There's a lot to talk about today, including news on how CPA domain applications are now open, and some discussion on the Federal Reserve's new FedNow service. We'll also touch on Arizona being the first state to okay non-lawyer ownership of law firms. In App News, Karbon releases Time & Budgets; a spreadsheet error led to Edinburgh hospital opening delay, and some news of Zoom, and Xero. Then, the piece de resistance - our take on the average annual compensation of equity partners in the top 100 accounting firms, and why big firms are starting to resemble pyramid schemes!
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.
David Leary: [00:00:20] Really, in this grand survey from ADP, only 20 percent of firms had four percent or higher, but the Top 100 accounting firms, one in six of them are averaging more than 20-percent turnover.
Blake Oliver: [00:00:31] The average turnover is 16 percent in those firms which have average partner compensation at Top 100 firms - equity partner, I should say - $682,000. So, the bosses are making $682,000, and the staff are turning over at 16 percent. You said that, in the U.S., a typical company is 3.2 percent. That's terrible turnover compared to a typical business.
This episode of The Cloud Accounting Podcast is sponsored by BQE Core. As firms everywhere are positioning themselves to work remotely, BQE Software is committed to supporting you and your employees during this critical time. BQE's Core products operate 100 percent on a native cloud platform that's uniquely able to help you in your efforts to embrace remote work while maintaining your productivity.
In response to the impact that COVID-19 has had on your firm and your clients' businesses, the team at BQE has let us know that Cloud Accounting Podcast listeners will now receive three months of BQE Core for free with an annual subscription package purchased on or before September 30, 2020. To learn more, head over to cloudaccountingpodcast.promo/core.
This episode of The Cloud Accounting Podcast is sponsored by ClockShark. ClockShark is the leading GPS, time-tracking, and scheduling system built for local construction and field-service companies that want a simpler way to track time, run payroll, and understand job costs. With the capabilities of crew tracking, scheduling, jobsite geofencing, teams, and project segmentation, automatic labor allocation, budgeting, and reporting, ClockShark has built a robust mobile time-tracking system to handle the unique challenges that face your clients.
With ClockShark, your clients can keep accurate records, like overtime, paid time off, unpaid time, hours per job, and tasks, as well as the crucial data needed for certified payroll. With the integrations ClockShark has, you'll be able to connect to one of many ADP payroll platforms through ADP Marketplace and process payroll in minutes with the click of a button. ClockShark's pricing starts at just $6 a month per employee. Head over to cloudaccountingpodcast.promo/clockshark.
[00:03:03] Welcome to The Cloud Accounting Podcast, I'm Blake Oliver.
David Leary: [00:03:06] I'm David Leary.
Blake Oliver: [00:03:08] So, it's Labor Day weekend.
David Leary: [00:03:10] We're knocking out a recording early. This is Friday evening and probably when we're done recording, the feds will release some news about PPP loans.
Blake Oliver: [00:03:17] Do you have any plans this weekend, David?
David Leary: [00:03:19] Just to chill out. I think we're gonna go to do a staycation at a hotel for one night just to relax. We had a pretty major- we soft-released our Melio accountants features this week.
Blake Oliver: [00:03:29] Oh, cool.
David Leary: [00:03:29] All the work we've doing the last six months at Melio is finally getting out the door. We're tiptoeing out into those waters. It's a little- it's scary to release a new offering, right?
Blake Oliver: [00:03:39] Yeah.
David Leary: [00:03:40] It's been a lot of work, but it's getting out the door, finally.
Blake Oliver: [00:03:42] So, when do I get my Xero integration, is my question.
David Leary: [00:03:46] It's in the stack. It's in the stack of a zillion things I need to do, for sure. It's getting out there - accountants features for Melio.
Blake Oliver: [00:03:53] It's nice you're doing a staycation. I am also staying at home. I imagine pretty much everybody is staying at home, or a lot of folks are. What are they gonna be doing at home? Probably spending some time on Facebook, going at each other on the political spectrum. I don't know about you, David, but my Facebook feed, lately, has become very partisan. I have noticed this on both sides. I log in and I just see a lot of angst. I was driving to pick up my son from school just before we're recording this.
David Leary: [00:04:23] Oh, wait, wait. He's going back to real school now?
Blake Oliver: [00:04:25] He goes to a community center where he is in a pod that learns online with the help of a few tutors.
David Leary: [00:04:33] So, it's tiptoeing in the waters, right?
Blake Oliver: [00:04:35] Yeah. It's like a hybrid-ish approach, and it's working because nobody- there hasn't been an outbreak. So, there is a way to social distance to make this happen, it's just- it's expensive. Anyway, I'm driving to pick him up, and I'm listening to Marketplace Tech with Molly Wood, I think. There was a story there about how Facebook has their own internal Facebook. Did you know this?
David Leary: [00:04:55] I feel like I've heard about this before, or I know of its existence. Yes.
Blake Oliver: [00:04:59] So, it makes sense, if you are Facebook, you would want your employees using Facebook. What they did is they created an internal version called Workplace. They then sell it now to businesses. Actually, you could go buy Workplace by Facebook and use it as an internal Facebook for your firm if you wanted to do that. A lot of firms-
David Leary: [00:05:21] I've heard it's actually decent. I've heard it's surprisingly a good communication tool to use in-house. I've heard it's decent.
Blake Oliver: [00:05:28] Yes, if you think about it, it's familiar to everybody because everybody pretty much has used Facebook. So, if you know how to use that, you can instantly use this. So, Facebook has their own internal Workplace, and it has 50,000 people because Facebook is big: it's like a little city. People don't just talk about work; they talk about all sorts of things. Apparently, according to this report on Marketplace Tech, it's gotten really partisan on there. There are people posting political stuff left and right. This Workplace app uses the same Facebook platform that we all do on the social media site. The algorithm has been apparently pushing very controversial topics to the top of everyone's news feed, and it has become really bad on that Facebook with a lot of anger, and vitriol, and just the same stuff that we're seeing.
David Leary: [00:06:19] Okay, so the algorithms- because they get lots of clicks, they're gonna push that stuff up to the top of your feed because it gets a lot of engagement.
Blake Oliver: [00:06:25] Yes.
David Leary: [00:06:25] That same algorithm's being applied to the internal Workplace Facebook groups as well, and coincidentally, because Facebook uses it, they're basically eating their own dog food in the way they probably never intended to or wanted to.
Blake Oliver: [00:06:39] It's an algorithm that prioritizes posts with high engagement. So, the idea is that if something is getting a lot of comments, a lot of likes, a lot of engagement from users, then other users will want to see it. The negative side effect of this, the unanticipated consequence, is that a lot of stuff that upsets people is what gets them to engage. This is what we have all been seeing on social media, is that really upsetting things get a lot of engagement and these get into our news feeds. That's why you see such a partisan environment. A very small percentage of people interacting over these posts with a lot of comments – really extreme liberals, really extreme conservatives – can mess with the algorithm in that way. They're not messing with it. That's how it's designed to work, right?
David Leary: [00:07:25] Well, the mainstream media is that way. It's very extreme on both sides, and ultimately, the politics is like that. The impeachment is a great example, right? They got people so divided, but both sides got tons of donations because of the impeachment. They both won.
Blake Oliver: [00:07:41] Right, right. Exactly. So, technology is prioritizing, or promoting, or making it good to be controversial. To get back to this story about Facebook, why I'm telling you this is that, apparently, recently, Mark Zuckerberg had to step in and say, "We're not gonna have these conversations on Facebook Workplace anymore." The irony of that, David, is just astounding. I almost couldn't drive. I was just floored that Facebook's algorithm is so broken that Mark Zuckerberg had to step in and say that "We are going to override it and not have these political discussions on Facebook anymore," on their internal Facebook. Of course, he's not gonna do that on the real Facebook.
David Leary: [00:08:24] We can't opt into that on the real Facebook?
Blake Oliver: [00:08:26] I know.
David Leary: [00:08:27] Maybe it's a paid tier, a premium offering. Twelve bucks ... You pay $1 a month for Facebook, and you get a better feed.
Blake Oliver: [00:08:33] Well, remember how it used to be where it was just chronological?
David Leary: [00:08:37] Yeah.
Blake Oliver: [00:08:37] The news feed was just whatever everyone posted, and it was in order, and you just go through it. It wasn't surfacing stuff based on engagement. That should be an option. I wish that was an option. I would switch that. So, anyway, I thought that was really funny.
[00:08:54] One takeaway, by the way, from all this, if you're a CPA or an accountant, bookkeeper, trying to get people to see you online, from a marketing standpoint, this is why, if you wanna get noticed on LinkedIn, or Facebook, or Twitter, it's actually really good to somehow figure out how to be controversial because that's what gets surfaced.
[00:09:11] So, you wanna be controversial enough with something where people start commenting a lot, but, obviously, not so controversial that it harms your business. Just be thinking about that if you're thinking about marketing. That's, unfortunately, the way these algorithms are designed. You're not going to get a lot of views if what you post is making people feel good; they just feel good and then they don't click.
David Leary: [00:09:37] So, we should be titling our episode titles very controversially to get attention.
Blake Oliver: [00:09:42] We did that deliberately with our last episode, with the payroll tax deferral. We put Trump in there, just because we know that it makes people ... It either makes people happy or sad. It's one way or the other, at this point, right?
David Leary: [00:09:55] We can make a big post that says, "Desktop software sucks," or we can make a poster about, "The billable hour sucks," and we get all these people fired up and responding. I see how the system works; we might be able to game this a little bit.
Blake Oliver: [00:10:06] Yeah. Unfortunately, that's the way it works in the world of digital marketing these days, so, I wanted to bring that up. I also have lots of stories this week. Amazingly, it was a very busy week for me, anyway. We have the new .CPA domain that was released. Karbon has a feature out, Time and Budgets, and a spreadsheet story, as well – a spreadsheet error that led to a hospital opening delay, believe it or not.
David Leary: [00:10:33] Spreadsheet stories are my favorite, though, that we get. I love our spreadsheet stories. I have some instant payment stories.
Blake Oliver: [00:10:39] The Wall Street Journal had a feature on how auditors are struggling to access data and do their jobs during remote work. I thought that was interesting; auditors don't get a ton of love from the press. There's a canton in Switzerland that is now accepting taxes in Bitcoin, that's pretty cool. The question is, where do we start?
[00:10:57] Maybe we should start with the voicemails we got. We got two listener voicemails, both about accounting education – one of our recent topics – and what should we be doing as an accounting profession to train people so that they're actually useful when they come out with their accounting degree and make CPA firms want to hire them? Because, as we have discussed in the past, the hiring of CPAs ... Well, it's actually not CPAs, it's the hiring of accounting degrees into CPA firms has declined by 30%.
David Leary: [00:11:32] Well, this is appropriate because one of our reviews we got was written by a student. So, it's very appropriate these voicemails are tied to a student listener.
Blake Oliver: [00:11:41] So, let's listen to those voicemails and then we'll hear that review.
Kayla Shwitter: [00:11:45] Hi, my name is Kayla Schleeter. I am calling from Grand Forks, North Dakota. First of all, I love your podcast. It is up-to-date, straightforward information that is really enjoyable to listen to. I just wanted to call in about how I agree with what you said about the grunt work is what makes you good at what you do 10 to 20 years in the future. I was fortunate enough that in my small-town high school in North Dakota, we had three years of accounting. The first two years we learned the basics of accounting. Then in year three, we used QuickBooks Desktop to enter transactions for a fake business, and then reviewed the financials to have an understanding of what that means.
[00:12:28] That experience and understanding is what got me a job at a small business doing data entry while pursuing my accounting degree. That eventually led me to doing what I do now, which is software consulting and providing advisory services at a regional accounting firm. I think the best first step for educating future accountants is integrating cloud-based accounting software with actual workflow into the curriculum. Maybe Intuit can set up, if they haven't already, a special pricing structure for educational institutions to have access to the product to help the future generations enter the workforce well prepared. Finally, I also agree with the point that you mentioned at the end of the podcast about potentially shifting away from so much time in the classroom and extending internship experiences. Again, thank you so much for the podcast, it's super-helpful, and stay safe, and healthy, guys.
David Leary: [00:13:25] Great voicemail.
Blake Oliver: [00:13:26] My mind almost exploded when I heard three years of high school accounting. That's amazing.
David Leary: [00:13:33] Yeah, it's probably the exception, right? Where people are getting three years of accounting in high school.
Blake Oliver: [00:13:37] That's awesome. Obviously, the work experience thing is great. Really great insights. All right, you up for number two?
David Leary: [00:13:44] Yeah.
Tasha Chambers: [00:13:45] Hey, Blake, and David. Tasha Chambers from Wisconsin here; longtime listener, first-time caller. Calling regarding your comments on the changes that should be made to the accounting education. Blake, I wholeheartedly agree; I think that we should return to an apprenticeship model for accountants. I would love to see maybe two years in the classroom, where they learn the basic 'debits equal credits,' but so many of them are coming out and they have just no practical application for the knowledge they have, and they can't make the leap. I think that it would be a great service for kids; it would be a great service for students; it would be a great service for the firms, as well, to bring people up and teach them their way. So, great show! Have a great day.
Blake Oliver: [00:14:32] Well, thank you, Tasha.
David Leary: [00:14:33] Yeah, I still firmly believe you can't replace that in-the-weeds hard work. You just can't.
Blake Oliver: [00:14:39] No. Work experience is so important when it comes to accounting. Like you said, David, starting a business is the best way to learn about running a business, and a lot of that is accounting.
David Leary: [00:14:49] We also got, from a student- we got a review.
Blake Oliver: [00:14:52] Oh, let's hear that.
David Leary: [00:14:53] This is from Jrg828. The review is five stars on Podchaser: "Funny, entertaining, and informative. What more could you ask for? I listen to The Cloud Accounting Podcast to discover new technology, statistics, industry news and trends, as well as best practices as a professional. Great for students, too."
Blake Oliver: [00:15:10] Thank you so much.
David Leary: [00:15:11] The theme here is about students. So, let's just say, Blake, now, I've busted my ass; I got my experience; I take the test; I'm a CPA. Can I now go get a .CPA domain?
Blake Oliver: [00:15:22] Well, no, actually; not yet. Almost. So, CPA.com is making available ".CPA," the top-level domain that they wrangled from the lords of the internet. I forget who-
David Leary: [00:15:39] The ICANN.
Blake Oliver: [00:15:40] The ICANN, yes. So, the AICPA is the official registrar for the .CPA domain. You can now, if you are a CPA firm, apply through October 31 to get the same URL you have currently with .CPA at the end of it. For instance, if you have BlakeOliver.com, you could apply for BlakeOliver.CPA, if you are a CPA firm. I actually can't yet do that because I am an independent CPA. I have to wait until January 15, when .CPA registrations will be opened up to individual-licensed CPAs.
David Leary: [00:16:19] Doesn't that mean all the good ones will be gone by then? You're gonna get BlakeOliver2552.CPA. You're not gonna get a good domains.
Blake Oliver: [00:16:27] Well, yeah, we'll see. I'm curious to see how many people actually sign up for this, because it is not cheap. I guess for a firm it is. It's only $225 per year for each domain, and if you're a CPA firm, that's really no big deal. They do have premium domains at a higher price. So, if you want a domain with only two or three letters, that'll be $690 per year, and I imagine that it'll be mostly firms that grab those.
[00:16:55] Here's one thing that I only saw in one publication. Going Concern said that one of the conditions of getting this .CPA domain is that you have to redirect your current domain to the new one. So, if you have that sweet .com domain, you are going to have to commit to use .CPA as your main domain. You can't just get that and redirect it to your .com-
David Leary: [00:17:18] Now, does that include all your email addresses and everything else, as well? You have to utilize this as your entire stack?
Blake Oliver: [00:17:26] Well, so, according to Going Concern, what they said in there, it seems to me that's the way they want it to work. It makes sense, right? If CPA.com is going to create this whole domain and try to get it to become the domain for CPA firms, that every CPA firm and every CPA uses, but definitely the CPA firms, they need to make people use it. They don't just want people buying it and redirecting it. That's just me thinking out loud.
David Leary: [00:17:51] You have to be a CPA firm? What if you're a bookkeeping firm, or an accounting firm, you ...?
Blake Oliver: [00:17:57] Well, you have to be registered as a CPA firm, I believe, is what that means. So, that's different in every state, but if you are not registered as a CPA firm, then I don't think you would be able to apply for this.
David Leary: [00:18:09] Now, what if you're a CPA firm, but you're not a member of the AICPA? Are they gonna allow you to buy it?
Blake Oliver: [00:18:13] I don't know about that. I am not sure; I didn't see that. It is limited to licensed CPAs, and CPA firms. That's what I know.
David Leary: [00:18:22] I saw a lot of pushback on the interwebs, a little bit, on the Twitter, that people were a little shocked by the price because you can ... What's a domain? Twelve bucks a month for a for a typical .com domain?
Blake Oliver: [00:18:31] Yeah.
David Leary: [00:18:32] People are shocked about the price. Then, also, think – there's a lot of people that don't renew their AICPA membership; they don't think it's worth the money. They could utilize this as a carrot to get people to renew. "Hey, if you renew your application, you get your domain."
Blake Oliver: [00:18:48] I would love to see CPA.com make this free for individual CPAs ... Not free, but included with your membership, because you're already paying a few hundred dollars a year. Why not give everyone their own .CPA domain as part of that? But I guess it's gonna be on top of that. It would be a great way to convince independent CPAs to actually maintain their membership because I know a lot of people, once they leave big firms, where the big firms pay for the membership, then they let theirs lapse because they don't see the value as much anymore.
David Leary: [00:19:19] I tried to register CloudAccountingPodcast.CPA, and it wouldn't let me get through there. For me personally, I'd like to get, "I'm-not-a.CPA"
Blake Oliver: [00:19:28] Well, unfortunately, David, if you and I tried to make The Cloud Accounting Podcast into a CPA firm, I'm not sure if we could, in most states, because it's a 50-50 business, and to be a CPA firm, you've got to have at least 51% CPAs in many states. It varies, right?
[00:19:47] Something I saw interesting in a related profession – in the legal profession, this is not common. To have non-lawyer owners of lawyer firms is actually- historically, you can't do it. Well, our state, Arizona, is now the first state to okay non-lawyer ownership of law firms. This was a big hullabaloo on Twitter, right?
David Leary: [00:20:08] Well, I think a lot of it's an ethical thing. They think that as soon as a lawyer is motivated by profit, he or she is going to not have any judgment and not represent clients properly.
Blake Oliver: [00:20:19] I don't understand how having non-lawyers in your firm or having non-CPAs in your firm makes you less ethical.
David Leary: [00:20:25] My experience with a lot of lawyers is they are horrible at running their law firm. They're always changing partners because they're just not good businesspeople. They're good at practicing law, but they suck at running their business. If you open the door to let them partner with somebody that knows how to run a business, they could actually do better at their law job, right?
[00:20:44] I do feel like it's an ethical argument, which almost leads me to be like, "Then why are you charging by the hour?" The fact that that's mandated, that they must bill by the hour; they can't even value bill in many cases ... It's just really being shaken up, and this is just another inch down the road. Good for Arizona being one of the first states to do that. Then, also in Arizona, I don't know if you remember, about a year ago, they were one of the first states to let people – if you move here, you don't have to retake your test or your license, for lots of different industries.
Blake Oliver: [00:21:12] Oh, yeah. Is that the case for CPAs? I don't know.
David Leary: [00:21:16] I think so, yeah.
Blake Oliver: [00:21:17] So, I could get my license here in Arizona now. Oh ...
David Leary: [00:21:20] Yeah. The same thing- there's a podcast about stupid things that should go away now that we've had COVID, like, "Hey, maybe it's okay for people to drink on the sidewalk. Maybe that's all right." We could have beers outside during our dinner. Maybe that's okay, right? But one of the things is nursing. Nurses, nationwide, take the exact same exam, but you're licensed in each state, and all of these states would not let licenses move.
[00:21:43] Now, because of COVID, they had to suspend all these laws, so that way some nurses who were registered in New Jersey, could go help out in New York City. So, they suspended all these laws, and hopefully laws like that will go away because it doesn't make any sense. If you're a nurse and you take a national test, you should be able to work in all 50 states.
Blake Oliver: [00:22:01] There's one more consequence of this ruling here in Arizona about law firms. The Big Four, now, if more states follow suit, have an opportunity to start competing in the legal services world. We've got Big Law and we've got Big Four accounting and consulting, and we might start seeing a lot of overlap. So, Big Law firms creating consulting divisions and going after that kind of work, and then, Big Four accounting firms going after legal work by starting to hire lawyers and provide those services.
David Leary: [00:22:30] This, in theory, should be better for the consumers, long term.
Blake Oliver: [00:22:33] Now, I imagine that our listeners may have some thoughts on this and some strong opinions, and we would love to hear those – your opinions about the .CPA domain, the presence of non-CPAs owning CPA firms, or really anything you want. You can also leave us a voicemail, just like Kayla and Tasha. Give us a call at 202-695-1040. That is 202-695-1040. It's a Google Voice number; it goes straight to voicemail. You get three minutes to tell us what you think, and we will definitely listen to it, and we maybe will even play it on the air. That's it for the CPA stuff. What's next? Should we talk about app news?
David Leary: [00:23:12] Yeah, let's jump over to the apps.
Blake Oliver: [00:23:17] A big one from Karbon; the practice management solution has released Time and Budgets, "Time and Budgets is designed to allow Karbon customers to set time and dollar estimates, track time, compare budgets against actuals, manage capacity, analyze progress and performance, allocate resources and more." So, it's now in beta and is rolling out to all Karbon customers in the coming weeks.
David Leary: [00:23:41] I always thought Karbon was about managing your communications. It feels like now it's heading towards full-blown firm management.
Blake Oliver: [00:23:51] I think this is an interesting new feature, because I do recall Karbon, at its inception, arguing strongly against time-based billing and having this attitude that you don't need to track time and manage your firm that way.
David Leary: [00:24:09] Oh, like if we went and Googled some of their old webinars and things.
Blake Oliver: [00:24:12] I do recall that being part of the mentality, which is the mentality of a lot of cloud accounting firms that have moved to value-based pricing and don't track time anymore. Clearly, there are lots, and lots, and lots of firms ... The vast majority still track time. So, I think maybe this move is just an acknowledgment that this is something that firms want, and you cannot grow to take on most of the market, unless you're gonna offer it.
[00:24:42] I will admit too, there is value, potentially, in tracking time. It's not good or bad, it is not one or the other. There are a whole spectrum of ways to track time and bill using time in a firm and use it in combination with value-based pricing. Maybe you use it to track performance, maybe you don't. Maybe you use it on some projects, maybe you don't. To go completely cold turkey is really challenging, and I think everybody will agree with that. Having a way for firms to be able to track time, while they move on to a new practice management platform makes a lot of sense to me.
David Leary: [00:25:14] Well, in a way, if Karbon really saves so much time in improving the communications, now that it's being tracked, they'll be able to prove the value for the product and charge more.
Blake Oliver: [00:25:22] Exactly, there you go. Xero released their September 2020 updates. I'm a fan of Xero, but I have to say, I am, again, somewhat disappointed in the pace of feature releases recently. The only thing in this list that stuck out to me that was even worth talking about is they have a redesigned date selector that finally makes sure that dates are formatted correctly for U.S. customers. Now, it's month, day, year instead of day, month, year, which is the rest of the world.
David Leary: [00:25:52] So, Xero rolled out 10–11 years ago in the U.S. market?
Blake Oliver: [00:25:56] Yeah.
David Leary: [00:25:56] Now, the dates are working correctly?
Blake Oliver: [00:25:59] They gradually started fixing it, and I don't think it was ever completely fixed across the whole product all at once because it's different code bases for different parts of the product. You would run into issues, sometimes, where you'd type it in the U.S. format into a field and then it wouldn't stick, and you'd have to go back and change it, and it was really annoying.
David Leary: [00:26:20] Rod Drury, the former Xero CEO, founder of Xero, he actually did a sale. It's a planned block sale, but he sold over $2 million of Xero stock. Another former executive also sold, but somebody that's on the board actually bought 400,000 shares. So, there's a lot of movement happening, but the fact that people that are currently on the board that are at a different phase of their life are buying Xero shares is probably a good indication. This is just ... People have to do that, right? Executives have to rebalance their portfolio eventually. You just can't have all your eggs in one stock, especially if you're not active in the company anymore as much, as Drury is.
Blake Oliver: [00:26:53] I might give Xero a hard time on features because I'm a user, but I'm bullish on the company, globally, and their prospects over the long haul, for sure. So, that was the news is that Rod Drury is cashing out and now is super, super rich? That is awesome. It's great that somebody could make- I don't even know how much he's worth, at this point, but $200 million just right there from cloud accounting software is pretty cool; accounting software ... It's just awesome. Anyway ...
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. ADP has your back with ADP Marketplace.
Blake Oliver: [00:28:41] The people who invested in Zoom are very happy, because Zoom stock bumped up ridiculously after their revenue numbers came out. Their revenue rose 355 percent to $663.5 million in the last quarter, crushing analysts' estimates of $500.5 million. To put this in perspective, the company made as much money in the past three months as it did in the entirety of 2019.
David Leary: [00:29:10] Wow.
Blake Oliver: [00:29:10] Yeah. One key metric, the number of Zoom customers with at least 10 employees exploded to 370,000, which is up 458 percent, year over year. That is startup-level growth, not growth-company-level growth. Just amazing. So, their stock jumped 22.7 percent. I'm not sure where it stands right now, after the recent fall in the markets, but it's still way up from where it was, and I wish I'd bought some Zoom stock when all this started.
David Leary: [00:29:44] It'll be interesting to see how this sustains long term, because obviously Teams is coming in heavy. Google has moved their videoconferencing up higher. When you book a meeting now, Google really pushes you to use their videoconferencing. Facebook's coming down the pipe with their- they're basically gonna move Facebook's portal to be a little bit more meeting-based for work. There's other competitors now getting into this and taking it way more serious because of the pandemic, but obviously, they can't maintain this growth. Eventually, people are going to be Zoomed out; there's no more people you could possibly add. There's a finite amount of people that need to use Zoom.
Blake Oliver: [00:30:18] They've expanded the market to kindergarteners, so how far can they go?
David Leary: [00:30:21] Yeah, there's not many-
Blake Oliver: [00:30:22] It's funny, you mentioned Google. I don't think Google has a shot here, because Google built browser-based videoconferencing, and they just can't figure out how to make it not suck up every single bit of power in your computer. Because not only is it Chrome, and Chrome is resource-intensive, but then you've got videoconferencing going through Chrome? It's a disaster. Every time I boot up a Hangout, I'm sad because I can't do anything else. Whereas Zoom just runs with no problems these days.
David Leary: [00:30:50] Did you see that they also disclosed that their chief accounting officer is leaving the company?
Blake Oliver: [00:30:56] No, I did not. Hopefully, we're not gonna hear about some shenanigans after this.
David Leary: [00:31:00] He's resigning as of October 16, 2020. It's interesting. The disclosure really goes out of its way to call out, "Nothing's going on; there's nothing questionable, it's a peaceful exit," etc., etc., etc., etc., etc., but there's an interesting thing about the new replacement that's coming in, and how the offer letter to the new replacement has an annual base salary of $350,000, and a sign-on bonus of $40,000.
Blake Oliver: [00:31:30] So, what's crazy about that?
David Leary: [00:31:32] The only reason I'm bringing that number up is because I think later on, we're gonna talk about there were some stats about how much partners at accounting firms make.
Blake Oliver: [00:31:41] Well, let's talk about that. How much do partners at accounting firms make?
David Leary: [00:31:45] Before we jump to that, really quickly, I'll just make a quick ... One more last piece of app news before we jump out of app news. Plaid, who, basically, builds bank feeds, right?
Blake Oliver: [00:31:54] Yep.
David Leary: [00:31:54] Almost all the apps are using it; a lot of them are using Plaid under their covers. Plaid, about a year ago, started working directly with the banks to offer the banks a service where, "Hey, we can help you build out your bank APIs," and they called that Plaid Exchange. Now, what they're doing is, if you now use Plaid Exchange, you can actually offer your customers instant account activity. If your bank- Blake's bank uses Plaid's Exchange service to build out your APIs, my bank feed's gonna be instantaneous now.
Blake Oliver: [00:32:23] I don't have to wait until close of day for my feeds to update the next day, it's just instantly? That's really cool.
David Leary: [00:32:30] Yes. Assuming they push it out in the bank feed ... Basically, it is available within seconds, the user's activity; you can authorize it-
Blake Oliver: [00:32:36] You can just be sitting there, reconciling those accounts all day long, just have QuickBooks open, as soon as a transaction comes in, just code that thing.
David Leary: [00:32:44] Refresh, refresh, refresh. Except for QuickBooks, I don't think uses Plaid. QuickBooks has their own proprietary-
Blake Oliver: [00:32:48] I think Xero uses Plaid now, right? That's a good sign for them. That's nice. Can we talk about partner compensation because it's-
David Leary: [00:32:55] Yeah, let's jump into that. Let's jump over-
Blake Oliver: [00:32:57] It's a really big number, and for people who don't know how much accounting firm partners make, it's shocking.
David Leary: [00:33:03] So, the average equity of a partner at a Top 100 accounting firm is $682,000 a year.
Blake Oliver: [00:33:08] You mean the average salary of an equity partner is $682,000 a year?
David Leary: [00:33:12] Yes.
Blake Oliver: [00:33:13] That doesn't include the Big Four? That is insane. That's a lot of money. I think I saw an article from Gene Marks, was it in Accounting Today with this number in it? Is that how we came across it?
David Leary: [00:33:25] Yes. There was a study that came out from Inside Public Accounting earlier in the month.
Blake Oliver: [00:33:30] Got it. To be clear, this is the Top 100 firms, excluding the Big Four. Do you want to talk about the Gene Marks article?
Kayla Shwitter: [00:33:39] Yeah. There's an article, and the headline was very eye-catching: "How your firm is missing a $682,000 opportunity." I was like, "Oh, that's interesting." Maybe there'll be some, "Oh, you should offer this service. There's some service you should be offering." I really read the article, and a couple of stats are in it, because it compares this survey, and the survey from ADP. ADP had a 2019 survey about the state of the workforce. The turnover in a typical business is about 3.2 percent. It's not a huge amount of turnover, but – really, in this grand survey from ADP, only 20 percent of firms had four percent, or higher, but the Top 100 accounting firms, one in six of them are averaging more than 20 percent turnover.
Blake Oliver: [00:34:24] The average turnover is 16 percent in those firms. We have average partner compensation at Top 100 firms – equity partner, I should say – $682,000. The bosses are making $682,000 and the staff are turning over at 16 percent. You said that, in the U.S., a typical company is 3.2 percent. That's terrible turnover compared to a typical business. What is Gene saying that we should be learning about this number then?
David Leary: [00:34:54] This is the part I don't get. He talks about how, in general, I feel like accountants- they don't wanna say how much they make. Partners, I guess, are embarrassed of how much they make.
Blake Oliver: [00:35:03] So, they keep that to themselves. They don't advertise that they're rolling in dough is what he's saying.
David Leary: [00:35:09] Yeah. They're not advertising the number, but my observation, though, is actually weird, and maybe we could, just as a side conversation related to this, is I don't understand ... When I worked at Intuit, I never said, "David Leary, Intuit shareholder." How come employees of the big accounting firms put their name and then say shareholder?
Blake Oliver: [00:35:29] Or equity partner, or partner?
David Leary: [00:35:31] Yeah, instead of just saying, "I have this position at this firm." It's almost like they wanna tell you they make $682,000 a year, but they don't want to actually tell you that.
Blake Oliver: [00:35:40] Well, that is possibly it. The other part is that there's a class difference between the equity partners, and the partners, and all the staff. It's a total- you're either in the club, or you're not. Everybody wants to get into that club, at least once they- when they first get to the firm, they're bought into the idea of probably getting to partner someday; at least a lot of people are. You know that you can make a lot of money if you become partner.
[00:36:07] I guess Gene's point here is that because accountants don't talk about it, the partners don't advertise how much they make, that they're losing out and that staff are turning over. If they talked more about partner compensation and the benefits of becoming partner, then staff would stick around, and they wouldn't leave, and they would try to become partner. That's what I'm getting out of this.
David Leary: [00:36:32] All right. The argument is because people don't know they could make $600,000 a year at an accounting firm, they just quit and just go get a different job somewhere else.
Blake Oliver: [00:36:41] Because it's hard, right? They become less-
David Leary: [00:36:42] They have to go to work at Zoom for $300,000 a year.
Blake Oliver: [00:36:45] Yeah, they get less motivated or something ... Maybe they would stick it out. I take a different approach to looking at this, and I see that number, and then I know how much the staff and managers make, and the senior managers don't even make close to that number. I think to myself, well, maybe it's not that 16 percent of staff are turning over every year because they don't know that if they stuck around, they would make all this money if they became partner.
[00:37:15] Maybe it's because they know that, and they're annoyed that the partners make that much money, and they don't want to stick around. What I'm trying to say is that if the partners shared the wealth more, maybe people would stay around, and they wouldn't leave. If you pay people more, then are they gonna leave? I think money motivates people, right?
[00:37:34] If partners are sticking around to become partner or future partners are sticking around to become partner to make more money, if you just paid your managers, and senior managers, and staff all more, then maybe they would stick around, too. This is how big firms work is they're giant pyramid schemes, right? You convince people to join, and you work them to the bone, 60-
David Leary: [00:37:56] Episode title. You said it. Top accounting firms are pyramid schemes. That's the episode title. Now, here's the voicemail number: (202) 695-1040, call us up.
Blake Oliver: [00:38:05] It fits with the marketing message about creating controversy. Engagement through controversy. I'm saying this tongue in cheek, but I'm a bit serious about it too, because how does it- it's not a literal pyramid scheme, but it has some resemblance to a pyramid scheme in that it is: recruit people at the bottom, get them bought in to this vision of someday becoming partner and moving up, and create this whole annual promotion schedule, so they're always competing to get to the next level, and then work them really, really hard and pay them not super great. That way, the profits flow up to the partners – the smallest group at the top. You just keep people hanging on for years, and years, and years, hoping that they're gonna make it. Eventually, they realize they're not gonna make. It is a ridiculously small number of people that become partner ever. Everybody else-
David Leary: [00:38:58] So, you're rolling the dice, here. It's a gamble. You're like, "Am I gonna be able to become partner before I burn out?" Or "I'm a young person ..." and he's saying this here. He's like, "Yeah, they should be telling people about the long-term financial rewards as long as they commit to being an accounting professional and keep the professionals, and good for you ... Let's work hard." Really, that's the gamble. There is a pot of gold at the end if you don't burn out first.
Blake Oliver: [00:39:19] Right, and of course, when you're young and you have this attitude that you're the best; you're confident; you make that deal. You're saying, "Oh, yeah, I have what it takes to make it." Then, of course, life goes on. Maybe you have some kids; that slows you down a bit. You decide, "This is not for me," and yet you've dedicated a bunch of your life to generating a lot of profits for the partners, and you never saw any of that yourself.
[00:39:43] I'm not saying it's all bad. You got a ton of amazing experience; you learned a lot and everything, but you definitely didn't benefit financially the way that the partners do. I think that is gradually changing because it's becoming more obvious, I think, with transparency that you get from the internet ... If you're an accounting student, and you just wanna know what it's like to work at the Big Four, you can just go on Reddit and learn all about PwC, and Deloitte, and KPMG from all the totally disengaged employees there who spend all their time on Reddit.
[00:40:18] You can see it's not exactly what the recruiters are promising you. Tell me I'm wrong. I'd actually love if somebody is listening to this and disagrees. You can call our number. You can leave a review and tell us what you think. If you agree with me, if you are one of those people who had this experience, let us know, as well.
David Leary: [00:40:37] Well, so, how many years does it usually take to become a partner at a Top 100 firm would you guess?
Blake Oliver: [00:40:44] Gosh, I don't know. 20 years or something?
David Leary: [00:40:46] Blake, we'll do the podcast for 20 years, and there's a pot of gold at the end here. One day, you will get a $600,000-a-year salary from the podcast in 20 years, based on our current growth rates.
Blake Oliver: [00:40:58] We're gonna do that much sooner, David. I'm looking forward to the Cloud Accounting Podcast yacht. We gotta figure out a way to get a tax deduction for having a boat, that's for sure.
David Leary: [00:41:09] One of these days.
Blake Oliver: [00:41:10] So, where do we go from here, David? What else do you want to talk about in the time that we have left? I've got a story about the spreadsheet error.
David Leary: [00:41:19] I don't wanna skip that. Talk about that because I really love the spreadsheet stories that we always have.
Blake Oliver: [00:41:25] So, there was this hospital in Edinburgh that was supposed to open; a very expensive hospital. I don't know, I want to say close to half-a-billion euros or something. The hospital opened up and then they immediately had to at least not use part of it, because the critical care rooms did not have the required features by law. They are required to have 10 air changes per hour. As we all know now, due to coronavirus, it's important that you aren't breathing recycled air when you're trying to control infections.
[00:41:58] The critical care rooms are supposed to have 10 air changes per hour. Well, the ventilation systems that were built only did four air changes per hour. The air was traced by Grant Thornton auditors back to a 2012 spreadsheet. So, this is eight years ago now. "This looks to be based on our review, human error and copying across the four-bedded room generic ventilation criteria into the critical care room detail," which I will translate from auditor speak, means, somebody accidentally copied and pasted from the wrong column into the wrong column. They had the number four in there instead of 10; everybody missed it all the way through the whole bidding process. That's the danger of spreadsheets there.
David Leary: [00:42:42] I'm speechless. A mistake in a spreadsheet was in 2012 and it probably would have never been a big deal, but then COVID came and all of a sudden, it was a big deal.
Blake Oliver: [00:42:51] I guess so, yeah. I'm wondering, actually, how much of an impact COVID had on it. All it takes is one person to do that copy-paste in some sheet that's way at the end of the workbook that nobody ever looked at. So, that's my spreadsheet error story. What else should we talk about here?
David Leary: [00:43:06] FedNow, we could talk about that if you want?
Blake Oliver: [00:43:08] FedNow?
David Leary: [00:43:09] We missed this story. It was actually the first week of August. The Board of Governors of the Federal Reserve System, the Federal Reserve Board, they proposed a development of a real-time settlement service, RTGS, and basically, the public name's gonna to be called FedNow. It's instant money movement; faster payments, instant payments, instant movement of money.
[00:43:35] They built their own system and, essentially, everyone knows about their clearing house for ACH, and the delays in that and how it's not real-time. The private-sector banks got together, and they actually built their own RTP – real-time payments network – but they really cut out the small banks, the credit unions, retailers, technology companies. They all just were not big fans of this. They all got cut out.
[00:43:54] What they've done is they released a 50-page press release about this. The timeline, really, originally on this was going to be- it started in 2013; they started watching the strategies to build this out. Then, they really committed to building it out in 2019. They were actually gonna go through and really build this, and they were looking for a comment. Then, they really thought they'd get it out '23–'24; they'd start to really round it out and polish it off.
[00:44:23] What's happening is, because of the stimulus now, an earlier roll-out might happen because of stimulus, and it really ties a couple of stories we had together in the past because a lot of people didn't get their stimulus checks. We've talked about it before, they saw instant impacts to the economy once the checks started getting into people's hands and getting into their bank accounts, or they cashed those checks, right?
Blake Oliver: [00:44:43] Yeah, yeah.
David Leary: [00:44:43] There's all these people that are unbanked, people that didn't get the checks. The IRS didn't have their addresses. There's all these reasons the money didn't get to people fast enough. It turns out, what they wanna do is basically utilize the post office now.
[00:44:57] Now, the post office story is getting tied in this, and the unbanked is being tied in, to where the unbanked will just go to the post office and get some sort of debit card, and the Fed will put money directly into people's bank debit-card accounts. Basically, it's a bank of the Fed, and they're bypassing the normal banks, and they're bypassing all the, what is it, nine regional feds, right?
Blake Oliver: [00:45:20] Wow. Wait. So, that's big news, if that's what's happening, because I had heard about this instant payment system coming someday, way down the road, so that we can replace ACH and actually have instant transfers like they do in Europe. We had speculated about how it would be beneficial for the Fed to have a bank account for every American, and that way, they could just put the stimulus money into it. Are you saying that this is now happening?
David Leary: [00:45:48] I'm tying a couple of articles here together, but I would not be surprised, as we see this next round of stimulus becoming more real, that this becomes a distribution method that is required. Even Senator Kamala Harris, vice president nominee now, I guess we have to say, she, actually ... This is a branch-off of the Obamacare rollout. The U.S. Digital Service, which was set up to help fix the healthcare.gov website, a teeny little agency, she wants to expand their budget by 400% because this all ties to modernizing Medicare payments. It's all tied to this TreasuryDirect accounts, these digital wallets.
Blake Oliver: [00:46:28] Well, it would make so much sense for Treasury to have a way to directly give stimulus to Americans and not have to go through the banking system. Because we saw that they had to pay the banks a pretty hefty chunk just to process those PPP loans, and then they had to cut checks via the IRS, which costs a lot of money and is super slow and doesn't get to everybody.
[00:46:52] If they could just have an account at the Fed for every American that is tied to your social or something like that, then they could just give you the money directly. Like you said, if you don't have a bank account to link it to, you could just go to the post office and get a debit card that way or something. That's brilliant. I could see there being a ton of opposition to this from the banking industry.
David Leary: [00:47:13] Yeah. It goes back to, also, we were talking about that modern monetary theory. If you think about it, now, the Feds can just inject money into the economy instantly and then pull it back. Then if you think about it, now that it's all digital, instead of it being tracked to just the penny, they could go out as many decimal places as they want. This is where you could start getting into negative interest rates. You could have very small negative interest rates and you'd only be losing a couple of pennies a day, or less than pennies a day, right?
Blake Oliver: [00:47:41] But it would force people or incentivize people to go out and spend the money in those accounts.
David Leary: [00:47:45] Exactly. This is all connected this instant payment. Basically, what was built to just move money around is now getting tied into the stimulus package possible, UBI, which we've talked about. It's really taught- you really see all these stories coming together into this federal wallet if you want to call it that.
Blake Oliver: [00:48:03] Well, this is gonna make Libertarians scream, but I think it's a really good idea. If we're gonna have stimulus like we just had, we need to be able to do it more efficiently and get the money out quicker, and this would be a way to do it, and to track it; to see where it's being spent would be interesting, too. I don't know if the Fed has a plan to track that, but they could.
David Leary: [00:48:27] It's just also scary at the same time, right? We have all this technology, and how much we're giving up our lives. You have your locks connected to the Internet. Actually, somebody here in- I don't know if this happened you, but I've heard people in Tucson, because the rolling blackouts in California and all of this ... All of those Nest thermostats were adjusting people's air conditioning in Arizona up to 86 degrees because they wanted to conserve some electricity, but you can't have your house at 86 degrees when it's 110 degrees out. It's just doesn't work.
Blake Oliver: [00:48:27] They had it on the automatic setting, where it just does it? Yeah.
David Leary: [00:48:59] Yeah. So, essentially, the government, if they wanted to ... You've got your smart lock; you've got your smart car; you've got your smart bank account that the government can control, and your smart thermostat ... They could just lock you in your house, and take your money away, and you're stuck in the house. I know it's a little 'tinfoil hat,' but are we giving up rights when we- the more dependent we get on all this technology stack like this?
Blake Oliver: [00:49:19] Well, and that's what we have to balance, right? We have to balance technology with freedom and liberty. It's a real challenge. Disinformation is a consequence that nobody ever anticipated in the way that it's become a problem where ... To go back to Facebook, they're gonna not even accept new ads a week before the presidential election because they're so concerned about disinformation, apparently.
David Leary: [00:49:44] Well, we keep getting into this because every time- obviously, every time we talk about PPP, and that's on our artwork, and we run an ad on Facebook, we keep getting into the list of-
Blake Oliver: [00:49:54] Oh, I know!
David Leary: [00:49:54] -Russian hacker advertising or something. We constantly have to play this game with them.
David Leary: [00:49:58] Yeah. We had to verify our identities in order to have political ads. Apparently, the PPP is so controversial that it falls under that. I've got more I could talk about, but that's all that we've got time for this week.
David Leary: [00:50:13] We have one more voicemail, though, we should play.
Blake Oliver: [00:50:14] Yeah, we have a voicemail to take us out. Again, if you want to call us, I'll read that number one more time; 202-695-1040. If people want to reach you online, David, where's the best place for them to do that?
David Leary: [00:50:28] The best place is on Twitter, but I'm also on LinkedIn and I know previously, I've told people, say that you like the show, so I know you're not a robot. But Blake, I saw you tweeted this great solution to how you can figure out if it's a robot on LinkedIn or not?
Blake Oliver: [00:50:42] It was one of our listeners, I think it was D.J. He tagged me in something on social and I can't find it now, because I don't remember where it was. It was somebody saying that if you put an emoji in front of your first name or just as part of your first name on LinkedIn, that it will then identify all of the spammers to you because they're just taking your first name off your profile and then you sending a message. So, then you can just look for that emoji and you know, "Oh, they clearly didn't type this themselves," and it worked. I caught somebody.
David Leary: [00:51:10] Because I'm never gonna type "Beer Mug Blake" when I go to talk to somebody on LinkedIn.
Blake Oliver: [00:51:15] That was the example, was somebody put a beer mug in front of their name. I put an abacus in front of my name.
David Leary: [00:51:21] I went and put a blue checkmark. So, hey, I'm one of those blue checkmark people now. I got the blue check mark. So, we're gonna report back on this in a week, because I get literally 50 a week, so it should be very clear. I'll do a screenshot of my LinkedIn inbox.
Blake Oliver: [00:51:37] Well, if you want to reach me online, I'm at @BlakeTOliver and again, you can connect with me on LinkedIn. Just be sure to let me know you're a listener of the show, so I know you're not a bot. Here to take us out is our final listener message.
Omalara: [00:51:52] Hey, Blake and Dave. This is Omalara. I'm calling in from Mexico. I've been listening to your podcast for about a year and I really love it. That's why I'm always posting those reviews of LinkedIn because I love your podcast. It's super-relevant and it's funny, which I don't think you can use those two things when describing accounting, ever. So, that's why I am gonna be a lifelong listener. As long as I'm in the field of accounting, I'll be listening to your podcast. Keep doing what you're doing. Thanks, guys.
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.