client's books, Honey can see every web page you go to. Blake Oliver: Let's keep on this privacy thing, this topic. David Leary: Okay. Blake Oliver: Last week, or [00:31:30] two weeks ago, I should say, we talked about California's new privacy law. In our first episode of 2020, we talked about the new privacy law, the California Consumer Privacy Act, that took effect January 1, and we talked about the potential confusion because it's super-super-broad, and businesses aren't really sure what exactly they're gonna have to provide, and what the restrictions are on selling data, and what even selling data means.  Because, now, the law says that a consumer in California should be able [00:32:00] to go to a website for your business and click a button that allows them to opt out of having their information sold. That's one of the provisions, among many. We're not really sure what it means to sell information because it doesn't mean just exchanging it for money. It could also be exchanging it for some other benefit that is non-financial. One sign this is very confusing is that both Facebook and Google have taken completely different responses and interpretations of the law. [00:32:30] Facebook says it's not gonna change anything about how it acts. The information that they share with third parties, they say, “We're not selling it so, therefore, we can continue to do that even if somebody opts out of it because we're not selling it.” Google has said they're gonna completely agree to this, and they're limiting the information that advertisers can reuse. They can only use the information to advertise on Google's platform. They can't take that info, and then add it to their own databases, or something like that. That's, at least, what I took out of this [00:33:00] article that was on Fox and Hounds by Chris Reed. David Leary: I saw another article related to the California Privacy Act, but I cut it. I didn't bring it with me this week. Essentially, it was really talking about the amount of money companies are spending to comply. Blake Oliver: Oh, yeah. It's gotta be huge, right? David Leary: It's huge numbers. The interesting line in the article is nobody really knows what the compliance means, so some companies are just opting out. They're gonna wait until there's enforcement of it. They're just like, "We're not gonna do anything until [00:33:30] they start busting companies, and we start seeing what it really means." Then, on top of that, the article also talks about how the state of California, it just doesn't even have the resources to chase and enforce this, at this point. So, everybody's gonna do whatever they wanna do at this … It's a Wild West. Blake Oliver: What we really need is for the attorney general, Xavier Becerra, to create an enforcement framework, and they haven't even done that yet. So, kind of, probably, take a wait-and-see approach is gonna be good. To reiterate what we talked about [00:34:00] at the beginning of the year, this is pretty big.  Any business with $25 million or more in revenue, or personal information on at least 50,000 people in California has to comply with this law, even if they're not in California. If you're an accounting firm and you've got data, or if you've got more than $25 million in revenues, and you've got information on Californians, if I ask you to provide me the information that you have on me, you have to send it to me – and, theoretically, everything you've got on me.  Then, if [00:34:30] I ask you to not- if I opt out of you sharing that information with other people, or selling that information … I don't even know if you can do that with CPA regulations, but let's say you did; you can't do that anymore, and you've gotta have a way for me to opt out of that. So, big implications, and we still don't know. David Leary: You cannot be in a business and your biggest user base will be in California. Blake Oliver: Right. Pretty much.  David Leary: Everybody is subject to this [crosstalk]  Blake Oliver: -if you're a national business, you're gonna have a lot of California users. David Leary: Even ours, right? Obviously, our number one market [00:35:00] is United States, but California, our number of downloads we get from the state of California is bigger than any other country [crosstalk] Blake Oliver: Yeah, it's like 20 percent of total downloads or something, right? It's a lot. David Leary: Yeah. If you had any other business that is broad, you're gonna have a huge amount of people in California. So, it's 50,000, right? Hitting that 50,000 number in California is very realistic for a lot of businesses. Blake Oliver: I'm hoping that, eventually, California does force Facebook to comply with this because I definitely do not trust Facebook with my personal information. [00:35:30] You wanna know why? It's because of a specific incident that occurred last year that was reported in December in Bloomberg.  Apparently, personal banking information for tens of thousands of Facebook workers was compromised last month when a thief stole several corporate hard drives from an employee's car. The hard drives, which were unencrypted, included payroll data, like employee names, bank account numbers, and the last four digits of employees' social security numbers. This is according to an [00:36:00] email that Facebook sent out to its own staff last year.  David Leary: They'll put them in credit report monitoring [crosstalk] At least they'll get that-  Blake Oliver: It also included compensation information, including salaries, bonus amounts, and some equity details. 29,000 employees who worked at Facebook in 2018 … This is all because an employee decided to take home these hard drives that are supposed to stay in the office, and they were not encrypted. David Leary: It's funny. The HR departments roll out these trainings at these big corporations about all the security, and all this stuff to make sure [00:36:30] they're in compliance. The biggest offenders, based on my observation, are the people that work in the HR departments. They're sending unencrypted spreadsheets around with people's socials … Because they actually are the ones with the sensitive data. At a vast corporation, most people don't have access to sensitive data in any big way. Blake Oliver: Right. David Leary: It's the HR department that does, and they're the weakest link in this. They should just worry about their own department, and then that'll secure the whole company. The company will be at less risk. Blake Oliver: Oh, God. It's just- it’s so bad.  David Leary: Just to be clueless and just [00:37:00] take hard drives home like that like. “Yeah, I'm gonna bring these home and work on them …" Blake Oliver: If that is the impact of Facebook's policies that they can't protect the personal information of their own employees, imagine how loose they treat our data as their users. David Leary: You know, you can get Firefox, and out of the box, Firefox just blocks Facebook everywhere you go. Blake Oliver: It blocks their tracking? David Leary: It just blocks it. Blocks it now, everywhere you go.  Blake Oliver: Well, one more California follow up, and then I'll turn [00:37:30] it over to you for our next topic. David Leary: I'll jump to New York City. It'll be a big swing to the other end of the coast. We'll do it.  Blake Oliver: The California Board of Accountancy is making some changes due to a new assembly bill that changed how they have to do business. I guess we have to pass a law for the California Board of Accountancy to do anything. It's pretty revolutionary, David, I have to tell you, starting in 2020, the newsletter that the CBA puts out, called Update, must be posted to the CBA website, and an email notification must be distributed to all licensees, and [00:38:00] applicants regarding its availability. I guess, previously, we didn't have an online form of the newsletter. It was only sent out by postal mail or something. I didn't even know that we had a newsletter. Here's the next bit. Well, in order to make that happen, apparently, we haven't been collecting email addresses, so now the CBA is going to request that by February 28th, 2020, everyone licensed or seeking to get a license in California visit cba.ca.gov/email and enters your license number, PIN, and [00:38:30] register your email, so that they can actually contact us via email because it's all been done by postal mail. David Leary: Well, this explains the lack of CRM usage when the CAL CPAs don't have CRM with email addresses in them. Wow, that's shocking. So, you've been a member? Blake Oliver: Yeah. David Leary: But you had no idea they were sending out this paper- I guess it's a little trifold newsletter that's stapled in half or something. Blake Oliver: I don't even know. I've never received it. Oh, by the way, they raised [00:39:00] the annual fee; so now, it's $250 a year just to stay registered and licensed. David Leary: You should do a demand. Your back newsletters are missing. Blake Oliver: I know. David Leary: You paid for those. Blake Oliver: Well, you know, I wonder if the CBA is subject to the California Consumer Privacy Act. I can just request all the information they have on me. I don't know. David Leary: Which, obviously, is nothing because they don't have your mailing address to send you the newsletter, so it's nice and safe that way. Blake Oliver: All right, David, what's next? David Leary: We can jump over to New York City. Blake Oliver: Okay. David Leary: New [00:39:30] York City, as of January 1, 2020, all the parking meters in York City stopped taking credit cards. Blake Oliver: Why did they stop taking credit cards? David Leary: Parkeon, who's a mobility company, they basically build the software that these parking meters are running on. The good thing is – this is what I noticed in the article - they did not say it was a glitch. There was good reporting, actually. You know, usually people are like, "It's a glitch," and I've talked about this before [crosstalk] stop using ‘glitch …’  Blake Oliver: Yeah, there are no glitches. David Leary: There's not glitches. They said it was caused by an anti-fraud security setting that disabled card [00:40:00] payments beyond January 1, 2020. Blake Oliver: This security measure, which didn't allow you to process cards beyond a certain expiration date, they forgot to update it, and all the meters stopped working. Is that what happened? David Leary: That's what happened. They have to manually update one meter at a time. These meters aren't Wi-Fi or connected to the cloud. Blake Oliver: But they have to be because they process credit cards, right? I guess they don't have a wireless way to update the software?  David Leary: Update, yeah. Blake Oliver: Oh, God. David Leary: Which is possibly good, right, because then people would hack [00:40:30] them and update the parking meters, right-  Blake Oliver: Right. David Leary: -from afar, so it's probably good that they're not connected at that level and only the payments part's connected, but completely, just to total brain fart, it's crazy. Blake Oliver: Good news for New Yorkers, right, because they all got free parking for a while. David Leary: Oh, no. People got tickets! Blake Oliver: Oh, no. David Leary: Because if you didn't have cash with you … Maybe we're getting to a point in our society where you almost need to have some cash just hidden in your car, some emergency cash, because [00:41:00] when things do go down, I think … I'm not sure we talked about it, but I think Venmo was down right after the first of the year. Blake Oliver: Yep. David Leary: A lot of people that use Venmo to pay their rent couldn't pay the rent, and it just had a lot of ripple effects. So, yeah, it might be smart to start keeping some extra cash in the mattress. Blake Oliver: Oh, God. Talking about glitches, right, staying on that for a moment and then also going back to that AccountingWEB survey, there was an interesting bit at the end of the survey, which we didn't mention earlier. Of those [00:41:30] folks that are still using desktop applications, only 32 percent of them are hosting desktop. The rest are using it local. Desktop hosting is … Less than a third of firms are using desktop hosting at this point. I started thinking to myself, "Well, that makes no sense. Why wouldn't you, if you're gonna stay on desktop apps, at least get the benefit of having it hosted in the cloud?"  Then, I saw what's been happening at Thompson Reuters over the last few weeks, and I understand [00:42:00] why. Because, starting on December 31 - I believe this is when this started, maybe as early as December 30 - users of their virtual office service, which is a … I'm not that familiar with it, but it sounds like a just a way to host desktop applications that Thomson Reuters provides. David Leary: Maybe because with the term ‘Office,’ you get access to a couple different Thompson Reuters products all under one virtual terminal of some type-  Blake Oliver: Exactly, so you host all your Thompson Reuters stuff, maybe some other stuff too, in Virtual [00:42:30] Office, and you log in, and your computer acts like a terminal to this Virtual Office; to this hosted solution.  Well, starting December 30 - I'm on the status page, which we'll link to in the show notes - they started having problems where it was either unresponsive, or people couldn't log in. It wasn't working very well. I just- scrolling up this status page, which is like a blog for problems that they're investigating and then updates - which, by the way, every single app should have to update people on the status …  [00:43:00] Scrolling up, they've continued to have problems and incidents almost every day from December 30 to today. Currently, applications are not launching on Virtual Office, yes. So, that is like two weeks of downtime, and this is tax season! Completely mind-blowing that this could be happening.  I want to give credit to Jacob Oberlander for letting us know about this because he's a Thomson Reuters Virtual [00:43:30] Office user, and he said that it's just a disaster. I don't know if those were exactly his words, but it sounds like a disaster to me. He can't use UltraTax, File Cabinet, Outlook, Excel, Word; can't work for the past two weeks. It's outrageous, he says. David Leary: He's 100 -percent down because his hosting- It was not just … He was using to get his Microsoft Office hosted [crosstalk] and everything else. Blake Oliver: Everything, yeah. David Leary: Oh, boy. Blake Oliver: He says, "Thomson Reuters is a big company that has lost touch. They increase the price every year just by emailing you [00:44:00] that the price is up. No innovation whatsoever. They did start some new program, Onvio, but that will not be usable for another few years.” Thank you, Jacob, for notifying us of this. If you're also a user of Thomson Reuters Virtual Office, and you have been having issues, I want to know what's been the impact on your firm?  This doesn't surprise me that firms are continuing to host applications locally because this is a risk that you just can't take. I could not take this risk, as a firm, if I were hosting apps. I couldn't. I just couldn't. [00:44:30] I couldn’t work-  David Leary: Are you saying that if you … Just like with anything, you should have a contingency plan? Blake Oliver: Yeah. David Leary: You’d need to keep one machine, at least, at your office, at a minimum, that has all your apps ready to go. They're patched; they're ready in case you need to fire that up and do client work. Blake Oliver: Or work with a provider where you have a guaranteed backup system where they can … They've copied; they've got mirrored copies of everything so that if they start having problems, you can just go to this other server. David Leary: Is [00:45:00] there any indication of what's going on? I mean, is this a ransomware thing and the word's not out yet? Blake Oliver: No, it looks like configuration issues. It's not really clear what is going on. Here's an email that Jacob Oberlander forwarded me. It says … This was back on January 5. By the way, ‘valued customer’ is a terrible way to greet your customers! "We have found the root cause of the Virtual Office CS service degradation and are confident that the actions we've implemented will ensure normal service and [00:45:30] performance moving forward."  Also, overconfident, because this was January 5, and they're still having problems January 11. "We understand and regret the disruption that this service degradation may have caused you. We appreciate your patience during the time our teams and technology partners spent working together investigating the root cause and implementing the solution.” “What we know: we encountered an unexpected and sporadic network performance issue that was not detected by our usual monitoring systems. It was difficult to identify this issue without a comprehensive troubleshooting exercise, which [00:46:00] has now been completed.” “What we are doing: we are working with our technology partners to implement additional monitoring that would proactively detect, and alert based on this network issue. As always, we will continue to perform network system and architectural analysis to further enhance your user experience and avoid further disruptions."  Then they close it out with stuff like, "We're committed to helping you; we're grateful for your business," and then points people to the status update page, which is the only good thing about that communication is the … Well, the fact that they [00:46:30] are proactive, and they are communicating is good, and it comes from a specific person, and they have a status update page is good; but two weeks of downtime is just crazy. David Leary: I'm surprised there's not more rumbling about this. Blake Oliver: Well, you know, it would surprise me, except when CCH went down for all that time, it was pretty darned quiet online. Accountants are really nice to software vendors when there are problems. David Leary: Is it just, maybe personality, as well? Maybe people that are using those products, their [00:47:00] firms, they're just not out there on the social media sites and other places, where all the cloud accountants are hanging out. Blake Oliver: Right. Where we get upset, and we know that if we make a lot of rumblings online, then the vendors will take note because they'll be like, "Oh, crap, we can't let the press get a wind of this … " So, yeah, I think it probably … The folks that are using this product, probably not as many online, so they're complaining to each other, perhaps, but we just don't hear about it. It's like the silent [00:47:30] firms. David Leary: No, agree. Do you have anything … I have three articles on fintech versus banks, but I think maybe you jump into anything else you have first, and then I can get into that mess. Blake Oliver: Let's see. Since we're on the topic of taxes, and tax season, 1099s are the big in January. CPA Trendlines did a survey asking how firms handle client 1099s. Some takeaways, some things I found interesting: solo practitioners, 25 percent of them don't do 1099s [00:48:00] at all for their clients. So, I wonder, "Well, how do your clients get their 1099s done?" David Leary: They don't provide it as a service? They just tell them, "Sorry, I don't do that. Go find someone else." Blake Oliver: I guess, yeah. David Leary: Okay. Blake Oliver: Which, to me, is kind of crazy because it's actually really a pretty easy service to provide, and you can charge a good amount for it. It was always very profitable for me. David Leary: Well, especially if you utilize some sort of app or technology stack, and you just market whatever you're paying for that technology stack and just pump it through the system. Blake Oliver: A [00:48:30] lot of payroll software does it. 42 percent of firms in 2019 used payroll software; seven percent used income tax software; 36 percent used standalone W-2, and 1099 software; and only 15 percent used an online W-2, and 1099 filing platform. Examples include Tax 1099, Track 1099. Those are the ones I've used. They work great. David Leary: I think I can do it from inside of QuickBooks Online this year. I only have [00:49:00] to do two, so I'm going to give it a run … Because I feel like, if it's only two, it doesn't make sense to try to get data to a separate app to do it somewhere else. I'll just do- whatever QuickBooks will charge me to do it, I'm just gonna do it inside of QuickBooks. Blake Oliver: I'm one of them, right? David Leary: Yes.  Blake Oliver: So, I'm gonna get to see this as the recipient. David Leary: Yeah, but I need your W-9. I still need your W-9, sir. Blake Oliver: You can request it via QuickBooks, right? David Leary: I think I did months, and months, and months ago, Blake [crosstalk]  Blake Oliver: I did not respond? David Leary: You did not respond. I think it still says pending. Blake Oliver: Oh, no. Okay. Send me that again, and I'll fill it out. David Leary: I'll see if there's a reminder; I'll see if there's a reminder, yep. [00:49:30] Blake Oliver: Okay. All right, so why don't we talk about the fintech stuff? David Leary: Fintech. Obviously, this story every week, it's like my beat, right? Blake Oliver: Yeah, you're the fintech beat [crosstalk]  David Leary: -is fintech. I have three articles. The reason I really got into these articles was the titles. The first one I'm gonna read is, “Inside the Chase Plan to Ban Screen Scraping.” Blake Oliver: Uh-oh. That would be very bad. David Leary: Very bad. This is an article on Bank Innovation. I actually clicked through, thinking this is gonna be this juicy, [00:50:00] behind-the-scenes drama thing. No! Basically, it's very straightforward. It's the managing director of digital platforms at Chase said that they're tokenizing the customers’ data in order to protect their financial information, and they're striking deals.  We talked about this, how they struck a deal with Yodlee a few weeks back. They've done deals with Intuit. Right now, I think if you're on QuickBooks Online, or using Intuit's Mint product, you've already gone through this transition where you've had to- you’ve been disconnected completely, and you've had to connect through the Chase's [00:50:30] API, and that now you're tokened in. In theory, you won't get disconnected, as well. Apparently, there's already 3.8 million customers using this API. Ultimately, the reason they're banning it - because they don't want to have third parties screen-scraping; they don't wanna have third parties copying and saving people's login information … Which, essentially, Plaid; these other services that exist. Intuit has their own banking feeds. You have Yodlee. They're very clear [00:51:00] about this. They're gonna keep banning these companies and blocking them. It's a little bit of a- there's a war here; a propaganda war, right? Blake Oliver: So, I can expect my Hubdoc account to stop fetching my bank statements from Chase this year, at some point, right? That's what it sounds like because it already doesn't work for Wells Fargo anymore. David Leary: That’s correct. Yeah. I actually think in Mint … Bank of America and Wells Fargo, Mint's very clear, like, "You have to reconnect in the next 10 more days," I think I have to [00:51:30] use the new API connection, or however it is. You're gonna see more disconnects in the next five to six months than you've ever seen before because Chase is not the only one that's blocking. Well, let me ask you this. Blake Oliver: Okay. David Leary: If I told you, "Hey, go watch this 15-minute video," and the title of the video was “The Open Banking Movement is Inspiring Consumers to Ask Who Owns Their Banking Data?” Blake Oliver: Uh, I would watch that because I'm a fintech nerd. [00:52:00] David Leary: What would you expect to see in that video? Would you expect to see a consumer wondering about their fintech data? Blake Oliver: I guess. Most consumers probably don't think about that, though. David Leary: Or anybody questioning that? No. This video, and this is where I said we're in a propaganda war. This is on CNBC. There's a 15-minute video, which is essentially a long infomercial for Plaid. Blake Oliver: Oh, God. David Leary: It's spun up as this … [00:52:30] Under the guise of open banking, and consumers, but really, when you watch it, this is just propaganda for Plaid. Blake Oliver: Maybe propaganda's a bit of a strong word. Maybe Plaid just has a really good PR team that pitched to a reporter on this because it doesn't say paid content or anything. I really looked [crosstalk]  David Leary: No, I checked. I checked. I checked for paid content.  Blake Oliver: Okay. David Leary: Yeah, so obviously it was pitched. But, for 15 minutes, couldn't you find one consumer that says, "I'm upset that I can't get my own bank data out of my bank"? [crosstalk] It's all from Plaid. Basically interviewed the Plaid founder. [00:53:00] Blake Oliver: Oh. David Leary: Then they interviewed somebody, an investor in Plaid. Then they interviewed some Harvard fellow that is in the bank industry of some type who probably is on the board at Plaid. I did not investigate that, but it's propaganda. Both sides are in this fight, right? The banks – “We’re gonna ban you,” and on the other side, the people getting banned are, you know, "We're defending you." Blake Oliver: This is all inside baseball because the consumer, the end user, has [00:53:30] no clue what's going on other than, oh [crosstalk] doesn’t work.  David Leary: Exactly, until their software gets turned off. Blake Oliver: Same thing with accountants, right? We really … Most accountants who are using QuickBooks Online or Xero or online accounting, when we connect the bank feed, we don't know what's going on behind the scenes. We don't really think about Plaid or- David Leary: No, but you, as the accountant or bookkeeper, look like the jackass when it disconnects because then you have to go back to your client and say, "I need you to log in again. Do-do-do …” and then you look like the incompetent accountant. It's horrible. Blake Oliver: Well, and that's why my [00:54:00] solution was always- I never had my clients connect the feeds. I would have them create a read-only login for me. Then I would use that login to connect whatever feeds I needed, so that way, if it broke, I could just go in and reconnect it myself. David Leary: Yes, but that's a bank that lets you do that. Blake Oliver: Well, and what I had to do, which was kind of painful, is I had to stop working with clients who didn't have a bank that would create a read-only login. If they couldn't do that, I wouldn't even take their administrator login. I wouldn't let them give me their login because [00:54:30] I couldn't take the chance that that gets stolen. David Leary: I know there's accountants or bookkeepers that, you know, they have this in a Quick Base; they're storing this for their clients. It's definitely a broken system, and that brings me to my third article. This is an article in americanbanker.com. The title of the articles is, “It's Time to Go All in on Open Banking.” This article is part one of a four-part series, so I'll summarize each one as they come out. I'd argue this article, right now, it's like an APIs 101 doc for somebody that's a banking [00:55:00] executive or a banking manager. Blake Oliver: Which would make sense because that's who the audience is for American Banker, right? David Leary: Yeah, but I think our audience, like, if you wanna understand more of how this works and how, in theory, it could be solved, I think this article is a very lightweight- for you to understand APIs, in general, I thought it was pretty good.  They talk about micro services. An example of micro services would be when you go to Amazon, maybe you can still shop, but maybe the reviews aren't working. The whole website is built from small pieces called micro services. [00:55:30] Then they reference in the article about Jeff Bezos’ famous mandate from the early 2000s. Are you aware of what this mandate is? Blake Oliver: Oh, that everything at Amazon had to be billed as its own service with an API. David Leary: So another team could use it. So, whatever piece of the product you built, you'd build it in a way so other teams could consume it. Then, eventually, you'd have it consumable externally. Blake Oliver: Well, in the modern way of building apps, if you want that, is you build the API first, and then you build your [00:56:00] app as sitting on top of that API- David Leary: Yes. Blake Oliver: - rather than the other way around.  David Leary: Which would be- we've talked about that before; that's how Twitter was mad, and that's how Square was built on- Square was built that way, right? Blake Oliver: It was an API first, and then the interface was added. David Leary: He lays out in the article about, like, this is just a simple plan. This is how they transition to open banking. It's very clear, right? He talks about how if you don't open up to APIs, you're gonna go obsolete. But my experience, this [00:56:30] takes a long, long, long, long, long, long, long time, especially if whatever it is you have was never designed to be open to begin with.  An example I can give on this was PayCycle … Bill.com, Rene Lacerte, he had a payroll company called PayCycle. Intuit purchased it – it’s probably going on a dozen years ago, maybe 13 years ago; could be 14 now. Time's flying, right? It was never designed to have an API. 13 years later, guess what QuickBooks [00:57:00] still doesn't have available as a public API? There is no payroll API still. Blake Oliver: Oh, because PayCycle became QuickBooks Online Payroll? David Leary: That's correct, but if something wasn't built from day one to have APIs, it's very hard to add an API on top of it. Blake Oliver: It's like trying to add plumbing to a building that never had it put in, in the first place? David Leary: Exactly, because there's security … There's just so much involved. This simple plan- just do what Jeff Bezos told his Amazon employees to do. I don't know. Will we ever have [00:57:30] open banking? Blake Oliver: In Europe, they're starting to have it because of the legislation. I think that unless we have some sort of legislation … Not that I'm a big fan of legislation, given what's happened in California, but maybe something to force portability of information would inspire the banks to actually build it. David Leary: Or an easier way is just to loosen up who can get a bank charter and let the free market figure it out. Blake Oliver: Yeah. David Leary: That's the best scenario. Blake Oliver: Let the challenger banks come in and build this from the ground up and have [00:58:00] all these connections. That's great. Hey, well, David, we're running out of time. David Leary: That's it. Blake Oliver: If people wanna catch up with you, get to know you, talk to you, send you stuff like Jacob did to me, where can they reach you? David Leary: The easiest place is on Twitter. I'm just @DavidLeary there, but you can also, on Facebook, find me the same way, and on LinkedIn, the same way. Blake Oliver: Yep, and I am @BlakeTOliver. For those of you who are not on the socials, feel free to email me at Blake@blakeoliver.com. Time for the classifieds. Looking to modernize your firm? Ryan Lazanis started and sold his own accounting firm in just five years. Now he helps firms like yours stay on the cutting edge.  Get access to his free weekly email curating the top five pieces of content that will help your firm modernize by visiting futurefirm.co/cloudaccounting. That is futurefirm dot co slash cloudaccounting. Want to get the word out about your newsletter, webinar, party, Facebook group, podcast, or that fancy Excel macro you just created? Why not let the listeners of The Cloud Accounting Podcast know by running a classified ad? Hit the show notes for the link to get more info. 
The best and worst 2020 predictions (and some of our own)
SponsorsJirav: www.jirav.comHi, this is Blake, and I just wanted to let you know that this episode of the Cloud Accounting Podcast is sponsored by Jirav, my employer. “Jirav” sounds a lot like “giraffe” — and that’s no accident. Giraffes are the tallest animal in the world. That gives them a great view. Our goal at Jirav is to give you a similarly great view of what’s going on with your business.We do that by helping you understand where your business has been, and most importantly, predict where it’s going. Jirav connects your cloud-based accounting, payroll, CRM, and billing data together to automatically update shareable online dashboards, monthly reporting packages, and sophisticated financial plans and budgets in real-time. If you’re using Excel for reporting and forecasting, you’ll save hours every month with Jirav.Learn how accounting firms are using Jirav to deliver connected insight, strategize growth, and help their clients make more profitable decisions. Visit jirav.com and start your 30 day free trial. That’s J-I-R-A-V dot com. See farther with Jirav.Show Notes 00:38 – Looking back - how many 2019 predictions came true?  03:17 – Blake's first prediction for 2020 comes true less than a minute later ... Well, sort of ...  03:38 – Culling All Accounting Conferences – less definitely may start to be more! | Accounting Today 05:33 – Is there any value in free?  09:01 – Duh ... Overstating the obvious isn't really making a prediction | E27 09:31 – Dynamic pricing is just not a thing, at least not for the smaller players 11:09 – Hmm - is "used" the new "new"?  11:28 – What's going to have the biggest short-term impact on accounting? One hint: it's not humans | Journal of Accountancy 13:25 – Blockchain in 2020 - boom or bust? | Enterprise Times  14:50 – Armanino releases blockchain-powered app for instant attestation | Accounting Today 16:49 – Government still says no to crypto | Real Daily 19:58 – Everybody’s losing their minds over 5G! But, why? | The Verge 21:14 – Blake takes issue with 2020 being the breakout year for 5G – lack of speed isn’t the problem; lack of use is  23:25 – 2020 just might be the year of foldy, rolly, hidey devices ... Maybe 25:12 – 2020 sees the hiring of non-accounting grads at CPA firms continue | Journal of Accountancy 26:25 – Blake says it's going to take a good decade to create and implement the changes needed in the CPA exam and curriculum  27:49 – Want to stay relevant, and innovate? Pull your head out of last year! | LinkedIn 29:33 – Millennials might be so 2019, but they still have some decent asks when it comes to employment | Boomer.com  31:31 – Open banking in the US? Maybe in 2030 ... | Accountancy Today 33:19 – What's the most important issue facing the accounting industry? Here are at least 100 | Accounting Today 35:30 – Things are different all over -  2020 Accounting Changes from Down Under | Accountants Daily  37:42 – Automation - great for those with actual skills; not great for the not-so-great ...  37:55 – What do accounting regulators actually DO? | CFO Dive 40:17 – For your reading pleasure - 120 AI Predictions For 2020 | Forbes 42:17 – Speaking of Voice AI – 46 industry pros share their 2020 Voice AI predictions | Voicebot.ai 45:01 – VR will continue to make people nauseous in 2020  45:08 – Four (just four?) Creepy Applications That Will Change Your Business In 2020 | Inc.com 47:36 – Is Netflix going to be your next bank? | Banking Innovation 49:24 – The moment we've all be waiting for - David and Blake offer up their 2020 predictions! 🎉 49:30 – Nobody's staying in their lane! David says watch out for blurred, crossed, and muddied lines more than ever.  50:59 – According to Blake, 2020 is the year that one of the GL players - think QuickBooks, Xero, et cetera - becomes a bank.  52:28 – David's no-brainer prediction - Xero and Sage will have to launch their own version of Live product to compete with QuickBooks Live. Mark his word! (For the record, Blake disagrees)  54:24 – Podunk is not the proper nomenclature, David ... 😁 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, and NOW, you can see our smiling faces on Instagram!   Limited edition shirts, stickers, and other necessities.TeePublic Store: http://cloudacctpod.link/merch Subscribe Apple Podcasts: http://cloudacctpod.link/ApplePodcasts Spotify: http://cloudacctpod.link/Spotify Google Play: http://cloudacctpod.link/GooglePlay Stitcher: http://cloudacctpod.link/Stitcher Overcast: http://cloudacctpod.link/Overcast   TranscriptBlake Oliver: The accounting regulators aren't really doing all that much. It's not that significant. We talked about this last week. The big thing they're gonna be working on over the next six months is deciding whether or not to allow public companies to amortize goodwill. Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: And I'm David Leary. Blake Oliver: This is our special 2020 predictions episode. David Leary: Should we check back in on our predictions from 2019? [00:00:30] Do you remember yours? Blake Oliver: Oh, I don't. I hope you don't call me out for making some bad predictions. David Leary: I don't remember yours, but I remember mine. I predicted that it was gonna be the year of instant payments. We kind of saw that across the board. QuickBooks announced you could get paid within 24 hours. In many cases, you can get instant deposits now if you're … Instead of putting your bank routing numbers in, if you put your debit card number in, you can get an instant deposit, or instant payments back for vendors or customers. So, I think I'm gonna declare victory on instant payments. Blake Oliver: Yeah, I think you're right. David Leary: Okay, good [crosstalk] It’s a wrap.  Blake Oliver: No, it's great. [00:01:00] Zelle is actually working really well; Venmo, Apple Cash. I can pay, pretty much, anyone with any app, although I have to have a variety of apps because we're not all using one app. Actually, we'll get into that as one of my predictions regarding fintech for 2020, so that's a good lead in. David Leary: I think, actually, even the explosion of all these getting-paid-two days-early-type-payroll plays that are out there, right? Blake Oliver: Oh, yeah. David Leary: People are getting paid faster than instant; they're [00:01:30] getting paid early. So, I'm gonna declare that prediction as a win. I'm glad I only made one prediction. It's harder to be wrong, right? It's a numbers game. Cool.  Blake Oliver: Well, so I'm actually going back right now to our old show notes from 2019 and looking and seeing if I made any predictions that came true or didn't. Let's see. My big prediction back in 2019 was that firms are going to have to figure out how to communicate with their clients and deliver really good customer service mobily. That [00:02:00] means letting your clients text you and being more responsive in that way. I'm wondering, did that come true? I don't know. I haven't seen any surveys about that. I guess it's more of a long-term prediction, and it has to go with customer experience. Good CPAs, good accountants, bookkeepers have always focused on customer experience. The key now is just merging that responsiveness with technology moving forward. How can we meet our clients where they are? Whatever [00:02:30] tools they want to use, we need to be using. David Leary: I'm gonna give you that you're right because we talked about this over … It was a theme of many episodes, not specifically about texting, but how you're communicating with your clients; how you're engaging your clients. Blake Oliver: Yeah. Don't send them this giant email when they ask a question. Give them your opinion in one or two paragraphs. If you go beyond that- nobody reads long emails. That's why texting can actually be good if you have a way to do it without having to pull out your own phone. If you have some sort of service [00:03:00] that can pull those in to a support ticket desk kinda thing. I don't know. The way that we can communicate with software companies, we should be able to communicate with accounting firms. There's software to do it, so people are gonna figure it out. I do have one prediction for 2020 right off the bat, David. David Leary: What's that? Blake Oliver: Which is that we have just way too many accounting conferences. Everybody's doing one now, and some of them just aren't gonna survive. We're gonna have a culling of the conferences. David Leary: A culling? Blake Oliver: Yeah. David Leary: Of [00:03:30] multiple? Blake Oliver: Well, at least one. We're gonna lose at least one accounting conference this year, yep.  David Leary: All right, Blake. I'm gonna give you this one already. Blake Oliver: Oh, yeah? David Leary: Accountex USA sent out an email yesterday. I don't know if you've checked your email, or if it's in your spam folder, but you're right. An accounting conference, Accountex USA, is not gonna do their 2020 event here in the United States. They'll still have their UK event, but they're not gonna do their event in the States. Blake Oliver: That's crazy. I have to admit, I cheated. I saw that email before I made my prediction. Do you remember- [00:04:00] David Leary: You could edit this in a way so nobody will know that. Blake Oliver: Nobody will know, but I'm not gonna do that. I'm not that smart. So, credit where credit is due … It was surprising to me, although not so surprising, given the decline that that conference has had. It used to be SleeterCon. It was the Sleeter Group's conference, which was- my first conference was going to Sleeter, and it was great. It had some of the best content in the industry. David Leary: That same goes for me. SleeterCon 2007 or something. I don't even remember how long ago. It was 2007 or 2006, but yeah, it was [00:04:30] a long time ago, and it's an end of an era. Doug Sleeter sold SleeterCon three years ago to the Accountex Group? Blake Oliver: Diversified Communications. Yep. They're a giant company. They run a ton of conferences. He sold it to them, and they just destroyed it, it's sad to say. They ran it into the ground. David Leary: It was interesting because they filled it with sponsors, though. I mean, you and I were there in Boston. We did some of those interviews, those episodes, but the attendees … There was almost more sponsors than attendees, and that was the struggle. I think there's this big argument with the conferences, [00:05:00] like, do you charge people, or do you not charge people? Because, in theory, you're like, "Don't charge anybody. You'll have so many people go. The vendors will be happy,” and just charge vendors, but I feel like people don't have skin in the game, so they don't show up. Blake Oliver: No. Well, part of the problem is that XeroCon started, QuickBooks Connect started, and they made those conferences almost free; essentially, free, they're so cheap because they're marketing activities, in addition to being educational. Conferences at the level of a SleeterCon, or an Accountex just can't compete with that, so they had to go free as well, which then … [00:05:30] People don't value free, actually. They're more likely to go to a conference if you have to pay money because they know at least the sessions are gonna be educational and good, and it's not all pay to play by the vendors. David Leary: You're right. I wouldn't be surprised … I feel like we've gone to the other shows that used to be owned by [inaudible] Management. Now they're owned by- is it Turpatin? They put on the Accounting Show- Accounting Show LA [crosstalk]  Blake Oliver: Terrapinn. Terrapinn, yeah.  David Leary: Terrapinn. I think they do the New York City Technology Show and the [00:06:00] LA Technology Show, and those are not very well attended either. Blake Oliver: No, yeah.  David Leary: I wonder if they … They also do a Toronto one that, I guess, is decent, and I think they do one in Asia that has really good attendance. Maybe your prediction’s more of some of these shows are gonna pull out of the U.S.  Blake Oliver: What's happening is the best shows are becoming vendor-sponsored - XeroCon, QuickBooks Connect. The shows that used to be independent can't compete with that. People aren't gonna go to … People have limited time to go to conferences; most [00:06:30] small- especially smaller practitioners. You can't leave your business for more than one or two weeks a year to go to get CPE and go to these shows. So, who are you gonna go to, right? You're gonna go to the one- the GL tool that is doing the conference. Yeah, I think it'll just continue to happen. We're gonna have just vendor-specific events. David Leary: I think I saw, either on Twitter … I feel like I haven't seen any confirmation of it, but that QuickBooks is not going to do a QuickBooks Connect in Sydney this year. Blake Oliver: Yep.  David Leary: In lieu of that, apparently, [00:07:00] do more of the smaller roadshow-type events. You're right, maybe 2020's the year of … The way people think of conferences is being changed. Blake Oliver: I wouldn't say it's a bad thing. It's that a lot of the stuff that used to happen at these conferences is moving online. People are engaging in Facebook groups a lot. David Leary: You can get your CPE online now. Blake Oliver: Yeah. You’ve got CPA Academy giving you all your CPE online, and you can get as much of it as you want, whenever you want. You've got podcasts like ours. This is something that has [00:07:30] developed over the last 10 years. Used to be you had to go in person to get this stuff, and now you can go online. In a way, it's just much more convenient. David Leary: Yeah. I feel like the in-person part of it, the important part of this now of the conferences is not the training you go to get; it's just the connections, the physical- the hugs, and talking, and eating with somebody that you've chatted with every other day, virtually. Blake Oliver: Yep.  David Leary: I feel like the conferences are more important than ever, but what the business model is and what the purpose of the conference is, I think, is what's being reinvented here. Blake Oliver: I agree. David Leary: It may not be solved in 2020. [00:08:00] It could take two or three years before whatever this new model of bringing people together is. Good one, Blake! Good prediction! I went through one, two, three, four, five, six, seven- about seven to 10 prediction blog posts that are out there - e-commerce, blockchain, tech gadgets, accounting things, audit, AI … Like 150 things in AI.  I don't wanna bring everything to the table, but what I did with each article, I just kind of went through and I'm like, "Oh, here's the "duh", obviously; that's [00:08:30] not much of a prediction;" something that I completely have no faith in like, "Yeah, right. That's never happening;" and then something that I didn't even think of.  So, we can kind of go through some of these and talk about these predictions. I know you have a couple articles and predictions of your own. Then, I will have my own predictions at the end of the show, if people wanna stay tuned for that. No skipping! No skipping!  Blake Oliver: Yeah, let's go through it. Let's go through it sort of by topic. Then, if our articles overlap in terms of topics, we can have a discussion. David Leary: All right. Wanna tip-toe in the water [00:09:00] with an easy one for e-commerce? Blake Oliver: Yeah, sure. David Leary: All right. This is from a website called E27.co. It's “E-commerce trends: What to expect in 2020.” My "duh" one – one of their predictions is people will find your product and website via Google search. Blake Oliver: Wait, isn't that what- David Leary: That's one of the predictions. Blake Oliver: - that people are gonna find you via Google search. David Leary: Yes. Blake Oliver: Okay. All right. David Leary: That was a "duh", and then the "yeah, right" was dynamic pricing. [00:09:30] I just don't see dynamic pricing happening for most e-commerce players, right? It’s a bigger platform.  Blake Oliver: What do you mean by dynamic pricing? What is dynamic pricing? David Leary: When you go to buy airline tickets, or hotels, or you have to book a hotel room, or you, yourself, when you shop on Amazon … You might see dynamic prices depending on who you are. I think, at a big platform level, this is gonna happen, but I don't see somebody who has their own website set up for selling their product online is gonna dynamically price things real-time for their visitors to their website. I just don't buy [00:10:00] that. Blake Oliver: When you say dynamic pricing, you're saying that the price changes depending on who is going to the website and when they're going, right? Because I know that airlines have been doing this for a long time, where if you shop on the weekend for a ticket, you're gonna pay more than if you shop on a Wednesday in the middle of the day. David Leary: And if you've visited the site before and your cookies. There's all kinds of stuff. I don't think smaller players are gonna do that. I think big platforms are doing it, but I just don't see that coming down the pipe there. Blake Oliver: Yeah. Well, you know where it should happen and where it could easily happen is that [00:10:30] as busy season approaches, frickin' raise your prices. If somebody comes to you in March, they should be paying a lot more than somebody who comes to you in January to get their tax return done in April. Everybody should do that. David Leary: I think you're right, yeah. Then, the thing I didn't think of that I thought was interesting in this article was rental and "re-commerce" are gonna increase because there's so much sustainability push and then, ultimately, people just want lower prices. If you can get lower prices through buying something that's used, or possibly renting [00:11:00] something … I thought that was an interesting prediction that we're gonna see a big jump in used goods. Blake Oliver: Well, and a great example of that, which we've talked about before, is Rent The Runway, which is that company that lets you rent high-end fashion; you'll wear it for one night and then return it, and they can get 25 rentals out of a single item or something. David Leary: That was it for that article. That was my three things. Blake Oliver: Okay. David Leary: Do you wanna jump into one of yours? Blake Oliver: Yeah. Let's talk about RPA - robotic process automation - a [00:11:30] big term in corporate America. In small business, we don't use the acronym so much. We just call it automation. David Leary: Or we just call it Zapier. Blake Oliver: Yeah, Zapier. Donny Shimamoto, he's the founder and managing director of Enterprise Technologies, and he's been a guest on the show. He said, in an article in the Journal of Accountancy called “What to Expect in 2020,” that, “RPA is the technology that will have the greatest short-term impact on accounting,” and that's because it could be used by management accounting, by audit, and by tax. [00:12:00] I really respect Donnie's opinion, so I'm just gonna go with him on this one and say RPA is gonna be the big thing this year. It's gonna continue to grow the most, probably, and have the most impact of any technology. Like you said, for those who aren't familiar with RPA, Zapier is a great example of RPA connecting different systems and automating the flow of information; stuff that you might have had to key in manually before. There's also really sophisticated RPA software that are essentially like [00:12:30] macros that you would have in Excel but that can live outside of just a spreadsheet application. They can act like a person clicking a mouse and typing a keyboard, going in between apps. They use some artificial intelligence to be able to work like a human, follow detailed instructions, and kind of overcome some of the issues that an Excel macro couldn't. This is basically a more advanced version of that. David Leary: It's the ability for the common folk to do automation. Before, an engineer would have to do it, and I think it's coming down [00:13:00] to a level where an average accountant or bookkeeper can automate some tasks now. Blake Oliver: Oh, yeah. We're doing that right now in marketing at Jirav. We're connecting our Google ads to HubSpot, our CRM, and we're using Zapier to automatically create contacts. That's something that, in the past, I would have had to go and manually enter all of those, and we don't have to do that anymore; fewer entry level people needed. David Leary: Got it. Wanna talk blockchain? Blake Oliver: Oh, yeah, That was the big one for the past few years. It kind of hit the peak of the hype cycle, [00:13:30] and then it just fell off the radar, didn't it? David Leary: I feel like we talked about it all the time towards the end of 2018, and then we barely talked about blockchain for all of 2019. I feel like we barely spoke about it. This article is in the Enterprisetimes.co.uk, “Blockchain 2020 – thoughts, comments and the future.” Blake Oliver: What is gonna happen with blockchain because there was all this doom and gloom about how it was going to automate audit, and get rid of auditing, and all that stuff? Still gonna happen? David Leary: That [00:14:00] was my "yeah, right". One of the predictions was, over and over again, the predictions were talking about, "This is the year of enterprise adoption. Enterprise is gonna adopt the blockchain." The words ‘enterprise adoption’ just kept coming up over, and over, and over, and over again, but it was a little gray, right? It was almost like [crosstalk]  Blake Oliver: Yeah, what are the actual applications of this? David Leary: I don't know. It wasn't clear, but that was the safe prediction - enterprise adoption. If [00:14:30] any of the Fortune 500 use some sort of blockchain technology at all, people are gonna say they're right. That one, I was a little skeptical of because I feel like enterprise just takes so long to adopt anything. Blake Oliver: There was one story last year that did catch my eye about blockchain and suggests that there is some progress being made in real-world applications. My old firm, Armanino, they created a tool called Trust Explorer 2.0. This was reported back in the end of October in Accounting Today. It's [00:15:00] an app that uses blockchain technology to provide a secure downloadable report which Armanino backs with its opinion. The idea is that if you can put it on the blockchain, then you can get an audit opinion from Armanino in seconds. That's kind of a cool application, right? David Leary: Yeah. Blake Oliver: It's not eliminating audit because Armanino built this tool, and they are backing it. So, if anything, it's allowing them to do an audit on a blockchain more efficiently. David Leary: Then, [00:15:30] my "duh" was regarding currency. There's gonna be government regulation and pushback against it from governments. The governments are anti-coin. They really are, ultimately [crosstalk]  Blake Oliver: Yeah, because it's an existential threat to fiat currency. If people decide that Bitcoin, or whatever comes after Bitcoin, or some other cryptocurrency is safer than the U.S. dollar, the U.S. government loses a ton of power over the global economy. David Leary: The U.S. government should just make their own Bitcoin [00:16:00] and the whole world just adopt it as a standard; it would be like that. That would be the smartest. Blake Oliver: There was a great article last year that we never talked about suggesting exactly that, that if the Fed really wanted to be on the cutting edge, that they would create digital dollars, a cryptocurrency linked to the U.S. dollar that they controlled. It would give them amazing powers like the ability to infuse money, in a financial crisis; instead of loaning [00:16:30] tons of money to banks and hoping that banks loan money to businesses and stimulate the economy that way, they could actually create an account for every citizen- David Leary: That’s true.  Blake Oliver: -and then infuse money directly into our accounts that way and skip the banks entirely, make the banks obsolete in that regard. They have, so far, just rejected any possibility of pursuing something like that. David Leary: Then the thing in that article that I didn't think about or opened my eyes a little bit is this whole concept of Internet of Blockchain. Essentially, the Internet of Blockchain [00:17:00] communication - separate blockchains will start talking to each other. Blake Oliver: Mm-hmm. David Leary: That's something to think about. Blake Oliver: Well, and continuing along with blockchain- I don't know if this is gonna happen in 2020; probably not; maybe over the next 10-20 years, but blockchain has the potential to disrupt Google's monopoly over information and could basically do … What the internet did to Microsoft, cryptocurrencies or crypto networks could do to Google, in that you have [00:17:30] this open database of information that doesn't get controlled by one algorithm or one source, such as Google. That's the potential long term of blockchain, if we're storing information beyond just financial information on a blockchain. David Leary: Yeah, and I think that's one of the big problems with blockchain is this decentralized approach. The problem is we've grown … The whole history of the world is about centralizing power. The natural order of the world has never been about [00:18:00] equal distribution of power. Essentially, it's all centralized. Blake Oliver: The problem with this theory that you can create a completely decentralized blockchain and have it succeed is there's a lot of hubris involved in that because that means that you've written it perfectly. That would be like imagine if the founders of our country had said, when they wrote the Constitution, that, “This Constitution can never be changed, and you can never amend it because it's perfect the way it is.” [00:18:30] In a lot of ways, that's what a blockchain algorithm is like, if you don't have ways for people to change it. Currently, the only way to change Bitcoin is to break off from the network and split the chain, which has happened before- David Leary: Then, everybody wants people to use my Bitcoin; David's Bitcoin instead of Blake’s bitcoin, and it's like … Which is centralizing onto one chain. Blake Oliver: That would be like if the only way to change the U.S. Constitution was for us to split into two countries and then, people have to decide which one they're gonna join. [00:19:00] David Leary: That's what churches do, right? When churches wanna … They can't agree on a change, they just split the church [crosstalk]  Blake Oliver: Right!  David Leary: -believe the one set of beliefs, they go one way, and the other one … Yeah. Blake Oliver: Yeah. David Leary: Churches are blockchains. Blake Oliver: I don't know. You need some sort of authority to manage a blockchain, I think, in theory, because it's not perfect, and there's gonna be changes that need to happen. That's one of the big problems with blockchain right now, is that if- or Bitcoin in particular, is if you make a transaction, and you screwed [00:19:30] it up, and let's say you sent money to the wrong wallet, or somebody steals money from you, there's no way to reverse those transactions. There's gotta be some sort of balance here. Can you have the protections of fiat currency that the banking system provides, while also having the flexibility, and openness of a blockchain? I think that's enough about blockchain, right? Should we-  David Leary: Yeah. Blake Oliver: How about I pick the next one? David Leary: Okay. Blake Oliver: Let's talk about a trend that isn't going to impact us very much that … I don't know why people are talking about this so much - 5G. I keep hearing 5G, 5G [00:20:00] is the next big thing for mobile technology, right? We had 4G. I think everybody's on 4G right now, right? 5G is somehow gonna change the world with greater speed, and all this stuff. David Leary: The next article I was gonna go to about, “What's Next for Gadgets in 2020,” and that was one of my "duh" - 5G phones are everywhere, but 5G networks are nowhere. Blake Oliver: This, specifically, was called out as a big technology to expect in 2020 in the Journal of Accountancy. Rick Richardson was quoted, "2020 [00:20:30] will be a breakout year for 5G, as handset manufacturers begin to make a 5G chipset standard equipment."  Okay, so it's gonna make cellular data transfer as much as 100 times faster than current 4G networks, but how is that really gonna change accounting and auditing? I mean, my 4G phone is plenty fast to do what I need to do as an accountant, and I can do video chat and conferencing and all that stuff.  Here's another quote from the article, "Faster, more [00:21:00] efficient broadband connections are essential for the real-time data connections needed to power continuous auditing and KPI dashboards that provide live results and analysis." Tell me how 4G is not fast enough to do that right now. I mean, the problem isn't that we don't have enough speed; the problem is that people just aren't using the tools. David Leary: I read that you can do cloud accounting from an airplane now, so ... Blake Oliver: Right. Yeah, we've got satellite internet. When I fly Alaska Airlines going up to Seattle, I can get 20 megabits per second. That's plenty fast to do what I need to do. David Leary: As [00:21:30] an accountant [crosstalk] bookkeeping type stuff. Blake Oliver: Yeah, 5G has big potential for self-driving cars, and all that stuff, but we're talking about accounting, auditing, bookkeeping.Hi, this is Blake. This episode of The Cloud Accounting Podcast is sponsored by Jirav, my employer. Jirav sounds a lot like "giraffe" – and that's no accident. Giraffes are the tallest animal in the world. That gives them a great view. Our goal at Jirav is to give you a similarly great view of what's going on with your business.  We do that by helping you understand where your business has been and, most importantly, predict where it's going. Jirav connects your cloud-based accounting, payroll, CRM, and billing data together to automatically update sharable online dashboards, monthly reporting packages, and sophisticated financial plans and budgets in real time. If you're using Excel for reporting and forecasting, you'll save hours every month with Jirav.  Learn how accounting firms are using Jirav to deliver connected insight, strategize growth, and help their clients make more profitable decisions. Visit Jirav.com and start your 30-day free trial. That's J-I-R-A-V dot com. See farther with Jirav.David Leary: This is in the magazine called- or website called theverge.com. “Here's What's Next for Gadgets in 2020.” Yes, 5G phones is one of the "duh" that's everywhere. Then, somebody in that article predicted that the streaming TV wars are gonna be here. Come on, how hard was that? [00:23:00] Blake Oliver: It's already here. David Leary: It's so obvious. It's here. That was a really obvious one. The thing I didn't really think of a lot is – it's two words – folding and rolling. You're gonna see screens, phones, tablets, TVs- TVs that roll. Think about shutters. Blake Oliver: Roll up? David Leary: They'll go up out of a box on your table, or they'll pull out of your ceiling. Screens are gonna be folding and rolling this year. We’re gonna see that.  Blake Oliver: Okay. I mean, we had the whole folding [00:23:30] screen fiasco last year with that phone from- was it Samsung that tried to do the folding phone that didn't work? It kept breaking. David Leary: That was just one phone. Blake Oliver: Yeah. David Leary: We're gonna see hundreds; hundreds of devices that fold and roll this year. Blake Oliver: Interesting. David Leary: You’re gonna see … That's gonna be everywhere. That's gonna be a big one. Then, the "yeah, right," was a lot of predictions about this is the year of smart home security. My "yeah, right" about that is most- every time you turn around, those smart home security devices, [00:24:00] Ring doorbells, et cetera, are getting hacked. Blake Oliver: Oh. David Leary: It seems crazy. You're gonna bring in a "security device" that’s more hackable than any other device in your house. It's the most hackable device. Blake Oliver: Yeah. David Leary: Nobody can hack your toaster yet; nobody can hack your refrigerator; but they can hack your doorbell. Blake Oliver: I'm okay with having the doorbell; just don't be stupid and use a very hackable password on your doorbell. I would never put a smart security camera in my home, like a Ring security camera. I just … That's beyond … [00:24:30] I'll do a smart speaker, that's okay, but a security camera? No way. David Leary: Yeah, I just don't buy- I think the tech nerds are gonna buy that smart security stuff. There's gonna be enough hacks, but I think the average person's just gonna get creeped out by it and not do it. I just don't see the explosion of smart home security yet because there's a fundamental flaw that those devices need usernames and passwords; they're calling home on the internet; they're connected to Wi-Fi.  There has to be a smart home security that's not connected … Maybe that's where 5G comes in? I don't know, but they're fundamentally [00:25:00] flawed. A security device is fundamentally flawed if it's dependent on your username and password, which everybody knows your username and passwords suck.  Blake Oliver: Let's talk about practice management. That topic also covered in the Journal of Accountancy's 2020 predictions article. The trend toward hiring non-accounting graduates at CPA firms is expected to continue, as firms seek the expertise of technology specialists. We've discussed before how non-accounting graduates consisted approximately [00:25:30] of 31 percent of all new graduate hires in public accounting in 2018, which is an increase of 11 percentage points over 2016. Dramatic change there. That is expected to continue.  The CPA license exam curriculum in schools has not, thus far, adapted to the new reality of what it means to be a CPA firm, so non-accounting graduates are needed. We need skills beyond accounting. Now there is that cpaevolution.org project going on [00:26:00] at the AICPA to change the curriculum, but I am not predicting that's gonna happen any time soon. They're still collecting commentary. I don't think that's expected to complete …  The proposal- The draft proposal for the changes is gonna happen this year, but that's just the proposal. Then, there's the years and years of actually making the change happen with the exam, and then there's the years and years of actually making the curriculum change happen, so that might be a 10-year kinda thing. Expect to see more non-accounting graduates in CPA firms [00:26:30], and really good career opportunities if you are a CPA who learns those skills that are missing from the license right now.  There's a quote from a firm in Chicago, Lauterbach & Amen, LLP. It's a mid-sized firm. They have decided that one in every four new hires needs to come from outside the traditional recruiting target population of accountants and CPAs. The non-traditional recruits are sought for their technology and data analytics expertise and also for skills such as project management, financial services, [00:27:00] and forecasting. They have made that a deliberate recruiting goal is to make sure– David Leary: I am now the perfect accounting firm candidate. Blake Oliver: Oh, you are, yeah, if you wanted to go do that to yourself. David Leary: I am not from the traditional background in any way, shape or form, but I am the ideal candidate of 2020 for accounting firms. Blake Oliver: Yeah, exactly. Although, accounting firms are notoriously ageist when it comes to hiring staff, so you might be out there. They only want those fresh- David Leary: I'm too old? Blake Oliver: Yeah, basically. They want the fresh college graduates who [00:27:30] don't know any better and are willing to work 60 to- hours a week for no overtime. David Leary: Oh, all right. Well, all right. You smashed my dreams for 2020, I guess [crosstalk] I have an accounting-related one-   Blake Oliver: You don't wanna fill out a time sheet do you, David? David Leary: No [inaudible]  time clocks. I have an accounting-related one, as well. Blake Oliver: Okay. David Leary: This is a blog post on LinkedIn, “The Accounting Profession and Accelerating Technology - the End to Many Firms?” My "duh" of the article was "the profession does not like change". I [00:28:00] was like, "Really? That was kind of obvious." My "yeah, right", and I'm gonna read this straight out, "The combination of big data and machine learning is driving a plethora of new data analytics tools that, frankly, can be used by anyone. Therein the issue, the do-it-yourself threat.” I think that's "yeah, right" because the do-it-yourself threat's been there for 25 years already with QuickBooks, et cetera. I don’t-  Blake Oliver: And TurboTax, right? David Leary: This "used by anyone" is just crap. Blake Oliver: Yeah. David Leary: I just don't buy that. The [00:28:30] thing I liked about that article, though, is he used an acronym that I thought was really cool. It probably applies really well to accounting firms is see the risk of SALY - S-A-L-Y - mindset, and that's ‘same as last year.’ Blake Oliver: Yeah, well, because if you keep doing it the same as last year, you're never gonna change. David Leary: I've never really seen that referenced as a mindset- or as an acronym, so I kind of like that one, going forward. Blake Oliver: It's a great analogy, or acronym that represents the mindset of the profession because it's [00:29:00] how accountants learn to work. When they go into a firm, this is how you learn. You look at what happened last year, and you're instructed to copy it and only make changes if necessary because that's the easiest thing to do. That way … People don't learn. They keep repeating bad processes. It's endemic to the profession because that's the way we learn to learn. David Leary: Let's stay on accounting. I have one or two other articles we could jump in. I don't know if you have any more accounting predictions? Blake Oliver: I do have [00:29:30] some more predictions. Let's see here. Let's talk about millennials. There was a lot of chatter about millennials over the last couple years, and 2019. I think we have hit peak millennial content, or topic, or derision. It's kinda over, so hopefully this will be the last time we talk about this.  This was an article by Jim Boomer on the Boomer Consulting Blog, “Four Things Millennials Want From Your Firm.” I liked how he talked about flexibility. That was one of the things that he said millennials [00:30:00] want. In recent years, millennials have become the face of the shift toward remote work. In a survey from American Express, 70 percent of millennial workers in the U.S. indicated that they want their work environment to be "flexible and fluid" rather than enforcing a rigid structure on employees.  Flexibility offers several benefits for employers, blah, blah, blah. Basically, the 8 to 5 office hours don't work with millennial employees, and firms should be offering more flexibility. So, offer some core hours; don't [00:30:30] require people to be in 8 to 5; maybe you do 10 to 3; let them start later or leave earlier. Hey -  and I'm adding this -maybe don't even require them to come into the office every day. Don't focus on overtime hours, focus on results. That's gonna continue to be something that firms have to change. They have to become more flexible. David Leary: That makes sense. Blake Oliver: Maybe that's kind of a "duh" thing at this point, David. I felt like Jim Boomer [00:31:00] expressed this very well; in addition to some other things, like, we need more stimulating office space, a sense of community. The last thing is the ability to not have to wear a suit every day to the office; let them dress flexibly for their job. David Leary: Yeah, with their torn up jeans or their- what's it called? Fast fashion! Blake Oliver: Fast fashion? David Leary: Fast fashion is the … It's like fast food but clothes, right? Blake Oliver: Yeah, exactly. David Leary: This is an article from Xero that was in the accountancytoday.co.uk. It's, “Four Accounting [00:31:30] Trends That Will Shape 2020.” The "duh" was pesky data entry will be gone. I'm like, "Yeah, it kind of already is." You put everything through Receipt Bank, AutoEntry, or Hubdoc, and you're not actually doing-  Blake Oliver: You could do that five years ago. It's just getting better and better, yeah. David Leary: My "yeah, right" was open banking. Okay, I'll give it credit. Yes, open banking in the UK and AU, for sure, but in the U.S., we're not seeing open banking [00:32:00] in 2020. Blake Oliver: No. David Leary: If we see it by 2030 … We'll be celebrating if we see true open banking in this country. It's gonna take a long time to get here. Blake Oliver: It's gonna take legislation, and that's what they have in Europe. The EU has a law called PSD2, which is like GDPR for payment data. It forces banks- large banks have to make consumer data available to any fintech, which the consumer permissions.  That would be like Bank [00:32:30] of America- I, as a customer of Bank of America, could say, "Bank of America, you have to make all of my banking data available to Venmo." That's a big deal, and it would take a law here in the U.S. for that to happen. We can expect to see payments and banking get more and more advanced in Europe. Maybe that'll stimulate regulators here to make changes, or lawmakers, even. David Leary: That part of that post that I didn't really think of or I wasn't aware of - it's a little specific because it deals with Brexit – but it's Brexit will essentially cause cashflow pains [00:33:00] for small businesses and clients, and they're gonna need help to address that. If you have the opportunity to come in as the adviser and understand how to solve those problems … But there are gonna be new problems that didn't exist before strictly because of Brexit. Blake Oliver: This is sort of like a predictions article. It's about the critical issues facing the accounting profession. Accounting Today asked their Top 100 Most Influential People, including you and me, David-  David Leary: Oh!  Blake Oliver: What is the most important issue currently facing the accounting profession? [00:33:30] Then, they took all those responses, which I didn't realize were gonna become public - I thought that was just part of the application - and posted them for everyone to see on a blog, and it's a lot- David Leary: I hope I gave a good answer. Blake Oliver: Actually, yeah, I didn't read yours. Let me go check it out. Let's see what David wrote. You said, "The struggle to show clients the value that they, as professionals, provide. As more hourly billable work gets automated to the point in which there isn't much left to bill for, clients are gonna start asking, “What am I paying you to do if it's all being done automatically?" That [00:34:00] was your top critical issue facing the accounting profession.  I said- I just kept mine very short, "As with many jobs in America, and around the world, automation is the biggest threat." I didn't read every single response. It’s 100 responses. It's a giant article. So, to automate that, I made a word cloud of the keywords that people used in their responses to see if there are any trends. David Leary: You just created our cover art this week Blake Oliver: Yeah. David Leary: That's gonna save me some work [crosstalk]  Blake Oliver: I’m gonna save you some work here.  David Leary: I can just use that as our cover art.  Amazing. Perfect. [00:34:30] Blake Oliver: Here are the top words. Technology was the most frequent word; then change; then clients; then tax, audit, talent; and then a bunch of other ones – management, models, partner, processes, people, succession, value, future, compliance, consulting data, automation, advisory, adapt.  You get a feel there, though, especially with those top words - technology, [00:35:00] change, clients, tax, and audit … Technology is changing how we work with clients is how I would stitch those together, when it comes to the world of audit and tax, most specifically. That's the trend. It's not just us saying that, right? That's the Top 100 Most Influential, according to Accounting Today. David Leary: Good, good, good. I have two more accounting-related ones, and then we can get back into fun things like creepy applications, and the such. Blake Oliver: All right, cool. David Leary: This is out of theaccountantsdaily.com.au. It's an article from [00:35:30] Down Under. It's, “Further Changes Expected in Accounting in 2020.” My "duh" in that article was that accountants will have more available to them than ever before. My "yeah, right" was that clients want to be inspired and led by their accountant. Do you buy into that? Blake Oliver: Clients want to be inspired and led by their accountant? Uh, no … I think clients want an accountant who will be responsive, who will get them the information they need, give them the opinion [00:36:00] that they want. I don't want to be inspired and led by my doctor; I want my doctor to tell me what I need. That's different. I come to them with a problem, and I want them to give me the options, and tell me what they recommend. David Leary: Yeah. I felt like this would be the dream as an accountant, "All my clients come to me for inspiration," like that would be the … I just don't buy it, yeah.  Blake Oliver: That's not for accountants; that's for business coaches. That's the whole coaching industry. Accountants [00:36:30] should not be coaches. It's a totally different mentality and personality. It's not for us. If you're an accountant who likes to do coaching, you're in the wrong business. You should be doing something else. David Leary: One thing I liked about this article, it got really specific about how accountants will survive "the media extravaganza that AI and bots will replace your job," but really, the belief is while technology will do the heavy lifting, it doesn't mean that accountants will work less. The accountants will still have work to do, it's just the [00:37:00] heavy lifting's gonna be done by AI and bots, et cetera.  Blake Oliver: Well, it's like that Google algorithm that's now checking out mammograms and does a better job than doctors. It's going to allow radiologists, the good radiologists, like the top 50 percent, those above the average, to do more because now they can use the algorithm to check their work, and we can basically get rid of all the crappy radiologists, right?  Same thing with accounting. You can get rid of the crappy accountants, and the ones who are really good can do double the work, or triple the work … In my case, [00:37:30] it was four or five times the bookkeeping work that I could do before. David Leary: It’s amazing. Blake Oliver: Yeah, so it's really good for some people; the people who are listening to this podcast, most likely, right? But it's not gonna be good for the people who aren't. David Leary: I have one more last accounting one, then we'll get into some fun, crazy stuff like creepy applications, and AI, and voice, and all that type of stuff. This is an article in cfodive.com, and it's, “Regulators Eye Accounting, Audit Changes for 2020.” To be honest, Blake, I read this article, and I looked at it, and I looked at it, and there [00:38:00] was nothing I could form an opinion of like "duh," or "yeah, right," or "I didn't think of that." I was just … I'm not saying it was a pointless article, I just struggled with it. Blake Oliver: That makes sense to me because the accounting regulators aren't really doing all that much. It's not that significant. We talked about this last week - the big thing they're gonna be working on over the next six months is deciding whether or not to allow public companies to amortize goodwill on [00:38:30] their balance sheet over a period of time rather than having to do a valuation every single year, and then decide if goodwill is impaired. This is just not important stuff, if you ask me. I mean, hey, I'm not a Big Four accountant guy, and I've never audited big public companies, but it kinda seems like they could be working on some more important stuff. This is the reason why accounting has become less and less important, when it comes to investors. We've made accounting complex. [00:39:00] We've made GAAP four or five times more complex than it used to be over the last few decades, and it doesn't provide, really, that much more useful information. It's just all kind of meaningless. I feel like that feeling you got, when you read this article, is the feeling we should all get when we look at what FASB is doing. It's just a bunch of people who love GAAP making the rules more and more complex. I think the people at FASB are the people who like to play those really complicated strategy board games that take five hours to play. David Leary: Like the Settlers of [00:39:30] Catan and those types of games. Blake Oliver: Oh, Settlers of Catan is just entry level, man. We're talking Axis & Allies … These games with 10,000 pieces and stuff like that like; a giant rule book … That's the kind of people running FASB. David Leary: That sounds boring. Let's do some fun things. Blake Oliver: I hope I didn't piss off any of our listeners here, but if you disagree with me- if you think that the work that FASB is doing is valuable and is making a difference in the world, let me know. David Leary: All right. This is like a pick your poison - voice, virtual [00:40:00] reality, creepy applications, AI, fintech. What do you wanna jump into? Blake Oliver: What about AI? David Leary: AI, okay. Voice AI, or just AI, in general? Blake Oliver: Yeah, include voice in there; AI, in general,  yeah.  David Leary: All right. We'll try to jump on both. Okay, so I have an article from Forbes. This is, “120 AI Predictions for 2020.” So, 120 predictions, right? I kinda had to really summarize the theme of this article to some extent. Chatbots are everywhere; that's [00:40:30] the "duh". Yeah, duh - every website you go to there's a chatbot, these days.  The "yeah, right" - this one I thought was really interesting. In 2020, AI will dramatically improve the employee experience. The ability to automatically and instantly collect data from across multiple channels, analyze it, and provide actionable insight that will enable support agents to more quickly, easily, and accurately address customer inquiries that come to highly satisfactory issue resolution. Blake Oliver: That's a big, bold claim.  David Leary: The reason I think [00:41:00] it's "yeah, right" because if all of these things were working correctly, and collecting data, and speaking correctly, you, as the customer, wouldn't need to contact anybody because you'd have access to the data, and you'd get your answer already. Blake Oliver: Right. David Leary: Right? This is total crap, so that one I didn't buy. The thing I didn't think of, which I thought was interesting is, right now, we live in this world where – we talk about it all time – there's apps, right? People are buying apps, and software, but the prediction here is they'll just buy the AI - one small piece of software, or logic, [00:41:30] or AI that detects one small thing, like, maybe when a toaster's gonna break. You're just gonna buy that one teeny micro sliver; it's not even an app, it's just a piece of AI. I thought that was interesting that we're gonna start seeing AI for sale at that level. Blake Oliver: AI for niche applications versus some AI that's gonna be able to understand a million things? That actually goes to voice AI, right? Our smart speakers in our home … We've talked before about how they're really dumb, and people are just [00:42:00] using them for playing music and setting timers. It hasn't gotten good enough to where people can actually have a conversation. You have to know specific commands. It's gonna take longer than 2020 to make this work well. David Leary: Well, I have an article about, “Voice AI 2020 Predictions from 46 Voice Technology Experts.”  Blake Oliver: Is it gonna get good? Is my Alexa actually gonna become smart? David Leary: Okay, so, I don't know. One of the things was voice will dominate search in the car. It's like, [00:42:30] "Yeah, of course," right? Blake Oliver: How else are you gonna search? David Leary: That wasn't much of a prediction, right? So, that was kind of an easy one. The "yeah, right", so do you know who Jony Ive is? Blake Oliver: Yeah, the former chief designer at Apple, right? David Leary: Legendary designer, now, right? In the grand history of the world designer, right? Designed the iPhone, designed the MacBook Pro, et cetera, et cetera, et cetera … Well, the prediction is that the Jony Ive of voice will emerge, and voice UI will be amazing this year. Blake Oliver: I think that is not gonna happen this year. [00:43:00] It's just too much of a [crosstalk] gap. That's the thing, for voice AI to get better … I mean, I can't even ask good follow-up questions of my Alexa. I had a conversation with her this morning. I think I asked her to repeat something that she had just said, and she couldn't do it. She's like, "I don't know what you're talking about … " Like, "You forgot the conversation we were just having?" David Leary: This is the prediction that could help you with this. There was one prediction that I saw that I was like, "This is genius. Why didn't I think of [00:43:30] that?" is you get to teach your own device. Instead of, right now - we talked about this in the past - recordings of what you ask Alexa are going off to India, the Philippines, or some other countries. Somebody's listening to that and then trying to teach the device what you tried to talk to the device about, Blake. What if you could just teach the device? Like you were talking about a couple weeks ago, you wanna turn the lights on in your hallway but not your living room. If you could just have some control and teach your own device about the context in your house- Blake Oliver: That would be great. David Leary: -that, I think, is a very interesting prediction in 2020 that we can actually teach [00:44:00] our stupid devices the things we need them to know because you really only need to teach them five or six things, and then you'll be super-happy with that device. Blake Oliver: Well, that would be a much more amazing experience because I've talked about … I control my lights with my Amazon Alexa in the house. I had to go and program every single light into my phone and then set specific names for every device in my phone before I could actually use any of the voice commands. I should be able to just set that up via voice. I should say, "Alexa, this light over here is called this," and [00:44:30] it should just walk me through it in a conversation. David Leary: Maybe that's something that these big companies are missing on, like people need to be able to … Maybe the pendulum's gonna swing back to you get to control your tech devices here a little bit more and not depend on these other companies to control your tech. Blake Oliver: We're running out of time here today. I think you said, David, that you had some predictions, in addition to what we just talked about? David Leary: Yeah. Let me just scan, really quickly, these last articles, and make sure there's nothing I don't wanna miss out on. Nothing exciting in VR, I don't think. Blake Oliver: No, continue to [00:45:00] make people throw up; that's what it will do … At least me, anyway. David Leary: Yeah. The one thing I liked- this was on Inc.com. This was an article from Gene Marks, “Four Creepy Applications That Will Change Your Business in 2020.” The "duh" was apps that track your field salespeople, and I'm like, "Yeah, of course. Field service apps have been out there tracking the field service people for years," right? Blake Oliver: Gene said that because his firm implements CRM systems. David Leary: The "yeah, right" is there's software [00:45:30] that watches how your employees are using apps, and that's gonna suggest better ways for them to use them. I just see a rebellion happening internally at companies; tracking every single click I'm doing in every single app and then reporting that up to management - that seems kind of ridiculous. Blake Oliver: With the new California privacy law, in California anyway, or if you have employees in California, you have to tell employees that you're tracking them and what you are tracking. David Leary: Yeah, we talked about that in the last episode. The thing I liked about this article, or that I didn't think of fully, is this concept of augmented writing, and [00:46:00] it really makes sense. If you think about it, first, we had spellcheck; then we had autocorrect; and now, keyboards are doing words suggestions; to the next level of communication suggestions … Like you start your paragraph, it knows where you're headed, and it just finishes the paragraph for you. It's augmented writing. Blake Oliver: This is one of the best AI implementations that has helped me in the last year. Do you use Gmail, David? David Leary: No, not regularly. Blake Oliver: Okay. This is now in Gmail. If I'm typing in Gmail and I've enabled this feature, it will, [00:46:30] as I'm typing, in a lighter gray text ahead of my cursor, suggests the end of my sentence. David Leary: Wow! Blake Oliver: More often than not, I can just hit tab and it finishes my sentence for me. The more that I do that, the more it learns how I like to finish my sentences. Often, I can just type a few words, especially if it's a welcome, or the beginning of the email, or the end of the email where it's pretty standard, and it just knows what I want to say, and I just hit tab.  On the mobile device, they've also got these quick responses. At [00:47:00] the bottom of every email, instead of having to hit reply and then type my response, I get three choices. I can say … It'll say like, "Okay, thanks, or I'll be right on that," stuff like that. Like short answers to questions. I can just hit that button, and it sends email without reply. Google's already doing this, and it's really good-  David Leary: So, we're gonna see this more mainstream this year. Blake Oliver: Yeah. David Leary: That's actually exciting. It's one of the more interesting things I saw. I have three more articles, but there's not really any major takeaways. The one that really made me say, "Hmm" and that probably affects our industry a lot is … [00:47:30] There's a [inaudible] talking about how about how big tech is coming for banking. Experts are predicting fintechs 2020. The interesting one I saw was this concept of other players getting into fintech that we would never think of. The example they brought up was Netflix. Blake Oliver: Netflix and fintech. David Leary: Netflix is already producing movies and television shows. They're writing big, huge checks for [00:48:00] $40-$50 million dollars for a movie or a TV show, whatever they're purchasing, right? They could just pay all the subcontractors. They could just create their own accounting and payroll system for subcontractors and manage the whole process. I was like, "Ohhhh … "  Yes, we're gonna see more players. I think we talked about that once this last year. Everybody wants to be a bank. That's another example of this. Netflix could actually just circumvent all these other players in the middle and just start paying. "Oh, you have actors. We're gonna pay your actors [00:48:30] and actresses, too, and the sound guy, and the editor, and everybody else down the whole chain." They'll build, and track, and they'll create some ecosystem-funnel app to do all this. Blake Oliver: Your average consumer doesn't want to have to open up a bunch of different apps to do finance activities. They want it in one place. They want consolidation. That's why you see Facebook trying to do Libra, and you see Apple doing Apple Cash.  We're gonna see more and more of our phones, the social media embedding [00:49:00] finance into those apps because that's where people wanna do it. I love it. If I need to send money to my father-in-law, I just open up a text message, and I send him the cash in the text message because we're both on Apple devices. It goes straight from my Apple Cash balance, or from my credit card, or bank account, to him. David Leary: That's a perfect transition into my prediction. I'm gonna give my prediction for this year. Blake Oliver: Okay. What's your prediction? David Leary: My prediction is the lines are going to get blurred [00:49:30] and crossed more than they ever have. Examples of this is, you have Bill.com, right? Bill.com, historically, has always been payments. Now they have some AR involved; but they've gone public. They gotta keep growing. So, maybe they have a Bill.com credit card come out. Receipt Bank; they have a Receipt Bank purchase card that comes out. Maybe QuickBooks launches a credit card; maybe Practice Ignition now gets into practice management. A lot of the credit card players, or spending [00:50:00] card type players, they're getting into bill payment now.  Everything's getting very gray, and I think you're gonna see this- more competition than ever because people aren't staying in their lanes anymore because they wanna keep growing, so they keep adding more features. I think, with that, you're gonna see more competition than ever. I don't think the competition's just gonna be for these apps. I think you're gonna see competition for QuickBooks and Xero at levels. I mean, we've talked about Square in the past … I think some of these other apps they're gonna … If you're owning the workflow of all the inbound payments, and [00:50:30] the expenses, well, just add GL, and now you're a competitor to QuickBooks. I think you're gonna see competition at a level we have not seen before, and it could actually help prices, right? Blake Oliver: Oh, yeah. David Leary: It could help drive prices down. I don't think it's gonna be a QuickBooks versus Xero world. It's going to be a QuickBooks and Xero versus everybody else world type of thing. I'm not saying that they'll be a team, but I think it's a different world. QuickBooks and Xero are gonna have to not focus on each other, and they're gonna have to focus on 40 other companies. Blake Oliver: Interesting. My prediction for this year is that either [00:51:00] QuickBooks or Xero, one of the GL apps - or maybe Square … I mean Square's essentially already done it - is gonna create a bank. They're gonna become a bank. I could totally see Intuit doing this, where when you sign up for QuickBooks, you get a bank account, and it's already integrated, and it's integrated to the point where it's just perfect. You get all the information you could possibly want out of that bank feed because it's integrated, and Intuit partnered [00:51:30] with a bank that does it, or it's gonna be Xero who does that or something. David Leary: Yeah, because then all the data just moves perfectly. Kind of like, right now, with QuickBooks Merchant Account Services, right? Blake Oliver: Right. David Leary: People like that and pay a little more for it than they do standard services because the data just gets in QuickBooks. You don't have to ever think about. It's perfect. Blake Oliver: Well, and QuickBooks is already offering loans, so why wouldn't they wanna have access to the data at an even more granular level? It's so sticky, too. Once you have somebody using your banking services … I don't know, [00:52:00] it just seems natural to me. I mean, if they're gonna go to the trouble of doing QuickBooks Live, it seems like a fintech partnership like that would be natural, too. David Leary: Yeah, and you're right. Maybe as more players try to become more like QuickBooks and Xero, QuickBooks and Xero are like, "Okay. That's fine, but we're gonna go play in a new pool. We're gonna go become banks too," right? To stay a step ahead of all this competition … That's true, that's coming on.  Then, the easy one, and you can title this to the episode if you want - Xero and [00:52:30] Sage will have to launch some sort of Xero Live or Sage Live type product to compete with QuickBooks Live. Mark my word - that will happen in 2020. It has to happen. Blake Oliver: I disagree with you on that one. We're gonna agree to disagree, I think. I feel like it's a competitive advantage now for Xero, and for Sage. Why would they then … If they can use this to peel off accountants from Intuit, use it. Don't become like Intuit then. It's a differentiator. David Leary: What if QuickBooks uses it as their differentiator against Xero in Australia? I mean, it's free, "Hey, you get [00:53:00] a free bookkeeper with your QuickBooks in Australia," to go after market share. Blake Oliver: They might. I mean, they did that whole, like, making QuickBooks almost free, it was so cheap, right? David Leary: Yeah, it's like 10 bucks or something, yeah. I think it's super-super-cheap there, yeah. Blake Oliver: That could be. I don't know. It's different. See, this is the thing that these big companies sometimes fail to understand is that these markets are very different. Australia and New Zealand, business owners are much more likely to go work with an accountant when they start their business; whereas here, entrepreneurs are [00:53:30] much more like go it yourself, do it alone, kind of do-it-yourselfers, and it's a very different mentality.  That's why the accountant channel in Australia and New Zealand is so important, and here, it's not, for selling software. Here, you can go direct, and that's what Intuit has done for a long time, and the ProAdvisor channel is really secondary to them. That's why they can do QuickBooks Live and not threaten their major business because their real customers are business owners, their major customers. I'm not saying that … Obviously, it's a huge [00:54:00] business, and accountants are important to that business, but not as important as the business owners. David Leary: In summary, I think our predictions are … Yours is one of the big GLs – Square, or QuickBooks, or Xero – is going to become a bank. Blake Oliver: Or maybe one of the banks buys one of the GLs and integrates it, right? We're gonna have that fusion of fintech and accounting software. David Leary: I mean, banks are buying some of these little podunk … Podunk's not the right word … Some of these cloud-accounting [crosstalk] that are out there, that-   Blake Oliver: Yeah, these are potential sponsors, David …  David Leary: But some of these ones [00:54:30] that nobody's heard of, right? Even you and I don't even know the names of some of these cloud-accounting packages that have been purchased by banks, so banks are doing that. I think that the prediction is a major thing's gonna go down; a very major shift in this will happen. Blake Oliver: I wouldn't be surprised. Awesome. Well, this was a really great, fun episode. If people wanna get in touch with us and complain, comment …  David Leary: Send us your predictions. Blake Oliver: Yeah, send us your predictions. You can reach me on Twitter. I'm @BlakeTOliver, or you're [00:55:00] welcome to email me at Blake@blakeoliver.com. David Leary: I'm on Twitter as well, @DavidLeary, and you always can email me, but Twitter's the best. People have to get to their point. Blake Oliver: That's right. If you want to do us a huge favor, leave a review. Where can people give us a review, David?  David Leary: If you're on Apple, you're an Apple person, you can go to Apple Podcasts and do reviews there. For everybody else who is not an Apple person, you can go to Podchaser.com and leave reviews there. Those Podchaser reviews start showing up in other players, so you [00:55:30] can leave your review in one spot, and it shows up on other sites. It’s great.  Blake Oliver: If you wanna combine your commentary with a review, you can leave a review, tell us what you think, and we will read it on the air. David Leary: Kill two birds with one stone. You could put your prediction in your reviews so the whole world will see it. Blake Oliver: I would love that. David Leary: That's a good idea. Blake Oliver: I would love that. David, until next week, it was great talking with you and have a great 2020. David Leary: And on to the future! 
How California's new privacy and contractor laws could affect you
SponsorsOnPay: http://cloudaccountingpodcast.promo/onpayOnPay is offering an exclusive promo code only for the listeners of The Cloud Accounting Podcast to get three free months of OnPay payroll service for any of your clients that you set up by February of 2020! Visit the sponsor link, and use code "CAP3FREE" to take advantage of this offer!Show Notes 01:48 – When it comes to staying organized, there’s only OneNote for Blake 04:24 – This one time, at Pod Camp ... David’s reminiscing about the early days of podcasting 06:00 – Laws, laws, everywhere – We talk about what’s new for 2020 in California - Assembly Bill 5, and the California Consumer Privacy Act 10:31 – Who's gonna drive you home? Uber argues that they’re not “really” a ride service 13:34 – Time to get your CPA? Certain recognized professions, such as accounting, may be exempt from the AB 5 requirements 14:23 – A refresher on European data protection laws | European Commission  16:48 – The devil’s in the data – just how much data will businesses be required to provide to consumers? | NYT Bits Newsletter 21:11 – Multifactor authentication, anyone? Moss Adams is the latest to report a data breach | Accounting Today 25:27 – Receipt Bank rakes in $73M in new funding with an eye towards tackling the US market | Enterprise Times 27:58 – Show me your AI … Google’s latest AI innovation targets breast cancer detection | WSJ  32:15 – Face value – H&R Block targets our need for personal interaction with its new software offering | Accounting Today 34:01 – Top tips for 10-year Customers here | SaaStr 34:33 – Apparently, accounting clients do not have commitment issues! | Accounting Today 37:06 – There’s gotta be better way than a 100-percent interest rate on small-biz loan! biz | PYMNTS  39:02 – They’re going the distance – the IRS updates 2020 mileage rate |Small Business Trends 39:13 – Perhaps the FASB fears change? WSJ 40:31 – In the meantime, however, this is what FASB’s working on for 2020 | WSJ  43:21 – Big Four, Big Tech, Big To-Do About Nothing? | Bloomberg Tax  46:46 – Stats abound  50:20 – Stayed tuned! Predictions are coming! Really! Before the end of the year! We promise!  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, and NOW, you can see our smiling faces on Instagram!   Limited edition shirts, stickers, and other necessities.TeePublic Store: http://cloudacctpod.link/merch Subscribe Apple Podcasts: http://cloudacctpod.link/ApplePodcasts Spotify: http://cloudacctpod.link/Spotify Google Play: http://cloudacctpod.link/GooglePlay Stitcher: http://cloudacctpod.link/Stitcher Overcast: http://cloudacctpod.link/Overcast   TranscriptBlake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: And I'm David Leary. Happy New Year, Blake!  Blake Oliver: Happy New Year to you, David. Did you stay up and watch the fireworks at midnight? David Leary: No, I was in bed by 11:30. Blake Oliver: I actually did. I didn't intend to, but I was up at midnight and then immediately asleep. The annoying thing here, in California, is that [00:00:30] all the stations delay all the coverage so that you can't do that. They want you to stay up and watch the whole thing, but if you stream it from your phone to your TV, you can get around that. David Leary: Oh, I should have done that, because that's what we noticed is they actually stopped coverage. You don't even get to see the ball drop in New York City. They stopped coverage completely. They showed Dr. Oz or something. Then they turn it back on later on in the evening. Blake Oliver: Yeah.  David Leary: It used to get beyond the whole evening. I don't know ...  Blake Oliver: Yeah, no, they want you to stay up and watch so they can sell more ads.  David Leary: There [00:01:00] was only ads for Planet Fitness though ... Blake Oliver: The whole Times Square is Planet Fitness No Judgment Zone. Everybody's wearing the stupid hats. You're waiting ... You're standing on your feet for 12 hours or more in Times Square in freezing weather to be a billboard for a mediocre gym. Why would anyone do this? David Leary: But, if Planet Fitness wants to sponsor The Cloud Accounting Podcast, we're more than happy to allow you to do that. I'll wear that hat.  Blake Oliver: We're [00:01:30] a 'No Judgment Zone' podcast here. No judgment. Meanwhile, of course, all of our accountant friends are entering busy season, so all of those diet and exercise resolutions ... I never did it when I was in practice because I just- I'm too stressed out. Although-  David Leary: You just can't commit. Blake Oliver: Yeah, exactly. Probably a good thing. Well, anyway, I have something new that I'm doing this year, which is, as I tend to do, I have switched note-taking applications yet again. So, I'm back to OneNote because [00:02:00] Evernote couldn't do it for me; Google Keep couldn't do it for me; I even tried Notion - Notion.so - didn't work. I'm back to my good old OneNote. David Leary: I think, back in the day, when I was looking at OneNote, it was still just on your machine only, and that was one of the reasons I went with Evernote because it was in the cloud, and just whatever device I picked up, my stuff was there. OneNote, I am assuming now, with Office 365, is just the same way. Whatever you pick up, your notes are there.  Blake Oliver: Yeah, it syncs to OneDrive, and it's on your phone, your tablet, [00:02:30] your laptop; it's in the cloud. I think there's a cloud  you can access via the web. There's a clipper for Google Chrome. So, yeah, it works fine. It works great. So, I got all my articles here, organized in OneNote, and I'm ready to go. David Leary: But you're a Google Apps guy, not an Office 365 guy, so how does this work in your world, being a OneNote guy and a Google Apps or Google Office guy?  Blake Oliver: So, this is great, David. You may not have noticed, being a Microsoft guy, but Microsoft had [00:03:00] a huge change of philosophy. I think it was with the new CEO; I forget his name ... Nadella, I think, is his last name. When he came in, he said, "We're not gonna be at war anymore, essentially, with Google." Now, you can actually get your Google- you can connect Outlook to Google. I can connect- even though Jirav on Google, and I personally am on Google, I could actually use Outlook. I connect, I authorize, and [00:03:30] all the Microsoft products work with my Google stuff. David Leary: Is it the same the other way? If I just wanna quit using my browser and put my email back in Outlook on my desktop, I can connect to my Gmail account?  Blake Oliver: Yeah, that's what I did. David Leary: Ohhh ...  Blake Oliver: Yeah.  David Leary: I'm switching back! This is the whole new world. I'm switching back to my Office stack, 100 percent. Blake Oliver: You like to talk about this in the world of accounting, David ... The companies that are doing it right aren't fighting each other anymore; they're integrating, right?  David Leary: Yeah, exactly. Blake Oliver: You gotta play nice if you wanna succeed in this world. So, I'm very happy. David Leary: Speaking [00:04:00] of playing nice, I noticed you tagged me on Facebook, or Facebook alerted you that we've been in 20 photos together. Blake Oliver: Yes, we've been tagged in 20 photos together, so I reposted that suggestion, and I said, "10 years ago, if you'd told me I'd be hosting the number-one accounting and bookkeeping podcast with David Leary, I woulda laughed in your face." Then, Hector Garcia posted a comment and said, "More like I would've asked, 'What's a podcast?'"  David Leary: Well, that prompted me because I was like, "I'm pretty sure, a decade ago, I wanted to do a podcast." So, I went on Twitter and there was a podcast [00:04:30] camp that was in Phoenix, November 20, 2009. So, I went and found this old tweet. It's funny because the short URLs in this tweet don't work, so I don't know who I was talking about, but I'll read my tweet. It says, "Here are some sites I spoke about at Pod Camp AZ - Cloud Computing Session ..." So, I spoke about cloud computing in November of 2009, but I don't know what I spoke about because the links don't link to anything anymore. It's a URL shortener that no longer exists. Blake Oliver: I'm really impressed. I mean, you were a super early adopter [00:05:00] of podcasting to be at a podcast camp 10 years ago? Wow! And it finally happened. David Leary: I might even have a shirt. I'm gonna have to check around. But it was bad ... I would wear that shirt around, and people would be like, "What the hell's that?" Even then ... Maybe I don't even have the shirt anymore. I might've threw it away because I'd get sick of people asking about it; like, "What's Pod Camp?"  Blake Oliver: Well- David Leary: Now, they just ask, "What's The Cloud Accounting Podcast?" Blake Oliver: That's right. People know what podcasts are. Something like 20 percent of Americans listen to [00:05:30] podcasts on a weekly basis now. Pretty good number. I think 40 to 50 percent have listened to podcasts at some point.  David Leary: Should we jump in? I have some news this week. I've been promising about the predictions, and I went through lots of prediction articles and pulled out, really, you know, the important parts of these predictions that exist out there.  Blake Oliver: So, we definitely wanna get to predictions, but I'm thinking, first, we should touch some of the new laws that came into effect on January 1 here in California. David Leary: That's a good start point, and then jump into news. Makes [00:06:00] sense. Blake Oliver: Because it's just in California, but it's affecting businesses all over the country because so many businesses sell to Californians or have Californians' data. The two laws that we need to talk about are the California Consumer Privacy Act, also known as the CCPA. That took effect on January 1. There's also Assembly Bill 5- AB 5, which reclassifies independent contractors into employees [00:06:30] and specifically was targeting the gig economy,  like Uber and Lyft. David Leary: That, we've talked about before on the show. So, that actually goes into effect, or went into effect January 1 - the gig worker one?  Blake Oliver: Mm-hmm. Yeah. Actually, this is one that, if you have clients in California employing contractors, this is probably going to affect them in some way, or at least you should have a conversation with them about it, and do an analysis, and figure out if they need to reclassify some of these workers. The big change [00:07:00] is that we have codified the test as to whether somebody can be a contractor or an employee in California. It's called the ABC Test. By the way, this is much narrower; a much harder test than the federal test for independent-contractor classification. The burden is now on the employer to prove that somebody should not be an employee. So, by default, any worker is an employee. I, as [00:07:30] an employer, now have to prove they're not, and I have to satisfy three tests - this is the ABC. So, A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under contract for the performance of the work, and in fact. The worker has to be independent. That's the part of independent contractor that's really important. They need to be able to decide how they're going to do the work. B) The worker performs work outside the usual course of the hiring [00:08:00] entity's business. That's a big one. That means if I am a tour guide company, and I have some tour guides who are contractors, and some who are employees, giving tours is part of the usual course of my business. So, now, I can no longer have contractors that give tours. Now, the accountant who I work with can still be an independent contractor because the accounting is just something that has to happen so that my business can exist. The business is giving tours. Accounting [00:08:30] is just an administrative function. Although there is a very important detail about accountants that I wanna get to, after this. Okay, so that's B - that the work has to be outside the usual course of the hiring entity's business. C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. Meaning, generally, they have to have multiple clients doing this sort of work. If you are their only client, then it would be pretty hard to satisfy that test. They've [00:09:00] got to be independent, the work has to be outside the usual course of the business, and the worker needs to have their own business. They need to have a trade that they do with other customers, generally. David Leary: So, they would kinda have to be a real business, and not just a gig worker, essentially.  Blake Oliver: Well, if they are a gig worker, they'd have to have multiple gigs. You can't be their only gig. David Leary: Is that the way the Ubers, the DoorDashes, et cetera [00:09:30] are gonna get around this? Because so many people that are an Uber driver, are also a Lyft driver, and they deliver for DoorDash, and they do some Amazon package delivery. Is this how they're gonna be like, "Well, look! They're a gig worker. We don't have to employ them now because they have ... They have multiple gigs.” Blake Oliver: So, you have to satisfy all three. So C is not a problem for Uber and Lyft. The problem for C is- or the problem for Uber and Lyft is B, whether they [crosstalk] work outside the usual course of the hiring entity's business. Uber [00:10:00] and Lyft are actually making the legal argument- they plan to not comply with this, and they are gonna go to court and say that they are not in the business of providing transportation; that they are in the business of providing a platform that connects riders and drivers. David Leary: I think I heard a judge already call this out and that just basically told Uber that their name is synonymous with driving; like a pick-up app. It's just like saying, "I'm gonna Google something," right?  [00:10:30] Blake Oliver: Right. David Leary: How are they gonna make this argument?  Blake Oliver: They need a judge that will buy that argument. I think they also have trouble with A - the freedom from control - because the Uber and Lyft exercise quite a lot of control over how drivers do what they do. So, they would definitely need to loosen that up, and I think they already have started to do that a little bit. But the big question is B, right? What is the usual course of the business? Uber and Lyft say, "We're a tech platform, we're an app; we're not a taxi service." [00:11:00] That's gonna be an interesting legal argument. I could see that going all the way to the California Supreme Court. So, it might take a while before this actually takes effect for anyone who plans to fight it, because there'll be lots of legal cases, and that could take years. David Leary: Now, are Uber and Lyft tough ... What I mean by that, in that Amazon sort of sense of tough ... Early on in the ecommerce days, I think, when states wanted to start taxing Amazon sales, Amazon, I think, even pulled the plug, and said, "Fine. We won't sell anything in your state." Then, they played hardball and shut off orders [00:11:30] to that state, early on in those days. Does Lyft and Uber have the guts to be like, "Fine, we just won't have any Uber or Lyft service in the state of California, and see how that goes for you ..."  Blake Oliver: I don't think anyone has suggested that because it's such a big market for them, and it's their home markets. To be based in San Francisco and not be able to offer your service in California, that'd be kinda crazy. David Leary: But who are people loyal to? They're gonna be loyal to the ride services, and they're going to bang on politicians about getting this resolved, right?  Blake Oliver: Yeah, well, that's what Uber and Lyft are hoping to do. They're trying to get [00:12:00] their users to complain. They're also, I think, trying some legal maneuvers. You know, we have direct democracy here in California, so they're gonna put forth a proposition to directly counteract this and exempt themselves. Because there are exemptions, by the way, for this law. It doesn't apply to every single contractor, and there's a long list of these exemptions that people have lobbied for. Do you wanna hear some of these? David Leary: Well, let me ... Before we do that, I just wanna understand the impact back to us, right? If I have a bookkeeping firm, and [00:12:30] I've- it's all outsourced, and I am not hiring my bookkeepers that work for my firm as subcontractors ... I'm sorry, I'm hiring them as subcontractors and not as employees. I'm gonna have to stop doing that? Blake Oliver: Yeah, pretty much. At least it seems like it to me. There are exemptions, and this is what I was getting to; that some industries- David Leary: Wait ... Before you jump to exemptions-  Blake Oliver: Yeah.  David Leary: Before you jump to the exemptions, then, my thought process is could this be why QuickBooks Live is hiring people as W-2? Blake Oliver: Oh, yeah, [00:13:00] definitely, I think- David Leary: Because they're in California. Okay. Blake Oliver: It's just not even worth it for them. The safe thing to do, if you are a California employer, or a national employer that employs people in California, is just to make everybody an employee, and it's easier for big businesses to absorb those costs. David Leary: Got it.  Blake Oliver: SO, there are some industries that are exempted, right? Doctors often are contractors for their medical practices. Makes sense for them, right? They make a lot of money. They have their own S corporation, and then they get paid as a contractor for services. So, doctors, surgeons, dentists, [00:13:30] podiatrists, psychologists, veterinarians- David Leary: Everybody that has a good lobby.  Blake Oliver: Exactly. Yeah. Lawyers, insurance brokers, architects, engineers, private investigators, or accountants. But this is really interesting - it is only ... I've been looking at this list. It's only licensed accountants, which- that's CPAs. Basically, if you're employing an accountant as a contractor for your business, and they're not licensed, you might have to make them an employee. So, this [00:14:00] changes- in California, whether you have a license or not, it really doesn't matter a whole lot, in terms of your employment status. But now, there's a potential question here. David Leary: Got it. What else is coming out of California? More legislation- Blake Oliver: The other big one is the California Consumer Privacy Act. I think you've done a bit of research on that, right? David Leary: A little bit. It seems very similar to the European privacy act that they passed. Blake Oliver: Yeah, that was GDPR, right? David Leary: Yeah, and most apps that you're using and websites you go to are [00:14:30] compliant with that right now, and they were able to stay in compliance because they have business interests overseas. But the average small business may not have business interests overseas, so they're not in compliance; but the average small business in the States may have business relationships with California. Blake Oliver: Right, and that's- David Leary: So, there's a ripple effect of this California law to the other businesses. Blake Oliver: And that's why you've gotten- I don't know if you got dozens of privacy notices in your email on December 29, 30, 31? [00:15:00] David Leary: Not as many as I thought I was going to get, to be honest. I really thought it'd be a lot more. Blake Oliver: So, apparently, that was due to people or businesses starting to comply with the new rules of the California Act, because if you're a big business, you're almost guaranteed to satisfy the requirements because you're doing business in California, and you've got California customers. This law applies to any businesses that serve California residents and have at least $25 million in annual revenue, [00:15:30] or 50,000 people- have data on 50,000 people in California. There's potentially a lot of smaller businesses under that $25 million revenue threshold that could have data on 50,000 people because an email address is data. If you have an email list that has more than 50,000 people on it, you've gotta comply with the California Consumer Privacy Act. There's tons of businesses that are only doing a few million dollars that might have a big email list like that. David Leary: Yeah, but ... The way that I'm understanding [00:16:00] this limit, though, is it's data collection. So, if you're collecting their data while they're on their tablet or PC, because the data is different that you're collecting, these all count as one. You might be tracking that they're on their phone; now, you're tracking that they're in their browser. Those are counting as separate [crosstalk]  Blake Oliver: Well, unless you have a way to link them up, and that's actually the challenge is that I, now, as a California resident, as part of this law, have the right to ask you, David, as the business [00:16:30] that I'm working with, for instance, to provide me with all of the information that you've collected on me. So, what if you don't have a database where all of the information is aggregated and linked to my identity? How do you go and get me what I want? Because the law is very broad. It's everything ... I was reading a New York Times newsletter. They have a great newsletter called Bits, that's all about technology. The author wrote, "Does [00:17:00] this mean Uber and Lyft will now be obliged to provide riders in California, who request their personal data, with a list of all the passenger ratings drivers give them after each ride? Will Amazon be required to give Prime customers detailed activity logs of their streaming video use? Will smart mattress companies have to show sleepers moment-by-moment records of their tossing and turning?" The technology consultant who is interviewed in this article says yes; they have to come back with specific pieces of personal information. If they are collecting that - [00:17:30] your sleep information - they have to respond with it. So, all that information that a business is collecting, they somehow have to compile it and give it to you, and it could be anything. If they've got you on an email list that has the name/status: "Seeking Singles," or something like that, you have to provide that information, theoretically; according to the law. Nobody really knows how broad it is going to be because I guess, I don't know, maybe a judge will have to decide if there's any limits. David Leary: Yeah, I'd imagine the sharing, right, where people ... They partner up and then, because of our partnership with Company A - "We're Company [00:18:00] B. It's nice to meet you, and we're sending you this email," right? Whether data will transfer to that company and then, from that company to the next company ... Yeah, where's the boundaries on this? Blake Oliver: Yeah.  David Leary: Nonetheless, the compliance is coming, and you probably need to take inventory of your bigger clients and make sure they're in compliance because I imagine the fines on this are probably gonna be pretty high, eventually.  Blake Oliver: Yeah. So-  David Leary: Because it's a revenue generator for the state. Blake Oliver: So, I'm trying to think, what does this mean for accounting firms, accountants, and bookkeepers? Basically, if you [00:18:30] have a customer in California, and they ask for the data that you have on them personally - your customer - you have to provide it to them, whatever that is. It doesn't sound like it's necessarily data that they provided to you. It's any data that you've collected about them, whether or not they provided it. So, what does that mean? David Leary: If you have a chatbot on your website, and you have ... That tracks some of their data; you have some in the CRM; you have some possibly in a QuickBooks or Xero file ... Yeah, how are you gonna gather [00:19:00] all that up? Is there a strategy to that? Blake Oliver: Yeah, and let's use that CRM example. Let's say I'm using a CRM for my firm, and I have a record of all the emails about my client, but with my client; I also have a record of all the notes that I have made about that client with other people in my firm where the client wasn't included on those notes. Is that part? David Leary: Like a Slack channel. Blake Oliver: Yeah. Do I have to provide them that internal conversation, that information? Nobody really knows exactly what [00:19:30] is going to have to happen ... David Leary: It sounds like there's room for some new products on the market to solve this and sell this to small business owners.  Blake Oliver: There's one other part of this law that I want to highlight. David Leary: Yeah.  Blake Oliver: So, employees have new rights, as well. As of January 1, employers in California must give contractors and employees a notice explaining the types of information the company collects about them and for what purpose. So, previously, if I had a work computer, my employer could [00:20:00] monitor that thing, monitor everything I'm doing on it, and didn't have to tell me. A lot of employers did, just as a matter of courtesy, but they didn't have to; and they didn't tell you what they were monitoring. Now, an employer, if they're spying on you, has to tell you that they're doing it and tell you what they're collecting. So, if they're collecting all your browsing history- David Leary: Can you request what they're collecting and see?  Blake Oliver: I don't see that in here. They just have to tell you-  David Leary: So, just consumers can do that, but not employees.  Blake Oliver: Consumers can do it; not employees. But, I'm curious, what if you're both a consumer and an employee of a company? What [00:20:30] if you work for Target, and ... This is really interesting. What if I go to Target, or Amazon, and I say ... Well, Amazon's easy because you can see your order history; but what if I go to Target and say, "I want to see everything I've ever bought from you." Are they gonna have to send me a list? Because they have that data; especially if I have a loyalty card- David Leary: I'm sure they have it because if you ever go to return something, and you don't have a receipt, you just give them the credit card ... You should start handing them credit cards, and they keep scanning them and they find your order eventually. So, they obviously have the data somewhere [crosstalk]  Blake Oliver: But I imagine it [00:21:00] could create a huge cost for these companies to try and do that. David Leary: Yeah.  Blake Oliver: So, anyway, those are the two new laws in the great state of California that businesses have to worry about. David Leary: Well, it's good that you brought up the California privacy law because I think we can tie this to ... Did you hear Moss Adams had a data breach? Blake Oliver: Yeah, I saw that on- was it on Going Concern?  David Leary: It was on Going Concern, but Accounting Today actually had a little bit better article about it, so [crosstalk]  Blake Oliver: Oh ... Did you find out what happened? Because it wasn't clear to me what happened. David Leary: Yeah, so they sent out a notice of [00:21:30] a data security incident that it detected in October, exposing the names and Social Security numbers of some of its clients. They reported this to the state attorney general's office because it's required if there's been a breach-  Blake Oliver: Moss Adams, by the way, is a Top 20 firm, so this is a pretty big deal. David Leary: Big deal, yeah. They had to report the breach to the state of California, because it's unencrypted personal information; but in a letter to the affected clients, the firm wrote that ... I'm gonna read the quote here, " ... recently learned that an unauthorized [00:22:00] individual gained access to a Moss Adams employee's email account containing your personal information. We're writing to notify you of this incident." So, two-factor authentication should keep people from getting unauthorized access to it, but my bigger question is why is sensitive data in an email - Social Security numbers, unencrypted [crosstalk]  Blake Oliver: Oh, because it's- David Leary: Are people still flinging spreadsheets around with people's first names, last names, Socials? Blake Oliver: Oh, absolutely- David Leary: Is that still happening?  Blake Oliver: It's an accounting firm. There's like- David Leary: At an accounting firm?!  Blake Oliver: Yeah, I mean ...  David Leary: Aww, Jesus ...  [00:22:30] Blake Oliver: We're emailing- David Leary: I'm so naive. I'm so naive! Blake Oliver: We're emailing spreadsheets with payroll, employee registers, Social Security numbers, tax IDs ... All this stuff's living in email. It's email, email, email ... . So, yeah, you can- if you hack an email account or email server for a big firm, it's a gold mine. I think this happened, what was it, last year, or a year before, to one of the Big Four. They had an email server hacked, and [00:23:00] they weren't using multi-factor authentication. So, it was just a password hack. I'm wondering if that's what happened here, too. Like you said, it's pretty hard to hack something if there's multi-factor, so maybe there wasn't. David Leary: It's a two fails, right? Because somebody gets your email, but you have sensitive data in it, who cares?  Blake Oliver: Right? David Leary: But if you have ... It's kinda mind-blowing. So, yeah, that happened ...  Blake Oliver: There's a lot of firms that are still having trouble, not internally, just externally. They're emailing personal Social Security numbers to external domains and [00:23:30] not even securing that. David Leary: They're probably even emailing out tax returns as PDFs just on email attachments, right?  Blake Oliver: I worked- when I was doing bookkeeping, I worked with an accountant who kept all of his clients' Social Security numbers, passwords, everything in an Outlook Contacts file that his firm shared on a local computer in the office; a networked computer. Guarantee you that still happens.This episode of The Cloud Accounting Podcast is sponsored by OnPay. Many times, when choosing a payroll service, you have to choose between a new startup with a great app, or an established company whose tech may feel a little behind the times. With OnPay, you get the best of both worlds - a great app from an established company that's been providing payroll for over 30 years in all 50 states. OnPay is an easy-to-use, full-service payroll with simple, straightforward pricing, and it includes all their features - employee self-onboarding, HR tools, health insurance, worker's comp tracking, and 401(k). With an accountant's dashboard and partner program combined with best-in-class integrations with Xero, and QuickBooks, OnPay is the right fit for all your clients, whether they have just one or 500 employees. They also handle all the complicated stuff that other payroll providers don't, like agricultural payrolls, including Form 943, multi-state payrolls, and employees with H-2A visas. I'm really excited to tell you that OnPay is offering an exclusive promo code only for the listeners of The Cloud Accounting Podcast to get three free months of OnPay payroll service for any of your clients that you set up by February of 2020. Head over to CloudAccountingPodcast.promo/onpay. That is Cloud Accounting Podcast dot promo forward slash O-N-P-A-Y, and use code "CAP3FREE," when you sign up your clients. That is C-A-P, the number 3, F-R-E-E. And to be clear, you cannot get this promo anywhere else. It's only available to the listeners of the Cloud Accounting Podcast.David Leary: So, some more news. Receipt Bank completed [00:25:30] a $73 million- another funding round. Blake Oliver: So, I know they've raised a lot of money so far. Do you have- how much have they raised so far? David Leary: 2017, they had a $50 million round. Blake Oliver: But they'd raised more money before that. David Leary: Over $100 million; pushing probably $130-$150 million, I bet, total. The article really is a little UK-focused and really talking about their success in the UK, which apparently is amazing, and that they're really trying to use some of this money to go after the US market more, which is a whole different animal, right? The US [00:26:00] market's a lot tougher. People underestimate how hard it is to crack the nut here. They had some interesting data about their 2019- Receipt Bank doubled the number of customers to more than 360,000 now. Blake Oliver: That is a lot for an add on. David Leary: And they support more than 63,000 advisors, or accountants and advisors for their clients. It's a huge number, but I also feel like, in the grand scheme of things, everybody's still doing manual data entry. So, there's still so much upside to this, right? Blake Oliver: My [00:26:30] big question is where does Receipt Bank go from here? Because QuickBooks is building their own receipt-capture into QuickBooks, and Sage acquired AutoEntry, and Xero has Hubdoc. So, who's gonna acquire Receipt Bank some day? And is OCR, data entry, big enough for it to really be a standalone company long term? We saw that Bill.com could IPO on just accounts payable, but [00:27:00] is data entry that big a component or will the accounting apps- or will the accounting general-ledger apps build this in as a feature? That was always the argument against Dropbox, for instance; that Dropbox was a huge threat to Microsoft, and then Microsoft built OneDrive and made it good. David Leary: I'm gonna get into this when we start talking about predictions a little bit, I think. We can hold off on little takes on this, because I think there's a lot of things happening; when we go through people's predictions, we'll see where this ... This starts [00:27:30] to fall in of, like, other possibilities for Receipt Bank; because I think you named the obvious things, which is they have an exit to one of the big accounting players. But then, arguable, who are the big accounting players, going forward? Blake Oliver: Right.  David Leary: Is it the bank; the banks-fintech game? I mean, there's probably a lot of interesting directions for this to go in the future. Blake Oliver: I've been a Receipt Bank customer in the past. It's a great product, and it's very powerful. So, really, congratulations to the team. David Leary: Did you have any news? I still got four or five news articles.   Blake Oliver: Well, [00:28:00] let's talk about automation, right? Because it is a new year, and we haven't talked about that in a while. I spotted a story in The Wall Street Journal called, "Google AI Beats Doctors at Breast Cancer Detection Sometimes." The gist of the story is- David Leary: Sometimes ... Blake Oliver: Well, it's really actually a lot of the time. Google's Health Research Unit has developed an AI system that can match or outperform radiologists at detecting breast cancer. The doctors still [00:28:30] beat the machines in some cases. So, the headline is misleading. It should actually be that humans beat AI at breast cancer detection sometimes because this AI system, Google got access to a large health care provider's database through some sort of agreement, and they've been feeding mammograms and patient records anonymously into this AI.  The AI has been learning, itself, how to detect breast cancer when given the patient record - did this end up being a [00:29:00] cancer diagnosis or did it not? - and then looking at the mammogram. So, it can learn like a human being does. It did better ... When the AI system was implemented, it reduced missed cases by 9.4 percent in the US, and 2.7 percent in the UK, compared with the original radiologists' diagnoses. We're talking over 9 percent misdiagnoses the AI caught. That's a pretty significant reduction. It also reduced incorrect-  David Leary: So, you'd [00:29:30] want to not replace but augment the humans with it. Blake Oliver: Right. That's the idea, and that's where, sort of, this is going is that it's making the ... It's catching the stuff the radiologists missed. But, at a certain point, you wonder, if the system gets really good - this is the first time they've done it - do you really need the radiologists anymore? I mean, you definitely don't need as many because, as cited in this article, in the UK, two radiologists typically read a mammogram. The study found that [00:30:00] the model didn't perform worse than the second reader and could potentially reduce their workload by 88 percent. So, basically, you can get rid of the second radiologist and just have one radiologist and the AI as the second. So, as I was saying before, it- David Leary: They're gonna have to start value-billing [crosstalk] have to value-bill.  Blake Oliver: -that's right. Can't just bill by the read, right? So, it reduced the incorrect positive readings by 5.7 percent, and 1.2 percent respectively, in the US and the UK. The UK had lower numbers because, I guess- it's [00:30:30] not clear in this article, but it sounds like, in the UK, two radiologists read every mammogram. My inference is that, in the US, it can be just one. So, ours are less reliable. Basically, the takeaway for me is let's give this AI tool to all the radiologists in the US because it'll dramatically improve our accuracy. This is AI in the real world.  David Leary: Do you wear glasses or not?  Blake Oliver: I had really bad vision, and then, I had Lasik. So, now, I only have to [00:31:00] wear glasses if I really want to see super-clear. David Leary: So, you've been to the optometrist in the last seven years, right?  Blake Oliver: Yeah, I went last year. David Leary: Yeah. You go, and you just put your face against six different machines. Then, when you go in the back room with the actual optometrist, in like four seconds, he's like, "All right, we're done," because the machines did all the work. Blake Oliver: Yeah.  David Leary: It's kinda that same thing.  Blake Oliver: Yeah, the machines can actually write your prescription, and he's just verifying it; or she. David Leary: Yeah, exactly. So, you're right- or does that person just get eliminated? Blake Oliver: Yeah. David Leary: You just go to a mall kiosk, [00:31:30] measure your face, and your eyes, and your vision with all these machines and then, you order glasses from some other service. Blake Oliver: What's interesting, too, is that the cancers that the AI system caught were generally more invasive than those caught by the radiologists. But the researchers don't have an explanation for the discrepancies because they're using machine learning. The way machine learning works is we're not programming the computer, it just sort of learns on its own, so we don't really know how it works. Actually, you kinda always need a human component because you need a baseline to compare it to. David Leary: I have some of that [00:32:00] in some of the prediction stuff. It talks a little- yeah, I have some things about the AI predictions for the year.  Blake Oliver: Why don't we .... Do you have any more news stories? David Leary: Yeah, I've got some news. You want me to plow through them really quick. We don't have to discuss them deeply, but I can bring up the hits here. Blake Oliver: Yeah.  David Leary: H&R Block is putting virtual prep into Walmart. So, essentially it's similar to a TurboTax or QuickBooks Live model, H&R Block has for their tax product. But what I found that's interesting about it is their side-by-side; if you take their typical H&R Block [00:32:30] software, it's just a box that says tax prep software, essentially. But all these ones have people on them, so you're picking this face, this box with the person you want to, "help you with your taxes." Now, there's only four different versions of a face, but I just thought, psychologically, that's an interesting way to ... It just proves that's the model people want - this do-it-yourself with a video camera; "I'm gonna chat with somebody." But the box leads [00:33:00] with the person, not with the software. Blake Oliver: So, I go into the store, and there's a terminal that I can chat with somebody on?  David Leary: No ... That's what I thought it was at first, when I started doing research. I don't think that exists. I think it's just there's a software section of Walmart and there's boxes of software on the shelf. This is the- they call it 'Pro Go,' 'Pro to Go,' or something like that.  Blake Oliver: Gotcha. You buy the software, take it home, and then it's basically the same thing as a TurboTax Live [00:33:30] kind of situation? David Leary: Exactly, but the box ... I mean, the way they market it, you're gonna buy them with the face. You're gonna be like, "That's the person that's gonna help me with my taxes." Blake Oliver: Oh, because it's got the face on the box. Got it. David Leary: Exactly. Exactly. It'd be like we've talked about, if you go to Costco, and they have all those QuickBooks boxes there. Claudell's face is on the box. So, instead of buying ... You're buying a relationship instead of just buying the software. Blake Oliver: You said this last week; you said something similar to this about accounting firms - put your face on your website or put a picture of yourself using Zoom, [00:34:00] or Skype, or something [crosstalk]  David Leary: Video chat. Show that you can video chat, absolutely. You have three more weeks before the Super Bowl, and everybody knows that this exists. I have a couple other smaller articles that aren't super-news, but ... I saw an article; it's from SaaStr. This is software-  it's for SaaS companies, right? Blake Oliver: Yeah.  David Leary: It's about how to keep your customers for a decade or longer. I thought he just had really good tips in there that people should think about for their own accounting firm; like taking that long-term view, to where you might even give your small business client the first 12 months free to 18 [00:34:30] months free because you want to win that client for a decade [crosstalk]. Blake Oliver: So, don't ... Well, and actually, I brought something with me today about how long accounting firms keep their clients. You wanna know? This is a stat from Accounting Today. David Leary: Sounds like it'll go right with my article, so ... How long is that? Blake Oliver: So, more than half of accounting-firm clients have been with their firm for eight or more years, and over a third have been with them a decade or longer. This is from the Accountants Confidence Index study [00:35:00] that Accounting Today does with ADP. It also found that more than half of firms have relatively low rates of churn. So, two-thirds, almost two-thirds, report that they have churn of six percent or less in their client base in each new year. That's pretty low churn. David Leary: I wonder if that's for personal-tax clients or small businesses, because I imagine that there has to be small business churn. Some of these small businesses go under. Blake Oliver: Yeah, I think this is for overall, right?  David Leary: Overall, not just CaaS, yeah.  Blake Oliver: I mean, we've [00:35:30] known this. This is not news that accounting firms are actually a great business to own because they're so steady. Once you get a client, you're gonna have them for - if you don't screw up - a decade or more. Only 15 percent of firms, their average client has been with them for less than five years. I'm gonna guess that's probably a lot of new firms. So, relatively low rates of churn. It's funny, though, actually, a lot of firms aren't even seeking new clients. Only 68 percent of firms are [00:36:00] actively seeking new clients in 2020. David Leary: That's interesting because his article here talks about how you should keep- even for clients that you lost to a competitor, or maybe somebody you never closed a sale on, you should just keep talking to them and keep that relationship going because they might run into a rough patch with their existing firm, and you have a chance of stealing that because once you get ... Like you said, once you get them, you have them for 10 years; a decade. The other thing that I thought was an interesting take away was get on a jet and go visit them. I think that's really more than ever, now, in this day of virtual [00:36:30] ... Go and visit your paying customers. Not fly to go make a sale but go visit your real paying customers. He went on to say he's never had a client ever leave- Blake Oliver: Who he visited? David Leary: That he's ever visited [crosstalk]  Blake Oliver: I know, personally, cloud accountants who do this, where they will take a week every now and then, and if they are in California, go to the East Coast, and just go and meet with their big clients all up and down the East Coast. That in-person [00:37:00] effort is sometimes what it takes to keep that client. It's really worth it. David Leary: Yeah, got it. Another article was a little bit about online- I know we've talked about this before, online lending surges for small businesses. Stats are actually coming out here, which are kind of shocking. So, in 2017, just 19 percent of small businesses had loans.  Blake Oliver: 19 percent of small businesses had any loans on the books- David Leary: Or took out a loan, yep, in 2017-  Blake Oliver: Oh, took out one. Okay.  David Leary: How [00:37:30] many do you think did it this year? Blake Oliver: I think it's gonna be a lot, actually, because the economy's been doing well. David Leary: Yep, so it's one-third have sought financing. Blake Oliver: Wow.  David Leary: A lot of what's driven this is all these easier- like QuickBooks Capital, OnDeck - all these easier ways to get the money through electronic means; these new banks. What's happening is the rates can be anywhere from nine percent to 358 percent, with the average rate - 94 percent. Blake Oliver: 94-percent interest rate?  [00:38:00] David Leary: Yeah. Even OnDeck - who are an exception - is actually publicly disclosing the rates; said they're charging between nine and 98.3 percent. Blake Oliver: That's just insane. 93-percent interest. David Leary: Yeah. What's happening is California and New York are really looking to expand protection because most small business owners ... Because it's a business, you don't get those Consumer Protection Act- Blake Oliver: Right. David Leary: For your credit. But most of these small businesses are so teeny that they're really- the personal liability's on [00:38:30] them still, so they're really looking to expand out the protection for these small businesses. Blake Oliver: This is an area where we, as accountants and bookkeepers, can help our clients; get them better interest rates; because it can't be that hard to improve on an almost 100-percent interest rate. David Leary: Well, especially since one-third ... Assume one-third of your small business clients have got probably some bad loan on the books. Blake Oliver: Yeah. David Leary: Every week, here, we've been telling people, "Here's another service you could offer your clients." They're just out there in [00:39:00] our face. The advising-level type services are just there.  Blake Oliver: Crazy!  David Leary: I don't even know if this is news - the IRS mileage-rate changed.  Blake Oliver: What is at now?  David Leary: 57.5 cents per mile. It dropped a half a cent- Blake Oliver: Oh, it dropped down.  David Leary: That's it. That's the story. That's it. That's it. That's story's done.  Blake Oliver: The FASB - Financial Accounting Standards Board - is getting a new chair effective July 1, 2020; this year. Ernst & Young's chief accountant, Richard Jones, is going to be the next chair of the FASB. He's [00:39:30] gonna succeed Russell Golden. Here's the thing about this that kind of saddens me. Richard Jones has spent his entire career at Ernst & Young; I mean, pretty much. Since 1987, he has been an assurance staff, senior manager, director of consultations; current role as chief accountant, and partner. So, this man has been in audit pretty much almost all of his career and now-  in Big Four audit, specifically. Now, he is [00:40:00] going to be making the accounting rules. He has never worked in industry. He's never been a CFO. He's never been on the analyst/investor side. How do we ever get to a point where ... I know you've heard me talk on the show about the inadequacies of modern GAAP in the past. We've had guests on the show talking about it. This is just gonna continue the status quo.  David Leary: Yeah, because what new vision, or new model, or new direction is this person gonna take it?  [00:40:30] Blake Oliver: So until the change happens, Russell Golden is gonna be focusing on a few issues. This was in a Wall Street Journal article here. So, the big things that FASB is gonna tackle in the next six months is whether or not to propose changes to the measurement of goodwill. Goodwill is an intangible asset created when a company acquires another business for more than the value of its hard assets. This concept is hard enough for accountants to understand; [00:41:00] the general public ... It's just- it's  a lost cause, right? It's an asset ... Does this make sense to you at all, David, as a non-accountant - the idea of goodwill?  David Leary: Yes. Blake Oliver: Yeah?  David Leary: Conceptually, it does. Blake Oliver: Tell me what it is, please. Explain to me, because I don't get it.  David Leary: All right, so I have a dental office in my community in the small town I live in. I'm highly respected and that has some sort of value for my company, and I can put it on my books, apparently. Blake Oliver: But what ... It's not  ... So, I [00:41:30] buy your dental practice for more than the sum of all of its assets. It's more than the value of its customer base, more than the building, more than ... We add all that up, and I'm paying a premium because I think there's some extra value above and beyond what we have measured individually. But why do I, then, put that on my own balance sheet as an asset? I can't sell my goodwill that I've purchased. So-  David Leary: That's a good point because Coca-Cola could put, I guess, the value of the brand- [00:42:00] Blake Oliver: Yeah, but they could sell their brand, right? You can exchange it for money. Goodwill is not exchangeable ... Anyway, it's a whole philosophical thing. There are some people who say we shouldn't even have goodwill. It was a mistake to begin with, and it should just be a reduction in stockholders' equity when we purchase something for more than the value of its assets. Anyway, that's not what they're really considering. They're just gonna decide whether or not companies should test goodwill for potential impairment [00:42:30] each year, or if they're gonna give public companies the option to just amortize it. So, let's say the goodwill is measured at, I don't know, $1 million, when I bought your practice, David. I could decide that I'm gonna just amortize it over 10 years. So, eventually, at the end of 10 years, I don't have any goodwill, and I have an expense of $100,000 every year. That way, I don't have to do this crazy thing that public companies currently have to do, which is, every single year, David, I would have to look at that practice that I acquired from you, and I [00:43:00] would have to measure and try to figure out is it still worth what it was before? Is the goodwill still worth what I paid for it? How do you do that? How do I decide if there was a reduction in the value of the overall business? It's a massive, complicated thing that we have to do [crosstalk]  David Leary: Well, I know who's working on it. Blake Oliver: What's that? David Leary: Ready for my next article? Blake Oliver: Let's hear it. David Leary: All right. This is an article from Bloomberg Tax: "Big Four Invest Billions in Tech, Reshaping Their Identities." So, I don't ... What [00:43:30] I liked about this article - it pulled together separate things we've probably spoken about during the previous year. They're now at $9 billion pledged. So, KPMG has pledged $5 billion for automation and AI internally. PwC has pledged $3 billion of spending on technology and training internally. EY's pledged $1 billion on something similar. Deloitte hasn't said what their dollar figure is, but they're carving out a niche creating automated services for law firms and legal offices. I don't know much news [00:44:00] is here, but I'm just wondering ... That's a lot of money. Then, I'm wondering, how well will they execute? Because that's a lot of money being bet on four companies. You think about the VC market, and all the apps, and all the successes that are out there being spread  across dozens and dozens- or hundreds and hundreds and hundreds of possible bets, and companies, and solutions. This kind of reminds me of the California thing - this build-it-yourself. What are these ... What is the Big Four actually gonna pump out? What is the result of all this spend they're gonna do? Blake Oliver: All this investment? [00:44:30] David Leary: $9 billion ...  Blake Oliver: So, think about it this way, accounting standards just keep getting more and more complicated. We have four or five times more complexity in accounting without really producing that much better information, but it creates a lot of work. For instance, the whole current measurement of goodwill is a great example; having to do valuations every single year. There's all sorts of examples where, for a public company, for every single account on your balance sheet, you've gotta do some complicated analysis, [00:45:00] and you have to use software to do it because it would take too long with people. So, now, we've got a whole industry for lease-accounting software. We've got entire industries for other measurements that need to happen. So, the Big Four are just kinda cashing in on that, right? The complexity of regulation creates this compliance burden, and the Big Four sees this potential where, "Hey, if we create some apps that we can sell to our clients, we can help them lower their personnel costs, [00:45:30] and we can capture the value there and make billions of dollars." David Leary: Got it. So, it's a way ... Their consulting business will be like, "Hey, by the way, we also have this app that does this," and then, keep them from using an app that's just publicly available, possibly. Blake Oliver: That's my theory, yeah. David Leary: Why don't they just spend that money and just buy every single app that exists in the whole small business ecosystem? They could just buy everybody- Blake Oliver: Because those apps are solving for a very different market. The Big Four are targeting those Fortune, what, 2000? Which, you can build customized software [00:46:00] for them and sell it to them for a lot of money. David Leary: Yeah, but this is the same Big Four that has worked on that project with the payroll fiasco in Canada on their software package ... I'm imagining some of the Big Four consulted on this California project; I'm guessing [crosstalk] or is California just doing this 100 percent on their own?  Blake Oliver: Well, they make even more money when it fails because then they have to charge all these consulting fees to get it working again. You want the thing to be hard to use. I mean, I'm sure nobody ... [00:46:30] I'm not saying people are actually thinking that; they're not evil. It's just the incentives are set up so that there's ... There's no incentive for them to make it so that it's turnkey once they're done. Anyway, speaking of big businesses, I got a stat for you. You know, I love my stats! David Leary: Okay.  Blake Oliver: So, I've cited these stats in the past. APQC has an Open Standard Benchmarking Database. They survey thousands of businesses; mostly large businesses in this country; medium and large. [00:47:00] They aggregate the data, and they publish it every now and then; some of it publicly; a lot of it you have to subscribe to. They'll occasionally publish some really interesting stuff in CFO. So, they have once again updated this number - the cost to perform the finance function as a percentage of revenue. What does your entire finance function cost in your business as a percentage of your overall revenue? They found that the median business spends one [00:47:30] percent of revenue on finance. Top performers, only 0.56 percent. So, almost twice as productive. Then, the bottom performers, 1.6 percent. So, the top performers are almost three times more efficient at finance than the bottom performers. But what's really interesting is that bottom performers have improved over the last five years or so; four years or so. In 2015, they were two percent of [00:48:00] revenue, and they've gone down to 1.6 percent, which is actually a pretty darned good improvement on a percentage basis. They've improved 20 percent. I attribute this all to tech. Even the bottom performers, even the slowest companies to adopt are adopting technology, and that's allowing them to spend less on salaries. So, overall, finance is getting more efficient. David Leary: Which is similar to the article last week about tech spending, right? The people that, if they can reach that one-percent spending on their tech improvements, they [00:48:30] have more revenue, et cetera, et cetera [crosstalk]  Blake Oliver: You know, think about it - if you can reduce headcount with tech, yeah, you may have some sticker shock when you're looking at an application that costs $10,000 a year, but if it can help you reduce headcount in your business by one, you've probably just seen a 10x return on investment right there. Or, maybe you take half of somebody's job and allocate it somewhere else; that's a five times improvement; stuff like that. So, anyway, [00:49:00] it's kind of interesting. These are big businesses, but I like looking at these percentages, too, because it's a good way to figure out how much to charge for services in a different way other than hourly billing. When I looked at businesses that I was quoting for outsourced accounting services, I would use a variety of methods to estimate what I should charge. Some of it was based on our old hours estimate method in the firm. Again, that's pretty common; everyone's used to that. You just estimate - how many hours am I gonna be spending on this client every month, and you multiply it by a target hourly [00:49:30] rate, and you get a fixed fee. Not the best way to do it, but pretty easy, and we're all familiar with that. Another way to do it that I would compare it with is the percentage method. I'd say - what is a reasonable percentage of revenue for this business to be spending on their accounting and finance? So, I would say- let's say it's two percent in a smaller business, because smaller businesses, they have more overhead when it comes to that. They're not like these big businesses where finance can be a smaller percentage of their revenue. So, [00:50:00] let's say it's two percent. I would just multiply their revenue by two percent, or expenses, if they were spending more than they were making, and I'd compare that to my other estimate based on hours, and I'd say, does this make sense? If they were similar, then I'd know I'd come up with a good amount. David Leary: So, just as a time check here, we're coming up to the top of the hour for our listeners. So, we can-  Blake Oliver: Oh, yeah ... I know you have to get going, David. We had so much news to talk about. Maybe, let's break out our predictions into its own episode. David Leary: Just do it as a bonus? [00:50:30] Blake Oliver: Yeah, let's do it. David Leary: Okay.  Blake Oliver: So, you gotta go to your appointment. Why don't we come back, and we'll record our predictions separately. David Leary: Okay. That's what we'll do. I'll have one less tooth, but we will record- we'll record it separately. Blake Oliver: Fortunately, we're not on camera, so no one will see your missing tooth. David Leary: I should record while I'm getting my tooth taken out. That would be [crosstalk] episode ... Blake Oliver: Oh, yeah ... We'll give you some time for the Novocain to wear off so that you're not mumbling through the session, but yeah, I'm looking [00:51:00] forward to that. It's, again, always fun chatting with you, David. If people wanna get in touch with you, what's the best place for them to do that? David Leary: Easiest way is on Twitter. I'm @DavidLeary.  Blake Oliver: I am @BlakeTOliver. I'll check in with you again shortly. David Leary: All right. Bye!  Blake Oliver: Bye.  
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Los Angeles, CA, USA
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3 days, 19 hours