2023 Predictions for the Accounting Profession

How SBF did the FTX fraud; how crypto exchanges exploited CPA firms; how generative AI will transform accounting; a private internet for accountants?; will remote work grow or shrink in 2023?; and more!

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

David Leary: [00:00:00] Regardless of what we technically call it. I think most of us can agree that all signs are pointing to an economy that is getting tighter, which means your small business clients will need your assistance in evaluating the spending of every dollar. How would you like to be the hero to your clients? By helping them to get free payroll until January 31st, 2023. I repeat, free payroll until January 31st, 2023. Stay tuned to hear more from our sponsor OnPay. Later in the episode.

Blake Oliver: [00:00:30] Sam said, So what you're saying is we all need to become fact checkers. I think that's another way to put it. B.s. detectors, fact checkers. And we already should anyway, Right. But that's going to become a really valuable skill. Maybe they'll teach a class on that. With all the disinformation out there in the world right now. I think it's really important. Right. How do you know when you read something online, like a Facebook post? How do you know that that's true? How do you go research it yourself? I think this is why disinformation is such a problem, because people don't they don't know how to look at something and decide, is this real or is this fake?

David Leary: [00:01:05] Coming to you weekly from the OnPay Recording Studio, this is The Cloud Accounting Podcast.

Blake Oliver: [00:01:14] All right, David. So the plan is we just decided on the fly. We had talked so much about the future of the accounting profession that we didn't get to our predictions. So now we're going to do our predictions episode, and then I get to take off a week, which I haven't done in four years of this podcast.

David Leary: [00:01:31] Until some news breaks tomorrow. They get rid of the 150 rule and we have to record.

Blake Oliver: [00:01:35] When the 150 hour requirement ends nationally, we can retire our podcast. How about that.

David Leary: [00:01:42] End? So before we jump into like prediction things, we can kind of review a little bit. I think one of your big predictions in general was crypto was a scam.

Blake Oliver: [00:01:52] We called it, we called it in January of 2022. We had an episode called Crypto is a Scam.

David Leary: [00:02:00] And it turns out I don't know if you saw the two of our partners, Elison and Wang, who were part of the trio, I think the US, and she she ran the Alameda thing and then Wang might I think it was his engineer. So they've, they've pled guilty and they're kind of turning state's witness I think is a familiar term. People understand if I say what that means. Mm hmm. Wang literally wrote code to make exceptions for Alameda. They had code. So no, no customers could ever have a negative balance. So in theory, it's like a bank account. You can't have a negative bank balance in your bank code. They wrote code to make exceptions to allow Alameda, who was basically like a customer of FTC's, to have negative bank account balances. And then they kind of did the same thing for a line of credit. So nobody else has lines of credits that was limitless. And they wrote special code just so Alameda could do it. So they purposely had to write exceptions to their code to enable this fraudulent behavior. So you're saying it wasn't like this was an accident, right? Oh, they had bad bookkeeping. They didn't know. They knew so much that they wrote code specifically to make exceptions for what they were doing.

Blake Oliver: [00:03:13] I want to make sure I understand what you're saying. So Alameda is the related entity that SBF owned that was doing risky trading, the trading firm that was supposed to be separate from the crypto exchange.

David Leary: [00:03:23] And so Alameda was the one he uses his personal bank account basically. Okay.

Blake Oliver: [00:03:26] So basically him him personally, right. So and and his readers. Yeah. Okay. So Alameda had an account on FTC's and you're saying they programed for the exchange so that Alameda could have a negative balance which is effectively a loan from everyone else on FTC's.

David Leary: [00:03:44] Yes, right. And then they also turned off. So apparently there's a they liquidate you if you fall below a certain reserve threshold of some type. They had an auto liquidation trigger that happened to all the accounts that were for people doing margin trading, except for they coded it to not have that apply to Alameda.

Blake Oliver: [00:04:06] That's just straight up fraud right there.

David Leary: [00:04:10] They literally wrote code specifically to do this. Yeah.

Blake Oliver: [00:04:12] So that SBF SBF My prediction is I mean, people are so like bearish on the punishment that he'll face. They think he's going to get away with this all because the Deep State was involved in this stuff. Hell no. There is so much evidence and he's got his top lieutenants who have already pled guilty. Sbf is going to go to jail for life is my prediction. He's going to get a madoff style sentence and he's only in his twenties. It's going to be brutal. He's going to be held out as an example. And it's so easy for the prosecutors to make this case. The best he can do is plead ignorance and innocence and all that. But I don't think it's going to fly because there's too many people who lost money on this where if they go easy on him, the political backlash will be super intense.

David Leary: [00:04:59] And I read another article where basically the argument is crypto just didn't understand basic accounting. So these people in crypto, it was actually the opposite understanding because we talked about last week how the FDX CEO FDX sorry, Binance's CEO said the big four account audit crypto, that was kind of his argument. Yeah and it's actually the opposite is true is it's created out of nothing which essentially defies the laws of bookkeeping. And the reality is though, there's an inflow of real money. The real money is the is what gives it value. It is not the technology or the network or the freedom. The real money is the cash that came in to buy X asset. But they are thinking, well, this has value and we created it from nothing. And it's funny because he also pokes a hole in their whole argument, Right.

Blake Oliver: [00:05:49] Well, a lot of what's the article you're looking at?

David Leary: [00:05:51] Oh, so this article is titled Returning to Nothingness Big Crypto Struggles with Basic Accounting. It's written by David Girouard.

Blake Oliver: [00:06:00] I'm on it now. Thank you.

David Leary: [00:06:02] Fundamentally, like, if you think about the Crypto Bro's, they've always argued about the big banks saying like, Oh, the big banks create money out of thin air and then they create more money and that causes inflation. And the. The reality is it's the exact opposite because the banks have assets and liabilities on their balance sheets. They're not just creating money out of thin air. And the reality is the crypto people are the ones creating money out of thin air.

Blake Oliver: [00:06:25] They want to be like the Federal Reserve, which can create money out of thin air. It's called printing money and printing money, the digital economy. It's just adding zeros to somebody's balance sheet. But the banks have to pay for that money. Now. Sometimes they don't pay very much. They pay very little, which makes it seem free, but it's not free. And the problem with crypto is that they're trying to create money out of nothing. The problem is it's very easy to do it fraudulently, like we did that thought experiment in a previous episode, David, where I said, I'm going to create a token and I'm going to issue 1000 of them and I'm going to sell you one for $100. And David, because you're my friend, you're going to buy that one token for $100. And now I get to say that all of the tokens I've got left are worth $100,000 because David bought one of them for a hundred.

David Leary: [00:07:07] And the problem as well is, from an auditing perspective, if anybody has access to the key, a private key, that means whoever has access to that key can control the funds. So not one entity truly has control like a bank account. If I'm Nike and I have a bank account at the bank, it's my bank account and I control those funds so I can audit those funds, I can take statements, etc.. Because of this, there's just no like it's almost impossible to audit because they don't actually nobody actually controls the funds. A lot of people this is a problem of decentralized, right.

Blake Oliver: [00:07:38] How do you prove who controls the funds? This is what's crazy about like crypto is like. And the problem with blockchain without intermediaries is if you don't have any intermediaries, then you're really at risk. Imagine if your house was on the blockchain that private key determines who owns the house. Imagine if, like the physical key to your house, determine who owned it.

David Leary: [00:08:01] And anybody who ever saw it. If they kind of just has a copy of your key.

Blake Oliver: [00:08:05] Or somebody steals your key, now they own your house. Yeah, that's the problem. You can't have this. You can't have blockchain in a business world without intermediaries to protect people from having their keys stolen.

David Leary: [00:08:19] And I'm going to read his last paragraph. It's a little tongue in cheek, but I really like how he states this. Hopefully now the reader has a little bit more sympathy with the poor, confused leaders of big crypto. If any of them do sadly end up in prison, the least society could do for them is provide some basic accounting and economics courses for them. Something to sure aid, rehabilitation, perhaps taking the right courses could be made a condition of parole to encourage more diligent study.

Blake Oliver: [00:08:47] But studying accounting studying accounting isn't going to help. You know, like this is not it's not that they didn't know accounting, they just chose not to do it. And they chose to commit fraud like accounting. Internal controls would have helped. Audits of internal controls would have helped. So what is your prediction again.

David Leary: [00:09:03] For so so this is just kind of reviewing a little bit going into this. And then now the mainstream is really getting on some things that we've been saying for months. I've been saying months ago that the accounting firms are being exploited by the crypto market. They get the logo, they exploit it. And now the Washington Post had an article and here's straight up. They say Wall Street's top regulator is warning investors to be wary of how crypto firms promote the often narrow work done by accounting firms.

Blake Oliver: [00:09:29] You made a great point in that episode with Ron Baker. You said that. Well, Ron Baker said that accounting firms need to sell the relationship, not the services. And you said crypto exchanges are exploiting the relationship. Accounting firms are selling the services.

David Leary: [00:09:48] And I think I said this months ago that that the crypto companies are just getting a logo. They're getting a statement, a sentence from an accounting firm trying to legitimize their industry based on this horrible relationship they have with accounting firms, which is barely exists. And then the last one that kind of should make you feel good, Gene Marks. So you're familiar with Jean Marks?

Blake Oliver: [00:10:08] Oh, yeah. Yeah.

David Leary: [00:10:09] So Jean Marks talks about who to blame. Who do we blame? I have the article and I scroll up and down. I'm not seeing the article.

Blake Oliver: [00:10:17] Well, I'll tell you, I got an.

David Leary: [00:10:19] Opinion.

Blake Oliver: [00:10:20] The article? Well, I just think that obviously blame the perpetrators of the fraud. But, like, where was the where was the CPA, you know, warning people about this stuff? Like, where were the, you know, accounting organizations saying, hey, don't rely on these proof of reserves reports because they provide no assurance and these crypto exchanges are holding them out as doing that. But they don't nobody's talking about that. We could have done something.

David Leary: [00:10:41] And I can agree with that. And Jean Mark's his argument, he's blaming the real villains as the Sequoia Capital, the investors. Yeah, these because there again, I think that gets exploited. Right. But his argument is these firms, when they give money to FTI like this without due diligence, they're giving a stamp of approval and there's a domino effect. So, you know, oh, well, Sequoia invested and now the Teachers Retirement Fund of Canada will invest and it creates a domino effect. I've seen this on many times before with startups in our space. I've been in meetings and I've had somebody say, Oh, they must be legit because so-and-so invested in them. Yeah, that's people's due diligence is who invested in the company. Yeah, like at this point, if you don't do your own due diligence, how can you feel sorry for somebody?

Blake Oliver: [00:11:30] Well, due diligence is hard and people don't want to do it. So relying on others is the way that you do it.

David Leary: [00:11:36] Because you're afraid of missing the due diligence takes time. Oh, the busses going by. I mean, I missed my opportunity.

Blake Oliver: [00:11:41] That's the problem. So, yeah, I do blame the investors. I think they they lost their own money, but they're responsible for giving FCX the money to do all that advertising. That sucker sucked in all these, you know, 20 to 40 year old men who lost thousands of dollars. And these are just average people. These are not investors. These are, you know, that taxi driver in Las Vegas, David, who was so bullish on crypto when you went to a conference at the beginning of 2022. Yeah. And how much money did he lose? I have no idea. Did he lose his nest egg? Is he starting over?

David Leary: [00:12:15] Yeah. To the moon. Well, that's what he said. So did.

Blake Oliver: [00:12:19] You have a prediction around.

David Leary: [00:12:20] Last week's show? We discussed really the number one story in our industry, which is the 150 hour rule, the lack of accountants, the the state of the profession. And then the other big story, I think, in 2022 was all this crypto mess. Right? And and I actually feel like in general, we spoke about crypto more than we would wanted to, but it was so involved in the accounting story, like the accounting store was a major part of the crypto collapse this year. And so I think we can now move on to what's going on in the new year and let me move and get those articles up here. This episode The Cloud Accounting Podcast is sponsored by ANP OnPay is built for accountants, and with 30 plus years of payroll experience, they can be the payroll partner you can always rely on to get payroll and tax filings right for any client, even those with distinct needs like restaurants, farms and churches. When you use OnPay to manage your clients payroll, you can balance that fine line between control and delegation for each client. Regardless, if you keep 100% control delegate payroll to somebody at your firm or hand off payroll duties to your client, OnPay always takes care of all tax payments and filings, even local filings and with integrations with QuickBooks Online, Xero and QuickBooks desktop, you can use OnPay across your entire client base regardless of the accounting GL they are using on PACE Partner program offers free payroll for your firm discount to rev share, and a dedicated support team of in-house payroll. Experts will do all the heavy lifting from setting up your dashboard to adding your clients and their employees. They'll even enter any prior wages to make it easy to switch. So learn more about switching your clients to the award winning OnPay payroll and h.r. And to get free payroll through January 31st of 2023. For every client, you switched OnPay. Head over to cloudaccountingpodcast.com promo slash OnPay that is cloudaccountingpodcast.com promo forgo npa. Why be more confident about payroll with OnPay.

Blake Oliver: [00:14:13] Well and so for me, since it's an easy one, I'm going to say that I is going to transform the accounting profession in 2023. Specifically chat GPT. Just go on Twitter and look at Jason's stats and Heather Satterlee demonstrating what you can do with chat GPT. It's incredible and the way I see it transforming our profession is, and especially small firms is client communication. The biggest bottleneck in most firms is not the volume of the work itself. If you set things up and automate properly. It's not like doing reconciliations. It's not completing a tax return. Moving the numbers around can be automated. You can automate 80 to 90% of all that, what used to be hand coding kind of work. What you can't automate is the client relationship. The communication with the client is very difficult to automate and still have it be a good experience. But chat GPT could do that. You could feed in a client email to chat GPT and generate a response based on your history with that client and information from different systems. And it could suggest a response and you just review, edit and send. That could save 80 to 90% of the time we spend on emails with clients. And so how do you do that practically? One of the practice management apps is going to figure out how to implement this so that it auto writes an auto address your responses to clients.

David Leary: [00:15:42] Yeah.

Blake Oliver: [00:15:42] Client emails you asking about a specific This is where you do it. Client emails you asking about the latest hot tick tock tax strategy and GPT can write the response.

David Leary: [00:15:53] Squash.

Blake Oliver: [00:15:54] It can look at the tax code and say, well, in this specific situation, no, it's not going to work and here's why you don't have to go do it. I think that GPT could do that.

David Leary: [00:16:03] So I think I have to agree with you at some level on that front. But there's also a big warning about chatty GPT. So, you know, I like to do for these predictions. I like to look at all these other crazy predictions you see out there. So this one is from Supply Chain 2023 and the one I highlighted was this prediction about chat GPT. And essentially the premise here is you yourself, unless you build a skill set to spot something that's fake, you're going to have your staff, you're going to have clients, you're going to have people present you information that they didn't make themselves that they created using chat. Gpt And you're going to make a business decision based on something that is 80 90% correct based on some blog posts that it read to write this information. So. So yes, it could save you time over here on your left hand, but you better be using that time to make better decisions because you're going to have staff that cuts corners and gives you answers that they created with chat. Gpt Yeah, you better figure out how to detect that when you see it.

Blake Oliver: [00:17:05] We need, I think. Go ahead.

David Leary: [00:17:08] I think you're like because even I go through this like for the show we plot through 1500 articles and I can spot articles and written by robots and you can kind of just sense it, right? But that's a skill. And it came from reviewing thousands of bad articles, tens of thousands at this point with the podcast. But this is scary because your staff will give you a report and you don't know if that staff member worked on the report or had a bot to it, which is really, really scary.

Blake Oliver: [00:17:31] Yeah, well, this is already happening with teachers. You can ask chat GPT to write your essay for history class and it does a really good job. I would say that these AI models write better blog posts than I got from most freelance writers that I have worked with in my career.

David Leary: [00:17:49] I agree.

Blake Oliver: [00:17:50] Like in terms of style, in terms of flow, in terms of logic. Yeah. Like you said, there might be factual inaccuracies, but my bullshit detector can catch that. So I think you're right, David. I think that BS detection is going to be the most important skill, and I think we kind of already do that as accountants where we're, you know, that's part of the job is BS detection. It should be anyway. And so if you can get really good at that, then you can analyze the output of these models and you can fix it and you can yeah, know, if you're getting tricked, it's going to probably make like scams a lot easier to perpetuate because like think about it. One of the ways that we catch people committing fraud is we analyze the check amounts that they write to themselves and or let's say a business, let's say a CFO is is committing fraud and they're entering fake journal entries or something. If you run the numbers through a system, you can figure out which ones were human entered and not because people choose round numbers. They choose certain numbers over other numbers. But Ney isn't going to do that. And I can generate truly what looks like real outputs based on the data set.

David Leary: [00:19:05] It almost makes it look more real or yes, more so.

Blake Oliver: [00:19:07] It's like I could tell the I like, please generate an invoice from this company to this company with this slightly changed name. And, you know, I bet you that like these A.I. image generation models, I wonder if anyone's tried this could do it really well and create fake invoices and create all the all the documents that you need to commit fraud. And these days, you know, we're not sending around the original documents just like PDFs. So if you can build an AI that creates all the fake documents that you can open bank accounts in people's names and you can create the the fake marriage license, all this stuff that would be really hard to do manually could now be really automated. So we're going to have to have systems to detect that and prevent that.

David Leary: [00:19:45] So this goes to a prediction that I found in the Crowdfund Insider Top ten FinTech predictions. And number eight is fractured protocol. And the prediction essentially is there's going to be two Internets, maybe a kind of a public Internet, and then maybe more of a private Internet that is has different level of national security and privacy, or maybe only corporations get to use it. Certain corporations. For me, it makes me think about the Sage digital network or invoices going back and forth, right? You create invoice in QuickBooks, it shows up as a bill and Xero, all this like network to do that and made me kind of think like, are we going to see a private accounting network? The Internet? The accounting Internet? That's a good point. Kind of in a way, like people argue blockchain is that but like a private network of of highways only sending invoices around that don't get touched by other ecosystems. Right.

Blake Oliver: [00:20:37] That's a really good prediction because it's a solution to this problem. Where how do you know who's real on the Internet? When I can generate emails and tweets and LinkedIn posts and all this digital stuff that seems like it was written by a real person, like if you meet somebody online these days, it's kind of easy to figure out if they're a real person, because usually it's somebody in a foreign country who's not an English speaker natively doing it and you can. See through it. But when they're using AI to do all this stuff, how do you know? And so trusted networks will be the way. That would be the solution. Or one possible solution is I know that these people are real because they've been vetted and accepted into the network.

David Leary: [00:21:18] When that specifically for you, I picked out.

Blake Oliver: [00:21:20] A prediction For me.

David Leary: [00:21:22] This is the same article. This is number.

Blake Oliver: [00:21:23] Two. Before you get into that, we've been stimulating some chat here in the YouTube live stream, and I would like to remind our listeners that we go live on YouTube these days, most of the time when we record our episodes. So if you subscribe to our YouTube channel, you can get notified if I correctly do the settings so that the live stream is not unlisted as it was when we started today. I'll figure that out in the future. But now we've got our audience here and we got some feedback, Amir said. I think I models are incredible, but I think adoption and implementation will take a few years at least. Another factor will be cost. These models are costly to maintain, and that's true. I think somebody said chat is costing Openai like $3 Million a day to run. But you know, they're basically the future of everything, so they're infinitely venture funded so they can afford to do that. But yeah, eventually they'll start charging, right? And then it's going to cost money. But even Jasper Right, which is paid, I use Jasper, I, it's like pennies per word. I think it'll get affordable with the amount of computing power that we have, especially once those quantum computers come online, it'll be infinite, Trinity said. My 16 year old has discovered chat GPT. I don't think it's occurred to him yet to use it for cheating at school, but dot, dot, dot it's only a matter of time. Trinity.

David Leary: [00:22:40] I think I saw teachers are doing pop oral quizzes now in school.

Blake Oliver: [00:22:44] Well, you know, the best classes I ever took. The professor, both in high school and in college, didn't give graded homework. Homework was assigned, but it was optional. And the only stuff that was graded would be those quizzes in class, like in my math class, my favorite math class. We had them every day or at least four days a week. And so if you didn't do the homework, you couldn't take the quiz, and the quiz was your grade and it prevented cheating because. Right, you can't cheat on the in-class quiz. And same thing with my college assignments. And I always thought, take home homework is going to become a thing of the past. It just doesn't make sense. It's too easy to cheat. It's always been too easy to cheat. If you had the money, you could just pay somebody to do your homework for you, Right? And it's just a waste of time for people who already know the material, Sam said. So what you're saying is we all need to become fact checkers. I think that's another way to put it. Bs detectors, fact checkers, and we already should anyway. Right. But that's going to become a really valuable skill. Maybe they'll teach a class on that with all the disinformation out there in the world right now. I think it's really important, right? How do you know when you read something online, like a Facebook post, how do you know that that's true? How do you go research it yourself? I think this is why disinformation is such a problem, because people don't they don't know how to look at something and decide, is this real or is this fake or should I trust this source?

David Leary: [00:24:06] That's a service for providing not saying that we're perfect at it, but we're cross vetting all these stories, right? Yeah, with each other, which I think helps.

Blake Oliver: [00:24:16] Trinity also said, David, that Zero already has an internal network for invoicing, just that a lot of users don't know it.

David Leary: [00:24:22] Well, yeah, everybody has it internally and that's easy. Yeah, every app can do it internally. But the Scot at QuickBooks has it. Emilio's got everybody's got it. But no, the crisscross outside of the network.

Blake Oliver: [00:24:33] The adoption has to be cross-platform, right? It's like the reason email is dominant is because everybody can use it. I can be on Gmail, I can be on Outlook, I can be on Yahoo, I can be on whatever. Everyone can exchange messages. But these invoicing systems are not cross-platform compatible, so none of them gets major adoption.

David Leary: [00:24:50] So it's a remote work prediction. Okay. And and a lot of this is tied to the economics. Essentially the ruling class, You know, the ones paying salaries and making investments are ultimately in control again, because there's the economy is tight. And so what you're going to see is you're going to see remote work kind of taking on the chin and probably commercial and office real estate go up in market.

Blake Oliver: [00:25:16] That's your prediction?

David Leary: [00:25:17] No, that's not my prediction. This is just one that I saw that I thought was interesting.

Blake Oliver: [00:25:21] You agree with it or not work?

David Leary: [00:25:24] I kind of I do feel like the remote work things, the pendulum is going to swing back away from that a little bit. I think. I think it's going to be people are going to be open to it as needed. But I do think that we've kind of been on a kick here for a while and it may have swung too much. I don't.

Blake Oliver: [00:25:40] Know. So I disagree. I think that remote work is going to continue and it's going to become more and more prevalent as the workforce shrinks year after year, because as we've said, you can go look at the data. There are fewer and fewer college graduates every year. There's fewer high school graduates. Every generation is smaller than the one before it at this point. And just because. People are having fewer kids, like whether or not you like it. That's the situation, right? People are not replacing themselves anymore. And so the population is shrinking. It means fewer workers and people are living longer, more old people. So over the next decades, workers are going to have a lot more power. They're going to even with automation and AI, you still need people to like, you know, press the button to turn on the robot like George Jetson and the Jetsons. Like that was his job to come into the factory and turn on the production line. And so I think that it's going to get more and it's going to get better because managers are going to well, I don't know if they get their heads out of the sand. They're going to see that actually remote work and flexible schedules improve productivity. And I saw this stat in a story on Bloomberg called Want a four Day Workweek. Show this research to your boss. Revenue rose 8% at companies in the study with positive impacts on productivity, employee wellbeing and carbon emissions. The first large scale study of a four day workweek has come to a startling close. Not one of the 33 participating companies is returning to a standard five day schedule. Data released Tuesday show the organizations involved registered gains in revenue and employee productivity, as well as drops in absenteeism and turnover. Workers on a four day schedule also were more inclined to work from the office than home.

David Leary: [00:27:26] And that might be the evolution of this. It's more of an in-person four day work week. So you're not you're getting that that flexible schedule. You kind of wanted those three day weekends but you're and you think about this like if employees can use chat GPT and create fake work outputs and just there's going to be a level where people are not going to trust the worker getting. And the only way they're going to trust it is by seeing people face to face. Like the relationship piece of this is going to be important. And it's kind of.

Blake Oliver: [00:27:54] I mean, I get it. I like seeing people in person. I mean, for me, I run a company that's completely remote because I couldn't afford to bootstrap it if if it wasn't. And we have people in Pakistan, in the Philippines, in Ohio and Arizona, like so I've chosen to do that. I think more and more companies will do that because hiring us people to do all this stuff is very, very expensive. It's going to get more expensive. I know that's my theory. But I also agree that if you shorten the workweek, you can get people to come into the office because you give them the flexibility of that long three day weekend. So it's a trade off, right? People will be more willing to come in.

David Leary: [00:28:29] Commit or maybe make that, you know, it's a you have the option to work remotely on that day or take it off. Yeah. You make it a little bit more optional on that. This episode of The Cloud Accounting Podcast is sponsored by Life Flow. Think about this If you have approximately 60 clients and create five reports a month for each of them, that's over 3500 reports a year. And let's say you're really fast and only take you one minute per report. That's almost 2.5 days a year you spend creating reports. Here are a few of the ways life flow saves time for so many accounts and bookkeepers. Once you create the perfect suite of reports for a client, you can just copy the Google sheet, use live flow to connect it to a different client's QuickBooks Online company and you're all done. The new reports will pull in the data for the second client automatically. You can easily drill down on the details of each number on a live flow report, including drilling down to the transaction level to navigate directly to the transaction inside of QuickBooks Online. No more opening QuickBooks Online to search for specific transactions like phone. Google sheets are in the cloud so you don't have to waste time emailing files between your team and your clients. And you can give your clients access to a suite of reports that they can access any time, eliminating one off request for you and your staff. It's more about using live flow and how you can save 20% off your first three months. Head over to Cloudaccountingpodcast.com Live flow. That is Cloudaccountingpodcast.com Promo for Live Flow. Stop manually updating your spreadsheets with live flow.

Blake Oliver: [00:30:01] So. So can I just give you a little more data from the study? Because I think it's like there were 33 organizations and not a single one is going back. They all decided that the four day workweek is better. So this was businesses and organizations in the U.S., Ireland and Australia tracking 969 employees over a ten month period as they reduce their workweeks by an average of 6 hours with no change in pay. It varied from a restaurant chain in the Southwest US to an Ohio based custom RV builder to a climate nonprofit in Dublin. So this is a variety of different types of businesses, not just businesses where people work in front of computers. Dozens of indicators ranging from productivity to well-being to fatigue, all improved as the companies transitioned. The findings come at a time well below when businesses and their employees are struggling to recover, blah, blah, blah. So here's the hard numbers for our accountant friends listening. Revenue rose 8% during the trial, 8% up and was up 38% from a year earlier, indicating healthy growth through the transition. Though multi company measures of productivity are difficult, the organizations rated the impact of four day schedules as positive, averaging a 7.7 on a ten point scale. Like I said, employee absenteeism dropped, resignations marginally dropped, new hires increased slightly. Companies rated the overall experience a nine out of ten.

David Leary: [00:31:15] Maybe this is the accounting industry that's the marketing effort for the CPA. You come out, you get all the big firms involved, say in the accounting industry, you only have to work four days a week and that's how we get more accountants.

Blake Oliver: [00:31:25] Can you imagine?

David Leary: [00:31:26] That's the marketing.

Blake Oliver: [00:31:26] And this is in a profession where I think staff work an average of 2200 hours a year and partners actually work more than staff. They work an average of like 2400 hours a year. And you do the math on that. If you take 2400 hours and I'm not going to do it without a calculator because I've gotten in trouble before. David So if you take 2400 hours and you divide that by 52, that's 46 hours a week. So that's if you didn't take any vacations, you're working 46 hours a week. That's four partners. So, you know, if you take like four weeks of vacation, which I really think you ought to be able to do that as a partner. I mean, you know, why would you That's 50 hour weeks. You know, why would I want to be a partner if I have to work 50 hour weeks? Yeah, I mean, sure, I make them money, but like, when you actually do the math, I'd rather be an owner of a business who works 20 hours a week or less and, you know, make a little less money. I think that's. Maybe that's just my generation. I don't know. So, yeah, this whole four hour workweek, it totally doesn't fit with, like, the way the accounting profession is set up, where it's like working more than 40 hours a week. You can get more out of your employees if they work 34 hours.

David Leary: [00:32:43] Yeah, the less hours.

Blake Oliver: [00:32:45] Less hours. People are more productive and fewer hours. And I think actually in a lot of firms, people aren't really working all that time. They're just looking busy. They're just sitting in their chairs pretending to be busy or making busy work.

David Leary: [00:32:56] And it also forces an organization to be more efficient. Maybe you cut a meeting out a week, two meetings a week, right? If you if you have that type of A cadence, you know, okay, we're going to meet every other week since we're only before the workweek. So we're not wasting a day of the week on meetings. Yeah, it's probably get a lot more efficient.

Blake Oliver: [00:33:11] We got some predictions from our live stream viewers. Christopher says in 2023, accountants will assume commercial real estate as a service and host self employed clients. I think that's a great idea. Christopher I have fantasized actually about opening an accounting firm that's also a cafe and people could come in and work, they could be members like or we work, and they'd also get accounting and tax services as part of their membership. I think it'll be great for Friedman.

David Leary: [00:33:37] Karen Woodman, and I think she's in Minnesota, 24 hour bookkeeper. They do construction niche type stuff. They I think she opened a co-working space herself.

Blake Oliver: [00:33:48] It's brilliant. And then and then you got all these clients coming in future prospective clients, they come in and they see, Oh, you do tax, you do accounting genius.

David Leary: [00:33:56] It's actually a really good idea. And I can look at like acuity, Kanji and Matt. They opened their firm in the Atlanta Tech Village, which only allowed SAS space startups in that thing. They were the only non tech company in that building. And obviously these companies, these startups would start and you'd get them as clients. So yeah, it makes a lot of sense. You could create your own funnel. Yeah, right. Instead of doing a one off webinar on QuickBooks here and there or in person Meetup Group, you just have the business owners that are all the time and you'll just be you could even figure in the accounting as part of their rental plan, right?

Blake Oliver: [00:34:29] That's part of the fee. You get your taxes done as part of your membership. If you stay.

David Leary: [00:34:33] One of those places will let you set up a mailbox, right. Physical mailing of something. You're just you're just adding on. It's great bookkeeping and tax. It's actually a really great idea.

Blake Oliver: [00:34:42] We should open it. David. We should do it. We'll just pipe in The Cloud Accounting Podcast as the music. The music. Trinity said there are several school districts in Texas going to a four day work week. I have heard about that as a cost cutting measure, you know, and it's a way to retain the teachers because if you don't want to pay more or you can't pay. The more you can attract them with the reduced schedule. And I think you could actually learn just as much in four days as you do in five If the you know, a lot of time in school is wasted. I don't know about you, David, but I was not a I was not really into school as a kid. I actually begged my parents to homeschool me so I could just do whatever I wanted. Like I felt like I was wasting my time sitting in class. It probably doesn't surprise anybody based on what I say on these shows. But yeah, it was like so much of that time is wasted. It's sort of like sitting in an office for 5 hours or 5 hours for five days a week. A lot of that time is just kind of downtime.

David Leary: [00:35:39] So one thing that I've seen a lot of predictions on is these neobanks and banking is a service. And after the EFT debacle and other issues, because a lot of these banks are like a teeny little bank in the Midwest offers up their charter for tech companies. And now that you've had some of these debacles happen, banks are going to be open to do this. So if you already have an existing relationship as as a tech company with a bank, you're going to be okay. But if you have a new a new startup, a new tech startup, and your plan was like, Oh, we're going to get a bank charter and build blah, blah, blah, it ain't happening like so you're seeing that. And then on top of that, there's going to be massive of these neobanks a lot of them are going to be going under because they got into the credit game and in many cases they were in the credit game with very risky lending relationships. And consumer credit now is back up to almost all time highs again. And so you're going to see this pop. And so I'm seeing a lot a lot of predictions in general about Neobanks going under. And actually, I think there was an article a listener sent us about Revolut. So Revolut is I always forget it. In the UK, it's H.M..

Blake Oliver: [00:36:50] Her Majesty's Royal Irish.

David Leary: [00:36:54] Revenue, whatever that is, commission or something. It's the Iris Queen's. Iris. Yeah, Queen's Iris. And they were supposed to report some numbers and they got an extension and now they're not going to be able to report the numbers again. And so here's, here's one of these neobanks that has taken tons of money and they're not able to issue their numbers of their earnings and their balance sheet. And so they're the biggest one. So what's going to happen to these smaller ones? So I think there's just that's a theme I've seen a lot is and I think I'd have to agree. I think for me one of the predictions is a lot of these neobanks are probably going to be in trouble. And then the other half of I think for me from a prediction standpoint is I think there's going to be a lot of apps being purchased by private equity. Twitter is the model. I think it happened to Koopa. Come in, you buy it, get rid of two thirds of the fat that are happening at these companies. And just run the company efficiently and profitable no more. Like you said, the guys choose only job was to order the sweat, the hoodies. Right. All of that's going to be cut out of these these companies. So you're going to see hopefully it'll keep a lot of SAS startups and tools we all use from going under. But if private equity doesn't come in and and cut the fat in these companies, yeah, they might not exist. Yeah, that's kind of my my impression is we're going to see a lot of private equity come in buying apps.

Blake Oliver: [00:38:11] David I know you have to go at a certain point pretty soon. I have listener mail. Do we want to do that?

David Leary: [00:38:17] And we have a review as well, so we could do that.

Blake Oliver: [00:38:20] Okay, So I'll get through.

David Leary: [00:38:21] Some of the you're on a good note.

Blake Oliver: [00:38:22] So we got a lot of listener mail over the last couple of weeks and we didn't have time to get to it with our interview with Ron Baker and then our My Soapbox sing on the last episode and then our predictions in this episode. So if we don't get to your message, just know we will attempt to read it in a future episode. Here's one, Martin said in response to our crypto, one of our crypto episodes. He said, quote, Well, it's a little confusing because he's quoting me and then responding to it. So Martin says, You said, quote, Allow their clients to spin agreed upon procedures, engagements as full audits to depositors, unquote. I agree. However, I once worked on an audit that had so many moving parts we decided we were trying to audit smoke. I'm glad Deloitte feels they have enough of a smoke shifter to offer an opinion on Coinbase, but crypto accounting standards are way too young and mostly nonexistent. Audit opinions state that financial information is presented according to a set of standards. In the case of crypto, I would have to ask what standards the FASB is working on it, but we are not there yet.

Blake Oliver: [00:39:29] So what is left? But testing transactions and balances and presenting the results of those tests? As Prager Medicine Almond discovered, the risk of offering an opinion is too high in the space until the smoke clears. Well, I think what Prager medicine are, Menino discovered, Martin, is that they they were getting used. And I think the the partners did not realize that they were getting used by the crypto exchanges, as you pointed out, David, I think we should just stop doing these agreed upon procedures, engagements. It should not be allowed to do that kind of stuff because it doesn't provide any assurance, but the public doesn't understand that. So you shouldn't be allowed to give those out. It shouldn't be allowed to be published. But I also think like, you know, saying that we can't do anything until the guidance is published is kind of like, I don't know, that's that's sort of passing the buck. We're accountants. We should be able to figure this stuff out. We shouldn't have to wait for some regulatory board to tell us exactly what to do with a 600 page document laying out exactly.

David Leary: [00:40:27] I mean, theory.

Blake Oliver: [00:40:28] Courageous, you know.

David Leary: [00:40:29] Defining fraud.

Blake Oliver: [00:40:31] Like that's our job should be.

David Leary: [00:40:33] It should be. It should be your job. Yes.

Blake Oliver: [00:40:36] Anyway.

David Leary: [00:40:37] But again, that's just what the public thinks your job is.

Blake Oliver: [00:40:40] So thank you, Martin. I understand like the concern there. But I think I guess my response is that, yes, FASB hasn't done its job, but we shouldn't let the lack of the regulators like I mean, FASB hasn't done anything for decades. They've useless, as far as I'm concerned, when it comes to accounting standards. So we have to step up and do it ourselves. Yeah, as a profession. Let's see. You want to read that review?

David Leary: [00:41:02] David Yeah, so we did get a review. This would be the final review we got of 2022. This was for his screen name. Here is Andrew is Taken, which I think is a pretty funny creative screen name. This is a five star review on Apple podcast, A must listen for accountants. I absolutely love listening to the Cloud Accounting podcast hosted by Blake and David. They have a great dynamic and their insights and tips on cloud accounting are always helpful and informative. I highly recommend giving this podcast a listen if you're interested in learning more about this topic. Thank you. Andrew. Thank you. Review.

Blake Oliver: [00:41:37] That's really nice. I really appreciate that.

David Leary: [00:41:43] This episode of The Cloud Accounting Podcast is sponsored by Patriot. Patriot Software creates accounting and payroll software that radically simplifies the day to day complexities that American businesses and their accountants face. Patriot is seamlessly integrated under one login. Easy to use and affordable and their number one for ease of use. Customer support features and value for the money by users. Patriots accounting software is a cloud based full featured accounting general ledger that gives your clients the simplicity they need but the power you require. Patriot has a patented dual ledger accounting so you can quickly switch between cash basis, modified cash basis or accrual accounting, and a chart of accounts that can have unlimited subaccounts and nest up to eight accounts deep. Patriots payroll software lets you run payroll in three easy steps. Offers free two day direct deposit and their full service payroll offers a tax filing guarantee. The accounting professionals can partner with Patriot and receive discounted pricing that increases as you add more clients support located in the USA, free co-branding and free accounting and payroll for your firm to join thousands of accounting professionals who trust Patriot with their clients, accounting and payroll, and to get a 30 day free trial. Head over to Cloudaccountingpodcast.com promo slash Patriot That is Cloudaccountingpodcast.com Promo for Patriot. Now. Now is that I think somebody on Twitter joked that they're going to use chat to read a review. I don't know if that's the one that came in or not.

Blake Oliver: [00:43:10] Yeah. And if you don't know what to write chat cheap tea writes really nice reviews of The Cloud Accounting Podcast It's something it's really good at doing. So the next time you have to write a product review for an app where you have to write a review for a business, just use the chat app to do it. Ken wrote in and said, Hey Blake, I was listening to your On the Money. Monday's episode number two distributed by Relay. You said something that gave me pause. Essentially, the reason small business owners need to keep good books is to prepare the hand off for tax prep. I'm a certified profit first professional, so I go around trashing the shortcomings with Gap and accounting for micro-business owners anyway, But this was too easy. I'm ready to use the segment as a strawman for my own marketing quote. Even this high visibility CPA recognizes that Gap isn't running. Your business isn't for running your business, it's just for tax prep. Therefore, you, Mr. Prospect, need me in my methodology to manage your cash effectively day to day, unquote, or some such. I believe it, but I wanted your opinion before I consider throwing you under the bus. It would be great to have a quick conversation with you about this. And I said to Ken, I wouldn't say you're throw me under the bus. Ken. I agree. Gap is useless for most small businesses. It is a total waste of time and resources to try to do gap accounting. And often for most of these businesses, even accrual accounting is a waste of time. I tried doing it, they didn't understand it.

Blake Oliver: [00:44:28] I spent most of my meetings with them trying to explain cash flow accrual and the statement of cash flows, and it took me years to realize I was just wasting my time and the theory that I had learned was applicable to large businesses and not small ones. And actually, you know, then we go in, I go into how GAAP is like kind of useless for a lot of businesses these days because it hasn't changed, right? Fasb hasn't updated standards for intangible assets and all that. But I do stick by my statement that most small businesses just need their bookkeeping done to get a tax return. That's not all. But the vast majority, that's all they need. And if you can design a service around getting that done, you can very efficiently, effectively serve that market. You can build a subscription around it. If you want to hear about people who are doing that, go to my earmark podcast, podcast, earmark. There's recent episodes with Michael Aliman and we've got two more with firm owners who have done exactly that, very streamlined. And these are all the people that are in your community, the small businesses between, say, 100,000 and 500,000 a year in revenue, the ones who need help but aren't getting served by traditional firms because they're too small, there's a huge opportunity to serve them. Those are the folks that QuickBooks Live is targeting. But we can do it way better than QuickBooks Live and we can make good money doing it. But it takes a whole different way of approaching how you do accounting, and.

David Leary: [00:45:51] Especially if you offer a co-working space in your you basically. Become the internal controller for lots of small businesses that are all your clients utilizing your your office space.

Blake Oliver: [00:46:01] So, David, I want to be respectful of your time. We got we got time for more listener mail or.

David Leary: [00:46:07] We try to do one more quick listener mail. As long as you don't pontificate on it, isn't it?

Blake Oliver: [00:46:13] All right, here we go.

David Leary: [00:46:14] Feedback.

Blake Oliver: [00:46:15] Bernard said, Hey, Blake listened to the Ron Baker episode this morning. You guys hit some real issues with our profession and the AICPA. It's not only big four firms having an independence problem with how audit fees are paid, and consequently one third of audits are failing. But the AICPA is really an organization that is catering to its highest paying customers. The top 100 accounting firms and smaller firms are seeing no reason to belong to the CPA, and the smaller firms are the majority of the membership. Our firm is a midsize firm, 30 full time equivalents, of which 4014 are CPAs. We have been frustrated for years on the lack of brand building that the AICPA does not do for the CPA brand. We do no audit work and very little assurance type services, so the requirement of an audit to be performed by a CPA is irrelevant to us. We need the marketing to highlight the CPA as probably the best qualified financial and tax advisor that can be offered to the public so many ways that the CPA brand could be marketed. We have been outgunned by the CFP designation.

Blake Oliver: [00:47:19] We are all hoping the AICPA will get more young and diverse leadership and get the organization serving its members in a more equitable way. We have been Ron Baker followers for ten years now and destroyed our timesheets nine years ago. We are a fixed price value billing firm and looking closely at the subscription model, I've already read Ron's book and it certainly lays the foundation and the logic for the subscription model. If we were starting our firm today or a smaller CPA firm, there would only be one way to go and that would be subscription for legacy firms, our size and larger. It is a little more difficult to switch only because we would just have to change everyone to subscription and basically start a new company. We will continue to investigate full subscription billing and hopefully figure out the way to change in the near future. I really like your podcast and try to catch every episode, keep making keep marketing Ron's book. And by the way, your foreword that you wrote for his book was great. Happy New Year. Happy New Year. That is amazing to hear.

David Leary: [00:48:16] And that's a good wrap up. Happy New Year.

Blake Oliver: [00:48:18] Happy New Year, everyone. So thanks to everyone who joined us on the live stream. Subscribe to our YouTube channel to get notified when we go live. You can chat with us. You can tell us what you think. You can tell us if we're wrong. I love hearing from people who disagree with me. Chris, happy New Year. Thank you for joining us. That's all I got, David.

David Leary: [00:48:36] That's it.

Blake Oliver: [00:48:36] All right.

David Leary: [00:48:37] How about in 2023, everyone?

Blake Oliver: [00:48:39] See you then.

David Leary: [00:48:40] Bye bye. Time for the classifieds. Is your New Year's resolution to get your firm better organized. The average firm spends more than 30% of its time sending repetitive tasks to clients for information to complete their work. And you don't have what you need. Your workflow is blocked and your team is frustrated. Eliminate this frustration with Client Hub. Client Hub is a modern workflow platform with deep roots in the accounting profession. Unlike traditional platforms, client hub is built for both your team and your clients. Get faster client responses, build better client relationships, and become a more productive firm. To schedule your demo, go to client hubcap. That's Client hubcap.

Greg Kyte: [00:49:18] I don't care where you live in the United States. If you're a CPA, you have to take ethics, continuing education. And I don't care who you are and where you live, you hate taking ethics, continuing education. That's why me, Greg Kyte and my buddy Adam Broad, we created a podcast called Drunk Ethics where we unfold and expose all of the inner secrets of not just ethics, but how to become more ethical and to promote ethical behavior at your workplace. And we do that while we are getting progressively more faced during the course of each episode. In each episode, we take seven shots every 7 minutes. And so at the beginning we are scholarly and by the end we are drunk, yet still scholarly. If you're interested in this podcast, which I know you are, anyone can listen to the podcast for free. It's out there, you can find it, but if you want CPE credit for it, Naspa certified CPE credit, it is a premium course on earmarks. So if you're already a subscriber to earmark, it's going to be more than that. But listen, it's worth it because for two reasons. First off, you know your company, you know, your firm's going to pay for it and not you. And second of all, it's worth it. Damn it.

David Leary: [00:50:41] 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 running a classified ad if the show notes for the link to get more info?

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2023 Predictions for the Accounting Profession
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