Student Loan Forgiveness Versus PPP Forgiveness

Why the White House is comparing PPP and student loan forgiveness; updates from Xerocon New Orleans; what public accounting can learn Disney's new pricing magic; former Atlanta BDO audit manager kills ex-boss

Please note, this is a machine-generated transcript. Therefore, there will be misspellings and occasional inaccuracies. Thank you!

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Blake Oliver: [00:00:28] The thing that also surprised me about this is the fact that current partners now are working more than they used to. So partners are making more money than ever, but they have no work life balance. It sounds like a lot of them anyway. And why would you, as a young person, want to aspire to be a partner when you see them working 60 hour weeks? Like, what's the point of having all that money? Yeah, sure. You might be making half a million or more, but if you have no work life balance, when are you going to spend it?

David Leary: [00:01:02] Coming to you weekly from the OnPay Recording Studio, this is the Cloud Accounting Podcast.

Blake Oliver: [00:01:12] Welcome to the Cloud Accounting Podcast. I'm Blake Oliver.

David Leary: [00:01:16] And I'm David Leary. Your voice, Blake sounds okay ... A little bit better.

Blake Oliver: [00:01:21] Yeah, you know, I took it easy, relatively easy when we were in New Orleans together for Xerocon this past week. How about you?

David Leary: [00:01:29] Well, you're doing a lot of talking anyways, but everywhere you go, it's just so loud. There's always music playing and you wind up screaming and you don't know you're screaming and people are screaming back at you. And so I texted you, what, yesterday morning or Friday night, it was like, we can't record till Sunday. I just can't do it. My voice is trashed.

Blake Oliver: [00:01:49] Well, we got lots to talk about with zero. I'm glad you've recovered, David. Your voice sounds good. So let's. Let's review. How was the conference for you?

David Leary: [00:01:58] It was a great conference. Best way I could summarize it is zeros all in for the US. I think the other big takeaway for me was there a lot of mix of people from the QuickBooks world that were there and I feel like we're at a new maturity level. I think for, you know, a decade people would just take their if you're a QuickBooks firm, you get a zero person migrated all over to zero. And when you're done, it's you're in the same spot and zero people that would migrate people over to QuickBooks. And when you're done, you're kind of in the same spot because you have all your apps and your app stack and in theory the GL shouldn't even matter or the client should even know about the GEO, maybe. And I think there's a maturity there. And then I think it's summarized that best with I ran into the country manager for Canada the last morning when I was waiting to get my Uber and get a coffee. I was at the Starbucks and like I mentioned to her and I said, I mean, why limit yourself to just one and one amazing event and party when you could go to two? Amazing event and party. And so that's how I felt about it, right? It's like it's an amazing event and party.

Blake Oliver: [00:02:59] It was I always admired the production value from the zero team. Just beautiful, beautiful event, really well produced. I always felt that way about zero when I had my firm and part of the reason I partnered with them is because I felt like they had this esthetic that I aspired to as well. And I copied a lot of what they did in terms of how I presented my firm. I think there's a lot that accountants can learn from the really good marketing that's done at software companies. Event Hall Great spaced out the party they had the wrap party just incredible and I was mostly really surprised to see just how many zeros, how many zero employees were at the event. And that to me was evidence of Zero's renewed commitment to the US, which is what they were leading with at this conference. On the first day of the conference there was a group photo of all the zeros and I was there early and so I saw them do it and it looked like hundreds, two. I mean, it must have been hundreds.

David Leary: [00:03:59] My guess is there was 200 employees there. Yeah. Yeah.

Blake Oliver: [00:04:02] And they're hiring in Toronto. They're hiring in Denver. And that is a good sign. It's more than just talk. There was also a bunch of product news. There was the avalanche and zero. Integration. That was the I think the first announcement on day one the and occurs in put out there that Avalere is now going to do the sales tax calculations inside of 040 customers at no additional cost for zero users. That's great. No longer having to put in your own sales tax Calix try to figure that out. They're going to do it for you. Really smart if you ask me, because now Avalere can market their additional services, the filing to zero users. Great partnership. So I spoke to Anna Curzon and the new VP of product here in the US, Hamish Cook at Zero. John, I want to play a few minutes of that interview for you because there's a bit at the end that's really interesting what Anna says. So as they like to say on Instagram these days, watch to the end.

Blake Oliver: [00:05:09] Hey, everybody, Blake Oliver here with The Cloud Accounting Podcast and we are at Xerocon in New Orleans. Anna Curzon, so many amazing new features coming. What's your favorite new thing that's happening at Xero?

Anna Curzon: [00:05:20] Oh my gosh. So many. I think, you know, one of the most important things is our sales tax. 70% of small businesses need sales tax. And why is my mind like literally 15,000 tax jurisdictions, all with different rules changing all the time? We know it's a lot of friction, love running and with Avatar we announced that and we just can't wait. You know, new sales tax functionality coming up ...

Blake Oliver: [00:05:45] And we're also here with Hamish Cook, you're new to Xero, relatively-

Hamish Cook: [00:05:49] Ten months.

Blake Oliver: [00:05:50] Ten months. All right. So how's it going so far?

Hamish Cook: [00:05:52] It's been really awesome. And my role is to support Anna in front of it, but focus specifically on the US, which is sort of what we're doing to invest in product and team leadership here in the US.

Blake Oliver: [00:06:00] And that is music to my ear. So what are you doing for us, in the US?

Hamish Cook: [00:06:04] First and foremost, my role is to advocate of the user experience here in the U.S. I'm a user focused product manager by trade, and it's feeling that because I'm hammering back into the product organization, I'm going to focus on the US user, their experience and their needs, and how do we deliver on that at a fast and frequent basis. So there's a lot of other things in the list, but that's a really, really number one.

Blake Oliver: [00:06:25] One more question for you before I let you go. With everything that you have to do to manage this global product with 3 million plus users, how do you decide what to book?

Anna Curzon: [00:06:35] We are expanding into North America, and we're here to stay. We're doing a lot of rolling thunder here and now, things for day to day experience. But we're also foundation. As I said yesterday, Stephanie Hobbs said to me once on a call, we don't want any unicorn features right now. We just want you to fix the basics, book the foundation, and that's exactly what they do.

Blake Oliver: [00:06:58] So that bit at the end, right? No more unicorn features. I think she repeated that on stage. She repeated it to us. They heard that. And that to me is important because a lot of times with software companies, they build new stuff and then they forget about it. And as accountants, we're stuck with a product that's not quite there yet. Yep. And it's really, really important if you want to win accountants that you keep investing in, in the features that are already there to solve boring stuff.

David Leary: [00:07:30] It's the boring work that nobody really wants to do because it's boring, but you have to do it if you want people to use your product, right?

Blake Oliver: [00:07:39] Yeah, exactly. And product people, engineers, they like to work on the new exciting stuff, not fixing technical debt and all that. But but it sounds like Xero has heard that. And so my hope is that even while they continue to build out this inventory with locate that as we've seen with the reporting that continues to improve all these painful little things that have been complaints for years and years that have not been addressed, those need to get addressed as well. If you want to win us accountants because it's these little things that make the difference, they pile up and you want to get people to switch from something they're familiar with. You can't have this super annoying thing that they got to deal with every day or every week or every month. You got to solve those things. They also announced their new quarterly Xero Small Business Insights report that's going to go out. So they're using anonymized, aggregated Xero data from the US and Canada to put out reports on the state of the economy and the state of small business like they've done in the past. They do that in New Zealand, in Australia and they're it's super important because in New Zealand they've got something like 70% market share. So imagine if if most of the small businesses in the country were on one accounting system, what kind of interesting data you could get so that report you can find if you want to find it.

David Leary: [00:09:05] Well, it'll be in the show notes.

Blake Oliver: [00:09:06] It'll be in the show notes link for that will be in the show notes. The two insights that they're offering now based on zero data, is the impact of inflation. And so they broke out Canada and the U.S. to see how much growth in invoicing and zero the prices on those invoices, how much of that is due to inflation versus real, actual growth. And actually, they found that Canada's price adjusted sales contracted by 1.7% year over year in March of 2022, whereas in the US it actually grew in real terms by 2.8%. So even though we're operating in a high inflation environment in the US, we've managed to still grow the sales by 2.2% when you take out the inflation. But in Canada they've actually contracted a bit and they also have data in there about payment times, how quickly small businesses are getting paid. In the US, payments took an average of 23.5 days in March 2022, compared to 25 days in 2021 in a pre-pandemic average of 27.1 days. So we're getting better actually about at payment speed, which is a good sign for small businesses. So they're going to keep adding more of these. And that'll be interesting to watch to see what kind of information about small businesses we get from this aggregated anonymized data. So, you know, maybe this will be something that gets cited in the news, like the way ADP payroll reports get cited.

David Leary: [00:10:30] They also have the inventories coming. So they start talking about how they're going to start rolling out the inventory features they've built with using locate that they acquired.

Blake Oliver: [00:10:40] So they acquired locate not too long ago and that's.

David Leary: [00:10:45] Fabulous than 12 months. Yeah.

Blake Oliver: [00:10:47] And that's a really robust inventory solution. And so I wasn't clear if they're actually just skinning locate in Xero, but it sounds like they're actually rebuilding well.

David Leary: [00:11:00] So it's a little of yes and no. They're actually asked this at the at the airport when I left the terminal next door or the gate next door with somebody from Locate and they took the Uber to the airport and talked to him. And so locate just a rewind. History is an old historic desktop inventory app company they obviously eventually cloud it it come they rebuilt their inventory product all in cloud but obviously if you build things on cloud the right way back in people, you would build your app or your product and would have APIs and then your UI would just be dumb, right? It's just going to make API calls to your data. And so this is this is what's going to allow them to basically have a zero skin, but it's making API calls under the covers. Now they've obviously had to tweak and improve and change things, but essentially the product's kind of built fundamentally already. So it's not going to be an iPhone because I asked them specifically about you just can I frame it in and skin it? And he's like, No, it's going to make our API calls. So it's not 100% build from scratch. The fundamental technology is already existing. They just have to obviously rewrite some API calls in a lot of different ways. They want to present it in. The UI is much different.

Blake Oliver: [00:12:09] And this is going to be us first. So it's coming to the U.S. first. I heard mention of the term e-commerce. It seems like Xero wants to be able to be a solution, an all in one solution for e-commerce. And if you don't have good inventory, you can't do that. So exciting things, exciting times if you're in e-commerce especially. We also talked to Liz Mason at Xerocon and I want to play a little bit of your interview with her.

David Leary: [00:12:37] We're at Xerocon-

Liz Mason: [00:12:37] Yeah!

David Leary: [00:12:38] Liz Mazon of High Rock. And so, you've been long time Xero user.

Liz Mason: [00:12:44] Minutes every Xerocon in the US.

David Leary: [00:12:47] So what do you feel about like? I feel like the big observation I made of Xero this year is they are finally like really the US is the priority of the market, which as I say you like. What's your thoughts on that?

Liz Mason: [00:12:58] Yeah, I mean, like one of the cool things about being an ambassador is I get to talk to the team about what they're doing in the US and they're actually investing like they're building big plans, they're hiring the right people, they're focusing on reorganizing teams to support this market. But as this market's different than Australia and they had to figure that out the hard way. Right? But now they figured it out and they're hiring the right leadership, they're building the teams in the right way and putting the investment in to our market. So yeah, it's great.

David Leary: [00:13:25] Because you've been hammering the table.

Liz Mason: [00:13:27] I mean, you know, it's like there's a few of us pretty loud ambassadors that just kind of yell. So I mean, like, I wouldn't say we yell, we just loudly express our opinions. To people that live in. But they're listening. And that's the part that's important.

David Leary: [00:13:42] Yeah. I mean that reconciles with your thoughts about that word unicorn features in this like add things that people need it's boring they just fix the bank feeds it's nobody nobody's zero is never going to have a press that says we fix the bank feeds. I know that's not going to get a billboard, but that's what people want, right? That's what people need. They need the data to be correct and be there.

Blake Oliver: [00:14:08] There was also news about improvements to Hubdoc, which is the document processing tool that Xero acquired and now made free with Xero. If you use Xero, they are now doing bank statement line item extraction, which to me when I heard that, I thought, isn't this like a step backwards from where we want to be, which is creating bank feeds that work everywhere and it's kind of crazy. Well, you know, that.

David Leary: [00:14:36] We should we even talk about that we were at Xerocon and the vast majority of the people's energy was spent talking about bank feeds and how they're broken and bank feeds don't work, and how Xero is going to partner with a bunch of banks to have direct integrations to the banks. And it's just to me, it's, it's 2023 basically, and we're still having that conversations. But the, the one thing I thought that was. Interesting or not interesting about the hub dock thing for this for the historical PDFs, right? Because you're going to use that there's two use cases. A, you can't connect in the bank feed, so you need the statements or B, you need to. It's historic. Write the bank feed maybe only goes back 90 days and you need to import three years. It's a new client, right? So those are the two use cases. But I do think it's a little limited, which is interesting because all they do is they're scanning it. And right now they only scan a PDF like from the actual bank. Like if you scan it the bank statement, they can't even handle that, but then they just dump it out as a CSV that you have to import it into zero, right? Which it's like, why aren't it putting in through the API? And so like my thing is if you do that, you're better off just going to get auto entry and just scanning your bank statements with that and then you can fast coding them in and putting them in. It's just there's, I don't know, it's like it's it's great that there's announcement to do this. It's just like you said, it's is it a stopgap? Like, I don't know. It's not that exciting.

Blake Oliver: [00:15:57] Our oftentimes global correspondent Heather Smith had a suggestion for how we can in the United States and in Canada, get banks to fix those bank feeds and to work with zero. And that might mean going and talking to them. Here's what Heather had to say.

Heather Smith: [00:16:16] Hey, Blake and David and everyone out there listening. I'm really excited to have been here at Xerocon New Orleans. Beautiful, beautiful city. Really enjoyed the conversations around community. Community building has been something that I've always been quite interested in and fallen into, kind of naturally. And there seems to be a lot of people talking about the importance of the community for them here, which is really lovely to see and talking about how people are really supporting them in their journey, whatever that journey may be. It's been really exciting to see all the different apps here and the ones who have to use checks which hopefully one day will no longer be here. I think the the thing that's been most interesting for me is the issue over bank feeds, which hasn't been an issue for us for about a decade now. And I know when that was initially an issue, we went and talked to our banks and said, get on board with this. And in some instances I had conversations with my bank manager for maybe 30 minute conversation, talked to them, explain what they need to do and keep pushing that way. So I would say to people who are listening, advocate to your own banks that you're working with to embrace bank fees because you know that's going to make your life much easier and you can get a lot further along on that journey which which other people are, because our banking systems are simpler. But New Orleans is fabulous. Come to New Orleans.

David Leary: [00:17:46] So I went back. I made a tweet. And Ben Richman, when he was on stage, talked about it that we're still talking about bank feeds. But I went back to my Evernote and I haven't a half written blog post from 2011. I know this is for Mitt, for personal finances. And it was really like, why bank feed suck? Like why couldn't get I couldn't get a full financial picture. This is after right after Intuit purchased mint I could connect to this account. You can't connect to this account type of thing. So we've been on this journey. So and the observation is, even at this conference, right, Xero is talking about how they're working with the banks to fix bank feeds or they're and then into it's conference. We work with the banks and you look at Sage Intacct said this and Oracle said this instead of all these accounting companies all solving bank feeds on their own or attempting to do these separate deals, you know, Oh, we have a deal with this bank now and we have a deal with this bank. And because some of the thing with the banks, it's this argument of whose data is it, right? And I think there are some agreements that have to go on between these accounting firms or the accounting GLS and the banks. We're like, okay, well then you get some access to data from us. I think some of that trading is going on. But ultimately, why aren't all the accounting platforms pull together some sort of alliance and go to the banks all at once unified and be like, If you don't do this, we are big enough now we're going to make our own bank the you know, the accounting friendly small business bank, credit union. And you can only get into this bank if you use one of these for products. And you know what I mean? Like, why? Yeah, everybody's doing it individually, but we need a mass effort across the board to do this.

Blake Oliver: [00:19:18] It makes so much sense. And if you're a bank manager, think about the hassle of working with all these individual apps to fit their API. If you could, we just need a Zapier for bank feeds. That's what we need, right? The apps need to get together and create this. I mean, it would require Intuit and Xero partnering, which. You know, that's hard to imagine.

David Leary: [00:19:41] But you never know. There was a time there was a time when you would say ADP and QuickBooks would never partner.

Blake Oliver: [00:19:48] Right.

David Leary: [00:19:49] Right. You don't know where the future is at. Right. Because it's really for the benefit of everybody. And if both sides had give lip service of caring about small business, you would partner to truly care about small business, right? This episode of The Cloud Accounting Podcast is sponsored by you collect. Are you still paying 1% for a to receive money from your customers? With you collect, you can pay as little as $0.30 per transaction. You collect as a two way sync to both Xero and QuickBooks Online and gives you the features that the accounting systems lack like installment plans, secure automatic payments, set up invitations, automatic receipts, and allows access to other credit card merchant providers beyond the ones that come with the accounting system. Giving you more control over the service and fees that you pay sure you collect may be new to me and to you. The Cloud Accounting Podcast listener. But Blake used you collect to automatically collect payments from his clients years ago when he had his own firm. For more information and a free 30 day trial, head over to a promo you collect that is promo forward slash U-C-O-L-L-E-C-T

Blake Oliver: [00:21:04] So one of the odd things about going to a conference is that you enter a different planet or a different world for a short amount of time because you're on the show floor. If you're doing it right, you're talking to people all day long, you're going to sessions. You don't have time to look at the news and then you're going out and networking after hours, and then you go to bed and you do it all over again.

David Leary: [00:21:25] In any sort of media, do is usually just around that conference. You don't even pay attention to the rest of social media.

Blake Oliver: [00:21:31] So occasionally big things will happen in the world and I'll come back and I'm floored at how the world has changed over just a few days. But this time that didn't happen because as I'm on the show floor, hanging out, talking to people at Zero Con, I keep getting notifications on my phone. There's a text thread going on between my parents and my brother all about student loan forgiveness. And it turns into this big debate because my dad's on one side and my brother's on the other, and they're arguing about whether or not student loan forgiveness is a good idea. And I'm like, how do I mute this mute? Mute for today? Mute for today. Keeps coming back. I was ignoring it. But then I went back on the plane home and I read through it. And so now I am aware that while we were at zero con on Wednesday, the Biden administration announced a plan to forgive $10,000 in federal student debt for borrowers making less than $125,000 a year or 240,000 for married couples filing together heads of households. And he will also cancel up to $20,000 for Pell Grant recipients as long as the student loans are held by the Department of Education. And this, of course, has ignited a political firestorm. People on both sides of the issue are arguing with each other about whether this is right or wrong or a good idea or a bad idea. And David, I just got to ask you, hey, how do you feel about it?

David Leary: [00:22:57] Well, kind of to rewind. I mean, this is another accounting story and tax story because people are going to have to fill out forms. This is going to tie back to people's taxes. I still don't know. Do they have to report it as this is income because it's debt that's been canceled? Like it's there's a lot of accounting questions that has to be discovered. But me personally, how I feel on it is a lot of people take bad loans, loans from the schools. The schools push them to take bad loans. The schools charge whatever they want because they know somebody is going to go with this money. And in the grand scheme for the amounts that people owe, all this is really doing is offsetting all the interest that they were, even though they didn't have to make payments during the pandemic. Remember, there's that relief. Yeah, they were still charging the interest. So in a way, sort of a small business owner somewhere got $20,000 of PPP money. This is kind of the same thing. Like this is just I look at this as like PGP, like Pandemic Relief still, it's really what I view it as. And it's like, you can't be like, this is okay if this restaurant gets this money or this concert venue got this money or, you know, small business got this money or well, now you shouldn't get your money. I don't know. It's like everybody everybody got on the the handouts train.

Blake Oliver: [00:24:08] Well, and you mentioned the word I was looking for the acronym. I was looking for PGP Paycheck Protection Program because we covered that extensively during the pandemic. It's one of our top topics of discussion on this show, and that has been brought into this, because the comparison now is being made between paycheck protection, loan forgiveness and student loan forgiveness, and whether or not you think those are apples and oranges, as my dad does, then, you know, that's that's part of the debate now. And the White House made it part of the debate by using their Twitter account to put out a series of tweets about members of Congress who oppose the student loan forgiveness plan, highlighting how much money they got from PGP and got forgiven. So a tweet.

David Leary: [00:24:57] On it, just a rewind. So the White House Twitter account called out the so whoever manages the social media called out other members of Congress, not other members of Congress is. People have given.

Blake Oliver: [00:25:12] Loans. Yeah. And they got forgiven because that's all public record. And and.

David Leary: [00:25:17] That's a lot.

Blake Oliver: [00:25:19] A lot of members of Congress got cheap loans on both sides of the aisle because people of a certain income tend to almost all be self employed to some extent are own corporations. I mean, we all know how that works, right?

David Leary: [00:25:30] All these congresspeople, all these entities have seen this, like. Exactly. There's no secrets here. There's like two poor congresspeople, right? Yeah, I think there's only two.

Blake Oliver: [00:25:37] And David, you know, you and I wouldn't call each other ourselves rich by any means, but we have entities, right? And, you know, anyone who had one qualified for a PPP loan. Right. Including, I'm sure, like all of our listeners, I would be really surprised if we have any listeners who own accounting practices that didn't take advantage of the PPP loans as well because we all qualified them for them. So. But it's a little embarrassing, right? If like the the juxtaposition can be a little embarrassing for members of Congress who are opposing student loan forgiveness when they themselves got PPP loan forgiveness. Again, we'll talk about whether or not this is even something fair to compare, but it's working from a from a PR standpoint. The White House put out these tweets and they have gotten a lot of retweets and likes. So on August 25th, they said Congresswoman Marjorie Taylor GREENE had $183,504 in PPP loans forgiven, and that got 800,000 likes on Twitter, which is a lot for the White House account, like way more than normal. Congressman Mike Kelly had $987,237 in PPP loans. Forgiven. That's crazy. Like close to $1,000,000. Now, these are for their businesses, don't get me wrong. But like the public doesn't necessarily understand that. And of course, they're writing this while they're there retweeting the tweet by that congressperson, criticizing student loan forgiveness. And I think that is a political winner for the Democrats.

David Leary: [00:27:10] I think if you step back and watch, this is like, you know, how you watch a sporting event, right? If you if you step back and look at politics as a sporting event, like, wow, that's a pretty good move.

Blake Oliver: [00:27:18] And this is public data, right? So this was very easy for them to do with the PGP Loan.

David Leary: [00:27:24] That's public. Yeah.

Blake Oliver: [00:27:25] And so, you know, how do I feel about it though? Like I personally do not think like in an ideal world that, you know, just giving, giving people money is a great idea. Like that's not good policy. Government handouts, right? Turning turning politics into a let's reward our constituencies kind of thing is a bad idea. And so like in principle, I'm against this whole student loan forgiveness thing and I think actually a lot of accountants are probably on board with that because we chose careers that are like sound financially. We made many of us like chose to go into accounting because we knew that we could pay off our student loans. And we did. And it's unfair, right, to have somebody else who made less wise choices.

David Leary: [00:28:09] Well, let's let's.

Blake Oliver: [00:28:10] Rework loans, forgiving.

David Leary: [00:28:11] You. Let's rewind to you. So you you're you became an accountant. This is a second college stint for you.

Blake Oliver: [00:28:18] Yes. Yes.

David Leary: [00:28:18] In my college stint. Did you have loans to pay?

Blake Oliver: [00:28:22] No. And you know, admittedly, I was very fortunate because my grandfather, when he died, he left an inheritance for his four grandchildren that paid for all of us to go to college without student loans. But, you know, he worked really hard to do that.

David Leary: [00:28:34] But if you had student loans, you had one of these, quote unquote, careers that you were able to ever pay them off. Possibly you'd be a half employed musician.

Blake Oliver: [00:28:44] Oh, yeah, yeah. If I take an on a student loans to go major in music at Northwestern University, which was where I went and is one of the most expensive universities in the world. Like one of the years I was there, I think we were number one on that list of expensive places, like $40,000 a year. I know it's more now. The only reason I could do that is because I didn't have to worry about it. Yeah. Now, when I then realized the error of my ways after graduating with a degree in music during the Great Recession, I decided to go back to school for accounting, and I deliberately actually did not go get another college degree. I looked at the cost and I realized I could do all of my courses at night school, get my CPA, and I'd be fine. And I did all that for like $10,000. So I didn't take student loans then either. So I kind of corrected my mistake, I think. But yeah, I mean, it's like actually it kind of would have been nice if I'd just been able to do a traditional program and get all that forgiven. That would be great. Right? But then, you know, so that's that's the response. But then again, I see what is happening as simply a natural response to the pandemic relief, which when you look at it and I'll put those links to the numbers in the show notes, you can email me if you want to see this stuff.

Blake Oliver: [00:29:53] There was $800 billion of PPP loans and studies estimate that only 25% of that money, which was intended to go to employees, actually went to paychecks to employ paychecks only. 25%. So 200 billion of the 800 went to employee paychecks. Where did the rest go? Well, if it doesn't go to employees, it goes to owners. And that's the fact of how this program was designed and changed in the middle of the pandemic. Is it? It went to business owners, $600 Billion. Oh, actually, we have to. There's one other group, the fraudsters. So the thieves took. We estimate around $100 billion. So 200 billion went to actual employees who it was intended to supplement their paychecks or keep them employed. 100 billion went to thieves and then the rest, 500, let's say, went to owners. And so then when you look at this, this student loan forgiveness program, which I saw, estimates that it would cost something like 300 to 400 billion somewhere in there for the government. I realized what is happening here. It's just that one political interest group, a very a group that is very loyal to the Democrats, is getting their handout, just like small business owners got their handout during the pandemic. It's tit for tat. This is politics at its worst, and I think both suck. Like This is not the way we should be going as a country. And of course, nobody likes that because, you know, I'm not I'm saying both sides are wrong here.

David Leary: [00:31:41] Yeah. I mean, eventually I'm not saying fake money, whatever you want to call it, like that's been shoved out in the we don't really know where we stand, I guess, the economy right now. Well, what do.

Blake Oliver: [00:31:51] You think caused all this.

David Leary: [00:31:52] Inflation? Very buoyant, buoyed by lots of money. And here's more and more like we just don't it needs to just settle down. But we keep they keep pulling levers constantly. And this is another lever.

Blake Oliver: [00:32:03] And and and if we actually want to bring down inflation, right. We got to have some fiscal discipline. But that doesn't seem to be happening. And it kind of really it really disappoints me. The Republican Party is no longer the party of fiscal discipline. Like that's gone. So if the Republicans aren't going to be the party of fiscal discipline, who's going to do it? Nobody. And. So it'll just get worse. Right. And that means inflation will be with us for a long time. So I guess if I if I had to bet on it, then I would bet that inflation is going to stay around for a while and and make the moves that go along with that. That's the world we live in now.

David Leary: [00:32:44] This episode, The Cloud Accounting Podcast is sponsored by Relay. The other day, Chris Maskey of Prefixed Accounting tweeted the following, quote, Not so hot take if your business banking cannot maintain a stable QBO connection, you do not in fact have a business account. That's a cheap knockoff of a real bank account, end quote. And I could not agree more. What's the point of a business banking account if it doesn't integrate with your accounting tech stack really is a no fee. Online business, banking and money management platform built for you and your clients really integrates in your tech stack with direct integrations to QuickBooks Online, Xero and Gusto, and improves your workflows by allowing members of your team to have their own set of secure logging credentials to clients banking data. No more bugging your client for two factor authentication codes. And did I mention the ultra reliable bank feeds? And your clients get powerful online banking features like 20 individual checking accounts and 50 physical or virtual MasterCard debit cards, which can be assigned to their team members to stop fighting with, as Chris tweeted, a cheap knockoff of a real bank and instead get a business bank account that cares about you and your small business clients. Head over to promo relay. That is Promo Forward Slash Relay II Relay Business Banking for your accounting tech stack.

Blake Oliver: [00:34:05] Where do you want to go from here, David?

David Leary: [00:34:06] I can just quickly talk about you mentioned fraud. So I'll start with that.

Blake Oliver: [00:34:12] Let's talk about.

David Leary: [00:34:12] Fraud. So you mentioned fraud with the PPP loans and pandemic relief. Well, apparently, I saw I saw an article this article was on CNBC. And the Secret Service has returned $286 million in fraudulent pandemic loans back to the Small Business Administration. So these were actually the idle loans, the economic injury disaster loans. So you said.

Blake Oliver: [00:34:34] 284. 286,000,086 million. Okay. So that's that's millions, not billions.

David Leary: [00:34:41] Millions. But this is all tied to one bank. Green dot bank.

Blake Oliver: [00:34:46] Green dot.

David Leary: [00:34:46] Bank. Green dot bank is green dot banks. One of those new fintechs where you just sign up online, you have a bank account type of a thing, right. Or and they also do all those prepaid cards you have. I think the bank account in QuickBooks is powered by Green Bank. I think they have an API Walmart. I think, I don't know, maybe not specifically Walmart, but all these these prepaid cards, you see, they're all built on the same tech stack. So anyways, this is just one, one bank. And so Roy Dotson's the lead investigator of the Secret Service. So he said that they they put out advisories to 30,000 financial institutions in early 2020 about fraud indicators and how to guide banks to partner with the federal agencies to recover the fraudulent funds. And they said that these investigations will likely last years due to their size and scope, and reiterated that this is one bank of 30,000 they're working with.

Blake Oliver: [00:35:43] They're never going to catch it all. There's just no way unless unless Congress decides to extend the statute of limitations 100 years, they're never going to catch everybody.

David Leary: [00:35:53] Well, then they just double it though. For PGP Loan. I thought you.

Blake Oliver: [00:35:56] Said it's a 10 to 10 years. But look, we're coming up on how many years has it been now since that that happened? It's been a.

David Leary: [00:36:02] Few. Yeah.

Blake Oliver: [00:36:03] And they've only prosecuted like 200 people or so. And I don't, I honestly don't blame the government for like being slow in this case. It takes a long time to put a good, solid case together and it takes a lot of resources and they just do not have the resources to prosecute all of these crimes. It's not going to happen.

David Leary: [00:36:22] And you brought up, I think last week or the week before our Cross River Bank, they're finding out a high percentage of their loans that they gave out were PPP questionable loans.

Blake Oliver: [00:36:32] So so actually, this is the thing they could go after. They could go after these fintechs for not following the know your customer rules and they could get them for the fraud that happened on their platforms. And maybe that's a way that the government could get reimbursed for the fraud, but they're not going to get the actual thieves. It's just too time consuming. Just the most egregious examples. Right. But there was a lot of small fraud. And hey, we're not even talking about like all the fraud that happened.

David Leary: [00:37:00] The the PPP Fraud Forgiveness Program. They could they could come out and just forgive everybody who did any fraud, any pandemic fraud. And we get a nice reset and we'll start everything from scratch.

Blake Oliver: [00:37:11] Yeah. That'll get the criminal voting bloc in the in the in the camp of whatever party does that. Yeah, I'm sure that'll work. Oh, man. I got a little follow up on the Inflation Reduction Act. So this kind of slipped through. It wasn't something that got widely covered because everybody was talking about the 87,000 armed IRS agents that are going to come invade your home with AK 47. And, you know, no, AR 15, I would say AK 47, because, like, that's the the weapon that we always used in video games when I was a kid. But it's air. Anyway. The Irish could be on the verge of changing the way Americans file their taxes. This was reported in the Hill and they highlighted a provision in the act, the IRA Act, which includes $15 million for the IRS to deliver a report on a free government run tax e-filing system that tax simplification advocates have long argued for. So this could be the beginning of that thing. We've talked about, David, where the IRS could simply offer their own version of free file. It could happen now. There's $15 million to do a study about it, the feasibility of it.

David Leary: [00:38:20] Oh, how do we get that? How do we get that contract to do the study?

Blake Oliver: [00:38:25] To do the study?

David Leary: [00:38:26] 80 million bucks. You got to get it. You donate a million to a college and then they have some students do the study for you. You just got 14 million left.

Blake Oliver: [00:38:34] I know, right?

David Leary: [00:38:35] This is better than pandemic relief.

Blake Oliver: [00:38:37] We need to get some of those suite government contracts, right? Yeah. I actually wondered, too, like of the $80 billion the IRS is getting, how much of that is is going to go to contractors to do a lot of this work? Because one of the problems is they're not going to be able to hire enough people quickly enough to to do a lot of these things that they want to do. I mean, maybe outsourcing it could help. I don't know if you can you can't really outsource enforcement, but could you outsource services? Why couldn't you outsource taxpayer services to accounting firms that want to like sign up to do stuff on behalf of the IRS? I mean, we're already basically.

David Leary: [00:39:09] We're doing so much. Don't people outsource a lot of government jobs out to the prisons? You can have all the prisoners taking IRS calls.

Blake Oliver: [00:39:16] Well, enrolled agents are already everyone already thinks they're IRS agents. Apparently already. So why can't we just make enrolled agents, like give them the license to do a lot more stuff on behalf of taxpayers with the IRS, like give them access into IRS systems. They're trusted, licensed.

David Leary: [00:39:32] Trained people think the way to do this is we nobody filed taxes for 2033. That's the IRS catch up, get their things back on track and you file a big two year return in 2024.

Blake Oliver: [00:39:42] You know, that.

David Leary: [00:39:42] Was that is a great.

Blake Oliver: [00:39:43] Solution. We put that out as like a short clip on Instagram and it proved really popular. But I think a lot of people watching it thought you meant that they didn't have to pay taxes for two years. No, you're saying just don't file. You just like do a double return.

David Leary: [00:39:57] Exactly. Exactly. We just we just don't create paperwork for a year for the IRS. Just one thing that happened in I don't know how deep we go on this, how much we touch on it, but it happened. I think we were in root. I think it was the day we were in root or maybe the day before and root to zero. Con there's a shooting in Atlanta. Yes. And I didn't I just saw it. And this is where we are in society. I just never clicked on it on Twitter, never clicked on it. Then I got to Zero Con and I started hearing from people that, Oh, did you see the shooting? Or you talk about it on the show because it involves accountants and accounting firms and it's do you want to cover some of the high level details and then.

Blake Oliver: [00:40:38] Well, it's kind of a crazy story and there's still a lot we don't know. So I don't want to speculate too much about this. So I'll just I'll just give you the facts as we know.

David Leary: [00:40:48] Them in case you haven't seen this or heard about it. But by this time it was very mainstream news.

Blake Oliver: [00:40:53] Yeah, although it's kind of crazy how, you know, I don't think this was technically a mass shooting because it wasn't four people or more. So it didn't make national news the way mass shootings do. But it everyone in accounting heard about it because it's a former BDO audit manager in Atlanta who shot and killed her ex boss, a disgruntled former IT audit manager at BDO USA in Atlanta. She was arrested by authorities after allegedly murdering her former supervisor and a condominium property manager with whom she also had a dispute. Her name is Raisa Kenny and went on a shooting spree at her condo complex. Shooting and killing building manager Michael Shiner, 60, and injuring another person. Then she went back to her former offices at BDO and killed the IT audit director, Wesley Freeman, 41 years old. She was later arrested at the Atlanta airport. The third victim is Mike Horn. He was hospitalized but is alive. And the reason this is getting a lot of speculation and questions around it is that Kenny had complained in a post on LinkedIn about being retaliated against by BDO and Friedman in 2021. She said In 2021 I was retaliated against by my employer at the time, BDO, BDO, USA, LLP. My home was broken into, my computers were hacked and my phones were spoofed. So she's accusing them of breaking into her house and she claimed that she had reported violations to the Securities and Exchange Commission, the PCAOB and the AICPA, and she had filed a lawsuit against Freeman.

David Leary: [00:42:32] That's why that lawsuit is 500 pages.

Blake Oliver: [00:42:34] Yeah. And there's a LinkedIn post that she wrote that was reposted on Reddit and it sounds like there's. Either some like conspiracy going on here where she's this target of retaliation and home invasion you know, like having her stuff ransacked in her house and they're trying to silence her or. Is this a case of like somebody who has mental illness and, you know, like, is that what's going on here? Like, we don't know.

David Leary: [00:43:06] Yeah. And and I think it's just it touches on so much. And I think I started texting, you know, I was like, she's this could be like an eight episode investigative report. There's just so much involved. And, you know, obviously, mental health is involved here, right? There's mental health. There might be partial racism here. There might be, you know, public service. Right. The she has videos of when she was trying to follow up on her case and her police reports. And the police, it almost felt like the police officer was blowing her off. Right. So that causes frustration, right? Yeah. It could be the stress of working in this environment. Obviously, it covers whistleblowing and and it also covers we talked about the whole like audit conflict of the integrity with audits and firms auditing their clients, and that's in there. Apparently, she had a beef with one of the crypto exchanges. So there's just a lot here that we don't have time to dig into. And then I also saw that she did a talk two weeks before or 20 days ago at the international it's like an international audits auditor thing that was in Atlanta. And she had a talk about fraud in accounting at accounting firms. And now I can't other than the description of that the session, I can't find it anywhere like it's not streamed. I can't find a recording of it. But essentially, she said her talk was titled Fraud and Public Accounting, and she talks about the Enron scandal. And then her presentation will cover concrete examples of unethical behavior exhibited by public accounting firms in the US and abroad. But I can't. Nobody can find this deck or this presentation now. It's got to exist. I'm sure it'll trickle out, but this could take months of investigative reporting. Obviously, she's arrested, she's in prison. But there there's almost more unanswered questions there are answered about this at this point.

Blake Oliver: [00:44:56] Yeah.

David Leary: [00:45:01] This episode of The Cloud Accounting Podcast is sponsored by Kanopy. Did you know that Kanopy has automation built in? Sure. You can still use an app like Zapier with Kanopy, but for most firms, the built in automation in Canopy's workflow module is plenty sophisticated enough. Your team can create trigger automations based on status, task and subtasks as well as dates, be it upcoming, reached or past. Then Kanopy can complete mundane tasks for your team, like automatically sending client requests or automatically assigning the next task or subtasks to a member of your team as work for a client is finished? Or how about a really nice email to the client after all the work is being completed? Can it be also integrates with QuickBooks Online? Xero FreshBooks Crm's Form Builder, spreadsheets, calendars, email and of course Zapier. You have a mobile app centralized file management filled with PDFs, a client portal, task management, and the list goes on and on. To get a demo of Kanopy and to receive a $40 Amazon gift card, head over to promo slash Kanopy. That is promo for Kanopy. Why?

Blake Oliver: [00:46:12] I've got a few more items before we get to our listener voicemail because we did get a voicemail. I want to play that real quick. The IRS is wiping away $1.2 billion in late fees from the pandemic. That's a big deal. Aicpa has been advocating for this. Now that the IRS got its $80 billion, they're wiping away those late fees. I wonder if they were waiting for that. Maybe holding it as a as a carrot. 1.6 million taxpayers will receive more than $1.2 billion worth of penalty relief. The agency will automatically issue the refunds or credits for most of the fees by the end of September. And Commissioner Charles Rettig said that this will also help speed up their catch up work because they no longer have to follow up on those payments.

David Leary: [00:46:57] So this is an opportunity for you with your clients. If you know you have clients that have been getting raked over the coals and they're coming to you like, why am I paying these late fees? Why are they charging me these this interest? They're the ones that are dealt with return. You get to call your clients on Monday and tell them, hey, great news. Money's going to be coming to you soon, right? Use this as a marketing opportunity. Yeah.

Blake Oliver: [00:47:19] Spread the good news to. Right. Not just the bad news.

David Leary: [00:47:21] Spread the good news.

Blake Oliver: [00:47:23] We were speaking of big firms and I saw this story about KPMG relocating its New York headquarters. This goes to the continued remote work environment and we don't think at least I don't think I don't know about you. I don't think, David, that we're going to go back 100%. I don't think it's going to happen in accounting. Kpmg must not think so either because they're downsizing. So they have this big headquarters in midtown Manhattan. They're going to leave it by the end of 2025 and reduce their office space by over 40%. So they have 800,000 square feet now at three, four, five Park Avenue. Oh, actually, they have three different locations and they're going to go in a single location, 450,000 square feet across 12 floors in the new 58 Story two Manhattan West building, which I believe is over near Hudson Yards, a really nice area. And they're going to finish construction in 2023 and move in there in late 2025. All right. Time for us to get to listener mail and reviews.

David Leary: [00:48:30] You've got mail.

Blake Oliver: [00:48:35] This is from Tyler Otto.

Voicemail - Tyler: [00:48:39] Hey, Blake and David, huge fan of the podcast. And first off, just let me say, I really appreciate you guys trying to tackle some controversial topics as of late. Even if people don't like your opinion, I like that you're trying to tie it back to our injuries industry and show the impact, especially how we can influence the world. So good on you, even if not everyone loved it. That being said, I am a huge fan of this discussion of how majority of our industry is about to age out. David I saw you post on LinkedIn about the accountant who wanted their client to bring in a decade old PC once a year to bring in their QuickBooks information rather than letting them upgrade to online or the Apple version or anything else. It just shows how stuck in our ways majority of this profession is. And my favorite example I've seen of this is in the last month I got an offer from Drake Tax Software to be able to get the 2023 version or pay for it right now. What made me laugh is it wasn't necessarily an offer to go online and buy it, but instead it invited me to either send mail back in a check or write down my credit card information on the four lines provided.

Voicemail - Tyler: [00:49:46] Send that back in so that they can send me back a code to go online and download it instead of just going online and paying for itself. And at first I was laughing thinking, Drake, you guys got to get with the times. You've got to understand this. And then I realized Drake's not behind the Times. They know their customer base. They know that the majority of accountants out there don't understand this new fangled. Go online and just buy the software and download it. They are used to having to mail back in credit card information, which I'm sure is not PCI compliant and be able to download the software that way. And so good on Drake, way to know your customer base, but it just makes me hit my head against the desk thinking about how behind the times the majority of our industry is. So if someone's just getting into the game and doesn't feel like there's a room for them to grow, just remember, this is your competition. This is what? This is what all the new firms are up against. And there is plenty of room. Blake and David, keep it up. Guys love the show and hopefully run into you at a conference at some point. Thanks.

Blake Oliver: [00:50:47] Thank you, Tyler, for that message. So I got to I got to make sure I heard correctly. They're asking people to write down their credit card number on a like a piece of paper and mail it back.

David Leary: [00:50:58] That's what I heard as well. Yeah, he nailed it right there doing that because they won't be able to get their customers to go sign up for something. Right. Right. And it's funny thinking about this, like even at zero con, right? Like to show you where we are, the how how the adoption curve is in the accounting world. Uh huh. Adoption of technology. You know about this, like early adopters, laggards, all the people. Yeah, whatever. Yeah, it's a big.

Blake Oliver: [00:51:22] Company, right? Yeah. Yeah.

David Leary: [00:51:25] We were practicing Michigan at the party on Tuesday night, and I bring our t shirts and I'm hustlin. I'm still working. Like you don't become the number one podcast in the world if you're not hustling and working right.

Blake Oliver: [00:51:35] Oh, I was so impressed, David.

David Leary: [00:51:36] And I'm giving out our shirts and I'll give people shirts and I want people to sign up and subscribe to the podcast or leave a review. And we're at the point now where for me to get somebody to get the podcast, they're like, I don't know how I have to help them plot their iPhone, install Apple Podcasts first, then get The Cloud Accounting Podcast. Now let's paint a picture of accountants of bookkeepers. We're at Zero Con. These in theory, are a little bit more technically technologically savvy, younger crowd, and that's where we're at. I'm like, I'm helping people install a podcast app to their phone.

Blake Oliver: [00:52:13] Yeah. Yeah, it is it does it does reset my expectations.

David Leary: [00:52:18] And this is at zero where these people are like they're on top of tech and they're, they're, they're the future. And we're still even the future is still a little further behind them, we expect.

Blake Oliver: [00:52:28] Well, like Tyler said, it's actually a good thing because if you can set up your firm in a different way. And and create a great customer experience where you're not requiring people to mail you stuff and do things in an old fashioned way, fax you things, all that. You have unlimited opportunity. And actually, we have an interview coming out with an accountant who is doing just that. Miguel. And he was featured on the main stage at Zero Con. And it's going to be a fantastic it's a fantastic interview. He talks about that's his focus is creating this easy experience for his clients. And I think that's that's the way you win in this world.

David Leary: [00:53:12] And I think that's the missing point of this post I found and I posted in this post. Now we're I'm pushing almost 30,000 LinkedIn views and another 10,000 on Twitter and hundreds of comments at this point.

Blake Oliver: [00:53:22] The one about QuickBooks Desktop.

David Leary: [00:53:24] Desktop. And so to summarize, those of you who haven't seen it, definitely you'll find it read the post, but basically follow.

Blake Oliver: [00:53:29] David on LinkedIn.

David Leary: [00:53:30] Yeah. So basically there's some forum post place called bobbleheads dot org. I don't even know what it is. I found this, it just came through in my newsfeed. And essentially this person is still using an old desktop computer from 20,011 to run QuickBooks 20,011 QuickBooks. And it just gets slower and slower. In the meantime, decade has passed. This person is now on Apple products, right? But this person's computer physically carries it to the accountant every year. The accountant told him not to switch to QuickBooks Online, not to switch to Apple. That's kind of it. But the real piece here that everybody is missing is he literally has a sentence. Is it time to just do the online version and find a new accountant? The clients are realizing maybe their accountants dated. And that goes to the the voice mail just now. Like this is your competition, folks. Now people are arguing QuickBooks and desktop all over this thread, but they're missing the point, which is the clients are ready to move on. Even the clients are there. They're saying this is insane, right? And that's the part that's messed.

Blake Oliver: [00:54:39] Here's a quick message from Jessica regarding surge pricing. And I've converted her message into audio with artificial intelligence. So this is an AI generated voice on behalf of Jessica.

Email - Jessica: [00:54:55] Great show, as always. I love that you talked about surge pricing. I have been suggesting that to colleagues for years. I don't do taxes, but as a bookkeeper, my busy season coincides with tax season as I get a lot of catch up and clean up projects. The lowest rescue project rate goes to those that come to me in December. The fee gradually increases each month through April. I have been doing it for three years and it's been great.

Blake Oliver: [00:55:18] So that's great to hear one of our listeners, Jessica, does search pricing. And if you don't, I highly suggest that you put that in place this year because it does two things. It ensures that you are getting paid for the value that you are delivering. And when you are jumping on a return late in the season, you are creating more value for that person who has fewer and fewer options as the year progresses. And you're also ensuring that you have enough capacity to help the clients that you've already committed to write. Somebody who gets you their stuff in January should not be held up because you're busy taking on more clients in March and you don't have the time to get their return done. You've got to manage capacity. You do it with surge pricing. And and actually there was an amazing article in Wall Street Journal about Disney and Disney's new pricing magic. The headline is Disney's New Pricing Magic More Profit from Fewer Park Visitors. And the story basically talks about how Disney had to reduce park capacity during the pandemic. And they implemented all sorts of new ways to charge people more money for greater experiences. And they're actually making more money now than they did before. So they have 17% fewer people in the parks, but they're making 17% more money.

David Leary: [00:56:42] Wow.

Blake Oliver: [00:56:43] Yeah. And it's anyone who's been there recently probably knows what I'm talking about. The biggest contributor to that is this new add on service called Genie Plus, which is an app that you pay extra for to get access to a priority queue so that you can book rides in advance. You don't have to wait in the standby line and it increases the number of rides that you can go on throughout the day. Now, some people are willing to wait in the standby line. They don't want to go on a ton of rides. They don't want to pay extra. That's great for the people who are willing to pay an extra $15 per person. You get to download that Genie Plus app, you go on more rides. Like this is a very smart strategy and firms could do something similar, which is to say, hey, if you don't want to be extended, here's the price. If you're willing to go on extension and we'll do your return later in the year, then we have a different price. That could be one way that you do things or you have different types of add ons that Disney has. For instance, their most popular rides like Rise of the Resistance, that new Star Wars ride. You actually cannot even go on that ride unless you pay extra. And so, yeah, go ahead.

David Leary: [00:57:50] So it's basically they're they're managing capacity because you can only put so many people on a ride at once.

Blake Oliver: [00:57:56] Right. And you can only have so many people in.

David Leary: [00:57:58] The park this time of day. And so by raising the prices, the reducing the people, and because of that, they can actually because of that reduced capacity, they can actually offer this premium experience. It's almost like both sides get solved at the same time by raising that price.

Blake Oliver: [00:58:11] And they've managed to improve the average customer experience. They've made it better. So even though it costs more, people are happier. And I'm one of those people who was happier, even though it costs more. I was happy to pay it because I had a great experience. They do, of course, have some of their annual pass holders who they are, you know, raising the rates on dramatically to get fewer of them. Those people are not happy, like the Disney superfans who would just go to the park and walk around. They have more blackout dates, all this stuff. But it it's important because when you have limited capacity, you've got to reduce those those people that are just there taking up space in your park for the people who are there for the once in a lifetime experience and are willing to pay thousands of dollars for that. So it's a great story. You know, Ron Baker always talks about Disney as a great example of pricing and creating a plus experience. They literally called their app Genie Plus. And this is something that we should be looking at doing is is how do we get fewer people in our firms paying more money and happier customers.

David Leary: [00:59:16] To add a plus to the end of your accounting firm? And that that signal that signals to everybody, you're now going to be a subscription service. You're going to kind of offer an all you can eat menu, but you're going to charge a little bit more every month. Yeah, yeah. Just it's an easy rebrand. You say one more voicemail or should I jump into the reviews? I wasn't sure if you had one more.

Blake Oliver: [00:59:36] So I have a message from. I've messaged about my CPA pipeline article. So why don't you read some of those reviews and we'll tag this on at the end because it's a little bit of a lengthy one. But I think those who are interested in the future of our profession and the CPA pipeline will really appreciate this message because it's from a former partner at Arthur Andersen, who is a CPA for 44 years.

David Leary: [01:00:00] Thomas Perfect. It'd be great. Great to hear. I'll read a couple of reviews, I guess. Why not?

Blake Oliver: [01:00:05] Okay, let's do it. Okay.

David Leary: [01:00:07] So all these reviews, believe it or not, were all captured at the ignition party. So these are fans that are coming in to get shirts. They all had a couple of drinks in New Orleans, so I'm just going to read the reviews as it is. Here we go. This is a five star review. This is from Ken at SBA. This is a must listen to podcast for accountants. I have been following Blake for several years and his knowledge of the industry has helped build my practice. David is okay. Kidding. They are a great team. So thank you very much, Ken, for that review.

Blake Oliver: [01:00:41] Thanks, Ken.

David Leary: [01:00:42] Okay. And this another review. This is from Canada. It's from Caroline. Caroline and Shawn. It's a five star review. David, great meeting you on our honeymoon. So they went to.

Blake Oliver: [01:00:55] Zero con for their honeymoon.

David Leary: [01:00:56] Zero con on their honeymoon and were highlighted part of their honeymoon to to see us. Of course, no connotations intended back to your show. We love your show. Great content. Highly recommend Caroline and Sean. And then he said, Oh, that's actually the screen name he typed in. I mistook David for Blake. He put that as a screen name on Apple podcast, which is kind of funny. And then the last review is titled Longtime Listener, First Time Writer. David and Blake. You guys had an awesome podcast with tons of relevant knowledge for professionals like myself and the cloud accounting space. You guys are the sole reason that I met my CPE requirements in 2022, and for that I am so grateful. I truly enjoy tuning in every week. And this is a Kristen Bell via Apple podcast, so thank you so much everybody for the reviews. One other thing I want to mention which blew my mind. Some Xero advisor right at Xerocon came up and she said, Hey, I was in Santa Barbara and I'm walking the dog or jogging. I don't even know what her activity was. I forgot that part of the story. And she said Coming the other direction is somebody wearing a The Cloud Accounting Podcast shirt. So she was so excited to get her own now. But that's where we're at now. People are just out living their lives and counting podcast shirts. I thought that was exciting.

Blake Oliver: [01:02:13] Fantastic. And to take us out here, here's a letter, very thoughtful email from Thomas Bettina about the CPA pipeline issue. And it's in response to that article I wrote on the Minnesota CPA Society magazine about this problem we have of not being able to recruit enough accountants to become CPAs. And one that I'm very passionate about. And he has an interesting take here.

David Leary: [01:02:37] Blake, I read your CPA Pipeline article with great interest. I retired as a CPA in 2020. After 44 years, I was a partner at Arthur Andersen, a managing director at Protiviti, and then taught auditing at the Carlson School of Management for 25 semesters. I agree that firms have a retention problem, but one has to ask Why do staff leave? What are the root causes? Turnover is a fact of life in public accounting. When I began my career, we were told the number of new staff who would pursue the 12 plus year track two partnership would be less than 5% long hours, weekends and grunt work all contributed to high turnover ratios. However, feedback from many former students suggest auditing has vastly changed from when I practiced. The most significant change is the use of low wage offshore personnel to perform internal control as well as substantive testing. New professional staff no longer build audit skills by testing internal controls and auditing bank reconciliations, prepaid assets and fixed assets. Client assigned staff merely select transactions, obtain documents from client personnel, and then forward those documents to an offshore testing center. Local staff on site never actually perform the testing. Former students with whom I have spoken complain that their responsibility is reduced to that of a paper coordinator. This situation is evident when reading the PCAOB deficiency reports on the eight or nine largest firms. Common themes from year to year are that staff do not know how to test internal controls and often place reliance on controls that have been deemed ineffective.

David Leary: [01:03:58] Audit failure rates among the big four firms range from 20 to 50% in 2017. It is understandable to see how such errors could be made by a new staff person, but one has to wonder how such errors escaped the supervisory reviews performed by the audit senior manager and partner. Will we see more audit failures in the future? I certainly hope not. Another factor impacting retention is chargeable. Our targets staff are responsible to manage their schedules and achieve chargeable hours targets. I believe accountability is a great concept. However, the firms need to match accountability with control. New staff are often not in control of their schedule. Former Big Four staff have told me that they dreaded vacation time because they would have to make up the chargeable hours through overtime. One former student who was assigned to his firm's largest in town client. Quit after 3.5 years when he worked the equivalent of 15 months in a 12 month period. When I was a young staff person, I saw partnership as a goal. I had great respect for the partners of my firm and aspired for their work life balance. That has changed. Current partners with whom I have spoken confide They often work 600 to 900 hours of overtime annually. A managing partner of a Big Four office told me that the partners in that office averaged 900 hours of overtime annually. That equates to nearly 60 hour work weeks throughout the year.

David Leary: [01:05:08] Young staff see the partners working weekends with a blurred line between work and personal time. Staff then ask if the work life balance improves as one ascends the ladder of success. They conclude that it doesn't end depart for greener pastures. During my 25 semesters teaching, I noticed a decline in the number of accounting majors and in the number of students interested in public accounting. Some students soured on public accounting after summer internships. Others may hear anecdotal experiences through social media. Regardless, today's students are much more aware of the public accounting environment than ever before and choose a less stressful option. I was often asked by students how I survived my 31 years in professional services. I told them each year I asked myself three questions one, do I like what I'm doing? Two, Am I learning anything? Three Is the firm providing me additional responsibility? If the answer to those questions was yes, then I stayed another year. If those questions serve as a barometer for young professionals today, then turnover should not be a surprise. I would also contend that the partners are too far removed to appreciate how the staff feel. I can speak to this firsthand. As long as partner profitability increases through more chargeable hours and labor arbitrage partners will not become sensitive to the issues facing the staff until the golden goose stops laying those golden eggs. Change will be slow in coming to the accounting firms.

Blake Oliver: [01:06:22] Thank you, Thomas, for that. I learn something new. And I have actually heard this now from more than one former partner. And it's this offshoring impact on young accountants, because part of the deal in public accounting is you work long hours, but you learn a lot. And if the work is just being coordinated by the staff and sent overseas and they don't get actually to do the work, that's a problem because they're not learning anymore. And I could see why I would leave that sort of B.S..

David Leary: [01:06:57] You're just a glorified project manager.

Blake Oliver: [01:07:00] Yeah, exactly.

David Leary: [01:07:01] So the only good thing about that is you could jump over to the advisor side of the business and get into the consulting side of the business, because that's what consultants do, right? You're just project manager, right?

Blake Oliver: [01:07:12] Right. But like, if you majored in accounting, you probably did it because you like the technical.

David Leary: [01:07:16] You're not getting any experience.

Blake Oliver: [01:07:18] Yeah, yeah. You're not getting experience doing the work. And that was my favorite part. You know, look, I didn't do big corporate financials. I did small business accounting, but I loved doing the books, like actually getting to make it happen and produce those reports. If all I was doing was like sending that overseas and just coming back and like, you know, printing out the reports and meeting with the client, I don't think I would have been happy early on. He mentions the chargeable hours targets, the billable hours. We know all those problems. We agree with that. And then the thing that also surprised me about this is the fact that current partners now are working more than they used to. So partners are making more money than ever, but they have no work life balance. It sounds like a lot of them anyway. And why would you, as a young person, want to aspire to be a partner when you see them working 60 hour weeks? Like, what's the point of having all that money? Yeah, sure, you might be making half a million or more, but if you have no work life balance, when are you going to spend it?

David Leary: [01:08:17] Yeah. See, in theory the old observation would be, I know how I'm working really hard right now. I'm getting experience partners, they're out golfing, they're all enjoying their lives. They have a boat. They're taking their family out on their boat. I want to be that some day now. It's like, Oh, that schmuck is working just me hours now that he did 20 years ago. Yeah. Why do I want to be that schmuck?

Blake Oliver: [01:08:36] No, nobody wants.

David Leary: [01:08:37] To do that. No emails to David @DavidLeary dot com Right. Is this observations about the students right. And the social media is like oh and now people just say, oh, bad accounting is social media. Which is funny because you just covered this last week about how semantic talk destroyed Deloitte. Yeah, right.

Blake Oliver: [01:08:55] And the big four are getting totally destroyed on TikTok by former Big Four employees who are in their twenties who are burned out and mad and they're angry and all it takes is somebody to go on Tik Tok and and post about it and a million people see it.

David Leary: [01:09:15] You know that beauty of the Accounting Twins podcast. We get to observe this journey of someone who graduated college and is now going down the public route. Well, you know, obviously, our sister is going down the private route, but we get to observe this like journey into the accounting industry from the view of the first Gen Zers going into the workforce. They're 22 years old. Right. We're going to see it.

Blake Oliver: [01:09:35] David, that's all the time we have today. Where can people meet you? Online.

David Leary: [01:09:41] I'm on all the socials. @davidleary.

Blake Oliver: [01:09:44] Follow us. The Cloud Accounting Podcast is on Instagram and Twitter. It is at Cloud Assisi Tea Pod. Check out our videos from Xerocon. We're doing more video stuff these days. It's a lot of fun. You can get clips of our show delivered into your feed. It's a nice way to stay up on on the episodes and check out those that you are interested in. I'm going to go enjoy the rest of my Sunday. I hope you have a great week, David, and I'll see you here next week.

David Leary: [01:10:13] Everyone. Time for the classifieds. Do you dream of starting a bookkeeping business? But you don't know where to start? Join the Bookkeeping Biz Workshops a Live for Day workshop series hosted by Serena Shoup, CPA. You'll learn where to start, what it takes, what tech to use, how to build a business, not a job. Plus, how to get comfortable on discovery calls. The workshops begin September 20, so register today at BC. Workshops online. That's BC. Workshops online.

Blake Oliver: [01:10:47] Hey, podcast listeners, it's Blake, and I wanted to let you know about a new show I'm working on with CPA comedian Greg Kite and blogger Slash former CPA Caleb Nyquist. It's called Oh My Fraud, and it's a podcast all about financial crimes. That's right. A true crime podcast for accountants by accountants. Caleb and Greg are going to come together every couple of weeks to unpack their favorite frauds and explore the circumstances, psychology and interpersonal dynamics involved. They also fully indulge in victim blaming the defrauded widows, orphans, infirm and feeble minded. Because who can resist if you fancy yourself a trusted advisor or prefer your true crime with spreadsheets instead of corpses? Listen to this show to learn what to watch out for and to keep your clients, your firm, and even yourself safe. To subscribe, go to Oh my fraud or search. Oh my fraud. On Apple Podcasts, Spotify, or wherever you get your podcasts.

David Leary: [01:11:45] 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 The Cloud Accounting Podcast know by reading a classified ad if the show notes for the link to get more info.

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