Employers Take Hard Pass on Trump Tax Deferral

So. Much. News! Grab a beverage, and/or snacks! Major companies reject Trump’s payroll tax deferral; SaaS Firm CEO Resigns; Layoffs, Probe Follow; DOJ: 57 Charged With Alleged PPP Fraud; Melio Raises $144M to keep Small Businesses in Business by Simplifying their B2B Payments; Sage and Revolut partner to hand back three weeks of admin time to small business owners; The FTC Is Investigating Intuit Over TurboTax Practices; Deel Lands $30M For Workforce Payroll; The majority of workers use automation software at work—here's why; Employers added 1.4M jobs in August, but subtracted 1.6K accounting jobs; Quickie lender Kabbage doled out billions in PPP loans. A number of borrowers raised red flags; SBA Loan Program Contractor and Rocket Loans Face Scrutiny; GPT-3 bot that lets people with no accounting knowledge generate financial statements.


Show Notes

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David Leary: [00:00:20] It's basically, President Trump's gonna get his next paycheck because he works for the federal government. There won't be Social Security taken out.
Blake Oliver: [00:00:27] The 6.2% is not gonna be taken out, but then it's gonna get paid back next year, but I guess, if Trump isn't president next year, then he won't be paying back the Social Security. It'll be the White House that owes it, right?
David Leary: [00:00:44] This is the perfect ... How come nobody's presenting it that way, Blake? This is genius. You should tweet this; it summarizes it perfectly.
Blake Oliver: [00:00:48] I hadn't even thought of that until now. That's pretty funny, right?

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Blake Oliver: [00:02:57] Welcome to The Cloud Accounting Podcast, I'm Blake Oliver.
David Leary: [00:03:00] I'm David Leary.
Blake Oliver: [00:03:01] It is Sunday, September 13, after, what did we just have? Labor Day? We had Labor Day.
David Leary: [00:03:07] All your trash, you have your trash out the wrong day, and your recycling out the wrong day.
Blake Oliver: [00:03:12] Yes, that's right. Well, I wasn't here. I was in South Lake Tahoe doing a leadership retreat for Jirav because we have raised $8.3 million this fall and we haven't been able to see each other to figure out, what are we gonna do? How are we gonna grow this company? It was critical that we get together, so we finally decided, we have to do it. We're just gonna, the six of us, get in a room together. Yeah, I was traveling for the first time since the pandemic.
David Leary: [00:03:46] I was just gonna say ... Wow.
Blake Oliver: [00:03:49] Yes. That was interesting. I have to say, the airports are set up very well to social distance, because there's not a ton of air travel. It's not like you're crammed together in the terminal. You can definitely social distance; through security, as well. Not a huge line. I flew Southwest, which is keeping the middle seats empty on planes, which made me feel very comfortable. I just sat near the window and kept my airflow going and wore my mask, and everybody was wearing masks. Compliance on that was super-high. I would say 98% of the people I saw were wearing them properly, over their nose and their mouth. So, I felt comfortable. I actually felt more comfortable in the airport and on the plane, than in many restaurants that I've seen, so ... 
David Leary: [00:04:28] That's because you're in non-compliant Phoenix area. I'm starting to get the itch to travel. I wanna travel to New York City. I'd like to travel to Tel Aviv, where Melio was founded.
Blake Oliver: [00:04:38] You were going to-
David Leary: [00:04:39] They're in the news this week.
Blake Oliver: [00:04:39] You've never been there to headquarters since you started, right?
David Leary: [00:04:43] No, I was literally- I started at Melio and I was five minutes from the airport in Tucson here, and the COO called me on the cell phone and he's like, "Don't come, they're locking everything down." Then two days later, we locked everything down in The States. I literally have-
Blake Oliver: [00:04:57] You had your bags packed.
David Leary: [00:04:59] I still have clothes folded that I just took out of my suitcase and put back on the shelf, and never put away properly. Actually, I finally picked up my backpack because Starbucks ... You can go to Starbucks and work again. So, I did that one day this week. If you think about it, my backpack just sat there for eight months, or whatever this is now. Are we eight months into this now?
Blake Oliver: [00:05:18] March, April, May, June, July, August, September. Yeah, past six months, seven months for some parts of the country.
David Leary: [00:05:26] Because it started right after first week, second week of February.
Blake Oliver: [00:05:30] In L.A., it started first week of March, was when people started to realize what was gonna happen. They-
David Leary: [00:05:36] Taking it seriously. Anyways, the reason I wanna go is Melio was in the news this week. I don't know if you saw on Tuesday morning? Melio announced their Series B and their Series C rounds.
Blake Oliver: [00:05:45] How much money? Are you rolling in dough now?
David Leary: [00:05:50] Yeah, I'm rolling ... We've gotta hire a lot of bodies, right? This is a big job here, but they had a $48 million raise, and then an $80 million raise. 
Blake Oliver: [00:05:58] Wow.
David Leary: [00:05:58] For a total, with the Series A raise, it's a total of $144 million that has been raised now.
Blake Oliver: [00:06:04] Were both announced at the same time because the first one wasn't previously announced, or did they both happen at the same time?
David Leary: [00:06:10] The other one was previously announced.
Blake Oliver: [00:06:12] Got it.
David Leary: [00:06:14] Both announcements were at the same time on Tuesday and then, in COVID, a lot of it is just about how to double down and grow more during COVID times. Melio, basically, we had 700% growth, which makes sense, because I've talked to a lot of accountants and bookkeepers that are like-  they have small business clients; they can't use paper checks. Or the bookkeeper took the paper checks home, but they don't work on her printer or his printer, and then the business owner has to drive over there twice a week to sign the paper checks. It's just, there's a lot of things going against using paper checks right now, and Melio solves that, ultimately.
Blake Oliver: [00:06:49] It's not just small businesses that feel that pain. I was just reading an article in CFO, talking about the future of finance in mid-sized to large organizations. One of the quotes was from Steven Horowitz, the CFO at CareCentrix, and he said, "The only time finance staff had to go to the office, was to scan physical mail and bills into their smartphones to process accounts payable." Isn't that amazing? That's the only time. So, you guys are doing good work. It's very, very timely.
David Leary: [00:07:17] The fact that people have to take photos of the bills, it reminds me of a feature and a request that I need to work on for Melio, because we don't let people email the bills in yet.
Blake Oliver: [00:07:25] Oh yes, I really want that. I got some more remote stories. Like I mentioned, finance teams are moving remotely, with a lot of success. There was a story in the Wall Street Journal about how auditors are struggling to work remotely, which doesn't surprise me given the reliance on paper for a lot of auditing and in-person interviews.
[00:07:46] There's some good news; the AICPA issued a new audit evidence standard that allows for non-human evidence collection. The PCAOB, which regulates public companies on that end, is also considering revising their audit evidence rule, bringing some potential relief to teams that are working remotely on the audit and on the finance side.
David Leary: [00:08:11] I got a survey from Zapier on the state of automation software and lots of cool data and things in that to look at. TurboTax, the FTC is investigating now on the whole Intuit deceptive marketing stuff, where Intuit employees are gonna be called in to testify.
Blake Oliver: [00:08:28] That'll be interesting. Like public testimony?
David Leary: [00:08:31] Yeah. Intuit handed over millions of pages of documents. It's almost like that overwhelm disclosure. "All right, here. Here's 500 million pages of emails you can go through. Build your case."
Blake Oliver: [00:08:43] Well, speaking of investigations, Intuit's not the only tech company under investigation. Kabbage is under investigation for its PPP loan program, which we've discussed.
David Leary: [00:08:53] Really?
Blake Oliver: [00:08:53] Yes, they were very successful, but now, that has attracted attention. Rocket Loans, and the contractor associated with Rocket Loans that helped them get all that work for the EIDL program, they're also under investigation- 
David Leary: [00:09:09] Why don't we jump into people that are under investigation, as a category today? I have- it talks about PPP fraud. Apparently, 57 total people have been charged as of now.
Blake Oliver: [00:09:21] Only 57? That's sounds low.
David Leary: [00:09:23] That was my thought as well. I saw just 57. If they said there's been 2 billion dollars in fraud, which I think was some of the reports a couple of weeks ago-
Blake Oliver: [00:09:30] That's the estimate, right?
David Leary: [00:09:31] -and only 57 charged. How long is this going to- it's like getting audited by the IRS. The odds are on your side.
Blake Oliver: [00:09:39] Very much so.
David Leary: [00:09:41] If you committed a PPP fraud, the chance of you getting caught is very low, actually.
Blake Oliver: [00:09:44] It's really easy to commit PPP fraud, or it was, I guess, because you can't do it anymore. It was very easy because you just had to self-certify to the payroll, to the need, and it was up to the banks to do a little bit of due diligence on that, but not much, because the law insulates them from having to do an audit, and to have to actually verify this information.
[00:10:10] People are talking about this is very similar to the Liar Loans of the 2008-2009 mortgage crisis, where you had banks issuing mortgages without any documentation at all, of people's income and stuff like that. As far as Kabbage goes, this is really interesting to me because we talked about how Kabbage got acquired by Amex, back in August. They were one of the first companies to jump on PPP. For our listeners who are not familiar with Kabbage, they are a digital lender to small businesses. Connect to your QuickBooks file, and Kabbage will tell you how much you can borrow, and then you can borrow online. It's very streamlined. You don't have to go to a bank.
[00:10:56] That was Kabbage's main business, was just making these relatively small loans to small businesses. When coronavirus hit, that business went away. They shut that down, and they pivoted very, very quickly to processing PPP loans. By the end of August, they were number two for issuing PPP loans. They got very quickly up and running; an amazing pivot. That is what caught the attention of Amex, American Express, which agreed to acquire substantial parts of the business and-
David Leary: [00:11:26] But didn't Amex not get the PPP part?
Blake Oliver: [00:11:29] Right. 
David Leary: [00:11:29] That's what was very confusing about the whole acquisition.
Blake Oliver: [00:11:31] They are acquiring the technology platform, which makes a lot of sense, because if the tech platform is so good that they were able to go from doing micro loans to PPP loans that fast, as a tech company ...?
David Leary: [00:11:42] Because they have all the pipes. They have all the pipes built.
Blake Oliver: [00:11:45] Right. Amex is buying that for- it's billions, right? It's a lot of money.
David Leary: [00:11:50] It was a good $800 million or something.
Blake Oliver: [00:11:52] Here's the thing about this - did Kabbage, in rushing to process all those loans, not do enough checking of the people who were going through their platform? Well, a joint investigation by the Miami Herald/McClatchy DC and Anti-Corruption Data Collective flagged more than 75 companies that received loans of at least $150,000 from the coronavirus Small Business Relief Program, but didn't appear to have existed before the spring, or to have met other eligibility criteria for the program. Now, of those 75 companies, one in five got their loans from Kabbage, so that's quite a good chunk considering the- Kabbage [crosstalk] 
David Leary: [00:12:34] So, they identified 75 potential frauds and one out of every ...?
Blake Oliver: [00:12:38] Five, yeah. 
David Leary: [00:12:38] -five of those 75 just coincidentally went through Kabbage.
Blake Oliver: [00:12:44] Kabbage processed fewer than 1% of all PPP loans. Really, you would expect maybe one of those companies to be Kabbage, given the total volume of loans. If Kabbage processed 1% of PPP loans, then maybe, one company on that list of 75 would be a Kabbage company, but it was one in five of those companies, so 15 of the 75, right?
David Leary: [00:13:10] Yeah.
Blake Oliver: [00:13:13] That indicates maybe that something might not have been right there.
David Leary: [00:13:18] Then why is Kabbage under investigation then? Is it because they think Kabbage did something to enable this on purpose or to push the loans through prematurely or without due diligence or is it just criminals found a hole- they figured out that they were the easiest to push loans through, so they attracted more criminals?
Blake Oliver: [00:13:37] I'm not totally clear on that. There is some requirement on these lenders to do something to ensure that the loans are not fraudulent. It's not very much, but the question is, were they just pushing through these without even checking the documentation at all?
David Leary: [00:13:55] It feels like it's just easy to solve because that's the same thing with this article that I have, which was in PYMNTS. They have businesses that basically said they had dozens of employees in four different businesses, but they actually didn't have any employees at all - zero employees.
[00:14:12] The thing is, you're the bank; you're giving the money. The SBA doesn't give you the money. You don't get the money from the SBA first and then use that to put out loans. You're giving a loan of your money and then you're going to the SBA and saying, "Hey, I gave out this loan. Here's why it's a qualified loan, please reimburse me." Really, is there even a crime committed here? Ultimately, the bank made a bad loan, or Kabbage made a bad loan. They gotta eat it.
Blake Oliver: [00:14:36] I don't know what's gonna happen with this, but I think it all boils down to the forgiveness process. If forgiveness is rubber stamped, like you have said it's going to be, or you've predicted it's going to be, then none of this will ever matter because most of these loans will just get forgiven. If they were fraudulent, oh, well.
[00:14:56] In the case of those businesses that didn't have any payroll at all and then they claimed to have all these employees, what were they uploading as evidence of their payroll? You had to include some evidence, some documentation. Were the lending platforms even requiring it? That's my question. Maybe they were just-
David Leary: [00:15:15] You're just creating a PDF. I just printed a report from OnPay and just uploaded it. Somebody could have- it's probably not hard to figure out what the report looks like in something like ADP, and just fake it and create a fake PDF and upload it.
Blake Oliver: [00:15:29] I don't know. We'll see, right?
David Leary: [00:15:32] It's like the coffee guys, they were uploading those, and the Wirecard guys. They were just creating fake bank statements.
Blake Oliver: [00:15:40] I've got one more fraud story here that I mentioned. The EIDL program, the Economic Injury Disaster Loan program, which has, itself, been kind of a disaster because, unlike the PPP program, EIDL loans did not get out very quickly. It has been plagued by delays and also plagued by pervasive fraudulent activity. Over 5,000 cases identified by the SBA Inspector General and an estimated $250 million in fraud, so far. 
[00:16:09] Lawmakers are drilling down on this one relationship that the SBA has with a contractor that is helping with the EIDL program. Get this, the SBA awarded a $770 million contract, actually, at least $770 million. We don't know the total amount. They awarded at least $770 million to a contractor called RER Solutions Inc., in Virginia, to process EIDL loans and grants to help get them up and running faster; moving those loans through faster.
[00:16:42] They got a $770 million contract. They only have 40 employees. The last contract they got from the SBA was for $10 million in 2018. So, they went from doing a $10 million contract, to doing a $770 million contract with only 40 employees. The whole point was to help the SBA accelerate EIDL. There was no competitive bidding on this. This was something the SBA just did very quickly. Now, RER, with only 40 employees, obviously, could not help that much, so they subcontracted the bulk of the work to Rocket Loans. The parent company of Rocket Loans also owns Quicken Loans. You've seen their ads everywhere, I'm sure.
[00:17:19] Now, Rocket Loans hasn't said how much it made as a subcontractor, but just think about this. You've got $770 million going to this 40-person company to process EIDL loans and they just turn around and subcontract to Rocket Loans. How much are they skimming off of this? How much money is this little consulting agency making as a result of its political connection to the SBA? Why didn't the SBA just go and contract with Rocket Loans directly? This is the kind of skimming and grift and graft in the ... This is the swamp.
David Leary: [00:17:50] This is politics.
Blake Oliver: [00:17:51] Just think about this. That's one contract. How much of this stimulus money is actually just being eaten up by fees to banks, fees to contractors? A lot of it could be not getting to the small businesses because of that.
David Leary: [00:18:08] Yeah, and I think we're gonna- we'll jump into Intuit's thing, but I have two more articles that are fraud-related, too.
Blake Oliver: [00:18:15] Well, let's talk about that. I'm curious to hear about Intuit. What's the ...? 
David Leary: [00:18:18] We can jump over to that one. This is the whole Intuit-TurboTax Free File. ProPublica has covered it extensively; they exposed it. They are now covering the fact that the FTC is investigating Intuit over these practices. The investigation has been under way for more than a year. Intuit produced a half-a-million pages of documents in response to the FTC's first civil investigative demands. It's almost like a subpoena, but essentially, they're just starting to subpoena and get the records ... A million pages of documents.
Blake Oliver: [00:18:51] The FTC is investigating now. What were the investigations that were happening before? Was that Congress? Was that ...?
David Leary: [00:18:56] It was Congress. That's what really drove this. There was demands by- it was a bipartisan order. There was demands ... Elizabeth Warren. She was one of the people driving this. They demanded this investigation. Then, it moved from a high-level investigation to now, they're getting into the weeds, right?
Blake Oliver: [00:19:15] Got it. 
David Leary: [00:19:15] Essentially, there was just fights about the company records and the conduct of Intuit. Now, what's happening is they're actually bringing in- they're gonna have a hearing with at least eight different Intuit employees. They're gonna require at least five Intuit employees to testify over several days.
Blake Oliver: [00:19:32] Wow. I'm gonna have my TV on, watching C-SPAN, and I'm gonna get to see Intuit getting grilled [crosstalk] 
David Leary: [00:19:39] Well, it doesn't say if that's in a Congress-type thing, but- so, this has crossed a whole new line from being very political grandstanding. "Oh, bad Intuit, they did this," to there's real legal things happening here. There's a couple of outcomes they're suggesting that could happen, 
[00:19:54] Previous FTC investigations in the past have led to large cash settlements and refunds for customers. Some have agreements by companies just to stop the practices, and then they could also just conclude Intuit did nothing and just drop the whole thing. It'll be interesting to see where this goes next. This is just taking another escalating turn.
[00:20:13] In the meantime, Intuit out there claiming they filed more free returns than any other software product on the market, combined. Maybe Intuit's not even successful at this, of getting people to upgrade and not use the free product. It'll be interesting where this goes, but it's basically in to that next level.
Blake Oliver: [00:20:32] Well, we're talking about politics. We could talk about the payroll tax deferral unless you've got some more fraud stories.
David Leary: [00:20:37] I got two more fraud-related type things. The IRS is now offering ... They have a request for proposals for people to help crack two different types of Bitcoin products, Monero, and Lightning. They're two different protocols ... Remember we talked about ransomware as a service?
Blake Oliver: [00:20:55] Mm-hmm.
David Leary: [00:20:55] These people that are hacking and doing ransomware, they don't want Bitcoin anymore because people can- it's not private. The IRS can track it. Now, basically, they're looking for people- the IRS is looking for people to help crack these two other protocols that are super-secure and private.
Blake Oliver: [00:21:10] A cryptocurrency is where you can't easily trace the wallets and where the money's gone.
David Leary: [00:21:15] It's interesting that the IRS wants to crack this, because if somebody's doing ransomware as a service, I don't think the IRS cares if it's legal or not legal. They just need to make sure taxes are being paid on it. If you have a ransomware as a service business, you've gotta pay your income taxes [inaudible] 
Blake Oliver: [00:21:32] This is one of the interesting things about cryptocurrency. Often, the analogy is that Bitcoin is like digital cash, but it's not really, because cash, you can't track it very easily. If I hand you a million in cash, David, it's very difficult for somebody to track that money back to me after you've spent it, but with Bitcoin, every single person in that transaction history has a unique identifier. You can trace the movement of Bitcoin through all time, back to its inception. It's more like credit cards, in that way, than it is like cash.
David Leary: [00:22:10] There's a  trail, right?
Blake Oliver: [00:22:12] Right.
David Leary: [00:22:12] It's all connected down the line.
Blake Oliver: [00:22:15] What these other services do is that they obfuscate the trail, so that it is more like digital cash. That's really scary for the IRS and for all tax authorities because cash is a big problem when it comes to collecting taxes. Imagine if it was easy- if we had digital cash, you didn't have to carry around in briefcases and smuggle across borders and whatnot, it'd be almost impossible to tax [crosstalk] 
David Leary: [00:22:40] Well, you know what'd be great for small businesses? If there was some software that helped you detect online fraud.
Blake Oliver: [00:22:45] Oh, yeah.
David Leary: [00:22:45] Though, there is. There's software called NS8. It's a Las Vegas-based online fraud prevention and detection software maker for small businesses, small to medium businesses, and also, they had a bunch of abrupt layoffs and their CEO resigned. It's turning out, it's looking- there's a Securities and Exchange Commission investigation. The company that specializes in fraud prevention and detection, basically has frauds happening at the company.
Blake Oliver: [00:23:16] Financial fraud going on there?
David Leary: [00:23:18] Yes, yes.
Blake Oliver: [00:23:18] Oh, boy.
David Leary: [00:23:19] The quote from the CEO that just resigned in response to Forbes, via LinkedIn, he said, "I did not walk away with the company's money."
Blake Oliver: [00:23:28] Where did it go? What's the scope of this fraud?
David Leary: [00:23:33] They were founded in 2012 with 50 employees. They grew to over 200 in the last year. In June, they closed a Series A with Lightspeed Venture Partners for $123 million in June. That's what, three months ago? They're burning $4-$6 million a month, and they're gonna run out, but there's ... This has just happened very quickly. All the sudden, they're laying people off. CEO resigned. The investigation has popped up. It's a story that basically just broke. Maybe we'll have more news on this next week. [crosstalk] I find it very ironic that here's a company that specializes in fraud detection who has people working there committing possible fraud.

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Blake Oliver: [00:25:29] Well let's talk about the payroll tax deferral. One of our-
David Leary: [00:25:32] Speaking of other possible frauds.
Blake Oliver: [00:25:35] One of our previous top stories, as listeners will recall, the Trump administration was not able to reach a compromise with Congress to extend stimulus, still has not, and unilaterally declared a payroll tax deferral starting September 1, that would go through the end of the year. Then the amounts would, if not forgiven by Congress, then be collected in the first four months of 2021. Now, there was a lot of discussion as to whether or not companies would actually participate in this program, because the IRS said that employers are on the hook for the payroll tax, that they aren't able to collect from employees who leave before January or sometime in between. If there's any issues, it's on the employer and ...
David Leary: [00:26:27] Ultimately, it's optional. As an employer, it's optional.
Blake Oliver: [00:26:29] It's optional as an employer, yeah. We were saying on the show, at least I was saying I don't think anybody is gonna do this because it's stupid. I would not do it as an employer. This is a risk to me. It's extra headache work and it doesn't really, in the end, help my employees because they're gonna end up paying the same amount. It's just shifting the burden and could even make it harder for them to manage their cash flow because now, suddenly, their paychecks will be smaller in 2021. That's what happened. No major private employer has stepped forward with plans to forgo withholding. Costco said they're not gonna do it. UPS is saying no; FedEx, no; Walmart, Macy's, Procter & Gamble have said no comment.
[00:27:07] The only large employer that is proceeding with its workers is the federal government because the administration can make that happen. Ironically, the federal government was late getting started. The withholding didn't start on September 1 because the regulations or the guidance just came out on the day before. They are starting the withholding in mid-September, so, I'm gonna guess this week's paychecks probably will have-
David Leary: [00:27:33] Basically, President Trump's gonna get his next paycheck because he works for the federal government. There won't be Social Security taken out.
Blake Oliver: [00:27:40] The 6.2% is not gonna be taken out, but then it's gonna get paid back next year. I guess if Trump isn't president next year, then he won't be paying back the Social Security. It'll be the White House that owes it, right?
David Leary: [00:27:56] This is the perfect- how come nobody's presenting it that way, Blake? This is genius. You should tweet this; it summarizes it perfectly.
Blake Oliver: [00:28:02] I hadn't even thought of that until now. That's pretty funny. Speaking of jobs, August was a pretty decent month for jobs. Employers added 1.4 million jobs in August, but we subtracted 1,600 accounting jobs. This doesn't surprise me, though, because there's a lag in the accounting world where the economy takes a hit. A lot of these engagements, a lot of this work that we're doing, it has to get finished before firms and businesses do any layoffs in the accounting and finance teams. We're so insulated in that way. Then the job losses are never as bad as they are in the overall economy, just because it's not like you can stop doing accounting and tax and finance and stuff.
David Leary: [00:28:44] Somebody has to count up the beans to figure out who to lay off, right?
Blake Oliver: [00:28:47] Exactly [crosstalk] Pretty much a wash for accounting in August, if you think about it in the big scheme of things. The unemployment rate fell to 8.4% from 10.2% in July, but before you take this as great news - the economy's recovering, we're all- this is the bottom, and now, we're gonna the top - the IRS has projections that it has to do to estimate tax collections in future years.
[00:29:16] They have released information saying they are projecting lower levels of employment in the U.S. that will persist for years as the results of the economic fallout of the coronavirus pandemic. The IRS is forecasting that there will be about 229 million employee-classified jobs in 2021. That is 37 million fewer than it had estimated last year. That's an estimate of the number of W-2s, so it doesn't totally fit the number of jobs, but it's a pretty good approximation of that.
[00:29:47] They are also estimating, and this is where it gets  scary, the lower rates of W-2 filings are gonna persist through at least 2027, with about 15.9 million fewer forms filed that year compared with prior estimates. We're in 2020, and they're projecting forward to 2027, and although we're 37 million fewer W-2s next year, we're not gonna get all those 37 million back, even in six years. It might be half, or 60%, or something like that. Yeah, it's gonna be a long recovery, and I don't see this as being politically motivated, in that this is the IRS doing projections for its own purposes. It's not typically politically-motivated here.
[00:30:36] We all hope that this is a quick recovery, but I would temper that expectation. I've heard stuff from experts saying even if we have a vaccine this year, then it's gonna take a year to roll it out and for things to go back to normal. 2021, not necessarily gonna be normal again. I know you don't like hearing that, David, because you really wanna get back to in-person events, and I do, too.
David Leary: [00:31:03] It's gonna be slow.
Blake Oliver: [00:31:03] Slow.
David Leary: [00:31:03] Football starts today, so ...
Blake Oliver: [00:31:06] That's good.
David Leary: [00:31:07] I think we're slowly getting back in there. I have two small app news, and then I just have one ... I do definitely wanna talk about that survey. What else do you have on your plate?
Blake Oliver: [00:31:15] Let's see here. I have an AI story. That is really the one thing I wanna talk about, because it's super-cool. So, why don't you hit your stuff and we'll finish out with AI? Then I think we got some listener-  we got a listener voicemail and maybe a review or two.
David Leary: [00:31:31] Yeah, we got four reviews. It's amazing! Let me knock out some quick, small app news. So, Sage and Revolut- remember, we talked about Revolut? They are that neobank, new bank in Europe and they're now coming to the States. I think, I saw this week, they've launched in Japan now, but they also have their Revolut business customers; they've rolled that out.
[00:31:50] They had a press release with Sage that they're- reading the press release, the summary is, its bank feeds. Revolut's  gonna basically be integrated with Sage and come down in the bank feed, which I think- actually, I don't think these announcements, when a bank announces they're integrated, and they just have a bank feed is really news.
[00:32:08] I feel like what's news about this is usually these neobanks get neglected or these newer- a credit card product like a Brex or a Divvy, don't get bank feeds into QuickBooks, and that makes them harder to use those products- these newer banks, these newer products that are out there. The fact that Revolut is now getting "into Sage" probably by bank feed is a big deal. It speaks well for these smaller banks. They're getting noticed.
[00:32:35] From a priority standpoint, it was very easy, I think, for a company like Intuit to be like, "We'll just take care of the Sages and the American Expresses of the world, and all these big companies," and they ignored these newer banks. Obviously, there's enough- these new banks now are getting used by enough small businesses, where the accounting software packages have to integrate them properly into the bank feeds.
Blake Oliver: [00:32:55] Well, that's great, because without that bank feed, you can't support clients on those banks. It's like, remember the new Apple credit card?
David Leary: [00:33:05] Oh, yeah. The Quicken integration we talked about.
Blake Oliver: [00:33:07] I still don't think there's a QuickBooks integration, so if you've got customers using that, it's got to be a disaster. I wouldn't wanna support that.
David Leary: [00:33:15] It's gonna be tough. We talked about this company Deel before. They took a Series B investment of $30 million. Their software- basically, they are global payroll. The theory is, it's one software package. You can hire your employees anywhere in the globe, and you have one package to do staff, contractors, compliance, payroll, all in one package. Now, I don't know how they're building this. I don't know how they're able to keep track of all the localized compliance and automating the payments through this, but they're going for it. They just took another round to keep pushing down this path. 
[00:33:57] I've seen companies like this before. This is the same- Xero's probably tried to deal with it. Intuit's tried to deal with it. This is why you have QuickBooks Payroll here in the States. They partnered with Wagepoint, and QuickBooks does in Canada. I forgot who the partner was in the UK. Then in Australia, it's KeyPay ... Same thing with Xero, right? Xero, here in the States, partners with Gusto. Xero tried to build their own payroll here in the States and wasn't successful at it. I even think Intuit purchased a global payroll provider company five years ago and just nothing ever seemed to happen from that. I think this is a very, very, very tough thing to solve, but these guys, it looks like these guys are just only trying to do this. They're not like, "Hey, we're gonna build payroll for one country and then try to figure out a second country." There's not many people that have done it successfully. I know Wagepoint is able to do U.S. in Canada, and that's one of the few exceptions.
Blake Oliver: [00:34:54] Well, this is really interesting to hear. I'd be curious to know what their market target is. Is it midsized businesses, large businesses? Because, like you said, doing this is insanely difficult, but if they can, they could own this category of global payroll. Really cool.
David Leary: [00:35:09] It doesn't really say what size businesses they're going for. It's just, they're- This is that startup, loosey-goosey, very inspirational, "We wanna just help people hire people everywhere. You can have a global workforce ... You can get the best talent wherever they are."
Blake Oliver: [00:35:27] Interesting. Well, I've got an app story. It's not specifically accounting, it's artificial intelligence. You know I am a skeptic of artificial intelligence in the accounting profession. I think it's been overblown for years, but I saw something this last few weeks that blew my mind, and I think it really will make a humongous difference.
[00:35:50] The new technology is called GPT-3. GPT-3 is what you should search for if you wanna find out about this on Google. It's created by Open AI, an artificial intelligence research lab based in SF. It is a machine learning, natural language-processing artificial intelligence.
[00:36:11] It can do some really, really interesting things with that. For instance, somebody built- on Twitter, there's a video by @itsyashdani, who built a bot plugging into this AI that lets people with no accounting knowledge generate financial statements. It really does that. He set up a balance sheet template in a Google Sheet with assets, current assets, non-current assets, liabilities, owner's equities.
[00:36:39] He laid out all the sections and the different accounts, and then, in his Python script that's connected to GPT-3, he types in transactions such as, "I put $20,000 in cash into the business." Then, you can see on the other side of the screen, the cash amount getting added onto the balance sheet, into current assets in the cash line. Then he types, "I prepaid $900 for the rent for the next three months," and the AI puts the $900 in the right spot on the balance sheet.
David Leary: [00:37:11] Now, is this really AI or is this- because this is the same kind of things I saw built at the hackathons on QuickBooks that people would build with Amazon Alexa, or a Google Voice thing, where they basically have to program all those phrases in. Is this one of those you- it's like Microsoft DOS, you've gotta type it or say it the right way, or it's not getting on that balance sheet?
Blake Oliver: [00:37:31] No, that's what's miraculous about this. GPT-3 is a general AI. Nobody programmed these financial statement phrases into it. What it does is it goes into its database and then it parses that sentence and tries to figure out what you want it to do, and it does it. It can actually- this is the sort of AI, where it could really look at a bank statement line and know how to categorize it in the GL. We have seen some companies doing that in our space.
David Leary: [00:38:00] It has billions of pieces of data, and some of that data that it has refers to how to properly track an owner's investment in the business. Then it's extrapolating that out into a journal entry and sticking it into that Google Sheet, basically.
Blake Oliver: [00:38:17] Yeah, it does it by best fit. It doesn't actually understand what you wanna do. It just looks through the massive database of information and tries to figure out, "Well, of all the accounts that are in the spreadsheet, when he says that, 'I put $20,000 into the business,' what does that most likely mean?" Based on all of the data it has, it says, "Oh, it must be cash because that's what other people do. That's what has been done in the past." This is actually not the most common use case for this AI. The stuff that you actually see that's really cool is somebody wrote an email plugin for Gmail where you write a bullet list of stuff you want it to say, and then it goes and takes those bullet points and turns it into a full email, and paragraphs in prose.
David Leary: [00:39:10] It's like having a ghostwriter.
Blake Oliver: [00:39:11] Yes. it's able to do that very well because it can look at all the emails you've ever written and then take that list of bullets and get that information into text that looks and sounds like you, based on what you've done in the past. That actually is a really cool application for this, and I hope somebody really writes that. I hope Google uses that because how great would it be if you could just write a bullet point of things that you want your email to say, and then it goes and adds the nice greeting like, "Hey, how are you doing today? Just wanted to let you know that blah, blah, blah," and then, puts all that in there? 
David Leary: [00:39:46] Or you could just be a better service to the person you're emailing, and just send them the bulleted list. That's the whole point of this. Just send them the bullets, don't send them all the extra text. Nobody wants to see that. Actually, you know what I want? I want AI that strips all the other shit out of somebody's email and just gives me the points.
Blake Oliver: [00:40:02] You could do it with that; you could do that with this, probably.
David Leary: [00:40:06] That would be useful. [crosstalk] That would be really useful. Yes, I get an email and there's three sentences, and it's the only three I need to read, and all the other crap is gone. Actually, the whole internet should act like that. There should be some browser plugin that just strips off everything.
Blake Oliver: [00:40:21] I don't know if I've done a great job explaining what this thing does. I think seeing the examples is really cool. Check out our show notes, but if the link isn't in there yet, when you listen, just search GPT-3 Beta, and see what people are doing with it, because it is amazing, and super-cool, and powerful. I think this will have a big impact on accounting and finance, especially when it comes to writing executive summary reports of what happened in the financial statements. There's apps that do that now, but they're limited because they had to be preprogrammed by the programmers to always say, "Our current ratio is this, and the cash in the bank is this." That may not be actually what's the most interesting. 
David Leary: [00:41:08] Got it. Speaking of this AI, you'd use it as a tool to automate your work.
Blake Oliver: [00:41:11] Yeah. Yeah.
David Leary: [00:41:13] Zapier released their State of Automation at Work survey. There's some cool data in this. Start at a very high level. Now, two-thirds of knowledge workers currently use automation software at work. Another 18% intend to use it in the future.
Blake Oliver: [00:41:29] It's not replacing us so much as super-charging what we can do.
David Leary: [00:41:34] Yeah, and there's tons of stats on this, but they basically- these are employees, right? These are people that are knowledge workers. They're saying, "Automation software improves the way I work." 38% of people agree with that.
Blake Oliver: [00:41:46] How many people? What percent?
David Leary: [00:41:47] 38%.
Blake Oliver: [00:41:48] Only 38%?
David Leary: [00:41:50] Only 38%. "Automation software helps me be more organized at work." 40% of people agree with that statement. 43%, "It helps me complete tasks faster." Almost everybody in the survey, 96%, so they get a benefit from it of some type. Some of the highlights on that is that it reduces the number of errors, 38%. They say they get more done, 37%. It makes me better at my job, overall, 36%, which I think that's a really, really interesting one, because I think that gets lost in the shuffle when you- if you're automating some of your work, Blake, in theory, it's not so you can go to the bar and drink. You're doing that because you're trying to accomplish bigger company goals, and that's a really big one that helps you more, overall. 
[00:42:39] Saving time, that comes in here. Saving money, doing things I value or enjoy more. Another one that really caught my eye is automation software prevents work from falling through the cracks. That's where I think I find a lot of benefit of it. I'm using it for some lead capture. I did a webinar with QBO Chat. If somebody watches that webinar, it automatically puts the email address into a Google Sheet. I'll forget to go get them and move them over to our lead sheet, but I just have it automated and it just goes from the Google Sheet Kathy Iconis made with QBO chat and gets it over into the Google Sheet, I need it in. 
Blake Oliver: [00:43:12] Yeah, I would agree with that. The confidence that you can have with automation versus having to run the business from your email inbox and try to remember to do everything is super-powerful.
David Leary: [00:43:23] Then, so there was a survey about- and you can take a guess on this. What stops people from using automation? What do you think one of the reasons are?
Blake Oliver: [00:43:32] Lack of knowledge of how to set it up, maybe? Some sort of fear of it?
David Leary: [00:43:38] Yeah, I think there's little of that. About 17% of the people say that their workplace isn't tech savvy. 23% didn't even know it was an option.
Blake Oliver: [00:43:47] Or lack of knowledge there, yeah.
David Leary: [00:43:48] Lack of knowledge. Then, some aren't sure how it could be useful for the job they're doing right now. They're almost mentally blocked. They're like, "Oh yeah, I'm sure, but that's just for other guys in the other department." They're not seeing how can be specific to them. Then, like you said, some people are afraid of using it. They think it'll change their role or their responsibilities. Then, there's the straight-out, plain, straight-up, "I am afraid of using automation software," 40%. Just, it's not even like, "I'm afraid to learn it," just "I'm afraid of it." It was a good survey. This is about 1,800 U.S.-employed adults ages 18, and older. Of those 1,100, 900 were knowledge workers, specifically sitting at a computer all day. That was their job.
Blake Oliver: [00:44:34] Interesting. Well, in the short amount of time we've got left, I wanna make sure that we hear the voice mail that we got. We got another voice mail, and then, we've got one review, and then we'll take it out. Here we go.
Mary: [00:44:45] Hey, my name is Mary, and I'm calling from the Bay Area in California. I'm just starting a practice. I love your show. I've just discovered it. It's full of extremely useful information. I follow it every week and have gone backwards, so thanks so much for doing it. I'm sorry I'm a little late to the conversation about value pricing. I appreciate the idea of the consumer surplus. Some people are willing to pay more than others, so why leave that extra money on the table? 
[00:45:16] But I'm curious to know the extent to which that perpetuates certain groups paying more than others. For example, people who don't feel as comfortable negotiating, or people who aren't as clear about their options. Like in salaries, would women and people of color get the short end of the stick? Of course, you can say that the market would take care of that with competition, but in my experience, humans are just way more complicated than that. This is more of a question than a stake in the ground. I just wanted to add that to the conversation. Again, I love your show, and I'll be listening every week. Thanks.
Blake Oliver: [00:45:49] Thank you, Mary. Thanks for listening, and actually, that's a great insight, and it's something I don't think about enough, I don't think, is how value pricing discriminates in a negative way. We even use that word "discriminate," because that's what you do when you value price. You're giving a different price for the same service to different customers. We have to be careful when we do that, that we don't do it in a bad way, or a wrong way, or an unethical way.
David Leary: [00:46:18] Because it's even illegal in some circumstances, right?
Blake Oliver: [00:46:22] Yes.
David Leary: [00:46:22] Charging for rent and things like that.
Blake Oliver: [00:46:25] Yeah, so I don't have the- I don't know if I have the answer for that. I think it's important to have, I guess it would be important to have measures in place to make sure that we don't discriminate unfairly based on race, gender, sexual orientation, all of, the whole list.
David Leary: [00:46:43] It's an unintended consequence that maybe people aren't thinking about that could take place. It could be one of those things where it takes place over time, and we won't know until years down the road and like, "Oh, God. Maybe this value-billing thing ..." Maybe Ron Baker is completely wrong. 30 years from now, we discover it was the worst piece of advice to ever come out of the accounting industry.
Blake Oliver: [00:47:04] This is why I'm a fan of making most of the services, especially the entry level services that your firm offers fixed fees. Because then, it's fair to everybody who comes to the firm, it's the same. You can have tiers of that, of course, but it's fair because of that. Also, the people looking at your site, or when you present these fixed fees, you can say, "This is our fee that everybody pays at this range of their business." Me, as a customer, I like that. It doesn't mean you necessarily put it on your website, but the way you present it can be like that. 
[00:47:36] Fixed fees are a way to avoid the value-pricing danger of discriminating improperly. You could have lots of different types of fixed fees for different sizes of business. The whole idea is to, if you wanna standardize your practice, is to not have to do value pricing all that much because it's time-consuming and tedious. If you're not doing big engagements, where it's a very heavy time investment, then you really don't need it, if you ask me; you don't need that much.
David Leary: [00:48:06] We do have four reviews. You wanna just knock those out here?
Blake Oliver: [00:48:10] Wow, four? That's awesome. Yeah, let's do it.
David Leary: [00:48:12] I'll jump into the first one here. This is Kate Josephine Johnson. This review is on Podchaser. It's five stars. "The Cloud Accounting Podcast has been an absolutely invaluable asset to me as I built my new bookkeeping business over the last couple of years. I don't have a ton of time to weed through the relevant industry news. I can trust David and Blake to give me the most important news I need to know. I also appreciate how the podcast continues to help me build my professional confidence. I'm an entrepreneur and bookkeeper for the first time in my life after having been out of the workforce for many years. 
[00:48:42] It is as if The Cloud Accounting Podcast helped me relearn the language of business and quickly get me brought up to speed with new bookkeeping industry, I find myself in. I highly recommend this product and I'm always recommending it, especially for anyone who is new in the bookkeeping and accounting world. You'll learn the language of the industry very quickly. You'll be a better advisor to your clients. You will learn information that can help you directly apply to be successful in your own business. I listen to every episode." Kate Josephine Johnson of Heritage Business Solutions and the Bookkeeping Side Hustle. Thank you, Kate. That's amazing.
Blake Oliver: [00:49:15] Thanks so much, Kate. Great to hear. Our second review comes from Omolara. "I have been listening to Dave, and Blake, or Blake, and Dave for about a year now. Their podcast is super-relevant for accountants, especially those in public accounting. When I set out to start listening to various accounting podcasts, I wasn't expecting much. I thought, "Here we go. This is gonna be boring AF." Quite the contraire. Even though Blake and Dave are talking about the most boring subject in the history of mankind, they keep it light and interesting. They always share what is going on in their personal lives and I love their political commentary.???????? When I tell people I listen to accounting podcasts, they always think it's because I am so passionate about accounting :). In reality, it's because I found a podcast that isn't so boring I wanna jump off a cliff. Thanks, Blake, and Dave."
David Leary: [00:50:04] That might be our funniest review we've ever gotten. Got another one here. This one's a five-star review on iTunes from JoshCrist. "Whether you're well established, or someone innovating in the accounting space, or just getting started as a catalyst for change, this is a must-listen podcast for you. David and Blake do an incredible job leading conversations that cover a huge breadth of topics related to the ins and outs of navigating an ever-changing accounting industry. As leaders who've actually experienced success themselves, I highly recommend listening and subscribing."
Blake Oliver: [00:50:36] Our final review comes from Ssidawg73. "This is a great podcast. It's light on the chit chat, which I appreciate, and full of useful accounting information and developments. This is one of my weekly must-listen podcasts." Five Stars on Apple Podcasts. 
[00:50:52] Thank you so much, everybody; all of you, Josh, Ssidawg, Omolara, Kate, for writing those reviews. They are so helpful. To all of our listeners, if you wanna go write a review, we would very much appreciate it. It really helps us get visible with all the accountants and bookkeepers out there who are looking for podcasts. David, where can people go if they wanna help us out? 
David Leary: [00:51:16] You can go to Podchaser to leave a review. It's Podchaser.com per review on Apple podcast. That's great. You could call, leave us a voicemail. Phone number is (202) 695-1040. 
Blake Oliver: [00:51:33] That is (202) 695-1040. It's a Google Voice number. Go straight to voicemail. You've got a three-minute limit. Let us know what you think. If you wanna reach me online, you can find me on Twitter. I'm at @BlakeTOliver. How about you, David?
David Leary: [00:51:44] I'm on Twitter as well. I'm at @DavidLeary. You can also get a hold of me on LinkedIn. Just make sure you say you listen to the podcast, so we know you're not a robot.
Blake Oliver: [00:51:53] Say you're not a bot. That makes it easy for me to accept your invite. Until next time, David, great chatting with you, as always. Stay safe. Stay sane. I'll see you here next week.
David Leary: [00:52:03] Bye.


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