Wave Makes Waves by Becoming a Bank

Today, we're talking about how Wave releases small business banking features bundled with their accounting software, but it turns out QuickBooks already quietly launched a similar feature. Then, we'll dive into how some businesses hit by coronavirus are now being hit by holdbacks from their payment processors; and though CPA firms and societies are pledging to change following Black Lives Matter protests, will things actually change? We've got more on the PPP front, with Kudlow and Mnuchin walking back promises of transparency for the Paycheck Protection Program (PPP), how Senate Democrats are pressing for a simplified PPP forgiveness process. In other news, FreshBooks launches its Accounting Professionals Program, and much more!


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David Leary: [00:00:20] So, according to Senate Minority Leader Chuck Schumer - this is on Friday - he said, "Given the many problems of the PPP program, it is imperative that American taxpayers payers know if the money is going where Congress intended, to the truly small and unbanked small businesses. Where did that ...? Where did this come from? 
Blake Oliver: [00:00:38] Yeah, that was-
David Leary: [00:00:38] That was never in any ... That was never, ever mentioned, that it's for the unbanked small businesses?!

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Blake Oliver: [00:03:01] Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. 
David Leary: [00:03:04] And I'm David Leary.
Blake Oliver: [00:03:06] Once again, David, we are fortunate that we have moved our recording day. It's Monday, right now, because we needed the whole weekend to digest everything that's been going on, and also, PPP guidance came out again on Friday.
David Leary: [00:03:20] After business hours, though, of course. 
Blake Oliver: [00:03:21] Always after business hours. Also, Larry Kudlow, the president's senior economic adviser, was on the Sunday shows talking about PPP, so I've got some good stuff on that.
David Leary: [00:03:35] This is the same Larry Kudlow that- he was talking about how easy it was for his wife to go into their local bank and just get approved for a PPP loan, like on day one of PPP. Remember that?
Blake Oliver: [00:03:45] Yeah, exactly, because that's the typical experience of most small business owners is that they have a private bank ... I've got some stuff here about coronavirus and payment processors; privacy, PPP privacy, as it relates to what Kudlow said on CNN. Then, also, Mnuchin was at a hearing and there was- it was basically a big uproar about whether or not these names are gonna get released if people who got the loans.
David Leary: [00:04:13] Oh, yeah. I still have some of that stuff, too; the PPP stuff, as well. There's also a newer program that's now coming on the table that's gonna be ... I don't know if we talked about that. They're calling it, I think, Payroll- Paycheck Protection Program Advanced, or something?
Blake Oliver: [00:04:29] Oh! This is new to me [crosstalk] 
David Leary: [00:04:30] Yes, there's another that's being proposed on the table. I wanna talk about neobanks, because Wave launched a bank; Wave accounting software. Then, I have stuff about Square. There's lots of neobank stuff. Accounting apps are becoming banks; banks are becoming accounting apps. Tons of articles related to all that mess.
Blake Oliver: [00:04:52] So, I would love to start with that because I think that is big news. You've been predicting this for months, if not years now. What is going on with Wave?
David Leary: [00:05:06] All right, so, Wave Accounting, which we've talked about before, they got purchased by H&R Block; last year, sometime, they got acquired. 
Blake Oliver: [00:05:13] They're an accounting application, like general ledger, right? 
David Leary: [00:05:15] That's correct.
Blake Oliver: [00:05:17] Historically free. You could start using it for free.
David Leary: [00:05:21] They had Google Ads on the side. In the accounting software package, it was free with a Google AdWords kind of running on the side in the margin. Then, they have a payroll product. It's a full built-out bookkeeping product. There are some people that use it. Then, H&R Block purchased them. Then, talking about that whole QuickBooks Live type model of you get your tax and your bookkeeping all under one roof for one price type model, they've been heading down that way. Just like we've been talking, Xero, Intuit, QuickBooks, they gotta become banks because the banks are heading towards the accounting package, as well.
[00:05:57] Wave had a big announcement this week. It was up on Twitter. They said, "We're shaking up the banking industry by introducing Wave Money, a first of its kind business bank account." Basically, it's a business bank account with a debit card. No account minimums, no monthly fees, free instant payouts, built-in bookkeeping, mobile check deposit. I was surprised to see them be the first ones to do this. One of the things that they released in their press release, which I thought was interesting, just two pieces. One, it's limited release, supposedly. It's only on iOS. So, if you happen to have Android, you cannot you take advantage of the Wave Money app at this time.
[00:06:33] They released a figure, which is really interesting, because obviously they're coming out as being fee-free. They said, based on the data Wave has for their U.S. and Canada customers, the average Wave business owner pays more than $425 a year in annual bank fees. If you think about this, whatever you're paying for ... Let's say Wave charged, or Xero charges, or QuickBooks charges, if you can just use a bank provided by your accounting software and not pay bank fees, it offsets the cost your subscription for your software practically.
Blake Oliver: [00:07:05] Right.
David Leary: [00:07:06] Then, they're gonna have automatic expense categorization. It's what you would expect because it's an accounting software package. It's just gonna be the built-in bank account. So, long story short, I put that out, and Xero actually kind of gave me a little reply, kind of like not a hint that they're doing something, but kind of ... They put a reply in. I was contacted by Intuit. Apparently, Intuit - believe this or not, Blake - this is ... We have failed our listeners.
Blake Oliver: [00:07:35] Uh-oh! What did we miss? 
David Leary: [00:07:39] In March ... In March, Intuit put out a little blog post about the new features in QuickBooks Online in March. In March, Intuit has quite ... There's a little sentence, a little sentence. It says, "QuickBooks Debit Card, a physical and digital card for accessing funds stored in a QuickBooks cash account. So, you and I missed it! Intuit launched a debit card- a bank! We missed it!
Blake Oliver: [00:08:02] But to be fair, it was a blog post. There was no big announcement on social media, right? It's a soft launch.
David Leary: [00:08:10] It's a sentence in a bigger blog post about a bunch of other features.
Blake Oliver: [00:08:13] So, they're rolling this out slowly, obviously. I think they've started doing this a lot of features now because they don't wanna get it ... They don't wanna overwhelm the system. Imagine if- they've got millions of QuickBooks Online users. If all of them tried to sign up at once, it would be a problem, right? 
David Leary: [00:08:28] Well, especially going by what Wave just said. If the average business owner that uses any of these products- QuickBooks has $400 in banking fees, and QuickBooks says, "Hey, here's a free bank account with no fees ..." 
Blake Oliver: [00:08:38] Yeah, right. 
David Leary: [00:08:38] Everybody's gonna switch. It's very attractive of an idea. Essentially, what this is gonna do ... They're tying this back into their new cashflow tool that they're releasing. Right now, the tool doesn't seem like it does much, but essentially, you're gonna be able to- you'll track your cashflow. You'll have this in an account. If you pay me through Intuit Merchant Services, that goes into this account, but then I could pay bills with this credit card. The money never leaves the QuickBooks ecosystem.
Blake Oliver: [00:09:05] I got it. 
David Leary: [00:09:05] It stays inside, which is very similar to what we've seen with Square and some other ones. Then, because of that, everybody and their brother started jumping on this tweet. I think we've loosely talked about there's a freelancer banking app called Lili. They raised $10 million in seed money. It's online banking services just for freelancers. There's challenger bank, Varo. Now, Varo is not really going to small business as much, yet, but they just raised $241 million. They're another challenger bank jumping into this thing. There's an accounting app, Wise. So, Wise is another challenger bank that's only designed for small businesses. They raised $5.7 million.
[00:09:45] Then, the interesting one is there's an article about Square that I found; why its stock is soaring and how it's threatening banks. Couple of interesting points in this article. One thing is the banks, themselves, have not been focused on Square's, and the accounting platforms, per se. The banks have been watching ... "Oh, my gosh. Google and Amazon are wanna-be banks, and Apple ..." The banks have been focused on the wrong people is one argument in this.
[00:10:12] Then it goes on to talk about how Square has been building out their Cash App. This Cash App sounds a lot like the QuickBooks card, right? The Cash App's revenue was $528 million for Q1 of 2020 and almost triple of what it was in 2019. Yes, the Cash App can be used for some investing in some Bitcoin-type plays, but even if you take out that, it's still double, year over year, the revenue that was created by this Cash App. Square customers have $1.3 billion stored in this Cash App, now, as of the end of April- 
Blake Oliver: [00:10:46] I wanna make sure I heard that right. $1.3 billion in deposits in the Cash App?
David Leary: [00:10:50] Yes, that are stored in there, right now. 
Blake Oliver: [00:10:51] Wow. 
David Leary: [00:10:51] Cash App is getting all this new adoption. People have used it to- their cash refunds, their stimulus. Now, people are taking their paychecks and directly depositing that into their Cash App account. Then, that Cash App account can be ... It's a debit card. It could be used other places. They also have a little bit of a play similar to these Robinhood, where you can invest from this account directly; buy Bitcoin and do other recurring purchases.
[00:11:17] Square Capital, they facilitated another 75,000 loans for the first quarter, totaling another $548 million, an eight-percent growth. Square has distributed $520 million in the Paycheck Protection Program. More and more, they're consolidating in this industry. The interesting, interesting point in this article that I think people should take note of ... I'll just read this verbatim from the article here. This article was in Forbes. "With the consolidation happening in the payment space- however, banks should be concerned about who might acquire Square. An Intuit acquisition of Square would be complementary to the firm's small business capabilities, as well as the newly acquired Credit Karma unit."
Blake Oliver: [00:12:00] Yeah, I think it would. 
David Leary: [00:12:00] This could be a way for Intuit to ... If Intuit were to acquire Square, they're now a serious, serious bank, even more than what Intuit could be on their own. Not to mention the competitive side; all the other stuff they get with the swipe in the retail terminals. It's very ... Now, what would you ...? There's no numbers on this. I'm just speculating. How big an acquisition do you think that would be?
Blake Oliver: [00:12:22] I don't know. Square is enormous, right?
David Leary: [00:12:24] $20 billion? 
Blake Oliver: [00:12:24] Square market cap ... Square's market cap as of June 12, 2020, is $38 billion dollars. So, I don't know ... Can Intuit swallow $38 billion company? Intuit's market cap is $73 billion.
David Leary: [00:12:41] Wow.
Blake Oliver: [00:12:42] Yeah. So, Square's big. 
David Leary: [00:12:43] Yeah, monstrous. Monstrous. A
Blake Oliver: [00:12:45] I've got a story about Square, though, that is not quite so flattering.
David Leary: [00:12:49] Oh, really?
Blake Oliver: [00:12:50] Yes. This was in The Wall Street Journal. The headline is, "Hit by Coronavirus and a 30-percent Holdback by the Payment Processor." Apparently, processors like PayPal, Stripe, Square, and WorldPay are making some businesses wait additional days or weeks to access funds deposited to their accounts, citing the need to protect themselves against possible losses when people who have bought airline tickets, vacation packages, and some other goods and services seek refunds.
[00:13:19] An example of this is Bluebonnet Photography. They're a portrait studio in Tacoma. On May 6, Square emailed the owner saying that it would start holding 30 percent of each of Bluebonnet's transactions for 120 days to, "Protect you and Square from unexpected loss events." Basically, Square, and PayPal, and Stripe, and WorldPay are increasing their loss reserves to cover chargebacks, which apparently have jumped dramatically during the pandemic. People are backing out of stuff that they bought in advance, like travel purchases. If they can't cancel, they're charging back. People are also doing chargebacks just because they can't pay, and they don't wanna pay for something. That's happening in some cases.
David Leary: [00:14:07] Especially if you're not getting a good or service delivered because of COVID. 
Blake Oliver: [00:14:10] Right. Right, but also, just people are like, "I gotta get my credit card balance down. Maybe I'll just do some chargebacks." Chargebacks are normally 0.05 percent of credit card transactions. Before the pandemic, 0.05 percent, this is just like a leaky pipe. Nobody really cares that much because it's not a big deal in the big scheme of things. So, Square, and PayPal, they can absorb those losses if they don't pass them on to the merchants. Normally they do, but sometimes they can't collect because the merchant then goes out of business. They're out. They have to cover that. So, that's why they have these amounts set aside to cover their losses.
David Leary: [00:14:44] Historically, it's been, I think you just said, a half a percent, historically? 
Blake Oliver: [00:14:48] It's 0.05 percent of credit card transactions.
David Leary: [00:14:52] And that was historically. You said this has increased now. 
Blake Oliver: [00:14:55] In certain categories, like travel, chargebacks are as high as 40 percent right now.
David Leary: [00:15:00] I understand that. 
Blake Oliver: [00:15:01] Yeah, just massive jump, right? This is rolling downhill to some businesses that are in certain types of industries, like photography, right? Well, what do a lot of photographers do? Weddings. Weddings are getting canceled or changed, and maybe somebody doesn't want a photographer for a virtual wedding. So, that company, even if they're not doing a lot of weddings, got hit with this new policy by Square because it's very impersonal. It's just based on your industry.
[00:15:27] The owner was really upset because their company, this Bluebonnet company, never had a disputed transaction in three years with Square. So, Square ... Here's the big picture effect. That's the small impact on the business owner. Holding onto your money for 120 days, that's- it's crazy.
[00:15:44] This is one of the things that PayPal has done for a long time that really, really pisses off business owners. I had a client when I was in practice who got hit with a policy like this with PayPal and was processing all of his business's online transactions through PayPal. Just totally screwed up his cashflow, and there was nothing he could do about it. So, eventually, he got away from them, but it took him like half a year because they were holding on to his money for that long, and they're allowed to do that.
[00:16:09] So, here's the big picture impact. Square reported a $106 million loss for the first quarter because it had to triple the amount it set aside to cover potential losses on transactions and loans. There's a chart here in The Wall Street Journal showing how much Square has set aside. They've more than tripled it. Now, they're setting aside $109 million dollars to cover future losses. PayPal, which is much larger, has increased from a little below $400 million to a little below $600 million in loss reserves.
David Leary: [00:16:40] It'll be interesting to see if they use this as a stick to push people into their Square card- their Square cash ... What's it called? We just said the name of it ... 
Blake Oliver: [00:16:51] Well, yeah, there's Square Cash- Cash App [crosstalk] Then, PayPal ... Obviously, PayPal's the original one, where you can have a PayPal balance. 
David Leary: [00:17:03] If you use Square Cash instead of moving the money out to your bank, you only have to have a two-day reserve or something. I don't know, but that 120 days is pretty aggressive.
Blake Oliver: [00:17:11] So, Square said to this reporter that less than one percent of customers were impacted by this- by this increase in reserve accounts, but that's a lot of businesses. So, watch out for that.
David Leary: [00:17:23] Just two other tech becoming banks ... Alibaba is like the Amazon of China, but they also can shop on ... They have Alibaba.com, which is American small businesses can sell things on that. They, and Amazon have both now launched financing. 
Blake Oliver: [00:17:39] Yes, I heard about this.
David Leary: [00:17:41] You can get loans and use that, if you're an e-commerce seller, to pay your invoices. A lot of times, it's like that, right? You have to buy inventory to sell inventory, and you need that elbow room. 
Blake Oliver: [00:17:50] Specifically, it's for businesses that sell on these platforms.
David Leary: [00:17:54] That's correct. 
Blake Oliver: [00:17:54] So, they're financing their sellers. 
David Leary: [00:17:57] They're financing their sellers. Amazon actually took it a step further. Initially, Amazon wanted to create a marketplace where all the online lenders could come in and make loans to the Amazon sellers. Now, Amazon just did an exclusive deal with Goldman Sachs. They can only give an option for a loan now through the Goldman Sachs-Amazon combined product.
Blake Oliver: [00:18:20] These aren't small credit lines. These are credit lines of up to $1 million. The interest rate is not that great, though. Fixed annual interest rates of 6.99 percent to 20.99 percent and can be drawn and repaid just like a regular credit card. So, I guess that's better than what some of these lenders are charging.
David Leary: [00:18:42] The interesting thing about this is Amazon is very about owning their customers. "We own the experience; they're our customers; we're Amazon." This is the first time Amazon's gonna let a third-party financial institution make decisions about their sellers. So, Goldman's making the underwriting decisions on their own, not Amazon. Almost in a weird way, they're kind of getting out of the banking game and just-
Blake Oliver: [00:19:04] Well, I think it makes sense for Amazon because Amazon is so capital-intensive. They have to open these warehouses and buy all these automation robots and machines. That's where they need to invest their capital, not in loaning out money to small businesses. So, this is a smart move, in that respect, because then, Amazon can take its profits, plow that into more warehouses everywhere, so they can do the one-day delivery everywhere in the country, which is what they're aiming to move to, is to be able to get every product to everyone in a day, or even same day. That's a completely different experience buying online than having to wait ... First, it was a week; then they brought it down to two days. If they can get it to one day/same day, I don't think traditional retail has a shot.
David Leary: [00:19:49] You're right. It does feel strange when you do order something, and it has to take five days. You almost feel like there's something broken. Like, what do you mean it has to take five days? This doesn't make sense.
Blake Oliver: [00:20:00] Well, that's been the weirdest thing about the pandemic, for me, when it comes to Amazon. At the beginning of it, everything was delayed, and it was like going back to that normal three-, to five-day period to wait for something, or even longer. It's just funny. It's funny how quickly we get used to having everything ASAP. That hasn't been around for very long. It's only been a few years.
David Leary: [00:20:22] We get comfortable with it, for sure.
Blake Oliver: [00:20:23] Yeah. Some more app news. Well, we're talking about QuickBooks, so we should mention that QuickBooks Online has some updates. They have done a lot of improvements to their reporting in QuickBooks Online, recently. They've been optimizing the platform to support large reports with two-times enhanced data limits and search function, smoother scrolling, and enhanced navigation to help drill down into report details. You now get smart page breaks and repeat page headers. So, if you're printing those reports to PDF, you get the formatting that you want. You can actually repeat the headers on each report page, which is important, in case those pages get mixed up. 
[00:21:00] You can reorder your comparison columns, create multiple comparisons, such as period, year to date, previous period, previous year, and previous year to date in a single report. You can reorder those columns as preferred. You can save, collapse, and expand to sections. That's a big one. It's just so annoying when you save a report, and you collapse certain sections in QuickBooks- it used to not save that. So, you'd have to then, every time you'd generate the report, collapse the sections, and open the sections that you wanted to show. Now, that'll save on your customer reports.
[00:21:33] You can also edit section titles. You can change titles, section titles, and reports to align with your company terminologies. You can change that on the profit and loss, and balance sheet reports. I don't know, for instance, if you wanted to display net income, and something else for a not for profit, then you could [crosstalk] 
David Leary: [00:21:53] These are big wins for accountants and bookkeepers because usually you're running these reports over, and over, and over again for clients. So, any time settings stick - the page break settings stick - you're not having to adjust and play games over, and over, and over again. So, these are huge, huge feature wins for- 
Blake Oliver: [00:22:08] Yeah, it definitely makes a lot better. It's funny, I was in Xero this weekend doing some work, and I noticed also their reporting has gotten a lot better in terms of just being able to quickly change columns, and do prior period comparisons, and stuff. So, I think everybody is upgrading that aspect.
David Leary: [00:22:28] Got it. Staying on the QuickBooks for a moment, did you know that they canceled QuickBooks Connect in San Jose? 
Blake Oliver: [00:22:33] Yes. 
David Leary: [00:22:33] That got canceled. I think we didn't talk about it last week when it happened. As of now-
Blake Oliver: [00:22:39] I'm just running with the assumption that everything is canceled until the end of the year.
David Leary: [00:22:44] As of right now, the only in-person conference that I think is still on the table is Joe Woodard's Scaling New Heights. It got moved from St. Louis to Orlando, and it's gonna take place, I think, at the Marriott. There's actually a webinar this week with him talking about an update on the status of that conference in Florida. I guess it all depends on how COVID goes, whether or not this happens, but that's the last in-person conference. I'm hoping it happens. I want to go and see people. I wanna give hugs to all our accountant friends- 
Blake Oliver: [00:23:13] No ... No hugs, David. No hugs! No HUGS! I know it sucks, but I just don't think this is wise. The value derived does not overcome the risk, in my opinion. It's just not worth it because it's not necessary. I'm a big- you and I talk about this off line. I'm a big proponent of opening up. Part of the reason I moved to Arizona from California is because I was sick of not being able to do stuff in California. But I think it's when it when it's necessary. It may not even matter because I don't know how many people are gonna go. That's the big question, right? Same thing as when the schools open in the fall. How many people are actually gonna put their kids in school? I think it's gonna be half. I wouldn't be surprised if attendance at Scaling New Heights is half. Can the show even work with half the attendance? Does it even make sense economically?
David Leary: [00:24:05] Yeah. I don't know those questions. I just ... The whole social-distancing thing is also weird, because if you're at a conference and everybody has to stay six feet apart [crosstalk] 
Blake Oliver: [00:24:13] What's the point of that, right? 
David Leary: [00:24:15] The point the conference is that close interactions with people, and it's not a Zoom meeting. If you're six feet apart, and you're wearing a mask, we might as well be in a Zoom at this point, right? 
Blake Oliver: [00:24:24] Yeah, the mask is ... At least, on a Zoom, I don't have to wear a mask, right?
David Leary: [00:24:28] Yeah, I could see people's faces. I'm really hoping we are over some level of this COVID thing; that there's a cure; whatever you wanna call it; an antibody, et cetera; vaccine ... I just want- the need for it is so important right now. It would be amazing to be able to go- it'd be amazing to see you, Blake; give you a hug! It would be amazing.
Blake Oliver: [00:24:50] It would be great, yeah. 
David Leary: [00:24:51] I wish we could- hopefully, we'll be able to get there because it's sad that every single event in our industry has been canceled; every single one of them. 
Blake Oliver: [00:24:58] No, I agree with you. It sucks. Yeah. I'm just not that optimistic. Maybe they'll bundle the vaccine with ... You show up in Orlando, and you get a vaccine [crosstalk] 
David Leary: [00:25:10] -some more app news. Did you hear about FreshBooks?
Blake Oliver: [00:25:13] Yeah. So, Twyla Verhelst is launching the Accounting Professionals Program at FreshBooks. She's a CPA who joined FreshBooks, which is based in Toronto, about two months ago. I got to know Twyla because she co-founded- is it Helm? 
David Leary: [00:25:36] Helm. That's correct.
Blake Oliver: [00:25:37] A cashflow application in 2018. Really interesting to see FreshBooks finally launching an accountants program. Although, I think maybe they had one a long time ago, but it didn't get a bunch of ... 
David Leary: [00:25:54] I feel like they dabbled in this about five or six years. It was back when Doug Sleeter had- when it was still SleeterCon, I think FreshBooks showed up.
Blake Oliver: [00:26:02] Yeah, because I remember getting a ... I signed up for their accountants program back in the day, and I got a really nice care package,  with a personalized letter saying, "Thanks, Blake. Welcome to the program." By the way, I go way back with FreshBooks. When I started my bookkeeping business, and I was just a freelancer in 2009, I was billing by the hour, doing QuickBooks ProAdvisor work and bookkeeping, and I used FreshBooks' mobile app, when it was one of the only mobile apps, to track my time when I was driving around doing all that stuff. Then, I would invoice my clients. I found it to be the easiest way to do that. 
David Leary: [00:26:40] One thing I thought was interesting in these press releases about this is this kind of loose words ... They're inspired by a collaborative accounting approach in which accounting professionals and their small business clients work together as a team sharing bookkeeping tasks. I kind of read this, and I almost start to feel like it ... Because FreshBooks, they're focusing on bringing together modern accounting firms with small businesses. Is this heading towards another QuickBooks Live model? 
Blake Oliver: [00:27:09] Oh, I hope not. We don't need- 
David Leary: [00:27:09] There's not a lot of details past that, but ... Is it another similar model where it's gonna be this gray area between accountants and the small business owners?
Blake Oliver: [00:27:19] I hope not, because I think we've got enough of that now. I mean, look, you mentioned it with the Wave Cash announcement. One of the things that Wave offers when you sign up is the bookkeeping software is free, but then they'll try to sell you stuff, like payment processing, and bookkeeping. You can buy bookkeeping through Wave. If you're gonna create an accountants program, it's probably better not to compete directly with the accountants in your partner program. So, I don't think they will do that. I think it's great. If I were an accountant, if I were ... Well, I am, but if I were in practice, if I had my practice, I would sign up for this ASAP because FreshBooks has millions, and millions, and millions of customers. They are the dominant GL, actually, in North America. I think they have more users, by user count, than QuickBooks. Now, granted, that's because they count it differently. It's not [inaudible] because it's users. 
David Leary: [00:28:10] If QuickBooks counted it that way, QuickBooks would have 80 million. Just because you send somebody an invoice, and they click pay, that doesn't make them a user, right? It's the way they count ... Another thing is they flat out say in here, "The program will connect its members with FreshBooks customers seeking analytics, reporting, and business strategy coaching from accounting professional." It's very clear they're gonna play middleman. 
Blake Oliver: [00:28:31] Well, connecting is different than processing payments, and managing a billing relationship. So, we'll see exactly what is meant by that. Hopefully, if it's a traditional program, it's like they have a directory; you can look up a FreshBooks professional who will then work with you on that platform.
David Leary: [00:28:49] Yeah, and they did talk about that there. They said it'll give you an access to a collaborative community, innovative tools, and technology, personalized training, and education, and dedicated support for the accountants and bookkeepers. So, yeah, some part of this does feel like a typical accountants program you've seen with other ... Some of it is a little surprising, like why it took a decade, really, for FreshBooks to finally jump into this [crosstalk] 
Blake Oliver: [00:29:12] Because they had a really successful direct model. They were able to go directly to small businesses, professionals, freelancers, and find them online. Maybe they've saturated that. Now, they're looking to expand further. Also, when they started, it wasn't- it was single-entry accounting, so most accountants were not interested in using that. They would take their clients and switch them on to QuickBooks immediately so that they could actually do double-entry accounting. FreshBooks- I haven't used the product since they announced it, so I'm not totally sure if it's full double entry, but they added that capability. So, now, it's like a competitor potentially to Xero, to QuickBooks, so that's [crosstalk] 
David Leary: [00:29:55] Yeah, you don't have to pull your clients off of it, or use it, and then have them sync, right? That was always a strategy people could use with FreshBooks; like, okay, fine, stay in FreshBooks; do your invoicing in FreshBooks, and then sync that data over to QuickBooks somehow, and then, I can do the bookkeeping-
Blake Oliver: [00:30:09] That's actually exactly- that's exactly what I did with one of my largest clients. I had them doing all their invoicing in FreshBooks, and I would sync the data into Xero, with various levels of success.
David Leary: [00:30:22] BQE Core had an announcement. They are going to now integrate with Tax1099. So, essentially, you can now- if you're using BQE Core to manage all your vendor relationships, you can actually onboard to Tax1099 automatically, so you can file your 1099 forms, et cetera. So. it's very similar to the way Tax1099's integrated with other apps. It's just now a niche app. BQE Core is really gonna start doing that. 

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Blake Oliver: [00:32:05] So, I don't know about you, but I've been getting email, after email, after email from companies with their Black Lives Matter message. At first, it was really cool, but then it started to get repetitive, like the same way as soon as COVID-19 hit, some companies jumped on it and sent out the really on-point messaging, saying, "We're here to support you. We're doing everything we can ..." The messages of encouragement, which at first are great; but then, they start to get repetitive, and you can see these companies just putting out messages- they're just doing what everyone else did. Does that make sense?
[00:32:39] So, last week, I got an email from CalCPA with the CEO's statement about diversity. Anthony Pugliese outlined his 90-day plan to enact programs and actions aimed at building a more diverse and inclusive environment for CalCPA members. So, here's what they're doing. They're signing a pledge to publicly affirm CalCPA's commitment to equity and inclusion. They're forming a member-led Diversity, Equity, and Inclusion Committee to lead efforts in creating meaningful programs, resources, and outcomes for CalCPA members. So, Diversity Committee, they are going to, via this committee, address specific goals, standards, and practices designed to identify and address racial inequities and establish specific metrics to measure progress on said goals, and they're going to join the state CPA societies across the nation, sharing best practices for achieving a more just and equitable professional association.
[00:33:30] This reminds me of all the stuff I've seen from some of the CPA firms that are out there that are making statements saying, "We're signing a pledge. We are creating a committee. We're gonna come up with a plan." I don't mean to call out CalCPA, it's just this is the email I got that I noticed that stuck out to me. Seems like all of these plans and stuff, they always result in a committee being formed, a plan being- a statement that, "We're gonna make a plan," and then, nothing really ever happens. I remember all of this with women in accounting recently. Has the number of female partners really increased all that much in large firms? No, I think we're still under 20 percent.
[00:34:09] We've been talking about diversity in accounting for 50 years and nothing has really changed. As we discussed on one of the last episodes, the percentage of African-American CPAs is one percent in CPA firms. I found out that partners, it's 0.3 percent, and the population is 13-, to 15-percent Black. So, we are not making much progress. It's about the same as it's been. It's frustrating. It's annoying to get these messages where you know there's- it doesn't feel like action is actually happening. That it's just words being said.
David Leary: [00:34:47] It's just the, "I guess we gotta put out our statement, too ..." It's the checklist; like, "Yep, all the other state societies did it; we need to do it, too," but nobody's actually truly implementing a plan. There's a meeting, they create the email, and then you kind of feel like nothing ever really happens after that.
Blake Oliver: [00:35:06] Yeah. I've been thinking about this over the last few weeks ... The protests are happening. Black Lives Matter is the top news story every single day for over two weeks. It's just sticking in my head. I think to myself, we know exactly how to solve this problem as accountants. We know exactly what we should do, and we just aren't willing to do it. Do you know what that is? 
David Leary: [00:35:30] What is this, Blake? 
Blake Oliver: [00:35:30] There's some hope in this CalCPA message because he calls out addressing specific goals, standards, and practices designed to identify and address racial inequities. Accountants are about quantifying. We are about setting goals, and metrics, and measuring progress to those goals, and metrics. So, if we want to make our firms more diverse, how do we do it? Create a KPI for diversity in your firm and stick that on the dashboard that all the partners, or at least the managing partner is looking at every week, because firms are really, really good at measuring stuff, like utilization, realization, billable hours. All the best firms are obsessed with looking at that data very frequently-
David Leary: [00:36:18] Then tie bonuses and partner payouts to this KPI.
Blake Oliver: [00:36:21] Exactly, and put that at the top. Start measuring what percentage of your staff at every single level in the firm is diverse. It could be as simple as, "Here's the percentage of White males, and then, here's everybody else." You could also break it down by gender, too. I think that would be helpful. So, you have two; you have gender diversity, and racial diversity, and that's a number. It's a percentage for every role in the firm, every level of promotion, all the way up to partner, and you display that publicly. Then, you say, "Here's what we aim for it to be." You set a goal, and then, you make it happen. If you don't do that, it's not gonna happen. We know that, as accountants. If you don't set a goal, if you don't set a budget, basically, then it won't happen. That's what needs to happen. We need to set a budget for diversity and then, figure out how to make it happen. It seems kind of obvious to me, actually. So, yeah, a diversity KPI; put that on your firm dashboard.
David Leary: [00:37:20] Even at the state society level, they should be tracking it and reporting on that every quarter, what the numbers are.
Blake Oliver: [00:37:26] Ask every firm to report diversity and then, give awards to firms that increase diversity, that improve that. It's just abysmal. What was really weird, I think, for me, working in a big firm, was seeing how many of the staff are diverse. So many women, it's like 50 percent or more women in accounting at the staff level ... In my classes, it was 60 percent or more. A lot of diversity ... In Southern California, tons of Asian folks are getting into accounting. That is no surprise to anyone who worked in accounting in California. Yet, they represent  hardly any of the partners. No Black people in the partnerships. It's all white men as partners.
[00:38:10] That actually worked out really well for me, as a white guy. All the partners ... It's completely obvious that the way that you get promoted in an accounting firm is when people like you. People who are in positions of power, who are partners, are more likely to like you and give you work, if you look like them; if you look like their kids. It's just- it's obvious. That's the sort of unintentional, not-direct form of racism. But it is. It is a form of racism. This is the other thing about accounting that I have noticed. We like to think that we are objective and that promotions are based on who has the most realization, utilization, billable hours [crosstalk] 
David Leary: [00:38:53] Billable hours. The most billable hours.
Blake Oliver: [00:38:55] But how do you get billable hours? People have to give you work. How do you get work from people? Well, first, you gotta be good at the job, but more importantly, they've gotta like you. So, if partners like you, if they identify with you, then they're gonna give you good work. Good assignments are what get you the billable hours that you need to hit your goals. Partnerships are clubs, right? It's just the same problem where you have a club that's a bunch of white men. They're gonna recruit people - subconsciously or consciously - that are like them because that's how people are. We like people who look like us.
[00:39:32] Unless you do something, consciously, to counteract that, that's gonna perpetuate itself. That is exactly the situation that we have been in, in accounting, for years and years. You have to actively push diversity in your firm, or it will, by the nature of the way partnerships work, it will perpetuate a lack of diversity. Does that mean that you set a target for recruitment, and you specifically say, "We are going to hire X percent diverse people, and we are gonna promote X percent diverse into our partner ranks?" If you wanna make it happen, then that's the best way to do it. Actually set a target and say, "We must, in our next partner class, have X percent diversity."
David Leary: [00:40:15] It may have to be a longer timeline because, fundamentally ... We've talked about these numbers before, the number of minorities that are graduating with accounting degrees. Then, as they move up the ladder ... You're probably not gonna make somebody who just got outta college- 
Blake Oliver: [00:40:30] No, it takes time. 
David Leary: [00:40:30] It takes time. But what's happening is, even if an accounting firm mentally says, "Okay, we're gonna promote somebody that's diverse," they might actually have not have anybody on their staff yet that's up to that level to become a partner. So, it could be very hard to see progress in quarter over quarter, but over three, four years, there should be less excuses for it not happening.
Blake Oliver: [00:40:51] You've got to do it at all stages of the funnel because a lot of the problem is, especially with women, we don't have a problem recruiting women into accounting firms. That's not a problem. There's plenty of women entering accounting, but they leave somewhere between manager and partner. Why? There's lots of answers as to why. If you really wanna make women stay, then you need to, at that point, say, "We are gonna make sure that we have 50 percent women going from manager to senior manager and then, 50 percent from senior manager to partner. We're gonna change how the firm operates to make that happen."
[00:41:24] If women are leaving because of a specific reason, we need to fix that. Same thing with other diversity targets. You can't just say, "Oh, we have a system that is ..." A colorblind system can still be racist. That's one of the things that I've learned over the last few weeks, because, if it perpetuates the situation, then it's systematically racist. So, anyway, that's me ... I'll step down off of my soapbox here on that.
David Leary: [00:41:50] To summarize, the premise is you've got to start tracking it. If we don't start tracking it-
Blake Oliver: [00:41:55] Track it! 
David Leary: [00:41:55] -at the state societies, et cetera, firms aren't gonna track it, themselves, if they don't ... Reward the behaviors along the way. 
Blake Oliver: [00:42:02] Go out and recruit on campus at places that are historically Black, or more diverse. You actually gotta go do it, too. But that alone is not enough. So, PPP?
David Leary: [00:42:14] Yeah, let's jump in.
Blake Oliver: [00:42:15] Okay! 
David Leary: [00:42:15] You wanna talk about Mnuchin? Do you wanna talk about Rubio? What do you wanna ...? 
Blake Oliver: [00:42:21] Well, let's just talk about the new guidance that came out on Friday. So, effective January 12, the SBA and Treasury announced some new and revised guidance regarding the Paycheck Protection Program. I think we're on the 14th interim final rule. Rather than releasing another interim final rule, they revised the first one. So, this was a revision to the first interim final rule. 
[00:42:46] The eligibility threshold for those with felony criminal histories has been changed. The lookback period has been reduced from five years to one year to determine eligibility for applicants or owners of applicants who, for non-financial felonies, have been convicted, pleaded guilty, pleaded no contest, or been placed on any form of parole or probation. It's still five years for felonies involving fraud, bribery, embezzlement, or false statement on a loan application; but for non-financial crimes, it's only a year. That was the only change that I spotted on Friday with PPP and actually the way that it operates.
[00:43:21] The thing that really stuck in my head was, over the weekend, Larry Kudlow, as I mentioned at the beginning of the program, was on CNN, on Jake Tapper's State of the Union program on Sunday and said some things that have created a bit of controversy. He said that the Trump administration never promised to release the names of businesses that received PPP loans as part of the CARES Act.
[00:43:46] This was in response to questioning about Steven Mnuchin on Wednesday, who said that he told Congress that the SBA is not going to release the names of the businesses that received PPP loans. Now, there's people in Congress who are upset about this because transparency- the administration promised transparency. I'm not sure exactly what the administration promised. I do recall them promising transparency in the program because it's $600 billion dollars, and you need some transparency to make sure that people who ought to have got the money got the money, right?
David Leary: [00:44:20] Well, some of it is to Marco Rubio, right?
Blake Oliver: [00:44:23] Yeah. Marco Rubio. Yeah, he was saying that [crosstalk] 
David Leary: [00:44:24] -on April 29, he insisted we are going to know, one way or another, who got this money. He was all about releasing this. We will make them do it. He was all about releasing this. Now, since Mnuchin went on and had his testimony- 
Blake Oliver: [00:44:40] They walked it back. 
David Leary: [00:44:40] -and walked it back ... Now, he's saying- he's changed his course. Maybe it is proprietary information. So, Rubio's completely flip-flopped on this point of view. But then, if you really- 
Blake Oliver: [00:44:51] Oh, just to add to that, David, the SBA also previously had said that the names would be released. On the application, it says that you agree that your name and address may be released as part of a Freedom of Information Act request. This was planned. 
David Leary: [00:45:10] Because, historically, all SBA loans, that information's released, historically speaking.
Blake Oliver: [00:45:15] Yeah, you can go find that out. Yeah, it's taxpayer money, right?
David Leary: [00:45:19] Yeah. There's the argument whether they should or shouldn't. I argue that- I come from the point of view that we should because, really, the key is just to get insight of who got sweetheart deals and if they're connected to people in politics. We need to see that; it needs to be disclosed. They think it's gonna be, "Well, if we know that this company got this much of a loan, that means their payroll was this much," and it's gonna be a competitive advantage for their competitors and all. If everybody's is out there, it's not competitive for anybody.
Blake Oliver: [00:45:46] That's the main argument is that because the loan is calculated based on payroll amounts, knowing the amount that somebody got for their loan, you could figure out what their annual payroll is, and that that is proprietary information and should not be released. I guess ... I guess that could be competitive intelligence, but given that these companies agreed that this information could become public ... 
David Leary: [00:46:17] The other problem I have with this is just ... There's an article [inaudible] article from Politico. Basically, Mnuchin's been testifying to Congress and talking about oversight of this. There's this revisionist history happening on what the purpose of the Paycheck Protection Program was. So, Blake, what was the purpose of the Paycheck Protection Program?
Blake Oliver: [00:46:37] Well, I'm still not clear on that. It was either- depending on who was talking, it was either small business stimulus, or it was to protect- keep people off unemployment. 
David Leary: [00:46:51] According to Senate Minority Leader Chuck Schumer - this is on Friday - he said, "Given the many problems of the PPP program, it is imperative that American taxpayers payers know if the money is going where Congress intended, to the truly small and unbanked small businesses." Where did that ...?! Where did this come from?
Blake Oliver: [00:47:09] Yeah, that was-
David Leary: [00:47:09] That was never in any ... That was never, ever mentioned, that it's for the unbanked small businesses?
Blake Oliver: [00:47:16] Yeah, and the way the program was designed, it was specifically for businesses that already had banking relationships because they went through the banks, Anyone with a brain could have seen that was what was gonna happen. I think that if they release the names and information about these loans, that that's what we'll find is that it's the well-connected small businesses, the large or small businesses that have accountants and lawyers, who can help them get these loans, that got the money.
David Leary: [00:47:46] That was very obvious in round one, that first $350 million. It was very obvious who got stacked up, who got prioritized, and they got a sweetheart deal, when it was supposed to open everybody on day one. That's what they're afraid is gonna be exposed is that people stacked  these things arguably illegally.
Blake Oliver: [00:48:04] I was talking with my dad about this, and he had a good point, which is that he doesn't think the names will become public because there may be a lot of the wealthy Republicans and Republican-owned businesses, where they got these loans, and they wouldn't want their names to become public. But you could say the same on the Democratic side.
David Leary: [00:48:26] Oh, it's- all politicians are connected. Yeah, this is not a Republican and Democrat thing. 
Blake Oliver: [00:48:31] Yeah. The leadership in Congress probably would- on both sides, probably would not be too sad if these names never came out because it would just create a hassle for them on all fronts.
David Leary: [00:48:44] Oh, I'm sure this is posturing. Right. This is political posturing on all fronts. But not only that, it's not just ... The SBA, they're withholding information from the Government Accountability Office. So, not even just information about who requested the loans, but they don't even know ... They can't get data from the SBA separating out the loans and separate Economic Disaster Injury Loan program. The GOA confirmed on Friday that it has received no information about ... Not even information of when the SBA will provide the data. They can't get a response from the SBA.
Blake Oliver: [00:49:18] Now, I wonder how much of that is malicious and how much is just they're overwhelmed, and they don't have the capability of getting them that information quickly enough. I think a lot of this is posturing, right? It's a negotiating position. The position the administration is taking right now is maximum privacy and that they're gonna end up compromising, so the Democrats in Congress will look like they forced the administration to release information. In the end, it will only be information on loans over a lot of money; over a few million dollars is gonna get released.
[00:49:53] Then, the press will have fun going through and picking out businesses, who ... Should they have got the money? Should they not? Look at this mom-and-pop that went under, but this big meatpacking plant was able to keep going, even though they're making tons of money. That sorta thing. That's where they'll end up. Nobody in Congress wants all the names to get out there, because I can guarantee you that so many of those names are gonna be donors; people who don't want the names to get out there, who have influence.
David Leary: [00:50:22] There is a letter that Senator Kamala Harris, Democratic Senator from California, and Representative Katie Porter, Democrat, California, they wrote an open letter on Friday. One of the sentences in it really makes a lot of sense and I think kind of can summarize this. "It is impossible to know to the extent of the PPP problems or its successes without access to the data." We even had somebody write a review that you and I wrote too harsh about the success of PPP. Without the data, none of us can celebrate this, or criticize its problems. The data's not available to us, to both sides. It's just not available.
Blake Oliver: [00:50:57] Maybe the administration is also stalling, hoping that the economy improves over the next few months and then, nobody cares anymore. The PPP will get credit for a lot of that success, which happened with the May unemployment numbers. PPP- in every article I read about the unemployment numbers, the Paycheck Protection Program got credit for at least some of that $2.5 million dollars- 2.5 million jobs that was saved. That's the controversy about the privacy. We'll see what happens with that. In terms of the actual forgiveness, there are still calls in Congress to make the forgiveness application simpler because it's 11 pages right now, and it's pretty complicated. 
David Leary: [00:51:39] Gene Marks wrote up another opinion piece for The Washington Times about, "The Paycheck Protection Program's a success, except for one big issue." You can skip the whole article and skip all the way down to the part where it's the forgiveness application. It's just impossible. Again, his argument is just call this what it is - it's a grant - and move on. Let small businesses move on [crosstalk] 
Blake Oliver: [00:51:59] Again, I would set a threshold. So, loans under a certain amount just automatically forgive them. Just do it. If they did that, that would encourage the businesses who haven't yet applied to apply and get the rest of the hundred billion or more that is still in the pot available to be taken. The second round has not been used up.
[00:52:20] I think the big reason is that most businesses, the small ones without the accountants and the lawyers, are too scared to take the money because they don't know how to do these forms. These forms are challenging for accountants. You think your typical small business owner is gonna be able to do them or want to do them? No. Then they worry about just getting saddled with additional debt if it doesn't turn out to be a grant. The uncertainty is the problem.
David Leary: [00:52:45] Do you want to chat a little bit about these new funding programs that we're gonna be talking about for the next eight to 12 weeks that are coming onto the radar?
Blake Oliver: [00:52:55] Yeah, I've been so focused on PPP that I haven't really been paying attention to much else [crosstalk] 
David Leary: [00:53:00] -are you ready? So, a group of Democratic senators have introduced a new Paycheck Protection Program only for small businesses with 100 or fewer employees, including sole proprietorships and self-employed. Are you ready for the name of this? [crosstalk] To be eligible for the Prioritized Paycheck Protection Program ... So, it's now four Ps. 
Blake Oliver: [00:53:22] The Four P Program. 
David Leary: [00:53:22] To be eligible-
Blake Oliver: [00:53:22] PPPP-
David Leary: [00:53:22] You must have already spent a PPP loan. So, you got your loan, you used it all up-
Blake Oliver: [00:53:33] Okay, well, that's where they're screwing up in the first place because-
David Leary: [00:53:35] -and prove that you had a revenue loss of 50 percent or more due to the pandemic.
Blake Oliver: [00:53:40] Oh, God. So, see, they're already screwing up because if they want smaller businesses to get the money, then those businesses didn't get PPP loans already. Then, you're making them prove a revenue loss with more paperwork. What is it about simplifying the stuff that Congress just doesn't get? That's a stupid question, given that they've written the tax code, so ... 
David Leary: [00:54:04] So, that's coming down the pipe. There's not a lot more on that just yet, just the Four P, or P4 is coming.
Blake Oliver: [00:54:13] So, that's a proposal in Congress. But we don't even know if that's gonna go anywhere because the administration is not ... They are not making encouraging sounds about more stimulus.
David Leary: [00:54:24] But, you know who's involved in this proposal is Ben Cardin, who is- he's the U.S. Senate Committee on Small Business. This may come off as, "Oh, it's just an idea. Who's introducing it?" But if you look at who's introducing it is the person who has a lot of influence over the SBA, et cetera. 
David Leary: [00:54:40] Then, we've talked about the mainstream loan program before [crosstalk] 
Blake Oliver: [00:54:43] Main Street lending program. 
David Leary: [00:54:43] -which is not for Main Street businesses; it's for huge businesses.
Blake Oliver: [00:54:50] Right. 
David Leary: [00:54:50] They've changed the guidelines for that already. Hasn't even started, and they've changed the guidelines. Now, the minimum loan amount will be $250,000; before, it was $500,000. The maximum, now, could be up to $300 million from the previous $200 million. So, they're already changing this, and this loan program was really ramping up to start next week. It's days away from making its first loan, it says in the article. 
[00:55:19] This is a whole other set of money that's going out that's gonna have to be tracked; gonna have to be reported on. This is different because this is loans directly from the Fed. This is- just how the Fed gives banks loans, they're gonna give loans to businesses, large businesses. So, this is a whole 'nother thing we're gonna see. They're going to provide $75 billion in equity that can be used for up to $600 billion in lending.
Blake Oliver: [00:55:44] Right.
David Leary: [00:55:44] This program's about to roll out and it's already getting changed. I hinted at this a couple weeks ago. I was like, we'll probably ... When we were talking about why there should be forgiveness; just get this off of people's plates, because there's new things to worry about. U.S. Treasury Secretary Mnuchin said the administration is considering reimbursing businesses whose store fronts were damaged in the recent rioting. So, there's gonna be a whole new set of programs that are gonna be out there for small businesses that were damaged because of the rioting.
Blake Oliver: [00:56:15] Well, hopefully-
David Leary: [00:56:16] Just more programs to track; more programs to report on ... 
Blake Oliver: [00:56:19] Hopefully, that paperwork will be a lot easier.
David Leary: [00:56:22] Well, the good news for accountants and bookkeepers - there's gonna be plenty of work for you. There's plenty of work for you regarding this stuff.
Blake Oliver: [00:56:28] It's true. It's a stressful time for the community. You can just see that in Twitter, but it's also an opportunity. There's so much work to be had, if you're willing to jump on these programs, and figure out how they work, and help your clients get funding. Well, that's all the time we've got.
David Leary: [00:56:45] Yeah. I'd love for people to give us a call. Car voicemail and let us know what you're doing, possibly, for diversity, in your own firm; if you have any ideas, or whatever you're doing to address diversity in your own firm, we'd love to hear their ideas on a way to do that. 
Blake Oliver: [00:56:58] Yeah, that'd be great. 
David Leary: [00:56:58] Ways to measure it.
Blake Oliver: [00:57:00] That number is (202) 695-1040 ... (202) 695-1040. It's a Google Voice number. It'll go straight to voicemail. Leave us a message, we'll take a listen, and we maybe will play it on the air. If you wanna reach me online, I'm @BlakeTOliver on Twitter. How about you, David?
David Leary: [00:57:19] I'm on Twitter and, actually, all the socials - I'm @DavidLeary.
Blake Oliver: [00:57:24] So reach out. Let us know you think. Give us a follow. Thanks for listening. We'll see you here next week.
David Leary: [00:57:29] Next week.


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