On Thursday the U.S. Treasury announced that the SBA's Paycheck Protection Program had run out of money. Now Republicans and Democrats are squabbling about whether or not to add more money to the pot. But perhaps first we should ask, what did the first $349 billion get us, anyway? Then, we dive into the what-ifs, and discuss better ways to spend trillions of dollars on our country. Plus, we find some other things to talk about, like the latest accounting firm layoffs, some new news from Plaid, Tiller Money, and more!
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Blake Oliver: [00:00:20] Billions of dollars are gonna people who don't necessarily need it, and a lot of people who really, really need the money are left out in the cold. Now, we're being asked to spend another $250 billion to do what? I looked at the numbers. What will another $250 billion that you and I are gonna have to pay back, someday, David, what is that gonna get us?
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[00:02:40] Welcome to The Cloud Accounting Podcast. I'm Blake Oliver.
David Leary: [00:02:43] I'm David Leary. Blake, two weeks ago, we sat down, hours after they opened up the PPP, and now we're here, two weeks later, and it's done. $349 billion is just gone. It's done.
Blake Oliver: [00:02:57] Exactly two weeks, right? Because it was April 3 that it opened up?
David Leary: [00:03:01] Yes.
Blake Oliver: [00:03:02] And it is April 17, in the afternoon, and the funds ran out yesterday morning, was it?
David Leary: [00:03:09] As the day ... It depends on how you counted because they had to back out the fees that the banks would take. So, the final numbers I can read - that's from an SBA slide deck that came out this morning - the reported loans that got E-Tran numbers - these are not people that applied for loans; these are just people that the bank took the data submitted to the SBA, and an E-Tran number/tracking number was issued - that's 1,662,367, for a total loan amount of $342 billion.
Blake Oliver: [00:03:39] Wow.
David Leary: [00:03:39] If you back out the $10 billion in fees that Marco Rubio reported on, it actually puts it to a negative one percent. 101 percent has now been allocated.
Blake Oliver: [00:03:51] So, now, Republicans are calling for another $250 billion to be added to the program. Democrats have some sort of conditions they want before the $250 gets released, so there's all this political bickering going on, but maybe ... I think there's a little more nuance here to this discussion than just, "Let's add more money," or, "Before we add more money, we wanna get more money for hospitals ..." Let's actually talk about who this program has helped so far, what it has achieved, and maybe then, we can debate whether or not it's worth it, adding more money. Does that sound like a good idea?
David Leary: [00:04:31] Yeah, because, I mean, we could just finish talking about some of the numbers that ... Because I think there's a big difference between the number of loans that were approved that everybody on Twitter - the politicians - are high-fiving about versus the money that possibly only made it to people's bank accounts.
Blake Oliver: [00:04:46] Right. That was part of the confusion. The first week of the program, I spent days and days trying to figure out how much of this money had actually been disbursed versus approved versus entered because the politicians were using "disbursed" in a lot of cases, and we knew for a fact that the money wasn't getting disbursed. So, at this point, we know that all of it has been allocated; it's all been claimed. But how much has actually gotten into small business bank accounts?
David Leary: [00:05:14] So, I'm tracking this on PPPstats.info, and there's another website that popped up that did really a survey of people that had their E-Tran numbers. It's called COVIDloantracker.com. They had three percent; then the number moved to four percent; then it was five percent. So, five percent's the best we've seen so far. That's only $17 billion.
Blake Oliver: [00:05:35] That's five percent of the people who attempted to apply.
David Leary: [00:05:39] Five percent of the people that got an E-Tran number.
Blake Oliver: [00:05:42] Oh, okay. So-
David Leary: [00:05:44] Because their survey that they had, you couldn't fill out- [inaudible] a question in the survey, and you couldn't continue on without E-Tran number to some extent. So, their survey only has people that got a response back.
Blake Oliver: [00:05:57] I'm curious about that because that's a data point, one point in time. Maybe I'm annoyed that I haven't got my money yet. I go to this site; I fill out the survey ... It's basically prejudiced toward people who haven't gotten the money yet because if you got the money, and you're happy, why are you going online looking for this thing, right? So-
David Leary: [00:06:16] That's true.
Blake Oliver: [00:06:17] I would take that with a grain of salt. Five percent seems really low to me. There are two other data points that I saw. One is data from Chase. On Tuesday, I think it was Tuesday, or Wednesday, Marco Rubio tweeted out that Chase had said that they had distributed ... Let me see where that is. I lost it. I don't wanna quote the wrong number, so I'm gonna find it. Give me a minute.
David Leary: [00:06:45] Okay, so while you're searching for that, Blake, I've been tweeting on top of Marco Rubio all week. I actually asked him to come on the podcast, but to no avail ... He did not respond to those tweets. Then, I also had another run-in with a politician. So, AOC, the Representative from New York City. She had a webinar on PPP and the emergency loan, and I attended her webinar. I was the only person whose questions did not get asked during her webinar.
Blake Oliver: [00:07:09] Did not get answered?
David Leary: [00:07:09] Did not get answered, yes.
Blake Oliver: [00:07:09] Yeah, well ...
David Leary: [00:07:14] The politicians-
Blake Oliver: [00:07:14] Nobody likes the media, David.
David Leary: [00:07:17] Nobody likes the media. I do have to commend, though, Marco Rubio ... For all the politicians that are out there, he's actually somewhat trying to communicate a little bit of what's going on and acknowledging the trouble with the program.
Blake Oliver: [00:07:29] Right. Okay, so I have that number.
David Leary: [00:07:31] Okay.
Blake Oliver: [00:07:31] He said, on the 14th, that the 14th that Chase had processed 300,000 PPP loans for $36 billion and had disbursed $9.3 billion. So, if you do the math on that: $9.3 billion divided by $36 billion, that is 25-26 percent. So, that would have been on Wednesday. Then, my other data point is this little survey that we did; that you did on Twitter, David, where you asked accountants, "Hey, how many loans have you applied for? How many have gotten an E-Tran number, and how many have gotten funded?" You put that all in a spreadsheet. We got quite a few responses to that, right?
David Leary: [00:08:14] Yeah, and what drove that is ... mean, obviously, we're talking to accountants and bookkeepers, and this is what drove our initial skepticism about the numbers coming out on day one is we couldn't reconcile them with what we were hearing from accountants and bookkeepers.
Blake Oliver: [00:08:26] Oh, yeah, and this was the crazy thing. It took us almost two weeks to figure this out, and it was thanks to Marco Rubio. The SBA does not have a way, in their system, to track what loans have actually been disbursed. There is no official government mechanism to see - here is the total amount that has made it into small business bank accounts - there's no way to measure the success.
David Leary: [00:08:46] They aren't requiring lenders to report it back up, either.
Blake Oliver: [00:08:49] No, so they don't require lenders to report it back. The only thing we can do is extrapolate and say, okay, the lenders, once the loan is approved, have 10 days to disburse the funds. So, worst case scenario - we know this didn't happen, but worst case - is that, as of yesterday, all the money has 10 days more to get disbursed. I'm gonna guess that is- I don't know if that's business days, or calendar days, or what, but ... Just to put this in perspective, this program is three weeks old. So, three weeks ago, the CARES Act passed, and this program was in there, and it's taken three weeks to get to this point. We know, from our survey that we did of accountants, that ... Let's pull up this spreadsheet here that you made. You wanna do the numbers?
David Leary: [00:09:35] Yeah, so we had about 33 people respond on Twitter, so it's not some super-official thing, but I left it open to accountants and bookkeepers just to say, "Hey, how many clients have you had that applied for loans? How many got E-Tran numbers, and how many had cash actually had cash hit their bank account?" The responses - 703 applied; 187 got E-Trans; 68 had cash in their bank accounts.
Blake Oliver: [00:10:00] That's 703 loans total, across 33 accountants/bookkeepers applying- helping their clients apply. So, 187 of those got E-Tran numbers. That's 27 percent of the applications got approved. Then, of the applications that got approved, 68 got money in the bank. This is basically as of Thursday; maybe some came in today. So, 68 percent- or 68 of 187 is 36 percent. So, I don't know. What you were thinking might happen this week, but I think on Friday of last week, it was about five percent of the approved loans had gotten paid out, and now we're at 36 percent. I mean, this is taking forever.
David Leary: [00:10:47] I think it's truly be reflected in the unemployment numbers. I mean, the whole point of the Paycheck Protection Program was to protect people's paychecks, to help small businesses to keep paying employees, so they don't have to go on unemployment.
Blake Oliver: [00:11:00] Right.
David Leary: [00:11:00] The unemployment numbers last week were another 3 million, 3.3. This week it was 5.2. I honestly- I think it's probably gonna hit 6 next week, and 6 the week after that. There's no sign ... If you really think- you wanna talk about extrapolating numbers, work the other direction. The accountants are telling us 187, right? Only 26 percent of people that applied even got an E-Tran number. So, work backwards from that, right?
Blake Oliver: [00:11:26] Yeah.
David Leary: [00:11:26] That's 4.3 times. So, if the reported loans is 1.6 million, at least 7 million people- small businesses applied.
Blake Oliver: [00:11:35] Oh, and I guarantee you that it's gonna be more than that because there's tons of folks who didn't use an accountant to apply, right?
David Leary: [00:11:40] Yep.
Blake Oliver: [00:11:40] They're not represented in this. I think accountants, given their relationships with banks- a lot of accountants have relationships with lenders, and one of the things they do is help people get loans. So, that 26-, 27-percent success rate is probably really high compared to most businesses that don't have an advisor. I wouldn't be surprised if it was ... Well, we can just look at the total number of small businesses.
[00:12:05] Oh, and one thing I wanna add before we go into that is the reason this program is not working, if you ask me, is here we are with 33 percent of the ... About a little more than a third of the $350 billion has been paid out, and we are three weeks after the CARES Act was passed, which was at the very end of March. Well, not the very end, but last week of March, right? This whole coronavirus thing that shut down the economy started in mid-March. So, we're a full month from when small businesses started feeling the impact - most of them - and most small businesses don't have more than two weeks of cash on hand. I guarantee you that almost all of them have less than 30 days, to your point.
David Leary: [00:12:49] Yeah, I think I tweeted that weeks ago. I think the average small business has about 27 days of cash, and restaurants have 14.
Blake Oliver: [00:12:56] Right.
David Leary: [00:12:56] So, yes, they are now out of cash. Any of them that were holding on to some hope, like "Hey, I'm gonna ..." because this loan was made out like it's this forgivable money; you're just gonna get it. Even the emergency loan, the rules changed on that, after people applied [crosstalk]
Blake Oliver: [00:13:12] We're not even talking about the-
David Leary: [00:13:14] -money's not getting out there. I know-
Blake Oliver: [00:13:14] We're not even talking about the EIDL. Apparently, nobody has seen money from that. People have seen the upfront - up to $10,000 advance part - but the actual loan, we have no clue what is going on with that. It's been eclipsed by the PPP, and people have lost hope. So, where I wanted to go with this was now to think about, okay, the money has been used - $350 billion. How much more money do we need to actually make a dent? Part of me thinks that it's too late anyway because the businesses that are most impacted have already furloughed or laid off their workers. I mean, obviously, hospitality, restaurants ... What are they gonna do? Hire people back and put them back on payroll? I saw people suggesting that that was the best course of action on Twitter, and I'm thinking to myself, if I'm an employer, that makes no sense because I don't wanna take my employees off of unemployment, so then, they get ... I put them back on payroll, I pay them for eight weeks, and then, they have to go back in line for an employment? Doesn't really make sense.
David Leary: [00:14:12] I mean, that's half the point of this, too, was the "Hey, keep your employees on your payroll, so that way, when everything gets opened back up in the economy, you don't have to do this game of trying to rehire your talent," but it's just not happening. Then, I've heard ... You understand about the unemployment; everybody's getting an extra $600 a week, right?
Blake Oliver: [00:14:29] Right. So, a lot of people are making potentially more money on unemployment than they were as employees.
David Leary: [00:14:36] I think, in the state of Arizona, the average unemployment's $240 a week?
Blake Oliver: [00:14:40] Mm-hmm.
David Leary: [00:14:40] So, now you add on $600 a week. It's significant.
Blake Oliver: [00:14:45] Right.
David Leary: [00:14:45] So, now, what's happening is there are some employers that are paying employees minimum wage, and those employees are like, "Screw it! I'll just stay on unemployment. I can stay on this til July 31, and I'm getting, easily, 2,400 bucks a month.
Blake Oliver: [00:14:59] Yep.
David Leary: [00:14:59] So, some good thing over here that's somewhat successful, even though I think there's problems and not enough people can even get through to apply for unemployment ... Over here, people are getting the money and that's possibly causing more pain for a small business owner, over here. The one that maybe did get their PPP loan, they can't hire their employees back.
Blake Oliver: [00:15:15] Right. So, I have an interview I wanna play for you that is a business owner talking about why he is going to not use the PPP money to pay his employees. This is really interesting. When I shared this out on Twitter, it ignited a firestorm. Some people were furious that this guy would think this way. Some people said it made sense, and they're advising their clients to potentially do the same thing. So, you won't mind taking a quick listen to this?
David Leary: [00:15:45] Perfect because I have yet to hear it. I did not see this tweet. So, this is perfect [inaudible] my raw reaction.
Alan Rosen: [00:15:51] Restaurants don't typically have a ton of working capital sitting around their month-to-month businesses, so this capital is gonna carry us through our grand reopening, for lack of a better term. And if we wanna do this smartly, we have to wait til people are comfortable from this medical crisis to sit shoulder to shoulder in our restaurants, or in Broadway theaters, or movie theaters. And until that time, it would be, in my opinion, wasted money to start spending it. We have to wait til we have a very clear pathway to success.
Interviewer: [00:16:25] So- so, let me understand this. The money that you received from the taxpayers, or backed by the taxpayers, is not reaching the workers.
Alan Rosen: [00:16:35] Not yet. It will reach the workers when we ... Right now, by law, Tyler, we can't open today. I wish we could, and if we did open today and only did 70 percent of our revenue, or 60 percent, or 50 percent, that money would basically evaporate in a matter of two-and-a-half months, because that's the calculation for the PPP loan. It's two-and-a-half times your monthly payroll. So, if we- if we start to use it too soon, the perfect [crosstalk] sorry, Tyler ... But the purpose of the loan is to get small business back on their feet, not for two months, but for the rest of our 70 years, so that's what we're hoping to accomplish here.
Blake Oliver: [00:17:13] That was Alan Rosen, the owner of Junior's Cheesecake, which is a famous New York restaurant. 600 employees. He could use the money to bring back his employees off unemployment, pay them for eight weeks. He's not going to do that. He's gonna hold on to it.
David Leary: [00:17:30] So, let me make sure I understand his timeline. So, he applied, basically got approved and got cash in his bank five days later for money he may not even use for 12 weeks from now.
Blake Oliver: [00:17:41] Yeah, he's gonna ... I mean, he has six months before he even has to start making payments on it, so he's gonna hold that capital for his grand reopening, which makes sense, right? But that's not what the program was intended to do. It's called the Paycheck Protection Program.
David Leary: [00:17:58] Well, this is why I saw Marco Rubio talking about how the hotel industry doesn't get it, but the hotels have gotten rid of 100 percent of their staffs. You don't get this money because you have no employees to pay. That's the whole point of this.
Blake Oliver: [00:18:11] But the way the program is structured, you can apply for it, you can hold on to the cash, and you don't get forgiveness, if you do that, but a lot of business owners are saying, "Well, I'd rather have a one-percent loan so that I have something that I can use to restart my business when all this goes ..." Again, they could've designed the program so that you couldn't do this, but they didn't. Maybe this was an unintended consequence.
[00:18:35] I think a lot of businesses are gonna do this. So, the money is ... We barely have information on how much of this is actually getting into small business bank accounts. We have even less information on how much is actually getting into employee paychecks. I feel like every layer that we go through is reducing the amount that actually gets to the employees. There's the banks ... Well, first, there's the SBA, there's the banks, SMBs, and then there's finally the paychecks. So, I don't know. We'll see. I mean, maybe this will help this business owner survive, and the restaurant can open up again, but I don't think that was what this was supposed to do. That wasn't the intent. Yeah, that's ... That is one example. I have some more numbers just to put everything in context-
David Leary: [00:19:22] I noticed-
Blake Oliver: [00:19:23] About how many businesses are getting these loans.
David Leary: [00:19:26] I'm wondering if this is an indication of how many people may or may not ... We've talked about some these apps. There's an article about how finance apps, their usage is spiking because of the pandemic. We've talked about these apps in the past, these apps, like Earnin- these apps where you can basically get your paycheck two days early, and you basically leave a tip. Well, these apps- people are using these apps; it's jumped now 35 percent. So, I think people are using it to get what possibly could be their last paycheck before the paycheck ever actually gets deposited in their bank to get some money early-
Blake Oliver: [00:20:01] Oh.
David Leary: [00:20:01] Because they have no confidence they're ever gonna see a paycheck again, so they're using these apps to try to get a paycheck.
Blake Oliver: [00:20:06] Right. It's basically a free one, right?
David Leary: [00:20:07] Free paycheck.
Blake Oliver: [00:20:08] Yeah.
David Leary: [00:20:08] They're using these tech companies to get that.
Blake Oliver: [00:20:08] So, 1.6 million loans have been approved. That was the number you had, right? That's the number I got.
David Leary: [00:20:18] That's the final number from the slide deck, yep.
Blake Oliver: [00:20:19] Okay. So, 1.6 million loans. How many small businesses are there in this country? Do you know off the top of your head?
David Leary: [00:20:27] I've seen, people have said there's 30 million businesses, and I'd say probably that you could shrink it down to 25 million small businesses.
Blake Oliver: [00:20:35] Actually, it's 30 million small businesses. That 30 million number, that is all small businesses.
David Leary: [00:20:40] All small businesses, okay.
Blake Oliver: [00:20:40] Yeah, which is like 99 percent of the businesses in the country are small ones. There's just a few thousand giant corporations. Those businesses employ about half the people in this country, a little less than half. So, 1.6 million out of 30 million is five percent. Five percent of small businesses got approved for loans and fewer than that, of course, a fraction of that, actually got the money so far. But let's assume that the rest of the money comes next week. We have funded five percent of the small businesses in this country, to some extent, for the next eight weeks, for their payroll. Some data came out of the SBA on average loan size and the different tiers; how many loans there were in different loan-size buckets. The average loan was- I'm not necessarily looking at the latest data because this was a report that came out through April 13.
David Leary: [00:21:44] I got the slide deck here, so I can repeat the numbers, if you're interested. If you talk about the bucket, I can give you the number.
Blake Oliver: [00:21:50] Okay. There are 1.6 million loans total. What was the average amount of the loan?
David Leary: [00:21:56] The overall average size was $206,000.
Blake Oliver: [00:22:00] $206,000. Do you know what annual payroll that converts to?
David Leary: [00:22:06] Yeah, I have that. It's $1.3 million, about.
Blake Oliver: [00:22:10] Okay, so $1.3 million is the annual payroll, so that would be ... Let's say your employees, on average, make about $50,000 a year because that's- the average annual salary in this country is about little less than $50,000. That means that these companies have 26- 25-26 employees? That's the average. The average small business has a lot fewer employees. 80 percent of small businesses have 10 employees, or less; and 90 percent of small businesses have fewer than 20 employees. This average loan size is for a business with more than 20 employees; 10 percent of businesses. What I'm kinda seeing in these numbers is that the businesses that got these loans tend to be on the larger side of the small business spectrum, which kinda makes sense, right?
David Leary: [00:23:13] We saw that on within hours, because I think when we started looking at these numbers way back on that day, on April 3, the average loan size, then, was through a $373,000. So, it has come down over time, but ... This is the latest numbers from the SBA. So, loans that are under $150,000, they gave out 1.2 million of those. But of the total bucket of money, that's only 17 percent of the bucket.
Blake Oliver: [00:23:41] How much of the bucket?
David Leary: [00:23:43] 17 percent of the bucket went to 1.2 million small businesses.
Blake Oliver: [00:23:47] Right. The ones that are basically fewer than 10 employees.
David Leary: [00:23:51] Yeah, like 150K loan size ...
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[00:25:07] Here you have less than 20 percent of the money going to 80 percent of the businesses, and the top 20 percent of the businesses collected 80 percent of the money. It flipped. This makes sense because the corporations got a weak head start. They got to apply two weeks ago, on April 3, and they made all the sole proprietors ... Anyone without a corporate entity had to wait until last Friday. By that time, most of the money was already spoken for.
David Leary: [00:25:41] Well, yeah-
Blake Oliver: [00:25:41] So, the way that this program was set up, it was designed to give preference to larger small businesses.
David Leary: [00:25:49] Well, I agree, as far as the way it was designed. It was already set up to where sole proprietors and subcontractor-level people couldn't even apply for a week. They already had- they were a week behind just even starting. But the "not" part of the design that happened ... There's stories from accountants about their own clients who are like, "Yeah, I have two clients that got their loan approved in five days." Then, you find out, oh, yeah, it's because it was $800,000. The bigger loans all got pushed through faster by the banks because the banks wanted to deal with ... The financial risk is different for the bank, and they pushed the bigger loans through.
Blake Oliver: [00:26:27] It's easier, right? You've already got all their information; you know who they are. So, not only is it less risky, but there's less paperwork to do. This is something that the designers of this program totally were okay with is that banks got to choose who they gave the loans to first. Of course, the banks are gonna choose their biggest, their best customers. You also have data that shows that if you were with a community bank, and you had a personal banking relationship, then you were much, much, much more likely to get a loan.
David Leary: [00:26:56] Yeah, they definitely have a lot of data on that. The COVID Loan Tracker has data that shows that. Even the PPP has said the amount of community banks and lenders that did that loan out ... I think Marco Rubio just tweeted this out-
Blake Oliver: [00:27:08] Well, he argued with it [crosstalk]
David Leary: [00:27:10] -5,000 lenders. 5,000 different lenders, and none of them loaned more than five percent of the total. 60 percent of the lenders are under $10 billion in assets. So, in general, a lot smaller banks were doing a lot of these loans, right?
Blake Oliver: [00:27:25] Yeah. I said earlier how I don't think the COVID Loan Tracker data, in a lot of cases, is valid because it's not a statistically representative survey, since the people coming are probably gonna be the people who didn't get money. But they do have a stand on here that I think is legit, and it's: of the people who did receive money, it asked them, "Did you have a preexisting lending relationship?" Over 80 percent of people who got PPP money had an existing- a preexisting lending relationship. If you did not have a relationship with a bank already, you had a less-than-20-percent chance of getting a PPP loan.
David Leary: [00:28:05] Yeah, I think that-
Blake Oliver: [00:28:05] So, that definitely gives an advantage to a successful, established small business that's big enough where they get to have that personal banking relationship.
David Leary: [00:28:16] I think that comes out in the state data. I know that a couple people have tweeted and sent me the ... Bloomberg has some maps where they've mapped out each state and the percentages of loans that they had approved in those states. Some people are even loosely implying that, "Oh, look, it's the Trump states," but I don't think ... I honestly, truly believe, based on my experience in the Midwest, this has nothing to do with these being Trump states. What it is, is in these states, they have much smaller banks. You have farmers. Everybody knows each other. A lot of the businesses have already established loans with these smaller banks. It's all these mid-regional banks-
Blake Oliver: [00:28:50] Right. Yeah.
David Leary: [00:28:50] -they were just able to handle ... The volume of what they had to handle was much lower, and they had relationships with these people, and they are able to process these loans much more efficiently than California, which only had 24 percent, because, in general, it's all ... People were going to the Wells Fargos, the Bank of Americas, the Chases, the big banks, probably, and the relationships weren't there.
Blake Oliver: [00:29:12] Well, and if you had a personal banking relationship, like let's say you're a high net worth individual, or you're an important person, like Larry Kudlow's wife, the- Donald Trump's Senior Economic Advisor, Larry Kudlow, talked to Bloomberg about how his wife, who's a self-employed painter, was able to walk over to their local bank at their house in Connecticut, and fill out a one-page form, and get the loan, and it was super-easy, he said. To him, that represents the experience of everyone. That's because, for one thing, she's the wife of a high-ranking White House official. Two, they're wealthy, right? They have three homes. They're millionaires. They have a personal banker who's gonna guide them through this thing and make sure that they get taken care of. If you're just some random business customer at Bank of America, or Wells Fargo, or Chase, you're screwed. I think virtually none of the people who got it ... I mean, it's not- I don't know if that's ... A very small percentage of people who got PPP loans bank at the big banks, right? It seems like it, to me. I don't have exact data on that, but ...
David Leary: [00:30:16] I fall into the group of people that applied. Got nothing. The very first day- I bank with BBVA. They sent me an email. I think we talked about this last week, loosely. They sent me an email, very first day. I was, like, "Hey, all right. It's gonna be ready tomorrow." Then I went to go to it- I got the button- I filled out my email address. I got the email the next day. I clicked the button. It took me to a page, said, "Start your application," and then had a 404 error and just died out. So, that day, I went and looked for sites, and everybody's pages were down. This was that Saturday morning. Then, I found a lender, a small local lender here in Tucson to apply. So, I applied. I never got a confirmation. I never got an E-Tran number. I got nothing. So, I stalked them on Facebook. This is my loan experience. I'll read you the reply-
Blake Oliver: [00:31:04] At least you got a reply. I think there are a lot of people who never even heard back.
David Leary: [00:31:08] Well, I had to stalk them on ... I had to go to LinkedIn. There was no other way. I just had to ... I bypassed the front doors, to some extent.
Blake Oliver: [00:31:16] Got it.
David Leary: [00:31:17] Essentially, I said, "Do I have an E-Tran number yet? How come you haven't sent just one email communication about the status?" I was told, "Not yet. We are waiting for more funds to hit our account to process more applications. We are a very small company with a lending staff of five people trying to manage well over 200 applications. This type of mass lending is not what our company is built for, but we are doing our best to help customers who couldn't get their banks to fund the PPP loan for them." Then, I said, "Where are you getting the funds from? Because my understanding is the SBA is not distributing the funds to lenders until the PPP loan amount has been "forgiven." He said, "That is correct. It's our own funds," but they're also a nonprofit, so they have to work with the city, and county, and other municipal organizations to get the funds.
Blake Oliver: [00:32:03] Right. They can only lend out a certain multiple of capital, so they've got to have capital requirements. So, they actually have to get money, so they can loan it out.
David Leary: [00:32:12] Yeah, exactly.
Blake Oliver: [00:32:17] Here's a big problem with this whole thing - everybody is trying to get the money. It's a $350 billion pot of money, which seems like a lot until you realize there's 30 million small businesses, and everybody wants a chunk of it. As Sabrina Parsons said on one of our episodes, a couple weeks ago, when we were talking about this, if every small business in the country applied, everybody gets $12,000. So, a big pot of money, way more businesses ... Really, anyone can apply for this, which kind of seems crazy to me that there wouldn't be an effort to make this maybe more targeted toward businesses that are actually hurt by COVID-19. I mean, you can make the argument that every business is hurt, but the way this program is set up, you can get this money even if your business is doing well.
[00:33:09] I'll tell you why. I'm looking at the Treasury regulations, and here's what you have to certify to, to apply for this money. As part of your application, you need to certify in good faith that current economic uncertainty makes the loan necessary to support your ongoing operations and that the funds will be used to retain workers, and maintain payroll, or to make mortgage, lease, and utility payments. Well, everybody has either payroll or rent/mortgage/utilities, so that's everybody in the country. Then, current economic uncertainty makes the loan necessary to support your ongoing operations? I mean, every business in the country is going through economic uncertainty, right? I mean, uncertainty doesn't necessarily mean something bad. So, everybody is allowed to get this money. I can't believe they didn't make it a little more targeted.
David Leary: [00:33:58] I would argue the same thing is on the other side on the CARES Act for unemployment. There's 12 reasons, and all it takes is somebody in your house had to stay home because the kids had to stay home. Basically, if your kid is out of school, you can apply for unemployment. It's that broad. So, these programs have been made very broad, but the execution, and the funding, and even the ... If you really look at the loan deck, or the SBA deck about the loan, they don't have- they don't see who these lenders are, but they have 15 lenders listed, by numbers, and 14 of them are all 200,000, 500,000, 400,000 ... Only one lender did 40- they did 40,000 loans of an average loan amount for $72,000. Everybody else focused on big businesses, big loans.
Blake Oliver: [00:34:50] I bet you that among even the small loan amounts, there's a lot of high net worth individuals, who have S Corporations, who are self-employed, but make a lot of money, who went and got these loans because why wouldn't you? It's free money. You can use it to pay yourself, or you can use it to pay your rent. There's no need-based methodology of assigning who gets these loans, and it's first come, first served. The people with the connections get it first. This really infuriates me. Billions of dollars are going to people who don't necessarily need it, and a lot of people who really, really need the money are left out in the cold. Now, we're being asked to spend another $250 billion to do what?
[00:35:31] I looked at the numbers. What will another $250 billion that you and I are gonna have to pay back someday, David ...? What is that gonna get us? Well, based on the data from the 13th, we're at about $250 billion in funding. So, $250 billion, if everything stays the same - the same mix of people apply - then that'll get us another 1 million loans. So, we're gonna go from 1.6 million to 2.6 million, which is still less than 10 percent of all the small businesses in this country.
[00:36:05] A lot of those businesses in that 10 percent are not the 10 percent that are super-impacted by this crisis. It's just people who wanted free money. I'm curious if there's ever gonna be any fallout from this. Do we ever get to know who got this money? I was seeing stories on Bloomberg about there's hedge funds that have applied for this money; people who make millions, tens of millions of dollars a year, and have billions of assets are applying for this money.
David Leary: [00:36:28] I think it's gonna take a decade for people to process what's going on, not just with the PPP, but I mean, even the data about people getting COVID, and now ... Have you seen some of the problems the stimulus payments are having?
Blake Oliver: [00:36:42] Oh, God ... Yes. The IRS came out with that tool to track your stimulus payment.
David Leary: [00:36:49] Yes.
Blake Oliver: [00:36:50] I don't think I qualify but, just for kicks, I went to see if I'd get the note that I don't qualify. Of course, I got an error message that my Social Security number and the stuff that I know is absolutely correct doesn't match anything in their system. Apparently, a lot of people had that same experience, right?
David Leary: [00:37:08] Not only does that site have some issues, there's glitches, but there actually is some reporting coming out now that if you used H&R Block, or TurboTax ... So, even though, when I file on TurboTax, and I have to pay, so I put my bank account number in so they can ACH that before I get my refund ... Apparently, that, if it's in TurboTax, the IRS is not storing that.
Blake Oliver: [00:37:29] Right, and this is because of people who had their ... TurboTax acted as an intermediary, so that's why the IRS doesn't have their checking info?
David Leary: [00:37:39] Yeah. So, if you're one of the people that have used TurboTax, you probably don't have the deposit yet.
Blake Oliver: [00:37:44] And then, as we talked about before, it might take until August before people get their checks-
David Leary: [00:37:48] The paper checks.
Blake Oliver: [00:37:50] -because the IRS can only print- yeah, they can only print 5 million a week.
David Leary: [00:37:56] Then, for all the bad service that the banks were giving, by the time the tech companies got involved - the PayPals, the Kabbages, Intuit became a PPP lender-
Blake Oliver: [00:38:00] Oh, yeah.
David Leary: [00:38:00] It was done. They basically attempted to process loans for a day and a half, and it was done. Everything was done. So, it's-
Blake Oliver: [00:38:14] I feel bad for all the developers that spent all that time trying to get this thing up and running and then, the funds are out.
David Leary: [00:38:21] If I had to guess, when they do put through any more money, it's gonna be different rules. There's just no way- there's no way it just gets funded exactly the same. It's gonna be different rules.
Blake Oliver: [00:38:31] Well, I would hope so. I would hope that Congress would realize that the 24 million small businesses that don't have any employees, where it's really just a sole proprietor, they had almost no shot at getting this money. What about them? They don't qualify. I don't know if they qualify for unemployment in every state. It's harder to get unemployment when you're self-employed, I know.
David Leary: [00:38:57] One thing that started to heat me a little concerned - and thinking kind of going forward - is the verbiage that was used in tweets, and all these celebratory "PPP was a win," April 3, was the word "forgivable" was just used; forgivable loans. Now, you're starting to see more, and more, and more the words "potentially forgivable loans" being used in the media.
Blake Oliver: [00:39:22] Yeah.
David Leary: [00:39:22] It's really kind of scary because it's starting to make me wonder, okay, are they gonna change the rules just like they changed the rules on the emergency from $10k to $1k per employee? Are they gonna change the rules of what people have to do to qualify to get this forgiven? Then the scary thing is, okay, now, eight weeks from now, when you use this money, and you have to justify it, you have to go back to your bank, who's gonna be processing these audits? Who's going to be signing off that this money was used in the proper way to get it forgiven? Are we setting ourselves up for another nightmare of insanity, six weeks from now? If the SBA was handling just the processing of the loans, and that was a one-page loan basically. Now, you're gonna get who knows how many reports to audit people?
Blake Oliver: [00:40:09] Yeah, the SBA application was like, I don't know, what, like less than 10 pieces of information, I feel like? Now, you've got to prove that you deserve loan forgiveness. How long is that gonna take the SBA to process? So, yeah, there'll probably be ... It'll probably be a mess, where small business owner comes back with the paperwork and ... Well, first of all, it's a mess for the accountants, who then have to prep all this stuff for their clients. So, now, I gotta prove that I get forgiveness. I gotta fill out another form, attach a bunch of paperwork, send it to the bank; bank has to process- all the banks have to process 1.6 million of these applications for loan forgiveness. They gotta send it to the SBA, who's then gotta process it and send back the forgiveness. If we thought this was a mess ...
David Leary: [00:40:51] Then, kinda thinking about ... So, we got the tax deadline extended, so accountants and bookkeepers have some elbow room, but then basically that time got filled up with PPP loans.
Blake Oliver: [00:40:58] Right.
David Leary: [00:40:58] So, now, it's outta money. It's funny, April 17, accountants, today, are taking a breath. I've noticed online people are taking a breath because they can't do anything for their clients, right now, today. But if you start counting out eight weeks from now, guess what else is going on eight weeks from now?
Blake Oliver: [00:41:14] The tax deadline. Is that it?
David Leary: [00:41:14] The new deadline of July 15. It's not exactly it, but it's very- it's four weeks within it. So, basically, when this money hits, and people are gonna have to start filling out their forgiveness paperwork ,and their forgiveness reports, we are going to be in the heat of tax deadline season.
Blake Oliver: [00:41:29] Well, and making it worse, a bunch of firms are laying people off. I don't know if you've been following this, but the last time we talked about it - we skipped a week talking about this because we did the interview with the AICPA folks - not a lot of firms had laid people off. But now I'm seeing a bunch of them. Armanino, my old firm, laid off eight percent of their workforce. Baker Tilly did layoffs. Burden did layoffs. We had Citrin Cooperman; five to 10 percent of their workforce was laid off. Crowe did layoffs. A lot of these mid-sized firms-
David Leary: [00:42:00] They probably didn't get their PPP loan, so they can't [crosstalk]
Blake Oliver: [00:42:04] Well, yeah, they probably don't qualify, right? Well, and there's a whole new loan thing for us to talk about, David, which is the ... We don't get a break either. We get the Main Street Lending program, which is the one for businesses with, I think, more than 500 employees; like the mid-sized, or the larger businesses. So, that's all getting going now.
David Leary: [00:42:27] Speaking of layoffs, I do not wanna forget to do the- mention this. So, I talked, two weeks ago, about Lime, and I said the scooter company, Lime, had their layoffs.
Blake Oliver: [00:42:35] Yeah.
David Leary: [00:42:35] I screwed up, and I got it confused. It was actually the other scooter company called Bird.
Blake Oliver: [00:42:42] Oh ...
David Leary: [00:42:42] So, the story was correct. They laid off 400 people, all really in a bad way, through a Zoom, but it was not-
Blake Oliver: [00:42:48] Right.
David Leary: [00:42:48] So, I'll get the correct article in. I just ... These companies start to sound the same after a while, so I do apologize. So, [inaudible] correction on that.
Blake Oliver: [00:42:56] They are copycats of each other. I think you deserve ... I do think you deserve a little forgiveness.
David Leary: [00:43:01] Then, to swing back, off of you, and the firms laying people off, I was listening to the Big Four podcast, the Big Four Firms Podcast, I think it's called. He had tips on how you can recognize you're gonna get laid off. One of the things that was in there, I just was like ... I've still been thinking about it, like two days later. If your billable hours go down, you're probably a target to be laid off. Would you agree?
Blake Oliver: [00:43:23] Yeah.
David Leary: [00:43:24] So, what they do is they have the HR department come meet with you a lot, so you have even less billable hours. The HR department will schedule meetings with you. "How's it going, Blake?"
Blake Oliver: [00:43:35] Right.
David Leary: [00:43:35] Then, you're losing billable hours, so you're at even higher odds. They almost ... It's an extra- if you start getting emails, or meeting requests from HR people, you're probably gonna get laid off because they're gonna eat up your billable time.
Blake Oliver: [00:43:48] Oh, man.
David Leary: [00:43:49] So, it's ... Yeah, we're in there ... I do have a non-COVID, and non-PPP, and non-government-stimulus story, if you wanna jump into something other than that this week.
Blake Oliver: [00:44:02] Let's just [crosstalk] do that because-
David Leary: [00:44:02] I've been holding this for two weeks-
Blake Oliver: [00:44:06] Okay, yeah, let's talk about that because all I had this week that I really wanted to talk about was coronavirus-related stuff. So, let's hear something else.
David Leary: [00:44:19] So, this is in the Plaid blog. Microsoft announces Microsoft Money is now gonna live in Microsoft Excel, but it's powered by Plaid. So, basically, to summarize this, it is bank feeds in Excel.
Blake Oliver: [00:44:34] This is super-cool!
David Leary: [00:44:35] For those lovers of Google Sheets, I actually just, coincidentally, the same week, got a Facebook ad for an app called Tiller- Tiller Money. It's Google Sheets- bank feeds for Google Sheets, essentially.
Blake Oliver: [00:44:49] How do you spell that?
David Leary: [00:44:50] Tiller? It's T-I-L-L-E-R-H-Q dot com. (tillerhq.com)
Blake Oliver: [00:44:55] T-I-L-L-E-R-H-Q dot com. So, I can have bank feeds go into my Google Sheets?
David Leary: [00:44:59] I mean, basically ... Yeah, they're a personal finance app of some type. But once that data is in your Google Sheet, you can do whatever you want. This makes me rewind to ... Remember the Botkeeper demo way back in the day?
Blake Oliver: [00:45:13] Yeah.
David Leary: [00:45:14] A lot of Botkeeper's things was "No, bank feeds suck in QuickBooks and Xero. We get the bank feeds, and we do whatever we want to them, and then we move that data to QuickBooks and Xero." I'm thinking, wow, now that you can drop bank feeds and shove data from the bank feed into Excel; bank feed into Google Sheets; now you can connect to Google Sheets through Zapier to QuickBooks and Xero ... You could do some really interesting stuff as an accountant, and bookkeeper, for your clients.
Blake Oliver: [00:45:45] Yeah. This is really cool. I might-
David Leary: [00:45:46] That's it. I'm almost speechless about it because it's so exciting where the imagination can go.
Blake Oliver: [00:45:53] Yeah, this Tiller Money thing looks super-cool. I'm a big Google Sheets fan. It's $59 a year. So, I think I might just sign up to try it if I can find some time in my schedule.
David Leary: [00:46:05] Yeah, because you could create it-
Blake Oliver: [00:46:06] Well, thanks for sharing that.
David Leary: [00:46:07] All those macros you can make ... Just think about all those macros you could do in Excel.
Blake Oliver: [00:46:10] Yeah.
David Leary: [00:46:10] And then get the data just like you want it and then, boom, it shoves it off to the accounting system. The possibilities here are very, very interesting on where that heads.
Blake Oliver: [00:46:19] So, there's only really one other thing I wanna talk about, and it is related to the whole current economic situation. It's a little broader than just the PPP stuff-
David Leary: [00:46:29] Yeah.
Blake Oliver: [00:46:30] I just gotta get it off my chest because I try to talk to my family about this, and they're like ... They don't wanna think about it, right? So, you're my outlet, David; you and our listeners. So, my big worry, right now, big picture, is we have these $1,200 stimulus payments coming in for some people this week, maybe in the next few weeks in April. 1,200 bucks per person. Then, we've got the PPP money, which I think kind of everything we talked about makes the argument that, is it really gonna have that big an impact on stopping people from getting laid off, and going on unemployment, and all that stuff? We didn't even talk about this, but all the state unemployment offices are completely overwhelmed, right? I mean, people are calling nonstop, all day long, every day, and they can't get through. They can't even get on unemployment, so they're not getting that money. We don't know how many millions of people are stuck trying to get it, still-
David Leary: [00:47:27] Yeah, and we haven't been able to look at that data, right?
Blake Oliver: [00:47:28] Right.
David Leary: [00:47:28] I'm sure people can't ... They've applied for loans; they've heard nothing. There's people probably in queues just waiting for a response from a state unemployment office.
Blake Oliver: [00:47:37] My worry is that we're gonna get to May 1, and just a ton of people and businesses are not gonna make their rent or mortgage payments. Then, what happens to the economy if, all of a sudden, renters aren't paying rent, and people aren't paying their mortgages. Do we get into another housing crisis at that point? Do we somehow do rent forgiveness? That can't really happen on a national level. I can't see that happening. What happens?
David Leary: [00:48:09] There's a Planet Money or Odd Lots podcast or [inaudible] Indicator ... One of those three podcasts, and I'll have to find it, and track this down. They totally addressed this, and how it works its way all the way up, and who winds up eating it.
Blake Oliver: [00:48:21] So, yeah, who does? If we did mortgage forgiveness, or rent forgiveness on a large scale, it's the investors, right, in the end. It's all of our pension funds, and 401(k)s, right?
David Leary: [00:48:33] Exactly, or foreign countries.
Blake Oliver: [00:48:36] Foreign countries. Well, I think the American people would be [crosstalk]
David Leary: [00:48:36] -be okay with it. Yeah. It's very, very interesting. So, I'll find that podcast and get that in the show notes. I think that [crosstalk] a lot.
Blake Oliver: [00:48:46] That would be great. The problem is, Congress is still on break, and they're not coming back anytime soon, so this isn't gonna get solved by May. So, I feel like, in May, we're gonna be talking a lot about that because some scary numbers will come out.
David Leary: [00:48:59] I mean, I don't wanna end on a downer, either, but they've talked about, for the COVID-19 deaths, and those three weeks in April are gonna be really bad ... I feel like the small business numbers, and the economy numbers, the next four weeks are gonna be really bad.
Blake Oliver: [00:49:14] Yeah, they lag-
David Leary: [00:49:15] We have not seen bad numbers yet.
Blake Oliver: [00:49:17] Right?
David Leary: [00:49:17] We have not even seen them yet.
Blake Oliver: [00:49:18] Yeah, that makes sense, right, because they lag-
David Leary: [00:49:20] And it's scary.
Blake Oliver: [00:49:20] -behind all the leading indicators of COVID-19 deaths. I just wanna leave with one calculation. What if we spent our money maybe a little more wisely? Because I don't think this PPP program is all that great. Listeners, you tell me ... But these numbers don't sound good. What else could we have done with the $2 trillion dollars? So, let me just do a little math for you, David, right now, if you don't mind.
David Leary: [00:49:45] Absolutely.
Blake Oliver: [00:49:46] So, let's say there's, what, like 330 million people in this country. I could be off by 10 or something million, but it's about that much, 330 million? Let's say that 100 million of them are really impacted by this, which that would kind of makes sense. That'd be like 30 percent- between 20 and 30 percent losing their jobs, not being able to work, all that stuff. Which, that would be Great Depression-level unemployment, which is what could really happen here. Let's say it's 100 million.
Blake Oliver: [00:49:46] If we wanted to cover them for the duration of this crisis, what if we just gave each of those 100 million people two thousand dollars a month? That's 100 million times $2,000 is $200 billion. So, $200 billion a month to give all those people enough to get by. So, basically, for the cost of the $2 trillion dollar program, the CARES Act, we could give all those people $2,000 a month for 10 months, wouldn't that-
David Leary: [00:50:48] I think I've seen some of this ... That's a proposal the Democrats might be running up the flag, right now, is they wanna just give everybody $2000 a month.
Blake Oliver: [00:50:56] It just kind of seems ... I'm a Republican; I'm not a Democrat, but that policy, that idea, which I think is gonna go nowhere, just makes a lot more sense to me than convoluted loans, and bailouts. Just give the money to the people who really need it to pay their rent and buy food. Kinda makes sense to me. I mean, even if you didn't spend the whole $2 trillion; what if you just spent half of it? That would get you for five months.
David Leary: [00:51:21] Well, that's what they thought they were doing, right? Hey, $600 extra a week for unemployment, people on unemployment; we're doing the Paycheck Protection, so people keep getting that. The problem is, it's just not making it to the people fast enough ... But if you came out and said, "Hey, here's the deal - everybody, for six months, or the rest of 2020, you're gonna get $2,000 hours a month showing up every month," that would just put everybody at ease.
Blake Oliver: [00:51:43] Right.
David Leary: [00:51:44] Just the knowing about it would put everybody at ease. The problem is, right now, it's like, "Hey, here's a bucket of $350 billion." Elbows and assholes trying to get it. It's just fight over it. We're off a feed truck here. It's crazy. You're right, some way to smooth this out and give people peace of mind, when, right now, we don't even know when peace of mind- when we get to go back to work is, right?
Blake Oliver: [00:52:05] I don't know if there's a better way to distribute that money. I don't think the banks were a good idea for doing it. Maybe there's a better way to get it out to people, if we did something like that. I do think that some of the tech companies would be able to do it a lot better.
David Leary: [00:52:22] Amazon. You just go to Amazon. It's just in your account. It just shows up.
Blake Oliver: [00:52:25] It just shows up as your Amazon gift card. That would be funny. Yeah.
David Leary: [00:52:29] Yeah, you just specify your apps, like, "Yeah, I would like to have some of it go to my Starbucks account, and some of it go to my Amazon account, and some of it go to my PayPal account." Then, they just push it down through that way. But I even think all of that's pushed eventually in the back end through the banks and rails that the banks own. So, who knows how we'll get there?
Blake Oliver: [00:52:44] Well, that's it for me this week, David. I think I sound like a Socialist, but I swear I'm not.
David Leary: [00:52:51] I think everybody has to take a good weekend off. I mean, all our listeners ... It's funny, I can see it in our show download numbers. You can see where people- those three weeks before the tax deadline was extended, our show numbers started to go down. Then they extended the tax deadline, and all our downloads went up for that week because accountants and bookkeepers had breath. They could take a breather. Then, PPP dropped, and our download numbers reflected in that. My bet is we're gonna have a lot of listeners this weekend because accountants and bookkeepers have a little breathing room until God knows what next legislation comes down the pipe.
Blake Oliver: [00:53:25] Maybe something new will crop up. Until next week, David, where can people find you online?
David Leary: [00:53:30] You can track me down on Twitter, and LinkedIn. I'm @DavidLeary. One other reminder, Podchaser.com is doing a donation to Meals on Wheels to help feed elderly that right now are stuck at their houses. They can't go to grocery stores. If you write a review of The Cloud Accounting Podcast, and if Blake and I reply to the review, they donate money, 2X more, if we reply to your review. So, if you wanna help out a little bit, leave a review on Podchaser.
Blake Oliver: [00:54:01] Oh, yeah, and we got a voicemail, David.
David Leary: [00:54:04] Oh, yeah.
Blake Oliver: [00:54:04] So, let's listen to [crosstalk] Here we go.
Voicemail: [00:54:08] Hi, David, I am Kristen, from Texas, and I just had to vent because my situation, I feel like, is too unbelievable. I had a great accounting job, which I left on February 28. It felt like the right time to actually start a marketing agency for accountants. The economy was good. I was financially stable. We really don't need to go into, retrospectively, why it was not the right move. But I am pretty sure I am also disqualified for unemployment, and the small business loans. So, I will be catching up on your podcast. Anywhere I should start? Thanks! Bye!
Blake Oliver: [00:54:53] Well, this episode was definitely a great place to start. So, thanks, Kristen, so much for listening. Yeah, David, do you have any recommendations? Favorite episodes?
David Leary: [00:55:03] I did create a list on Podchaser of our 10 best episodes of last year. So, you could search for that and easily see that on Podchaser, those episodes. The phone number that she used to call in on is (202) 695-1040.
Blake Oliver: [00:55:10] So, if you wanna leave us a message, we'll take a listen and maybe even play it on the air. Leave a message for us. What is that again?
David Leary: [00:55:25] (202) 695-1040.
Blake Oliver: [00:55:28] And you can find me on Twitter. I'm @BlakeTOliver. I'm very active on Twitter these days. All the latest ... Follow me there, and you'll hear it there first, and then we can talk about it on the podcast. Anything else?
David Leary: [00:55:40] No, I think that's it, but that's a good observation. All the PPP action is on Twitter. It's not on LinkedIn. It's amazing.
Blake Oliver: [00:55:45] Until next week, David, have a good one. Hope you have a great weekend!
David Leary: [00:55:48] You, too. Bye, everybody.
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