David Got Fired By His Tax Preparer

Not enough new jobs allow for remote working; CPA firm revenue growth outpaces staff earnings; Ron Saharyan from Profit First Professionals joins us; David and Blake catch up on listener mail and much 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] So many of us have app fatigue, so many clients, so many apps and so many different payments, charges, receipts, subscriptions, discounts, bundles. It's almost impossible to keep track of What if you could have just one subscription for 50 different integrated business apps? You can. It's called Zoho One. Stay tuned to hear more from our sponsor, Zoho, later in the episode.

Blake Oliver: [00:00:26] Most accountants in school are only ever taught about the traditional path to go to like large firms and do audit or tax. And so they get turned off by that because then they go on Reddit, they go on tick tock, and they see that it's kind of miserable the first few years and they're not willing to make the same exchange that people in the past where because they have more opportunities. And so if they're made aware of, hey, you can have actually work life balance, there are these firms that offer 40, maybe no more than 50 hours a week. Some are saying like we only work people 35 hours, but you can choose the firm that fits your lifestyle and then we don't lose those people to other professions.

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: [00:01:15] And I'm David Leary. Friday the 13th, Blake ... It's today.

Blake Oliver: [00:01:20] Well, maybe that's why our guest is is missing in action Ron Saharyan from Profit First was scheduled to join us today. He is not yet in the studio perhaps he has been held up by some bad luck. If he does make it, we will welcome him in and if not, we'll get him rescheduled.

David Leary: [00:01:39] So I had a pretty eventful week, but I'll let you talk about your week first and then because once we start talking about my week, it's going to spiral. We got four episodes of material based on mine.

Blake Oliver: [00:01:48] Oh, well, then let's let's get to it. I mean, you know, the only thing eventful for me was my wife was on a business trip, which she doesn't do very often. So I, I got to, you know, be the single dad for.

David Leary: [00:02:00] I think I saw you cook steak for one. They literally just one steak day.

Blake Oliver: [00:02:04] One dinner was macaroni and cheese, because that's all that was in the fridge. And then day two dinner was I found some frozen sausages, grilled does. And then I ran out of food completely. I was going to starve to death. So I went to the store and bought myself a nice bone in rib eye and had that last night. But I screwed up and I've never season the steaks. She always does it and I grill them and I over salted it. So I ruined my steak. Gotta be careful, you know, bad luck. But, you know, that was it was a good week. All in. And she's back. She made it, and she was flying southwest and she made it home. So.

David Leary: [00:02:34] Hey, especially because that was the other thing that happened this week, right? Didn't the FAA. Oh, the IRS of the airline industry now.

Blake Oliver: [00:02:41] Yeah. And it's really still not clear what happened there other than some database file got corrupted. And the FAA, in all its wisdom, decided that because this emergency messaging system wasn't working, that they had to ground every plane in the U.S. And I wonder, is that really standard protocol, Like if this one system goes down, you can't fly? What's the risk.

David Leary: [00:03:01] Reward? I think it was a bigger issue. Like I think the issue was they couldn't figure out what was going on. They had a file that I get kind of a manual process like firms do and the IRS does that's been working for 30 years. And then for whatever reason, it was Tuesday or Wednesday, somebody has this file, they go to upload it to a computer and it just doesn't want to upload. So then they get it and they'll send it again. Then we'll try it again or reboot everything, not try it again. And I think the the the scary part for them I guess was like, why is this not working when it's worked for 30 years? And I think that's why they put everything on hold till we solve this because like there was obviously something unexplainable and of course they're like, we weren't hacked. We weren't this, you know, who knows? But and it's.

Blake Oliver: [00:03:39] Scary. Hello, Happy Friday to everyone who's joining us in the YouTube live. You can follow us on YouTube, Cloudaccountingpodcast.com. Subscribe and get notified when we go live and you can chat with us. So hello, Dhall and Christopher. Great to see you, David. I want to hear about your week. You had an eventful week.

David Leary: [00:03:57] My week. So I think I've said this before on the show. One of the best things about me leaving into it and starting my own entrepreneurial journey is I now get to be a client of accounting firms. So I get to get the client experience, which is great, right? I'm on the other side of the fence and we talked. I bitched about tax organizers before. I've talked about a lot of things. Well, I officially have had another accounting client experience that I want to talk about here. So I got a nice letter in the mail, you know, dated January 10th. So, you know. Okay.

Blake Oliver: [00:04:33] And hold on, David. I got to stop me, Ron. Ron, you made it.

David Leary: [00:04:37] Well, Ron showed up. Hey.

Ron Saharyan: [00:04:38] Hey. I'm sorry for the confusion, guys. I didn't know what was going on there for a minute.

Blake Oliver: [00:04:43] No worries. No worries. We're glad to have you. It's Friday the 13th, so we're just going to attribute this to to that, Right? And.

Ron Saharyan: [00:04:49] Yeah, yeah, yeah. Well, I've already been nervous. I'm like, Man, I'm going to be on with Blake and David. This is. You guys are the best. I've been following you and Ron Baker, you know, interviews and everything. I'm like, how am I going to compete with those guys?

Blake Oliver: [00:05:05] Well, you have the energy. You bring the energy to all of your podcast episodes, and I take inspiration from that.

David Leary: [00:05:10] So you have a lightsaber or something, right?

Ron Saharyan: [00:05:12] Or I got lightsabers, I got bats, I got lacrosse sticks, I got it all, man.

David Leary: [00:05:17] We don't have any of that.

Blake Oliver: [00:05:18] So that's awesome. So, well, everyone, welcome Ron Sahakian to the show. Ron is the co founder and managing director of Profit First Professionals LLC. Yeah, and we'd love to hear about profit. First a little bit about your journey there, but I want to get back to David's story about his week because, well, David, you were laying the groundwork there, right? What was I.

David Leary: [00:05:40] Could I catch Ron up here? I'll give you the ten second ground catch up. Ron in 10 seconds. Ron I left into it. Corporate jobs started my own entrepreneurial journey, and because of that, I now am a client of accounting firms and it's been an eye opening three and a half, four years being a client of accounting firms, because I think I'm getting the typical client experience and it's not the best experience as a client across the board. Tax organizer's. This tools portals, you know what I mean? It's just it's just the state of the industry. It's really a good experience for me. Well. This week, I officially have gotten the next level of client experience this week. So I got a letter here. So it's dated to its address to me and my wife. It's dated this week. Dear David. And this is.

Blake Oliver: [00:06:23] From from your accounting.

David Leary: [00:06:25] Firm? This is from my accounting firm. So this is the firm that does my personal return. Not a business. Not any of our business entities. Dear David and Laurie, the last few years have brought tremendous challenges to the public accounting profession. The massive Tax Cut and Jobs Act of 2018, the CARES Act of 2020, which was a response to COVID 19, created significantly more work. And at a time when our profession and our firm are facing the same labor shortage as many business sectors throughout Arizona, in the United States, looking ahead at 2023, we have determined we can no longer provide the quality of service to all our clients. Regrettably, we need to ask that you engage with another tax professional for your income tax preparation for the year 2020 tax year. Thank you for your understanding. By way of this letter, we hereby inform you that effective immediately, we have terminated our professional relationship with you and will no longer render your professional services as of this date. So I've been fired as a client of a firm, and I've gotten the full client accounting experience.

Ron Saharyan: [00:07:23] So what did you do today or what date?

Blake Oliver: [00:07:26] Yeah. Were you a were you a pita, David?

David Leary: [00:07:30] Yes, I sent I sent emails with all caps all the time. Yeah. I would just call and ask to speak to the, the firm owner whose name? The name of the firm every time you know. Yes. No, I was actually probably a decent client and that's why I wanted to talk about this. And I think it affects the show a lot. First, let me just preface, I'm not upset about this. Like, this is the greatest thing. Like for me to experience this, we have something to talk about on the show. We'll make eight episodes out of this. This is great.

Ron Saharyan: [00:07:56] I'm happy to introduce you to any number of Private First professionals that would love to do your accounting.

David Leary: [00:08:01] Yes. Yes. So it's kind of like rewinding about to. So I probably have paid this firm anywhere between 5 to 7, seven and a half. Okay. Price 6 to 7 and one half K over the last 18 months. Right. So it's not like I was like an $800 return or a $200 return. Yeah, I would argue that's decent money. Can we agree like it's.

Ron Saharyan: [00:08:24] Purchase for four for what, what level of services.

David Leary: [00:08:26] I mean so I mean I have a you know it's a personal return. I got a couple of W-2s, couple of K ones, two rental properties, Airbnb. We bought an electric car this year. So some extra guys, some options.

Ron Saharyan: [00:08:39] What was your total spend between roughly?

David Leary: [00:08:41] Probably it's I think it was seven 7500 over the last 18 months. Yeah.

Ron Saharyan: [00:08:45] That's not chump change for that.

David Leary: [00:08:47] No and it's not.

Blake Oliver: [00:08:48] That's what I said.

Ron Saharyan: [00:08:49] I thought it's not egregious. It's not egregious, but it's also not nothing.

Blake Oliver: [00:08:53] Yeah. And you had some options. Did you mention that you had some stock options?

David Leary: [00:08:56] Yeah, I exercised some stock options that were. It reached the point where I couldn't do my own taxes anymore. Right? So I'm like, All right, we have to pay some bills to do this. But so, so but I wasn't a bad client from that perspective. I uploaded all my stuff into tax Daddy. You know, I participated. Yeah, but. But, but I also, like, understand the reasoning for this. I'm talking to my my tax professional, my accountant, I guess. Right. She's a senior tax preparer, a CPA.

Blake Oliver: [00:09:22] Tax senior or a manager.

David Leary: [00:09:24] Partner or a partner principal. I don't know all these titles. Right. Partner. Principal, Owner.

Ron Saharyan: [00:09:29] Director. Who knows?

David Leary: [00:09:30] Yeah. Yeah, exactly. So I was talking to her and because I said there's no there's nothing wrong with any of this. I get it. She worked 3200 hours, just a shy under 3200 hours last year.

Blake Oliver: [00:09:43] 3200 hours. So that.

David Leary: [00:09:45] 3200.

Blake Oliver: [00:09:46] Do you know if she took any vacations? Because that's like even without vacations, that's like 60 hour weeks.

David Leary: [00:09:50] I don't know, because I know that she's like, sent me things on a Sunday night of a holiday weekend.

Ron Saharyan: [00:09:55] Right. I run for the hills. That's the best thing that ever happened to you. Any accounting firm or bookkeeping firm that is banging their chest. I'm working 60 hours a week. I'm packaging all my food for the next three months, and I'm not going to see my family. I don't want bah bah bah bah bah bah. I wanted for the hills. I want my accounting professional to get a good night's sleep. As much as I want my surgeon to get a good night's sleep, I want my accounting firm to be a well-oiled, well-run machine where their employees are looking forward to coming to work and doing the job all throughout the year.

David Leary: [00:10:30] Yeah, and then this is like, I think some of the what went into that decision and I'm that's what's crazy about this. I got fired from a firm where I'm personal friends with the CEO. This is a top 200 accounting firm I'm friends with and I still got fired from the firm.

Ron Saharyan: [00:10:43] Like, did they call you or did they just say, Yeah.

David Leary: [00:10:46] Yeah. The letter came after the meeting in phone call.

Ron Saharyan: [00:10:49] But okay, so that's good.

David Leary: [00:10:50] But the in so I talked to him and I think I'm going to have him be on an interview with Blake in the Earmark County podcast. They as a firm they let go of a significant amount of revenue. And when I say significant, more than probably most of the listeners firms make in the year of our podcast, it's significant amount of revenue. And I was talking about it and there's. We used to think about it from his perspective. You know, he just invested that much revenue into the health and welfare of his employees and to its clients getting better experiences.

Blake Oliver: [00:11:23] So I have a question for you, David, about this, though. Like, what was the logic? Walk me through the logic again of letting you go as a client, like instead of somebody else. Because when I heard how much you were paying for your return, I said, Well, that's a good that's a good client, right? At least in my opinion. Like that's not a, you know, small. 1040 that's not a 1040 that you're doing for $200. Right? That's not the kind of thing that you usually hear about people shedding. I know there are bigger firms.

David Leary: [00:11:49] It's but it's that game where take on the more expensive client. So if there's only so much work, you're going to take the client, you're going to do the work for the client that's paying you 60 grand a year engagement, right? 70 grand a year. Right. And it's just coming down to there's just not enough employees. They can't hire enough. They outsource some stuff, but you can't hire enough people to do the work for your firm. Right.

Blake Oliver: [00:12:09] And that's what Christopher asked in the live stream, he said, is the crux that they are terminating because of staff shortage. And that's what it sounds like they're saying, you know, our people are working 60 hours. We can't handle the work. Sorry, we can't help you.

David Leary: [00:12:23] That's the gist of it. And I mean, I think this is the typical experience. I think all the firms are doing this right. And we see it on Twitter. They're taking on this firing on my client business.

Blake Oliver: [00:12:31] That they shouldn't be taken on the business. Yeah. Yeah. And so that's what I want to know, David, is like because, you know, hey, look, I'm your co host here, like we're buddies. I'm in your corner here on this one. I'm a little kind of, you know, pissed off for you that you have to go find somebody new. Like, what did they take on? I want to know, did they take on new business this year? And you're getting pushed out for that new business because that's not.

Ron Saharyan: [00:12:52] Yeah. Were you upgraded? Yeah. Were you upgraded or were you.

David Leary: [00:12:56] Just handed off to somebody else? But this is the bigger issue of our industry. And I keep I've said this I've said this to Ron Baker. I said this when Joe Woodard was on everybody and even Ron, I'm sure you guys coach your your professionals right to hey, you want to get less clients that pay you more?

Ron Saharyan: [00:13:12] Depends on what you want to build. Yeah, that's what you want to build. But yeah, in essence, most of them want higher premium customers and not as many of them.

David Leary: [00:13:21] Yeah. And so they've handed me off to a new a CPA.

Blake Oliver: [00:13:24] So not in the firm.

Ron Saharyan: [00:13:25] In the same company or new.

David Leary: [00:13:27] Firm. Another, another firm completed the handing me off and he's happy to take me because for him he's probably okay, I'll get four grand out of this guy. He can let go of four of his 800 clients that are taking up his time. Right? Right. And so now where do those people go? And this and I brought this up on tax Twitter. All these people on Twitter send out my client firing letters this week. Everybody's doing the same thing across the board, which gets us to what happened. I've asked Mr. Ron Baker, I've asked this to Twitter, what happens to the bottom of these people? And they have no they're going to have to go to a TurboTax live situation. So when people say TurboTax is stealing your clients, that's bullshit. You guys are firing on your clients. It's a domino. I'm going to have a client because I'm still going to pay four grand or I'll have a this is.

Blake Oliver: [00:14:07] A good.

David Leary: [00:14:08] Somebody will take.

Blake Oliver: [00:14:08] This is a good argument to invest in into it. H&r BLOCK, you know, all the all the apps, all the companies that are going to take on those clients that are getting fired by accounting firms.

Ron Saharyan: [00:14:17] But so.

David Leary: [00:14:19] And.

Ron Saharyan: [00:14:20] I see the problem guys as well. We're blessed to receive a lot of inquiries from business owners that are looking to work with profit versus professionals. A lot of these business owners, unfortunately, are sub 150,000. Nobody wants to work for them. Yeah, if you want to work for them.

Blake Oliver: [00:14:38] You know, it is possible though, because, David, you've gotten me some great interviews recently on my earmark podcast where I talk to people who have built practices that are serving clients for a few hundred dollars a month in recurring revenue.

David Leary: [00:14:51] Yes. And they release their needs.

Blake Oliver: [00:14:53] That's the only way that you can do it, is you have to be like focused on like a super niche area of I'm just going to focus on real estate agents or I'm just going to focus on property owners or volume.

Ron Saharyan: [00:15:03] Yeah, volume. Scalable, less, less, less of us speaking together where we're the higher paying customers. We're weaving in strategic conversations throughout a 12 month period. Well, what you can do that when they're affording that investment, but somebody that's only can pay a couple of thousand 2000, you know us we don't have the bandwidth to spend, you know, an hour necessarily every month coaching them on helping them grow their business. They're going to they're going to be better suited off going to a large firm where it's more of the compliance getting done right. And what I always advocate, of course, is to create get the accounting done. And as you're growing open up, open up or budget for real accounting services, for advanced accounting services, I have a budget for an accountant that is has some business acumen that isn't just transactional, but can help you grow your business through their lens. Yeah, but you have to prepare for that investment much like you have to prepare for investing in a person or another piece of machinery.

Blake Oliver: [00:16:09] So. I'm willing to bet that this firm, this large firm, top you said top 200 firm, David, that you were with. We're not going to name them.

Ron Saharyan: [00:16:17] But every fraction probably don't care about you either, David, quite honestly.

David Leary: [00:16:22] Well, there is, you know, like, I want to make sure very, very clear the risk is great. I like you. I mean, you know these people personally, but like, I understand where they're coming from. Like. Like nobody wants to work 60 to 63 hours a week every single week for an entire year. And.

Blake Oliver: [00:16:39] Right.

David Leary: [00:16:39] But but this is what's broken about our industry. It goes back to the discussions we have, why we have 300,000 accounts that left the industry like this is just I'm experiencing the bigger problem of our space.

Blake Oliver: [00:16:49] And the question is my question is why is that tax manager working 60 hour weeks, 3000 hours a year? Why is that happening in that firm? And why is it just now? Go ahead, Ron. You've got your hand raised there.

Ron Saharyan: [00:17:04] I'm going to say, because it's poor management, poor systems, poor and poor, everything, you know, they're doing the same thing they've always done. They're not they're not growing. And I don't think that, you know, they have the a lot of the owners don't necessarily have the empathy for what their their employees are going through. They're more in for in that hour and that hour in that hour. And they just feel as though they're just going to get somebody else to come on in here and do it. They're just.

David Leary: [00:17:31] Not. I want to make sure I don't think this is specific to any firm because I'm experiencing not an ideal client perfect relationship with all the firms I'm working with. Right. So I don't think the problems this firm and then letting go me as a client, I guarantee you the other top 200 firms, I'll send out letters like this. Absolutely. I'd be shocked if there's a top 200 firm that did not send out letters like this and let go of millions of dollars of clients. I'd be shocked. Well, shocked that.

Ron Saharyan: [00:17:56] There's a lot of, I guess, experts out there that are saying, you know, cut your bottom 10%. Right. To make room for better customers. And I get it. I get that's good business practice. But I think what we're trying to address here is how do we help these people? How do we help them? Right. We're all trying to grow profitable, efficient accounting practices. Is that only going to be for the successful companies?

David Leary: [00:18:21] You know, we're only A and B, clients get served by accountants because there's just not enough accountants anymore. Everybody else, if you're if you're a C player, good luck. How fun. And so I did like firing the F clients. I get fired. You have clients, right? But people are letting go of I'm I'm a b b client. I got let go.

Blake Oliver: [00:18:39] Well, I maybe B and I would question the methodology for how they decided to let go of clients. If they're just looking at revenue and they're saying, I'm just going to fire all the clients that are not paying me as much revenue, then are you really freeing up time in your firm? Because maybe those clients, they're paying you a lot of money, are sucking up tons and tons of hours. Like, do you know that if you're billing hourly, if that's how you think of it, then every dollar of revenue is equal. But we all know as business owners that when we consult with clients, not every dollar of revenue is equal. But if you think in terms of time sheets, it is. And so, like, that's why I was shocked, David, because I think that you're actually probably a I bet you're an A client, honestly, compared to most clients out there because you do your bookkeeping, you understand how to reconcile your QuickBooks file and you give what I I've seen your work. It's good you spend.

David Leary: [00:19:28] Time, I scan the PDFs and I upload them to the you don't.

Blake Oliver: [00:19:31] Spend.

David Leary: [00:19:31] I play the.

Blake Oliver: [00:19:32] You don't spend like a decade in customer support at QuickBooks without learning how to do good bookkeeping thankfully. Right. So you and you upload the files you you don't as Christopher said in the live chat you don't send individual JPEGs, you know via email to your tax preparer. So I think you're probably you don't I think your return is probably really profitable, but I think the firm doesn't have a way to understand that. And so this is where these.

Ron Saharyan: [00:19:56] Usually the cringe factor. Yeah, right. They're not using cringe factor. They're not using the pain in the ass.

David Leary: [00:20:01] Maybe they did, Ron. Maybe they.

Ron Saharyan: [00:20:03] Did.

Blake Oliver: [00:20:03] Maybe I am willing to bet that, you know, I'm going to go to bat for you, Dave, and say that they did not vote you off the island due to your personality. I think it was really just like a metrics, you know, top line revenue driven thing. But yeah, it's a sad state, you know, that we don't have enough accountants. And the question is why does that firm not have enough talent? I'm going to bet it's because they're still hiring people in their local areas that have to come into the office, you know, probably. And they're not considering offshoring. You know, they're not.

David Leary: [00:20:34] Well, no, I think they have Philippines. I think they have South America. I think they even have some in India. So they if they.

Blake Oliver: [00:20:39] Did, though, they'd be able to do your return if they were really using it properly, I think. Yeah. Did you ever.

Ron Saharyan: [00:20:44] Talk? That's why I.

David Leary: [00:20:45] Said certainly so. So so I am going to get the CEO of this firm to be on the accounting podcast. Blake So you get an hour to dig in on this like journey of, of the, the reasoning, right? So because I wouldn't give them the price it's not, it's not I don't think this is typical and I'm sorry I think it's typical like everybody's letting go of clients and the decision process is. Probably different at every firm to. This episode of The Cloud Accounting Podcast is sponsored by Zoho. I'm sure you've heard of Zoho before. We've probably even mentioned Zoho CRM or Zoho Books on this podcast in the past, but you really know about Zoho. Did you know that Zoho has been around for 26 years? Did you know that Zoho has 85 million users? Did you know that Zoho has over 50 applications? Did you know that Zoho offers one subscription to 50 applications? Did you know that Zoho apps are integrated with other Zoho apps? Did you know that almost all Zoho apps have Zapier connections? Did you know that some Zoho apps can connect directly to QuickBooks Online, Xero and Sage Accounting? Did you know that Zoho offers an entire suite of solutions to run your firm, including a CRM expense tracking bookkeeping, a full office suite, a support ticket system, and workflow automation? Did you know that Zoho offers a suite of solutions for your clients bookkeeping, including bookkeeping, inventory invoicing, subscription management, and a checkout app? Did you know that Zoho has an accountant program? Did you know that Zoho advisors get free access to eight Zoho applications and a dedicated account manager? If you want to learn more about becoming a Zoho advisor, head over to Cloudaccountingpodcast.com promo slash Zoho. That is Cloudaccountingpodcast.com Promo for less Zoho Soho A one stop solution for all business needs.

Blake Oliver: [00:22:41] Well, I think that one of the reasons that some firms can't find accountants is because they aren't supporting remote work enough. And the firms that do allow people to work remotely are able to get talent. And the reason is it's in the data. The number of or the demand for remote jobs exceeds the supply. This is according to a LinkedIn story that I saw last month. Here's the quote.

David Leary: [00:23:06] And just when you say jobs, just accounting jobs.

Blake Oliver: [00:23:09] Or this is all jobs.

David Leary: [00:23:10] It's all jobs across.

Blake Oliver: [00:23:11] But I'm willing to bet that this goes to accounting to probably even more. Demand for remote work is showing no signs of waning post-pandemic, but there simply aren't enough flexible jobs to meet candidates criteria, says Axios. Just 15% of job vacancies advertised on LinkedIn are for remote positions, but 50% of applicants say they don't want to be in the office full time. So think about that. Only 15% of jobs advertised on LinkedIn are for remote positions, but 50% of applicants would like a remote position. So if you as an accounting firm support remote work, you are going to be able to staff up in my like it just seems natural right supply demand.

Ron Saharyan: [00:23:50] I would also take a look and question the data and what type of jobs there are. I mean you can't have remote working servers, right? So I'm wondering what that all of the data is. If they're talking professional services, I would like to see that broken out. But if there's if there's business owners out there, accounting business owners, bookkeeping firm business owners that aren't allowing remote flexibility and hear my voice, you're losing.

Blake Oliver: [00:24:16] You're losing all that potential talent, right. When you can only hire from your local area versus the whole world potentially.

Ron Saharyan: [00:24:23] And now we have the problem.

David Leary: [00:24:25] But but but that's like I think you're oversimplifying this. Like you start with like, well, local and local area. Okay, fine. There's maybe there's only so many CPAs in Tucson, but how many are really out there to hire anyways as as a complete industry, the bodies just don't exist.

Ron Saharyan: [00:24:39] Right. And also, what are what are you giving other than a paycheck to get up in the morning for. Right. And so, you know, maybe you are able to hire some local people. You get those local people, you're up and maybe there are a year or two out of college or they're fresh out of college. You get them, you train them, they get them going, and then you lose them because somebody poaches them. Why? Because you're not looking at them at the level that you should be looking at them and making the salaries equitable for somebody who is coming in off the street. Yeah, if I if somebody is drone with me a couple of years and now they have five years and I got them at a discount, a rookie contract if you will, right. Yeah. If I'm not paid them the next. To really retain them as though they were coming off the street. They're going to leave, especially if there's a better opportunity, a better culture and more flexibility.

Blake Oliver: [00:25:34] So, David, anything else you want to add to this story? We're going to follow up on this in future episodes.

David Leary: [00:25:39] I think, and then Ron could have half speak to this. And it kind of makes me wonder about, you know, the coaches. And if you're on LinkedIn at all, you get inundated by, I'll fill your inbox with more clients like, Don't get you so many leads. And I see these. And I'm like, Are they just naive to the industry accounts have more work than they could possibly do. Like they don't know. I don't know one accountant. I don't know one accountant that needs more clients. Everybody is busy. They've ever been now. And you're in that gray area because you guys coach, mentor, profit, first professionals. So I speak to this and you almost said it's bullshit. So let me. Yeah.

Ron Saharyan: [00:26:15] Any, any anybody that's promising leads. I run for the hills, you know. You know, it's not about the leads. It's never about the leads. It's about sharing the value and the benefits of working with your firm. Right? It's the experience from hello. When they're talking to if you're asking the same questions over and over the same people, you got to differentiate yourself. Right? And so I don't I don't like that what we're here to do Profit First is we're helping our members really share the value and the benefits of working with them in Profit First. It's just happens to be a component of the business. It's a tool that they're utilizing. But the issue that I really see, guys is over the years accountants have had it easy, right? It's like the pharmacist. There's always going to be business available and a lot of it is through referral. But now people like me, I'm looking for why should I work with you? Right? And there's a there's a skills gap because a lot of accounting firms don't know necessarily how to close a car door, let alone unseat the incumbent. And that's what a lot of people are looking for. You know, high, high profitability. Good businesses are not necessarily looking to change accounting firms. However, if there is an opportunity, if there is that that, huh, that catches my attention, maybe I'll I'll reach out to that firm and just see if they're different than what I have, see if they're better than what I have and if they're not. No harm, no foul. I'm already happy with what I got. And so we spend a tremendous amount of time helping improve that experience.

Blake Oliver: [00:27:56] So I totally forgot about this and I just remembered it. My friend, one of my close friends, just left her firm and went to a new one. And the reason why is kind of crazy. She didn't want to move. Also, sort of like we're talking mid-sized firms. So similar, David, to where you were getting your return done.

David Leary: [00:28:16] Similar. She's not a tax person or tax person.

Blake Oliver: [00:28:20] Tax tax senior with, I want to say like five years of experience, ready to make the move to manager. Felt like she was ready to make the move put in for the promotion on schedule. Got denied the promotion so denied the new title, denied the new salary. She feels she's got the skills and I believe she does. Very talented. Appeals the decision to her partner gets denied again. Tells me her salary, which is way under market even for a senior. So I said, Well, I guess the only way you're going to make more money is if you go out and find a new firm. Within one day she had two firms competing for her, offering her significantly more tens of thousands of dollars more per year than she was making before with a promotion to manager. You know, and she left forever.

Ron Saharyan: [00:29:11] Yeah. Yeah.

Blake Oliver: [00:29:12] It happened in, like, a few days. And I wonder, like, what was the firm that she was at thinking? What were they thinking? You know, maybe because they are in the same situation as David's firm.

David Leary: [00:29:25] And the other firms, probably the same situation. So they're like, well, we'll just pay more to hire somebody to fire a couple of less clients. And ultimately, I still think at the end of the day, the only way we grow the bottom of the funnel is all the way just to have to start growing up. And so the people make a decision like, I don't want to be a software engineer because I can make more being an accountant. So I and that's how we.

Blake Oliver: [00:29:44] I have a video here or just a screenshot really from a video that I want to share with you guys to put this in perspective. Okay. So are you able to see this here.

David Leary: [00:29:53] This chart? I got to make it bigger, but so yes.

Blake Oliver: [00:29:56] Okay. You see this? This is from a CPA Trendlines webinar from like last from January, I think. But but the data is, you know, through 2019. So it gives us a snapshot of we're looking at 2008 to 2019 here at the bottom, and we're looking at three things, right? The blue line is revenue and this is for CPA firms. So blue line is revenue and you can see it going from the left up to the right, revenues up 70%, 70% increase in revenue from 2008 to 2019. In CPA firms, expenses are up 61%, staff are only up 18%. And the pricing index, which I take it, is how much they've raised fees is only up 15%. So what has happened in revenue.

David Leary: [00:30:41] This graph like when's it start?

Blake Oliver: [00:30:45] The year 2008 is where the data looks to start, 2008, 2009, and then it goes up to 2019. So it's like a ten year snapshot from the last decade. So revenue goes up 70%, but staff only goes up 18%. So what happens when that happens in a firm that bills hourly? They work more hours. The staff work more hours and they get overwhelmed and they quit. And we saw over the last two years that 17% of U.S. accountants and auditors quit the profession. Why did they quit? I think it's really simple. I don't think people are complicated. I think it was too many hours they got burned out. And so.

Ron Saharyan: [00:31:23] Well, what is the 70, 61% in expenses?

Blake Oliver: [00:31:28] I think that's partner compensation. So I think what's happened is that and this you see this in the data partners are making half a million dollars a year on average. That is way up. All of this additional revenue is on the backs of staff and the partners are real and in the dough they're making tons and tons of money. This is in traditional CPA firms. And so staff that don't want to get overloaded and work those crazy hours, they leave. I mean, we've done this to ourselves as a profession. Like it's pretty simple. And actually the real crime here is, is you could have had the revenue go up without overwhelming the staff if you'd actually raised your prices right.

Ron Saharyan: [00:32:07] So like a 1 to 3% price increase, margin increase across the board is going to do wonders for the profitability of a company.

Blake Oliver: [00:32:16] Yeah. So so that's a this is the fault of CPA firm management, not raising prices, but bringing on clients without raising prices, overworking the staff, not bringing on enough staff.

Ron Saharyan: [00:32:27] And overpromising under-delivering or biting off more than you can chew. I think it's it's everything that David and I and you are saying, Blake, where it's the the ultimate tsunami where, you know, okay, they're getting tons of business. They can't control themselves. They can't say no. They can't say no. Right. Because they're coming on and they're trying to get theirs now. They have staff work the staff work, the staff work to support the staff. Staff is overworked because that is industry standard. Industry standard to work all these hours.

Blake Oliver: [00:32:57] That's crazy. So right over here on the right is the actual summary of like the thing that matters. So profit is up 94%. You know, and the revenue per full time employee is up 45%.

David Leary: [00:33:10] Wages for employees of firms. Not not partners are not up 45% in the last decade.

Blake Oliver: [00:33:15] No.

David Leary: [00:33:16] If you're making 100 grand in 2008, you are not making one.

Blake Oliver: [00:33:19] 50 Wages have basically been stagnant. Now they're finally going up dramatically. And we saw that with my anecdote of my friend who just, you know, got the pay increase. But it's still not as fast as I mean, I guess the last few years it's been even in terms of like revenue and wage growth, but there's still a huge gap. So what is this?

Ron Saharyan: [00:33:35] What about starting? Yeah, I mean, has starting the starting salaries increased? Because I remember when I was coming out of school, accounting majors were getting like 40 to 60. No, and this was 20, 30 years ago.

Blake Oliver: [00:33:47] It's recent. Go ahead, David.

David Leary: [00:33:50] I can ask let me I'm my head out of the studio for a second. I have in recent accounting grad who has an offer already. Let me ask. Hold on.

Blake Oliver: [00:33:58] Yeah. All right. Well, David goes. My bet is not really meaningfully. I mean, you indexed for inflation, and everything I've heard is like, especially like the big four. The salaries have basically been stagnant for, like, two decades. Meanwhile, cost of living has gone up, right? So.

David Leary: [00:34:12] Right. So I have somebody she's a graduate in accounting student. She is already signed a letter of intent with a top ten accounting firm, $65,000 starting salary.

Blake Oliver: [00:34:22] And what city is it.

David Leary: [00:34:24] In for a CPA?

Blake Oliver: [00:34:25] For a city like Phenix.

David Leary: [00:34:27] It's a top ten firm like.

Blake Oliver: [00:34:29] Tucson. Like, well, the cost of living matters, right? That's I'm curious about that.

David Leary: [00:34:32] Let me check.

Blake Oliver: [00:34:33] David, is I.

Ron Saharyan: [00:34:34] Actually I lost a Phenix employee. We hired a guy who was you know, he didn't graduate college yet. Yeah. He was getting a CPA sharp, dude. Very, very sharp. He knew all his life he wanted to work for the big, big companies. He got 70, 70, starting one of the big the big eight or four or whatever they are now. And he knows he's going to be absolutely miserable. He he's choosing to be miserable. He knows he's going to be working like a machine. And for the next couple of years, he's going to he knows that and he's going to hope to make partner. But that's that.

Blake Oliver: [00:35:14] But that's like that's like playing high school baseball and hoping to get into the MLB. The odds of making partner at a big firm, it's less than 1%. I know. So it's not that if that's what I don't understand accounting is kind of a conservative profession. So if you're conservative like don't bet on becoming a partner at the Big Four.

Ron Saharyan: [00:35:33] Well, they sell you on it. They sell you. Yeah, right. Yeah.

Blake Oliver: [00:35:35] Well, because if you do, the rewards are enormous. On paper, you make like at a big four firm, you're making $1,000,000 a year as a partner, but it takes you. At least 15 years to get there, maybe 20. And then you're working 3000 hours a year still.

Ron Saharyan: [00:35:55] You don't remember your kids birthdays.

Blake Oliver: [00:35:56] And you get divorced at least two.

Ron Saharyan: [00:35:57] Times.

David Leary: [00:35:59] And that's the bigger issue here as far as selling them on it. You can't sell anybody on this dream anymore because they look at somebody else who's the senior tax manager of of me who has 25 years experience. Right. And it's still having to put in 60 hours a week. So the part the promise of becoming a partner or principal is just not there anymore.

Ron Saharyan: [00:36:20] Partners aren't.

David Leary: [00:36:21] Retired. People are like, I'm out, my partners aren't retiring.

Ron Saharyan: [00:36:23] Retire at your apartment.

Blake Oliver: [00:36:24] Well, I.

Ron Saharyan: [00:36:25] Mean, they're staying longer.

Blake Oliver: [00:36:27] I don't know about you guys, but, like, my goal of working is so that I don't have to work someday. But it doesn't seem to. But I think I think this is part of the cult of public accounting, is that you go into it and then you become enmeshed in this cult of billable hours and working all the time. And it like changes how you think about the world and you value work more than you do anything else, your family, your life. I mean, there was a thread on Reddit that I was reading about, like, how do partners show off their, you know, all the money they make? And actually, most of the staff in these big firms that were posting on Reddit said most of them don't. They drive like old Saudis and like they're not even using the money that they're making. Like, what's the point? I don't understand. Now, of course, there's the partner. Every now and then who buys, you know, the Bentley ghost or whatever, you know, like, you know, the crazy car. But most of them aren't like that. So anyway.

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Blake Oliver: [00:38:25] I. I want to follow up on our previous episode where we we talked about what was it o. David, you had the story of the guy who was looking at KPMG or the military, and he thought the military would be easier than KPMG.

David Leary: [00:38:38] Oh, it was basically it was part of that article about the 30,000 people that were quitting accounting or 300,000. And he's an accounting graduate and he's like, I like the accounting classes. But then I went to work for a firm and I hated it. So I'm going to join the military.

Blake Oliver: [00:38:49] And so I posted that clip because I love that clip. I put that on Instagram and Sweet Law 812 commented, I'm getting out of the military and will be using my accounting degree. I'm more scared now than ever. Laughing emoji. So thank you. Sweet Law eight. One two. But you know, that's that's kind of nuts, right? I just feel like that's that's the world we're in.

Ron Saharyan: [00:39:12] I have never understood why somebody would want to get into that profession. I mean, I'm not a degree in accounting. I'm not a degreed bookkeeper or credited bookkeeper. I'm a business guy. And I just happened to be working in the accounting profession. Right. We don't teach accounting. We don't teach bookkeeping. We teach transformation when it comes down to it. And my wife is a degree in accounting. That's as close as you want me doing your books. And, you know, I'm like, Mary, what? I mean, I wouldn't be seeing her for weeks. I'm like, This is crazy. She's like, No, it's a norm. All their friends, everybody's work and work and work and work and work and work and work and work and work and work and work it. And they may not have regret now, but I bet they have a little bit of micro regret. Yeah. And I don't want to even have micro regret at my age at this point.

Blake Oliver: [00:40:06] Well, so maybe this is a good opportunity for you to give us the elevator pitch for Profit First. What do you guys do?

Ron Saharyan: [00:40:13] What are your too kind? I didn't come on here.

Blake Oliver: [00:40:16] Well, we made you wait 37 minutes, so, you know.

Ron Saharyan: [00:40:21] I was waiting. I was like, Oh, no, no. I was also introduced, guys. I was also a little scared, you know, coming on to the guys.

Blake Oliver: [00:40:27] So, you know, my experience as a bookkeeper who became a CPA is that I always sort of known about Profit First, but never really used it, never knew anyone who used it in their business. Right. And but, but I became acquainted with it, you know, in the last couple of years. And yeah, you know, it's funny as, as an entrepreneur myself now, David and I starting a media production business, we have all the same challenges financially of of your typical entrepreneur and I find my accounting reports to be honestly a bit lacking when it comes to actually operating as a business owner and not as an accountant. So that's what you guys aim to solve for entrepreneurs.

Ron Saharyan: [00:41:06] Yeah, well, financials are very important. I would never say that they're not. And you know, my offer still stands. I don't know if you're working with Liz, but totally gratis on me. Nonprofit versus professional. I want you guys to experience Profit First selfishly, and because I know it's good for your business. So what Profit First Professional is, is it's a membership organization, membership organization, limited membership organization. We're capping membership and 1000 because of the exclusivity, because everybody is certified and everything. And with all due respect to QuickBooks, too, everybody's watered down. We want our members to be unique and distinct and one of a select few, right? Also, the brand. We're pretty much the largest brand on small business profitability. The book's been translated into 27 different languages. Hebrew just came out this week. We certified. Yeah. Mazel tov. Yeah, we have certified accounting, bookkeeping and coaching firms in over 30 countries. I've established prophet verses UK prophet verse Canada, prophet verse Germany, Belgium, Netherlands, Australia, New Zealand. We have four folks in South Africa, Angola, Africa, Italy, France, you name it. And why it is so successful, why? Over 700,000 companies of all sizes are using it is because it's not accounting or bookkeeping.

Ron Saharyan: [00:42:28] It's a cash flow system that resides in between financials and forecasting. It's an allocation system. It's a front window approach to managing your money. Yeah, right. And so we once we're able to understand that it's not accounting and not bookkeeping, my Keith CPA Keith, he doesn't care how many bank accounts I have. He doesn't care what I call those bank accounts. All he cares is that I'm pushing a boatload of money over to him so we can do tax planning. Our bookkeeper doesn't care that Ron and Mike have 20 different bank accounts at a couple of different banks. Because here's the story. This is where people screw up Profit First. This is how Profit First can ruin a. Business. They're using it as a pal each account. They're collecting income into that account and they're trying to write checks out of that account. That's a reconciliation nightmare. Nightmare. But so what we're doing in its simplest form is we know the importance of having a sales tax account. Right? You guys would agree it's a pretty cool thing to have a sales tax account if you charge sales tax.

Blake Oliver: [00:43:51] Absolutely. Yeah.

Ron Saharyan: [00:43:53] Yeah. It's not your money. Yeah, right. Right. You would also probably recommend a payroll account.

Blake Oliver: [00:44:00] Absolutely. Keep those viral taxes and make payroll.

Ron Saharyan: [00:44:03] Yep. Right. Those are important things that you need to do. You're not writing checks. You're not collecting income. What you're doing is twice a month. You're taking that money out of those accounts and you're copying it into whatever the op X account, which is what you're going to be spending on. Yeah, that's pretty simple.

Blake Oliver: [00:44:25] What I love about the way I try to describe Profit First to people who have no idea about it is it's the thing I like about it is that you're taking the bank balance accounting that entrepreneurs instinctively do and you're modifying it to get like better, more value out of it to help them manage their cash flow better. In the same way describe so that they're not spending money that's not theirs and that's where businesses get in trouble, is they end up having all these liabilities because they've spent the money already and now, oh, I can't pay the payroll tax, I can't pay the sales tax. I can't pay these contractors that I owe money to. And we try it. We can do that with liability accounts in the accounting software. But to actually provide a like the up to date financials every single day that you need to be able to manage a business like that is there aren't enough people to do it right, David? Like there's not a there's not enough accountants to do that for small businesses. So.

David Leary: [00:45:19] Right. And what I love and correct me, Ron, I don't want to step on toes here.

Ron Saharyan: [00:45:23] Sure.

David Leary: [00:45:24] Mike, who authored the book, did you are you a coauthor or it's just.

Ron Saharyan: [00:45:30] Not so Prophet versus a book in a methodology. Profit First Professionals is the organization Mike and I co-founded to support the teachings in the book.

David Leary: [00:45:39] Got it. So? So I've heard Mike on an interview talk about.

Blake Oliver: [00:45:42] So Mike is like Jesus, and you're like the Pope.

Ron Saharyan: [00:45:48] Mike is Einstein. He's the crazy inventor. I'm just a business owner.

David Leary: [00:45:54] But but I think what the analogy I've heard him say before, which is really smart, it's like a toothpaste tube, right? And you you squeeze the tube and then it's all the things you squeeze out. And one of the things should be your profit. You take some of that out and then whatever's left in the tube, you'll figure out how to run your business on what's left. You better put that other stuff. You better put some of that toothpaste in other places. If not, you're just going to waste, you know, the tubes empty you just use.

Ron Saharyan: [00:46:20] Not exactly, but kind of. Sort of. Yeah. Okay. So one of the things you're talking about is a behavioral theory called a Parkinson's law, not Parkinson's disease. Parkinson's law. Northcote Parkinson is a theorist who basically said that US human beings are going to exhaust all the available resources in any given time. Stephen Hawkins also is used to echo that as well. That's why if I give a web developer a project six weeks and 10,000, they're going to take six weeks and it's going to cost me 10,000. If I give somebody else that same project scope and give them $20,000 in four weeks, they're going to do it in four weeks and $20,000. The flip side of Parkinson's is, is where the beauty is. Us human beings, when resources are sparse, when they're limited, we're going to be more creative, we're going to be more inventive, We're going to try to get more out of less. So that's where the tube of toothpaste analogy comes on it, right? So when you get a full tube of toothpaste, it's like a fat operating expense account, right? You lay some on the on your brush, some falls off, no big deal.

Ron Saharyan: [00:47:34] You brush your teeth. As that month continues, you you find yourself taking the tube of toothpaste, cranking it on the corner, you're squeezing it up. You might even buy a tool right to squeegee it up. That's innovation. That's creative. You're trying to get that little turtle head of a of a toothpaste out there. You get someone on your toothbrush. It's amazing how clean we can make our mouths with just a little bit of toothbrush, toothpaste. Right. And so that's the essence. What That's what we want to run our business on. We want to constrain the resources so that we are inventive, we are creative. We are trying to get more with less because when things are rocking and rolling and money is plentiful, we're not addressing those issues. We're. Pulling the wool over our eyes. Those issues are still there. The this PPP and all these loans and everything, those companies are still having freaking issues. This just math debt. And so, you know, that's what Profit First is that's why bank balance accounting is good because you can look at that every single day and that is already your constrained tube of toothpaste.

Blake Oliver: [00:48:49] And taking.

Ron Saharyan: [00:48:50] This.

David Leary: [00:48:50] Mix. Let's take this back full circle.

Blake Oliver: [00:48:52] Yes. I was just going to say that, David.

David Leary: [00:48:53] So if an accounting firms set a limit, none of my employees will work more than 40 hours a week. That's it. That's the limit. Well, they still get all the work done for all the clients.

Ron Saharyan: [00:49:03] Yes, absolutely.

Blake Oliver: [00:49:04] I think they will.

Ron Saharyan: [00:49:05] Yes.

Blake Oliver: [00:49:06] They will. I feel like a lot of that time when people are working 70 to 80 hours, especially in Big four firms, they're just sitting around the office. They're just looking busy. Right.

Ron Saharyan: [00:49:14] Like Ron said, face time.

Blake Oliver: [00:49:16] Yeah, they're pretending to work.

Ron Saharyan: [00:49:17] We have part time employees. We've have grown our business on part time employees. Our our part time employees are efficient, are effective, and they are awesome. This 40 hour thing is is, is, is a waste. Do your job, get your stuff done.

Blake Oliver: [00:49:38] And that's that's why I like I like Profit First. The idea of it is it deals with the psychology of money. Right. It's not it's not just the theory of it. It's the psychology of it. And that's how you get people to do the right thing, to do the thing you want.

David Leary: [00:49:59] This episode of The Cloud Accounting Podcast is sponsored by Anker. For many of you, getting paid by a client is a multistep and multistep workflow that looks something like this. Send a client a proposal or engagement letter via a quote unquote signature tool. Wait for the client to accept it. Add the client to the accounting system, generate an invoice, send that to the client, wait for the client to pay you, or maybe your advance and you set up separate PDF to collect their ACH or credit card info to set up automatic payments. But again, you wait for them to provide those details. You get the point. It's a messy manual process and I've even mentioned the spreadsheet you'll need to create to track all these steps. Introducing Anker. Anker automates your entire billing process for you end to end with Anker, you create one proposal that defines your scope of work, includes terms of service, allows your client to review and accept disagreement, even collects the client's payment info instantly to establish automated monthly payments for the client. They experience all this in just one screen. It's really that simple and clean. But Anker's dashboard, you always have visibility into the entire process from pending and approved agreements. It will even surface items that may need additional attention, like when a client needs to update their credit card expiration date and if the scope of work of the client ever changes. If monthly services or a one time additional charge, you can easily and clearly modify the agreement keeping you in the client on the same page. And the best part, there is no subscription fee at all. Anker only costs $5 per payment received. No matter how much you charge a client, it is still only $5 per payment. For more about using Anker at your firm, head over to Cloudaccountingpodcast.com promo slash Anker That is Cloudaccountingpodcast.com promo for A and c. H. O. R.

Blake Oliver: [00:51:38] So. So it's been great having you on the show. I want to be respectful of your time. We booked you for an hour. How can people learn more about Profit First? Where should they go?

Ron Saharyan: [00:51:47] Yeah, they can. One, they can hit me up on Facebook or two, they can go to Profit First professionals dot com and there's an apply button you can hit apply. You'll be asked to fill out some forms. You'll be asked to leave a deposit because I'm not here to explain what the book is. So read the book first and if it's your cup of tea, then schedule a call and we'll see if it's a fit. If it's a fit, great. If not, we could still be friends.

Blake Oliver: [00:52:11] That's awesome. Well, thanks, Ron, for joining us.

Ron Saharyan: [00:52:13] Thank you very much. I really appreciate the opportunity. You know, you guys have been on our podcast G map Grow my accounting practice. I love what you're doing with the earmark. We're going to be circling around and you guys know, totally gratis on profit versus professionals. I want you to experience Profit First. I want to help you architect your cash flow in your bank accounts and not only eliminate the pains, but achieve the wants. Awesome. All right, guys, thanks very much and I'll talk to you soon.

Blake Oliver: [00:52:39] So, David, we got a bunch of listener mail, and if we can go long, we'll go long and.

David Leary: [00:52:45] Go.

Blake Oliver: [00:52:45] On and make sure we get to it. Otherwise it's going to pile up. So this is a voicemail that we got from Jennifer Johnson. And let me know if you can give me a thumbs up when I start playing this to make sure you know you can hear it.

David Leary: [00:52:58] And this is Jennifer Johnson. She's the professor of accounting at University of Texas.

Blake Oliver: [00:53:03] And I forget which one.

David Leary: [00:53:04] Dallas campus, I think. I think.

Speaker4: [00:53:09] Hey, Blake and David, Jennifer Johnson from the University of Texas at Dallas, longtime listener and sometimes contributor. Hey, I wanted to share a couple of stories about an event I host every semester with my class. I do a networking event where I bring in, I don't know, 7 to 12 professionals every semester, and I break my group, break my class into small groups just to get an opportunity to talk with other CPAs and accountants out in the field. The students get a chance to ask questions that they may not ask under an interview or a job fair setting, and the professionals get an opportunity to give back. Well, this semester I think I even had two or three students who found internships through this low pressure opportunity. So I want to encourage educators out there, if you are listening, maybe take a chance on your students and bring those professionals in. They want to meet people. They want to get to know folks. And for the professionals listening, jump on in at that opportunity. If you get a chance to go into a classroom and meet with students, that is one of the best ways to help encourage them to continue on in the profession. From a student I got in an evaluation this semester and an email that said that this event was one of the most important things that they did and stood out to them throughout their whole career here at the university. And from the professionals who were involved, the feedback was amazing and they really enjoyed it. So I want to encourage everybody to continue to make those connections because it is very helpful. Thanks for all you do guys, and love the podcast.

Blake Oliver: [00:54:47] Thanks, Jennifer. Thanks for that voice memo. And that's a great idea. I mean.

David Leary: [00:54:52] Imagine that accounting students are getting offered jobs at mixers. Why? Because there's not enough funds. That's right.

Blake Oliver: [00:54:58] I know, right?

David Leary: [00:54:59] Hey, you're an accounting student. Come on. They should. What you should do is create, like, a bidding war, like an.

Ron Saharyan: [00:55:06] Auction.

David Leary: [00:55:08] For each student. Put them on stage. People have little placards. They raise their hands up and down, really drive up those prices.

Blake Oliver: [00:55:13] The problem with the recruitment issue is that most accountants in school are only ever taught about the traditional path to go to like large firms and do audit or tax. And so they get turned off by that because then they go on Reddit, they go on Tik tok and they see that it's kind of miserable the first few years and they are not willing to make the same exchange that people in the past where because they have more opportunities. And so if they're made aware of, hey, you can have actually work life balance, there are these firms that offer 40, maybe no more than 50 hours a week. Some are saying like we only work people 35 hours. You can choose the firm that fits your lifestyle and then we don't lose those people to other professions. We can actually keep them in in the firms that are willing to support that. And there's a there's a place for that. But the problem is the students don't know because the universities and the big firms are in bed with each other and like that's, you know, where do the universities get their funding from the big firm partners. That's why they promote the big firms. It's follow the money, Right.

David Leary: [00:56:06] And they're giving them offer letters basically at the end of their freshman year. So if they're reaching them first and basically they're reaching people when they're done with accounting 101. Here's the letter, an offer letter for an internship two years from now.

Blake Oliver: [00:56:19] So we got more listener mail. We also have comments in the YouTube live, Dhall said after having retention issues and bleeding talent for 5 to 6 years, my big boss is finally open to training up finance and accounting professionals from no experience in building capacity to train. That's great. And this is why a lot of firms don't train as. As they work everybody so much, there's no time to train anyone. Like the managers don't have time to train and then the staff don't have time to learn. Christopher said. Citron Cooperman very forward thinking firm first to take on private equity, I believe, has spun off their consulting practice to where non CPAs can become partner. And they have to do that because here's why They aren't getting enough managers and directors who want to become partner anymore. And if you don't have people buying in to the partnership, how do you pay out the partners who want to retire? The only way to do that is with private equity. I think they're smart to do it now because those partners are actually going to get that payout. The problem is the private equity money isn't unlimited. And so the firms that are unable to do that are going to have a huge succession crisis. And I think you'll have some firms that are upside down and they they have to renege on their retirement payments to their retired partners, because when the when the pyramid becomes thin at the bottom, you can't support it. They're basically big unfunded pension liabilities is what's happening in a lot of firms. Joseph said, Man, love y'all's show. I'm currently in community college for accounting. Do y'all have any advice on charting the course in my professional career in accounting. Oh, that's a good one. So, David, in Community College for Accounting, do we have any advice for charting a course? You know, I actually.

David Leary: [00:57:59] Quit courses they should.

Blake Oliver: [00:58:00] Take. Well, I think it's for the career. Like, where do you go once you have the degree, the accounting degree from community college. Right. Where do you go? I would say, well, I mean, based on what we said, don't go to a big firm. I would not be the best experience. You know, find a local firm, find a cloud based firm. Maybe. I know it can be hard to learn in a remote environment, but there's ways to overcome it. If you're comfortable with that, you could start at a remote firm.

David Leary: [00:58:24] And I would try to find a smaller firm that is very technology based. Yeah. Where you're going to get exposed to things like Zapier, air tables, Excel. I mean, everyone's going to be exposed to Excel, but something like a process. St Right. Tools, because if you can learn those tools early, if you, if you get really good at something like a process ST an error table and a Zapier and maybe a little RPA, if you can learn that stuff early, two things are going to happen. It's going to celebrate your career at other firms that don't have tools and processes implemented. They need this stuff. Or two, you're going to set yourself up for setting up your own firm one day.

Blake Oliver: [00:59:01] Well, I think it depends too. Like, what do you want to do? Do you want to work with small business clients? Do you want to work with corporations? I mean, think about not necessarily where you want to be in 20 or 30 years, because that's impossible to predict these days. But think about where do you want to be in a few years? Because if you want to be a corporate controller, there's a certain path to take. If you want to be a partner in your own firm, own your own firm, then the path that David suggested learning the technology is a great idea.

David Leary: [00:59:27] So you could I mean, at this level, you don't even have to do more schooling. You could go get certified in QuickBooks and Xero. You could go be a Profit First professional. There's stuff out there to give you the infrastructure and support for you to run your own firm and service small businesses that that are you going to be a $25 Million firm one day? Probably not. But you're going to have a real business and you might not have to spend anything more in school.

Blake Oliver: [00:59:51] Dhall, in the live stream, said With the current model, if more accounting firms say yes to 40 hours a week, more Davids will be let go. A firm would have to reevaluate how to get to 40 hours instead of setting a 40 hours cap. So challenging this idea that we can cap the hours and we can still do the work now. I think that part of the reason a lot of these firms are overworking their staff is because they didn't make the investments in technology that would allow you to work fewer hours. Like over the last ten years, 20 years, there has been an incredible leap in technology. As any listener of this show knows, cloud accounting increases your efficiency in a lot of ways. By four or five times I can do the work of a bookkeeper. I can do I myself, one person can do the work of four or five traditional bookkeepers, maybe more now. Right. And the same tech is coming to tax, it's coming to practice management and they haven't invested. And I think that's one reason why staff are overwhelmed. So I think that if you cap the hours, it forces people or you don't encourage people to work crazy hours, you don't reward them for working crazy hours.

Blake Oliver: [01:01:00] It encourages people to find efficiencies and find faster ways to do things. The problem with the billable hour model is that it just encourages people to be inefficient because if your bonus is linked to your billable hours, why would you go any faster or figure out ways to go any faster? Right. And, you know, it's you see this with just like underinvestment in technology across the profession, especially in large firms. Of course, that's not going to happen overnight. I was talking with a friend, You know, how could you actually do this in a larger firm that's based on a billable hours model, like, let's say, tax, right? All these tax returns have budgets. They have hours budgets, you know, a 20 hour tax return, that sort of thing. Right. Well, Jenny Jenny Taber, my friend, suggested what if you instead of having a billable hours budget, you had a point system and you just converted all those billable hours into points and you gave your tax preparers points for completing the return. And it didn't matter how many hours it took. And you incentivize people based on the points. I guarantee you that that 20 hour return, there's somebody who can figure out how to do it in a shorter amount of time.

David Leary: [01:02:03] I guarantee you those two fixed pricing models. Right, if you if you charge a client the same amount every month, it's in your best interest to get as efficient as possible, to work as little as possible to keep the same revenue.

Blake Oliver: [01:02:14] And these tax returns are effectively already fixed priced anyways. If you're using last year's price, that's a fixed price. Or if you're, you know, they're not they're not actually billed based on ours. If you go way over, it's not like the partner's going to build double or triple what happened last year, you know, unless something actually new happened, in which case it's not based on ours, it's based on the circumstances. Right. So that's possibly, you know, one way to do it, I've been thinking about that points based system, gamify tax season and try to encourage people to do more in less time. That could be one way to do it. So I just keep plowing through the listener mail.

David Leary: [01:02:49] Plot the listener emails. Yeah.

Blake Oliver: [01:02:51] So this was an Instagram message from Linda. Linda said, Hi, Blake and David, I just saw this article about Illinois lowering the CPA hours requirement from 150 to 120 to sit for the exam. They still have to complete 150 to become licensed. It's a tiny move in the right direction, but still not enough, in my opinion. Out outgoing Society President Todd SHAPIRO has been an advocate for change in the CPA profession. But change is still very slow. So yes, it is a step in the right direction, right? So now you can actually sit for the CPA exam before you've gotten your 150 hours, like why you had to wait before you know, it makes no sense. But anyway, now you can sit for it while you're in school still. So I guess you could like take your four years. Then while you're in your master's program, you could be taking the CPA exam, but still, like, what's the point of the 150 hours, right? Like, what's the value? I don't I still have yet for anyone to explain to me how the extra year of education makes anyone a better CPA. Like it just objectively doesn't. There's no evidence that it does. Right? And all the arguments about keeping it have to do with stuff like Barry Melanson was just at the Accounting Club of America and he said, Well, no other profession is reducing its educational requirements, so we shouldn't reduce our educational requirements. Like what kind of argument is that? Just because every other profession, which is also short staffed, is being stupid, is the reason for us to be stupid too? You know, it's like we don't have enough doctors. Eventually they're going to have to do something, right?

David Leary: [01:04:22] Yeah. I mean, and again, this is everywhere. It's every profession. Like everybody is going through this and not thinking, well, how do we get more accountants? We could raise the wages, but there's just still not enough bodies. Like at what?

Blake Oliver: [01:04:35] And it's not about.

David Leary: [01:04:36] Where is this going to tip? It has to be technology.

Blake Oliver: [01:04:38] And it's not about.

David Leary: [01:04:39] This is why.

Blake Oliver: [01:04:40] It's not about lowering quality standards. It's not about lowering quality standards because the fifth year adds no quality. The fifth year has zero impact on quality. Prove it that it does. It's so expensive it doesn't do anything. And it's just a money grab for universities that don't aren't doing their job. Most of them, some of them are, most of them aren't. They're not adding any value and just costing money. So sorry.

David Leary: [01:05:02] At least treat it like work with the universities. But here's the deal. Yeah, we are going to keep 150 hour rule so you get one extra year of education from these students. You make a lot of money, Mr. University, but in exchange, you have to promise us you're going to double the amount of accountants that graduate every year. You have to do whatever you do on your campus recruitment, encouraging, like whatever you have, you're going to produce more accountants, and we'll keep this extra year around for you to make your extra cash. But the universities aren't pumping out more accounts or pumping out the smallest amount is ever.

Blake Oliver: [01:05:35] So you know what the solution to the fifth year is? They say, okay, well, we're still going to require 150 hours, but we're going to make that year a year internship at the firm. And then the university is going to give credits to the student for working at the firm. So. So why why then have the 150 hour rule? Why not just require the work work experience? You're just giving money to the university. You're basically.

David Leary: [01:06:05] If you pass the test, you pass the test.

David Leary: [01:06:07] Right? Just get rid of it all. You don't even need a degree. If you pass the test, you pass the test.

Blake Oliver: [01:06:10] What you're what you're admitting by doing that is that the universities aren't adding any value, but you're still going to pay them. We're still going to. So the firms the firms are going to pay the university tuition for the student. Just give the give the money to the accountant. The worst person working more listener mail. Here we go. This is from Bernard. Hey, Blake, listen to this episode. Ron Baker this morning. So that episode he did Auditing Apathy with Ron Baker. Lovely episode, fantastic episode. Go listen to it. Continuing on, 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 by the customer, 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 AICPA, and the smaller firms are the majority of the membership are. Our firm is a midsize firm, 30 full time equivalents, of which 14 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.

Blake Oliver: [01:07:30] We have been outgunned by the CFP designation. 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 have 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's a little more difficult to switch only because we would 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 like your podcast and try to catch every episode, keep marketing Ron's book. And by the way, your foreword that you wrote for the book was great. Happy New Year. Thanks, Bernard. Yeah, actually, David, that's another way that your firm could have avoided firing you, as if they'd had everyone on subscription billing because they would have seen the capacity constraint. They wouldn't have taken on the new clients and fired you. I guarantee you, David, that somebody stole your spot.

David Leary: [01:08:40] And arguably this is my I think is the mindset of the industry. Higher quality, higher get higher, higher paying clients so you can work less hours. That's how everybody's trying to solve. They're working too many hours and it just trickles. And I think I'm going to go to this other firm and I'm going to steal the spot of four people that are going to get like, Yeah, and then those people are going to go have to scramble around and find somebody.

Blake Oliver: [01:09:02] I don't know if it really solves the problem. I don't know if what they're doing will actually make anybody work less. I mean, it's going to stop them.

David Leary: [01:09:10] And when you say what you're doing, what all accounting firms are doing.

Blake Oliver: [01:09:13] Yeah, right, Right.

David Leary: [01:09:13] I just want to make sure.

Blake Oliver: [01:09:14] Well, this this idea, what I.

David Leary: [01:09:15] Experience is not.

Blake Oliver: [01:09:16] Exclusive. This idea. Everyone's doing it right. This idea of fewer clients for more money. But are you actually reducing the amount of time you're working? Are you really? Because if it's again, if it's based on billable hours, then you can only make so much money as there are hours in the day.

David Leary: [01:09:32] Yeah, I think you'd almost have to do this, like declare bankruptcy where you We're going to get let go of half our clients. Half of them. And then we're going do nothing with our spare capacity is work on processes and automation and efficiencies. And then once we have everything working like a machine, now we'll start trying to add clients back on to our systems again. Like, you almost have to because. Because really, if you just cut it to get people down to 40 hours, again, they're not going to have elbow room in space to improve the world and the world their system.

Blake Oliver: [01:10:01] The reason that's not going to happen, that's not going to happen is because you cut half the clients, you lose half your revenue, and the partners don't want to take the pay cut and you owe money to the retiring partners. You can't not pay them. And yeah, that's the problem. It's sort of like the system is like it's not that any individual is doing bad things, it's the system is failing and at certain point it will break for some firms.

David Leary: [01:10:25] Yeah, I'm going to change my, my, my. My prediction from last episode. What's that like after the Southwest Airlines thing and the FAA? I think we are going to have an accounting industry meltdown in 2023, just some insane meltdown. Not just like IRS problems, like firms themselves. We're going to hear stories of firms. Remember how like two or three years ago, these little start ups weren't filing people's tax returns and these nightmare scenarios like that. We're going to start hearing that from legit firms. Well, firm did not file the tax returns. They ran out of time. They ran out bodies. They couldn't file the extensions long enough because maybe the IRS had some delays. I think we are going to see like accounting industry meltdown, eight 2020.

Blake Oliver: [01:11:05] Major customer service problem kind of thing. How about one more and then we'll save the rest for next time. Okay, so this is from Rusty. Rusty said Hello, Blake and David, longtime listener, first time emailer. I have just finished listening to your December 23rd episode, QuickBooks. They were on QuickBooks, and I wanted to comment on the voicemail from Kate Johnson. As you are aware, each state has its own CPA license requirements. I acquired my CPA license earlier this year in North Carolina. I met my experience requirement without working a single hour under a CPA. In North Carolina, an applicant must pass the CPA exam, meet the 150 hour education requirement, obtain three good moral character references from current CPAs and meet the work experience requirement. An applicant can obtain the work experience in three ways one one year in public accounting under the direct supervision of a CPA or two four years of teaching accounting courses at the four year college university level, or three four years of working in an accounting field in private industry. I completed my work experience for my CPA license application by working as a controller for a multi-state corporation. For the past five years. My employer didn't require a CPA for the position. Also, according to the North Carolina Board of CPA Examiners, website, work experience can also be met by self employment individuals working in an accounting field. So as I understand the requirements in North Carolina, someone who has been self employed running their own bookkeeping casts and or tax preparation or consulting firm can use that work for their work experience. So this is fascinating. Like, this could be a way for people who don't want to go work for a traditional firm and work under a CPA to get licensed. Isn't that amazing? I had no idea that this requirement was different in like.

David Leary: [01:12:54] Each state.

Blake Oliver: [01:12:55] Yeah. So isn't that crazy? Like you can get license as a CPA? They're requiring all this education, but no work experience. I mean, no work experience under like, in a CPA firm. How can the requirements be this different state by state? And I guess this is why. It kind of you know, I mean, it doesn't make sense that we even have state by state licensure. Everything's so different, you know, And like, how can the CPA advance when it's all different from state to state?

David Leary: [01:13:25] I got some work for you over the weekend. Okay. You got to go figure out, is there a loophole where people could just listen to, you know, 150 hours of podcast and take quizzes on the earmark app and that somehow it can be utilized as your education requirement? So you can go research this offline. But at some level, is there a business opportunity here to make some money off of these crazy requirements? Do we need to start a university.

Blake Oliver: [01:13:48] You know, start to get accredited? Maybe we could get some of that federal money. Oh, man. All right, that's it. We still got some mail we're going to hold on to if you want to send us mail or voicemails, email The Cloud Accounting Podcast at earmarks, CPE. We love hearing from our listeners. Join us on YouTube live. We stream most Fridays, Subscribe to our channel. You'll get notified when we go live. Or you should anyway. And yeah, we that's.

David Leary: [01:14:15] A good week to send it to us because news is a little slow right here. But then as soon as the tax season and the IRS servers get kicked on and they start accepting returns and all of that, that's when news starts to happen again. So I think, like this is a good week. If you want to send us stuff, send it to us this week.

Blake Oliver: [01:14:29] I mean, we didn't even get to the Trump, you know, CFO going to jail for five months. We didn't get to the company getting the maximum payment. We didn't get to the buy now pay later bubble, which is going to burst, which you kind of predicted that actually that might have been one of your predictions in the past. You've highlighted that we you know, I guess we talked a little bit about remote work. I got stuff I've saved up. So next week hopefully we can actually get back to just hack and through that news.

David Leary: [01:14:58] Well, yeah, I mean, we still work with a couple other accounting firms. Maybe I get let go again. I don't know.

Blake Oliver: [01:15:05] Well, thanks, everyone, for joining us. Thanks, David. I will see you here next week.

David Leary: [01:15:11] Next week. Bye bye, everybody.

David Leary: [01:15:14] 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 requests to clients for information to complete their work. When 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 Hub app. Check out Hector Garcia's new app called Right Tool for QuickBooks Online. Instantly increase your productivity with keyboard shortcuts and more. It will save you seconds. The app is free at the moment in public beta. Check them out at right tool app. That is right. Tool app. R. I. G. H. T. T. O. L dot app. I'm The Cloud Accounting Podcast Blake and I discussed the top accounting, bookkeeping and tax news stories each week, but for years we've always felt like there were so many federal tax related updates changes the news that we couldn't possibly ever talk about all of them on our podcast. Not to mention we probably lack the knowledge to go into the weeds about tax code and how it affects your clients.

David Leary: [01:16:35] The host, Roger Harris and Annie Schwab together have over 75 years of tax experience helping both individuals and small business owners navigate the complexities of the current tax law. Their expertise has been published in the Wall Street Journal, USA Today, the Morning business report, Bloomberg Business News and Accounting Today. And even as it led to offering testimony before Congress on small business tax legislation. Listening to this podcast will save you time from scouring, digesting scores of blog sites or IRS news feeds while keeping you up to date on the latest federal tax information needed to run your tax practice and best serve your clients and to save you even more time. Cpa is in EA's, Canada, CPA and C credits. Or listen to this podcast and don't worry. They're both fully NASBA, and IRS approved. Be sure to subscribe or follow the Federal Tax Updates podcast in your favorite podcast player today, or head to federal tax updates. Dot com That's federal tax updates dot com. 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?

Creators and Guests

David Leary
David Leary
President and Founder, Sombrero Apps Company
Ron Saharyan
Ron Saharyan
I believe you should have a business that supports you…not the other way around.
David Got Fired By His Tax Preparer
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