In this episode, we've got more PPP news, including the debate over accounting firms paying back PPP loans, the elusive and nonexistent deal on federal unemployment benefits, and how one Florida Man buys a Lambo with fraudulent PPP money to ease his pandemic burdens. In other news, we've got updates from Xero, FreshBooks, YayPay, Gusto, and big news from Intuit about their latest product, QuickBooks Cash. We'll also talk about Shopify's revenue nearly doubling, Enova's slated acquisition of OnDeck, Monzo's losses in the UK, and much more!
Get in Touch
Thanks for listening and for the great reviews! We appreciate you! Follow and tweet @BlakeTOliver
. Find us on Facebook
and, if you like what you hear, please do us a favor and write a review on iTunes
, or Podchaser
. Interested in sponsoring the Cloud Accounting Podcast? For details, read the prospectus
, and NOW, you can see our smiling faces on Instagram
! You can now call us and leave a voicemail, maybe we'll play it on the show. DIAL (202) 695-1040Need Accounting Conference Info?
Limited edition shirts, stickers, and other necessities
ADP has your back with ADP Marketplace, a digital HR storefront. Be a more trusted advisor to your clients by recommending apps to help streamline HR processes and free up time to focus on people. Stay tuned to hear more from our sponsor, ADP Marketplace, later in the episode.
Blake Oliver: [00:00:20] This is huge! David, what is QuickBooks Cash? Why is this such a big deal?
David Leary: [00:00:24] QuickBooks Cash ... Essentially, you no longer have to get a separate bank account. You can just, in QuickBooks, sign up and get a bank account. Not only that, the bank account pays interest.
Blake Oliver: [00:00:36] Yeah, it's pretty good, actually. One-percent interest, pretty high yield; I mean, relatively speaking.
____________________This episode of The Cloud Accounting Podcast is sponsored by ClockShark. Back in October of 2013, I became ClockShark's first Twitter follower. Today, ClockShark has grown into a highly rated and very-much-loved time-tracking app that is now used by over 5,000 small businesses globally. With features like crew tracking, scheduling, overtime notifications, routes, geofencing locations, job costing, budgeting, and reporting, ClockShark has built a robust mobile time-tracking app to handle the unique challenges that face your mobile workforce clients.
Their technology has been helpful as their clients work through the COVID-19 pandemic. Your clients will need accurate records of their expenses, and losses, and technology like ClockShark helps. With ClockShark, your clients can keep accurate records, like paid time off, and other important data to provide the necessary proof for CARES, and FFCRA Acts' benefits. This lets them get straight back to work without too much disruption after the pandemic has passed. ClockShark's standard plan is just $6 a month per employee. Head over to cloudaccountingpodcast.promo/clockshark. That is Cloud Accounting Podcast dot promo forward slash C-L-O-C-K-S-H-A-R-K.
This episode of The Cloud Accounting Podcast is sponsored by Smansha. The line between a successful business and a bankrupt one is often how much cash they have in the bank and how long they are able to remain cashflow positive during challenging times. Keeping an eye on your clients' cashflow is now more important than ever. Smansha integrates with QuickBooks Online, and Xero to help put an end to cashflow problems.
By using daily, weekly, and monthly forecasts, cashflow calendars, and powerful, customized 'what-if' scenarios, you can visualize your clients' finances in clear, and intuitive ways, so you can take action and reshape their cashflow by getting them funding with one simple application. Smansha identifies when extra cash is needed and can match your clients with multiple financing options via more than 50 screened lenders, and you can advise on the best offer suited to your clients' needs.
Just for the listeners of The Cloud Accounting Podcast, Smansha is offering its fully functional unlimited-companies license for free until August 31, 2020. Head over to cloudaccountingpodcast.promo/smansha. That is Cloud Accounting Podcast dot promo forward slash S-M-A-N-S-H-A.
Blake Oliver: [00:03:02] Welcome to The Cloud Accounting Podcast, I'm Blake Oliver.
David Leary: [00:03:05] And I'm David Leary.
Blake Oliver: [00:03:06] So, how's life in quarantine?
David Leary: [00:03:08] It's good. I took my laptop apart yesterday and put it all back together.
Blake Oliver: [00:03:12] Oh, wow. That is a real act of desperation there. But no, you actually had a broken keyboard.
David Leary: [00:03:16] Yeah, the Z, X, C, and V keys wouldn't work, so it was very, very hard to-
Blake Oliver: [00:03:20] How long-
David Leary: [00:03:20] That's cut/copy/paste. It was pushing 90 ... Well, it was slow. First, the Z key wouldn't work; then, it was the X key; then it was the contract, then the V. It was spreading like a disease across the keys.
Blake Oliver: [00:03:32] How were you even working?
David Leary: [00:03:33] I bought a USB keyboard, and I had that on top-
Blake Oliver: [00:03:36] Okay, got it.
David Leary: [00:03:36] -of the other keyboard. I was using that. I had this laptop with a keyboard on top of the keyboard.
Blake Oliver: [00:03:40] Too bad you can't go to Starbucks because that would be real impressive, right?
David Leary: [00:03:43] So, I found a replacement on Amazon; ordered it in from China. It took like 12 weeks to ship. It finally shows up. I tear my whole laptop apart, and I get to the last part, and the keyboard is soldered- it's not soldered, but it's riveted in.
Blake Oliver: [00:03:56] Oh, no.
David Leary: [00:03:56] I had to break all- I had to break like 75 plastic rivets to get it out fully, and then put the new one in, and then basically use a little Super Glue to fix all the rivets. It's working! I can type, I can cut/copy/paste. Everything's perfectly fine. It's a successful rebuild. It was one of those ... Sometimes, you'll see- I mean, the keyboard, you can replace from the front.
Blake Oliver: [00:04:17] Yeah.
David Leary: [00:04:18] I literally had to take every single part of the laptop out to get to the keyboard to put it back in.
Blake Oliver: [00:04:23] You're making me nervous just listening to you. That's scary. I'm an Apple guy. I can't take that apart. I just take that to the Apple store.
David Leary: [00:04:32] For a couple of seconds, I was like, "Shit, how are we gonna record the podcast tomorrow?" Because when it was a part, I was like, "I can't get the keyboard out. Now what?"
Blake Oliver: [00:04:38] Well, it's a good thing you're handy with that.
David Leary: [00:04:42] It was a little risky. I didn't have a contingency plan. What if I would've broke my laptop yesterday?
Blake Oliver: [00:04:46] That would've been bad.
David Leary: [00:04:46] We couldn't record.
Blake Oliver: [00:04:48] Well, I had my own adventure in technology. Jirav is participating in the Boomer Consulting Virtual Summit on August 9-12. That summit, as you can tell from the title, has gone virtual, like everything this year.
David Leary: [00:05:04] Are they gonna rebrand that now? No, I know it's his name, but ...
Blake Oliver: [00:05:07] To what?
David Leary: [00:05:07] Because everybody- this word "boomer" has such a negative connotation now. I know he had the brand, way before, right? But it's almost like ...
Blake Oliver: [00:05:14] They have selected a platform for the virtual conference called VirBELA. It's a virtual world, David. Did you ever play Second Life back in the day?
David Leary: [00:05:30] No, but I'm aware of that stuff.
Blake Oliver: [00:05:31] Or any online multiplayer video games, or your kids, maybe? Think of Fortnite, but instead of blasting people with laser rifles, you are in an office, walking around, talking to people. You have an avatar that you control. You can shake hands with people. You can look at a screen and control it on the wall. You can sit down in a chair. One of the neat features is this microphone proximity. You turn on your microphone. There's no webcam, which is kinda nice, actually, and when you walk up to somebody, if you're in a common area, you can just start talking to them. It's already working. If you walk too far away, you can't hear them anymore.
David Leary: [00:06:14] Okay, so there's a little meeting room, and if you walk in it, it's quiet. As soon as somebody else walks in, you both can hear each other.
Blake Oliver: [00:06:22] Mm-hmm.
David Leary: [00:06:22] I get it. All right.
Blake Oliver: [00:06:23] Yeah. You can have a screen on the wall, like a conference-room screen, and then you can put up web pages on there. You can put up a presentation, and you can talk about it. It's like kind of being in an office. Some companies are using this as their virtual office. Folks are using this for conferences. That's what Boomer Consulting is doing. They're gonna have an expo hall, and they have all the rooms that you would expect. What's great is it can be the most beautiful expo hall you've ever seen - super-neat and modern. It's gonna be interesting. I have a virtual booth that I'm creating marketing materials for; uploading images and branding it with our logo and whatnot. We're gonna staff it for three days and see what happens.
David Leary: [00:07:07] So, the conference has not happened yet, the virtual conference has not happened.
Blake Oliver: [00:07:10] No, it happens on August 9; starting on August 9.
David Leary: [00:07:14] Okay, you'll have to keep us [inaudible]
Blake Oliver: [00:07:14] Yeah.
David Leary: [00:07:14] Because, a lot of times, these virtual tools, the conference day comes, and I don't know how many people they have attending, but then, we've heard story after story of these things crashing, not working.
Blake Oliver: [00:07:24] Yes.
David Leary: [00:07:24] So, that'll be ... That's the real test.
Blake Oliver: [00:07:28] Hopefully, it'll work. This is quite a large platform, and I've already tested it out. You can actually go and download the client and try it. There's a free area, where anybody can go and try it. Then you pay to have your own private area, your own private world. Check it out - VirBELA.com - if you're looking for a solution. I am going to have to upgrade my computer, though, because my laptop, which doesn't have a graphics card, is kind of struggling. It works, but I really would like a smoother experience, and now I get to justify buying a new computer.
David Leary: [00:08:01] Always.
Blake Oliver: [00:08:01] Yeah, so that's that's my adventures in virtual reality, but let's get back to reality and the news that is oh-so-important to the economy, which is unemployment benefits that expired on Friday. Discussions between Republicans and Democrats didn't come to anything last week. Negotiations are going on over the weekend. Treasury Secretary Mnuchin has been meeting with Chuck Schumer and Nancy Pelosi. He did that yesterday, on Saturday. As we record this on Sunday, staffers are purportedly working together to try and get a deal going, but so far, we haven't heard anything, and we've got a $600 per week federal unemployment benefit that is expired. Now, all that's left is the state unemployment benefits, which can be as low as a few-hundred dollars. Some serious challenges in that, if there isn't a deal soon.
David Leary: [00:08:53] The New York Times has a great series of tweets, where they have a slide deck, basically, showing the Republican plan, what's already been passed, in the middle, and then, to the right, the Democrat plan. If you look at these two plans going forward, they are very far off. An example would be small-business aid. The Republican plan has $200 billion for small-business aid. The Democrat plan has zero; zero of a $3.4 trillion plan. The Republican plan is $1.1 trillion. Remember, we've already had $3.2 trillion in between. There's no alignment on any pieces of this - the tax breaks for businesses, stimulus checks, unemployment benefits. Even the state-to-state and local municipalities, nothing is aligned whatsoever.
Blake Oliver: [00:09:37] Yeah.
David Leary: [00:09:37] Unless some miracle happens on the Hill tomorrow, or today possibly - I'm sure they've worked all weekend-
Blake Oliver: [00:09:45] This is not good news, but I do have a little bit of good news, which is that the IRS is making it easier to change your accounting method during the pandemic. There's a form called Form 3115, which you file with your income tax return to change your accounting method from cash to accrual, vice versa. You used to have to actually mail a duplicate copy of that to the IRS - you file one with your tax return and then you mail a duplicate copy. Now, the IRS is really moving into the future and you can fax that form.
David Leary: [00:10:18] There was an article about more fraud in the in the disaster loan program, not PPP program.
Blake Oliver: [00:10:25] The EIDL?
David Leary: [00:10:25] The EIDL. The thing to take away from this article for me - it was in The Washington Post - was they're indicating there's widespread fraud. It's way more than it was. They said that $1.9 million of these loans went to bank accounts outside the United States. A banking service provider said that about 3,000 were suspicious transactions totaling $73 million. A federal credit union told the Justice Department that 59 out of 60 SBA deposits it received appeared to be fraudulent.
Blake Oliver: [00:10:56] Wow.
David Leary: [00:10:56] 59 out of 60. The article also talks about how they were overwhelmed. One of the takeaways, which I did not know they were doing ... The first six weeks, they only got through 38,000 loans. It was less than one percent of their backlog.
Blake Oliver: [00:11:10] Is this the EIDL program you're talking about, still?
David Leary: [00:11:12] Yes, the EIDL. Remember, pretty much nobody could find anybody who successfully got an EIDL loan in the beginning. Then, they got through their backlog, but the way they did it, and I did not know this, they hired 1,200 loan evaluators and outsourced much of the work to Rocket Loans and other consultants. Rocket Loans is Rocket Mortgage. You've heard of all that.
Blake Oliver: [00:11:34] Yeah. Yeah.
David Leary: [00:11:34] They're using third parties to just plow through this loan paperwork. Then, by the time it was done, by July 15, they approved 2.6 million loans. They really, in a short amount of time, burned through all these loans. Again, like we talked about before, there's gonna be fraud if you do this many loans this fast.
Blake Oliver: [00:11:52] Well, hey, I can one-up you on these fraud stories here. New York Times is reporting that: "Florida Man Took Coronavirus Aid and Bought a Lamborghini, Officials Say."
David Leary: [00:12:04] The title really says Florida there-
Blake Oliver: [00:12:05] Florida, yeah.
David Leary: [00:12:05] -because my daughter showed me some trend you could do on Google. If you do "Florida Man" and put in your birth date, there's always gonna be a news article on Google News about "Florida man ..." continue your article. It's that headline.
Blake Oliver: [00:12:18] Well, it's a trope, right? It's a joke now, and "Florida Man" is the quintessential ridiculous headline story. We finally got one for PPP. David T. Hines, 29, was arrested and charged with three felonies after spending his PPP money on- the big-ticket item was a $318,000 Lamborghini.
David Leary: [00:12:39] Did he get a custom plate that said PPP?
Blake Oliver: [00:12:41] I don't know, but he should have. Apparently he actually had some real businesses. He said he operated four businesses with 70 employees and had $4 million in monthly expenses. He received three payments totaling almost $4 million. After that money came in, he continued submitting requests for more funds. Eventually the requests totaled $13.5 million. Then, he went on a spending spree with the money that he had received but obviously got caught. He made two payments in May totaling $30,000 to a person listed as "Mom," officials said. The same month, he paid more than $4,000 to Saks Fifth Avenue. In June, he paid more than $7,000 to the Setai Hotel in Miami Beach, and $8,500 to the jewelry company, Graff. The biggest purchase was, of course, that Lamborghini. Monthly expenses for his businesses, in reality, averaged around $200,000 -far below what he claimed on his federal loan applications.
David Leary: [00:13:38] Another fraud one - former Microsoft executive, Mukund Mohan, was arrested for a $5.5 million fraud for PPP. Basically, he applied, and he took the money, and he put some of it into his Robinhood brokerage account, so he could play stock games and gamble with it. He applied for eight loans for six companies. Now, mind you, he's a CTO at a real company called BuildDirect.com. It's for home contractors; some middleman software for you to- if you need to get a drywall guy, or an electrician, you could use this website to do that. He was really blatant about it. He applied for the loan; said that he paid more than $2.3 million in payroll in 2019. The reality is he bought this other company in May and it had zero employees.
Blake Oliver: [00:14:23] I just wonder what what they- how they think they're gonna get away with it because that's so easy to check. You just look at the the payroll filings, the federal 941s, or whatnot. If there's no payroll related to that EIN, you're gonna get caught pretty easy. Anyway, people are dumb. Criminals are dumb.
David Leary: [00:14:42] Speaking of dumb, and I don't know if this is dumb or not dumb - I'll leave this up to everybody arguing - this is from the Virginia Gazette. It's a letter to the editor. I'm gonna read the letter, itself - Accounting firms should repay PPP loans - "As a practicing CPA I was glad to see July 15 finally arrive and signal the end of a long busy season. It has provided some time to reflect. I was shocked when I heard that CPA firms had received PPP loans. Some firms received millions of dollars. Of course, in April, nobody knew what was going to happen. But now I believe most accounting firms have revenue, as of the end of July, that is close to the revenue they had earned during the same time frame in 2019.
[00:15:33] If these firms have kept their expenses the same for 2020 compared to 2019 and they received a Paycheck Protection Program loan, then, when the loan is forgiven the entire amount of the loan will increase their net profit. As a former partner in a large regional firm, I do not think the purpose of the PPP loan program was to enrich individuals that already earn far more than the average American. In my opinion, accounting firms that received PPP loans should pay them back. Bryan G. Goetsch, Williamsburg."
Blake Oliver: [00:15:50] I wonder what our listeners think of that. Law firms and accounting firms were some of the top recipients of PPP loans. Why is that? It's because we knew how the system worked, so we were able to go and get the money for ourselves, in addition to our clients. That's just how it was set up.
David Leary: [00:16:06] Yeah, because if the accountants and bookkeepers are helping small businesses get the money, you're not gonna not fill out an application for yourself along the way. You just did 45 of them for clients.
Blake Oliver: [00:16:14] Yeah.
David Leary: [00:16:14] As a percentage of the industry, I imagine- you're right, it's probably 99.9 percent of all accounting, and bookkeeping firms applied for the loan.
Blake Oliver: [00:16:25] Now, rather than return the money, here's what I would say. If you feel guilty about this, having received this money, do some pro bono work for businesses that are struggling. Maybe that's a solution.
David Leary: [00:16:34] I'd imagine that's already happening [crosstalk]
Blake Oliver: [00:16:36] Yeah, it probably is. There's a lot of firms that aren't billing for PPP services and stuff. Anyway, I think it's kind of ridiculous. What are you gonna do? Ask everybody who didn't really get ...? What is the definition of hurt? What is the definition of need for this money? There isn't one. So, what are we gonna do, make one up? I'm interested to know what our listeners feel about this. Let us know. Hit us up on Twitter.
[00:16:59] In the meantime, I got one more PPP story here, which is a story in The Wall Street Journal about how business customers are bailing on big banks and switching to community banks due to PPP loan issues, which was anticipated. I think we've talked about that as something that might happen, and we have some stats on that. According to a survey of 931 firms, conducted by Barlow Research Associates, 28 percent of businesses that secured PPP funding got their loan from a lender with whom they had no prior relationship or a bank that wasn't their primary one. 44 percent of those borrowers said they would move at least some of their accounts and loan to the bank that came through for them during PPP. That's a lot.
[00:17:40] Then, there's a bunch of anecdotes in the article about businesses that got really pissed off at Wells Fargo, or Citigroup, or Bank of America and have moved their assets. The banks with less than $10 billion of assets account for just 14 percent of the industry total, but they handled 52 percent of the loans that were approved in the PPP, and 44 percent of the program's dollars. They really came through, and it seems like they're they're reaping the benefits.
David Leary: [00:18:11] Well, again, this is just like with- in general, using the PPP loan to acquire ... Accounting firms to acquire new clients to provide service to build up that relationship. The smaller, smarter banks were able to do that, and the bigger banks were just overwhelmed with applications. Who they took care of was their most important customers, the Shake Shacks, etc.
Blake Oliver: [00:18:33] One of the banks mentioned in the article is called InBank. They added 350 new customers because of PPP, mostly from large banks, said chairman and CEO, Ed Francis. It would normally take that bank, which has $423 million in assets, as of March 31, as long as two years to bring that many aboard. So, they got two years' worth of clients in a matter of months.
David Leary: [00:18:53] Wow.
Blake Oliver: [00:18:54] Sort of reminds me of all the stores that are selling home gym equipment. I went out yesterday trying to look for an elliptical or a treadmill, and all the stores that I went to said that they did two or three years' of business and two or three months, and everything's on backorder until the fall.
David Leary: [00:19:13] I remember going to Target, right after things started to lock down. They don't have a huge fitness section; it's just like one aisle of yoga mats, and some weights.
Blake Oliver: [00:19:21] YeAH.
David Leary: [00:19:21] It was like a robbery. There was nothing there. Then, the whole bike shelf, all the bikes were gone, too. People are really desperate to get some home workout equipment.
Blake Oliver: [00:19:34] So, let's get to app news!
David Leary: [00:19:34] Apps. I was gonna say, let's chat apps.
Blake Oliver: [00:19:41] We gotta start with QuickBooks Cash. This is huge! David, what is QuickBooks Cash? Why is this such a big deal?
David Leary: [00:19:47] Yeah, so QuickBooks Cash. Essentially, you no longer have to get a separate bank account. You can just, in QuickBooks, sign up and get a bank account. Not only that, the bank account pays interest.
Blake Oliver: [00:19:58] Yeah, it's pretty good, actually. One percent interest, pretty high yield, I mean, relatively speaking.
David Leary: [00:20:04] According to Intuit, it's 25 times higher than the average rate for small business accounts.
Blake Oliver: [00:20:09] Yeah. Then, there's no fees. That's pretty amazing, too. No minimum balance, no required daily balance, no monthly service fee. That's a big deal because a lot of businesses pay a lot in fees.
David Leary: [00:20:22] Because it's Intuit's account, you connect your merchant service to it; do instant deposits. There's no more waiting that extra day and a half, two days for ACH. You can get instant deposits to that account free of charge. You get a debit card, so you can actually do spend. They have a cashflow planner. The cashflow planner that I currently see in my QuickBooks Online, it's only historical - the last 12 months. I'm not seeing a future look yet, on that. Apparently, that's something you get when you get the QuickBooks Cash account. They also have the QuickBooks Pay. It's QuickBooks Online bill pay, powered by Melio. That's available, and that ties into the whole thing. The thing that I found interesting ... Remember, we talked about personal finances before? I stopped using mint and I switched to You Need a Budget. You Need a Budget uses kind of that envelope budgeting system.
Blake Oliver: [00:21:10] Yes.
David Leary: [00:21:10] They have this concept of envelopes, and I'm not sure ... Is this subaccounts? Would these be treated as separate bank accounts, the way I can do that with Relay, or this is this just like a budgety thing? I couldn't tell from the screenshots and some of the UI things I looked at. It looks like, with the the cashflow planner, it's gonna be a little bit more where you can actually put in scenarios, like, "I'm gonna buy a boat on this day," and you can start putting those types of things in. It's not just gonna take the data and the bank feeds and create a cashflow projection. It's gonna allow you to put in events, and transactions, which is funny because, full circle, that was one of these things where there used to be this calendar in Quicken, 25 years ago, and people could go and take this calendar and then, just put transactions they know are coming up in the future on this calendar. Essentially, it was a cashflow planner. So, it's like full circle. This is coming back to old Quicken functionality - envelope budgeting, cashflow planning, that type of stuff. I did sign up for it. I did try to get it set up.
Blake Oliver: [00:22:07] How'd that go?
David Leary: [00:22:07] It's interesting because I didn't get as far as I thought I would. I clicked the thing to sign up. I said I'm already a QuickBooks customer. I clicked "Getting Started." Then, it took me to another screen that said "Payment Account Application." It said, "You're good to go. We got your information. Charge on." I hit an "OK" button and that's it. I think they already have my information because I have a merchant services account at Intuit, but then, that's it. I didn't get an email that said, "Hey, your application's pending. Your QuickBooks Cash is on the way. Congratulations." It just was like a dead end.
Blake Oliver: [00:22:38] Hmm.
David Leary: [00:22:38] So, I don't know if ... It was very kind of like a marketing kind of screen, like, "We've already got information. Charge on!" I was excited. I was gonna click "OK," and I thought I'd see something, but I don't have anything in there. There was an article on Insightful Accountant that linked to the actual Envision. Envision's a way for companies to do mock-ups, almost like an interactive slide deck of a feature. I was able to click on that and look at the mockups of it, but I don't have any of those screens in my QuickBooks. I can't find them anywhere. I'm in QuickBooks Cash limbo.
Blake Oliver: [00:23:12] Well, keep us posted on that.
This episode of The Cloud Accounting Podcast is sponsored by ADP Marketplace. How can you be a more trusted advisor for your clients as they face new challenges? By recommending solutions from ADP Marketplace, ADP's digital HR storefront. With ADP Marketplace, clients can try, buy, and implement highly rated HR apps that can share data with ADP. With secured data integrations, it's easy to streamline HR processes and adapt to new business needs. Help your clients discover new ways to recruit and onboard employees, boost performance, offer unique financial-wellness benefits, and much more.
With integrations for popular business software, like Expensify, PayActiv, Slack, and ClockShark, clients can add value to the tools they already use by simply and securely connecting them to ADP. Have clients in field service, or construction? ClockShark can help them track time to quickly and accurately run payroll, all integrated with ADP. Visit ADP Marketplace at apps.ADP.com, or right from your Accountant Connect dashboard. Not set up with Accountant Connect? Sign up today. It's free. Head over to cloudaccountingpodcast.promo/ADP. That is Cloud Accounting Podcast dot promo forward slash A-D-P. ADP has your back with ADP Marketplace.
[00:24:30] I've got updates on Xero. Xero Premium customers can now sync Xero smart lists to Mailchimp, the popular email service, in real time. What does that mean? Well, it means that you could use the smart lists, which allow you to create dynamic lists of customers and contacts, and then trigger email sends in Mailchimp, based on stuff like overdue invoices, and payment confirmations. I think that's pretty neat. There is a new dashboard in Xero Projects with an at-a-glance view of project profitability; a few other miscellaneous features. I'm really excited about that Mailchimp thing. I think that's pretty neat.
David Leary: [00:25:08] OnDeck got acquired. You're familiar with OnDeck, right?
Blake Oliver: [00:25:09] Yeah. They're one of those modern lenders, right?
David Leary: [00:25:15] Yeah, for small business-focused ... Modern lenders. Probably, the interest rates are a little high. They're a little bit more high-risk loans. Their balance sheets were getting a little wacky because of the crisis, etc. They were acquired. Now, OnDeck has been around for a decade and a half or so. They started doing funding in 2006, and they funded $13 billion plus to small business loans. How much do you think they were acquired for? It was only $90 million.
Blake Oliver: [00:25:40] I'm looking at this article right now, in American Banker, and they're saying that it's less than 10 percent of what its market value was in 2015. That's crazy.
David Leary: [00:25:51] Yeah, and only $8 million of it was paid in cash.
Blake Oliver: [00:25:53] Wow. So, they must not be in a good situation at all. I bet you a lot of these online lenders lending to small businesses are in trouble because they're never gonna be able to collect on a lot of these loans.
David Leary: [00:26:04] In the meantime, they're probably getting pressured because all these companies are smaller fintechs ... They have to earn trust in market. Then, in the meantime, QuickBooks Capital, and Xero has a product now, a loan product, right?
Blake Oliver: [00:26:17] So, speaking of acquisitions, YayPay was acquired by a French company called Quadient. It's a publicly held company purchasing YayPay for $20 million in cash. YayPay, if you're not familiar with it, they're an automated accounts receivable application - invoice delivery, collections management, credit assessment, payment and cash application solutions.
David Leary: [00:26:42] They're up-market, right? I think their client base was like Nike, and-
Blake Oliver: [00:26:45] They're more of mid-market ... I think I saw them over at NetSuite SuiteWorld and that sort of thing. They integrate with NetSuite, Dynamics, SAP, Sage, those kind of solutions, ERP systems. I've got news about FreshBooks, as well, and Gusto.
David Leary: [00:27:02] Yeah.
Blake Oliver: [00:27:02] FreshBooks now has Checkout links. These allow you to collect payments on fixed-price items and services using a simple URL. You just create the link, share it with your client online, and then FreshBooks provides them with an automated receipt. I guess it's a simpler way, rather than sending an invoice, you just send them a link, then they can purchase. They've also got some improvements to their in-app timer. Now, you can create an outstanding invoice banner on the client view. When your client logs in to look at their invoice, if they have any outstanding invoices, they'll see a big banner at the top that says that they have an outstanding invoice due to you.
[00:27:36] Finally, we've got the big Gusto announcement. Gusto announced a new People Advisory certification for accountants at their online Gusto Next conference this past week. That was a really nicely done virtual conference presentation on Zoom, sort of like a webinar on steroids. This certification is four hours, online training, and it "will enable accountants to combine their financial advisory expertise with new services for clients in areas such as payroll, benefits, and HR as People Advisors. You can sign up at Gusto.com/partners/accountants/certification
David Leary: [00:28:18] So, the gist of it is, if my small business owners- instead of me just setting them up on payroll, if they need additional help on hiring, posting for jobs, HR decisions, I can kind of get into that space a little bit and offer that as an additional service to what other services I'm offering them.
Blake Oliver: [00:28:36] Yeah, or even more basic than that, I think there's a lot of bookkeeping, and accounting firms that don't even touch payroll, that don't want anything to do with it. All they do is the bookkeeping,and the tax. This is a great way for accountants, and bookkeepers to learn about the benefits of offering payroll management, and HR, and benefits for their clients - to be their advisor, in that regard. I will tell you, based on my own personal experience, having that offering - offering payroll through Gusto as part of my firm - was a huge value-add for my clients. That was the thing they would call me about most. It wasn't about the bank reconciliations, or the financials. It was, "I'm hiring somebody. How much do I pay them? Do I offer them benefits? What kind of benefits do I offer?" Having a way to do that, streamlined in a platform, I think is super valuable. I highly recommend people check that out.
David Leary: [00:29:31] Vertex went public on the Nasdaq. Vertex is similar to an Avalara-type sales tax play. Obviously, they're riding the benefits of South Dakota v. Wayfair. The only thing I thought was interesting about this IPO was, on Twitter, somebody asked- an accountant said they've never heard of them. That doesn't bode well, I think, for your IPO, in theory, if one of your target customers has never heard of you.
Blake Oliver: [00:29:59] I'm not very familiar with them either. It's Vertex is what you said? Vertex.
David Leary: [00:30:05] iseah, Vertex. They've been in the space for 40 years. They have 1,100 employees.
Blake Oliver: [00:30:09] I'm gonna guess that they're serving mostly folks who are up-market, right?
David Leary: [00:30:16] They say they have 50 percent of the Fortune 500.
Blake Oliver: [00:30:19] Yeah. There you go. See, that's why, because the folks who are listening to The Cloud Accounting Podcast, it's accountants serving small businesses, but there's this whole world of solutions and software solutions that you wouldn't even know about because you've got to be a giant company paying hundreds of thousands of dollars a year for this software [crosstalk] You know how you know when something's up-market? When you can't find the pricing on the website. That's how you know that it's not for small businesses.
David Leary: [00:30:49] Yeah, when it says, "Book a demo."
Blake Oliver: [00:30:51] Yeah, that's the best you can do, or, "Request Info for Pricing." It's gonna be out of your price range-
David Leary: [00:30:55] Or, on the sales form, it asks you what company you're with, first, right?
Blake Oliver: [00:30:58] Yeah.
David Leary: [00:30:59] It's like, "What company are you with?" The choices for number of employees, they give you that 50,000 or more box, and that's the only one they really want you to choose. Sorry ...
Blake Oliver: [00:31:06] Shopify had an amazing quarter. The economy might be going down the toilet, but e-commerce is doing great, as a small segment of that. Shopify's revenue nearly doubled as COVID-19 pushes shopping online. They're an e-commerce platform that allows you, as a small business, to set up an online website, where people can purchase from you, and the shopping cart is all integrated into your website. They've got all sorts of e-commerce integrations. It's the Amazon alternative is, I guess, how I would describe it. Revenue was $714 million in the second quarter, up from $362 million in the year-ago quarter and way above the analysts' forecasts of $511 million.
David Leary: [00:31:58] Yeah, Shopify, they are putting pressure on Square, and they're putting pressure on Amazon. It's really interesting to see how much they've really separated from everybody else in their pack, as far as the big commerce, and the other e-commerce players, these online shopping carts. Shopify has completely separated themselves from everybody else. I still watch. I would not be surprised - them and FreshBooks doing something together. They're neighbors in Toronto. What would make them unstoppable? A GL, right? Taxfyle- you're familiar with Taxfyle?
Blake Oliver: [00:32:29] Yeah, we've talked about them before.
David Leary: [00:32:31] They basically play like a middleman. They're like a search engine to find other accountants, or bookkeepers.
Blake Oliver: [00:32:35] They connect business owners with tax preparers.
David Leary: [00:32:38] They formed an accounting firm called RMW Accounting, and they're seeking to acquire CPA firms. This was in the South Florida Business Journal.
Blake Oliver: [00:32:49] Huh ...
David Leary: [00:32:49] They're basically looking for owners that wanna liquidate or sell parts of their business.
Blake Oliver: [00:32:55] This sounds like another potential issue, though. We've got all these tech companies that are getting into the services business. I mean, maybe this is because they can't get enough professionals to do the taxes on their platform, so they're just gonna create the the market on both sides.
David Leary: [00:33:10] It's interesting because, in a way, they're a little Uber-like, where it's on demand. I need taxes done. They just match me up with one of 2,700 CPAs.
Blake Oliver: [00:33:18] Right.
David Leary: [00:33:18] Now, they're- it's like Uber hiring their own drivers.
Blake Oliver: [00:33:21] It would be like Uber becoming an actual taxi company. It doesn't make sense. I don't get it.
David Leary: [00:33:25] Yeah, I don't either. It's just, this is their plan. It's been formed, and they're heading down that path. Then a last piece of app news: I have a another AI accounting startup, Candis, raises $14 million in fresh funding.
Blake Oliver: [00:33:38] What are they doing?
David Leary: [00:33:40] It just feels like more of this overly cocky AI type game. Candis, a German startup company working to automate companies' manual accounting workflows, today, announced it has raised €12 million euros, about $14 million USD. Candis provides a cloud-based accounting platform, uses machine learning to reduce the amount of time needed to organize a company's financial records. One of the main use cases for the platform is automating payment reconciliation. [That’s the] process wherein the accounting department compares a company’s various transaction logs with one another to ensure that all the sums match. So, it sounds bank feeds, right? It's just ... It's bank feeds.
Blake Oliver: [00:34:15] Yeah.
David Leary: [00:34:15] Candis imports transaction logs from a company's financial systems and automatically matches each record to the associated invoice. They're making it sound super-complex here.
Blake Oliver: [00:34:26] It's just bank recs, right?
David Leary: [00:34:28] Essentially, it's bank recs. The best part is it goes a little bit deeper in here. This is a quote from the co-founder, Christian Ritosek: "Our machine-learning-based technology disrupts a whole industry in which the majority of tasks are still very manual." Another part of the article says: "The startup claims that its platform features are together capable of automating about 80 percent of classic accounting processes involved in managing an organization's books."
Blake Oliver: [00:34:54] Oh, boy ...
David Leary: [00:34:54] 80 percent, and they got $14 million ... The thing is, and we're seeing this, going from 80 to 82, 80 to 85, breaking that 90, it gets harder and harder and harder. So, somebody tossed them $14 million for them to do what everybody's getting out of the box, right now, with any accounting software package.
Blake Oliver: [00:35:14] Here's the problem - that 80 percent, which I dispute that-
David Leary: [00:35:18] You think it's lower?
Blake Oliver: [00:35:18] I mean, maybe traditional accountants are spending 80 percent of their time on this stuff, but most of us who have already moved to the cloud are not. We've automated this ourselves. So, even if it is 80 percent, though, there's not a lot of value in automating that 80 percent, or there's not a lot of value in that work. Even if you automate it, you can't charge much for it. Like you said, it's already built into a lot of these GL packages.
David Leary: [00:35:42] Everybody thinks bank feed is bookkeeping, and accounting. They take the bank feed and categorize it automatically, which is easy when it's a Starbucks transaction.
Blake Oliver: [00:35:49] You know why I think these startups keep getting founded? It's because there's some entrepreneur, and he starts a business, and he has to do his own bookkeeping-
David Leary: [00:35:57] Ah ...
Blake Oliver: [00:35:57] -and he gets really tired of doing it. He's like, "Oh, this is a problem! In my next business. I'm gonna solve bookkeeping, and I'm gonna automate it," not really thinking that the GL apps are building this themselves and gradually improving it, so it's not as much of a problem anymore. Do you really need a third-party solution for bank feeds and automating that? Also, once a business gets to a certain size, they hire a financial professional and then, that person is responsible for all this stuff.
[00:36:26] Are they gonna pay for a tool that does this when they could just kind of do it in the GL? Like you said, there's diminishing returns. It has to get so automated that I don't even have to touch it. But to get to that point, nobody's figured out how to do that. I still have to go in and review all the transactions anyway to make sure they're coded correctly. I can't just trust the AI to do it.
David Leary: [00:36:47] I think this transitions well into new banks because, ultimately, it's a banking-feed world, right?
Blake Oliver: [00:36:52] Yeah.
David Leary: [00:36:52] All the banks are coming after, arguably, the GLs, and what is a bank is even getting confusing. I have some articles just about new banks. One of them really gets into some numbers. There was an acquisition that took place, and it really explains QuickBooks; what QuickBooks' motivation here is.
Blake Oliver: [00:37:12] You mean why QuickBooks created QuickBooks Cash?
David Leary: [00:37:14] QuickBooks Cash, exactly. One is Varo. We've talked about Varo. They are a consumer- but they are officially a bank now. They got their bank charter, so they're one of these new bank startups-
Blake Oliver: [00:37:24] Wait, you mean they're a consumer bank-
David Leary: [00:37:28] They're a consumer bank. It's another one of these new banks, but they got a bank charter.
Blake Oliver: [00:37:33] Okay, got it. Now, they don't have to work with a partner anymore. They can do it themselves.
David Leary: [00:37:37] That's correct. The Federal Reserve signed off on them, so they're out there as a real-deal bank now. There's another one that- there's an online bank called Monzo. They're having opposite luck. Their losses have doubled, and the UK digital bank warns of pandemic uncertainty. Their annual losses more than doubled and warned that its ability to continue operating had become more uncertain. So, on one hand, these digital banks are really crushing it, and on the other hand, they seem to be struggling.
Blake Oliver: [00:38:09] Yeah, well, it kind of makes sense because the whole idea of these digital banks is that they cut costs because they don't have physical locations, and they are able to then eliminate a lot of the fees that are charged to consumers, the bank fees. The way they make money, then, is when you spend on their card, they get a cut of that processing fee, but if people aren't out spending on their credit cards, like at payment terminals, they're gonna have a hard time making money, right?
David Leary: [00:38:36] Yeah. It's like you read the article or something. The big challenge for Monzo, now, is to figure out how to make money from its 4.4 million users. The challenger bank currently generates most of its revenue from fees generated every time a customer uses their card, but people aren't using the card. They're not getting revenue [crosstalk]
Blake Oliver: [00:38:52] A lot of the consumers who are using these banks are folks probably the lower end of the income spectrum, the ones that the traditional banks don't want. They're spending the least of anyone because they are more likely to have lost their job.
David Leary: [00:39:05] This is news from down under. Commonwealth Bank is now gonna give $500 to entrepreneurs who sign up to use their small business app. So, here's a bank with a small business app. They have an app that will help them register their business, do invoicing, and do some business plan formulation. If you download this app, they're gonna give you 500 bucks into your bank account. They're coming after the tech, and the data play. They're coming after that.
[00:39:34] Another article has a lot of good numbers in here. There's a company called ZenBusiness. They acquired one of these new fintech platforms called Joust. Joust is basically really going after the sole proprietor and independent contractor style, the super-micro-small small business owner. They just acquired them. The deal expands the ZenBusiness service offering by combining Joust's integrated suite of simple, easy to use, enterprise-quality financial tools within the company's already fast-growing all-in-one micro-business platform. I thought was interesting: enterprise-quality financial tools targeting solopreneurs.
[00:40:12] They had a couple of surveys that had some interesting data from it. According to a survey conducted by Sensibill, 51 percent of solo entrepreneurs in the U.S. do not use a business bank account and commingle their business and personal finances. On average, these micro businesses use more than 10 separate financial products in order to run their business. So, half of all small solopreneurs in the U.S. do not have a business bank account. Does it make sense why QuickBooks created QuickBooks Cash?
Blake Oliver: [00:40:38] Absolutely. That's an amazing stat.
David Leary: [00:40:41] What accountant, and bookkeeper isn't going to just opt them in? "Guess what? I'm turning a bank account on for you. No more of this messing your funds around."
Blake Oliver: [00:40:50] I wonder who this is really for. Is this for the business owners who already have a relationship with an accountant or bookkeeper, or is it for those small business owners who are doing it themselves? Because there's a lot of those people on QuickBooks. I think more than half.
David Leary: [00:41:06] I think it's all of the above, right?
Blake Oliver: [00:41:07] Yeah.
David Leary: [00:41:07] It's anybody who doesn't have a business bank account because- to be honest, I went to open a business bank account, I had to go to two different banks. It was annoying [crosstalk]
Blake Oliver: [00:41:14] Well, yeah, and if you're a solopreneur, the banks do not care. They do not want your business. They make it as hard as possible for you to get that business bank account because-
David Leary: [00:41:22] They tried to sell me checks. I'm like, "I don't want checks. I just want a bank account."
Blake Oliver: [00:41:27] This is great. This is really gonna help the people who are left out by traditional banking.
David Leary: [00:41:32] They're saying there's 57 million micro businesses that this could be targeted at. They're guessing by 2027, more than 50 percent of the country's workforce is expected to freelance in some capacity. If you think about how many people ... The gig work, it just keeps growing. More and more people are gonna need a business bank account, so whoever owns their eyes is probably gonna have success in that.
[00:41:56] It started to make me really think, from an industry perspective, who owns the bank feeds? If you own the bank feeds, that's gonna control how the data gets in the accounting system, and you, as an accountant, or bookkeeper, the bank feeds are super-valuable. What happens if banks start blocking you? Because, "Oh, no, we want you to put your clients on our app," or they charge a premium for the bank feeds. That's gonna eat away at your profit margins as an accounting firm.
[00:42:20] It's gonna be important where you put your clients. In my brain, it's probably best that you try to put them on alternative banks, at this point. Put them on a QuickBooks bank, or I'm sure Xero will probably have a bank one day. You put them on the banks that are in the accounting tools you use because you can't afford the risk of a bank blocking you. I think the banks just don't know how valuable it is to cloud accountants, and bookkeepers, the bank feeds.
Blake Oliver: [00:42:48] That's a good end to this episode, David. We got a review, though. We should read that before we go.
David Leary: [00:42:53] Yes, yes.
Blake Oliver: [00:42:54] Excellent Podcast! Five stars. "As the co-founder of a technology focused bookkeeping, accounting, and CFO advisory firm, this is a must listen for me. It is the most efficient way to get up to date on industry news and find out about the latest and greatest solutions for our members. We have members which include small to mid-sized businesses from a diverse set of industries and the range of solutions we find for them by listening to Cloud Accounting is priceless. Highly recommend for anyone in the bookkeeping and accounting industry. Period!" That is from Lapdjas, via Apple Podcasts. Thank you so much for that. That's really great to hear.
David Leary: [00:43:32] It's always great to see the reviews. If anybody else wants to leave us to review, they actually help us a lot because it lets people that are just searching on iTunes or on their phone or searching for accounting podcasts, it gives them confidence that when they listen to The Cloud Accounting Podcast, they're gonna hear information they need and love. So, please leave a review on Apple iTunes, or Podchaser. It really helps the show a lot.
Blake Oliver: [00:43:53] We will read it on the air. So, if you want to tell us what you think, that's one of the best ways to do it because we're required by the rules of The Cloud Accounting Podcast to read your review on the air.
David Leary: [00:44:05] Even if it's bad. We've read bad reviews-
Blake Oliver: [00:44:07] We have had some ... Well, not bad, but critical.
David Leary: [00:44:11] We've had one bad review-
Blake Oliver: [00:44:11] There are no bad reviews. There are no bad reviews, there re only critical reviews. We appreciate the feedback. You can also leave us a voicemail. You can call our Google Voice number at (202) 695-1040, and you can contact me on Twitter. I am @BlakeTOliver. How about you, David?
David Leary: [00:44:28] I'm @DavidLeary; also on LinkedIn. I noticed some of you have been saying, "I'm not a robot," when you reach out to me on LinkedIn, which is very nice.
Blake Oliver: [00:44:35] I got one of those this week. That was really fun. Tell me you are not a robot when you connect with me on LinkedIn and I'll be sure to accept that connection invite. David, until next week, stay sane, stay safe ...
David Leary: [00:44:45] Buh-bye.
Blake Oliver: [00:44:45] Bye.
Still sending spreadsheets of unclassified expenses to clients? With ClientHub, automate this process and get client answers instantly. ClientHub is a client-communication platform that helps you consolidate client communication, securely share files, and instantly get answers, and much, much more. Get started today with a free trial at ClientHub.app and enter promo code "CAP25" for 25 percent off your first three months. ClientHub - frictionless client communication.
Want to get the word out about your newsletter, webinar, party, Facebook group, podcast, e-book, job posting, or that fancy Excel macro you just created? Why not let the listeners of The Cloud Accounting Podcast know by running a classified ad? Hit the show notes for the link to get more info and be sure to check out our special stimulus pricing of four episodes for just $100.