Employers Responsible for Trump Payroll Tax Deferral

While we wait for AI to take over the world, there's a lot to talk about in the now, like the fact that the IRS guidelines put employers on the hook for Trump's payroll tax break, and how Intuit's revenue is up 13 percent. Beyond that, Xero is entering the lending arena with an $80m Waddle acquisition, and they've appointed a director to help grow the U.S. Hispanic market. Meanwhile, Amazon gets hit with a $19M invoicing scam, along with other interesting app news tidbits. Then, we talk about why CPA firms' hiring of accounting grads down 30%, and possible solutions for all sides, and discuss why the U.S. tax code favors automation. All that and more, now!


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Blake Oliver: [00:00:20] The U.S. tax code actually favors automation, according to a new paper. This is from the Brookings Institution. When you add up all the taxes on labor – hiring people, employing people to do work – it ends up being about 28.5% on employers. Now, what is the tax rate on replacing those people with software, and equipment? It's only about 5%.

This episode of The Cloud Accounting Podcast is sponsored by A2X. Blake and I have talked to plenty about the massive shift to online shopping during the time of COVID-19. This means that e-commerce sellers are dealing with massive amounts of transactions that need to appear in the general ledger correctly so that you can easily reconcile these transactions with a bank statement. 

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This episode of The Cloud Accounting Podcast is sponsored by Scott's Add-Ins. Are you tired of repeating the cycle of exporting data from an accounting system, then importing it to Excel, only to repeat the process again and again and again when the data in the accounting system changes? Ever wish that you could just create a formula in Excel, and have it get the data from the accounting system automatically? 

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Blake Oliver: [00:03:03] Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. 
David Leary: [00:03:06] And I'm David Leary. Blake, I know last week, one of the headlines was we were just waiting for guidance from the IRS on the payroll tax holiday ... Is that what they're still calling it, payroll tax holiday?
Blake Oliver: [00:03:19] It depends who you're talking to, if it's a deferral, which is, that's what it really is, if it's a holiday, or if it's a cut. We finally do have guidance. I think it just came out yesterday, late Friday, as per the administration's operating procedure these days. Yeah, now we know that employers, the companies, are gonna be responsible for deferred payroll taxes, which, if I were an employer, I would definitely not participate in this program, because if my employees leave, then I'm gonna be on the hook for this money.
David Leary: [00:03:52] Do the employers get to opt out? If my employees say, "I don't wanna be paying this Social Security. I want my holiday; Trump promised me a holiday," you can say, "Sorry, we're not participating in that, at this company ..." or you have to participate?
Blake Oliver: [00:04:08] It is optional for the employer. It's up to the employer whether or not they wanna do it. Here's how this is actually going to work. From September 1 through the end of the year, the employer will stop withholding the employee share of Social Security, which is 6.2%? Then, starting in January, January through April 30, the employer will withhold double the normal amount of payroll tax. By April 30, it will have been- the net effect will have been the same.
David Leary: [00:04:40] I'm an employer. I'm being set up to look bad, now, right? Does Trump not want U.S. small business support? First, the employees are gonna complain  want this; then you're gonna give it to them it's what the employees want. They only think instant. Then, they're gonna be pissed at you, come January, when you take out twice as much out of their paychecks.
Blake Oliver: [00:05:03] Yeah, or you're gonna say, "I'm not doing this." Then, they'll be pissed at you because you didn't do it, or worse, they're going to leave their job, and take a new one in January, and you won't be able to collect that payroll tax, so you'll be on the hook for it because the employer is responsible. The IRS explicitly said that. 
[00:05:24] It just seems like ... Definitely, the big employers, they're not gonna do this. Apparently, by the way, the holdup in all this guidance was due to the White House. That's according to Accounting Today. The White House actually wanted employers, not employees, to be responsible for the payroll tax collection, and payment, even if the employees leave. 
David Leary: [00:05:45] That's because there's more employees that vote than there are small business owners.
Blake Oliver: [00:05:51] I guess so. They were perhaps even pushing for a longer repayment period. Our favorite Trump economic advisor, Larry Kudlow, he said last week that the administration is, "Exploring ways," to forgive the tax payment completely. The taxes, "essentially can be forgiven if you stretch it out five years, eight years," which, to me, is ridiculous, that kind of logic. It's not forgiven. You're just stretching it out over five or eight years, so it feels like you're not paying it back because it's a small amount over five to eight years ... It's completely divorced from reality, that kind of thinking, because-
David Leary: [00:06:33] This is gonna tie into some articles I brought in for later, actually. It's perfect, about deferring payments on things.
Blake Oliver: [00:06:39] Well, I think it's obvious what I think about this program. I think it's idiotic, and it just creates havoc for payroll companies, payroll processors, for small businesses. It's not helpful. It's not even that much money.
David Leary: [00:06:52] Yeah, I saw that. For $50,000 a year salary, it's $119 a paycheck, probably, for a total of $1,073, over nine pay periods. The cost to track that, and the risk to the employer are pretty high. Just cut everybody a check for $1,200. Again, it seems really ... I think what they're trying to do though is they're trying to be like, "We wanna reward the people that have jobs, or go to work," or whatever this psychological game is. Just send out a checks for $1,000 to everybody ... I don't know. It seems like it's just not enough money to make a difference.
Blake Oliver: [00:07:30] Yeah, it's not a lot of money. It's helping the people who already have jobs, but not really helping them because they're gonna have to pay it back anyway. It's ridiculous. But, hey, I don't wanna be too negative, so I have a positive story about the administration. 
David Leary: [00:07:44] Okay. 
Blake Oliver: [00:07:44] -where I actually agree. There's been a lot of talk about the United States Postal Service over the last few weeks. Have you been following any of that, David? 
David Leary: [00:07:52] Yeah, I even tried to start a plan here. I tweeted about it, that people should ... Remember when the Treasury said they were out of coins in the country? I said take all your coins and go buy stamps. 
Blake Oliver: [00:08:03] Oh, yeah. 
David Leary: [00:08:03] Then that would solve two problems, right? 
Blake Oliver: [00:08:05] Well ... 
David Leary: [00:08:05] They'd get the coins back in circulation, and  the U.S. Postal Service would get lots of money.
Blake Oliver: [00:08:11] Right, but you may be pouring money into a government program that is actually very wasteful. CFO.com had a story about this overtime question. Postal Service over time is one of the things that Postmaster General Louis DeJoy — who is that Trump donor, but also a very successful logistics executive who knows how to run a company that does packages, and deliveries, and all that stuff; business guy — one of the things that he did when he came in was he said, "Guys, overtime is ridiculous here. We gotta stop it with the overtime." 
[00:08:48] It really is. The Postal Service had $522 million in overtime; 42% of the Postal Service's 633,000 employees had unauthorized overtime in fiscal 2019 ... 42% of their employees, hundreds of thousands of employees had unauthorized overtime. They're not operating like a logistics company. It's wasteful. Sure, some of that overtime is necessary, but I can't imagine that there's a justification for so many employees having unauthorized overtime. Just seems wasteful.
[00:09:26] I'm just thinking about this, and I'm thinking, it just doesn't make any sense that somebody would try to sabotage such an important service. The United States Postal Service is so important, serves so many people. It just seems kind of ridiculous to me that somebody would try to sabotage an entire department, or a program like this, just for the election. It could not possibly end well. 
[00:09:49] I think, actually, a lot of what has been happening is legitimate attempts to control costs and make the United States Postal Service operate more like a business that happened to coincide with the president saying stupid things that would then imply that he's pushing to destroy the Postal Service for the election. I think it's all getting confused.
David Leary: [00:10:12] Yeah, I heard a really good NPR podcast about this specifically. It's the guy they brought in to run it. Is the title like Chief Postmaster ...? 
Blake Oliver: [00:10:22] Postmaster General Louis DeJoy. 
David Leary: [00:10:23] Postmaster General. He came in from outside logistic companies, like you said. I think he's at the age of his career ... He's made plenty of money. I don't think he's doing this for money; he's doing it for the challenge, but the challenge is ridiculous. 
[00:10:36] It just sets everybody up for failure, because back in the '70s, when this was really just a government agency, and they spun it off, and they said, "Hey, let's run it as a business." Basically, on one hand, they're telling the Postmaster General, "You need to run this is a business, but guess what? You still have to pay all the retirement stuff, the pensions that are pre-set up, and you can't get out of that." Basically, it's been running at a loss, and nobody can figure out how to fix it. 
[00:11:04] The changes this new Postmaster General started implementing, like ripping out those machines, were decisions that were made in December, and January, before pandemic, before all this other stuff, just because he's trying to make everything more efficient. They've done lots of things. They've closed ... Every Postmaster General does cuts, but nobody can figure out how to make this profitable, it's because they're locked in. 
[00:11:26] The big auto companies, they were able to declare bankruptcy, and  then get out of paying their pensions, eventually. That helped them get back on track. But the Post Office is just set up for failure. It'll be saved because we care about it, as a country; it's an institution, but whoever's running it has no chance of winning anybody's approval.
Blake Oliver: [00:11:44] Well, because Congress is bipolar on this issue. They say that they wanna make the Postal Service profitable, or at least break even, but then,  Congress people in rural areas won't let the Postal Service close post offices that serve very few people or limit the days that you have delivery. We deliver the mail to the middle of nowhere, six days a week. It makes no sense. Cut it a little bit, don't have Saturday delivery. That's very unpopular with constituents, so you've got political considerations that-
David Leary: [00:12:17] Because if it was running like a business, it would be like the cable companies, and their internet. It would be the way FedEx and UPS do it- 
Blake Oliver: [00:12:23] Well, hopefully not that bad. 
David Leary: [00:12:23] There'd be parts of the country that do not get service.
Blake Oliver: [00:12:26] Well, no, they would all get service, but it would cost more, or you'd have fewer deliveries. You'd have to do something. Okay, so that's it for the United States Postal Service. I got a few more political things we could just hit on real quick. 
David Leary: [00:12:39] Might as well. I don't think I have anything political. 
Blake Oliver: [00:12:41] Something kind of wonky: The Fed changed its inflation target. This is actually super-big news, but kind of hard to make sense of because what does it even mean? I'll just try to summarize it here. 
[00:12:54] For the longest time, the Fed has had a target of balancing unemployment with inflation; the theory being that if unemployment gets too low, then inflation is gonna go up. When unemployment starts heading down to some unspecified target, the Fed preemptively raises interest rates to slow down the economy and prevent unemployment from getting too low and then inflation from happening. 
[00:13:19] What they have done now is basically change their philosophy to say that "We no longer believe that low unemployment causes inflation necessarily, so we're just gonna allow unemployment to go down, and we're not gonna preemptively raise rates anymore. We're gonna have our target be around 2% inflation." That's a big change. This is related to some of that monetary policy stuff we were talking about in previous episodes. The impact of this is probably what you're wondering about. The impact is that we're gonna see low interest rates for a very, very long time. Most likely. 
David Leary: [00:13:52] Yeah, which explains why the stock market just keeps going up because you can't make money anywhere else. There's no interest rates.
Blake Oliver: [00:13:59] Yeah, the asset prices are inflated. This will actually be really bad for retirees on fixed incomes, potentially, because if inflation starts to go up, and the Fed doesn't raise interest rates, then ... If they allow inflation to grow, then that reduces the value of fixed-income securities, annuities, that sort of thing. Not great, if you're retired on a fixed income, or Social Security,
David Leary: [00:14:24] You wanna jump into  TurboTax-  TurboTax? Sorry, Intuit earnings?
Blake Oliver: [00:14:28] Let's talk about app news. 
David Leary: [00:14:34] App news. Intuit released their earnings; they had a 13% annual growth driven by strong TurboTax performance. Considering all the bad press TurboTax has gotten for the last 18 months, it had its strongest year-over-year performance in four years. 
Blake Oliver: [00:14:52] Wow. Well, we knew it was growing already, right? It had good momentum.
David Leary: [00:14:55] It's been like this for- a machine, right? It's been growing year after year after year after year after year for 20 straight, 25 straight years, TurboTax has. More and more people ... You're right, we talked about this before. They're moving from the tax shops. If it's an easy return, the H&R Block ... The Block stores ... What'd we call that? 
Blake Oliver: [00:15:14] Yeah, the retail tax.
David Leary: [00:15:15] The retail tax. People have been shifting to do it themselves. A couple of interesting numbers they talked about, though, specifically around that is that ... They actually put this in their filing: the number of customers paying nothing grew over 20% to 60 million filers, which, obviously, they put that in because they were accused of swindling people into paying. 
Blake Oliver: [00:15:37] Right. That is kind of funny, though. You don't expect to see a company touting how many people use its products for free, right?
David Leary: [00:15:43] Yep. The magic number, I think, for TurboTax is they have that side offering, Turbo, which is kind of their credit-reporting software, which is kind of Intuit's version of Credit Karma; now, Intuit's obviously buying Credit Karma, but that moved- that grew from 14 million users last year to 22 million. Ultimately, even if you have-  for a free offering over here, on one hand, you're still able to get people to start using your other offerings, and they're feeding into each other.
Blake Oliver: [00:16:13] Did you mention that TurboTax Live has grown quite a lot? I'm seeing here- 
David Leary: [00:16:16] Yeah, I was gonna get into TurboTax. Yeah, TurboTax Live grew nearly 70%. Mind you, remember, they talked about before, in the previous years, that TurboTax Live has been their fastest-growing, most-successful product offering ever?
Blake Oliver: [00:16:30] Yes. 
David Leary: [00:16:30] And the fact that their most successful product offering ever has grown by 70% is pretty amazing. That ties back into the- 
Blake Oliver: [00:16:38] TurboTax Live, by the way, that's where you get TurboTax software, plus you can video chat with a real CPA through the app.
David Leary: [00:16:46] What they're really excited about is with the- QuickBooks Live is basically built — this is from the conference call — QuickBooks Live is built basically on the platform they built TurboTax Live on, so they're able to more rapidly roll this out. What they're really excited about ... Remember they started just like a QuickBooks Live-only set-up service earlier in the year?
Blake Oliver: [00:17:04] Yes. 
David Leary: [00:17:05] What's happening is a much higher percentage of customers than expected are upgrading to it. They buy the set-up service, and  then, it's a good experience. Their QuickBooks Online is apparently set up, and a higher percentage than expected are choosing to just opt into it monthly. We talked about this before in the past, where they're really taking people from a $70-a-month QuickBooks subscription to a $200-a-month QuickBooks subscription just by tacking on some "live" services.
Blake Oliver: [00:17:36] Just help when you need it, right? 
David Leary: [00:17:38] Which explains why they're having so much growth here.
Blake Oliver: [00:17:41] Yeah. QuickBooks Online accounting revenue up 38% for the year. Customer growth, and higher effective prices drove that. Higher effective prices, I assume, means QuickBooks Online Advanced. Online services revenue up 21% for the year. Their fiscal year ends July 31, so they really didn't get hit by the pandemic, it seems.
David Leary: [00:18:08] No. I feel like Intuit never does. They seem to be able to ride out ... When the economy gets tight, I think people pay attention to their finances more.
Blake Oliver: [00:18:19] Well, and you know what? Let's say I have a business that I had to close during the pandemic, and I'm not gonna come back. I still have to keep my QuickBooks subscription because I gotta file my taxes down the road, maybe a year later, or longer. That is one of those things that is essential to my business, even if I'm not operating. I've got to have my accounting data. Maybe that's part of it.
David Leary: [00:18:39] Also, just in general, I think when things are tough — I've seen this with the Dotcom One bust; with the Great Recession — is people have to ... If they don't have a job, and you can't find a job, and you can't get a job,  the only option is to start a business. So, you see a lot of new business growth, and Intuit, because they're cheap, it's gonna benefit from that because you're trying to start a business. You're not gonna go buy Sage Intacct, when you're starting a brand-new business. You're gonna buy $39 QuickBooks Online. It's kind of that same mindset. A couple things that were interesting ... Remember, they did really well with all their PPP loans? At the end of the fourth quarter, they held $98 million in loans receivables for PPP, and they intend to sell all of those off. 
Blake Oliver: [00:19:27] Makes sense, right? You don't want that on your balance sheet.
David Leary: [00:19:30] Yeah, and I imagine they are just gonna package all that up and sell it to somebody else, and that person eventually will just own- 
Blake Oliver: [00:19:36] Hey, maybe we'll see some PPP loan-backed securities ... Derivatives,
David Leary: [00:19:43] Well, if we pooled enough money together, we could buy these for a cheaper cost from the banks and just hope that they all get forgiven, and then, we'll just make up the difference, if that's the case, if we can buy them for-  I don't think  pennies on the dollar, but maybe you might be able to get them at 80% off.
Blake Oliver: [00:19:54] You'll have to see. 
David Leary: [00:19:54] You might be able to ... Nobody wants to hold notes for $7,000 at a 1% interest rate. Nobody wants that.
Blake Oliver: [00:20:04] Nope. All right, well, we're talking about Intuit, why don't we talk about QuickBooks updates for August?
David Leary: [00:20:08] Yeah.
Blake Oliver: [00:20:09] All of the updates — four updates — for QuickBooks Online in August, all for Advanced. This has been the trend that we've seen this whole year. Almost all the updates that we see are going into Advanced, which is the $150-per-month product. Makes sense, right? They're trying to increase their average contract size. What do we get? Well, Invoice Approval Workflow is now live in QuickBooks Online Advanced, so you can route invoices for approval before they're sent to clients. There's also Tasks — Go ahead.
David Leary: [00:20:41] Okay, that makes sense. Somebody else sent me that as a video, or a link specifically about that because, a lot of times, you'll have Employee A creating an invoice to send to a customer, and it's missing stuff. If it's missing stuff, it's hard to get paid for that later on, so an approval workflow makes sense on the accounts receivable side.
Blake Oliver: [00:20:57] Yeah, I think that's huge. We've also got Tasks. Now, you can see your QuickBooks to-do list in Tasks. Related to invoice approval, if somebody sends you an invoice for approval or creates a custom task for you, you'll now see that when you log into QuickBooks. We've also got Batch-Create Bank Deposits. Now, you can reduce the time spent entering multiple individual bank deposits. Finally, Performance Center updates. Your Performance Center in QBOA now displays Quick Ratio, and Current Ratio. They're continuing to add to the KPIs that are available in that Performance dashboard.
David Leary: [00:21:35] I'm trying to still feel out the QuickBooks Advanced. They talked about this in the earnings that both QuickBooks Live, and QuickBooks Advanced, basically, people look at those services and compare it to what they're currently paying for services. They look at QuickBooks Advanced, and they compare it to super-expensive ERP software. In this environment, the cheaper cost option's gonna win. They also know what they're paying for bookkeeping, and accounting services, and if they can get QuickBooks Live for cheaper, it's really ... Intuit views it – because of the current economic environment – as a competitive advantage. 
I'm trying to still feel out QuickBooks Advanced. It doesn't have enough features to get anybody to switch. If you have to go to an ERP software, like a Sage Intacct, etc., you're gonna go. It doesn't have enough features there. I also feel like it doesn't have enough features to possibly ... Is it gonna encourage you, like, "Oh, those few features are worth the extra money? I'm gonna upgrade my subscription ..."? It feels like it's a very narrow audience, people that might need two or three of these things they need. I don't know. Is invoice approvals enough to push you over to pay double on price?
Blake Oliver: [00:22:37] Well, considering that you're going from, what, $70 a month to $150, you've got to really justify that extra $80. If you're sending a lot of invoices and there's consistent errors in the invoices because there's no approval process, and you can pay $80 a month to avoid that problem, and you're sending hundreds of invoices, that seems reasonable to me. That could save you easily $80 a month just by not missing stuff on invoices. That's the sort of thing that I think does provide value there. 
They're also bundling Fathom into QuickBooks Online Advanced, so if you're paying for a separate reporting tool, you can justify the cost there. You have to if you've got a big chart of accounts, right? That was the very first thing that they did with QuickBooks Online Advanced was limit the number of accounts you could have in Pro, so that you have to upgrade. I think they have ... The more customized user access, that is probably valuable to some businesses.
David Leary: [00:23:31] I guess it feels like they're ... If you're using QuickBooks Online, and  you're missing a feature, instead of putting that in QuickBooks Online, they're putting it in QuickBooks Online Advanced. Then, that customer- "I guess I'll use QuickBooks Online Advanced because I need that thing." 
Blake Oliver: [00:23:41] Right. 
David Leary: [00:23:41] They keep adding all these extra Advanced things, all separately. Really, ultimately, most people are gonna upgrade not to get all of QuickBooks Advanced; they're upgrading for the one use case they need that wasn't put in regular QuickBooks Online. Anything, like you said, that's advanced at all, or a specific need is just kind of thrown in that QuickBooks Advanced. 
Blake Oliver: [00:24:00] Yeah, and another big one is custom fields. You can add lots and lots of custom fields. If you need customization, normally, you'd have to go to an ERP system to get that. You can add those in Online. I think a lot of the stuff that's in the current Desktop Enterprise product is gonna end up in Advanced. It makes sense. They're just getting there. The batch processing can save you a ton of time. Online Advanced includes that integrated Bill.com thing, too. If you're using Bill.com by itself, you'd probably have a ton of money doing Advanced. 
David Leary: [24:33] Or you could use Melio. 
Blake Oliver: [24:35] Or you could use Melio, yeah ... 

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David Leary: [00:25:58] Did you see that Xero appointed a director of to lead the U.S. Hispanic market?
Blake Oliver: [00:26:04] I had not.
David Leary: [00:26:04] Jackeline Velez, she's gonna be the director of the U.S. Hispanic market to support the fastest-growing language demographic in the U.S. small-business economy. I think we've talked about this before in the past, like how many small businesses are started by Hispanics, and now, it's outpacing every other demographic. 
I think this is a smart move by Xero. Intuit tried to get into this space years ago with TurboTax, almost 15 years ago. They created a Spanish version of TurboTax, and it just didn't sell. I don't know if it was 15 years too early. When I say it didn't sell, I think they moved 25 units- 25 versions of it were bought off the store shelves, and that was it.
Blake Oliver: [00:26:42] That's interesting because the retail tax shops, the ones that are growing are the ones that target Hispanics.
David Leary: [00:26:49] Yep, but as far as standalone software, it's been a struggle. It'll be interesting to see where this goes. My understanding, talking to- when we talked to the Latino Tax Pro guys before, at conferences, and I've had discussions with them, and some of it, the learning is they don't ... My understanding is it's not so much that your software has to be in Spanish, but maybe your support team does, your sales team. If you're doing webinars, all the other communications around your product ... Maybe that was the problem before. Intuit created a Spanish version of TurboTax 15 years ago, but none of the other things that supported the product were in Spanish- 
Blake Oliver: [00:27:27] Yeah, none of the people who worked there were Hispanic.
David Leary: [00:27:31] Exactly. I think it's an interesting move. I think some former Xero employees, I know, were pushing for this a long time.
Blake Oliver: [00:27:39] That's great. Hopefully, that'll help Xero make greater inroads in the United States. We've got some more Xero news. Xero has acquired Waddle to help improve small business cash flow. I had not heard of Waddle before. Were you familiar with them in any way?
David Leary: [00:27:54] Not entirely. I'm familiar with the concept. It's an invoice-refactoring-type service. It's very similar to FundBlock, who's really a huge partner with Intuit here in the U.S. market. My understanding is they're huge in New Zealand. They're a New Zealand startup, right?
Blake Oliver: [00:28:12] They were founded in Australia in 2014. I think the term that they use down there must be invoice-financing, but we know it as invoice-factoring, often. Basically, you get a- you connect Waddle to Xero, and you get a line of credit based on your outstanding invoices. Pretty simple. Like you say, David, everyone's becoming a bank. 
A few more updates real quick on apps. FreshBooks has some updates. Mileage Tracking is now live in the FreshBooks iOS app. I think we mentioned that they had added that into their desktop app previously. You've got a month view in the time-tracking area. You can automatically apply credits to recurring invoices; that's very helpful. Now, your clients in FreshBooks can have secondary contacts, so you can keep track of more folks, more like a CRM at your clients. That's great. When somebody doesn't respond to your invoice, you can send it to the CEO, as well. 
Direct debit is now live for UK users of FreshBooks, and you can include unbilled expenses on invoices, and recurring templates, so you always remember to include your unbilled expenses. Then, last one for me, Google Chrome had some updates. I think this is worthy of the podcast, even though it's not accounting, because a lot of us live in Google Chrome these days. Although, David, I know you're a Firefox aficionado. You and 2% of the internet users in the world.
David Leary: [00:29:33] If I wanted to use the new IE, I would be using Chrome.
Blake Oliver: [00:29:38] Right. Well, Chrome has a lot of features. One I love is that when I'm logged in on Chrome, with my Google account, it automatically logs me into all the other services that I use that use a Google account. That's not what I wanna talk about here. 
The new feature that's really cool is tab groups. David, this might actually be helpful to you. You have a zillion tabs open. Now, you can create groups of tabs in Chrome that you wanna leave open, and you can name them. You can move the all the tabs around as a group. Could be really helpful, if you're working on a specific project, and you don't wanna get disorganized. Instead of having to organize them in windows, you can use tab groups. I've been playing around with that, and I kind of  it a lot. 
Another big one, I think that could be very helpful for accountants, is Chrome is rolling out the ability to fill out and save PDF forms directly in the browser. I'm not gonna need a special — I'm not gonna need Adobe to do this. If I open up a PDF, I can just fill it out, and save it. 
David Leary: [00:30:33] That'll make all PDFs, even when people send you a PDF that's not fillable, is it gonna help out with that situation?
Blake Oliver: [00:30:38] I don't know. We'll see. Lastly, one of the big complaints about Chrome, even though it's got such functionality with the plugins, and all that stuff, is that it gets slow because of that. You have those zillion tabs open, and your computer just bogs down. Well, they're introducing tab throttling. Tabs that are not in the forefront, that have been in the background for a while, will be throttled so they don't consume all your computer resources.
David Leary: [00:31:02] Firefox has been doing something like that for a while, where the other tabs are just not running.
Blake Oliver: [00:31:07] Well, my problem with Firefox is just I need certain extensions. They make my life so much easier, in Chrome, and I just ... They're never as good in Firefox because it's a secondary browser, so companies don't develop those extensions. That's my thing. Oh, and also, I'm a Google Apps user, so just so much easier to use it in Chrome.
David Leary: [00:31:28] No, no, that's fine. It's fine, it's fine, it's fine. Just [crosstalk] 
Blake Oliver: [00:31:31] You're a maverick, David. You're an Android user. You're a Firefox user.
David Leary: [00:31:36] We've had repeating history here. Remember when you'd go to websites, and they'd tell you, "This website only runs on IE 5, or IE 6, or IE 7. You must use IE 10 to use this website." 
Blake Oliver: [00:31:47] Oh, yeah, that was the worst. 
David Leary: [31:47] Now, what's happening, you go to websites, and they're like, "Oh, you must use this on only Google Chrome," because the developers only built it for Google Chrome. It defeats the purpose of the whole internet. Google Chrome is the new IE, plain and simple. 
Blake Oliver: [00:32:00] Well, it's certainly better than IE. At least, let's give it that [crosstalk] 
David Leary: [00:32:03] I've heard, actually, the new Microsoft Edge is excellent. 
Blake Oliver: [32:06] Oh, really? Well, I run a Mac, so I don't know. I haven't seen that yet.
David Leary: [00:32:12] If you use Firefox, you get it on all your devices; works perfectly everywhere. People should take a look. We need to have an independent browser available [crosstalk] Go ahead.
Blake Oliver: [00:32:23] What else? What else? What should we hit on next? 
David Leary: [00:32:25] I have a quick- Amazon got hit by a fraud scam for $19 million.
Blake Oliver: [00:32:30] What sort of fraud? What happened?
David Leary: [00:32:32] It's a typical old school ... Two brothers in New York State were just sending fake invoices to Amazon.
Blake Oliver: [00:32:37] Oh, and they paid them, right? 
David Leary: [00:32:38] They paid them.
Blake Oliver: [00:32:39] That's what happens when you get too big, right? How much did they lose? 
David Leary: [00:32:43] $19 million. 
Blake Oliver: [00: 32:44] Wow. That's like a rounding error for Amazon, though, these days, right? 
David Leary: [00:32:48] The best part is, in the claim from the district attorney's office, in this press release that was released, they said that the brothers, "manipulated" Amazon's vendor system. I think manipulated is not really the word. They just mailed in an invoice, and some morons at Amazon paid them. This is not- 
Blake Oliver: [00:33:06] The classic fraud is you figure out who a vendor- a big vendor of Amazon. Then, you form a company that has a very, very similar name; enough where, if you've received a check paid out to the real company, you could deposit it, and the bank wouldn't question it. Then, you start sending invoices, as if you're that company, and you just have a different mailing address.
David Leary: [00:33:29] Yeah because manipulated makes it seem like these guys almost hacked in, and Amazon's a huge victim, here, but they've gotta take some responsibility. You're Amazon. How do you not have some controls around this? 
Blake Oliver: [00:33:43] Yeah, it's like when Wirecard went belly up, when that whole $2 billion fraud was exposed, Ernst & Young said, "Oh, well, you know, it was a sophisticated attempt to defeat our fraud detection capabilities." It turned out that it was just they faked bank statements. They just sent them fake bank statements-
David Leary: [00:34:01] I guess that's the question that's not even in this article - where were the auditors? Nobody was like, "What's going on with this $19 million?" 
Blake Oliver: [00:34:07] Well, again, I guess, at Amazon, $19 million is probably a rounding error, given how big they are. 
David Leary: [00:34:12] That's true; that's true. 
Blake Oliver: [00:34:14] Materiality, fraud detection, it probably wouldn't even matter if that ... It just sounds like a lot of money to us, and it's interesting ... C'mon, it's still kind of amateur. They should have better controls in place to make sure that- 
David Leary: [00:34:26] They could use Melio for free and have Google processes. It would cost Amazon nothing to implement a solution.
Blake Oliver: [00:34:35] What they should've had in that place ... I don't know exactly how this happened. Let's say that it was the address changed in the vendor, or the invoice came in, and there was a different Pay To address. That should be an alert. To change the address on a vendor should have required some review, and approval, and confirmation, or whatnot. 
A lot of accounting systems don't have that built in because they aren't built to detect fraud. They're built to process transactions. Every fraud-detection capability that you build into your app just makes it harder to use, and slower, in a lot of cases, so there's that tradeoff. You make the app harder to use when you put in place that stuff. 
Continuing on Wirecard, PwC's Global Head, Bob Moritz, responded to the Wirecard scandal. Now, his firm wasn't the one auditing Wirecard, but he pledged that PwC has to aggressively review how the firm can better hunt for frauds following the Wirecard, and other accounting scandals. "We want to make sure we're moving forward on the detection of fraud to ensure the relevance of the profession. Wirecard is yet another example of the fact we need to look at this and do it aggressively over the next few years."
Now, how they're actually gonna do that, no answer. So, is it just talk? Probably. Who are the auditors really working for? They're not working for the markets. They're working for the companies that hire them, so they'll continue to overlook fraud as long as they can. They'll do the crappiest job they possibly can satisfy their clients. That's just the nature of it.
David Leary: [00:36:02] There's an article in Accounting Today: "CPA firms' hiring of accounting grads down 30%."
Blake Oliver: [00:36:07] Yes, I saw that, too. It's funny, that's not actually a new stat. We've actually talked about that.
David Leary: [00:36:14] Yeah, they said it's been declining over recent years. 
Blake Oliver: [00:36:17] From 2014 to 2018, CPA firms reduced their hiring of CPA grads, or accounting grads, I should say [crosstalk] not CPAs. They reduced their hiring of accounting grads by 30%.
David Leary: [00:36:30] It's also not just the Big Four or CPA firms doing it. It's just in general, corporate America is hiring less CPAs. They're having less CPAs [crosstalk] 
Blake Oliver: [00:36:38] -fewer accountants; fewer accounting grads. 
David Leary: [00:36:40] Then, it's kind of where now, I'm thinking about this ... On one hand, I see posts, and accountants, and bookkeepers struggle to get qualified individuals to work for their firm. On one hand, there's a shortage of labor, and people are looking for people with the skills, but is it just the typical accounting grad doesn't have the skills? 
The other part of this kind of thinking, the ripple effect of this, is that we always talk about diversity in the accounting industry. How are you supposed to convince minorities, be like, "Hey, go be an accountant?" Nobody's hiring. You can't get a job afterwards, but go get ... Is it gonna hurt- the ripple effects of the hiring not taking place, just, I wonder ...? Also, I really can't reconcile how I see constant posts from people; they can't find talent.
Blake Oliver: [00:37:29] You hit on it right there. There's a lot of accounting grads still, but the accounting education system/accounting curriculum isn't preparing accountants to do what businesses need, and what firms need. That's the whole justification for this CPA Evolution Project the CPA is working on to add in technology into the curriculum, and to offer people specialization when they take the CPA exam. I can choose if I wanna specialize in tax; I can choose if I wanna specialize in financial reporting/audit, or I can choose if I wanna specialize in- what was the other one? Business management ... Technology. Sorry, that was one of the specializations. I can choose to specialize in those things and be more relevant. 
It's interesting, the article that you saw- I think it was the Accounting Today one, right? That was driven by the Illinois CPA Society president, and CEO Todd Shapiro talking at their annual State Society Summit. He was talking about these stats and trying to come up with solutions. I'm not sure ... He didn't really have a solution for this. I mean, adding in technology is important. The other thing that he mentioned is something that is kind of missing from this Evolution Project, which is looking forward, and being able to provide advisory services to clients. That's a really important thing. 
We know that advisory is growing. We talked last week about how businesses want to pay accounting firms for advisory, and they would pay 30% more among the small businesses. Small businesses would pay 30% more if they could get advisory services from their firms, but they're not being served. 
I don't know if the curriculum has changed since I took my accounting classes — because I'm a career-changer. I've been through it recently. There was nothing finance, really, related. Maybe we barely touched on KPIs, and they were the really basic ones, like current ratio, and inventory turnover. 
This whole future, forward-looking, helping clients see what's coming — none of  that is in there, and I don't think that's in this new curriculum. They're adding in the tech, but I think that kind of misses the point because the purpose of the tech is to automate the accounting, the historical work, so that you can do the future-looking stuff. If you don't add in that, then, I don't know ... I don't think it really solves the problem.
David Leary: [00:39:54] It's a big overall question — when people are wondering, "Why do I even I wanna go get my CPA?" It's almost like it's a perfect storm ... The extra- nobody's hiring, or hirings are down. You have to do the extra 150 hours of semester study. You have RPA, and  AI eliminating CPA functions across the board. It's the perfect storm of things happening. 
Even if you go smaller market, in general, now, small businesses are doing most of their work on the cloud now, and if you're not coming out of college with that experience with the cloud apps, and the cloud technologies ... I don't know how to solve it. It's a perfect storm, and it's not gonna help. Not hiring is not gonna encourage the best, and brightest to become accounting majors.
Blake Oliver: [00:40:45] The 150-hour requirement was the profession shooting itself in the foot. It makes no sense. It makes becoming a CPA very expensive, and time-consuming compared to other things that you could be doing with your time, where you could be making more money in a shorter amount of time. It's just anti-competitive and was a really bad idea. 
The problem is, I don't think anyone's willing to admit that it was a bad idea and to undo it because now it's enshrined in law in many states, so you can't undo it. It takes so long to make anything happen that to undo it would be another ... I don't know how long that took, but 10–20 years or something like that. We're kind of stuck with it. Maybe this is inevitable, this decline, but that might not be such a bad thing. 
I think I saw Donnie Shimamoto arguing in an article on CPA Trendlines, and I have to dig into it more. I haven't read the whole thing, but basically his premise is maybe this isn't such a bad thing. We don't need everybody in a CPA firm to be a CPA. It's not like everybody who works at a hospital is a doctor. You have all these people that support them, right? 
David Leary: [00:41:46] I think that makes sense. 
Blake Oliver: [00:41:47] That makes sense, right? That's fair. Maybe this isn't such a big deal. 
David Leary: [00:41:50] The market's gonna figure this out from a supply and demand perspective. If there's not enough CPAs, the market will be hiring a lot more- they'll try to hire more. The market's gonna balance this out, but it's shocking when you see headlines that 30%, hiring is down.
Blake Oliver: [00:42:04] It's not shocking, though, if you look at the incentives in place for employers, when it comes to automation. The U.S. tax code actually favors automation, according to a new paper. This is from the Brookings Institution. When you add up all the taxes on labor – hiring people, employing people to do work – it ends up being about 28.5% on employers. 
Now, what is the tax rate on replacing those people with software and equipment? It's only about 5%, and that is in large part due to government policies by both Republican, and Democratic administrations, from Bush, to Obama, to Trump, in which to incentivize business investment, we created bonus depreciation rules that allow businesses to buy equipment, and software, and write it off very quickly, thus getting a tax benefit. 
Whereas if you hire people, you don't get any tax benefit, generally; certainly not as big one. So, there's this huge difference in the benefit you receive from implementing automation in your firm versus hiring people to do work. We are actually- this is not intentional, but we are incentivizing businesses to replace people with automation, even when the automation is only equal to the people, because of the tax benefit. 
David Leary: [00:43:32] Not only that, because of these tax policies that we're currently rolling out for the pandemic, it's encouraged you not to have employees at all because it's too much headache. It's too much headache to pay employees now. 
Blake Oliver: [00:43:43] Yeah, so remote work is making it harder to hire, and train people. It's making it easier to retain people, but it's not making it easy to train, and integrate people into your company. What are people gonna do? They're gonna buy software. They're gonna buy automation, instead of hiring people. That's probably also a big reason why accounting firms are hiring fewer accounting grads is because they're automating a lot of the work that these accounting students were taught to do. It's cheaper to automate it than to hire them.
What's the policy implication here? Well, the authors of this economic study at Brookings say that we should adjust the taxation, so that it's even, or even preference labor over equipment because there are many first-order effects that are much more beneficial of having ... Well, I think it's obvious, right? If you have low unemployment, it's better for society than if you have high unemployment. We should even this out is the argument.
David Leary: [00:44:44] Let's say all the grunt work is automated. I'm a firm believer that the grunt work is actually what makes you amazing, 10 years from now, 20 years from now, because you know all the inner workings of the pieces. How do you just graduate college? It's all theory. All the grunt work's automated, so you're not doing any of that, and you just jump into advising ... You kind of have to have that basis of the work.
Blake Oliver: [00:45:08] Mm-hmm. Right, yeah, you have to do the dirty work. I always say that the best thing for me was I had to post debits, and credits in an ancient accounting system. It wasn't one of those systems like QuickBooks, where you can't screw it up. If I got the accounts wrong, I would create a huge mess, so I learned, like intuitively! It's in my bones how to post journal entries properly. You're not getting that anymore; you don't get that experience. I think I was one of the last accountants to- 
David Leary: [00:45:43] Won't that hurt the success rate in the CPA exam because, in theory, in the CPA exam, you're supposed to have time and practice before you take the exam?
Blake Oliver: [00:45:43] A little bit. Yeah, at least a few years probably.
David Leary: [00:45:54] If the grunt work's not there, what are you learning? Just all in theory, still?
Blake Oliver: [00:46:00] Yeah, this is the problem, where we're getting these firms that are no longer pyramids, where you have a lot of people at the bottom, and as you move up, you have fewer people. Now, we're getting diamonds, where you have very few people at the bottom entry level, and then you have a big group of middle managers who have experience, and know how to do the advanced technology, and advising stuff. Then, you have a smaller group of partners at the top. 
I think it's a big problem. It's gonna be a huge challenge. I don't think anyone has a solution yet. Where do you get the experience that you need? This is something I talked about with Phil Yaeger on his podcast about the future of the CPA, and the profession. One of my suggestions is that we change the education, so it's less theoretical, and more practical. Do fewer hours in the classroom, fewer years in the classroom, and do more are working in firms? I think it would be better for people to do extended internships, and firms would be willing to hire them, if they didn't have to pay them a full salary; if it was an internship, and then get the experience that way. It would be better than just sitting in a classroom learning stuff that you're never gonna use. 
David Leary: [00:47:09] Yeah or make them go run a business ... Start a business, and run a business for 12 months, and set up your own bookkeeping, and get revenue, and reconcile things. All these things you have to do that gives you the experience, so when you do ... You can have these conversations later on with a small business owner.
Blake Oliver: [00:47:26] Here's the thing – if you're listening, and you're studying accounting, and you're worried about this, I would say, yes, you should be worried. Here's what you should do – take classes in finance, as well. Take your basic accounting, get your intermediate accounting, but more valuable to you than your advanced accounting courses – because you can learn that stuff probably in the real world – would be take finance. 
According to an Oracle NetSuite survey, nearly half of respondents across finance, and executives on small- to medium-sized businesses said that finance has grown in importance since January. The most important elements of finance are financial planning, and analysis, corporate development, and strategy, and risk management. Those are areas they're growing. Accounting is shrinking due to automation. Finance is growing because, in uncertain economic environments, that's what people need. I think they're gonna need it going forward. 
FP&A is always something that businesses need. As business models change quicker, and quicker, due to technological advancement, this is gonna be something that we need, at least until, I don't know, 40 or 50 years from now, when we develop an AI that can basically take over the world, and we don't have to do any work at all because we are either all destroyed by the AI or it becomes our benevolent overlord, and provides us with everything that we need.
David Leary: [00:48:56] Yeah. It'd be great if people called and left us a voicemail about their opinions on — how do you solve this problem, or how should the industry solve this problem of accounting majors not being able to get the skills and why they're not becoming CPAs, and why they're not being hired, and why they're not being valued in Fortune 500. We'd love to hear your opinions on this. That phone number, Blake?
Blake Oliver: [00:49:20] (202) 695-1040. That is (202) 695-1040. It is a number that goes straight to voicemail. You have three minutes. Leave a message. We will absolutely listen to it, and we may even play it on the air. We'd love to hear from you. That's all I've got this week, David.
David Leary: [00:49:39] I'm out of news, as well.
Blake Oliver: [00:49:41] Until next time, stay safe, stay healthy. See you all here on the next podcast.
David Leary: [00:49:46] Bye. 


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