How Intuit and H&R Block May Have Tricked Low-Income Americans into Paying to File Their Taxes

We go in-depth on ProPublica's IRS Free File investigation that has implicated H&R Block and Intuit in misleading schemes to push taxpayers who could have gotten their taxes done for free into paid offerings. Also, follow-up on QuickBooks with Live Bookkeeping (which goes live in June), Divvy's gigantic $200 million fundraising round, OnDeck's concerns about small business credit worthiness, NetSuite's new analytics tool, why accidents like the Notre-Dame fire happen, and more


Show Notes

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This episode of The Cloud Accounting Podcast is sponsored by Xero. Atlanta, Denver, Houston, Los Angeles, New York City, San Francisco, Seattle - this May, the Xero Roadshow is coming to a city near you. As an accountant, when you join Xero, you'll not only have access to essential practice-management tools, but you'll be joining a collaborative community of accountants, and bookkeepers.
At the Xero Roadshow, you'll meet this community, learn how your practice can benefit from the full power of the Xero platform, and even earn CPE credit. To register for free to the Xero Roadshow USA 2019 event nearest you, head over to That is Cloud Accounting Podcast dot promo forward slash X-E-R-O-R-O-A-D-S-H-O-W. If you can't make any of the live Roadshow events, be sure to sign up for the free online Roadshow events in June. 
Blake Oliver: Welcome to The Cloud Accounting Podcast, [00:01:00] I'm Blake Oliver-
David Leary: And I'm David Leary.
Blake Oliver: Maybe we should re-title this podcast Intuit Weekly.
David Leary: It could be. I guess every week, Intuit is in the news, and this week there was so much news, I couldn't even keep up. Every day, you were sending me another article, another article, another article, another article ... It's all TurboTax.
Blake Oliver: TurboTax; also more on QuickBooks Online Advanced. Well, no, not QuickBooks Online Advanced. I'm sorry, there's too many stories; I'm getting confused; QuickBooks with Live Bookkeeping, but I do think we should probably [00:01:30] hit on this Free File fiasco, as I like to call it, first.
David Leary: How do you wanna do that? Do you wanna just kinda rewind, and go through some history? There's just-
Blake Oliver: Yes, yeah.
David Leary: Even this morning- just five minutes ago, you sent me another article.
Blake Oliver: I'm gonna try and give you the lay of the land, all right?
David Leary: Okay. 
Blake Oliver: From the beginning ... You may recall how we were discussing, a few weeks ago ... I'm not sure if it was last week, the week before? There's a bill that passed the House to make permanent the Free File program that the IRS has had with [00:02:00] Intuit, H&R Block, and a few other tax-preparation. online tax-preparation companies for many years now.
David Leary: That's right, and I was arguing this is not news. It's been going on for 16 years. I went and said, "Look at the Free File agreement," et cetera, et cetera-
Blake Oliver: Right. This has been extended, I imagine, on an annual basis, for years, and years and this bill would make it permanent. ProPublica, which is a not-for-profit journalism outfit, has been doing some investigative reporting, really, really fantastic [cross talk] 
David Leary: -I think they only do investigative, [00:02:30] deep investigative journalism. That's their whole mantra.
Blake Oliver: On April 22nd, they published a story called, "Here's How TurboTax Just Tricked You into Paying to File Your Taxes." It details a number of ways that Intuit and H&R Block are apparently circumventing the Free File program or pushing people who would otherwise qualify for the Free File program, by the IRS, into paid products.
Now, let me step back for a moment, one more time, and [00:03:00] just talk about the Free File program. What this is, is a program that the IRS created, with a bunch of tax-preparation companies, to help low-income taxpayers - those under  I think it's about $60,000 a year - use free online tax-filing software provided by companies, such as Intuit, and H&R Block, and others. The IRS committed not to build its own software, because it was partnering with these companies. That was the deal.
David Leary: In the spirit of it all- on the spirit of [00:03:30] it, it all makes a lot of sense. Hey ... 
Blake Oliver: Yes.
David Leary: You can file for free. You have to jump ... Just like with all government programs, you have to jump through some hoops; you have to go to the IRS's website, and click on it from there. The spirit of it is like, "Hey, Everybody wins here," right? 
Blake Oliver: Yes. The number's actually $66,000 a year. With this program, if you make less than $66,000 a year, you're supposed to be able to file your taxes for free on a federal basis, using this program. ProPublica decided, "Okay, let's try, and actually do that. Let's act like consumers, and [00:04:00] go online, and search for these programs." When you do that, when you go on Google - at least it used to be this way, a couple weeks ago - and you tried to search for term, such as 'IRS Free File taxes,' what you will find, most of the time, is ads, or pages that direct you into supposedly free filing programs that end up up-selling you. Most of the people who think they're gonna file for free, end up paying money.
To do this investigation, the reporters from ProPublica [00:04:30] pretended to be various consumers. For example, they started the process by creating the profile of a TaskRabbit house cleaner, who makes $29,000 a year." They entered extensive personal information into the site that they found on Google. It was TurboTax ... It seemed to be free, but then, after entering all this information, they were told that the house cleaner doesn't qualify for the free program, because that person is an independent contractor, and the charge is now $119.99; $120 to file. [00:05:00]
This is not unusual. They did more digging. On April 26th, ProPublica published a story, "TurboTax Deliberately Hit Its Free File Page from Search Engines." Intuit, on its official Free File site - the one where you can actually file for free - they had put in a code, a no-index code, into their HTML, and their robots.txt file, which instructs search engines, like Google, and others, not to index that page, not- so people can't find it.
David Leary: They [00:05:30] just ignore it, so that way ... They're just on Google- don't put this in your search engine. That's basically what that does.
Blake Oliver: Yes. 
David Leary: When I saw that screenshot, and that's when this really exploded, I think, on Twitter, and everything else; that's when this moved from it's kind of bad that people that don't make that much are having to pay, to, okay, something's  deliberately happening here.
Blake Oliver: I didn't know this, but apparently, TurboTax has two different free products. They have TurboTax Free Edition, and then, they have TurboTax Freedom Edition. TurboTax [00:06:00] Freedom Edition is the IRS Free File version - the one that will not up-sell you; the one that is truly free for people making under a certain amount every year. TurboTax Free Edition is not affiliated with Free File. That's the one where you can start for free, but then you will find out, when you use certain forms, or you have a certain tax situation, that you have to pay. Most people, it seems, end up having to pay when they start with TurboTax Free Edition.
Intuit, and H&R Block were [00:06:30] hiding their Free File sites from search engines, directing people into other free products that were not affiliated with IRS Free File, and then up-selling them. The reason this matters is because, in exchange for the IRS promising not to create its own Free File online tool, Intuit, and H&R Block, and anyone else signing onto this agreement, they committed to promote the Free File program, and to try and get people to use that. It's actually in the language of the agreement.
David Leary: I think TurboTax has their own [00:07:00] blog post out about this, and I think they talk about that - how they have promoted it in their ... That they have raised awareness of this, and they actually process more than any of the other companies that are in the Free File Alliance, et cetera. At the same time, fundamentally, I think one of those examples was like a grandma who made $12,000 a year, or $11,000, had to pay ... 
Blake Oliver: Here is the exact language from the Free File agreement. It says, "Members shall work in concert [00:07:30] with the IRS to increase electronic filing of tax returns, which includes extending the benefits of online federal tax preparation, and electronic filing, to economically disadvantaged, and under-served populations at no cost to either the individual user, or to the public treasury. Members shall work in concert with the IRS to increase electronic filing at no cost to the individual user, or public treasury." This, to me, seems to be the opposite of that.
David Leary: This is interesting, right? Is this- obviously, [00:08:00] it's gonna be up to interpretation, and now, politicians are getting involved, right? I do know that Intuit always had ... They would set up time where people could just go to the Intuit local site, for example, in Tucson, and people could go get their taxes done for free. Intuit employees would help them do their taxes for free. It's like, there's nothing that says how much has to be done for free.
Blake Oliver: No.
David Leary: Every return? Educating the market? Is it possible to say, "We did free filing. People came to our site and we did that - the physical site - and we did free filing." Is that enough? Are [00:08:30] they upholding this agreement, at that point? I don't know. 
Blake Oliver: No, I don't think so. They committed to increase this program, to help it grow, but, when you look at the numbers, the number of people actually filing for free has declined over the years. It's shocking, actually, how few people who qualify take advantage of this. 70 percent of taxpayers are eligible for Free File options. Only three percent, or fewer, use them every year. Why is that? Well, [00:09:00] maybe it's because they can't find it. Maybe it's because they're directed into paid options. I just find this to be unconscionable.
David Leary: It's on the IRS's website, but it's also not very ... I follow the IRS on Twitter. I've never seen them tweet, "Hey, go here to file for free." It's not something that's big on the IRS website, either. It's almost like everybody ... It's not out there enough, or people don't know it exists.
Blake Oliver: The IRS deserves a lot of criticism, too. Apparently, an independent panel - advisory [00:09:30] council - last year said that the IRS was exercising deficient oversight of the Free File program, and recommended changes. The IRS disregarded those changes, and said, "Oh, no, it's fine. There's enough people taking advantage of this." The tax-prep companies - Intuit, which is the dominant one - deserves a lot of criticism for this, and the IRS, too, for not looking out for these taxpayers they're supposed to be looking out for. Only three percent of eligible taxpayers are using this program. That, [00:10:00] to me, means there's a problem. There's more to talk about, actually. There was an article that just came out yesterday - another ProPublica article. They interviewed former Intuit, and H&R Block employees to find out [cross talk]
David Leary: Before you jump into that, I actually saw, like three days ago, there was an article on ProPublica that came out ... I think I saw a tweet. They were actually looking for ... It's a form. I'll read the headline: "Have You Worked for Intuit or in a TurboTax Customer Support [00:10:30] Role? Have You Worked for Another Tax-Prep Company? We'd Like to Hear About Your Experience in Software ..." In Free File, et cetera, et cetera. They actively, about four days ago, five days ago, were actively wanting people to fill out this web form and contact them. They even made a secure drop-file box, et cetera. I think the article you're about to talk about is the information they gained from this survey, or web form they put out there.
Blake Oliver: Yeah. Apparently, H&R Block explicitly instructs its customer-service staff [00:11:00] to push people away from its free offering, according to internal guidance obtained by ProPublica. "Do not send clients to this website unless they are specifically calling about the Free File program," the guidance states, referring to the site with the company's free option. "We want to send users to our paid products before the free product, if at all possible." 
Now, that's H&R Block. What about Intuit? A former mid-level Intuit employee said that steering customers away from TurboTax's truly free option is a "purposeful [00:11:30] strategy." The article continues, "For people who find TurboTax through a search engine, or an online ad, 'the landing page would direct you through a product flow that the company wanted to ensure would not make you aware of Free File.'" It just keeps going ... "The entire strategy is to make sure people read the word 'free,' and click our site, and never use an actually free product," the former mid-level employee said. "In reality, TurboTax's Free Edition guides many people to a product [00:12:00] that costs them money. It's only free for people with the simplest tax situations. The vast majority of people who click that will not pay zero dollars," the former employee said. 
Apparently, it's an open secret at Intuit that helping customers find the Free File program would be bad for business. There was a May 2017 meeting of the marketing team at TurboTax's San Diego headquarters. The tax-filing season had just ended, and a dozen or so staffers, up to the senior-manager level, were brainstorming. A new employee proposed that customers going through TurboTax's interview-style [00:12:30] filing process, who were found to be eligible for Free File, get a hard recommendation - essentially a pop-up window - to be routed to the truly free product. The response - laughter," according to the former employee. The meeting quickly moved on."
David Leary: Yeah, I think another thing in that article was a former TurboTax Vice President of Product Management, a decade ago, Heather Samarin, and  ... ProPublica found this on her LinkedIn profile that she was charged with addressing the threat posed by the IRS Free File [00:13:00] program; that she had revamped the TurboTax marketing strategy for low-end tax filers, driving a hundred-percent increase in revenues. This obviously goes back a long time. It went from Governor Cuomo, in New York City, wanting an investigation, and, as of this morning, I just saw Elizabeth Warren wants one. This has become a PR nightmare for-.
Blake Oliver: This is Headline News/CNN/Fox News fodder, at this point.
David Leary: This is an election issue. This will be an election issue, for sure.
Blake Oliver: There's a chart [00:13:30] that shows the use of Free File declining. It peaked at 5.3 percent and declined to 1.9 percent; less than two percent of tax returns are filed using this program, even though most people qualify.
David Leary: I didn't think about this til right now, but what would be an interesting graph to overlay over that is people searching for 'TurboTax free,' or 'file tax returns online for free' - some of those Google searches over time - and see are the same amount of people searching for that, now, or has that just naturally decreased? It's an interesting one.
Blake Oliver: Of [00:14:00] course, the timing is terrible, given this Taxpayer First Act that is in Congress right now. It passed the House with no opposition, and now, the fate, in the Senate ... I think it's dead. I'm guessing it's dead, given all of this bad news. It is co-sponsored by Senators Ron Wyden, and Charles Grassley, on the Senate side. In the House, it's sponsored by John Lewis, and Mike Kelly. There is a statement out from Ron Wyden, the Senator. [00:14:30] He's the ranking Democratic member of the Senate Finance Committee, as well, and he said that he plans to raise Intuit's misleading marketing with the IRS. "Intuit's tactics to reduce access to the Free File program, and confuse taxpayers are outrageous. The IRS agreement with the tax-preparation-software industry requires companies to work to increase the number of taxpayers who file their taxes for free. Steering eligible taxpayers away from filing for free or blocking the Free File page from search results violates the spirit of the agreement and calls into serious question the justification [00:15:00] for the program."
David Leary: I don't necessarily think these things ProPublica discovered are something that just started this year.
Blake Oliver: No, no, can't be. 
David Leary: Obviously, this has gone on for a long time. It really just piles into ...  I mean, somebody like Elizabeth Warren's gonna be all over this, because this piles right into her 'break up the tech companies; don't trust the tech companies.' It's just another example, where, regardless if this was shady, not shady, on purpose- regardless of all that, it just doesn't look good for Intuit, in any way, shape, [00:15:30] or form. Intuit even knows this. I don't know if you saw ... I sent you an article about the domains Intuit's been buying. Did you-
Blake Oliver: Oh, yeah, no ... Yes, I think we should list some of these out, David.
David Leary: I think I remember Intuit did this once before, a few years ago, when I worked there. I remember, early days of electronic distribution. There was something wrong, and the distribution center at that time was drop-shipping mufflers to people's houses, instead of TurboTax. I remember people were all getting upset ... I think, at one time, [00:16:00] I remember, in the past, Intuit had to buy domains like this, but I didn't know there was a website that covers when people buy domains like this. Intuit's been - 
Blake Oliver: Yeah, the headline is great. 
David Leary: -buying a bunch of domains. Yeah, go ahead, and read the headline, if you want.
Blake Oliver: Well, I don't want us to have to get an explicit rating on iTunes, so it's, "'F*** Intuit,' says Intuit. Tax-Prep Company Registers Derogatory Domains as the Public Dials Up the Heat." Here's just a sampling of the domains that Intuit has registered:,, [00:16:30]
David Leary: TurboTaxScam, TurboTaxExpose, TurboTaxReports ... There's a bunch that are on there, and they're all ... I get it. Companies have to do this. You've gotta protect that brand. You don't want somebody spinning up a website that says " You gotta keep those in your- under your holdings. We should probably go get, and protect ourself, as well. The fact that this just ... Is there a date [00:17:00] when these got registered? If it's recent, though, in the last ... Past month; 30 days- 
Blake Oliver: Well, it's supposedly recent, yeah. Intuit's in damage control more than just for registering domains. They've also apparently created a special customer-service group to handle these inquiries, because now, people are calling asking for refunds. It's a lot of people, you can imagine. MarketWatch has a story, an interview with a guy who did call. He's a [00:17:30] 60-year-old man who said that he paid TurboTax for tax prep, even though he made less than $30,000 in 2018. 
When he called the company to ask for a refund, after reading the ProPublica piece, a customer-service manager told him the ProPublica stories were "fake news." Then, here's his quote in the article, "She said what I read was fake news, and I shouldn't believe everything I read," wrote the taxpayer. Steven Mueller, in a note to ProPublica reporter Justin Elliott, who shared it on Twitter. "She was very rude," Mueller added. Mueller confirmed the exchange to MarketWatch, [00:18:00] and said the experience infuriated him. Worse still, he didn't end up getting a refund, he said.
David Leary: I feel like I read an article that somebody did get the refund. Maybe it was a tweet or something. There are so many of these articles [cross talk].
Blake Oliver: These are millions of tax returns, right? 
David Leary: Yeah. 
Blake Oliver: So, I imagine that Intuit does not wanna give out millions of refunds.
David Leary: No. We're gonna find out. Next week, we'll be talking about the story again. This is not going away. Elizabeth Warren jumped all over this, this morning. This is now a much bigger story. We'll see where it goes next. [00:18:30] In the meantime, I have a whole different browser open with 10 other stories, so I don't know ... Blake, is there anything else on this one? Did we miss some part of this? 
Blake Oliver: QuickBooks Live? Any update on that? 
David Leary: Yeah, so QuickBooks Live, there was a really good video. After we recorded Friday ... Remember last Friday, we talked about is Intuit marketing QuickBooks Live to ProAdvisors that are connected to clients, or to clients that are connected to ProAdvisors? 
Blake Oliver: Right. 
David Leary: I don't know, we recorded ... Three, four, or five hours later, whenever it was, Rich Preece, who's Vice [00:19:00] President for QuickBooks, he went on Hector Garcia's Friday Night Live - it's like a Facebook Live video - for about 25 minutes. It actually was very, very good. Rich Preece, I thought, was very upfront, and honest about what's coming. I'd recommend everybody go watch the first 20 minutes of that video. I think, for me, the couple takeaways that were really in there: there was some sort of bug causing that to appear for some customers, so it wasn't [00:19:30] intentional-
Blake Oliver: The issue was that people were freaking out on these Facebook groups because their clients were seeing advertisements for QuickBooks Live, even though they were connected to an accountant already, and Intuit had promised not to market QuickBooks Live bookkeeping to anyone who was connected to an accountant, and he's saying it was a bug. 
David Leary: It was essentially a bug. If people want more details on that, go listen to last week's episode, and then ... Pause this, go listen to last week's; come back, and you'll be right [00:20:00] there. A couple of other big takeaways. This is launching, which you and I have been saying, since we broke the story. This is coming; it's inevitable. He said this is launching. He also mentioned that Intuit will own the relationship.
Blake Oliver: I have a date for that, by the way. One of our listeners attended the Woodard Town Hall with Rich Preece, recently, and messaged me on LinkedIn. Thank you,  Ray Mayer. He said that QuickBooks Live is officially launching on [00:20:30] June 3, 2019.
David Leary: Yep, that was the other takeaway. Four takeaways. 1) this is a bug. 2) it's launching - like this is launching as a service, regardless. 3) Intuit will own the relationship with the customer ... Really, the big news in June, this is going to be live, and marketed to every single- all the visitors on Obviously, right now, there's us, and our little listener group that know about this; the Facebook groups ... I would argue the Facebook groups, [00:21:00] and listeners of our podcast is a teeny percentage. If I'm guessing, 5,000 ProAdvisors know about QuickBooks Live.
Blake Oliver: Well, yeah, because that's about how many people are actively in these Facebook groups. There are something like tens of thousands of ProAdvisors- 
David Leary: There's 100,000 ProAdvisors. 
Blake Oliver: Yeah. 
David Leary: When this goes on, that's when we're gonna see some really interesting reactions. This is coming; everybody knows it's coming, but, yeah, them owning the relationship with the customer is really an interesting statement. Everybody should go listen to that, and get it from Rich's mouth, himself. [00:21:30] It's a good 20 minutes of your time.
Blake Oliver: Ray had some good takeaways from the Town Hall, as well. He said that Intuit plans to use TurboTax Live personnel to staff QuickBooks Live positions? That's how they're gonna ... I was wondering about this, how are they going to ramp this up quickly enough, because, so far, they've said they only hired 10 people in Idaho, right? 
David Leary: Yeah. They have the model. Rich Preece talked about that. He talked about that they have, for TurboTax Live ... Let's say you, Blake, you wanna be a QuickBooks Live person/ProAdvisor. There's [00:22:00] a little bit of a test; a little bit of certification; they ship you a laptop, microphone, video camera; they just- you get it in a box, and you can start doing it.
Blake Oliver: Mm-hmm. 
David Leary: It's one of those on-demand type things. Maybe you have your own practice, but maybe on Tuesdays, things are slow. Kind of like an Uber driver, you could just pop in, take a couple questions, assist somebody, get back off, and make some money on the side. Like I said, it's worth everybody's time to go watch the first 20 minutes of that video. It's really, really valuable.
Blake Oliver: Anything else about Intuit before I [00:22:30] move on? That's all I got. 
David Leary: There was a slew of price increases across the board for- 
Blake Oliver: Oh, no, yeah, the price increases! I forgot about that! 
David Leary: There's just a lot, and even that's hard to keep up with. Desktop's gone up in price; the wholesale prices. There's just been a lot of change, and it's ... There's just a lot of change happening in a short a time, and it's been a crazy 8  to 10 weeks for Intuit, I think.
Blake Oliver: Yeah, the timing on these price increases couldn't be worse, and it's significant, right? Do you happen to have that in front of you? Shannon [00:23:00] posted in The Entrepreneurial Accountant's Facebook group that she got three emails from Intuit informing her of price increases. "Perhaps they could have combined them all into one," she said. Probably would have been better, rather than hitting somebody three times in a row-
David Leary: Well, it feels like three different departments, like completely not ... The desktop team's like, "We're gonna increase prices." It's all done in a silo versus the wholesale QBO prices, versus the QBO Advanced prices. It's like a bunch of silos are just doing their own thing.
Blake Oliver: QuickBooks Online Essentials [00:23:30] is going from $35 a month to $40 per month, and the Wholesale billing is staying at 50 percent, so that's now $20 dollars per month. QuickBooks Online Plus is going from $60 per month to $70, and again Wholesale pricing stays 50 percent. That's not, I guess, terrible. It is a significant increase - over 10 percent for Online Plus-.
David Leary: There's perspective here, though. One thing I've learned after being in this industry for a long time [00:24:00] is small-business owners are not price-sensitive. It's the accountants that are price-sensitive.
Blake Oliver: Well, I don't know about that- 
David Leary: Now, the small-business owners are price-sensitive on how much their accountant charges them, but they're really ... If they have a solution that's solving a problem, five bucks more a month, 10 bucks more a month isn't ... They don't care, they'll pay it; but the accountants start doing the math across all their clients, and they get a little panicky about it.
Blake Oliver: Here's the thing, I think, that's pissing people off the most is that the ProAdvisor software bundle that you pay for annually is [00:24:30] going up by $100, from $349 to $449 per year. That's a significant price increase.
David Leary: That's the desktop-software bundle [cross talk] 
Blake Oliver: That's the desktop-software bundle, and Premium is going up by $250 per year,  which is almost doubling it. Then, yeah, Desktop Accounting is going up 100 bucks a year, which is like 25-percent price increase, in total. 
David Leary: I think some of that is- it's to [00:25:00] drive more accountants to QuickBooks Online. 
Blake Oliver: Yeah.
David Leary: QuickBooks Online, for accountants, and bookkeepers, has always been free. QuickBooks Online [cross talk] free, everything ... On the Desktop side, you have to pay Plus on top of that; membership programs like that, with desktop software, they have to charge for ... It's very confusing with the SaaS, and SaaS just gives a lot more freedom, in those cases, of doing things for free, but, if you're paying for it, that's a big jump, right?
Blake Oliver: Yeah. 
David Leary: One thing that I think I got, and I think I mentioned it [00:25:30] when I was at the AICPA event in January - accountants really want a 12-month notice before prices change, because ... They understand if prices are gonna change for a software app, but they need 12 months, because so many are trying to move to fixed-rate pricing, and flat-fee billing. They've already figured out their costs to their clients, and they can't just randomly change it. They need to kinda have a 12-month ramp-up to get those price changes out to their clients.
Blake Oliver: All right, let's pivot, and talk about something other [00:26:00] than Intuit.
David Leary: All right. You wanna ... What should we touch on quickly?
Blake Oliver: How about another app that is not Intuit? How about Divvy? Divvy is raising $200 million in a Series-C round. That is a crazy amount of money for an app that ... I haven't- I don't know, do you pay attention that much to Divvy? [cross talk] heard about them?
David Leary: I use it. I use it- 
Blake Oliver: Oh, you're using ... You use Divvy? 
David Leary: I actually like it. I love the concept of spinning up virtual credit cards. I have a virtual credit card [00:26:30] for Uber. I have a virtual credit card for QuickBooks. Virtual credit card for all these products I use, because-
Blake Oliver: Wow. 
David Leary: -if one of these companies gets hacked, I don't have to go fix my credit card in 35 SaaS apps. I love the concept of virtual credit cards. I have a Divvy  card. I use Divvy, but I'm hoping they spend some of this $200 million on a QuickBooks Online integration. They don't integrate with QuickBooks yet. It's just like, "Come on!" 
Blake Oliver: What do they integrate with?
David Leary: I don't think anything yet. I just beg, like spend $100 million of that on a QuickBooks integration ... Something. It's [00:27:00] just some amount of it. Because, you know all this money is gonna go in advertising, and it's maddening. I wanna QuickBooks integration, Divvy. Come on! 
Blake Oliver: Divvy is virtual credit cards. Do you also get a physical one, too? 
David Leary: Yeah, I have a physical one, as well, yep.
Blake Oliver: Okay, so you get a credit card; you can tag your transactions in an app on your phone ... I assume scan the receipts, too, so you don't have to do expense reports, too? 
David Leary: They've added [cross talk] stuff like that. Yep. That's been added in the last year, or so. 
Blake Oliver: You can see [00:27:30] the transactions as they happen. You can set budgets for your team. You can give cards everyone on your team. What is really interesting about Divvy that is fascinating is it is completely free. They do not charge. The way they make money is on the interchange. You're basically trading the cash back you might get from a business card for Divvy, and all the features that they have that your cash-back card wouldn't, right? That's what it seems like the trade-off is, to me.
David Leary: For me, it was a situation where traditional banks would not give me a credit card. [00:28:00] I have a Discover card. That's a personal card. No problem. Tried to get a Discover Business card ... I actually tried to get a Discover Business card, because I got a flyer in the mail that said it worked with QuickBooks. Discover instantly said, "Nope, you don't get a credit card with us." You have to go to alternative lenders, like Divvy ... 'Alternative lender' is not the right term, but it is. They're not a traditional bank.
Blake Oliver: Divvy does kinda hint at what they're gonna spend the money on. They want to  become "the financial nervous system of every company; the indispensable part [00:28:30] of the finance tech stack for a team to manage their spending before it actually happens, not just after." They're creating what they call an entirely new category of 'pre-spend management.' I imagine that means that eventually you'll be able to do a purchase order on your device, and get approval for it before you spend, which, to me, makes total sense. Expense reporting is after the fact. Purchase Orders are supposed to be what ... That's what you really [00:29:00] need to do to control spending in your company, but most companies don't do it, because it's too arduous.
David Leary: The sweet spot, I think, for this is people that need those controls ... Think of a nonprofit, where you have to predetermine everything that's spent by each person, or each employee ... If you're ever in a situation, where you have lots of subcontractors. If that person has to go to Home Depot to buy something for a job, you can instantly just add credit to that card, and instantly pull the credit away.
Blake Oliver: Yeah. 
David Leary: It's actually slick. It's got a lot of budget controls; it's cool, but they're also [00:29:30] trying to be, like you said, the nervous system. also is doing that. You can get virtual credit cards with now. There's a lot of competition; a lot of money being tossed this way to become that payments engine of business.
Blake Oliver: Yep. What else is new? 
David Leary: Let's see ... I guess, related to alternative lending, and payments, OnDeck gives out small-business loans, and there's been a rise of companies like OnDeck - Cabbage, et cetera - post-2008, when no small businesses could [00:30:00] get a loan from a traditional bank. They flocked ... Even QuickBooks has capital; Xero has their loan product. I forget what that's called. Squares is in that loan game. OnDeck's latest earnings announcement, they started to hint at the credit quality's worsening.
Blake Oliver: Uh-oh ... 
David Leary: The percentage of loans that were past due is now 8.7 percent. It's up from 2.7 percent last year.
Blake Oliver: You mean 6.7 percent.
David Leary: Oh, sorry, 6.7, yes. I need thicker [00:30:30] glasses. It's moved two percent. They're gonna start tightening how they're gonna distribute this money, and these loans. I always thought all of these services that are like this are charging pretty high rates.
Blake Oliver: Right. 
David Leary: I think OnDeck takes way higher than traditional, which, a lot of them take on more risk, but, obviously, that pendulum is gonna balance itself out, because they maybe are taking on too many risky clients.
Blake Oliver: It could be that if you aggregated all of the nontraditional lending that is happening, and you added add it up, it might [00:31:00] be a really scary number. There's a potential bubble in the small-business lending market.
David Leary: I believe that's true. Then, the question I have is a lot of these companies are tech plays. They're all bragging about, like, "Oh, because we can connect to their data in Xero, or their data in QuickBooks, and we can see their financials every single day, and see how much money's in their bank account, we're gonna make better lending decisions than the average bank will." Maybe that reality is not true. I don't know. Anything else? Do you [00:31:30] have anything, or did you just only have the ProPublica novel?
Blake Oliver: Sholto MacPherson, he has a great article over on Digital First, called "NetSuite's New Analytics Show How ERPs Win Over Ecosystem Reporting." Now, I know David, you'll probably disagree with this, because you are a huge fan of the ecosystem concept; the idea that ERPs-
David Leary: It's my baby. 
Blake Oliver: Yeah, this is your baby. This is what you worked on for years. Well, there is one downside to [00:32:00] integrating a bunch of apps, and having your GL separate from your inventory, and all that stuff, which is that you have different databases for your data. If your CRM is connected to your inventory, connected to your GL, yes, they might work from an operational standpoint, but what about running analytics? You don't have all of that stuff in the same place. You've got to somehow pull it into a reporting dashboard, and it's not always easy to align that data to get the insights that you want.
Sholto has this article that talks about the NetSuite SuiteAnalytics Workbook tool [00:32:30] that they announced at SuiteWorld 2019. It's a really cool tool. It allows you to basically do Excel-type pivot tables using all the data in NetSuite. NetSuite is an all-in-one type application, where you don't need to integrate multiple databases to get what you need. You've got your inventory in NetSuite; you've got your CRM, even, data in NetSuite - all that good stuff. You can do some pretty amazing analytics, now.
I'm very curious to see [00:33:00] if this allows all-in-one solutions, like NetSuite, to continue to win out against the ecosystem approach in the mid-market, but I think, actually, it doesn't have to be an either/or. It'll probably be still an ecosystem approach, because, now, NetSuite has lots of apps. You've got hundreds of apps you can plug into NetSuite, but it's also a single database. I think that's the best of both worlds, here, is you don't have to use NetSuite's CRM; you could plug in another CRM, but NetSuite is essentially the database [00:33:30] underneath [cross talk]
David Leary: Versus an ecosystem play, like QuickBooks Online, with a bunch of add-on apps, or Xero, with a bunch of add-on apps. That's something I always told the dashboard players - that, in the olden QuickBooks Desktop days, everything was just in QuickBooks Desktop. If you wanted to make some [cross talk] app, it was easy. Now, the source of truth of data is in 15 apps, and you've gotta go get that. Now, you're saying, with NetSuite, it's just in one spot.
Blake Oliver: Yeah. NetSuite is the single database, ideally, and then you run all your analytics out of there, but you can plug in apps that act sort of as the [00:34:00] front end, for interface, and for functionality, that are pushing data into NetSuite's database. To me, like if Xero, and QuickBooks Online wanna be truly great accounting systems, they need to add to that functionality, where you can track ... You can have all your data in the system, even if you don't use the system to manipulate it. Does that make sense? 
David Leary: Yep. 
Blake Oliver: Check this out, if you're interested in the differences between QuickBooks Online, and Xero, and NetSuite, and the philosophical [00:34:30] differences, and the benefits of being able to have all your data in one place.
David Leary: Let's see, what do we have? I have some advice-y things.
Blake Oliver: Okay. 
David Leary: I have three articles here that are kind of advice-based. I only have to talk to them for about 45 seconds or so, each one. There was an article on His name is Peter Cohen. He's a managing partner. Essentially, his article title is, "Practical Advice on SaaS Marketing," and that's essentially the blog. His [00:35:00] argument is nobody ... I'll just read this straight up: "No one needs your solution unless they have a problem. Let me give you this straight. Nobody really cares about your SaaS solution. They don't care how it's built. They don't wanna see a demo. They don't wanna talk to you. They just don't have interest." 
This would be all for our app-developer listeners that are out there, right? "Instead of talking about features, features, and more features, a website would probably generate a lot more engagement - clicks, downloads, trials, whatever - if marketing folks made it easier for visitors [00:35:30] to see the problem we solve. We should make it easy to see the connection between their problem, and the solution being offered. We shouldn't rely on the visitors to do that.".
Blake Oliver: Right. Well, that's because most of these websites are designed by the developers who are obsessed with features. They wanna create product, but your customer, in the end, doesn't care about the product. They care about how it solves their problem. That's what we need to be doing, as developers, when we market our software.
David Leary: Yep. Another piece of advice. [00:36:00] There's an article about, "Why Amazon Bet (Almost) A Billion On Certainty."
Blake Oliver: I wanna hear this.
David Leary: Amazon announced they're gonna spend $800 million, so that you can order something from Amazon, with Amazon Prime, and you get it the next day - one-day shipping.
Blake Oliver: That's because of their competition. It used to be Amazon's two-day shipping was the defining feature of being an Amazon Prime member. That's why you paid the what's now $120 a year, so you'd get that two-day shipping, but everybody else has caught up now. They're all giving it away for free, so Amazon [00:36:30] has gotta do something new, right?
David Leary: Yeah. Where this came back to me, I was thinking about, you know, everybody's worried about how to compete in the future - accountants, and bookkeepers, et cetera. There's some good takeaways in this article about how humans hate uncertainty, so much so that people do whatever they can to avoid it. Ultimately, if they can have certainty, they'll pay for it. I think if accountants, and bookkeepers go read this article, they can kind of maybe figure out what are ways they can bring certainty to clients and be able to charge for that [00:37:00] as their accountant, or bookkeeper. It's a really interesting ... If you can provide certainty, you can charge for it. There's value in certainty.
Blake Oliver: That's a great takeaway.
David Leary: Last one that I have that's kinda quick, and it offers advice, is an article called, "What the Heck is an Advisor?" from Twyla Verhelst; it's on the Helm blog. Helm's a new app that's coming out. I think it's a cash-flow app. Pretty much, she has two conclusions in this article. One is advisory services are undefined. She went and polled people. She [00:37:30] cannot find a clear definition of what advisory services are.
Blake Oliver: Mm hmm.
David Leary: She actually doesn't one exists.
Blake Oliver: I don't think that our profession has an idea of what it is. I think that most of the people talking about it at conferences have no idea what it is either.
David Leary: What I loved about her article is she goes on to make the argument that it's actually good that it doesn't exist, because that allows you to customize that as an experience, based on your experience, your passions, your desires, your skill set, and to customize what you offer as an advisor to your [00:38:00] client. 
Blake Oliver: Right.
David Leary: It's actually good that it's undefined.
Blake Oliver: Yeah, well, clients have no idea what we mean, when we say advisory services. That's the big problem is everybody's out there saying, "You've gotta move to advisory services; you need to add- you need to do this." They rarely say what those advisory services are. They also rarely say how do you price for it? It's incredibly challenging to price for something that's undefined.
David Leary: Advisory can be whatever you want it to be.
Blake Oliver: Unless it's telling people what to do, right? 
David Leary: Yeah.
Blake Oliver: Or giving them options. [00:38:30]
David Leary: I have an article you might love, kind of a thinking man's article. It's a little bit of a deep read; it's in The Atlantic. It's about why accidents like the Notre Dame fire happen.
Blake Oliver: Why do they happen? 
David Leary: The premise is we keep building in safeguards, over and over again, that actually cause bigger problems. It's kind of cautionary tale. There's a couple books that are out. One's called-
Blake Oliver: That's definitely what happened with the Boeing crashes. The software that caused the [00:39:00] crash was actually designed to prevent the crash, by overriding the pilot.
David Leary: Yeah. The safety systems ultimately increase the overall complexity of the systems. There's another-
Blake Oliver: What does that have to do with the Notre Dame fire?
David Leary: Well, the Notre Dame fire had all these extra new protections of fire alarms, and things. Apparently, this fire alarm went off, and said the fire was in room A, and the fire was really in Room W, and it wasn't even correct. People ran to put out a fire in a part of building [00:39:30] where there was no fire.
Blake Oliver: Oh ... 
David Leary: All these safeguards that they didn't have centuries ago did not protect the Notre Dame any better than not having the technology to begin with.
Blake Oliver: Right.
David Leary: They get into a little bit where this concept of de-skilling, and automation ... This is this concept of, like, pilots are losing their manual flying skills. It's a deeper article; it's worth reading, and kind of ... Because we're always talking about automation, as bank feeds come in, and  bookkeeping kinda [00:40:00] becomes automated, is the basic skill of debits and credits gonna go away? 
Blake Oliver: You could make that argument that it already happened; that QuickBooks caused that to happen. Once accounting software like QuickBooks came along, or Quicken, you didn't need to know how to do debits, and credits, because you no longer had to make journal entries for every transaction. It can certainly get even easier, and accountants can be even more de-skilled. I was fortunate in that I got to learn how to do bookkeeping on an ancient DOS system, where I had to make journal entries for everything. If I screwed [00:40:30] up, I couldn't delete them; I had to actually make reversing entries [cross talk] 
David Leary: A DOS system? I had to learn on paper. Man ...
Blake Oliver: Yeah, well ... You're the O.G., David. I'm just imitating. Well, hey, that's all the time we've got today, David. If folks wanna reach us online, where's the best place for them to get in touch with you? 
David Leary: Best way to get in touch with me is on Twitter - @DavidLeary-.
Blake Oliver: And I'm @BlakeTOliver. 
David Leary: Everybody should probably go to our Facebook page. It's just Cloud Accounting Podcast, on Facebook. Like [00:41:00] that page, so if we do any Facebook Live events, you'll be notified right away that we're doing those. The other things we really want somebody to do ... We would love it if you went to iTunes, and you left a review. If you do that, Blake will read your iTunes rating, and review on The Cloud Accounting Podcast, in the next episode.
Blake Oliver: All right. Have a great weekend, David. Talk to you later. 
David Leary: All right,  
Blake Oliver: Bye. 
David Leary: Bye.

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