What is mid-market and why should accountants care? 🎙 Live at Sage Intacct Advantage 2019

Founded in 1999, Sage Intacct was one of the earliest cloud accounting applications on the market — and now one of the most successful. That's why David and Blake were eager to sit down at Sage Intacct Advantage with Rob Reid, Chairman Mid-Market Solutions (formerly CEO of Intacct, prior to the Sage acquisition), and Kevin Cumley, Director of the Accountants Program. In this episode, we chat with Rob and Kevin about the growth opportunity for Sage and their accounting firm partners in the mid-market, the needs of mid-market businesses, why top accounting firms use Sage Intacct in their practices, and what it was like trying to convince accountants and their clients that cloud is secure back in the still early days of the internet.

  • 01:18 – Meet Rob Reid, chairman of Sage Mid-Market Solutions Group
  • 01:23 – Meet Kevin Cumley, director of the Sage Intacct Accountants Program
  • 01:40 – What really is 'mid-market'? 
  • 04:34 – Doing cloud before cloud was a thing - Sage Intacct began as a cloud firm some 20 years back! 
  • 05:02 – Sage Intacct helps firms deliver outsourced accounting and financial services to their clients
  • 06:44 – What separates Intacct from other players in the field? 
  • 08:17 – For small organizations, understanding cash takes priority over GAAP, until they need investors. Intacct offers insight from both perspectives
  • 11:48 – Sage's Accountants Program offers extensive training and certifications to get them prepared to use the Intacct platform effectively
  • 14:21 – It can't be that hard to satisfy accountants, can it ...? 
  • 16:57 – Innovative firms understand the importance of combining the technology with their accounting expertise
  • 17:39 – Practice lines, such as tax and audit are on the decline, making outsourcing more attractive
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Transcript

This episode of The Cloud Accounting Podcast is sponsored by Bill.com. As a listener, you've probably heard Blake and I speak about Bill.com on numerous occasions. It feels like they are discussed monthly in either new news or new announcements, but I'm betting there are some things you don't know about Bill.com. Did you know customers use the Bill.com platform to process over $70 billion in payments for the 2019 fiscal year? That they partner with several of the largest U.S. financial institutions, like Bank of America, PNC, and Chase? More than 70 of the top 100 U.S. accounting firms use Bill.com.

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Rob Reid: They want the visibility to understand where are there opportunities, so I can take advantage of them faster than larger corporations?  [00:01:00]
 
Blake Oliver: Welcome to The Cloud Accounting podcast. I'm Blake Oliver.
 
David Leary: I'm David Leary.
 
Rob Reid: I'm Rob Reid.
 
Kevin Cumley: I'm Kevin Cumley. 
 
Blake Oliver: Thank you, Rob, and Kevin, so much for coming. I guess we should say a little context for listeners. What is it that you do, Rob?
 
Rob Reid: So, I'm the chairman of the Sage Mid-Market Solutions Group.
 
Blake Oliver: All right, and Kevin? 
 
Kevin Cumley: I'm the director of the Sage Intacct Accountants Program.
 
Blake Oliver: Awesome! We are here live recording at Intacct Advantage in Las Vegas. [00:01:30] So, thank you so much for having us here, inviting us to come.
 
Kevin Cumley: Yeah, thanks for being here.
 
Blake Oliver: Yeah. It's a privilege. This is my third Intacct Advantage, but this is David's first.
 
David Leary: It's my first. So, I'm probably like a lot of listeners that maybe have come from a small-business background. I'm really wondering what is mid-market? Because, sometimes people are like, "Oh, it's once you have 50 employees; you have $50 million in revenue; or you have 20,000 inventory items ..." How does Intacct define mid-market? What is it, and then, what are problems that mid-market have that maybe be normal small [00:02:00] businesses don't? What's the mindset?
 
Rob Reid: Yeah, David, a bunch of great questions there. All the different analysts do have different definitions; that sort of confuses people. We really believe that the mid-market really spans from about 100 employees up through a few thousand. Enterprise is typically over 5,000; large is typically a couple thousand to 5,000. That mid-market, then, is right there above small - small usually being between [00:02:30] one and in 99.
 
What portrays a lot of the differences in the mid-market is they're typically very oriented to growth. They've been able to get out and thrust out of being a very small business, but now, they're typically going up against larger competitors. What's really interesting about the mid-market is that 90 percent of all the growth in our economy since the Great Recession is coming out of the mid-market. Enterprise actually has declined by 10 percent, and [00:03:00] the mid-market is pacing this economy.
 
We think that's a prime opportunity for organizations to be more efficient in mid-market, so they can best go and have differentiation to go up against those larger organizations; and they want the visibility to understand where are there opportunities, so they can take advantage of them faster than larger corporations; or where are the risks where they need to shore things on up? Those are some of the things at Sage Intacct that we [00:03:30] focus on.
 
David Leary: So, it sounds like if you are a small business that's becoming a bigger business, and you're ready to take that next step and grow, you should go for it because it sounds like the market conditions are ripe for that.
 
Rob Reid: Right. Absolutely. We have a lot of graduates that come on in utilizing our system in the mid-market. They've been a small business. They've now thrust it into having a lot of success, and they know that they need to have a system that they understand the metrics as to what's going on and where should [00:04:00] they be investing the next dollar. We help them with that.
 
Blake Oliver: So, I spent some time at a firm called Armanino, who you know well as a big Intacct customer/user for their clients. Maybe you could tell us, for accountants not so familiar with the product, what are some of the reasons that they use Sage Intacct in their practices?
 
Rob Reid: You know what, Kevin? Why don't you talk about why all the top accounting firms are out there using us for their practice, and [00:04:30] the kinds of benefits they receive, and how that goes on then to their customers and clients?
 
Kevin Cumley: Sure, Rob, I would be glad to, and maybe start with a little bit of background first. So, from the very beginning, almost 20 years ago, Sage Intacct was designed to be a platform for accountants to be able to deliver outsourced services to customers-
 
David Leary: And started as a cloud firm, day one [crosstalk]
 
Kevin Cumley: Very first, yep. From day one-
 
Blake Oliver: And we should say, 20 years ago. So, you guys have been doing this for a long time, right? Is it the 20-year anniversary is coming up? I heard that in the keynote-
 
Rob Reid: Yep, next month.
 
Blake Oliver: There weren't a lot of cloud applications [00:05:00] around back then, right? 
 
Rob Reid: We were one of the very first.
 
Kevin Cumley: Yeah. Accountants didn't really understand that back then. It was hard for them to wrap their head around, "Okay, we're gonna use something that exists someplace else to deliver outsourced services to our clients ..." But it's the only platform that was actually designed, from the ground up, for that specific purpose. To Rob's point, firms like Armanino, and including, I think, now almost 40 of the top 100 CPA firms in the country, they use Sage Intacct as a platform to deliver outsourced [00:05:30] accounting and financial services to their clients.
 
It enables them to be not much more than just an accountant, but to deliver high-value strategic advisory services that are oriented in an up-market, as well. So, it scales very well. Our Accountants Program, we've got firms that are on the smaller end of the scale, both CPA firms and BPOs; and we've got large firms, like Armanino, that can use it to provide outsource services to smaller organizations or much larger organizations [00:06:00] that are right in the middle of the mid-market.
 
Rob Reid: Typically, a client would go to an Armanino, and say, "Here I am, an entrepreneur, trying to start my business. I really don't know that much about accounting, and I don't wanna go in and hire lots of accountants or a CFO. I wanna invest in the service or the products that I'm in." Armanino utilizes our platform and their expertise, from an accounting perspective, to do this outsourced accounting so that the entrepreneur and his [00:06:30] team can be- or her team can be focused on their business. Then, they allow the accounting firm, with all the expertise they have, to draw upon. Armanino has just done a great job for thousands of customers, from that perspective.
 
Blake Oliver: What makes it ... Any features, for somebody new to the product, that make it different than a QuickBooks or a Xero? Why couldn't I just use that? What is special about Intacct?
 
Rob Reid: Yeah. One of the great things that QuickBooks does is it allows a [00:07:00] entrepreneur to understand and be able to invoice, which, to get the cash in; and then, to know where they're expanding. It's very easy-to-use consumer-like type of application. However, when you start to move up to going into mid-market, or if you want to be very sophisticated in your planning, the ability to get insight out of QuickBooks, the way Intacct can provide it to you, it's just not there.
 
It's just a great tool to [00:07:30] manage a very small business. But you have aspirations to grow, you need that insight that Intacct can provide. Then, if you wanna bring in investors, we are a GAAP solution; meaning that investors trust the data coming out of it. Unfortunately, QuickBooks is, again, a great product, but it's not GAAP. 
 
Blake Oliver: Yeah, that's a very good point. We were preparing GAAP financials for our clients, and I think, in particular, multi-book was very popular in that we could have our [00:08:00] reports for various different purposes. You have your GAAP book and then, you have some other management book or [crosstalk]
 
Rob Reid: Well, one of the number-one things people like about our multi-book approach is that they can look at a cash position versus GAAP. 
 
Blake Oliver: Yep.
 
Rob Reid: For most small organizations, understanding your cash position is actually more important than GAAP. But then, if you wanna go out and get investors, then GAAP's more important. That was [00:08:30] a very unique capability that we provide to our clientele that the vast majority of other solutions do not provide.
 
Blake Oliver: Yeah. The other one that I recall is multi-ledger. Is that the name for it? The ability to have multiple entities all sharing the same-
 
Kevin Cumley: Multi-entity functionality. Yep, that's right. You can have small organizations that have very complex needs, or they need multi-entity - consolidations, inter-company transactions - so they don't have multiple copies of, say, QuickBooks, and lots of spreadsheets trying to do all that stuff. You probably experienced that.
 
Blake Oliver: Yeah, 20 [00:09:00] QuickBooks files, and then I have to consolidate in an Excel spreadsheet.
 
Kevin Cumley: Yeah, but what's the risk of ever having errors there? No ...
 
Blake Oliver: There's none. None at all. I mean, I'm an expert.
 
David Leary: Spreadsheets are perfect.
 
Kevin Cumley: So, that's one good example. Another good example is if they need advanced functionality. So, if they need things like contract management, revenue recognition, integrations with large platforms, like Salesforce, for example, those would be differentiators, where it might be a smaller organization that's more complex; or to Rob's point, now they're moving up; they're getting larger; they're really moving into mid-market, where they [00:09:30] need higher transaction volumes and all those more advanced features and functionalities in order to really, truly manage the business.

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David Leary: I have a question regarding the Accountants Program. You obviously talk about accountants that are at firms, whose service clients that are on Intacct. I was just even standing in line at the registration desk, here at the hotel; I met somebody in line, and they're just an internal controller. What's the mix, I guess, for your Accountants Program, or even the attendees of this conference? How many are just internal controllers at their own companies coming to this conference? Or is it accountants that serve clients? Then, is the training in the programs you provide for internal people versus people with [00:11:00] clients? Is it different? Is it the same?
 
Rob Reid: The overall mixes about 90 percent of our customers actually go on a subscription, and they do have a controller or another financial professional in their organization. Then, they'll have somebody like Armanino help them implement it initially and make sure that all their processes are being satisfied the way they want. They get to reimagine how they want to be for the future, and the system gets set up like that for them. Then, [00:11:30] about 10 percent of our clientele then just has this outsourced model, where it's 'rent-a-CFO,' 'rent-an- accounting-department,' and then, the underlying platform that's supporting that accounting firm is Sage Intacct. It's about 90/10.
 
Kevin Cumley: To answer your question about training, if somebody is in our Accountants Program, we have a very broad and extensive training and enablement program to not only teach them how to be in this business, and how to be successful as an outsourcing [00:12:00] firm, but then, provide them with extensive, in-depth training on the product and certifications, so they're well-prepared in order to be able to use Sage Intacct as a platform to deliver those services, and, ultimately, what matters the most, which is successful engagement and a happy client.
 
Rob Reid: What has been interesting is even though we were visionaries coming in and providing the solution 20 years ago for accounting firms, we had to overcome the issue with regard to the cloud. We [00:12:30] also had to overcome the issue - business mindset - of, "Oh, I need everybody reporting in and being part of my organization." So, we've seen tremendous increase - even though I just gave that ratio of 90/10 - in the interest of outsourcing. People are now getting comfortable with a subscription, if you will, type of economy, or other people doing things and having tools for them. 
 
How many people now don't have cars? They're just using Uber? How many other things [00:13:00] is it ... Well, it used to be you had to own. The new millennials, et cetera, they don't wanna own homes. They just wanna rent. They wanna be able to move around. They don't wanna have to be buying books. "I just wanna be able to subscribe to them." We're seeing a real movement to the accounting firms as to, "Why do I need this expertise? Let me focus on my business and let the accounting firms in this outsourced model take off." So, Kevin, and the team, we've had tremendous increase, [00:13:30] especially over this last year.
 
Blake Oliver: Going back 20 years ago, Rob Reid, what was the genesis of Intacct? Because that was very early in the world of cloud. What gave you guys the idea to build a cloud product - very focused ...? Was it always focused on the CFO as like the primary customer?
 
Rob Reid: Yeah. Our original founder, David Thomas, had this vision that we could deliver cloud services for accounting firms [00:14:00] in this outsourced model. We were able to go out and sign up thousands of accounting firms initially-.
 
Blake Oliver: Ah, so it was accounting firms, first [crosstalk]
 
Rob Reid: It was accounting firms, first. That's what Kevin was reflecting on ... That's sort of the soul of Intacct is we took on, actually, the hardest thing we could do - satisfy accountants in accounting.
 
Blake Oliver: It is difficult, yes. 
 
Rob Reid: It is, yeah. It's the hardest thing you could possibly do. We decided that's a good one to go after, right? 
 
Kevin Cumley: Yeah. 
 
Rob Reid: But he had wild success in signing up these accounting firms. [00:14:30] Then, the accountants who are accountants, they're not salespeople, said, "Hey, we've got this new technology. It's gonna allow you, and I, simultaneously, to look exactly as to what's going on, what's going on with your invoice, see what's going on in your expense; we can have a strategic discussion." 
 
The client went, "That sounds really cool." They would get all excited about it. 
 
Then, the accounting firm would say, "Now, this is gonna be out in the cloud ..." 
 
The client would go, "The cloud? What the heck is the cloud?"  [00:15:00]
 
"Oh, well, we have these servers in this [hardened] data center, so that all the ... You can share the resources ..." 
 
The client would say, "You're not gonna have my most important information behind your closed doors, in your vaults? My information is gonna be somewhere out there? I don't think so." 
 
Then, the accounting firms said, "Okay, we'll just keep doing it the old way." 
 
So, the company struggled for a little bit and then, we decided, okay, we've gotta go after small- and medium-sized organizations [00:15:30] directly. As soon as we did that, the company just started flourishing, and we've been growing at great- a really fast pace ever since.
 
David Leary: Interesting that going straight to the business owners, or the businesses that are looking for getting their pain solved ... I think, sometimes, accountants don't go out of their way to solve their clients' pain points. So, you have to speak to the business owner to do that. I have a question - the big thing this last year has been services, where it's software and the services. You're getting kind of an accounting system, and you're getting access to bookkeepers. Everybody's [00:16:00] heading down that path, and there's a lot of accounting firms that are doing this now. There's accounting firms that have- I call them [crosstalk]
 
Blake Oliver: Accounting firms with engineers.
 
David Leary: Engineers under the roof, and they have a front end ... So, it's truly Software as a Service, right? Is Sage heading that way, as far as Intacct goes? With some of the firms are you ... [inaudible] "Hey, I'm gonna buy Sage Intacct, and I also get accountants and bookkeepers that are experts at the same time in my rolled up subscription"? Is that kind of coming? 
 
Rob Reid: I'm not aware of any accounting firms are providing subscription on their [00:16:30] services, just ... You have a set fee that you're paying for the accounting services to the firm, and we're bundled into that. Having a subscription for engineers, I'm just not aware of that. Typically, what they will do is 'by project,' and take it from them. But maybe, if they start to see a trend that they could figure out how to do the subscription services from that perspective ... 
 
A lot of accounting firms have seen that [00:17:00] the melding of all the regulatory requirements and then, the technology together and offering that as a service is actually becoming the most important business. It used to be tax and audit, and now, most of the innovative accounting firms are saying, "Our understanding of accounting, overall, and technology ..." and they're turning as much into technologists, and accountants, as opposed to just accounting.
 
David Leary: Compliance is just a given; like, "We're just gonna do [00:17:30] that because, duh, we have to do compliance ..."
 
Rob Reid: Exactly.
 
Kevin Cumley: It is, but there's literally no growth in those practice lines anymore. I mean, they're pretty much flat, or very, very low [crosstalk] 
 
Rob Reid: You're talking about tax and audit? 
 
Kevin Cumley: Tax and audit, yep; those compliance services. In fact, I led a panel discussion yesterday, where I had four of our top partners - two of them were larger CPA firms. One of them talked specifically about audits and how they're giving up audits; take the outsourcing services, just because it's delivers a lot higher value to their clients. And, in the end, it's [00:18:00] much stickier.
 
Also, you look at ... Rob had mentioned these organizations that are now looking to outsource on an increasing basis. Part of it's just about unemployment. It's really hard to find that talent. They're competing against all the top firms in the country, so these firms, they have a large set of staff that can deliver those services a lot better; oftentimes, more economically viable. So, just it's better all the way around.
 
Blake Oliver: It's not an either/or, anymore. It used to be I either had everything in-house, or I outsourced my entire [00:18:30] finance function. But now, you might have a CFO in-house, who purchases- basically leasing staff, almost, from an accounting firm, or having them do the close. That sort of thing is becoming more common.
 
Kevin Cumley: That blended model is becoming increasingly more common.
 
David Leary: I think it's time to wrap up. We thank you for being with us on the podcast. If people wanted to get a hold of you, what's the best way, Rob?
 
Rob Reid: I'm Robert.Reid [R-E-I-D] @Sage.com.
 
Kevin Cumley: And I'm Kevin.Cumley [C-U-M-L-E-Y] @Sage.com.  [00:19:00]
 
Blake Oliver: And for accountants who want to learn more about that Accounting partner program you have, where should they go?
 
Kevin Cumley: They can go to the Sage Intacct website, go to the Partners section, and go to the Accountants Program.
 
Blake Oliver: All right. Thanks so much, guys.
 
Rob Reid: All right. Thank you. 
 
David Leary: Bye, everybody.
 
Kevin Cumley: Thank you.
 

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