Accountex USA 2019 - Interview Pack

A curated episode list by
Creation Date December 28th, 2019
Updated Date Updated June 1st, 2020
 1 person likes this
Have something to share?Create your own list of podcasts or episodes!

About This List

All the interview episodes of the Cloud Accounting Podcast recorded LIVE at Accountex USA 2019 #AccountexUSA
  1. SponsorsRight Networks: https://cloudaccountingpodcast.promo/rncloudShow Notes 00:17 – Meet Cash Flow Mike!  00:36 – Cash flow is king - It's how businesses keep their doors open 01:26 – Mike teaches banks effective methods for communicating with small-biz owners 01:50 – Mike teaches from the standpoint of necessary advising, instead of trusted advising 03:41 – Want to add advisory to your practice? Learn how to tap into your experiences and tell that story 04:49 – Mike says it's imperative to start with the end in mind - and map out that advisor/client relationship  06:55 – Since everything you do impacts cash flow, you need to know the reason why  you're making every single transaction 09:01 – Run your firm like you're going to sell it - keep it show-ready every day 09:34 – Stupid cash flow tricks  12:01 – You don't need fancy tools and software, but you do need to track everything - what's coming in, what's going out, and the timing of it all 14:15 – When it comes to cash flow, looking ahead gives you time and options 14:35 – Practice what you preach. When it comes to advisory, if you believe in what you're selling, why aren't you doing it?  15:20 – What comes in should match what's going out 18:39 – A discussion on how having more month than money and oversized growth affects startups like WeWork | NYT  Connect with Mike Milan Linkedin: linkedin.com/in/mikemilan/ Website: https://www.elevatefinancialtraining.com/ 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. Meet Blake and David in person!  November 5-8: QuickBooks Connect in San Jose November 5: Practice Ignition PreCon Party in San Jose November 6: VIPartners Party with Gusto, Routable & Jirav in San Jose December 9-11: Digital CPA Conference in Seattle 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 TranscriptMike Milan: We're gonna spend the next 10-25 years together. You don't just change accountants every week. If we're gonna spend that much time together, where are we going? Blake Oliver: Welcome to the Cloud Accounting podcast. I'm Blake Oliver. David Leary: I'm David Leary. Mike Milan: And I'm Cash Flow Mike. Blake Oliver: Now, is that your legal name, Mike? Mike Milan: Sure. Why not? No, my name is Mike Milan. Blake Oliver: Awesome.  David Leary: Thanks for coming, Mike. We're here at Accountex USA. We are at day two, doing a lot of interviews here. Blake Oliver: Yeah.  David Leary: I think, with your name, we should talk to you [00:00:30] about cash flow and small businesses. Blake Oliver: It seems appropriate. David Leary: It seems appropriate, but, before we jump in, why are you qualified to talk about cash flow? Mike Milan: Well, I can tell you, I've dedicated my life to it. I believe that that's the way that businesses stay in business. I've built 12 companies, so if anybody's had cash flow problems, or seen cash flow success, I think it's me. Blake Oliver: I've heard these stats ... Every year, there's a stat that Intuit or Zero talks about, how like 80 percent of businesses or something crash due to cash flow problems. That's the main [00:01:00] reason they fail. Is that right? Mike Milan: It is. It's 82 percent blame cash flow, in one way or another, as the reason that they failed. What's interesting is that 50,000 businesses filed bankruptcy; 35 percent of those have net profit. Blake Oliver: Really? Mike Milan: So, think about that. That's a cash flow problem. Blake Oliver: Right? Wow. So, they're profitable; they just can't keep the cash moving, and they have to shut down. Mike Milan: Yeah, exactly. Blake Oliver: Who are you talking to mostly? Are you talking to accountants? Are you talking to business people? Business owners? Who ...? David Leary: Banks? Who do you talk to? College students? You teach, as well?   Mike Milan: Yeah, that's right. I'm [00:01:30] actually a ... Ultimately, it's the small business owner; it's the guy that's out there actually trying to live his dream, trying to build what I call a lifestyle-friendly business. In order to do that, I'm talking to the people that actually deal with small business owners. I teach bankers; a course that we call Relationship Banking, which is more or less teaching bankers how to communicate with that small business owner. I work with accountants. Same thing. It's the same practice. You've gotta realize that those three people - the small business owner, the accountant, and the banker are all on a pedestal together. It's not the trusted [00:02:00] advisor in my world; it's the necessary advisor. That's what I want him to become, that necessary part of their life, right? It's a necessary advisor. You mentioned college courses. I'm on the faculty at the Graduate School of Banking at LSU. I've taught at the Graduate School of Banking at Colorado, and the Pacific Coast Banking School up in Washington. A little bit there, but it's all about banking. David Leary: One thing, I think, in my hallway conversations with you, Mike, is you talked about how all aspects of the business are related to cash flow. It's not like there's a tool, and you report out the future cash [00:02:30] flow. Every part of the business is going to affect cash flow. Mike Milan: Every decision. It depends on how you look at it. Every decision that you make has an impact on cash. And, again, most people get focused on the profit, but that's just the result. What I always say is if you wanna know what the future holds, you've gotta bring it to the present. That's why we do forecasting. That's why we do budgeting is to be able to bring that to the present and see how your decisions today will impact tomorrow's cash flow. It doesn't matter ... If I'm sitting here right now, there's an opportunity cost [00:03:00] in cash flow. I actually had to pay to come here to be with you guys to be interviewed on this. David Leary: Thank you for [cross talk] Blake Oliver: To be clear, you're not paying us. Mike Milan: I'm not paying you. That's right. Blake Oliver: I'm a CPA. I'm an accountant. I'm a bookkeeper. I want to get into helping my clients in a more proactive way; not just doing the compliance. I like cash flow as a great starting point for advisory because that's the [00:03:30] thing that needs to be monitored, probably, on a daily/weekly basis, right? If I've never done it before, how do I go about building that as part of my practice, what I'm doing for customers?  Mike Milan: That's a great question, and I'll tell you, this whole industry - accounting - has been transforming, since I came in. I used to be part of Finagraph, which is a cash flow company; app-based company. Basically, what I've learned is that there is a transition. People are trying to get into it. How do I start? I'm gonna say there's a new kind of advisor, a new kind of accountant [00:04:00] that's out there, and it starts with you. All of you, every accountant, every bookkeeper has a story. That story is, "I'm working with other clients. I have my own life experiences." You start there. You've seen things happen in your other clients' businesses that you can translate to somebody else. You don't know the concepts, if you don't know the math, don't worry about it. You've got life experiences, and that's the new advisor, in my mind, is the one that can translate and tell their own story. David Leary: If you're trying to advise a client, even if you haven't looked at their numbers yet, you can be like, "Hey, here's something that I have a client [00:04:30] do ... for example, people with payroll taxes; keeping those in a separate bank account, so when it's time to pay those ... It's just a tool that you can implement, and this is gonna help you not get a surprise at the end of a tax season and have to shell out a big old check, which you don't have the cash flow for." You don't even have to look at somebody's numbers, and you can still provide them advice regarding their cash flow. Mike Milan: Absolutely. I built - shameless plug for me - Clear Path to Cash, which is just a blueprint. It's eight steps, and it starts with - start with the end in mind. If [00:05:00] I'm the advisor, if I was an advisor right now; a bookkeeper or an accountant, I'd say, "Hey, listen, David, we're gonna spend the next 10-25 years together. That's the way I look at our relationship. You don't just change accountants every week. Where we going? If we're gonna spend that much time together, where are we going?"  Try to figure out what their transferable value number is. Now, you might not have heard that term. That's one that I use in banking. Transferable value is when you get done with this, how much money does it take you do whatever it is you want to do next? There's some calculations I have to get there, but that's where I would start is-  David Leary: That's [00:05:30] the 'I wanna live in a beach, and fish' or something [cross talk]  Mike Milan: -that's right. I wanna sit on the deck. I wanna travel the world. Whatever it is. Blake Oliver: Do you have a method? How do you actually deliver this service, or how do I deliver the service as an accountant? Mike Milan: Again, I've got just a strategy, a blueprint, but where I'd start with is let's start with the transferable value number. Then, every day [cross talk]  Blake Oliver: -I wanna make sure I understand that. That's the number I want to get out of my business at the end of it, or ... Mike Milan: At the end of it, and without relying on the sale [00:06:00] of your business. I want that to be gravy. What I want you do is take what we're doing today and make your profit - your transferable value number - a planned event, which means every month, we're working towards that goal, even if that goal is 20 years from now; because we're not gonna be surprised. We're not gonna wait til we're 65, and we sell the company ... We look at the check, and the check isn't enough, and all of a sudden, you've gotta go get a job. My job as an advisor is to keep you in business and make sure that you have your dream fulfilled at [00:06:30] the end. So, you're fulfilling dreams. David Leary: If I'm hearing you correctly, instead of just actual forecasting enough to, "Hey, I need to click on this AR; I've got these AP transactions I have to do; I need to make payroll," and really the day-to-day business functions, you're stepping back and saying, "Hey, look at ... You need to include the money you're taking out of the business as part of the long-term cash flow, and you need to be including that ..." Then, work everything off of that, backwards. Mike Milan: Pretty much. It's a planned event at the end. I'm gonna start here with what I need, [00:07:00] and then, again, work through the balance sheet or the income statement back. What's interesting about that is that ... You've talked about all the transactions. That's where I say that everything you do impacts cash flow. There's thousands of these transactions that happen every day, week, month. What I'm saying is, before you get to the transactions, know why you're making the transaction.   This episode of The Cloud Accounting Podcast is sponsored by Right Networks. In a perfect world, everyone would have 100 percent of their clients on a cloud-based accounting system using cloud-based apps, but the world isn't perfect, and clients have a wide range of needs. For some, this means using desktop-based software. That's where Right Networks comes in. Right Networks is your 100-percent accounting-focused desktop in the cloud that also includes an ecosystem of over 250 connected apps. As you and your clients take the journey to the cloud, Right Networks will be at your side innovating the best ways to leverage the true cloud future by investing heavily in cloud apps, like Transaction Pro and Autofy. They've created an always-on environment that supports 24/7 data transfer. Right Networks also offers no scheduled downtime for maintenance or application updates and meets the industry's highest security standards.  To join the more than 50,000 firms that use Right Networks daily with their clients, head over to CloudAccountingPodcast.promo/rncloud. That is Cloud Accounting Podcast dot promo forward slash R-N-C-L-O-U-D. Be sure to visit the Right Networks booth in San Jose at QuickBooks Connect 2019.  David Leary: It's [00:08:30] interesting, we did an interview - we haven't released it yet - at The Accounting Show LA, and it was about selling your firm. Ultimately, it's kinda the same thought process you're saying, which is, when you make the plan to sell your firm - on day one, when you start your business. It really aligns well with the vibe you're putting out here on this. Mike Milan: You know what's funny is I just wrote a blog and posted it yesterday on run your business like you're gonna sell it, right? Because what's the first thing you do?  If you're gonna sell your house, or sell your car, [00:09:00] what's the first thing you do? David Leary: Vacuum it and paint it.  Mike Milan: Yeah, you clean it up and all of a sudden, you've got a nice place, right? You're going, "Whoever buys this house is gonna have a nice house or have a nice car..." Why not do that to your business? Have it show-ready all the time, because you're gonna get the benefit of the cash that's coming off of it. It's gonna be operating healthily, or very profitably, and efficiently. Get that, because people will pay you more in the end for something that works right. The value will go up. If they come in, and they see that you're running around, and you have all these problems, nobody's gonna buy your problems for [00:09:30] premium dollars. Run your business like you're gonna sell it - that's what I say. David Leary: What are some of the cashflow mistakes you've seen, like nightmare stories? Besides like the guy who filed bankruptcy ... Have you seen some crazy hacks or workarounds people have done just to make cash flow work for them? Blake Oliver: No, no, I wanna hear the disasters. Mike Milan: Disaster? All right [cross talk]  David Leary: I'm sure people do very creative things. Blake Oliver: Yeah. Mike Milan: Well [cross talk]  David Leary: Floating checks ... Mike Milan: Yeah, the floating checks ... I've seen a guy buy a business with credit cards that he just [00:10:00] took out the credit card to get the cash advance, and give a cash advance over ... He bought a $350,000 business on credit cards he applied for all at once. David Leary: That's a lotta points. Mike Milan: That's a lotta points ... Isn't it? You could almost buy a house on points. Blake Oliver: Yeah, but that's very expensive. Mike Milan: Very expensive, right? You're talking 20-some-percent interest. There's other ways to finance your business outside of taking a big collection of credit cards to do it. That's the biggest thing. He lasted almost nine months in business, before [00:10:30] he couldn't keep up with the payments. That's the biggest disaster, because he actually bought a restaurant, put the money into the restaurant, had no operating capital because he financed the whole thing on cash advances, and then couldn't keep it open. Blake Oliver: Okay, so maybe that's an extreme example. What is- Mike Milan: You said disasters!  Blake Oliver: What are some ...? What did you say, David, like common ... Best practices, or ...? David Leary: Yeah, best practices or how to not create these situation,  because I think people get caught off guard. They have to collect ... They don't [00:11:00] have cash ... Not making payroll is probably ... I've heard about that; like you're not a real business owner until you can't make payroll once. That's when you really ... Now, you're truly a business owner. You have to make payroll. You've got to figure out how to pay your employees, right? That's when things get real, right?  Mike Milan: Exactly. The way I teach that, it's all about timing. You can make your profit and loss statement. You see how the revenue's coming in, and how it should look at the end. But, let's face it, that's not the timing of dollars, and I blame it on ... There's two types of accounting - cash-based, and what's the other one? Blake Oliver: Accrual.  [00:11:30] Mike Milan: Yeah, I call it cruel accounting - accrual. It's very cruel, because I think I have money, but I really don't. So, it's 'a cruel' accounting. That's what it is being able to look at the money as it comes in, in addition to how you expect it to be spent - inflows and outflows. There's two parts to it. Most people who do the first part will miss the second part and not understand the timing of payments.  David Leary: Are there easy tools ...? What's a small business owner supposed to do? Everybody says this, like, "Oh, cash flow; watch your cash flow." What [00:12:00] do they have to do? Mike Milan: I think it's a simple ... I mean, of course, there's lots of apps that are out there that they can use, but you might be in a position where you're like, "Hey, I don't have an accounting system that works with an app." It's as simple as just keeping track of what's coming in, and what's going out, and the timing of when that's gonna happen. You'll start to see things.  I used to own three restaurants. You don't have AR in the restaurants, but you have a daily sales. So, I would keep just keep track on the Excel spreadsheet - what comes in on Monday; what comes in on Tuesday, Wednesday, [00:12:30] Thursday ... I would do that by week, and I would leave notes to myself out on the end. "This was Mother's Day. That's why your Sunday was so great." It was just notes on why things happened. When I started graphing those numbers, I saw a pattern that developed through the year. Every year, I knew that right around St. Patrick's Day was one of my best months. The weather was turning in St. Louis to the better. People were starting to get out. I had better months in March than I did in July because it was too hot. People didn't wanna be in the restaurant, or out there. They wanted to be at the lake. Just [00:13:00] keeping track of what you're doing is the first basic step to understanding what's happening in your own business. David Leary: That sounds like you're saying timing is very important. It'd be interesting to see that pattern .... If you were gonna give your employees a bonus, maybe don't do it at Christmas. Maybe you do it in March, when you know the revenue is going to be there, and the timing's right. Mike Milan: Perfect. You'll be able to see that seasonality. What I like about it is if you start managing your cash balances that way, you'll start to see it happen, where you're like, "Oh, my God, I'm going into a three-month low period. I don't sell [00:13:30] as many swimsuits in November, December, and January," if I'm a swimsuit-shop person, "so maybe I should keep back some cash in September/October to be able to make my fixed expenses through that." You'll be able to see that and react. I was reading a book today; it was actually by the Dryrun CEO, "Pandemic Cash Flow." David Leary: "Pandemic Cash Flow," yeah, yeah. Blaine, yeah.   Mike Milan: He makes a statement ... I'm not gonna ... Nobody could say that more perfectly, and I'm gonna steal it from him. Blaine, I'm sorry, but it's ... What he says is it's the difference [00:14:00] between walking out into the street and not seeing the bus, or you see the bus coming, and you got time to react. You got options. You just walk out and get hit by the bus, which is not paying attention to cash flow at all, versus seeing it's coming down the block, and I've got options. I can cross. I can stay put. What you're doing by looking at it and looking ahead is actually giving yourself time and options. That's what it takes to satisfy most cash flow problems. Blake Oliver: Ironically, cash flow is often a problem in an accounting firm ...  I'm guilty of this. I do my [00:14:30] books last, right? How can I make sure that I'm managing my cash flow better? Mike Milan: Well, you should already have, we'll say, a blueprint for how you're going to advise your clients. Make that part of ... You put yourself right into the program. If you believe in it, and you believe that what you're saying to your clients really helps them, and helps them make more money, and have more time, and build that lifestyle-friendly business. then why aren't you doing it? Blake Oliver: So, what do I do? How do I make payroll? Mike Milan: How do you make payroll? Blake Oliver: Yeah.  Mike Milan: Okay, that's good, because you're gonna encounter the exact same issues they are. If you're [00:15:00] gonna give them advice on the timing of their collections- they've got people that are paying late; they've got maybe too much inventory, which you won't have that problem, but you probably have more of a collections problem than anything ... But you're also making purchasing decisions that could either be held off on; you could scale back. Here's an expense-control rule, and that's what you really have to do is exercise discipline, and expense control. Here's the rule - a change in gross profit should match the change in operating expense. So, if I have less gross profit, which is money to spend, I should spend less money. Blake Oliver: Right. Mike Milan: It should [00:15:30] be equal dollars. That's one quick rule that you can say, "Okay, well, I'm done $100,000 in gross profit, I need to cut expenses by $100,000." That's the quickest, easiest way to get expenses back in line. Blake Oliver: Challenges, of course, we've got ... Most of our employees are fixed costs in accounting firms; although, you could change that with outsourcing, or- David Leary: I think with accounting firms now, them going to that fixed fee, or getting paid upfront is gonna help. They've shifted that. Instead of an accountant giving services and then collecting maybe 90 [00:16:00] days later, you're getting the cash before you even provide the service. Blake Oliver: Yeah, and I can't believe there are firms that ... Actually, most firms operate this way, so I shouldn't say I can't believe it, but tracking your time; billing at the end of the month; waiting 30 to 60 days to get paid ... When the alternative is bill on the first of the month for that month, because you're operating on either a retainer or a fixed fee. Mike Milan: Yeah- Blake Oliver: [inaudible] engagement. That's what I did, so all of my cash would come in on the third day of the month, and I had that cash to pay all of my employees and contractors [00:16:30] throughout the month. My customers were financing my business, not the other way around. Mike Milan: That's right. That's the way it should be.  David Leary: I think I've talked to some accountants that are doing- they're billing their clients on fixed fee. But what they've done, they've set their clients up on every two weeks because it helps the cash flow situation for the clients, as well.  Blake Oliver: Well, now you could do it every week if you wanted to. It's like with the automated billing systems. Mike Milan: Right, yeah. You can set it up for any recurring-  David Leary: Which helps stabilize the expenses for their small business client.  Mike Milan: You brought up an interesting labor problem, though, especially if you have fixed costs in your labor [00:17:00] pool. I used to have a hotel staffing company. What we used was a labor utilization rate. Any time somebody's individual utilization - which means you're doing more non-billable time versus billable time - dropped below 75 percent, I started thinking I was overstaffed. That's how we decided, as a whole, I wanted everyone working at least 75-percent billable versus unbillable. Blake Oliver: Yeah, and that's one of those ... I think that's one of those metrics that, if you're an accounting firm that inventories your time, you try to track that very carefully, or you should be, anyway.  David Leary: Once [00:17:30] I solve my cash flow problems, is this something that, once I get ... I have my processes in place, let's say. Is it kind of set it and forget it, or do I need to be revisiting this constantly? Mike Milan: I think it's an exercise in discipline. Even successful companies ... I mean, look at it. In 1985, Home Depot, which I think we all think is successful, was 21 days from death- David Leary: Because of cash flow. Mike Milan: Because of cash flow, and because what they were doing is they were trying to do the growth model that Walmart had done, [00:18:00] which is a lot of build, build, build, and cash flow just outran. You can be so successful that you can do something that I call 'grow broke.' It isn't just that I had a problem, and I was being unsuccessful, and I didn't have enough money coming in to match. Sometimes, you can grow so rapidly that you actually outrun your operations. David Leary: Like all the startups- Mike Milan: Yeah. David Leary: -that fail with VC money. Blake Oliver: Now you can go public and be losing billions of dollars a year, apparently. So, the rules don't apply. Mike Milan: It doesn't apply at all.  David Leary: We talked about this on the podcast. WeWork, right? I guess WeWork's expenses is [00:18:30] greater than their income-  Blake Oliver: Their operating expenses are double their revenue, and they're gonna try and go public. Although, there was just this story- Rachel Fisch sent over this story about how they're gonna have to cut their valuation in half, maybe. That's gonna really screw up their IPO.  David Leary: From a cash perspective, how does that cash flow, long term, work? Like, how is this possible, if their operating expenses are 2X their income? How do you make that cash flow work? What would you do for WeWork to solve that problem? Mike Milan: With WeWork, basically what it's doing is that ... It's [00:19:00] okay to run in what's called a negative working capital cycle, which means you actually have your current liabilities are higher than your current assets. That's basically what they're doing, but they're also in a growth mode. There's gonna be a point in time when it flips. That's how all these tech startups in this room do is that they're gonna go expenses out, top end, and when the subscription-based model starts to flip ... Their R&D costs are coming down. They're back into maintenance or mainly just adding a few features. Yet the actual subscription model flips, and it [00:19:30] only works in high-growth, rapid-growth type organizations [cross talk] Blake Oliver: That's when your WeWork rent doubles. Mike Milan: That's right ... But those places are full; I mean, absolutely full, and they just keep adding them. Blake Oliver: There's demand. David Leary: So, if people wanna get a hold of you, Mike, and they wanna learn more about cash flow, locate you?  Mike Milan: I think I'm on the internet. My company's name is Elevate Financial Training, so it kinda says what I do. We have a product called Clear [00:20:00] Path to Cash. Any of those words, if you Google those ... elevatefinancialtraining.com, or clearpathtocash.com, or cashflowmike.com. Blake Oliver: All right. Mike Milan: Any way, you can get ahold of me. David Leary: Just cash [cross talk]  Mike Milan: Just cash me ...  Blake Oliver: As always, I am @BlakeTOliver on Twitter. And you, David?  David Leary: I'm @DavidLeary. Blake Oliver: Thanks for talking to us about cash, Mike. David Leary: Thanks, Mike.  Mike Milan: Hey, thanks for having me. I really appreciate this. This was a good time. Thanks.
  2. SponsorsRight Networks: https://cloudaccountingpodcast.promo/rncloudShow Notes00:40 – Welcome Jose and Tony!  01:13 – Tony explains the Latino Tax Professionals Association’s mission 02:37 – The fast-growing Latinx small-business market is largely underserved in the U.S. 04:59 – Uncle Sam wants you  -  even if you're an illegal immigrant - to pay your taxes 05:32 – There's a delicate balancing act of compliance with the IRS, or the government 06:31 – Jose tells undocumented clients that filing a return is an imperative step in becoming a citizen or getting authorization to work in the U.S. 07:15 – Tony explains how the mixed-status family can mix up your brain when trying to file that type of tax return 09:12 – Jose talks about the absolute necessity for education to prevent Latino small-owners from making huge mistakes with their finances and taxes 11:05 – Talking diversity, and the perceived, or real lack thereof in the accounting profession 12:48 –  Financial illiteracy may be what gets in the way of Latino entrepreneurs being able to grow their businesses | Stanford Graduate School of Business 14:32 – Jose says while most Latino business owners speak English and use English-language products, they prefer to consume educational content in Spanish 15:21 – Translating your educational content into other languages will pay off  in the long run 18:25 – Scaling New Heights started offering Spanish-speaking tracks in 2017  | Woodard.com 19:12 – To reach the Latinx market, try a less salesy, more genuine approach 20:12 – Tony explains how Contabi Alliance takes the mission of serving the underserved to the Latin American countries, providing resources and education for accountants and bookkeepers who don’t have access to the tools and technology available in the States 22:00 – Each country has its own particular accounting rules and regulations to navigate24:35 – There's a huge shortage of third-party apps that connect Latinx accounting software to the global players, such as Xero and Intuit25:25 – What kinds of opportunity exist for Latin American countries that want to expand into the U.S.? 26:54 – Jose may have the world’s longest social media profile! 28:39 – Latino Tax Fest – parties, pools, and education! Connect with our guests Jose Zavala LinkedIn: https://www.linkedin.com/in/jzavala03/ Twitter: https://twitter.com/ztxadvisors Email: jzavala@ZTXadvisors.com More About the Xero Virtual Hour: https://www.xero.com/us/partner-programs/partners/xerohour/ Tony Martinez LinkedIn: https://www.linkedin.com/in/tony-martinez-a095613a/ Website: https://latinotaxpro.com/ Email: antonio.martinez@latinotaxpro.org Latino Tax Fest: https://latinotaxfest.com/ 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. Meet Blake and David in person!  November 5-8: QuickBooks Connect in San Jose November 5: Practice Ignition PreCon Party in San Jose November 6: VIPartners Party with Gusto, Routable & Jirav in San Jose December 9-11: Digital CPA Conference in Seattle 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 TranscriptJose Zavala: ... Just because they don't wanna pay payroll tax, then they start, "Oh, well, he's actually here on an ITIN, or he's undocumented, and I'm paying him cash," and it's like ...  Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: I'm David Leary. Jose Zavala: I'm Jose Zavala. Tony Martinez: Tony Martinez. Blake Oliver: Awesome. David Leary: Hey, guys, we are here ... Welcome. This is our first interview we're doing live at Accountex USA in Boston. Weather's been beautiful. Last night, we went to the Red Sox game. It was- baseball games are long. There was a rain delay. [00:00:30] Then, I learned that apparently they do not do Sweet Caroline at the bottom of the seventh. It's actually at the bottom of the eighth, and Blake and I just couldn't stick it out last night.  But welcome, guys. We're here ... Brought you guys on the podcast today because I want to learn more about the whole Latinx community. I know you guys do things with Latino Tax Pros. You have Contabi Alliance. There's just a lot happening, and hopefully, Blake and I can learn, and our listeners can learn why the Latin market is so important in North America. But then, I'd say like this whole hemisphere, right? Jose Zavala: Definitely. [00:01:00] It is a market that kind of expands based out of here. I know Tony has the numbers, and I don't wanna take it, because I know you guys are doing a lot ... Let me take a step back. I'll let Tony talk about it, and then I'll kind of fill in, because if not, I'm gonna take over the show, so go ahead-  Tony Martinez: No worries. Yeah, we work a lot with Jose because he has a lot of clients who are Latinos, or immigrant clients. When we started Latino Tax Professionals Association, our first goal was to bring people together who [00:01:30] may be Latino or speak Spanish and may need content and education in their language.  Over the years, we started getting phone calls from non-Latinos saying, "Hey, I'm not a Latino. I'm in Alabama. I'm in the Midwest, but I have an influx of these Latinos in my town, in my city. They're opening up businesses. They have families. How do I do their taxes? What forms do I use?"  We started changing our approach and basically saying, "Anybody that works with this [00:02:00] market, join us, because we have the content; we have the education around it; we have the resources to help you serve that market." I believe there's about 4 million Latino small business owners in the country. They keep growing every year. David Leary: I think I saw something ... It's like eight of 10 small businesses, right now, being started are started by Latinos, I think, in the States, which is ... That's an insane number. Tony Martinez: Yeah, exactly. What's happening is a lot of our members that we work with - the tax and accounting professionals - they're coming to us and they're asking, "Hey, my clients are opening up new businesses. [00:02:30] They wanna incorporate. They're hiring people. How do I do payroll? How do I do HR? How do I do business insurance? How do I do accounting and bookkeeping?" Because the market is very underserved. So, by us trying to fill that void, we get a lot of engagement. Do you see that also [cross talk] Jose Zavala: Oh, yeah, 100 percent. For me, I kind of started doing it, and I started off just doing taxes and everything; just moved into more kind of the cloud-based, and all that. One thing I do see a lot, and a lot of colleagues, in going to all these events, is people [00:03:00] trying to find - how do I serve them? How do I serve the Latinos? I get asked that a lot. Well, they may have an ITIN, because when it comes to ... With an ITIN, it's different. That's something [cross talk]  David Leary: What is that?  Jose Zavala: Identification number. An ITIN is essentially an identification number for whenever you are not a US citizen-  Blake Oliver: If you don't have a Social Security number, that's what you get. Jose Zavala: You get an ITIN. Yeah, but you're not allowed to work on an ITIN. People still do ... Do what you do, but ... It is those situations- because whenever you get to that situation, [00:03:30] with an ITIN, it's like, "Okay, well, how do I prepare the tax return? How do I approach this?" That's something I've seen a lot, and I think that, Tony- they do a really good job over there of educating.  I'll tell you this, I'm part of the VIP program. I had somebody come with a visa. They're like, "Hey, I need to prepare my tax return," with this specific visa that I'd never heard of before. Reached out to them, and within, I think, a day or two, Tony, himself, was like, "Hey, this is what you need." I'm like, "Oh ... Well, all right, then!" It was so much better.  David Leary: Just to back up a second, Jose, you have your own practice. Jose Zavala: Yes. David Leary: ZTX Advisors. [00:04:00] Jose Zavala: Yes. David Leary: Tony, you are running an organization that trains and supports people like Jose in the market. Is this correct, what Latino Tax Pros does? Tony Martinez: Yeah. In essence, Latino Tax Pro is an association with members, and the members are tax and accounting professionals who are serving Latino and immigrant taxpayers. We also have our own tax and accounting firm in Monterey County, California, under Lopez Tax Service. That's the one that our founder, Carlos Lopez, started 35 [00:04:30] years ago. That's where we have our footprint, in Monterey County. Learning from that, we're helping other tax and accounting professionals scale their business, serve the market, hire the right employees to serve the market. We have a program called Start Your Own Tax School, in order for a tax office to find qualified employees to be able to serve Latinos or immigrants. It's all driven through how the tax law applies to the immigrant tax payer. There's 44 million [00:05:00] immigrants in the country. A lot of them are here on visas. Some are residents. Some are not authorized to be here, but they are, and they're making money; even though illegally they're making the money, because they're not authorized to work, but like Jose said, if they're making money, the IRS's approach is "Cool, file a tax return." "Well, I don't have a Social Security number. How do I file a tax return?" No worries. Apply for an ITIN; then you file a tax return. The fact that they're breaking the law by working without authorization doesn't got to do with the IRS. The IRS just says if you make money legal, or illegally, you [00:05:30] file a tax return to pay your taxes on. David Leary: Maybe this is a question for you, Blake ... Where does CPA ethics fall into that? If you know somebody is working illegally, is it your job just to file the return and keep the IRS happy, or is it your job to be the police? I'm putting air quotes here, but ... Blake Oliver: I don't know. We probably should've asked that of the cannabis folks that we talked to a few weeks ago, because that was the issue in California, til recently. I think the compliance is ... I don't know. You guys talk about it ...  Jose Zavala: For me, the way I see [00:06:00] it is this, man ... You're staying compliant. They made income. Whether it's illegal or not, you need to file a tax return. That's the way I see it. We're keeping them at least ... Yeah, the Department of Labor, or whatever it is, whoever other organization may have a problem with you working. If you're working and making money, at least the IRS is going to be off your back. They can't say anything because you're paying your taxes. Yeah, you missed out a couple items here and there. but at least you're paying your taxes. You at least know, hey, that's taken care of. You're not gonna have two hammers coming down on you-  David Leary: Yeah, don't break two crimes-  Jose Zavala: Exactly, yeah.  David Leary: That's [00:06:30] a good policy. Jose Zavala: That's at least what I tell my clients. They're like, "Well, I don't need to file a tax return." Yeah, you do, because eventually you wanna make this legit. You wanna get your residency card, or you wanna be authorized to work here. Then, all of a sudden, you're gonna start filing a tax return, and you've got a $2 million gross revenue business? It doesn't work like that. Nobody is that good overnight. That's gonna open up a red flag. Blake Oliver: We talked about the international issues, the documentation issues unique to ... Well, not unique, but just more significant in the [00:07:00] Latino community when it comes to taxes. Are there any other specific challenges facing the Latino community when it comes to accounting tax that you support? Jose Zavala: Are we talking in the US, or are we talking globally? Blake Oliver: We can do both. Let's talk both. Jose Zavala: Okay, so U.S. [cross talk] Tony Martinez: -what we've been seeing is they call them a mixed-status family. There's about 16 million people in this country that are part of a mixed-status family. What a mixed-status family is - it's individuals [00:07:30] living under the same household with different immigration statuses. You may have people that are here on a visa, or the DACA recipients, or residents, or unauthorized individuals all within the same household, on the same tax return, for that matter. Typical situation - parents are undocumented. They're filing with an ITIN, but children are citizens and filing with a Social Security number. On the 1040 tax return, how do you fill that out? Who [00:08:00] gets certain credits? Who doesn't? Another example - the DACA recipients. They're here ... They're technically not lawfully present. They're only deferred from being taken action on- deportation action because of an Executive order. So, they're authorized to work. They're given Social Security numbers, so they're eligible for what's called the earned income tax credit, if they otherwise qualify for it. However, the Affordable Care Act does not apply to them because they're technically [00:08:30] not lawfully present. These unique situations come up by serving the market ... It's not just the Latino market. It's really the immigrant taxpayer of America, regardless of what country that they're coming from, because they may encounter some of these situations. That's on the family; on the individual side.  On the business side, we've been noticing a lot of small business owners that are really - especially in the Latino immigrant market - they're really good at starting a business. They'll open up a restaurant, construction firm, landscaping. They're making money. [00:09:00] They start paying people, and they realize, "Hey, I'm not doing things right? I need to start withholding payroll tax. I need to hire the right accounting." Do you see that often with serving the Latino market? Jose Zavala: Yes. I'm gonna say this ... They're great at starting businesses. They get out there, and they hustle. Man, they are the hardest working people ever. The only problem is, immediately, they start to look into some of these notary shops, and these unlicensed preparers, which a lot of them are very educated, but [00:09:30] some aren't. They get bad advice. Like, "Oh, you wanna bring on people? They're all contractors." No, no, no, no, no, it's not that easy [cross talk] Blake, you know ...  Blake Oliver: Not in California, yeah.  Jose Zavala: You know ... Just because you don't wanna pay payroll taxes ... Then they start, "Oh, well, he's actually here on an ITIN, or he's undocumented, and I'm paying him cash." It's like, "Whoa ..." There is another level right there that you gotta kinda like, "Hey ..." That's what I've seen. It's just about education, I feel like ... Where I think you guys do [00:10:00] a great job is educating the practitioners to educate the community. That's, I think, the best way to do it, because they're going to- they're coming to us because we're supposed be the professionals. If we can educate right, they're gonna say, "Well, I don't like that. I pay more money." It's like, yeah, you're paying more money in payroll taxes, but you want the IRS to come down, hit you with penalties and interest?  When we're talking about payroll taxes, that's a criminal offense if it goes too long. Then, it's just kinda like, "Oh ..."  David Leary: It almost sounds like this is, to some extent, a niche because ... I've [00:10:30] seen software products, like, "Hey, if we just create it in Spanish, we can go after the Hispanic community," and maybe that doesn't actually make the most sense. But even if this ... If I have a firm now, and I want to ... I'm like, "Hey, look at this growing market; there's an opportunity here." If I just market to them, I actually need a lot of extra tax expertise. There's gonna be situations that I'm only gonna see in that community, just because ... Like you said, there's mixed families; the way they're doing things; they've gotten bad advice. I have to have some level of expertise. I think that's where the Latino [00:11:00] Tax Pros comes in. You're that support structure for me as a firm owner. It's beyond just marketing, right?  Tony Martinez: Mm-hmm.  Blake Oliver: Here's a question ... I've noticed, at least in L.A. - I don't know what it's like everywhere else - the CPA firms and communities tend to be highly segregated in that  ... At least, where I live, I go to these CPA events and it's a bunch of white guys and all their clients are a bunch of white people. David Leary: I've seen Tony at the last four conferences in a row. Tony Martinez: The only one ...  Blake Oliver: Let's say I'm a practice owner, and [00:11:30] I've got my traditional practice. I wanna diversify. I wanna go after these entrepreneurs; the immigrants who are ... But I don't have anyone in my practice who speaks Spanish. I don't know anything about these issues, so it's a real challenge. Can I come to you as ... Would you help me market to Latinos, or learn how to solve their problems, or something like that? Tony Martinez: One of the best ways is to go to one of our events, because we bring people together who are serving the [00:12:00] market. When you go to an event, you're able to meet people like Jose; have those conversations on how to be able to reach out to those small business owners. I know there's also like the Hispanic Chamber of Commerce that has events, and many things around the area that you may want to encounter. One of the best ways that is through hiring maybe somebody that's bicultural, bilingual, who has access to that community. You may wanna be picky [00:12:30] on who you work with, at first, because it might not be a good fit for you. Like Jose said, unfortunately, a lot of people, they're good at starting a business, and you're trying to give them some guidance; they're like, "No, no, my brother-in-law is doing it this way, and he grew his business, so I'm not gonna follow you." It's like, "No, do it right!"  Because a lot of the data ... There's a report by the Stanford Graduate School of Business on the state of the Latino entrepreneurship, and it shows that Latinos, yeah, they start businesses, but they cap out. They can't scale them. A lot of it has to do with not [00:13:00] having proper bookkeeping, accounting; not having ... Financial literacy, in my opinion, is the gap that needs to be filled. That's why I always ... When I meet a lot of the partners, and exhibitors, and sponsors around the way, whether it's a lot of people here, a Paychex, ADP, Gusto, Intuit, Xero, it's like, "Help us fill that gap with education and awareness."  This episode of The Cloud Accounting Podcast is sponsored by Right Networks. In a perfect world, everyone would have 100 percent of their clients on a cloud-based accounting system using cloud-based apps, but the world isn't perfect, and clients have a wide range of needs. For some, this means using desktop-based software. That's where Right Networks comes in. Right Networks is your 100-percent accounting-focused desktop in the cloud that also includes an ecosystem of over 250 connected apps. As you and your clients take the journey to the cloud, Right Networks will be at your side innovating the best ways to leverage the true cloud future by investing heavily in cloud apps, like Transaction Pro and Autofy. They've created an always-on environment that supports 24/7 data transfer. Right Networks also offers no scheduled downtime for maintenance or application updates and meets the industry's highest security standards.  To join the more than 50,000 firms that use Right Networks daily with their clients, head over to CloudAccountingPodcast.promo/rncloud. That is Cloud Accounting Podcast dot promo forward slash R-N-C-L-O-U-D. Be sure to visit the Right Networks booth in San Jose at QuickBooks Connect 2019. Jose Zavala: That's [00:14:30] something that I've kind of made it my mission is there's not a lot of resources in Spanish. You can find education, and webinars, and things with Xero, with QuickBooks, with Gusto. They do things in English all day. A lot of these people, they speak English; practitioners, small business owners, they speak English, but they prefer to consume the content in Spanish. The product can be in English. That's not an issue. It's just the support and the content needs to [00:15:00] be in Spanish. That's where I'm trying to fill in that gap, and that's where I've been working with them; kind of like, "Hey, let me make these videos ..." For Practice Ignition, I made a how-to video in Spanish because I use it so much. I've already had a lot of people, "Oh, I love it. I love it," but then you go back to, "Oh, it's too expensive." Yeah, but then, kind of changing the mindset of how much time are you ...?  Blake Oliver: Yeah, but take some existing content, and have somebody translate that, and recreate it ... Jose Zavala: Yeah. That would [00:15:30] pay off dividends, because that's what I've noticed is they want that content in Spanish. David Leary: I'm gonna repeat this because I know we have a set of app developers that listen to the podcast. What you need to do is you need to create your training and your content in Spanish, but your product, itself, can be in English. Jose Zavala: Mm-hmm.  Tony Martinez: Yeah, exactly. Definitely. Keep the product as is. My advice is get somebody that's bicultural/bilingual and have them in your booth. Have them talk to people. Have them create [00:16:00] those relationships, because people then, you know, they feel more comfortable. They look like you; they speak like you; they hang out like you. Then, if you just build out your support and sales force in maybe bilingual English and Spanish ... That's what they want. They want to basically be able to be guided ... A lot of the software that exists is in English. People use it fine. It's just if they have a question on it, if they want to understand how things work, they want to easily be able to communicate, and that happens to be in a different language ... [00:16:30] Jose Zavala: It's funny you say that because ... It's true because, with Xero ... I'm really actively involved with Xero, and we have a community in Latin America that we meet once a month and we talk. A lot of the big thing they say is the product down there, it could be in English. We speak English ... Again, reiterating, it's just there's no training in Spanish. How am I going to get my colleagues or my small business owners to use it? I have to do it all, and then, they have to translate the videos and they have to do everything- David Leary: It doesn't scale.  Jose Zavala: It's not scalable. That's [00:17:00] what I want to do, and that's what I've been ... Working with them and on my own is to try to change that mindset of there's a different way to work and to try to get past that cap that you were saying. You get to that certain point, and you can't scale anymore. Okay, how do we get from there to the next step? A lot of that is, again, the financial literacy and the education. Blake Oliver: Again, coming from the perspective of ... Pretend I'm in a CPA firm. We don't have many Hispanic clients, Latino clients. We're stumbling [00:17:30] in our efforts to reach this community. How do we go about ... Or maybe it's a software company, too, that has never done this. What are the pitfalls? How do we avoid doing outreach without coming across as just totally out of touch? Jose Zavala: Like trying too hard? Blake Oliver: Yeah. Yeah. Well, you ... Jose Zavala: I think that's a great question for you guys. I'd like to know your thoughts on it, because I've got a few thoughts on that, too.  Tony Martinez: Yeah. Yeah. Something we do at all of our events, including our big event, Latino Tax Fest, we have one big room in English; one big room in Espanol, in Spanish, and we're [00:18:00] giving the content in both languages now. Like we said, most people speak English. They're bilingual, but they may prefer to go to a language that - again, Spanish - and they're consuming the content; people that they interact with are bicultural/bilingual. I never understood why Intuit - I know they have the roadshows - why they don't do like an English and Spanish track in the same location. I mean, the Latino market using QuickBooks is huge. David Leary: I think Joe Woodard's, with the Scaling New Heights conference ... I think they have a Latino track [00:18:30] or a Spanish track now-  Tony Martinez: Oh, wow. That's awesome.  David Leary: It's started in this industry. It's starting, as far as I can tell ... Accountex USA, other than Latino Tax Pros having a booth here and this interview, I don't think anything is happening [cross talk] at this conference.  Tony Martinez: -we also have a regional seminars. They're one-day events, but we do ... We happen to have two rooms. But yeah, to reach out to the market, I would say go to the events, encounter people; maybe hire somebody who is bilingual and bicultural. Blake Oliver: Could [00:19:00] you help me find that person? Tony Martinez: Oh, yeah. Yeah, exactly. Something we're looking to launch is a directory and maybe starting chapters across the country through Latino Tax Pro to have monthly meetups. You can go maybe meet up ... I know we talked about it in Houston- Jose Zavala: That's something we've been trying to get going in Houston. It's just been a little bit hard to do, but I think you're right ... To say it on your point, as well, what can you do without coming off kind of fake or pretending? It's just be genuine. Don't come out there ... Don't sell. But that's [00:19:30] with everything. If you have a software that comes out, and you're like, "Hey, you need to buy this because we're the best!" No. I'm not gonna buy you ... It goes back to just giving the value, and then let them see what the value is. At least that's my personal opinion. I could be way off. but that's just kinda how I think.  David Leary: Let's say you solve the US, right? Latino Tax Pros gets all accounting professionals up to speed and the Latin market is just served in the U.S.. I've been hearing about this thing, it's really attacking the whole- [00:20:00] all Latin countries in this hemisphere. Contabi Alliance. Can you speak to what that is? What the goals are? Because I think it's at a much higher level than just specific to U.S. taxes and U.S. small businesses, right?  Tony Martinez: Yeah, I know, speaking with Arthur Garcia, and Joel Lacayo , they're involved as the co-founders of that. It's exciting what they're looking to do in outreach outside of the U.S., down to the Latin American countries, and again, fill that gap - serve the underserved. I think I keep using that term because [00:20:30] by them serving the underserved, people who may not have these technologies ... From what I understand, a lot of these accountants in Latin America, they're not on the cloud. They may not have access to a lot of the tech stack apps and such. So, they're looking to introduce these technologies and these resources to them to make it more efficient. At the same time, it'll lead to engagement. If we can bring everybody together, we can learn from each other. David Leary: That's a huge market, as well.  Jose Zavala: Conversations with them, from what they told me, they're trying to create a BDO Alliance. Russell [00:21:00] Bedford ... You know, those big international alliances that CPA firms are involved? They're trying to create that for the Latinos. That's kind of the big vision is to create something like that, to where ... Because, with the BDO Alliances ... I was at a firm where we're part of the Was it Russell Bedford, I think? Is that one of them? I don't know. All I know is that those alliances, you have access to CPA firms throughout the whole world, and you can send work back and forth. You refer each other; you get discounts on softwares, and things like that. That's [00:21:30] what they're trying to do for the Latino community, based on my conversations with them. Part of that is, like you said, the education, the training, and getting everybody up to speed, and have a place to where people can go to for those resources that are nonexistent. David Leary: It's a hugely underserved market because you're talking about you have Mexico, you have Brazil. These are huge countries, huge populations, and nobody's really there. They're not- in the grand scheme of the world ... We're still trying to convince people here in Boston, at this conference, to use the cloud, right?  [00:22:00] Tony Martinez: Yeah.  David Leary: Nobody's using it at all. So, it's interesting to see that push. But each of these regions if I'm understanding correctly ... I have some knowledge of Mexico. There's just nuances, right? Like, an invoice, in Mexico. Can you give background on specifics to each region or each country [cross talk] Jose Zavala: So, I know, at least with my experience when I've talked to ... Again, going back to Xero and talking with some of these other partners, a big problem that's out there is when you invoice, the invoice needs to go to the government; it gets stamped that they approved it; then, it comes [00:22:30] back. Blake Oliver: Is this paper? Is it digital? How does it ...? Jose Zavala: It's digital ... The government has an open API that you can connect to it, but the problem is there's no app partners connecting to it. Companies like Xero are having a hard time going into there, because then you still have to use ... There's no third party to connect to it. Now, I know in Argentina, Gonzalo, which, I know you guys had him on with Xerocon- Blake Oliver: Yeah, we were walking the floor, and he chatted with us. I [00:23:00] was just blown away to even ... I had not heard about this alliance. What is it? Contab- Jose Zavala: Contabi Alliance. Blake Oliver: Contabi Alliance. That was my favorite moment, I think, of the entire conference was meeting him and realizing that cloud is- it’s going global. It's inspiring.  Jose Zavala: They've got people in Argentina. Contabi has ... A lot of their directors- they've got people in Argentina, which Gonzalo ... They've got people in Mexico who are kind of championing this with Xero. They've got people in Costa Rica and other places that are kind of the champions of this that [00:23:30] are gonna be directing it into there, which is what I'm ...  Just a quick plug, Xero Virtual Hour, in Spanish ... We're actually doing a Spanish one here pretty soon; I think next week or the week after. I don't remember quite the date, but the plan is to essentially have what the Xero Virtual Hour is, but in that Spanish region and build it up to where we have these partners that are part of the Contabi that use Xero ... The breakout sessions per country, so they can focus on the problems that they [00:24:00] have internally. Because, I mean, I can't help. I don't know anything about Mexican tax.  Blake Oliver: Well, and I'm sure that the development team at Xero would have no idea unless somebody told them ... That actually- to bring it back to that invoice thing, what a challenge! Let's say I'm sending an invoice to David. You're telling me that I can't just send it directly to him. I have to send it to the government; federal government- Jose Zavala: Yeah, based on my understanding. From what I've been told and from what I understand, it has to go through the government. They have to stamp that they approved it, and then, it [00:24:30] can go to David. Blake Oliver: Is that to make sure that they can track it for tax purposes? Jose Zavala: I'm guessing so, yeah. I guess they must have had too much money laundering problems down there, or whatever it is. That's one of the big problems, right now, facing ... I know, like in Argentina, Facturante, which Gonzalo, I think, is a part owner, they've solved that, and they are plugged into Xero. Some of these app partners are starting to come up in these different countries, or some of these just ... I know in Mexico, [GCAS], they built their [00:25:00] own tool internally to do it. A lot of these people are starting to come up with solutions themselves. David Leary: There's a tech scene in Latin America. I have a friend that does a lot of stuff in Nogales, and Sonora, startup weekend type things. But then, I know there's apps, even at this conference, that have development teams in Brazil building their apps that ... Cloud accountants have no idea that some Latinos have built the app they might be using.  Blake Oliver: When I was with Aprio Cloud, a big part of our business was helping [00:25:30] Australian and UK companies start a subsidiary in the U.S.; is that something you're seeing more of, is South American, Central American countries expanding into the U.S. with subsidiaries? Is that an opportunity here? Jose Zavala: Me, personally, I haven't. Tony Martinez: Yeah, I know, speaking with a lot of our members, especially the ones in Florida, they're seeing entities from like Colombia, or Argentina have some sort of enterprise in the States. Their biggest thing is, "How do I report that income to the IRS? How do I file those tax returns?" By [00:26:00] us positioning ourselves as an organization of, "If you have any international issues, go to our event; take our online course; meet Jose, meet Philip, or whoever ..." We want to create an ecosystem to serve those individuals.  Jose Zavala: I think that's kind of what Contabi Alliance is trying to solve is you're an Argentinian company, or a CPA firm, or firm in Argentina, and your client wants to come over here, you're part of Contabi; look up the directory. You can find somebody in Florida, in Houston, in [00:26:30] California that's in that network that can help you with that, and then connect with them. That way, you guys know ... Theoretically, it's the same mindset. Theoretically. Blake Oliver: That's important, because a lot of people when they come here, they don't realize it's 50 governments, not just one that you have to deal with, right? Jose Zavala: Mm-hmm.  David Leary: Don't even go with a local ... Blake Oliver: Yeah ... Don't open an office in New York City.  David Leary: Jose, if people want to stay connected with you, hire you; they wanna become [00:27:00] a client of yours, or they just wanna catch up with you on social ... I know you're multi-streaming to 16 services at the same time. How ...?Actually, it's funny, because I ask everybody who were interviewing to give me their social profiles. Jose just has this list ... I was like, "I don't have space for this!" We're gonna have the world's biggest show notes! So, Jose, please let us know ...  Jose Zavala: So, @ZTX Advisors, across the board. JZavala@ZTXadvisors.com - email. Please reach out. I'd love to meet [00:27:30] people. I mean, that's my biggest thing. I love to talk to people. ZTX Advisors, I think I'm on everything, and it is exhausting, guys. I'm not gonna lie to you. It is. Blake Oliver: You mentioned a Xero Virtual Hour. How can people learn about that, and in Spanish you said, right? Jose Zavala: Yes, in Spanish. After this, I'm gonna retweet the- there's an event link, Eventbrite link. That should have the Zoom calendar meeting. Just follow me on social media, so you guys will be able to see the link there. Then, like I said, the first one is just [00:28:00] gonna be us talking about what the program is; what we want to do. Then, after that, we're gonna try to mirror what the English version is. I know the last one I was part of was cash flow forecasting. They had Helm, Jirav, and these other different app partners there talking; so we kinda wanna do the same thing, but in Spanish. Blake Oliver: Awesome. David Leary: We'll get that link in the show notes. Jose Zavala: Okay, awesome. Thank you, guys. Blake Oliver: How about you, Tony? If people wanna learn more about LatinoTaxPro.org, I guess they should go there, right? Tony Martinez: Yeah, definitely. Then, just search us under Latino Tax Pro. Every [00:28:30] July, we're at the MGM for Latino Tax Fest [cross talk]  David Leary: -interrupt you on that. We weren't able to go this year, but if you go to the Latino Tax Fest conference website, basically it's a video of people dancing, and then another video of people dancing in a pool. This is like the greatest conference party ever. Is there even a conference? Blake Oliver: Here's the problem. I don't know if I could go because I'd have to overcome my fear of dancing. That's why I became a musician, so I didn't have to do that. Maybe I can get the band or something ...  David Leary: But it's big, right? You've got 3,000 [00:29:00] attendees. It's a huge conference. Tony Martinez: Yeah. In 2014, what was our first year of the event, we attracted 500 attendees the first year. What we do, it's three days of classes. They're mostly tax updates. So, people want to get the latest tax law and changes. 500, year one; year two jumped up to 1,000; year three, 1,500; year four, 2,000; year five, 2,500; and this year, we had about 2,800; heading towards 3,000. Blake Oliver: Wow.  Tony Martinez: Again, the same set-up - three days [00:29:30] of classes, two rooms - one English, one Spanish. A lot of these speakers are in both agency PAs, IRS executives. This year, the commissioner of the IRS was our keynote speaker. Again, serving the underserved, I think, is what's leading to the growth, because people go and they wanna learn. They wanna have a community. They hang out with people that look like them, that speak their language, that serve the same market that [00:30:00] they do. Our next push is to start offering bookkeeping classes, accounting classes, because out of the 10,000 members we work with, about half of them also do bookkeeping, in addition to tax. Everyone does tax preparation, but half of them also are doing bookkeeping. There are a lot on the legacy platforms. They need help navigating the app ecosystem. We're working with a lot of app partners to be able to teach and give some more ... Right Networks, for example, we're [00:30:30] doing a lot of content around what is hosting, how you can still be on the cloud, et cetera. Hopefully, you guys can make it next year because it's awesome.  David Leary: I'm penciling it in, or putting it in pen, really- Jose Zavala: Guys, it is a lot of fun. It is. I think it was my first time going, and I was to just like, "Yeah, I don't know why the heck I haven't been back?"  Blake Oliver: Awesome. Great to hear. Hopefully, we can make it there. David Leary: I think that's a wrap. Blake Oliver: Thank you, gentlemen. Tony Martinez: Yeah, thank you, guys [cross talk]  Jose Zavala: Awesome.
  3. SponsorsRight Networks: https://cloudaccountingpodcast.promo/rncloudShow Notes 00:13 – We managed to get three editors from the top competing accounting media properties together in one spot!  00:35 – We asked the panel  - what is top of mind in the accounting industry?  01:13 – For Accounting Today, Dan says tax and tech is at the top of readers' minds 02:00 – Dan reveals a bit about AccountingWEB's approach to sharing relevant accounting news 03:04 – Jess says tax law changes are what keep accountants employed 03:48 – Dan says hyper-focusing too much on one specific topic, like tax, means you're missing out on the bigger and more important accounting-industry picture 05:15 – Like it or not, Jess says advisory is in your future, 06:39 – Dan says accountants need to realize that they're much more comfortable with change than they believe 07:47 – Don't forget that small and mid-sized firm owners are entrepreneurs, combining that perceived conservatism with a huge amount of risk 08:43 – Jess says the constant barrage of "Do Advisory" advice started with vendors 10:53 – Seth notes that there's a dark tech and automated cloud looming over the billable hour  11:38 – The concept of killing the billable hour isn't a new one 13:42 – Turn and face the change - The gentleman talk about the transformation from paper to digital in accounting media 14:20 – If you want to stay on top, you've got to be willing to meet your clients where they are 15:53 – Seth talks about the art of fine-tuning the accounting content to stay connected to readers 17:08 – Who's gonna drive you home? The data is - in media, and the accounting industry 18:35 – The guys talk "A" words - automation and advisory 20:49 – As advisory services start to play a bigger role, the bigger firms are starting to be more selective about their client lists 22:32 – Dan's theory - AI and advisory are going to position the smaller accounting firms for bigger success 23:41 – Jess says there are three levels, when it comes to the evolution of accounting - Let's do it, Help Me do it, and Leave Me Alone! 26:11 – Seth's conclusion - Automation enables greater profitability  Connect with our guests Dan Hood, Editor-in-Chief of Accounting Today: https://www.linkedin.com/in/daniel-hood-3494ab49/ Seth Fineberg, Managing Editor of AccountingWEB: https://www.linkedin.com/in/seth-fineberg-86aa8663/ Jess Scheer, Executive Editor of Accountex Network:https://www.linkedin.com/in/jess-scheer-43038610/ 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. Meet Blake and David in person!  November 5-8: QuickBooks Connect in San Jose November 5: Practice Ignition PreCon Party in San Jose November 6: VIPartners Party with Gusto, Routable & Jirav in San Jose December 9-11: Digital CPA Conference in Seattle 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 TranscriptJess Scheer: These are entrepreneurs, and there is nothing more risky than starting your own company. Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: And I'm David Leary. Jess Scheer: I'm Jess Scheer, with Accountex Report. Seth Fineberg: Seth Fineberg, Editor, AccountingWEB. Dan Hood: And I'm Dan Hood, Editor-in-Chief of Accounting Today. David Leary: Wow. We have all the editors of the big major media powerhouses in the accounting industry at one table. We're here at Accountex USA in Boston. You guys normally do not ... You're siloed [00:00:30] out; competing media properties brought together to speak about whatever we're gonna speak about today. Any ideas, Blake? Blake Oliver: Well, I have a starter question, because I am always wondering what is top of mind for accountants, bookkeepers, anyone in the accounting profession? You all have unique insight, in that you know what articles people are reading. I read everything. I read this particular article, and I think it's fascinating, but maybe that's just me. Maybe I'm weird. So, I'm curious to know, based on your perspective, what is top of mind for the accounting profession? David Leary: I'd be interested if it [00:01:00] aligns with what we've seen in our downloads. QuickBooks Live is huge for us, download-wise. Everybody loves QuickBooks Live, but outside of that, I don't know if we have any numbers. So, that's a great question, Blake.  Blake Oliver: Who wants to start? Dan.  Dan Hood: Well, I'll give you ... This is literally just in terms of actual numbers of story views - it's anything tax. Still, there's very much a technical focus- Jess Scheer: Definitely.  Dan Hood: -in all ... It's the tax regulation status, IRS guidance, and all that stuff. They're very into the technical issues. [00:01:30] still. It's only after you sort of clear that away and say, "All right, what else are they looking at?" That you get to the broader professional issues, or the practice-management issues? Blake Oliver: You mean articles like, actually, how do you deal with, what, like Wayfair, sales tax, income tax, TCJA? Dan Hood: Yeah, anything about the Tax Cuts and Jobs Act is huge. Things about when the IRS comes out with the new 1040s; or the proposed 1040s; the proposed W-4 - all that sort of very technical stuff, that's top of mind, because that's what they're doing every single day. Blake Oliver: How [00:02:00] about you, Seth?  Seth Fineberg: Yeah. I mean, mine and Dan's approach - the approach of AccountingWEB, and the approach of Accounting Today, obviously, we're keeping our finger on the pulse of what's actually going on. What we'll do is go, okay ... Blake, you brought up Wayfair. When that happened, we didn't necessarily say, "Okay, this happened." We kind of take the perspective of, "All right, let's find people who know something about sales tax and have been following it, who've been active about it and tell other tax professionals [00:02:30] how to advise their clients how to deal with it." That has been huge. If you've been kind of following along for just that story thread, just Wayfair, specifically, and its impact on a state-by-state basis, it's pretty fascinating on what is actually going to ultimately happen to retailers, state by state. Yeah, anything that an accountant can get their teeth into, tax-related. That's just one tax topic. But Tax Cuts and Jobs Act - the [00:03:00] ripple effects from there, which are gonna be going on for years. Jess Scheer: Absolutely. The best-kept secret for accounting firms is that changes in tax laws keep accountants fully employed. The only thing better is a chaotic roll-out of changes in tax laws, and we had both last year [cross talk]  Dan Hood: Pretty much.  Jess Scheer: -it's been fantastic. Dan Hood: It was a great year. Jess Scheer: It just hit like a ton of bricks. I've been covering the profession, I guess, 17 years. Dan has been involved even longer than that. What [00:03:30] we've seen the most with accountants is nothing motivates an accountant more than changes in the regulatory environment, and just compliance, in general. You have to do that. Google what's going on in the UK, specifically. Blake Oliver: So, David, I'm getting the picture - we're covering completely wrong topics. We should just switch to tax.  Dan Hood: This is the thing is, is you'd think, right, because we're spending ... Gotta cover all this sorta stuff, but then the issues that are really gonna matter for them ... They can't just focus on the technical thing. That's [00:04:00] what's really changing the story going on. The profession is ... If you stay only focused on the technical issues, on the tax-law changes, the regulatory changes, you're missing out on some things, on some opportunities.  But also, there are some- I don't wanna call them threats, but there are some issues, and some areas of concern that are coming up that you won't find out about, if that's all you're paying attention to. It's entirely too easy to focus only on the day-to-day sort of thing, as opposed to taking a step back and looking at where the profession is going, and where the business is going. Jess Scheer: Ultimately, this does get around to the A-word that we [00:04:30] were discussing before, which is advisory. Ultimately, all of these changes and all of these things ... Just putting tax aside, but even just with tax, itself, it's like you have to be on top of this, because your clients have questions. They've more questions, not just about tax, but about just the whole changes- all the changes in the business environment, in general. Who are they looking to the most?  Are you going to be sitting on the sidelines with that and continuing to just, "All right. Well, I'll help you; fill this out for [00:05:00] you, and I'll make sure that you don't get audited," and all these things that we've been doing for years, and years, and years. Or, are you actually gonna have to step up and talk to your client more about planning issues? Dan Hood: Have you met their clients? They don't wanna talk more to their clients. No one wants to ... You know what these clients are like ... Jess Scheer: But no, it's true. That's pretty much what's happening. You're getting pushed to advisory, whether you like it or not. I think there's really two pieces. The first one is the compliance piece around tax is table stakes, right? It's [00:05:30] not that that's what's driving needs. It's that they have to do that part. Why do they have to do that part? Well, one, there's a steady base of work, but the second part is that then gives you the insight to do the higher, more profitable advisory work. One feeds the other. What drives traffic to our websites, to our content is that table-stake content. The question is, if that's all you're focused on, then I think we'd be doing a disservice, if we said, "If you just are good at tax, then you're gonna be a great firm going forward." I [00:06:00] think that's a baseline; then, the next opportunity is where can you follow the money? Where can you find more profitable revenue sources? That's where advisory comes in. Dan Hood: I think a lot of people are worried. They say, "Oh, they want us to give up our old core services and just do this advisory stuff." That's not right. You have to stick with the old work; you have to stick with the old stuff, because that's what gives you the reason to exist- Jess Scheer: Yeah, that's ... You have to ... That's what brings them in. Then, it's like, "Oh, well, we can have a conversation about what do we do next? What do you do over the next three years?" Dan Hood: One of the things I ... I keep coming back to this whenever I think about the [00:06:30] tax ... We talk about a huge amount of change going on in tax, and accountants keeping up with it, and paying a lot attention to it. Like I said, it's driving a lot- it drives a lot of our traffic. Jess Scheer: We like those numbers. Dan Hood: Keeps the doors open. Keeps lights on. The thing that fascinates me about it is that you hear a lot from ... You may hear this more from observers of the profession than from people in the profession, but there's a general sense that accountants don't like change; they're a little conservative; they're not up for change; they don't want to make these changes. You think that the fact that, every year, they're able to digest this vast [00:07:00] collection of changes, and apply them with expert precision, and so on ...  Forget just the craziness of the Tax Cuts and Jobs Act. Every year there's some ridiculous new set of standards. There’s three huge new FASB standards - CECL, and lease accounting, and all that sorta stuff. Accountants have a tremendous ability to digest change. They just don't think of it that way. When you think about the fact that they're able to say, "Oh, yeah, the tax code changed in 1,500 different ways, and I figured it all out, and applied it for my clients in seven different industries, and [00:07:30] individually," that's a huge amount of change to manage and digest. Accountants should think of themselves as much more comfortable with change, I think, than they do. David Leary: I love that point. Jess Scheer: That's one of the things I think is really fascinating about the space. By their nature, they may be conservative, particularly when it comes to audit and tax. It's, "We wanna make sure that we stay within the boundaries of the law." Dan Hood: Right.  Jess Scheer: The difference, though, is, particularly for small to mid-sized accounting firms, like the ones we have here at Accountex, these are entrepreneurs. There is nothing more risky than starting your own company, regardless of industry, and starting your own accounting firm in as [00:08:00] challenging a market as we sometimes have, with all the changes you're talking about, and leaving the guaranteed income of a larger firm to start your own firm is incredibly risky. There's that interesting psychological juxtaposition between our audience. Blake Oliver: It's not that accountants are averse to change, it's that there's ... They're too busy absorbing all the changes in the actual tax law to ... That makes sense, right? Because that's what you're good at. That's what people are paying you for. Practice management comes a little bit later, and [00:08:30] maybe that's part of the reason the shift to cloud has taken longer, here in the U.S., right? In other countries, they do not have this complex regulatory regime like we do. Income tax is not as difficult in Australia, or New Zealand. Jess Scheer: I would add that I think what they're averse most to, at least in just being observers of the profession, as we are, is being beat over the head with, "This is what you have to do. This is what you have to do!" And where it's coming from ... A lot of it, a lot of this, "You have to change! [00:09:00] You have to change!" It kinda started coming from vendors in the space- Blake Oliver: Not just kind of ... We've been in that space.  Jess Scheer: I'm being kind ... I'm being kind, Blake ... Blake Oliver: It makes sense. You're trying to get people to implement your software, your tool, your solution. Well, how do you motivate them to do that, other than with fear that they're gonna be left behind if they don't? Dan Hood: Fear is great. Blake Oliver: Fear is a great motivator. So- Dan Hood: I'm afraid all the time. Jess Scheer: It drives web traffic [cross talk]  Dan Hood: I was gonna say, the other half of that, to be fair to vendors, the other group of people ... Well, there's a number of groups of people [00:09:30] saying, "You've gotta make this change." Vendors are big on it, but everyone ... All three of us are big on -the media, and thought leaders, and pundits, and stuff like that - are constantly saying, "Hey! We heard this from a vendor - you should change and move to advisory." I don't think anyone's doing it dishonestly, but there's definitely- Jess Scheer: No.  Dan Hood: There are ulterior motives to a lot of it. Jess Scheer: But I think the other piece is it's not creating demand where it doesn't exist. I think one of the things that drives the attendees, here, is the role that technology plays, and [00:10:00] technology is changing even faster than regulatory change. Technology enablement has two big components to it. One, to your point around firm management, it's gonna help you grow faster, right? You can't always hire fast enough to keep up with demand. And it's also the challenge of adding people, when you're not sure if this new service, this new office is gonna make it. You can figure out how to work more efficiently, internally, with automation. The other part is, as large firms have been firing their clients, and those clients have now been [00:10:30] making their way down to the small and mid-sized firms that we have here at the show, technology has helped to level the playing field. Those clients are used to accountants with a certain level of technology automation. So, they're required to - if they wanna pursue those clients - be able to serve them in the same automated, cloud-based, secure manner. Seth Fineberg: Well, the one thing that, since we're on the topic of automation, and the topic of change, the one thing that is [00:11:00] most threatened by automation is the billable hour. Accountants are finding it harder, and harder to justify things that are getting more and more automated; to charge for that time to do it. Blake Oliver: If you are successful with your automation endeavors, and you're on a billable-hour system, you will put your firm out of business. Dan Hood: Right. How do I bill for pushing a button? Jess Scheer: Yeah, putting it simply, absolutely. That's [00:11:30] what I think they struggle with the most. They kinda don't wanna leave that behind, because this is what's safe; it's what they know; they can see it. I remember, years ago, when first hearing Ron Baker talk about it at a conference, maybe 16-17 years ago  ... It was at an AICPA conference. He was getting up, talking about getting rid of the billable hour, and people ... You would think that this was a child murderer up there. I swear! People ... Two, [00:12:00] three, four people getting up, shaking their fists, and yelling at Ron Baker [cross talk] about how it's immoral, and it's ... Dan Hood: To be fair, Ron viciously hates ... He would kill the billable hour, if he could. He would literally ... If you named your child, Billable Hour, he would kill it-  Jess Scheer: He would run ... He would run it over twice- Dan Hood: Twice, and then beat it with a shovel. He [cross talk]  Jess Scheer: This was 16-17 years ago, and he was talking about this. It really kinda struck at the heart of the profession. You would think that, yeah, he was just taking food out of their mouths. This episode of The Cloud Accounting Podcast is sponsored by Right Networks. In a perfect world, everyone would have 100 percent of their clients on a cloud-based accounting system using cloud-based apps, but the world isn't perfect, and clients have a wide range of needs. For some, this means using desktop-based software. That's where Right Networks comes in. Right Networks is your 100-percent accounting-focused desktop in the cloud that also includes an ecosystem of over 250 connected apps. As you and your clients take the journey to the cloud, Right Networks will be at your side innovating the best ways to leverage the true cloud future by investing heavily in cloud apps, like Transaction Pro and Autofy. They've created an always-on environment that supports 24/7 data transfer. Right Networks also offers no scheduled downtime for maintenance or application updates and meets the industry's highest security standards.  To join the more than 50,000 firms that use Right Networks daily with their clients, head over to CloudAccountingPodcast.promo/rncloud. That is Cloud Accounting Podcast dot promo forward slash R-N-C-L-O-U-D. Be sure to visit the Right Networks booth in San Jose at QuickBooks Connect 2019.  David Leary: Change [00:13:30] is hard, right? It's gonna take time. If I'm correct, Accounting Today had a paper magazine- Dan Hood: Still does. David Leary: Did AccountingWEB have a paper magazine? Seth Fineberg: Never. David Leary: Never, and then-  Seth Fineberg: We are celebrating our 20th anniversary this year. David Leary: Just strictly web from the get-go [cross talk] Seth Fineberg: 1999, yeah- Dan Hood: Interestingly, the first 15 years of AccountingWEB, they were just in an office. They would call people in to read the stories to them. They didn't have any [cross talk] facts, and stuff, early on-  [00:14:00] Seth Fineberg: Those were the days ... Those were the days.  Dan Hood: -they just got on the internet five years ago-  David Leary: You guys had to go through a change, because media ... I mean, you think the accounting industry is going through a change? Look at the shift media has had the last 25 years. Can you speak to some of the learnings of that, as far as how .... You had to transition, right, Dan? Like, how that affected you guys? Dan Hood: Probably the big overall lesson is you have to go where the people are, right? You have to go where your readership ... For us, where your readership wants to be for accountants. You need to go where your clients want to be. They want a certain [00:14:30] kind of service. They want a certain kind of certain kind of interaction. Whatever that may be, and it'll vary from client to client, you need to meet them there. That's the thing we realized - it was more and more of our audience, more and more ...  Actually, our audience - we still have a paper magazine, because we still have a section of our audience that just wants paper magazine, and it's a great way for us to reach them. We reach the majority of our audience now, though, online, and actually a much bigger audience than we ever had, because we have much bigger reach online. But that was the thing - we needed to be where they are. You're not gonna reach any accountant under 40 with a print magazine, and actually, some even older [00:15:00] than that are already ready to get [cross talk] Jess Scheer: Unless you're chasing them down the street with it- Dan Hood: Literally. Jess Scheer: I don't know [cross talk]  Dan Hood: But that's a different service entirely [cross talk] Jess Scheer: Value-added service. Dan Hood: You can't automate that. Having a person chase you down the street is pretty much a personalized service. But that's the message, I would say, for accountants is you really need to be where your clients need to be. Actually, I would expand it, and say you need to be where staff you want ... Right? We're always talking about staff crunch, and how difficult is finding people. You need to be where they are, whether [00:15:30] that means at a certain technology level; you need to ... You can't look like an old-fashioned firm, when they come into your office; or whether it means, recruiting; if you're recruiting through local papers, that's probably not the [cross talk]  Jess Scheer: No, have the audit standing desk, and things like that.  Dan Hood: Yeah, you've gotta look like where they wanna be. David Leary: I don't wanna let you off easy, Seth, since you're standing here, like, "Hey, we've been on the web since day one ..." I'm sure it's changed. The game is different. Seth Fineberg: Oh, it is. What I was gonna add is, yeah, you've had - to Dan's point - you do have to respond to your audience. I would go [00:16:00] a step further in that I spend ... We spend a lot of our day figuring out things like looking at Google Analytics and looking at where traffic is coming from. We have to go to them. That's why search engine optimization has become so important, because we have to know the things that they're searching for. We have to have searchable topics. We have to really focus on the things that ... It's like, okay, this is driving traffic, but why, and where is it coming from? We have to fine-tune [00:16:30] those dials bit more than ever. Dan Hood: That's a tremendous parallel with accounting, right? For years, in print, you had no idea what people were reading, and what people responding to, how advertising was doing. Seth Fineberg: It was a lotta guesswork. Dan Hood: It was all guesswork, and sorta like, "We think ..." and everyone had to believe you. Now [cross talk] Seth Fineberg: "What's our circulation?" [cross talk]  David Leary: It's like podcasts. Seth Fineberg: No idea who's out there. Dan Hood: There are at least five people listening to this podcast right now. Seth Fineberg: My mom. Your mom ... Dan Hood: Wait, no! That's 10. Sorry, I was ... I [00:17:00] guess none of us are probably gonna listen to this anyway, so it is all our moms-  Seth Fineberg: Is that even on? Blake Oliver: No, it's not even recording. This is just ... Dan Hood: No, it’s just the amount of data that's available and the need to go through it, the need to actively dig through it, as opposed to just going with guesswork and saying, "We think this is what's going on." Now, you can know, and more and more clients are gonna want that from accountants. The data is there, it's just the accountants need to be willing to dive into it and grab it.  Seth Fineberg: I bring [00:17:30] up Google Analytics again .. It's like, okay, I'm looking at this chart. I'm looking at these trends and things like that, by topic, by just generally. We make decisions a lot based on that, because we have it in front of us. Same thing with bookkeepers. They have these numbers in front of them. Now, it's like, okay, how do we respond to that? What do we do with that? Getting back into the topic idea, outside of tax and things like that, things [00:18:00] like cash flow management, cash flow forecasting - that is becoming pretty big for us. And we wouldn't have known that necessarily ... Obviously, anecdotally, you talk to people at shows and things like that; that's why we do like to get out among the other humans every so often and just not stare at our desks; but looking at some of the numbers, too, of things that people are searching and coming to our site. We're like, "Oh, wow! Okay, we should have more on this." Blake Oliver: Cash flow management, that is the basic advisory [00:18:30] service that you could be offering as an accountant, or a bookkeeper to your clients, because every business- Jess Scheer: Definitely bookkeepers, for sure, yeah.  Blake Oliver: -every business has to think about cash flow, right? Some crazy number of businesses, a percentage, go out of business every year because of cash flow problems; like 80 percent, right? We've talked about advisory - we've touched on that - and automation. I wanna get your take on how those two things tied together, because they are really related in that we're all talking about compliance being automated. Obviously, not all compliance is going to be automated, but there's [00:19:00] a lower level. Basic returns. We have the tax-prep companies - TurboTax- Jess Scheer: The audit work.  Blake Oliver: Lower-level audit work is being automated with AI, with companies like Mindbridge. I think Thomson Reuters has a product that does that, too. There's less need for staff. TurboTax Live, right? A lotta people are gonna go to that, instead of walking into a tax store these days. That's putting pressure on the bottom of [00:19:30] compliance. Then, the advisory is what you need to move up into from there. Dan Hood: Well, to have anything left ... My favorite thing is Credit Karma ... They did, not this year, but last year, did a million tax returns for free, because they're like, "Well, we have all your financial information from your credit report. We'll do your tax return ..." They did a million. Now, there's, what? Over 145 million tax returns filed every year, but they did a million of them. It doesn't take long for you to realize that a lot of that business can just disappear, and if you're not [00:20:00] doing advisory, then-  Jess Scheer: What are you doing? Dan Hood: Yeah.  Jess Scheer: The other part- it's not just chasing revenue, but it's chasing profitable revenue. The audit and tax work is fine. It's table stakes, as we talked about before, but the more profitable billable hour, or project, or value-based billing - so I don't get Ron chasing me - is-  Dan Hood: You will. Feel that red dot on your forehead. That's his ...  Jess Scheer: The reason you're pursuing it- Dan Hood: He's in the rafters, looking to shoot- Jess Scheer: He's somewhere. He's [00:20:30] everywhere ... The more profitable work is that advisory work, so it's not just a matter of finding alternatives. One of the things we're seeing at the larger firms - and I'm gonna play host and ask Dan and Seth to chime in on this one - I look to the larger firms to see what's happening- what's going to happen downstream. One of the things that we've seen over the last two years, since the tax rollout, is a larger firm shedding clients; firing clients that were just doing audit and tax; very basic low-margin [00:21:00] kind of work; which then created opportunities for those downstream. When we get all the way down to the small to mid-sized firms - here's we're defining firms with less than 50 FTEs. One, they're those larger clients they're pursuing, but they're also seeing that tax advisory and financial advisory, and all the cash flow work, et cetera, is higher-margin opportunities, as well. David Leary: I'll jump in and just reinforce that. I talked to somebody with a top 200 firm, at BeachFleischman in Tucson, about two weeks ago, I had lunch ... He was saying, as they're moving to advisory and doing this higher-value work, they're actually finally saying [00:21:30] no to clients. They used to just take on ... Every single person that came to the door, you're a client of BeachFleischman. Now, they've actually started to say no, because they- in their new model, their business model, if they don't select the right clients, their business model doesn't work in the future. Dan Hood: I want to see ... Actually, I think that is the way to go in the future, but I am fascinated, because there's gotta be some firm, somewhere, that will take all the dogs that get kicked out of everybody else, that are like, "I don't wanna work with you."  David Leary: QuickBooks Live. Dan Hood: Ouch! That's a lot! Take them to the burn ward. But anyways [cross talk]  Jess Scheer: Disclaimer - we love [00:22:00] all of our vendors here at Accountex-  Dan Hood: -they've gotta end up somewhere, right?  David Leary: It's the QuickBooks Live model. There's a bunch of firms doing this model- Jess Scheer: There's a couple guys in dark suits that are coming this way-  Dan Hood: That makes sense. That's where they're gonna end up, because what's gonna happen, I think, for the accounting firms, what they're gonna be ... What we're gonna discover is every small business is gonna get a CFO, or a kind of CFO, right? If the accountants are moving up to advisory the way they should be, they're gonna be doing the bookkeeping; they're gonna be looking at the books, looking at the taxes, but also then, providing them the advice [00:22:30] that a CFO should be giving them. In theory, this is gonna make it ... Well, everything's much more complicated for everybody. So, it may be the difference between more small businesses surviving or not, but it may also be the difference between a lot more successful small businesses than not. That's one of the models behind anything where you're bringing an accountant together with a small businesses is that they can use that advice. If accountants are automating and moving away from the actual grunt work of the bookkeeping, and the tax work, and freeing themselves up to do more of the analysis, and the insight, and the advisory [00:23:00] stuff, in theory, everybody's business should be in much greater shape. Jess Scheer: Dogs and cats living together ... No, seriously. I mean, this is really what is ... If you really wanna start really going there, you're actually helping out the economy more than some of the regulatory environment would otherwise do, or not do. But you have to start somewhere. It's not just, "Hey, poof, I'm the CFO!" or, "Hey, poof, I'm an advisor!" It's [00:23:30] a gradual thing. You have to sort of just be willing to embrace some of this work and, and actually just really think about ... Look, we look at the profession in three sort of tranches, if you wanna put it in a pyramid. Way at the top, about, say, seven or eight percent are ... This is kind of the Uber community. These are [00:24:00] people like CHADD from LiveCA, and Ryan, and people who are just really way at the top. Dawn Brolin; people who are kind of- embraced automation from the get-go and are doing all kinds of amazing things and are just really like- these are the accountants of the future, today. Then you have, in the middle, I'd say around- somewhere around 50-55 percent; good chunk of the market are just kind of your workaday- [00:24:30] your CPAs; your enrolled agents; your bookkeepers, who are at firms ... Less- a dozen or so staff; easily sub-20 staff. They are not unwilling to change and do all these things, they just need help, and they need that hand-holding. Then you have what I call the LMAs - the Leave Me Alones. They're kind of in the bottom. They're just like, "Yeah, I'm fine. I'm [00:25:00] already booking 150k a year; I've got my client base." It's not that they're not willing to tweak things in their own practice, but they're ... Maybe you don't pay as much attention to them, but they're still kind of a minority. The majority is still ... They finally have gotten to the point of where they're willing to listen, and it's taken years. But here we are, 2019, and you finally have the majority of the profession that are saying, "Yeah, talk to me," but do [00:25:30] it in the right way. Seth Fineberg: I think this serves two buckets of companies, if you look at- in those three tranches, right? There's the companies that are looking- firms that are looking to grow, and firms that are fine with the lifestyle choice. They're-  Jess Scheer: Growth can be subjective, too.  Seth Fineberg: Absolutely. There's nothing wrong with someone saying, "I've got my clients. I know QuickBooks. I don't need to learn anything else, and I'll use my older version until I can't- it's not supported anymore; then I'll just upgrade to the next version. I don't need anything [00:26:00] else. This is good enough. I'm making enough money." David Leary: Those guys are not listening to the podcast [cross talk]  Dan Hood: In that case ... They were at a party last week, and you should hear what they did!  Seth Fineberg: I think that's part of the LMAs, right? The folks that are growing or that are seeking growth, either because they want more profit per partner, they're looking at it as a good strategy, et cetera, automation is a great enabler to drive toward greater profitability. Blake Oliver: Well, this has been a great conversation. Thank you all [00:26:30] so much for joining us. Jess Scheer: Thanks for having us at the table. Blake Oliver: Yeah. David Leary: Your media properties don't come off this fun [cross talk] You guys are much more fun in person [cross talk] Dan Hood: That's because our bosses don't usually let us do this. Jess Scheer: We try to be. I thought we were the bosses ...  Dan Hood: I think that illusion was shattered long ago.  Blake Oliver: So our listeners know where to reach you, and if they haven't discovered your publication yet, let's let them know. We'll go down the line. Dan? Dan Hood, where [00:27:00] can people connect with you online and your media? Dan Hood: We're at AccountingToday.com. I'm @AccountingEdit on Twitter, or Daniel.Hood@SourceMediacommunity   Blake Oliver: And how about you, Seth? Seth Fineberg: We are https:// [cross talk] AccountingWEB.com, and I am Seth.Fineberg@AccountingWEB.com. I'm also on Twitter: @B2BSeth. Blake Oliver: And Jess? Jess Scheer: JessScheer@Accountex.com. Really [00:27:30] easy to find. Blake Oliver: As always, I am @BlakeTOliver on Twitter. And you, David? David Leary: I'm @DavidLeary, and I think that's a wrap. Blake Oliver: Thanks, guys. Dan Hood: Cheers, all. Thanks.
  4. SponsorsRight Networks: https://cloudaccountingpodcast.promo/rncloudShow Notes 00:35 – If you're moving to remote work, here are some key things to consider 01:35 – Let's get digital, digital ... When going remote, all your company's data ,  and processes need to be digitized 02:31 -- Having the right software and tools in place, along with digitized date ensures that you and your employees can work any place, any time 03:01 – As we discussed in Ep. 121, security is a crucial component of setting up your remote workforce  06:03 – Roman says most accountants favor Microsoft's collection of collaboration tools, especially for remote work 06:42 – Team chat or collab tools make it very easy to see who's available when 11:19 – Removing the guesswork - collaboration tools, such as Teams, keep all the information  from every conversation in one place, eliminating the wasted time of searching email threads for just one thing | Microsoft.com 12:46 – First things first - what's the first thing firm owners should consider about going remote?  13:32 – The key ingredient for a successful remote-work situation  is to use the right systems and tools for the situation!  13:41 – The best candidates for remote opportunities  are those with experience, and who need very little supervision 14:34 – It pays dividends to keep your top employees engaged, and happy, even if that means letting them go remote 16:25 – Letting employees work when and where they want means more productivity and less wasted time 18:09 – You can accomplish more, and still have those watercooler convos, all from the comfort of home  Connect with Roman H. Kepczyk, CPA.CITP, CGMA Website: https://www.rightnetworks.com/roman-kepczyk/ Right Networks Blog: https://www.rightnetworks.com/blog/ Twitter: https://twitter.com/romancitp LinkedIn: https://www.linkedin.com/in/romankepczyk/ 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. Meet Blake and David in person!  October 22-25: Sage Intacct Advantage in Las Vegas October 29-30: AcuityCon in Atlanta November 5-8: QuickBooks Connect in San Jose November 5: Practice Ignition PreCon Party in San Jose November 6: VIPartners Party with Gusto, Routable & Jirav in San Jose December 9-11: Digital CPA Conference in Seattle Limited edition shirts, stickers, and other necessities.TeePublic Store: http://cloudacctpod.link/merch SubscribeApple Podcasts: http://cloudacctpod.link/ApplePodcastsSpotify: http://cloudacctpod.link/SpotifyGoogle Play: http://cloudacctpod.link/GooglePlayStitcher: http://cloudacctpod.link/StitcherOvercast: http://cloudacctpod.link/Overcast  TranscriptRoman Kepczyk: And long term, I think Microsoft teams, and Yammer, even though we love Slack, and we love Zoom, we think, because of that integration with the Microsoft Office Suite is gonna win. Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: And I'm David Leary.  Roman Kepczyk: I'm Roman Kepczyk, Director of Firm Technology Strategy for Right Networks. David Leary: Hey, welcome back, Roman. Day two of Accountex USA. Roman Kepczyk: Thank you.  David Leary: You're joining us again for another quick interview. I know we caught some of your session, and we wanted [00:00:30] to extrapolate more about your thoughts on remote working and what that's driving inside of firms. Blake Oliver: I'm a big fan of remote work. I worked in- I had my own online bookkeeping company, where we were all remote, 12 of us, and then we merged with a CPA firm, and there were 25 of us all remote. We were kinda doing that at the beginning. There weren't always the best tools for us to work remotely. That was the big challenge is collaborating.  We had Zoom, so we could at least all get in a meeting together online. That was fun, seeing like 25 windows up on [00:01:00] the screen - 25 people. Practice management, at that time ... We're talking only five years ago, really still hadn't really gotten there in the cloud. I was wondering if you could share some of your insights with our listeners, many of them who are building remote practices or trying to close their offices and go more remote. What should people be looking at? Roman Kepczyk: Well, what you gotta look at is the infrastructure they have in place already. A lot of times, people took traditional manual processes and created digital versions of that. The due-date tracking list, something like that might have been a paper list; now it's a spreadsheet. [00:01:30] The problem is that only one person can really look at and update that spreadsheet at a time. To work remotely, we need to have ... First of all, all the data in the firm has to be digital, and all the transactions, workflows, the processes, due dates, they have to be digital, too. We've seen a transition away from those practice management tools that had projects listed to dedicated workflow tools. Pretty much, XCM, they started the charge. They started out as an Indian outsourcing company, 25 years ago. Then it kind of got pushed away, but the firms that used that loved it, because [00:02:00] it tracked every status of the tax return. It tracked any changes, delivery instructions, updates ... You could attach the files to it, and move it with it, so we could move it to remote people back and forth very easily. Blake Oliver: It was like the digital version of that old paper-routing sheet that would sit on the-  Roman Kepczyk: Yeah, the lead schedule; the tax-routing sheet. The beauty was you could customize the views to what your role was. If you worked the front desk, checking in things, you saw those things. If you were in the assembly department and you saw due dates coming up, you could see which one had finished [00:02:30] review and do all that. Tools like XCM, Thomson's FirmFlow, CCH's Workstream - all those tools are really ... That's the thing we're pushing in our firms today, because we can do the entire tax process in the cloud now. If we have an employee whose spouse gets relocated, or they stay home because they wanna raise their child, they still have access to all the applications, all the data, all in one screen. That's what you really want is having the ability to work any place, any time. Blake Oliver: How do you address security [00:03:00] concerns for folks? Roman Kepczyk: Well, what we had is like- the other podcast we talked about - making sure that, first of all, that we have the training on the phishing, so they're not they're not hitting on ransomware and stuff. Then, after that, having a multifactor-authentication tool, so that once I log in from my home, or my cabin, or wherever, client's office, it authenticates who I am into the cloud, and then I can work on those applications. Blake Oliver: These workflow tools, you're calling them ... They're not practice management? Do you prefer the term 'workflow?' Roman Kepczyk: I [00:03:30] think it's a digital workflow- Blake Oliver: Digital workflow. Roman Kepczyk: -because it's beyond the practice management. It actually has status of things. It has, like you said, the routing sheet; things that we write down; that they're in their Florida home, so we've gotta deliver it there ... All that's captured in one place. You can put your timekeeping in there; you can keep scheduling in there. It's more than practice projects. David Leary: When you say digital tool, it's more than just like, okay, we scan our paper, and now it's in an e-file cabinet, because that might not have any workflow. It's all about ... It's moving to digital workflows. It's not [00:04:00] just going paperless. Roman Kepczyk: Correct. What it's saying is this return that's been scanned in, like you said ... Let's say we use fx Scan and [inaudible]; get all that together; AutoFlow ... Then it says the scanning is done, so there's notification that that return is ready for preparation. Then, if it's a complex return, it's usually assigned to a specific preparer, or it's going to a pool, but that can be managed in the workflow from one year to the next, so that it's already decided who is gonna do that return. [00:04:30] Then it gets - if it's a complex return - it can go to a specific reviewer. If it's a super-complex return, it can go to a second partner that has to review that stuff. That's all managed. The beauty of the workflow tools is once it's captured, it rolls over to the next year, and it's all on the screen. Whereas, the sheet, the lead sheet we used ... Every year, we're reprinting them; we're filling out the information we needed. The notes were going on it. Well, this the delivery instructions, the specialty things that happened; like, during the year, let's say a client sells [00:05:00] a property or something like that. You can go in the workflow tool and say, "Hey, we noticed that this partnership was sold, so we've gotta make sure there's a real estate transaction." You can put that in the workflow tool, so when the preparer rolls it up, they see those notes. You're capturing data one time at its root source and making it available to everyone after that. Blake Oliver: I wanna go virtual - I need that. What else do I need to be looking at? Roman Kepczyk: Well, I think it's just the communication; what's going on out there. We had talked in the past that we were using tools like Skype and Zoom. For multiple groups. Zoom is still [00:05:30] the best video for ... I'm in a couple of consulting groups, and we use Zoom for 20 people on screen. When it comes to capturing firm knowledge and then being able to reuse, and re-access that data, we used a product called Socialcast before, but now we've switched to Microsoft Teams. Long term, I think Microsoft Teams, and Yammer, even though we love Slack, and we love Zoom, we think, because of that integration with the Microsoft Office Suite is gonna win. David Leary: We've talked about that on the podcast. Blake Oliver: Yeah.  Roman Kepczyk: I was great at Lotus 1-2-3; I was great at WordPerfect; but [00:06:00] when Microsoft integrated all those, they won. Accountants, we're very Microsoft-specific. If you look at our audit tools, they all link to Word and Excel. All of our calendaring schedule systems, it's all Microsoft. We think getting involved with Teams, and Yammer, and those plugins, that's where we're gonna get the real collaboration. Blake Oliver: For those who have not used a team-chat tool like Slack or Microsoft Teams, what does it look like? How do I visualize it? [00:06:30] Roman Kepczyk: It combines a bunch of tools into one screen. For instance, we used to have a thing called a check-in/check-out board of availability. First of all, when you look on the schedule of who's available, if you wanna chat with somebody [cross talk] Blake Oliver: This is everybody in the firm, right, on the list? Roman Kepczyk: Everybody in the firm. You could have hundreds. What happens is you can customize it to your team. If I am, let's say, in a bookkeeping department, client access- client services, and I'm dealing with the payroll people, I can have all the payroll people on my top. I can see, if there's a red bar, it means they have an appointment [00:07:00] that's there. If it's a yellow bar, it means I've stepped away for 10 minutes. These are circles, or little dots. If it's red with a white line through it, it says 'Do not Disturb,' but if it's green, I'm available. I can click on the person, and I can do a small messaging - type of message to them - that says, "Hey, do you have two minutes to look at this tax return, or review this document?" They can respond it in one minute. Blake Oliver: That's very familiar to people who have been using Skype to chat with co-workers, right? Roman Kepczyk: Correct.  Blake Oliver: That's similar. What I really like about Teams that I've been missing, I think, in other [00:07:30] applications, like Slack, is I think Teams, the presence integrates with your calendar, right? So, it knows- Roman Kepczyk: It knows your calendar, if you've got appointments- Blake Oliver: -if you're busy or not, based on that. Roman Kepczyk: It automatically updates that in real time, as you're adjusting things. The other cool things is you cannot only, you know, the SMS, but you can talk with audio; you can talk with video chat. Blake Oliver: They've integrated Skype into it, now. Okay.  Roman Kepczyk: Absolutely, and the best parts of Skype, so it works, which is wonderful. Then, you can also do screen-sharing. One of things we try to promote in our firms is that, when [00:08:00] you're doing a tax return, the prep review back to ... Writing notes back to- this back and forth kills the profitability on a tax return. What we're saying is if we can get a reviewer to basically connect to the preparer and say, "Hey, I need to finish this tax return, but instead of sending it back to you, let's see if we can fix it and do it done-and-one."  The cool thing is I can show you on the screen, while I'm talking to you, even if you're in another- if you're in a home office working late at night, or something like that, I can show you that return; take over the mouse [00:08:30] and explain what I'm doing. Then, if we can fix it, we can actually get it done, and out the door, and billed, as opposed to taking the time to write the notes, taking it back to the preparer to interpret those notes; then having to go back and forth ... Because, you know, a reviewer will look at it two days later and doesn't remember it. Those are the features that we think that the tools like Teams and Yammer provide that real-time capability. Do it, do it right, do it right now. This episode of The Cloud Accounting Podcast is sponsored by Right Networks. In a perfect world, everyone would have 100 percent of their clients on a cloud-based accounting system using cloud-based apps, but the world isn't perfect , and clients have a wide range of needs. For some, this means using desktop-based software. That's where Right Networks comes in. Right Networks is your 100-percent accounting-focused desktop in the cloud that also includes an ecosystem of over 250 connected apps. As you and your clients take the journey to the cloud, Right Networks will be at your side innovating the best ways to leverage the true cloud future by investing heavily in cloud apps, like Transaction Pro and Autofy. They've created an always-on environment that supports 24/7 data transfer. Right Networks also offers no scheduled downtime for maintenance or application updates and meets the industry's highest security standards.  To join the more than 50,000 firms that use Right Networks daily with their clients, head over to CloudAccountingPodcast.promo/rncloud. That is Cloud Accounting Podcast dot promo forward slash R-N-C-L-O-U-D. Be sure to visit the Right Networks booth in San Jose at QuickBooks Connect 2019. Blake Oliver: One of the cool features about Teams is this ability to have persistent threads or chat rooms. What are you seeing people using those for, most frequently? Roman Kepczyk: We build chat groups. There could be like a tax group, a security group, a client-services group. Let's say, in the tax group, we're a Florida firm, and we have some kind of weird Florida franchise thing that impacts certain kinds of corporations or partnerships. While someone [00:10:30] does the research there, they document it in there. Then, if that comes up again - there's new legislation - everyone who responded to that, you write a note there, and they all get automatically notified that there's been an update to that. Then, if there's people that were not part of that conversation, what's cool is they can do a search on that, 'franchise tax for 1031 exchange,' and it pops up as one of those things. You can see all the thoughts that already went into it, as well as add to it, or say, "Hey, there's a new form." David Leary: In a bigger organization, you know Blake was [00:11:00] all over that chat. I'm gonna track Blake down to ask some questions- Roman Kepczyk: Exactly.  David Leary: -instead of just randomly asking partners, "Who should I talk to about this problem?"  Roman Kepczyk: Well, that's stuff we used to write in the notes. A lot of my firms, on the business returns, they might use like a CCH engagement binder, and the notes are just there. But, with engagement, you can't search across binders. This, you do a keyword, and you get- you're capturing firm knowledge. Blake Oliver: That's the thing that's amazing. The reason to switch away from email threads to something like Teams is this ability to search the entire history across the whole organization of every conversation [00:11:30] that's happened in public and be able to find that guidance, or that person that has that expertise. That's a game-changer. Roman Kepczyk: Yeah, and when people like you pointed out, when you're on a project, you know all the other project people that were writing on that, so someone usually knows, in that group. Blake Oliver: David, and I actually ... It doesn't have to be a large organization for this to be helpful. David, and I switched from- we were using Facebook Messenger to coordinate for the podcast- David Leary: Super-professional [cross talk] Roman Kepczyk: Hey, we all start that way. Blake Oliver: We didn't wanna do email, [00:12:00] because we felt like that would be taking a step back, so we set up a Slack, which is similar to Teams. We set up a Slack organization. We create channels for every conference that we wanna go to-  David Leary: Helps keep things organized.  Blake Oliver: -we have all the conversation about Accountex in the Accountex ‘19 channel. That way, if I lose something, I just search for it, and find it. Roman Kepczyk: We love Slack. I think Slack is actually a better product than Teams, but, in the long term, we think Teams will- Blake Oliver: Well, the integration, right?  David Leary: Slack's like the compromise, because I'm [00:12:30] an Office 365 Teams guy and Blake's a- Blake Oliver: Google Apps- David Leary: -Google Apps guy. Slack had to be the [cross talk] we could've gotten either ... I have a question. I have an accounting firm. I know it's stodgy, and I know I'm not moving to the future, but I have employees that are asking me to do- they want to work remotely. What's the first step I could take as a firm owner? Should I try to work remotely myself? Should I say, "Let's just go to a chat program"? What's the very first baby steps I should be taking to let my young millennial employee that wants to work at Starbucks ...? [00:13:00] Roman Kepczyk: The one thing you need to do is, first of all, make sure you have an infrastructure that supports it, you know, as the quality of the work, as well as the remote site is, internally. A lot of firms, what they try to do is they shortcut it with like Windows Terminal services, Remote Desktop. If they don't know how to install it, the experience for the remote user is actually worse. All the sudden, it becomes negative. If you start by using applications in the cloud - QuickBooks Online, XCM -  those applications will work- they're designed to work [00:13:30] well or use cloud-hosting providers to do that. That's the first step - make sure it's not gonna be a negative experience. Second of all, you need to pick people that have experience with the firm, that have a track record of success. You do wanna put someone who's never worked remotely; they're not sure they're doing; that needs a lot of supervision. People that ... A lot of long-term bookkeepers, client access services, they have certain payrolls they do every week; they have certain monthly-end reports. They're really good at that ... And you have track-record realization. Those are the first things we put out there. Blake Oliver: I [00:14:00] think that's one of the misconceptions about remote work, is that, actually, it's not necessarily about keeping your younger employees happy; it's often about retaining your employees, who would otherwise retire- Roman Kepczyk: Or, if it's someone that wants to go on the family track. Blake Oliver: Yeah. Roman Kepczyk: I remember, one of my mentors was Bob Bunting from Moss Adams. What he said is that you look at your employees, you're A's and B's; you do whatever it takes to retain those A's, or B's, because they'll make you more profitability, and there'll be more success in your firm. [00:14:30] Blake Oliver: They're five times more effective or more- than a disengaged employee- Roman Kepczyk: What he said is if you have an employee that wants to go on the family track, for instance, keep them engaged 10 hours a week. They will retain their technical edge. They will help you with their clients. As their kids get older, they can go to 20 hours a week and 30 hours a week, but those people ... Or, let's say someone's spouse gets transferred. That's an ideal situation, where you retain those A and B employees ... The clients love them.  At the end of the day, the unique [00:15:00] thing we have, as CPA firms, is we have a relationship with the client that trusts us. If they have that senior, who's always been with them, they want to keep that person. That's one of the big- best way to retain people. One of the statistics that came out of Accountingfly GFO that we quote all the time is that firms that offer remote work get eight times as many candidates to apply for that position. Just by virtue of firms offering remote work as an option, you're going to be a more attractive employer. [00:15:30] Blake Oliver: There's huge demand for it and, like you said, especially, I think, a ton of moms would benefit- Roman Kepczyk: In our accounting profession, you look at it, there's a lot of females, and they normally get the home responsibility; they're our best accountants [cross talk]  Blake Oliver: Yeah, and you look at the discrepancy between the number of women who enter accounting and then the number who become partners, it's this steep drop off. I mean, I don't have evidence to back it up, but it seems completely obvious to me that women wanna spend time making a family, and that [00:16:00] is not compatible with the traditional- Roman Kepczyk: Structure of a CPA firm-  Blake Oliver: -structure of a CPA firm, which, it's like you have to live at the firm. It's not that you have to be working all the time, it's just this is the culture. You have to be in the office all the time. If you allow people to work remotely ... I don't even think that it's that they need to necessarily reduce the hours, because it's ... A lot of that time in the office is wasted completely. If you let people work when and where they want to, they can be just as productive, [00:16:30] while raising a family. I know that because my wife works remotely, and she works for a big company. She works for Anthem Blue Cross - 50,000 people - and her team is remote. It can be done, even if you're a big firm, and it enables her to work full time, while we raise our son. The benefit of just being able to take off and go do a doctor's appointment without that being a big deal is amazing. Roman Kepczyk: And going to your kid's basketball game ... Those junior-high/high-school [00:17:00] years when they're participating actively, you could go see the game, and then you log in afterwards, from home, or early in the morning and knock it out. Blake Oliver: I can work ... I was fortunate in that, in my entire public-accounting career and after, I've always been able to work remotely. I have been at home, when my son gets home, every day for his whole life. I've been able- Roman Kepczyk: You'll never miss that. You'll be so glad you did that. Blake Oliver: Yeah ... Then I hear about people who like to make partner; they had to never [00:17:30] have dinner with their family. I just think that's so old; just crazy that- David Leary: Well, it doesn't make sense in our industry. I get it. If you work construction, or you're in farming, there's only so much daylight, or if you're building a bridge, you physically have to be there to build the bridge. In our industry, there's no deadlines, in a way. If somebody- Blake Oliver: Well, there's lots of deadlines [cross talk] David Leary: -there's deadlines, but- Blake Oliver: You don't have to be at the office to do the work. David Leary: Yeah.  Roman Kepczyk: I think that's the point he's making.  David Leary: If you take the family track, and your kids are in bed at 7:00, 7:00 to 9:00, you have some [00:18:00] downtime, and you can catch up and do some work. For some people, that's what they can do. If people can work when they can work, it's just better for everybody. Roman Kepczyk: That brings us back to the whole collaboration thing. The tools today are so good to manage all the workflow, plus to have the collaboration and communication. You really don't miss things, because the coffee cooler is now on the screen as opposed to the two people that are standing in the lunchroom. David Leary: That seems like a good way to summarize this. Blake Oliver: Yeah. Thanks, Romans, so much. I really [00:18:30] appreciate you joining us for these episodes. If people want to get in touch with you, find out more about what you're up to, where's the best place for them to do that? Roman Kepczyk: Probably on ... I'm Roman@rightnetworks.com, but we have a blog - Right Networks Blog, where all the articles and content that I develop, all is published there. Blake Oliver: Head over to ... What's the URL for that? Roman Kepczyk: Right Networks.com/blog. Blake Oliver: /blog ... And, as always, you can reach me on Twitter. I'm @BlakeTOliver. If you wanna subscribe to our show notes, head [00:19:00] over to BlakeOliver.com and click the blue Subscribe banner at the top. You can put in your email address, and you'll get new episodes emailed to you automatically after they publish. How about you, David? David Leary: You can just get ahold of me on Twitter - that's the easiest way - @DavidLeary, and you can track The Cloud Accounting Podcast on all the socials. We're on Facebook, Twitter, and LinkedIn. Blake Oliver: All right. Thanks a lot, Roman. Roman Kepczyk: Thank you, guys.
  5. SponsorsRight Networks: https://cloudaccountingpodcast.promo/rncloudShow Notes 01:39 – With the rise in ransomware rampages, it's more crucial than ever to protect your company's data  02:07 – Roman explains the Right Networks disk-to-disk-to-offsite backup process  03:14 – Don't get caught with your cloud down ... Just because your data is in the cloud, doesn't remove your responsibility to make regular backups here on earth  04:05 – You can't tune a phish - Training employees to recognize phishing emails is an important step in safeguarding company  data  05:31 – It's trickier to spot phishers on smartphones, since you can't see the full URL 07:27 – Stop being so predictable! Using the same password for all your websites is just an open invitation to hackers  11:12 – Roman suggests checking your online bank accounts daily, in the morning, especially if you travel and swipe cards frequently in numerous locations  12:27 – Target practice? With digital threats constantly changing and evolving, small businesses need experienced, well-trained IT security providers to help protect systems 15:46 – Roman shares some more details about services that provide phish-attack testing for employees, and the process Right Networks uses for its own people  Connect with Roman H. Kepczyk, CPA.CITP, CGMA Website: https://www.rightnetworks.com/roman-kepczyk Right Networks Blog: https://www.rightnetworks.com/blog/ Twitter: https://twitter.com/romancitp LinkedIn: https://www.linkedin.com/in/romankepczyk/ 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. Meet Blake and David in person!  October 22-25: Sage Intacct Advantage in Las Vegas October 29-30: AcuityCon in Atlanta November 5-8: QuickBooks Connect in San Jose November 5: Practice Ignition PreCon Party in San Jose November 6: VIPartners Party with Gusto, Routable & Jirav in San Jose December 9-11: Digital CPA Conference in Seattle Limited edition shirts, stickers, and other necessities.TeePublic Store: http://cloudacctpod.link/merch SubscribeApple Podcasts: http://cloudacctpod.link/ApplePodcastsSpotify: http://cloudacctpod.link/SpotifyGoogle Play: http://cloudacctpod.link/GooglePlayStitcher: http://cloudacctpod.link/StitcherOvercast: http://cloudacctpod.link/Overcast  TranscriptRoman Kepczyk: The threats change so rapidly ... The hacker groups are professional organizations. You need a team. You can't just have local Joe Screwdriver guy doing it as a part-time gig, because we are a target. Blake Oliver: Welcome to the Cloud Accounting Podcast, I'm Blake Oliver. David Leary: And I'm David Leary. Roman Kepczyk: And I'm Roman Kepczyk, Director of Firm Technology Strategy for Right Networks. David Leary: Wow, Roman, thanks for joining us. We're here at Accountex USA in Boston, interviewing lots [00:00:30] of important people; you being one of them. Roman Kepczyk: Well, I'd like to see one of those, too. David Leary: You have the ability to speak about a billion things. One of the things I was thinking is like why don't we just do a security one [cross talk] views of security ... We talk about security all the time on the podcast. Ransomware is rampant right now. Again, we talked about ransomware ...  Blake Oliver: Malware-  David Leary: Malware. Blake Oliver: -and with desktop-hosting providers that are getting ransomed ... The iNSYNQ outage attack; CCH getting shut down temporarily [00:01:00] by- what was that? That was malware- Roman Kepczyk: Yep.  Blake Oliver: Not ransomware in that case, but- David Leary: That Dentist Safe ... There's something called Dentist Safe, and they back up dental medical records. They got ransomwared last week. Blake Oliver: Many city/local government- cities have been taken down and had to completely rebuild their systems, right? Roman Kepczyk: I think there was like 22 cities in Texas that were all using kind of the same infrastructure, and they all got hit with the same ransomware that's out there. Matter of fact, I was at a conference last month, and Gene Marks was speaking. One of his [00:01:30] predictions was that four out of five firms and companies in the next year will be hacked by something and have ransomware that they have to work around. That's why it's so important to make sure you have a process of good backups; that you're testing them, so that, in the event your firm does get hit, the solution, honestly, is wipe out the servers, restore the data, and get the people back up and running. Blake Oliver: What does that actually look like? Because it sounds like, in a lot of these cases, there weren't backups being made, or the backups got themselves infected-  Roman Kepczyk: Infected, exactly.  Blake Oliver: How do [00:02:00] you ensure that you actually have backups that are up to date and that you can actually restore in the case of one of these attacks?  Roman Kepczyk: What happens is you've got to be doing constant shadow copies. Microsoft, by default, has the capability on the servers, where every hour, any file that's been changed, those components that have changed can be backed up to the main server. We do what's called disk-to-disk-to-offsite. If a firm is doing their own stuff, they'll have a set of ... Like I said, there are standard servers; then they'll have their backup servers and they'll be shadowing and copying nonstop [00:02:30] to that secondary set. Then, during the evening, or when there's a slow time, they'll backup all those images up there, so you can restore to a different version. Now, what's unfortunate is you've got to be able to catch the malware as it's spreading out there. There's tools - intrusion detection, and prevention software - that kind of identify it. If you catch it quick enough, then you can restore to that last version. I've had scenarios, where firms were not checking their backups. Basically, when they tried to restore, they found, like months back, there was malware and stuff in there- [00:03:00] Blake Oliver: Malware was in there.  Roman Kepczyk: Yep. They had to keep going back, and back, and losing data the whole time. That's one of the benefits of the cloud. That software is a higher-level quality software that's testing more frequently, and it knows when something weird is going on; it all the sudden starts encrypting files randomly, they can shut it down much quicker. David Leary: There's this over-assumption, like, "Well, it's in the cloud. I don't have to take any personal responsibility ..." and make more backups yourself; but yes, you need to pull your own stuff down occasionally; put it on an external hard drive; throw it in your safe. It's not that the cloud's not reliable. It's just if there is an outage, if there's a ransomware attack, [00:03:30] you can keep working if you have your own stuff. People, I think just- there's this assumption, like, "Well, it's in the cloud ..." and it's really confusing with the hosting-type situations, because- Roman Kepczyk: That's why you need to ask your hosting provider what is the scenario? Having them explain to you examples where clients have clicked on ransomware, and how did they recover from those things? We have scenarios every week where one of our clients' employees clicks on a phishing email and, all of a sudden, you realize the credentials have been compromised. We have a procedure that basically [00:04:00] knows immediately how to shut it down, pretty much contain where the damage is and then get them back up and running. It brings up what's important - the phishing training of employees. That is what's gotta happen. It seems like the two routes to all the attacks - whether it's ransomware, or malware - is either compromised credentials, that's someone gets your password, or they click on that phishing email. We do a bunch of surveys through a group called the CPA Firm Management Association. That's the larger firms, between 10 and 200 members. The [00:04:30] top three products they use is PhishMe, KnowBe4, and Wombat Security. These are services that will send phishing emails to your people and then let you know who clicks on them. Then it does constant training; just-in-time training. With Right Networks. We always use KnowBe4. We're required every six months to go through ... Actually, it's like almost every three months, now, where they send us emails and that we have to do a training module. David Leary: So, that one- Blake Oliver: That's really smart-  David Leary: "Your FedEx package is ready. Click here for the status." I'm like, "What did I order?" I don't click [00:05:00] those links. Roman Kepczyk: We were getting close to the holiday season, so the Better Business Bureau puts out their list of the Dirty Dozen phishing threats. We tell all of our firms, look through that list, because exactly what you said - FedEx; Target gift card; "Hey, we noticed your Costco membership, it's time for renewal," and they get somebody. That's like someone clicking on a Bank of America link. They send you a Bank of America, Wells Fargo, Chase- Blake Oliver: "Click here to log in." Takes you to a fake login page that looks exactly like the regular one [00:05:30] except for the URL. Roman Kepczyk: Yep, and they're doing it on your smartphones now, too. That's what's crazy is they can ... With the smartphone, you can't see the full URL; whereas, on your computer, you can hover over it, and see it all the way, but not on smartphones. Blake Oliver: Wow. This episode of The Cloud Accounting Podcast is sponsored by Right Networks. In a perfect world, everyone would have 100 percent of their clients on a cloud-based accounting system using cloud-based apps, but the world isn't perfect, and clients have a wide range of needs. For some, this means using desktop-based software. That's where Right Networks comes in.  Right Networks is your 100-percent accounting-focused desktop in the cloud that also includes an ecosystem of over 250 connected apps. As you and your clients take the journey to the cloud, Right Networks will be at your side innovating the best ways to leverage the true cloud future by investing heavily in cloud apps, like Transaction Pro and Autofy. They've created an always-on environment that supports 24/7 data transfer. Right Networks also offers no scheduled downtime for maintenance or application updates and meets the industry's highest security standards. To join the more than 50,000 firms that use Right Networks daily with their clients, head over to CloudAccountingPodcast.promo/rncloud. That is Cloud Accounting Podcast dot promo forward slash R-N-C-L-O-U-D. Be sure to visit the Right Networks booth in San Jose at QuickBooks Connect 2019.  Blake Oliver: You said there are two ... I think you said there's two [00:07:00] main vectors of attacks? Roman Kepczyk: Yeah.  Blake Oliver: The phishing emails are one. What was the other one? Roman Kepczyk: Well, it's compromised credentials- Blake Oliver: Compromised credentials.  Roman Kepczyk: What happens is the hacker groups have these bots, and utilities that ... For instance, if I hack into your Marriott account, I will use that login and password I know automatically to go to your IHG account, to your Hilton account, Kimpton account. It goes to all those and tests. They do the same thing in the CPA firm. There's groups that attack accounting firms. Once I know that ... Let's say I've compromised your cPaperless SafeSend credential, I'll [00:07:30] try that on your Thomson Reuters, your CCH. They have these tools that just go through automatically-   David Leary: Because you're not using a random password for every single site; you're using the same password. I probably did for the first eight years of me being on the internet- Roman Kepczyk: We all did.  David Leary: Using that same password everywhere. Roman Kepczyk: We all did, because it was easy to remember. For small practitioners, we do recommend password wallets, and that would be like LastPass, RoboForm, Keeper, all those type of products. But as soon as you get to four or five members, you want it managed. [00:08:00] Honestly, the tools like Duo and Okta, what happens is it creates ... Once you log into any website, it sends a code to your phone or your smartwatch that you can click on, and then it allows access- Blake Oliver: These are the single sign-on tools that you mentioned. Roman Kepczyk: Well, multi-factor authentication- Blake Oliver: Multi-factor authentication.  Roman Kepczyk: Sometimes, it's called dual-factor authentication. What happens is, let's say, I'm an UltraTax user, and someone tries to log into my account - because on the dark web, you can buy ... There's [00:08:30] lists of UltraTax users' passwords and logins - you try to log into my account at 3:00 in the morning, it sends a code to my phone. I sleep through it. The next morning, when I wake up, I see that someone tried to log in. They couldn't get in because I didn't authorize it, but then I know my credentials have been compromised and I have to get- change them immediately. David Leary: Yeah, and I think there's layers, right? Like your Google account, your Apple account, your Verizon, your T-Mobile - there's certain accounts that you have to have super-extra security levels, [00:09:00] right? Roman Kepczyk: Yeah. David Leary: And you'd better have two-factor on because if they get your Google one, then it's just a domino effect. They can probably get everything, because they can start resetting the passwords you have on other sites. One thing I have on my most secure account, I us a YubiKey. They have a physical hardware device now, as well, because I would hear these horror stories of cell-phone swapping. Blake Oliver: Oh, yeah, the SIM attacks, right?  David Leary: SIM-ing attacks, right [cross talk]  Blake Oliver: They can steal your phone number-  Roman Kepczyk: Well, YubiKey got hacked, too. I don't know if you saw that. David Leary: No!  Roman Kepczyk: What happened is they have a series of- David Leary: Breaking news! Roman Kepczyk: No, they had six different formats, I [00:09:30] guess. In one of the formats, someone had figured out the algorithm and posted it, because within Right Networks, we use ... We have a security profile. It's like a Yammer Talk. Basically, I was doing a speech on YubiKey, and someone popped that up there and said, "Hey, all these have to be replaced." They replaced like a million of them.  They fixed it immediately, but it's one of those things you always have to be very cognizant of those tools. But I agree with you, the YubiKey is better multi-factor authentication with credentials than not having it. In [00:10:00] a lot of our markets, there are local consultants working with small firms that prefer those products. You know what? If it's installed by qualified installer, it as a secure as you're gonna get. Blake Oliver: For our listeners who have never seen a YubiKey, it looks like a very small USB drive- Roman Kepczyk: Yeah, with the skin cover pulled off of it. Blake Oliver: Yeah, so you plug that in, and then you press a button on it, and it generates this random code-  Roman Kepczyk: It authenticates [cross talk]  David Leary: Yeah, so the workflow ... GoDaddy has done it very, very well, which is good, because if you [00:10:30] get into GoDaddy, now, you get in my email, and now everything's domino, right? Roman Kepczyk: Yep.  David Leary: But GoDaddy ... You set the key to associate with GoDaddy. You log into GoDaddy, but instead of getting a text message like everybody else gets, I have to touch my key. Now Firefox has good support for it. Actually, Windows 10 now has good support for the hardware-based keys. I don't set it up on every single website I go to, but just the important ones. Roman Kepczyk: Absolutely.  David Leary: The super ones that I want to make sure nobody can log in unless they have the physical device. Roman Kepczyk: If it's anything that's financial; [00:11:00] if it's got personally identifiable information, that stuff is what you'd block in there. I've gotten to the point, actually, where I do certain things on my iPad; like when I'm doing browsing and just looking, I just don't do that on my computer, or in my smartphone. Blake Oliver: Right, because- Roman Kepczyk: If that gets messed up, no one cares. I don't care. But I do have to use multiple devices. I have a routine I do with my banking online. In the morning, I check all my accounts, because I travel about 120 days a year, so I'm swiping both the company card and my personal card everywhere. Every [00:11:30] morning, I check to see what is impending; you catch things before they get passed through. Blake Oliver: Pulling things back to firm security, I just want to review what we've talked about so far. We've talked about multi-factor authentication- Roman Kepczyk: Absolutely. Blake Oliver: -whether that's a YubiKey, a physical key, or authenticator app on your phone. I don't know if we talked about that, but that's another option. Do you have any recommendations for a firm, like somebody's listening, and they want to get started with it. What do you like? Roman Kepczyk: Well, one thing we always ... If it's a firm [00:12:00] that does their own network infrastructure and support-  Blake Oliver: Yeah, it's a small firm.  Roman Kepczyk: -ask how much training their internal IT person has. We find that they don't. Blake Oliver: Yeah, well, they often don't have an IT person- Roman Kepczyk: Even if they have an external person, ask how much security training they've gotten. It's better to have a third party look at what they're doing and check their work. That's one of the things, within Right Networks ... We have two or three different security providers who are constantly checking us and doing different testing-  David Leary: External security providers. Roman Kepczyk: External, correct. We have a strong team doing this. You [00:12:30] have to have other people checking because the threats change so rapidly. The hacker groups are professional organizations, and once they learn how to hack one tool, they use that same tool on all similar situations. They've recorded information. They've captured everyone's servers, so they know who to attack. So, you need to constantly be vigilant. You need a team. You can't just have local Joe Screwdriver guy doing it as a part time gig, because we are a target. Blake Oliver: One [00:13:00] of the problems with some hosting companies is that one firm will get infected, and then it spreads. How do you, at Right Networks, prevent that from happening - a spread within, from firm to firm, from server to server? Roman Kepczyk: I can tell you that we are a SOC 2-certified data center and all that, and we follow all the protocols for that. We can't tell you what we're doing internally. Our clients know. We have a document that tells them and explains what that is- David Leary: Don't worry, no hackers are listening to The Cloud Accounting Podcast. You can disclose these things ...  [00:13:30] Blake Oliver: You never know.  Roman Kepczyk: You know, it's a very small world we live in. We all know each other. Everyone knows everyone ...  Blake Oliver: You have ways of putting up walls.  Roman Kepczyk: They're already housed; they're housed separately. Blake Oliver: Okay, gotcha. Roman Kepczyk: What happens is, with the three hacks that happened previously, we all learn from them. It's not like CCH, and CTerm were in a vacuum and all that, when it happened. The information was spoken in the background, and all that. We're all in the same game. David Leary: What recommendations do you have for [00:14:00] accountants and accounting firms, when dealing with their clients' passwords and records? Because you're seeing this a lot with banks ... Only a couple of banks have an ability to, if I wanna add Blake is my accountant, I can invite him to my account, and he has his own username and password, but he has access to my bank account. Lots and lots of bookkeepers and accountants have their clients' usernames, passwords ... Some of them are setting up- Blake Oliver: For all sorts of things, not just banks.  David Leary: -phone numbers to route through a second-form authentications ... What do you recommend firms do? Would you recommend [00:14:30] don't do it at all, because you're liable? Roman Kepczyk: There's just no good answer to that, honestly. We find that most commonly what we see is, honestly, a spreadsheet that's encrypted. We know that there's hacker tools for every spreadsheet that's out there that's stored under a weird name on their machine, and we recommend against that. If the client can use the product like a password vault, where there's a one unique code and then that is utilized, that's probably as good as you can get. As a CPA, I've got to say you shouldn't [00:15:00] share your passwords out there, but we know firms are doing it, because they're getting access to those business accounts. David Leary: Even, I always think ... Which I, even on a personal level, with my wife or my kids, you could email me the username, but then text me the password, or- Roman Kepczyk: Separate them. Yep. David Leary: You can never let them travel together in the same conversation. Roman Kepczyk: No, because there's always one person listening ... Where we're concerned is sometimes, even with the email, good hacker tools now are actually looking out there for those weird ... It's something that's not a word in the English language; it's [00:15:30] really long, or a passphrase, they can pull those out of the texts now. It's scary. Blake Oliver: Roman, the thing I learned today- today, I learned that these companies exist that will test your employees with fake phishing attacks. What was the name of the service that you like? Roman Kepczyk: Well, there's three that always show up in the surveys. Number one is called KnowBe4. Then there's PhishMe, phishme.com, and then, Wombat was the third that showed up on our survey. Blake Oliver: Is [00:16:00] this something that I, as a CPA firm, could sign up for? Roman Kepczyk: Absolutely. Yeah. It's an annual fee per user. I don't know the prices. I know it came with ... At Right Networks, that we signed up for it, and all 300 of us have to go through it. Blake Oliver: What a great way to educate your team, because if they fall for it, they know that they won't do it again, or hopefully they won't do it again.  Roman Kepczyk: Correct. Then, the training that follows up - it knows the type of thing you fell for, so they have very specific training for that type [00:16:30] of thing. When you see someone, even if they hover over the name, there's ... If it says like bank.com and has a slash afterwards with a word, that's okay, but it's another dot and another word, we're going down ... They have training on how to look at that specifically. Blake Oliver: That's great. Well, thanks so much for all this insight on security, Roman. If people wanna follow you online, get in touch with you, where's the best place for them to do that? Roman Kepczyk: Probably on the Right Networks blog. I write for CPA Practice Advisor, Thomson Reuters. [00:17:00] I write eight columns for the AICPA, and we retain the right to publish those all on RightNetworks.com/blog. Blake Oliver: All right, and, as always, you can find me on Twitter. I'm @BlakeTOliver. David Leary: And I'm on Twitter: @David Leary. Blake Oliver: Thanks for joining us. Roman Kepczyk: Thank you, guys.  David Leary: Thanks, Roman. 
  6. SponsorsRight Networks: https://cloudaccountingpodcast.promo/rncloud Show Notes 00:48 – How can being a Bills fan ever be a bad choice?  01:40 – Fraudster Tip: If you're gonna steal the cash, stash it in your backyard!   02:36 – Dawn explains the geometry of fraud | ACFE  03:01 – The three steps leading to fraud - pressures, opportunity, and rationalization  04:55 – In the age of payroll automation, why do small-biz owners still insist on paying with paper checks?   05:26 – Time really is money, especially if your employees steal it  06:38 – Hook, line, and sinker, as a small-biz owner, you're fully liable for all tax obligations, regardless of whether you've been defrauded.   07:37 – Dawn says advisors are missing the mark when it comes to using the cloud and accounting apps  09:24 – Accountants and bookkeepers, assessing your clients' financial risk and providing suggestions for better internal controls should be a priority when it comes to adding value  12:48 – Table for two? Especially in smaller businesses, two or more employees make teamwork out of fraud  14:15 – The downside to all this super-efficient tech? It can make it super-easy to commit fraud  15:15 – Never take candy for your passwords!   21:29 – Why finding fraud is fun  23:05 – Forensic accounting - kicking ass and taking names is just part of the job description  25:46 – How to become a certified fraud examiner | ACFE  28:42 – Swearex 2019  Connect with Dawn LinkedIn https://www.linkedin.com/in/dawnbrolin/ Website https://powerfulaccounting.com/ Twitter https://twitter.com/dawnbrolin 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. Meet Blake and David in person!  October 22-25: Sage Intacct Advantage in Las Vegas October 29-30: AcuityCon in Atlanta November 5-8: QuickBooks Connect in San Jose November 5: Practice Ignition PreCon Party in San Jose November 6: VIPartners Party with Gusto, Routable & Jirav in San Jose December 9-11: Digital CPA Conference in Seattle 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   TranscriptDawn Brolin: You know, I used to say, "I'm not trying to scare you, I'm trying to prepare you," but really, I'm just trying to scare the s#*$ outta you ... Blake Oliver: Welcome to The Cloud Accounting podcast. I'm Blake Oliver. David Leary: I'm David Leary. Dawn Brolin: And I'm Dawn Brolin.  David Leary: Dawn Brolin. I'm so happy to be in your, basically, hometown here for Accountex USA. We're in Boston, home of all the sports teams I personally hate. Dawn Brolin: Yeah. David Leary: And usually I'm getting grief from you about how great these Boston teams are. Dawn Brolin: Yep. I've been really lenient on you, thus far. David Leary: This is why I would never invite you on the podcast until [00:00:30] today. Dawn Brolin: Well, don't worry. The Patriots start their revenge on Sunday and just go in for another Super Bowl this year. David Leary: I hate Tom Brady. Dawn Brolin: I know you do, but the Buffalo Bills, they have a chance to participate this year. I mean, they're gonna get uniforms and cleats, so they'll probably be out there a little bit. Yeah-  David Leary: This is the world [cross talk]  Dawn Brolin: Yeah, this is it.  David Leary: This is why I do a podcast with Blake and not you-  Dawn Brolin: It's your fault. It's your fault that you are a Buffalo fan, not my fault. You made bad choices. It's not my fault [cross talk] David Leary: Speaking of bad choices, the reason we have Dawn [00:01:00] here today is Dawn is an expert in small business fraud. When I say expert, you testify at courts and things, and you're seriously all about the small business fraud. Let's go from there. I don't know if you've a question, Blake? When you had ... Actually, let's start with that, Blake. When you had small business clients, did you ever come across any fraudulent things? Blake Oliver: Well, not my client, my dad. My dad was a consultant in real estate. He had a practice with three partners, and they [00:01:30] had an office manager who, over the course of a few years, stole a quarter-million dollars. Dawn Brolin: Yeah, no problem. Easy breezy.  Blake Oliver: Yeah, and they never got it back. She went to jail, but they ... Yeah. Dawn Brolin: They don't typically save the money when they steal it and then return it upon discovery. Typically, you know, they got a new car; they're going on quite a few trips. Their kid's in private school ... They're not stashing it. They're not putting it in cans in the backyard ... Which, if you're gonna steal, do that. If you're gonna save it, put in the backyard. Blake Oliver: I feel like a lot of these fraud cases, it's one of those things that just spirals [00:02:00] out of control. They weren't planning it. They didn't have an exit strategy, because how did you think you were ever not going to get caught? Dawn Brolin: Yeah. Well, it's interesting. We all know the fraud triangle, which is the three pieces- David Leary: No, we don't. What is the fraud triangle?  Dawn Brolin: Oh, you don't? Okay, well, it's a fraud- Blake Oliver: Educate us. We are woefully ignorant. Dawn Brolin: Oh, good. That's just like my clients- David Leary: We always have good ideas for committing frauds.  Dawn Brolin: I know so many people who are ignorant, including an attorney that I'm gonna go battle next- a week from Wednesday in court on a fraud case, which I love. I love doing that. I love humiliating those who think they're smarter than every other person in the universe, when they're not-  Blake Oliver: Well, especially [00:02:30] lawyers- Dawn Brolin: Especially lawyers.  Blake Oliver: We're on board with that. David Leary: And accountants.  Dawn Brolin: I call them lawyer-liars, and accountants. Well, actually, the fraud triangle. What happens ... If you read The Report to the Nations, which is a great resource ... If you've never heard of that, it's called The Report to the Nations. It's published by the Association of Certified Fraud Examiners. It comes out every year, and it's like a book. I love it. It's my favorite book ever. It really tells you the statistics around what's happening.  In the fraud triangle, what happens is people have, without internal controls - of course, small businesses think that's impossible to have. "We're not a corp big corporation. We don't need internal [00:03:00] controls." They don't even know what that means- Blake Oliver: Yeah, they have no idea.  Dawn Brolin: It's such an easy, easy way for those who are involved, where they have pressure ... What kind of pressure do they have? It's a bunch of different things. Either they have pressure to get their work done, and they're always at work - 80 hours a week - and the boss is outta town; always traveling to Italy. But they've got all this pressure, and then they have opportunity, because the small business doesn't have internal controls implemented or in place.  Then, the last thing, they can rationalize it. They rationalize it and say, "You know what? That guy's always in Italy, and I'm always here working for that guy. I'm in charge [00:03:30] of everything, and I only get paid $60,000 a year, and they're living the life of luxury." Typically, the people who are actually committing the fraud are first-time offenders. These are not criminals that are out to defraud small business-  David Leary: So, they weren't planning this-  Dawn Brolin: Right.  David Leary: The situation created itself-  Dawn Brolin: -in their life. Correct. Blake Oliver: Okay, so we've got three of them. You said opportunity, rationale - well, that's the last one ... What was the ...? Dawn Brolin: Yeah, opportunity, pressure- Blake Oliver: Pressure. Dawn Brolin: -and rationalization- Blake Oliver: Those three things, okay.  Dawn Brolin: When that combination comes, that's like a hurricane, which we've [00:04:00] just seen, hurricanes are coming back, because it's the time of year. That's what happens; it's like the perfect storm, where they've got this pressure at home. Maybe a spouse lost a job; maybe a spouse passed away, and now they're the only source of income, and they've got six kids. There's reasons ... Anyone could give a reason why they would defraud somebody. Blake Oliver: Your high school chemistry teacher who gets cancer and needs to pay for his treatment ... Dawn Brolin: You know, literally ...  David Leary: That's because there was no money in the high school system, so he couldn't commit fraud there ... He had to move on to selling meth.  Dawn Brolin: Selling meth is not [00:04:30] a bad idea, I guess- Blake Oliver: It's probably a better idea than-  Dawn Brolin: That's more tax fraud than anything, but .... Blake Oliver: Right. Okay.  Dawn Brolin: No, so that's what happens, and these small businesses are going out of business. Interestingly enough, there are statistics, which I'll be giving in my presentation, where payroll fraud takes three years to detect, and an average of $150,000 per occurrence. Blake Oliver: Wait, say that again, those numbers?  Dawn Brolin: Yeah. It takes three years - 36 months - on average- Blake Oliver: To detect it. Dawn Brolin: -to detect a payroll fraud. Now, to me, that's disgusting, and the reason is there's so many easy, affordable ways to have your [00:05:00] payroll processed that there should never be a bookkeeper stealing payroll taxes. That should not even be a thing, but it is.  Blake Oliver: Right, but a lot of businesses ... We tend to forget this, I think, living in The Cloud Accounting Podcast world, with these automated payroll providers ... A lot of businesses are still cutting paper payroll checks.  Dawn Brolin: Right. Those, in and of themselves, is a whole 'nother situation.  Blake Oliver: Just checks. Dawn Brolin: What's really great is - well, it's great for me, I guess - there are so many ways that these people are stealing ... They're time-stealing. Matt Rissell's the king of that. He solved that [00:05:30] problem for his small business. Time doesn't matter? Well, guess what? If people are stealing time, which people do, and you multiply that out, that's costing a small business owner a fortune. I can tell you, as a small business owner, myself, having someone steal from me, after the sacrifices ... Listen, everyone thinks you're in business. You've got all this flexibility; you have all this money ... They have this big vision of what we all look like, quote/unquote, right? Ultimately, at the end of the day, we've sacrificed everything. We've invested in our education and all these things. You hire an employee, and they're in a situation, [00:06:00] where maybe the baby is sick ... Whose heart doesn't stretch for that? But instead of talking about it or bringing it to attention, they feel like they've just ... "I'm under so much pressure. I've gotta take care, my baby," because, trust me, your baby comes way before me, as your boss. I get that. What ends up happening is they do that rationalization and say, "Well, you know what? They have plenty of money. I don't have any money, and I need it for my baby." Guess what? They're gonna rationalize that, and they're going to steal; it'll be the first time ever ... With the payroll tax, it's a compounding issue, right?  Blake Oliver: Sorry, did you bring up payroll, because that's the most common, or [00:06:30] is it- David Leary: Or is just the most preventable? It's easy to [cross talk] preventable. Dawn Brolin: Yeah, I think it's the most preventable out of all of them. Blake Oliver: You said 36 months to detect and how, on average ...? Dawn Brolin: Average, over $150,000. If you think about it, if it takes three years, they're not saving the payroll tax money. What ends up happening is the IRS does not care, neither does estate, neither does unemployment. They don't care that the bookkeeper stole your money. You are a fiduciary to your employees, and you are the boss of your company. If the bookkeeper steals the money, you're still on the hook. Blake Oliver: The business owners are personally [00:07:00] on the hook- Dawn Brolin: You bet. Blake Oliver: -for the payroll, or whoever was also responsible for the payroll, right?  Dawn Brolin: Yeah, there's different ... Obviously, if you can prove control of the bookkeeper, 100 percent, then the bookkeeper's the ... There's a lot of cases.  Blake Oliver: I've heard about outside accountants, actually, who run payroll, getting held accountable- getting on the hook for those payroll taxes- Dawn Brolin: Absolutely. Blake Oliver: -that didn't get paid.  Dawn Brolin: I think that's part of this awareness that I'm trying to bring to people about fraud, that it's not ... This is something that I talk about all the time. All the applications that we see at all of our shows, those [00:07:30] applications are great. Yes, they're efficient. Yes, they're all of those things. But that's not the primary reason why we should be implementing them with clients. I think that's where we as the trusted advisors are missing it. I think we're so wrapped up in efficiency, and, oh, bank feeds ... You don't even really have to do anything. Well, that's not what it was ... That's not what it's meant for. It's not meant to not hand-key transactions. It's meant to be an internal control for someone to look at financial records and say, "Why do I have so much in marketing?" They're cutting themselves a $5,000 check, and if you're a company that spends a lot of money in advertising, you're [00:08:00] not gonna think $30,000 a year is a big deal. That's one of my biggest things is the awareness that we, as the trusted advisors ... It has to start with us. If we, ourselves, aren't cloud accounting for ourselves, how can we possibly, with an ethical attitude and appearance, promote that to our clients? Blake Oliver: David, I'm sure you have lots of questions. I have lots of questions about ... I've never looked for fraud, as an outsourced accountant/bookkeeper. Sometimes, I've spotted it, or found iffy situations. How [00:08:30] can I make that part of what I do for my clients? Dawn Brolin: Yeah, so great! That's such a great question because I'm actually gonna cover that in my presentation today, which is fun. What we can do is we can start with one client at a time. I think people ... Sometimes, we all, as we find this maybe new service value-add that we can give to our clients, which is really one of the most important ones is to protect them ...  We can take one client that we know, that we work with often, maybe they're even on a value billing. You take that one client and say what do they do? Do they have a cash register? [00:09:00] Do they have payroll? Do they have files in their office that are in an unlocked desk, or whatever? Even just taking a simple evaluation of one client, and say let me look and see where are the areas that they could be at risk of even just basic ... Go through five- pick five things and say, payroll, that seems to be pretty nailed down. Okay, that's good, but they've got the payroll documents in a drawer that anyone can grab and have identity theft. You could do a simple evaluation of one client and say, "Hey, I went to a conference, [00:09:30] and I'm starting to really pay attention to how the technology changes can be a threat for you. It may not be an improvement. So, how can we implement some internal controls? Because I'm concerned about these five areas of your business. What do you think about that?" Hand them The Report to the Nations; actually, print it and hand it to them ...  Well, I'm not really ... I'm all about the cloud, too, but whatever you've gotta do-  David Leary: Yeah, kill some trees.  Dawn Brolin: Shake them. I used to say, "I'm not trying to scare you, I'm trying to prepare you," but really, I'm just trying to scare the shit outta you, because you don't listen when I'm just trying to prepare you. "Oh, okay, great. Thanks. That's [00:10:00] nice ..." No! Guess what? I'm going to court a week from Wednesday, and I'm going to testify in a divorce case, which, who would think there's fraud in a divorce case? Guess where this fraud? An affidavit of financial means. Do you know what that is? That's one spouse has to provide their financial- how do they make money.  Blake Oliver: Oh, yeah. Mm-hmm. Dawn Brolin: The other spouse has to do the same thing. When it gets down to it, if you have a small business owner who runs a salon, for instance ... If there's a person running a salon, is their Schedule C accurate? Why do they [00:10:30] say they don't make any money? Okay. Why do they show $30,000 profit on their Schedule C when there's no accounting system? Now, you go, and you start digging into bank statements, and you look at the copies of the deposit slips, which are awesome, because, at this particular bank, you have to sign them when you do the deposit. So, we know exactly who made cash deposits. Who made check deposits and did less cash received - which, you're not supposed to even do with a business bank account? You just start to look, and you say, "Oh, my goodness ... There's fraud [00:11:00] everywhere." It's happening. That's a simple example, but this other- the husband, or whatever, he's making a 150Gs a year, and she's saying, "He's making 150, and I'm making 30." Well, he's like, "No, you make more than that, because you may show you make 30 ..." Now, guess what? We've got structuring, when it comes to the cash deposits, potentially; we have tax fraud - under-reporting of gross income; tax loss to the government; we have sales tax issues, sales tax fraud-  David Leary: It's a domino.  Dawn Brolin: -all in one case. It just falls ... I tried to scare the crap out of this chick in my deposition, [00:11:30] and she was stone cold. I was like, "Wow, I don't know if I've ever met anyone as dumb as you, because I'm gonna tear you apart in court. You and your attorney, I'm gonna annihilate you in front of the judge." It's so simple, because guess what? One plus one is one. We're not economists; we're not weather people. We get paid for the facts, not for a guess. Blake Oliver: Wait, did you say one plus one is one? Dawn Brolin: No, one plus one is two. I might've said one plus one is one, but that's an economist [cross talk] I apologize, if that's what I said.  Blake Oliver: I was trying to work it out in my head.  Dawn Brolin: My bad [cross talk]   Blake Oliver: I was like, wait ... Gotcha-  David Leary: So, every day, there's a news article that comes up- [00:12:00] Dawn Brolin: Absolutely.  David Leary: -constantly, some bookkeeper did something fraudulent. It always seems like it gets discovered on accident. Like, oh, that person finally took a vacation ... Is there ways you can actually create a scenario in your small business to possibly surface fraud by [cross talk] like little hacks, making some- changing rules. Can you speak to that? Dawn Brolin: Yeah, and that's one thing ... When you get to a company that's like 10, 15, 20 employees, that's a small business that's growing. They're still considered, in the world of our world, they call them small business, [00:12:30] which is relative, in my opinion. You've got 10 employees, and you have one bookkeeper and maybe one AR person, for example. There could be coercion there, where the two of them are working together, and they're figuring out how the AR person is gonna send invoices. Then, when the check comes in, the bookkeeper will delete the invoice from the system. They'll take the check and deposit it in their bank account. Especially when there's multiple roles, where there's five people in the accounting department and two people team up ... I don't know, maybe they go out and drink together at night or something, and they've got the scheme where, "You know what? I really wanna go on a trip. Let's just ... We'll [00:13:00] do one invoice," and it leads to two, three, four, and then it becomes a pattern. Your question is a great question - do you want to create that culture of ... "I'm trying to frame my employees" would be something I think a business owner would think about- David Leary: Yeah.  Dawn Brolin: When, in fact, for me, it's more of let's examine this one internal control and see where there may be risks. Do you ever open your mail? Do you ever go online and check your bank statement? "Well, no, I got ... They do all that stuff ..." Have you ever signed a payroll check? "Well, no, I just sign checks and hand them to the bookkeeper, and she pays the bills." I've seen [00:13:30] that, and they and they just hand them over. I have a fraud case right now in South Chicago, which is really safe. A business owner has been kinda pushed out- a partner has been kinda pushed out, and they're using his signature stamp. Back in, I think it was February 18 or something of 2017, there was an email that went out from not him, but his partner, who said, "Don't use this guy's signature stamp without his approval." We went in there. I took everything off of computers that I could find. I took the whole Outlook file from forever, and we restored it. We found the email that gave that direction. [00:14:00] Well, everybody's ... Yeah, they deleted, or no one remembers that it really happened. We went in, and we searched for it, and we found it. That's one of the complaints ... That's what you do, you look at the complaint - what are the issues that we're bringing up? Then you get the facts to back it up. That was just one example, but it's just crazy what people are doing, and the technology is allowing them to do it easier, to be honest with you. That's why you need internal controls, approval processes, and things like that. Blake Oliver: Yeah, yeah, because people think, "Oh, I'm gonna get rid of the paper checks ..." Yes, it solves one problem, but then it creates a whole host of others, [00:14:30] which is now you've got people accessing online banking, perhaps. Dawn Brolin: Exactly. Blake Oliver: I saw business owners in my practice who'd give the employee full access into their online banking, so they could do bill pay- Dawn Brolin: Yeah, their own their log-in. Blake Oliver: Yeah. Dawn Brolin: I have clients, all I have to do is say to them ... I love it when you go out ... They have those videos, where you go out and you say, "Hey, what's your password to your email?" and they tell it to them, like on the Facebook Live, or whatever it is. David Leary: We should actually do that here, for accountants [cross talk] we should test them once- Dawn Brolin: Yeah, just test some people.  David Leary: We'll go walk around with our microphones, and be like, "What's your password?" and see if somebody just spits it out to us. [00:15:00] Dawn Brolin: Really cool ... Yeah, you just say, "Oh, hey, do you listen ..."  Blake Oliver: We're security researchers- Dawn Brolin: "... do you listen to us on Google podcasts? What's your Google password?" And just see if they give it to you ... You'll probably get a ... I don't know. Blake Oliver: We talked about a study. Some researchers did this- David Leary: Oh, the chocolate; the chocolate study.  Blake Oliver: Yeah. It was like a German university, and the researchers there just stood outside wearing the logo of the university and asked people for their university log-ins in exchange for chocolate, and 40 percent of the students gave their passwords away. Dawn Brolin: It's [00:15:30] like, no ... But here's what you're gonna find. You're gonna find one of a few things, right? "Hey, what's your Google password?"  "You know what? I have no idea, but I have a notebook with all my passwords in it. Let me get that outta my backpack.". Blake Oliver: Right.  Dawn Brolin: That's gonna be one answer. Blake Oliver: Oh, man ...  Dawn Brolin: Then, you're gonna have another answer, where, "Okay, my password's ... Oh, yeah ... I always use my last name and birthday ..." or whatever. They're gonna say, "I use this password for everything ..." You'll see people here, and if you do it, ask these people, "Where do you hold your passwords? Where do [00:16:00] you hold your passwords?"  Blake Oliver: Most of them, it's gonna be like an Excel file- Dawn Brolin: In a notebook, or it's in an Excel file, or, "It's on my desk ... A Sticky Note on my monitor." What? All of my passwords are in Password Keeper or LastPass. I have them, because I never remember my passwords, and I'm not gonna have them on paper; like, "Oh, I have them in my notes on my phone." Are you kidding me? Well, that's nice and secure. Blake Oliver: Yeah, very secure, very secure ... Dawn Brolin: They're entering them into information systems, like- David Leary: Well, you could just put them in your email, and email them to yourself ...  Dawn Brolin: Well, yeah, and then you have a sent item ... You could pin it to the top - "Here are all [00:16:30] my passwords ..." This episode of the Cloud Accounting Podcast is sponsored by Right Networks. In a perfect world, everyone would have 100 percent of their clients on a cloud-based accounting system using cloud-based apps, but the world isn't perfect, and clients have a wide range of needs. And for some, this means using desktop-based software. That's where Right Networks comes in.  Right Networks is your 100-percent accounting-focused desktop in the cloud that also includes an ecosystem of over 250 connected apps. As you and your clients take the journey to the cloud, Right Networks will be at your side innovating the best ways to leverage the true cloud future by investing heavily in cloud apps, like Transaction Pro and Autofy. They've created an always-on environment that supports 24/7 data transfer. Right Networks also offers no scheduled downtime for maintenance or application updates and meets the industry's highest security standards.  To join the more than 50,000 firms that use Right Networks daily with their clients, head over to CloudAccountingPodcast.promo/rncloud. That is Cloud Accounting Podcast dot promo forward slash R-N-C-L-O-U-D. And be sure to visit the Right Networks booth in San Jose at QuickBooks Connect 2019. Blake Oliver: Before we go, I really wanna hear some good horror stories or some good case studies. What's your favorite? I mean, it's not a good thing- Dawn Brolin: There are so many ...  Blake Oliver: -give us a really juicy one, like top of mind. David Leary: The creative ... You know when these people do something and it's so genius ... Those are the ones [00:18:00] I love. I'm like, "This is the smartest person in the world!"  Blake Oliver: Yeah. We were talking about the guy who was using the IRS to launder money. He was paying the payroll taxes, but on the check, he would write his own social. Dawn Brolin: Right, and he was paying his estimated payments, essentially- Blake Oliver: And then getting refunds.  Dawn Brolin: Refunds. Oh, yeah. That's a good one. Blake Oliver: It's annoying to me when people aren't even somewhat clever. They're just taking money; writing checks to themselves. I'm like, "This is stupid ..." Anyway ...  Dawn Brolin: The problem is they don't realize that when they actually document- when [00:18:30] they sign something, or write something, or do something, it's documented. If it was a negotiation, like Bitcoin, that's a whole 'nother thing ... I'll tell you; this is a good one. This is a good case I did, a year ago, about a year ago. It was a husband and wife who became ex-husband and wife, because he threw her down the stairs. That happens. He went to jail for seven years. While he's in jail, the ex-wife runs his landscaping business. She's running her own landscaping business and running his landscaping business, okay?  Blake Oliver: They previously had [00:19:00] one together, or ...?  Dawn Brolin: Yeah, they previously had one together, but then they got ... You know, he threw her down the stairs, and she was like, "Well, I'm going to have my own landscaping business because you threw me down the stairs ..." or whatever. So, she actually does the accounting. She's sending the crew out. She's cutting the checks. She's doing all this stuff. Now it comes to me. She wants more child support, but he's been in jail, so he makes probably one cent an hour or whatever. But she's running his business ... Lucrative; cash all over the place. You mow a lawn; you get 50 bucks; you put it in your pocket; you walk away. That's not being reported, but that's a whole separate issue. She wants child support. [00:19:30] So, they hired me to go in and do a forensic analysis of his business account and her business account. We were able to very easily show where she would pay herself, because she wrote a check out to herself and wrote whatever on it. You could see she would pay for the subcontractors that were doing work for her out of his business, and all of these things that I could tell what was going on. Then, when you go in and look at that, and it's so easy to pick it up ... If you make a check out to yourself, you gave yourself money, what was it for? Well, guess what? If she [00:20:00] put on there subcontract labor for herself, like doing accounting work, and bookkeeping, and she paid herself, did you claim it on your tax return?  We pull the tax return. We say, "Okay, well, did you report this?" "Well, no, I was paying myself for my husband's business." Yeah, that's called income. The best part about the story is that she represented herself in court. Blake Oliver: Oh, no. Dawn Brolin: I went to court, and I'm on the stand. She's asking me just questions that I'm just like, are you serious? The judge's got his hand on his head. I mean his head on his hand or whatever, and he's like, "You [00:20:30] can't object to that answer, miss," and all this other stuff. He's just like rolling his eyes at me. I'm like, no kidding. How do you think I feel? I have to answer dumb questions [cross talk] That was kind of a good one-  David Leary: -could Blake and I show up and sit in the back as press and watch one of these hearings? Dawn Brolin: Oh, definitely. Those are public cases. Cases are public, man. I'll let you know where I'm going on the 18th. You can come visit. You can come and watch how I will rock and roll, because I'm gonna tear that one apart. It's fun. I do depositions, and I have to- I create an expert report with what I'm relying on - the facts and figures. [00:21:00] This one case that I'm gonna be at, I'll pull the sentencing guidelines from the IRS pubs. I'll pull their- they have Internal Revenue manuals that they follow when they do audit. So, I specifically go to those businesses that are primarily cash-type businesses, which, hair salons are famous for that, if you will. Not that they don't accept other things. Everybody really accepts credit cards, but what about the cash? You know, you're still doing ... You see, you go in to get your nails done, and you see "Cash Tips and Cash Only." Well, why do you think they're doing that? I mean, come on ... David Leary: Or, "Hey, 20 percent off if you pay cash." [00:21:30] Dawn Brolin: Yeah. I mean, come on. So, anyway, it's kinda fun stuff. I don't remember the last time I couldn't find something wrong. Partners stealing from partners is so easy [cross talk] Oh, you didn't have a company trip to the Bahamas? Oh, no ... Oh, there's four tickets? Oh, I see. Are these your kids? Because on the front of your tax return, it shows they're your dependents. Are they working in your business? Oh, they're four and five? Oh, this is not really working out well for you. Blake Oliver: You mean I can't employ my four-year-old son?  Dawn Brolin: Oh, boy, don't even get me started on a particular [00:22:00] speaker at a particular conference, who was promoting strategic tax deductions that was extremely inappropriate. We can talk about that offline. But people are telling people to do that, and those people are gonna get caught, because, if I hear it, I'm reporting them. I'm not- I will have none of someone, a professional, telling other professionals that this is okay. You cannot write off your swimming pool. Okay, people? I don't care if you bring your clients over, or your customers, or your employees, or whatever, that's not a write off. You can't [00:22:30] call that part of your home office, people. It's just not a thing. Sorry, David. You're gonna have amend your returns. David Leary: I record the podcast in my closet, and all my wife's clothes are in there, and they act as a sound barrier. Can't I just buy her new clothes, and it's a business expense?  Dawn Brolin: Of course. Yeah, it's a business expense. It's part of your noise-buffering system? Yeah, of course. Absolutely. Listen, I use my dogs. I use my dogs for their bark for some of my things- recordings that I do. So, I pay the dogs. They can't go to the bank. They've got little legs, so, of course, I'm gonna pay them and deduct it as [00:23:00] part of my voice-over career. Blake Oliver: I like that, yeah ... Dawn Brolin: It's stupid. So funny. Blake Oliver: That's a good one.  David Leary: Dawn, you're super-excited about this. Feels like it's the dream for you. You've found your niche. In all the accounting directions you could go, this is the one for you. You're like the detective. You're like a cop. You get to kick people's ass, you know?  Dawn Brolin: Absolutely. For me, the hairs on my arms - which, I have hair on my arms. That'd be the first observant thing for you, David ... I do have hair on my arms ... Whenever I [00:23:30] get a call for a new case, my hair stands straight up, and I get giggly, and I grab the nearest eye-black that I can find, and I wipe it on my eyes. I put my bullet-proof vest on, and put my belt on and off I go, because I'm like, "Okay, someone stole from someone else. I'm not okay with that!" I love it so much that I'll put everything I can ... You have to be creative as a forensic accountant, right? Blake Oliver: Yeah.  Dawn Brolin: You have to think outside the box and think of how can I back into these facts? I come up with crazy things, like I need your schedule, for a hair salon. I want [00:24:00] to see your schedule, because I wanna see how many appointments you had that day and what deposits went in. You only had three credit card transactions, but you had eight clients, and you're only showing that you had five. Where the other three? People just don't get that connection. David Leary: You're just reconciling it. That's all you're doing.  Dawn Brolin: It's simple. Yeah, and it's not about really doing accounting in some ways. It's just there's something that doesn't make sense here.  David Leary: One and one equals one ... Dawn Brolin: One and one equals one, to them, but one and one equals two, to me. David Leary: I have some questions on the whole ... You're a certified fraud examiner, and obviously, [00:24:30] you're telling us you're going to different states to testify in court. Is there some sort of licensure that carries from state to state? How does the logistics of being in your profession work? Dawn Brolin: As far as going across state lines and whatever, being a certified fraud examiner, you're just a certified fraud examiner. Obviously, a CPA, those kinda rules run a little different, if there's reciprocation between the states and things like that. But going in as a certified fraud examiner and saying, "Okay, I'm testifying in court," there's no parameters around that. Blake Oliver: What does it take to become one? Dawn Brolin: Well, so, you go ... Again, [00:25:00] Association of Certified Fraud Examiners. They're based in Texas. They're wonderful. You can either take their course in self-study, or you can go do it in person. Then you take four tests, four exams. What I found ... I went to D.C., and I went for four days, and I sat in class all day. They brought FBI agents ... I was like this, "Can we do this again?"  David Leary: You lost your mind, I'm sure.  Dawn Brolin: I lost my mind. I was like, "Oh, my goodness ... I'm such a nerd. I can't ..." Blake Oliver: The accountants who carry guns, right? Dawn Brolin: Yeah. Hey, listen, if I can't be a cop; like a real police officer ... I wish somebody had told me. I would've went into the FBI, or CIA, or something like that. I had no [00:25:30] guidance for that. Blake Oliver: She's deep undercover. Dawn Brolin: I'm hardcore, yeah [cross talk]  David Leary: Yeah, somebody's like, "Hey, you should be an accountant. It's great!"  Dawn Brolin: Yeah, really! Let's do it. That's why I have a Jeep Wrangler. I just gotta shade the windows a little bit more. They need to be a little darker. I'll put on my glasses, and sometimes, I just put a suit coat on, and I have shorts on, to make it look like I'm in the Secret Service- David Leary: Do you have big binoculars? The big old ones-  Dawn Brolin: I do, and I have the earpiece thing and everything. I got all that stuff. Rollin' ... Rollin with Brolin. But no, you can go take the test and then you become a certified ... There are requirements; if you go to the ACFE.[com], there is a point system. So, you [00:26:00] have to have a certain number of points between education, between experience; you have to get letters of recommendation that you've done casework. It's similar to the CPA, where you have to have the two years' experience and all that stuff; a little less heavy than, obviously, the CPA - which is insane, that whole thing. Being a certified fraud examiner is, for me, really changed things, because I learned a lot of strategies through that class, and things that I already knew as an accountant, but looking at it in a totally different angle. As, there's obviously ... As [00:26:30] a tax preparer, you're preparing taxes based on things your client has given you, and that's the best we can do. They don't let us audit their books before we prepare tax returns. But, at the same time, because I deal with IRS, criminal, and civil investigation, all these other things, as a preparer, it's made me change the way I approach a tax return, and the fraud that's out there, and that kinda stuff. I look at the comparatives for the small businesses and say why is this so high this year? Like, I don't just prepare the returns and say, "Oh, you owe this much money, or you're getting this refund." I look at the Schedule Cs and I'm like, "Wait a minute, this is really [00:27:00] off. Why was your revenue so much lower? Like, what happened?" I've become a little more inquisitive. Not that I have to, but I do, because I want to be more diligent. You know, the last thing I want is one of my tax returns to get audited, and I screwed it up, or I at least didn't do- add up the deposits, which even that is ... You wanna do a due diligence. Add the deposits and see if it matches gross revenue. That doesn't even matter, because in this case I'm working on now, she took checks to the bank and then took cash out of the deposit and deposited what she wanted. If you just added deposits, you'd think she made X, when really, [00:27:30] if you look at the deposit slips, it's way more than X. It's just a whole different mindset, and it's a new level of paranoia. I think that's probably the biggest thing. Blake Oliver: Well, I love it. And it's been so great talking to you, but you've gotta go do your session. Dawn Brolin: I gotta go teach to you guys, because I don't think- I think you're the only ones left. So, I'll be talking to myself, and I'll just let you listen. Blake Oliver: We're gonna come listen. So, Dawn, if people wanna get in touch with you online, where's the best place for them to do that? Dawn Brolin: I'm very active on Twitter; @DawnBrolin is a really good way to just catch up on [00:28:00] what I'm posting. LinkedIn, I try to get relevant fraud content out there as much as possible. I think Twitter is probably the best. That's where I live mostly, and I enjoy that. I'm building this fight against fraud, and I've got the FightAgainstFraud.com, and the Fraudcast that Cloud Accounting and I are gonna talk about, coming up here in the future, because- Blake Oliver: Oh, awesome. Yeah.  Dawn Brolin: -we need to get the word out. Our small business owners are in danger. They really are. If people don't start taking that seriously, we're gonna lose those small business owners and we're gonna have a bigger problem in the United States than we have ever had before, because [00:28:30] we do carry the country. Blake Oliver: I love that mission. As always, you can find me on Twitter. I'm @BlakeTOliver.David Leary: And I'm @DavidLeary. Blake Oliver: Dawn, thanks so much. Dawn Brolin: I love you guys. Thank you. I'm so proud of you-  David Leary: If you want ... I know you held in all these cuss words, to be very professional ... If you wanna just rattle them off now, we'll just beep them-  Dawn Brolin: I just F*$%&#@ love you guys. This is unf*#$ingbelievable! Oh, $&%^, sorry, that's absolutely unprofessional, but they said, "You know what? Got a whole bunch of $*#&@ards around here, so we've gotta be real careful about what we're saying. And they're accountants, dumb as #$%* ... My [00:29:00] favorite one is douche canoe, If you don't- Blake Oliver: I've never heard that. That's a new one for me.  Dawn Brolin: That's a good one. I saw it on Bachelorette. Such a good word. So, anyway, bleepity, bleep, bleep, bleep. David Leary: Podcast out ...  Dawn Brolin: Was that loud? Did I say the words loud? 
  7. SponsorRight Networks: https://cloudaccountingpodcast.promo/rncloud Show Notes 00:53 – Meet Dena Oberst, CEO of Gable Tax Group 01:45 – Meet Diane Yetter, president of Yetter Tax, and founder of the Sales Tax Institute 04:11 – Diane gives a brief overview of the South Dakota v. Wayfair decision  | AICPA   05:26 – According to South Dakota, a business’s physical presence is less important than its economic presence  06:50 – You gotta get up pretty early in the morning to go hang with the Supreme Court crowd!  08:37 – Most states, except Kansas, have adopted the $200k/200 transaction threshold | TaxJar  09:55 – If a company sells through Amazon, or other major marketplace platforms, there's nowhere to hide.   10:45 – To be registered, or not to be registered – that is a huge question right now  14:50 – States are attempting to ease the burden on smaller sellers through Marketplace Facilitation laws | Bill Track 50  17:10 – With the constant changes to the sales tax laws, which can vary state by state, it’s imperative to constantly monitor thresholds, and transaction counts 21:47 -- Who has to file? Who doesn't? Who knows? All states have yet to reach a consensus regarding the particulars of the new sales tax laws  25:38 – While it’s a mess right now, Diane believes things will start falling into place in the next five years.  26:21 – Business is definitely booming for sales-tax specialists, and firms, such as Gable Tax Group as CPAs scramble to help their clients meet these new and ever-changing sales tax requirements   28:39 – Diane doesn’t foresee any interference from the federal government, because it would only cost them more money to jump into the fray 32:06 – While the states are mostly self-policing the workings of the sales tax laws, there are some states that still want to forge their own seemingly senseless paths  33:46 – Economic nexus applies to all companies, not just sellers of physical goods  34:35 – Accountants and bookkeepers might want to exercise some caution with add-on products and bundling, as it can create additional confusion, and taxation  38:22 – With the shift from a manufacturing to a service economy, states are on a mission to replace lost revenues 39:57 – As accounting and bookkeeping practices continue to expand services, education, and understanding of the sales tax laws is critical Connect with Our GuestsDena Oberst: https://www.linkedin.com/in/dena-oberst/  https://twitter.com/PasadenaDena https://twitter.com/gabletaxgroup  Diane Yetter:  https://www.linkedin.com/in/dianeyetter/ https://twitter.com/YetterTax https://twitter.com/SalesTaxInst SalesTaxInstitute.com/accountex2019 Get in TouchThanks for listening and for the great reviews! We appreciate you! Follow and tweet @BlakeTOliver and @DavidLeary. Find us on Facebook and, if you like what you hear, please do us a favor and write a review on iTunes, or Podchaser. Interested in sponsoring the Cloud Accounting Podcast? For details, read the prospectus. Subscribe Apple Podcasts: 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 TranscriptDiane Yetter: Here's the thing that you have to remember - economic nexus is not just for online sales, and it's not just for sellers of tangible personal property, it is for all companies; even a company like Dena's and mine. We have to monitor, because I have clients all over the country; I think you have clients all over the country. So, we have to monitor - do we exceed the economic thresholds? Blake Oliver: You're saying that I have an accounting practice. I'm in the cloud. I'm serving clients everywhere. I have to start counting, too. Diane Yetter: Yes. Blake Oliver: Oh ... Welcome [00:00:30] to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: I'm David Leary. Dena Oberst: I'm Dena Oberst. Diane Yetter: And I'm Diane Yetter. David Leary: Thanks for joining us. We're at Accountex USA in Boston, here to talk sales tax. Do you wanna introduce yourself? Basically what firm you're with and some background, and then we'll jump into sales tax, sales tax sales tax ...  Blake Oliver: We wanna learn. So, how about you go first, Dena? Dena Oberst: Ok, great. Well, I'm Dena Oberst. I'm the CEO of Gable Tax Group. We're a sales tax outsourcing provider. [00:01:00] What we do is we do multi-state sales and use tax returns for businesses, and we mostly support CPAs. We're usually working direct with accounting firms and bookkeepers to be their in-house sales tax department. Blake Oliver: Got it. So, I have a client that does e-commerce in like 20 states. I do not have the expertise to do those returns, so you guys will take care of those for me? Dena Oberst: Exactly. Usually, CPAs may do their sales tax return for the one state that they're in, but once you go multi-state, most CPAs say, "I hate [00:01:30] sales tax returns," and we love them. I've been doing this for 28 years. Blake Oliver: Gotcha. David Leary: It's like outsourcing your payroll, in a way. Dena Oberst: It's like outsourcing your payroll. Exactly. We handle all the payment processing, journal entries, everything; just like as if you had it in-house, but outsourced. David Leary: And Diane? Diane Yetter: I'm Diane Yetter. I am the president of Yetter Tax, and the founder of the Sales Tax Institute. I am the sales tax nerd. We provide sales tax education and resources through our Sales Tax Institute division, including [00:02:00] online classes. In fact, later this month, we're launching our next round of Sales Tax Jumpstart, which is a nine-week online live class. Accountants that need to know more about sales tax, that's a perfect venue for them to learn about that. Then we have tons of free resources on our website all about this economic nexus that I know we're gonna talk about, white papers, and things like that. Then, through Yetter Tax, we are an advisory firm. We don't do compliance, like Dena does. We help people [00:02:30] understand where they have to collect tax, what's taxable that they buy and sell. We can negotiate settlement agreements, help with audit defense. Then, we also our technology partners with the largest providers of sales tax technology. We partner with them and help our clients find the best solution for them, not just a one- we're not just a one-person or one-firm partner. David Leary: Got it. I randomly- not randomly ... I consciously go and I pick people that I wanna bring on to interview on the podcast, but, apparently, you [00:03:00] two knew each other from the past already in your career. Diane Yetter: We did. Dena Oberst: We did. We both- Well, I don't know if you started at Arthur Andersen, but ... I didn't start at Arthur Andersen. I started at Arthur Andersen as an experienced hire doing sales tax, because back in those days in the SALT group, there weren't a whole lot of sales tax people. Maybe did state income tax, but not SALT. Yeah, Diane and I go way back. We actually used to train on software together for a software provider back in the '90s. Blake Oliver: I'm gonna make a big ask of you, Diane-  Diane Yetter: Sure.  Blake Oliver: -which is David [00:03:30] and I had a brief episode/interview, post-Wayfair, like the week after that decision came out. Since then, we haven't talked about sales tax. Diane Yetter: Oh, gosh. You guys have missed out a lot. Blake Oliver: I know. I'm wondering if you can ... I know you just did a three-hour class, and we don't have three hours, but if you could kinda give us - for the uninitiated - what is the landscape of sales tax in the United States, post-Wayfair? David Leary: Or, even just talk about what the Wayfair decision [00:04:00] was. I think people have heard about it, but, even in those days, when we brought in somebody to talk about that, we had 200 downloads at the time. We have lots of new ears and new listeners and maybe they haven't heard of it yet. Diane Yetter: Briefly, what the Wayfair decision did is ... How I describe it is it turned the sales tax world upside down and inside out. Prior to June 21st, 2018, companies were required to collect tax where they had physical presence. That physical presence could be through their own people, through independent contractors, [00:04:30] through paying commission payments, or referral payments, through ...  States had enacted what we called click-through nexus. A lot of people referred to it as the Amazon tax, because it was the Amazon model that they would pay people that referred people to buy things off of Amazon. They would pay them a commission. That's what the states went after. That started in 2008, in New York. But you had to have physical presence. Things like having inventory in a warehouse, which has caught a lot of Amazon FBA sellers with physical presence. That [00:05:00] was the rule - over two major court cases going back to 1967 - that you had to have substantial physical presence. Blake Oliver: So, for example, I'm selling something out of my house in California, and I'm shipping outside of California. In the past, as long as my operations were all in California and my inventory was there, I didn't have to deal with collecting sales tax from Wisconsin or something like that-  Diane Yetter: Correct. You'd collect for California, but that was the only state you had to worry about- Blake Oliver: That was it. Okay.  Diane Yetter: What happened in the Wayfair decision is [00:05:30] South Dakota passed a law in 2017 that said, "We don't think physical presence is a requirement. Rather, it should be economic." So, South Dakota passed a law that said if you make more than $100,000 of sales or 200 transactions into the state of South Dakota- Blake Oliver: Which, are very different things, right? Diane Yetter: Very different. Exactly, exactly ... That constitutes substantial presence. They said, "We don't think physical needs to be part of that." The [00:06:00] way the South Dakota law was written, it was able to be fast-tracked, so we've saw the fastest movement from a law being passed to a U.S. Supreme Court decision. The other kind of little nerdiness of it is the case is South Dakota v. Wayfair - most tax cases are taxpayer v. state, because it is the result of an audit. The South Dakota law required a proactive registration, as of May 1 of '17, and anybody that did not register that South Dakota believed met that threshold, South [00:06:30] Dakota sued. That's why the case is the reverse, and it was initiated-  Blake Oliver: Because they sued Wayfair. Diane Yetter: They sued Wayfair for not filing that proactive registration that was required. Blake Oliver: Gotcha. Diane Yetter: So, the Supreme Court, fast forward ... I was at the oral arguments; didn't get to see the whole thing. Blake Oliver: That's still super cool. Diane Yetter: I got in line at 4:30 in the morning, and I was seven people too late to get in for the whole thing. I saw the first two minutes and then just hanging out and doing [00:07:00] all that. It was quite fun to be there. It was exciting-  Blake Oliver: So, you tailgated-  Diane Yetter: I did, I tailgated. Hint: if you wanna go, you can actually pay homeless people to go and get in line. So, next time, I will go find a homeless person and pay them a hundred bucks to go get in line at midnight. But what the Supreme Court came out, June 21st - it was actually in the middle of our Basics of Sales Tax class, which was kind of exciting - what they said is the Commerce Clause, which is what it's based on, [00:07:30] actually does not have the word physical in it. It requires substantial presence. Blake Oliver: So, what is that? Yeah, that's the question, right?  Diane Yetter: Exactly. What the Court said is, "We believe that South Dakota's law meets the Commerce Clause requirements." So that has now become the standard of $100,000 or 200 transactions. There's some other nuances, like no retroactivity and not an undue burden on taxpayers. There's been a lot of discussion about what [00:08:00] is an undue burden, and then, also, as you compare state sizes from South Dakota to a state, say, California, New York, Texas, is $100,000 or 200 really equivalent in those states?  Blake Oliver: Right. Wisconsin just picked that as the threshold. Diane Yetter: That's what most of the states picked was the $100,000 or 200, coming out of the gate, correct.  Blake Oliver: Okay, and the Supreme Court ... They didn't weigh in on whether that was appropriate or ...? Diane Yetter: What they said was, for South Dakota, it was appropriate. Blake Oliver: Oh, South Dakota, okay. So, for South [00:08:30] Dakota, it was appropriate, but they didn't actually say it's appropriate for every other state. They just said it's possible-  Diane Yetter: Correct.  Blake Oliver: It's possible, now, to do this. Diane Yetter: Correct. What most of the states have viewed, except for Kansas, is that that is the threshold. You shouldn't go below that threshold. Blake Oliver: Okay, but that threshold can be very low, if you're selling $10 widgets. Diane Yetter: Correct. Blake Oliver: 200 of those is not that many- not that much volume ... Not that much in terms of dollars. Diane Yetter: Correct. Blake Oliver: So, that's creating ... I'm [00:09:00] thinking to myself, if I have- if I'm selling a low-dollar-value item, maybe I just stop selling to those states, because I'm not making enough money to pay for the compliance. I guess, Dena, we can talk about this - how much it actually costs now to comply. Dena Oberst: Right. Blake Oliver: The big-picture implication of all this is, now, I'm a small seller in California, and I'm selling to people in every state. What [00:09:30] do I do? It's overwhelming, right? Dena Oberst: It is overwhelming, and a lot of businesses that are selling in multiple states, whether it's just e-commerce ... Sometimes, that's just one of the revenue streams - it's not their only revenue stream - is to use one of the big marketplace platforms. But the number of transactions, like Diane said, that has come out, a lot of people are like, "How do I comply with that, and what happens if I don't?"  Now, if you went back prior to this last- I would say the last 12 [00:10:00] months, the states had the list of inventory. They knew exactly where Amazon's customers were. Those customers were actual- those businesses were getting letters, so they knew who they are. It's not like you can just hide. Again, you sell whatever, 200 coffee mugs- Blake Oliver: So, people who are using Fulfilled by Amazon, I understand that's where Amazon takes your inventory and distributes it around all of their warehouses. There's like 26 states, or ...?  Diane Yetter: It's growing. Missouri, [00:10:30] Idaho, and Oklahoma have warehouses that just opened or are due to open in, and those are three brand-new states that had not had warehouses before. Blake Oliver: Basically, if you used FBA and you wanna be compliant, you kinda have to ... You were already filing in pretty much all those states [cross talk]  Dena Oberst: Well, that's- Diane Yetter: You should have been filing.  Dena Oberst: That's kind of the confusion. That's where people like Diane and I come in and say the economic nexus, the revenue threshold, is the newest thing since the Wayfair, but the physical presence is not dead. If you were selling on Amazon and had goods and inventory, [00:11:00] you still have to register. It has nothing to do with the number of threshold- the number of transactions.  That's where a lot of businesses are confused. They call me all the time ... "But, Dena, maybe I have 200 ..." I'm like, "Yeah, but you had physical presence there. You need to register. There's a lot of other nuances I won't even get into. You don't have time. I'll talk about the Marketplace Facilitator law, which adds even another layer of confusion to businesses. But I would say, on the compliance side, for sure, the volume of returns for any business has grown [00:11:30] substantially, and I would say probably by 2020, most of those companies should be filing in every state. Blake Oliver: You touched on, or you mentioned the risk of noncompliance. What are those risks, if I just ignore ... I'm in California ... What's South Dakota gonna do to me? Dena Oberst: Well, this is what I tell, and then definitely let Diane opine on it ... I always tell businesses, all the time, "Do you wanna lose 10 percent of your gross revenue in taxes that belong to your consumer?" They're like, "Well, no!" I'm like, "Well, you [00:12:00] are now taking the responsibility for it. Why not just find a solution to implement a process, whether it's technology and outsource, and collect it from the consumer?" It's a consumer's tax. These businesses shouldn't be absorbing that as a liability, and it's really risky. If they're not gonna do it, I always say, "You better prove something on your books ..." because 2020 is- we're gonna be a second year into this, and it'll be really interesting to see how the states enact- David Leary: You wanna basically build the [00:12:30] proper system and have the proper system procedures, so all you're doing is you're just collecting the tax and passing it on. You wanna eliminate the burden. It's not your tax, as a small business owner. It's just, you just have to create a process to move that money through, and when you do that- Blake Oliver: Remit it properly.  David Leary: -you just can forget about it. Diane Yetter: Correct. Blake Oliver: But that's not- that's easier said than done, right? Diane Yetter: It is.  Dena Oberst: Well, that's true, but that's why there's- David Leary: That's why there's cloud accounting, right?  Dena Oberst: Yes, that's why there's platforms out there that can help. There's a whole host of them, as Diane mentioned. They do a lot [00:13:00] of implementations. There's definitely a lot of options out there for businesses, large and small. David Leary: I think I've seen some of the e-commerce conversations where people are- they're worried about the big companies, like Amazon, turning over data to the agencies or being forced to collect it on their behalf. It gets very, very messy, because then, if you're shipping some stuff on your own, and some stuff through Amazon, Amazon can't file your return for you. It's very complex-  Dena Oberst: Some of it can, right? I know [00:13:30] Diane's gonna have a whole topic on it this afternoon about the Marketplace Facilitator, and how Amazon and some of those other platforms are now gonna be required to collect and remit tax on behalf of the sellers. Being on the business side, I don't have one client that just sells on Amazon. Blake Oliver: Yeah, how does that even work? Dena Oberst: They sell on their own website, and they have other platforms. If it says $100,000 in gross sales, that's gross sales; that's not taxable sales. We go back to that discussion, right, Diane? Is that really [00:14:00] gross sales, meaning the marketplace sales, and including the ones that you have from your own website? I tell my clients, "Yes, if you've met the threshold on gross sales, completely, whether or not Amazon's reporting on your behalf and you have the remainder, you need to register." Again, do you wanna lose 10 percent of your revenue? I don't think so. Diane Yetter: The states are starting to come out ... On our website, SalesTaxInstitute.com, we've got a couple of great remote seller charts, and economic nexus charts. We are [00:14:30] tracking whether or not the state has enacted Marketplace Facilitation laws. What that is, is it is the state's attempt to reduce the burden on the very small sellers. So, sellers that exclusively sell on marketplaces - Amazon, Etsy, eBay, Walmart, Google, all of those platforms - that the states are saying, "Individual seller, you don't have to be the one to register and collect. The marketplace will do that." They file a [00:15:00] single return for all their sellers. It lessens the confusion of the consumer. If you go on Amazon, and you buy the same thing, you could have three different situations. You could be buying direct from Amazon, in which case, they're collecting tax in every state. You could be buying from a third-party seller that does FBA, so they're registered in a number of states, or should be; or you buy from somebody that self-fulfills that maybe is only registered in their [00:15:30] home state. You can buy the same thing from three different vendors and get three different tax results. Confusing for the consumer, right?  Blake Oliver: Yes, right. Diane Yetter: What the states are saying is if you're selling through Amazon or any of the other marketplaces, the marketplace will take that responsibility. If you're a seller, you go on to the marketplace. You can't even turn those marketplace states on or off. Today, we're up to 37 states that have passed that. Blake Oliver: The market- So, Amazon is gonna collect ... When does that start? Is that already happening? Diane Yetter: It's already happened. Of the 37, there's 14 [00:16:00] that are not yet effective. We got a bunch coming on 10-1, and we've got a couple January 1. A bunch just came on July 1. That is gonna reduce the burden, but where the complexity comes in is, just as Dena was talking about, if you're multi-channel, which many sellers are - you sell through Amazon, eBay, Etsy, Walmart, and your own website - when you're figuring out if you've exceeded that threshold, what do you include? Some of the states say you have to include everything, like Washington. But there's [00:16:30] some other states that say ... For example, Arizona says if the marketplace is collecting, you exclude those, even though they otherwise say your gross sales. Now, as long as you can confirm - which all the big players have lists on their website that show, "Here's where we're collecting as of what date" - you get to exclude those sales. Now, if you're below the threshold, in Arizona, they go into effect 10-1; they're the only ones that's doing a phase-in for 2019. It's $200,000 in [00:17:00] sales, no transaction count. Exclude your marketplace. If you're below that, you don't have to register. In January, it drops to $150,000. In 2021, it will drop to $100,000. It's an ongoing exercise to continue to monitor your transactions, especially as we've seen a number of states ... We've had seven states change their thresholds. We had six of them originally enacted with a transaction count and then realized they caught a whole lot of [00:17:30] tiny sellers, so they've eliminated the transaction count and now just have a dollar threshold. Blake Oliver: That's good, because that transaction count seemed ridiculous to me.  Diane Yetter: Right. We're seeing that. Big states, like California, Texas, and New York are all at $500,000. Texas and California are dollars only. New York has an "And" test. So, it's $500,000 sales and 100 transactions." They're saying if you make one $500,000 transaction, you don't have to register. You still have to have 100 transactions in New York. But most states are an "Or" test. David Leary: If I'm [00:18:00] selling ... Amazon's gonna now remit and pay my sales tax for me, for some portion of my business. Is their official ... I know this is not the right analogy, but a 1099 ... It's kind of standard, right? You're gonna get a 1099, and it's very clear of what you need to do with that on your own personal income taxes or your business income taxes. Is there kind of that equivalent, where if Amazon pays this on these different states, you're getting a real form, or is it just gonna be like, "Here's the report ..." "Amazon - I'm doing air quotes here - Amazon created this [00:18:30] special sales tax report," and that's kind of what you get, and now you've gotta backwards figure that in? Maybe this is a question for you, Dena- Dena Oberst: Well, in the Amazon Marketplace platform, when you run the reports to do your tax returns, it'll actually list which transactions were reported by Amazon-  David Leary: It's broken down by each state, or ...  Dena Oberst: Right. They still wanna know the revenue. A business still would wanna know their revenue. They still need to know their products. From the tax perspective, in that column, it'll say Amazon reported the tax on behalf of the seller. Then, there's the other states [00:19:00] that still have tax turned on. Because, like Diane said, this is kind of a rolling thing, this Marketplace Facilitator law. It's not all states now. Some are in October, some are January 1, 2020. It's not all states, but probably by next year this time, it'll be all the states. I can't imagine not. It's actually listed on the report the sellers can see. This episode of The Cloud Accounting Podcast is sponsored by Right Networks. In a perfect world, everyone would have 100 percent of their clients on a cloud-based accounting system using cloud-based apps, but the world isn't perfect, and clients have a wide range of needs. For some, this means using desktop-based software. That's where Right Networks come in. Right Networks is your 100-percent accounting-focused desktop in the cloud that also includes an ecosystem of over 250 connected apps. As you and your clients take the journey to the cloud, Right Networks will be at your side innovating the best ways to leverage the true cloud future by investing heavily in cloud apps, like Transaction Pro and Autofy. They've created an always-on environment that supports 24/7 data transfer. Right Networks also offers no scheduled downtime for maintenance or application updates and meets the industry's highest security standards. To join the more than 50,000 firms that use Right Networks daily with their clients, head over to CloudAccountingPodcast.promo/rncloud. That is Cloud Accounting Podcast dot promo forward slash R-N-C-L-O-U-D and be sure to visit the Right Networks booth in San Jose at QuickBooks Connect 2019.  Blake Oliver: Even if I'm exclusively selling on Amazon and some of these other- all these other marketplaces that are now going to collect and remit on my behalf, I still have to register in the states where I have exceeded the threshold?  Diane Yetter: Maybe- Dena Oberst: I was gonna say, maybe. If it was a gross receipts state, maybe. Diane Yetter: The states are starting ... If I can just answer your question quickly, some of the [00:21:00] states in their Marketplace legislation require like a 1099 form, though it's a certificate. Think of it as almost even a reverse exemption certificate that the marketplaces will need to provide to the sellers. That is one of the things that the states are putting in there. There's a lot of crazy liability issues that are being worked through. There's a task force that the Multistate Tax Commission has put together on marketplace facilitation. I'm on that task force. We had our first call last week. We're [00:21:30] working on trying to figure out how to come to a happy medium between the states, and the sellers, and the facilitators, in terms of shifting that liability and responsibility, and who will have to issue certificates or not. All of that is kind of evolving. What the states are seeing is, now, to your question about do I have to file if I'm strictly on a marketplace and they're collecting? Some [00:22:00] of the states say yes. A state like Washington that you have to file the Business and Occupation tax, which is their gross receipts tax on the same form, they definitely want you there. Some of the states want you to include the sales, and then there'll be a deduction line.  Some of the states- New Jersey has come out and said if you're strictly a marketplace and it's collecting, if you're already registered, we're gonna put you on inactive status. Then, if you start making sales that you need to collect, just call us, and we'll make you active again. Some of them are saying cancel your registration and then [00:22:30] re-register. We have the same question if you drop below the threshold - what happens? The states are figuring it out, but they're ending up with a lot of zero returns, or very low dollar returns that are very expensive for them to process, so the states are still figuring it out [cross talk]   Blake Oliver: It's expensive for the businesses to file- David Leary: It's a burden for both sides, right? It's expensive for both sides to track zero-  Diane Yetter: Right, it is. It's a burden for both sides. Exactly. Dena Oberst: Which I would say is why it's the greatest change, I would say, in the sales tax since I've been doing it. This has been the greatest change where it happens- probably every week, every month, there's some change. It's really hard to advise [00:23:00] clients. Like we were talking about earlier, you get clients to register because they met the threshold, and then they come up with a Marketplace Facilitator. Now what? They're already registered. What do you do? Some states say you can cancel your registration. Some say you can't. Blake Oliver: Yeah, and do you have to file separately? Like, I sold everything on Amazon. They're gonna report/remit. Do I file my own sales tax return, too?  Diane Yetter: In some of the states, because the states want to see the revenue, and then, you take your deduction. Blake Oliver: Oh, you [00:23:30] take a deduction, got it. Diane Yetter: You take a deduction. You file a zero return, but it's a way for the states now to get data that, when they go to audit the marketplace, they know these are the sales that should have been reported, because they're getting it that way. It's a lot of data analytics that the states are trying to use the information for-. Blake Oliver: But not every state does it that way. They're all different. Okay-   Diane Yetter: But not every state does it that way, exactly.  David Leary: Is there an end to this? Every month, every quarter, somebody's discovering something - "Oh, this is kind of broken in this new system," and they're adjusting, changing the laws ... Is this gonna- three years down the road, things ... Is this gonna stabilize [00:24:00] here? Diane Yetter: I think it will. We're definitely getting- we're getting close. We have all but two states that have enacted economic - Missouri and Florida. Florida has all already pre-filed legislation for next year. Kansas came out with an administrative; they tried to pass it twice. It got vetoed by the governor because it was bundled in with some other issues that she didn't want to sign. Kansas came out, administratively, and said, "Under our existing law," which a number of other states did, "we're [00:24:30] going to impose it, except we do not believe we can authorize thresholds, because that would be granting an exemption which requires legislation." So, Kansas has a zero threshold, starting October 1. People have appealed to the attorney general. The attorney general of Kansas has said that they will come out with an opinion before October 1, when it's effective, so we'll see on Kansas. But otherwise, Missouri and Florida are the only ones.  The marketplace, as I said, we've got 37 that have passed it. The only two that are possible, yet this year, are [00:25:00] Michigan and North Carolina that have it proposed, but they're still in legislative session. Most of the legislative sessions have ended, so were waiting til next year to see what's gonna happen. But we do have cleanup. We have administrative rules. Illinois passed some goofy rules that go into effect next July. Switching the sourcing rules; how they wrote it, it's unconstitutional, under the Illinois Constitution. We're hoping there'll be some cleanup legislation in the [00:25:30] veto session this fall; if not, early next year, if there'll be ... There's coalitions of people getting ready to file a lawsuit against Illinois. Right now, yes, there's a lot of turmoil. It's hard to stay on top of it, but I think it'll slow down after next year. Then, I think the next stage will be as audits start happening. So, three to five years out, we'll probably now see some of the administrative things get worked out a little bit more. Blake Oliver: So, Dena, [00:26:00] your business must just be booming at Gable. Dena Oberst: It is booming. Blake Oliver: To me, this resembles payroll. Like David said earlier, a lot of firms used to do payroll for their clients. Pretty much everybody that I talk to has gotten out of it and outsources that now to a payroll provider. So, do you see that- is that where sales tax is headed? Dena Oberst: Well, absolutely, because small companies ... It's the small businesses, the e-commerce businesses that are impacted the most. The ones that are well-established are already filing sales tax [00:26:30] returns everywhere, based on physical presence, and they just don't even have a tax department, let alone, sometimes, an accounting department. You're usually working with the CEO or the founder and some salespeople. They're never gonna have that in-house. Yeah, it's definitely been a good solution for the e-commerce businesses to have an independent, because, quite frankly, people like me usually sit in the Big Four accounting firms, and it's kind of untouchable for a startup company to have a sales tax compliance team. Yeah, we've definitely been [00:27:00] popular in this last year. Blake Oliver: I know you're working with CPA firms. I'm a CPA. I have clients that have nexus, all this stuff, and I wanna pass it off to you guys. You guys will take care of that. Do you also work direct with a lot of businesses [cross talk]  Dena Oberst: Oh, absolutely. Absolutely. Yeah, we work direct with businesses all the time, but really, since the Wayfair decision last summer, we've just been focused on working with the CPAs because that's where all the businesses go. They go to their bookkeeper and their CPA, saying, "Help, what's going [00:27:30] on with Wayfair?" or, "I got a letter. How do I comply?" Most CPA firms, again, don't specialize in sales tax, so where do they go? Are they gonna go to their competitor and refer their client to a competitor? No, they're not. Gable Tax Group is gonna be the sales tax guru for them to go to keep the competitors out from poaching their clients-  David Leary: So, I can pretend I have a sales tax department. I'm like, "Oh, great, I have a sales tax team. We can handle this ..."  Dena Oberst: That's right.  Blake Oliver: It's just like I handled payroll for my client, right?  Dena Oberst: Right. Blake Oliver: To them, I'm doing it, but really, it's [00:28:00] a payroll provider that I'm working with. Diane Yetter: Exactly. Dena Oberst: That's right.  Blake Oliver: Here's a question - what do you think the odds are that the federal government ever gets its act together, and Congress unifies the states? Why can't we have a system where we just file with one- David Leary: That's called the Avalara Short. They were short on Avalara, and then pushed for that decision? Diane Yetter: Yeah. I get asked this question all the time. There are, I think, it's three [00:28:30] current federal bills pending. Dena, object if you disagree? Dena Oberst: Nope.  Diane Yetter: Don't hold your breath. Dena Oberst: Yeah, that's what I would say.  Diane Yetter: It's not gonna happen. At this point, a couple of things to keep in mind. If the federal government is going to eliminate a revenue source for the states, the federal government must reimburse the states for the lost revenue. All but two states ... Well, we've got three that come on 10-1, but basically all but two [00:29:00] states already have a revenue stream. So, to repeal something that is already in place is not gonna happen. The only other time that I've really seen that happen is the Internet Tax Freedom Act. When that came out, there was legislation that said states cannot tax internet access, if they didn't have it in place at that time. There were eight states that were grandfathered in when the bill went permanent, under [00:29:30] President Obama. It gave them until 2020 to eliminate it. We've got a couple of states that that's their legislation to eliminate it. That's really the last time we've seen the federal government go in and take a wholesale change to that. But keep in mind, that bill was passed when the internet was in its infancy, and when you paid AOL to have online access. Today, [00:30:00] it's kind of- it's your phone bill. It's a general commodity. I almost feel like the Internet Tax Freedom Act and no tax on internet access is almost not needed today, but that's in place. So, no, I do not think ... The other reason that I don't is the states all came together in setting that threshold, setting the $100,000 or 200 transactions and not going retroactive ... Nobody [00:30:30] has made it effective earlier than June 21st of 2018, other than a couple of- Blake Oliver: Knock on wood. Diane Yetter: Well, there's a couple of weird things called [cross talk] cookie nexus, but we won't get into that today. Blake Oliver: Is that with the internet browsers, like an internet cookie? Diane Yetter: It's a digital cookie. You guys drop cookies on all of your listeners' computers so that you can track them, and they come back. Blake Oliver: Oh, no. this is [cross talk] This is the problem with podcasting is it wasn't designed to track well. Diane Yetter: You don't.  Blake Oliver: Other than people [00:31:00] downloading, you have no idea- Diane Yetter: That people are listening. Blake Oliver: Yeah.  Diane Yetter: I drop cookies- Blake Oliver: Yeah, every website, pretty much-  Diane Yetter: Every website. That was considered physical presence, because in the states that did that, which were Massachusetts and Ohio, that was a physical presence. What is happening is the states all said, "We don't want the feds to get involved. We gave the feds ..." There has been federal legislation pending since- I remember the first one in 1988, and it goes back even [00:31:30] before that. The federal government has done nothing to that, and what the states are saying is, "We are doing this in a measured, appropriate way." There's arguments as to what is appropriate, "but we're being somewhat consistent; we're being reasonable. We're not going retroactive. Feds, stay out of it." What Kansas has done, that's kind of tipping the apple cart a little bit. Hawaii attempted [00:32:00] to go back to January 1 and, within days, got slapped down by all of their fellow states, changed it, and said, "We'll make it July 1." The states are self-policing on that, and the bills are getting passed. The only really goofy thing is New Hampshire with no sales tax. They've passed a law that now any state that wants to require a New Hampshire business to collect their tax must apply to the New Hampshire Department of Justice to be certified that [00:32:30] they're not putting an undue burden on a New Hampshire business. Blake Oliver: The state's having to register with another state. Diane Yetter: Right. Blake Oliver: How does it even work?  Diane Yetter: It's crazy- Dena Oberst: Yeah, it's crazy.  Diane Yetter: It's crazy. We haven't seen how that's gonna work. Blake Oliver: Can they do that to ...? [cross talk] the constitutional question, right?  Dena Oberst: That is the question.  Blake Oliver: So, more court cases coming, I imagine- Dena Oberst: Yes.  Blake Oliver: How are we doing on time? Because I have one more big question, I'd love to-  Diane Yetter: I'm good. Dena Oberst: Yeah, I'm good.  Blake Oliver: Okay, so, tax on services ... We've [00:33:00] been talking about ... I think we haven't said explicitly, but mostly about goods, right? That matters to our clients of CPA firms, but CPA firms, and CPA-firm owners are probably very interested to know what's going to happen. David Leary: Well, especially our Cloud Accounting Podcast listeners, because a lot of them have cloud-accounting-based practices and they're having clients now in multiple states. Blake Oliver: Yeah. We had clients, when I was in practice, in like 26 states, and not to mention, different countries. What do we have to look forward to, in [00:33:30] terms of the states passing ... Well, I guess, how many states collect tax on CPA services, or accounting services, or bookkeeping services? Diane Yetter: One, it's South Dakota-  Blake Oliver: South Dakota is the leader, here. Diane Yetter: Yeah. Here's the thing that you have to remember is when ... Economic nexus is not just for online sales, and it's not just for sellers of tangible personal property - it is for all companies. Most of the states use a gross [00:34:00] sales threshold. There's a few that use taxable sales, and a few that use retail, which means if you're a wholesaler, you exclude your sales for resale. Even a company like Dena's and mine, we have to monitor because I have clients all over the country. I think you have clients all over the country. So, we have to monitor do we exceed the economic thresholds? Now, in most states-  Blake Oliver: Let me hold you there, just for a second. You're saying that I have an accounting practice. I'm in the cloud. I'm serving clients everywhere. I have to start counting, too. Diane Yetter: Yes. Blake Oliver: Oh ... I [00:34:30] feel like a lot of accountants and bookkeepers don't know this.  Diane Yetter: Don't realize it. Blake Oliver: Yeah. Diane Yetter: Here's why - most accountants don't just do accounting services. In my workshop, yesterday, I had a mix of people that say, "I'm a reseller of QuickBooks Online, Xero ..." name your platform - because a lot of them do that, so that they get an additional revenue source. They are a reseller of cloud applications. There's a number of states that tax cloud software, and cloud applications- Blake Oliver: Oh, wow ...  Diane Yetter: Now, if it's [00:35:00] a gross sales state, you have to include your professional services revenue to see if you're above the threshold, and then you have to tax those. In my business, I've stayed out of selling on-demand webinars, because those are considered digital audio/visual, and that's taxable in a bunch of states. Blake Oliver: Wow. I did not know this. This is [cross talk] Dena Oberst: -about 12 or so states-  David Leary: This is why we aren't gonna charge for The Cloud Accounting Podcast. It's too much work.  Blake Oliver: Let me get this straight. This could [00:35:30] change, depending on how I structure my engagements, right? Diane Yetter: Exactly. Blake Oliver: Let's say I purchase the software. Let's say it's QuickBooks Online. Then I just bundle that with my services, but I'm not explicitly charging the client for that subscription. I own the subscription, and I'm just ... That's different than if I resell- Diane Yetter: Resell it.  Blake Oliver: So, I get the subscription; Intuit charges me; and then I resell to the client, and it's as if it's their subscription- Diane Yetter: Correct.  Blake Oliver: That's two different situations- Diane Yetter: It is. Dena Oberst: Be very careful about bundling, right? [00:36:00] Blake Oliver: Yeah. Dena Oberst: Because if you bundle things that are not taxable with things that are taxable, the whole thing could be taxable, so just be very careful. Blake Oliver: I wanna own ... I don't wanna be reselling software, really, if that's not my main business, I wanna be owning-  Diane Yetter: Turn it into a commission. Get a referral fee, something. Let the software company do it, because the trick also becomes if you buy it, and then you provide it as part of your monthly recurring fee, Intuit has to charge you the tax on that, and they have to [00:36:30] know where your client is, because if you're giving your client access to that QuickBooks license, or subscription, then they need to know. So, they're gonna charge you the tax based on where your customer is. Blake Oliver: I don't think they do that [cross talk]  Diane Yetter: But that's what they should be doing. Blake Oliver: That's what they should be doing.  Diane Yetter: But here's the thing, if they don't, because they've considered it to be you, and you're in California, and California doesn't tax SaaS, but you're having a client in Washington use it, you now potentially owe Washington use tax on that, because you're using it-  [00:37:00] Blake Oliver: Yeah, yeah-  Diane Yetter: -in Washington. It adds a lot of complexity. Blake Oliver: Washington use tax is no joke, I understand.  Diane Yetter: It is not. It is not. Blake Oliver: There are some hefty fines if you don't comply. Diane Yetter: A 39-percent penalty Washington imposes if they catch you. Blake Oliver: Wow. David Leary: This could be a session you guys should do at one of the future conferences - just a how to be sales-tax compliant in your own [cross talk] and what's the best strategy for bundling, doing webinars, if you're doing bar work, any of that.  Diane Yetter: Yeah.  Blake Oliver: You mentioned only South Dakota collects a [00:37:30] tax on services- Diane Yetter: On professional services- Blake Oliver: Professional services-  Diane Yetter: -accounting services, but [cross talk] lots of other states tax computer-related services. If you're doing installation of software, you're doing a training on software, digital goods ... D.C. and Iowa just started taxing those products, those types of digital services, effective January 1. I think that's where we're gonna see more movement, because states went from taxing physically delivered software. Then, when it was electronically [00:38:00] downloaded, it was like, "Oh, it's exactly the same thing." I go into the store, and I buy QuickBooks on a disc, taxable everywhere. I go to QuickBooks Online, and I downloaded it. I install it on my computer, not taxable everywhere, but moving ... California, it's not taxable. Now, I'm accessing QuickBooks Online, it's taxable in fewer states. You've got the exact same product sold in different mediums taxed differently. We're seeing states kind of move [00:38:30] along that continuum to start charging or start imposing tax on more of those types of things, more services ... The economy has shifted. We used to be 70-percent manufacturing. Now we're 30-percent manufacturing and 70-percent service. The state revenues are plummeting, so they're trying to figure out how do we do this? Economic nexus is one way but broadening their tax base is the other. They can't raise the rates higher than they are. Blake Oliver: Do you think that professional services, that it's inevitable they'll get taxed someday? I feel like ... I mean, NASBA, AICPA have [00:39:00] been doing a good job of clamping down on that and stopping the legislation before it ever gets to a vote, most of the time, along with other professional groups, but to me, as we move more to a services-based economy, a digital economy, it seems kind of inevitable that the states won't try to grab that money. Dena Oberst: Well, I know, because California, right? I mean, California comes up all the time. They wanna know-  Blake Oliver: Yeah, every year it seems like there's an effort- Dena Oberst: They wanna know ... Really, let's just see the impact of the Wayfair. This is just my opinion on it, but as the states are trying to even deal with new businesses registering and [00:39:30] all the tax that they're gonna get from the product sales, I just think service is gonna be a little bit further out there right now. Not to say that it's not gonna happen. People [inaudible] comply. States need revenue. They're gonna tax it. But professional services is definitely- it's not off the table, but I'm just- I can't see in the next 12 months at that [cross talk] That's just me, but [cross talk]  David Leary: So, our listeners have 12 months ... Dena Oberst: Well, I'm just saying, the Wayfair ... It'll be ... Wayfair, the decision will be two years old by then. Diane Yetter: I think what's important for [00:40:00] your listeners to keep in mind is, I was in the keynote this morning, and Dan, Gary and Jeannie talk about how the accounting firm of today needs to diversify and start doing more than straight compliance business. So, as you move into doing different things like providing education, providing different sorts of things, those are not necessarily accounting services. If you are in the technology space, and you are doing [00:40:30] analytics; you're building RPA; you're doing different sorts of artificial intelligence- Blake Oliver: Technology consulting, implementation work- Diane Yetter: That's taxable in a good number of states- Blake Oliver: Really?  Diane Yetter: So, as you start expanding your practice to start doing different things, you have to be aware that it's considered a different thing under state law, and you need to know what you're doing. If you're an accountant, and you're not doing your taxes right, kind of can impact your reputation, you know? [00:41:00] Blake Oliver: Yeah, and you can't exactly claim ignorance- Diane Yetter: Right. Exactly, exactly! Dena works with a lot of CPA and bookkeepers. We do, too; not on the compliance side, but on the advisory side and help them help their clients understand what they need to do. Then we refer to people like Dina, when they're like, "Okay, now we need help doing the returns. What should we do?" Because we just don't do that. Dena Oberst: Like Diane mentioned, if you're an accountant or a trusted advisor, and you're not doing your own taxes correctly ... But [00:41:30] the one thing that I will say that comes up a lot is - and I'm not an income tax person - but what happens on the income tax? Now that these businesses are registered for sales tax everywhere, have they just increased their income tax footprint? Just something- Diane Yetter: A whole nother topic. David Leary: Another ripple-  Dena Oberst: -that CPAs ... For you guys to make sure that you cover. David Leary: So, I'd love, if there's a major decision, to try to get you guys back on again to educate us, but we're kind of running out of time today. Anybody who's listening and wants to get a hold of you, Dena, what's the best way? Dena Oberst: You [00:42:00] can just info@gable.tax.  Blake Oliver: What's your website?  Dena Oberst: It's Gable Tax-  Blake Oliver: GableTax.com? Dena Oberst: Mm-hmm.  Blake Oliver: All right-  Dena Oberst: Or SalesTaxGurus.com, if that's easier to remember.  Blake Oliver: SalesTaxGurus ... Gotcha, and Diane? Diane Yetter: The best way to find all of our great resources, SalesTaxInstitute.com. We have a special landing page for Accountex - my presentation. So, if you're not here, and you wanna see what I talked about, you can go to SalesTaxInstitute.com/accountex2019. We've got a lot of our [00:42:30] resources pooled together there. We'll have my PowerPoints for my presentations. Once this is up, we'll put that out there, too. David Leary: We'll get it in the show notes, all the links- Diane Yetter: Yes, definitely. Blake Oliver: All right. Well, thank you both so much for joining us. It was a real pleasure, and I learned a lot today. Thank you-  Dena Oberst: Thanks for having us.  Diane Yetter: Thanks for having us. David Leary: Thanks a lot.  Dena Oberst: Bye-bye.  Diane Yetter: Bye. 

Join Podchaser to...

  • Rate podcasts and episodes
  • Follow podcasts and creators
  • Create podcast and episode lists
  • & much more