078 How To Build Your Accounting Firm Tech Stack

How do you build your accounting firm tech stack? It's probably the most asked question that I get. I share a bunch of tools and people are like, man, but what would you use? And admittedly what I say is it depends. Which is absolutely a cop out. But also it does depend. So let's talk about it. There's so many apps these days, so many apps that do overlapping things. It's really high stakes. Like, oh my gosh, you don't want to make the wrong decision. Sometimes that can actually be paralyzing for years where you end up on some dumpy app stack because you're just so afraid of making the wrong move. So we're gonna talk about that today. I'll run you through my process. The best, the least imperfect way to go through this process and make this sort of decision in 20. There are lots of overly simplified frameworks for how to do this, in my opinion. There are like the, the rate at which stuff's coming out now is faster than ever before. There's like, at any given point in time is a snapshot of where all these apps sit. And they are. Many of them are developing so quick, quickly that like, almost as soon as you have done that research, it's out of date. So this is a, admittedly a really hard thing. I posted something on Social the other day that I think kicked off a good discussion. So I said XPM Aero Pixie, Lisio, Senta Count Mango Carbon Keeper, Co Pilot, jetpack canopy firm, 360 elephant, taxdome, client hub, Financial Sense. If you run an accounting firm under 100 employees, I don't have any tech advice for you until you're using one of the above tech decisions. Start with your practice management system. No amount of bolting new tech to an old system will get you to where you need to go. People engaged, to say the least. It's interesting and it's worth acknowledging just straight off the top. It is human nature to be very opinionated on the things that we are most invested in. A practice management system, like the backbone of your firm, is something you've put a ton of time and effort and thought and money into. And it is only natural then that we are super, super opinionated on that just because we have sunk so much into it. So let's just acknowledge that straight off the top, that's how we're all gonna be. When we've put years of work and thought and effort into these things. The result is just, it's human nature to, to cling to that thing because good golly I hope I made the right decision. Right. And that was what a lot of the comments were. But the whole process by which we go about this is so wrong and broken in so many ways. And the two most broken things I see happening are if you are a tax practice, the default is to go buy the project management system, whatever you want to call it, from your tax vendor. And I think that's pretty much always the wrong move. In fact, I can't think of any situation in which that is the right move. If you have 100 or less employees now, right now, the current state of cloud practice management systems, you go beyond 100 employees. There are cloud PMs trying to get there and wanting to be there and raising money to support more mid market firms. But that's hard. Right now most of those products sweet spot is under. That doesn't mean it can't be done, doesn't mean it's not worth setting up camp there because they will continue to invest to make the product better for those types of firms. But the reality is if you're going beyond 100, 200, 300 employees, that's a different need. Like that product that your firm will sit on top of is fundamentally different than what we're going to talk about today. I'm talking about small firm, 100 employees and under, and the tools that the tax suites sell are not optimized for those firms. They may have their value in different applications. I'm just gonna talk about firms 100 employees and under. These are largely legacy products. But you know how they sell you is they say, hey, we're gonna cut you a great deal because we can bundle all of these things and it's gonna basically be, you know, free for the next three years. And it integrates with your tax software. And let me tell you gang, there are a lot of dead bodies, a lot of cars in the ditch on the promise of integrations. There is no amount of integrations that make up for something simply being an inferior product. Now there are certain integrations that are like water that you need to survive. Your QuickBooks integrating with your Bill.com, yes please, bank feeds technically an integration, but your tax software doing this half baked integration with some other system that still is gonna be a crappy integration because it's like oh great, we can sync client info from one system to another. Spoiler alert, their practice management system will not then sync with any of the other apps that you use. Also, client info is fundamentally a hard thing to sync because it lives in so many different places. Great. It may push it to that person's 1040. Is it gonna push it to K1s? Is it gonna push it to all these other places? Like, no. So there's still gonna be a lot of work to do in moving that client info around. But integrations 95% of the time are a trap. And the whole premise of the cloud ecosystem and building this stack of apps that could all talk to each other, yes, great, and really nice when it works. But like to pull the old curtain back on that hypothetical kind of la la land, perfect. All your stuff talks to each other. The reality behind the scenes, there is native integrations are big business. There is money that changes hands. There are people who like it is very much a quid pro quo. We'll build this native integration for this company, but not for that company. It's not this meritocracy where everybody's doing their best to make all of their apps integrate with all these other things. And nobody knows better than accountants that not all integrations are made equal. So staking a decision on an integration is a bad move, bro. Just don't do it. Fundamentally, the place to start is what app is going to be the core, the backbone of your firm. And it's going to depend on a few things from what type of work you're doing. Is it a tax centric firm? Is it a bookkeeping centric firm? And usually, but not always usually that core app will be a practice management system. But there are some exceptions. One exception right now is Keeper. So Keeper is like a month end close app. You've got people building firms around Keeper because they think it is such a boon to their productivity when it comes to doing monthly like client closes that they want to start there. But Keeper has like a client facing portal. Like it is one of a growing number of apps that kind of straddle a bunch of different categories. So I don't think it's actually enough anymore to just say, start with your practice management system. I think of it almost more as like a draft, like what is going to be the most impactful app and there's certain things that it ought to do like, you know, coordinate your workflow and all that stuff across the team, the client experience. But I wouldn't go as far as to say that 100% of the time it's going to look and feel like a practice management system. Listio is another example where that's just like a client communication layer. But in terms of where to start, I think of it more in terms of almost like not necessarily a specific category of app, but when you throw all those things into a big old mixing pot, what is the one app that is going to be most impactful in your client experience and your ability to get the work done? And the answer is going to be different there depending on whether you are, you know, a solo practitioner. And you never have. You never plan to build a team. Like, your needs for a product are very different than someone who wants to scale to a big team. This episode is sponsored in part by zero because zero's roadshow is coming your way, buddy. July 27th in Austin, August 3rd in Atlanta, but August 17th Los Angeles in California at Ballantyne DTLA. Hang on. Googling. Oh, that is nice. Okay, if you've ever been to a Zero party at a conference or anything like that, you know these folks know how to put on a real nice event. How's 6 hours of CPE sound? How's hanging with a bunch of other forward looking accounting practice runners sound? And even going to have some people there from like the app ecosystem. You know, the people that make the fun little tools you use. I've done some roadshows before. Pretty solid. I'll put a link in the show notes to register. If you're in the Los Angeles area or if you're anywhere by an airport. Because there's an airport in Los Angeles. Get on down to the Valentine DTL. That must be downtown LA. August 17th. Get some CPE and have some fun. This episode is sponsored in part by the fine folks at Cloud Accountant Staffing. Do you hire accountants? Bless your little heart. Not the best part of the job in my opinion. Not something I ever enjoyed. Well, listen, you can build your accounting dream team with talented offshore accountants in the Philippines that work 100% full time for your firm. Their accountants aren't freelancing or contracting for multiple firms. They're all yours. They work exclusively for you and are incentivized to stay with you and your team long term. They're not going to get swiped. Cloud account staffing is 100% dedicated to the accounting industry and founded by a former accounting firm owner that understands your business, knows your pain points. They had to hire some accountants and they said, you know what? We're going to build our own pipeline in the Philippines, going to pull in some super talented people and then open that up to other firms. Basically that's the story. We've been talking about a lot about staffing, building more resilient staffing pipelines for your firms. I had Staff in the Philippines like totally red pilled me to like oh geez, like we need to globalize the way that we get our work done. Check these folks out. Link in the show description Cloud accountantstaffing.com now what I see happen, happening like very frequently is you have this core system that does not do what you need and you have people trying to bolt a whole bunch of different things onto it. And like the biggest offender here is the practice management systems of the tax suites because they will integrate with nothing but the other things within those suites with like very limited exception. And so you're on system A and you're like, well my only other options are those that are within this ecosystem for this company. And so you go out and you pick up that product and that product when what you're actually doing is doubling down on like an ecosystem that is fundamentally inferior to if you then go outside of that space. And that's why I tell people, only ever buy tax software from your tax vendor, do not buy anything else. And I'm completely open to like my mind being changed on this. And like I'll be honest, like I never do this. Like I never write off products and categories and say absolutely don't do this. And so I am open to being convinced otherwise on this. And maybe the closest, maybe the closest thing that's maybe an option I think for these firms that are 100 employees and unders, maybe Thompson Road is on view. So this is not like some moral stance as much as they are not good implementations of practice management systems for small firms specifically. And the cost of the platform lock in is really high. Hi, they are not fundamentally like an ecosystem first company because they've got the cash cow of the tax software and then they make a lot of their money trying to get people onto those adjacent products. I have a hard time seeing a timeline where they're gonna come out and build a whole bunch of integrations with all of the other tools that you wanna use. So there's a big cost to setting up camp there as opposed to on cloud platforms that are more ecosystem friendly. Now some are more ecosystem friendly than others. Some have APIs, some don't have APIs. But the reason I'm so harsh on the tax vendors is they're usually the opposite end of the spectrum. They are not ecosystem friendly. And like when I'm making the decision of what my accounting firm is going to run on, that is a massive, massive commitment. And if I've then hitched my wagon to all of the creative potential of Just the company behind this tax suite. That seems like a winning bet as opposed to the other end of the spectrum where you're betting on an ecosystem. If you are hitching your wagon to ecosystem friendly players, then the upside that you have of future developments is kind of the collective creative capacity of all of the people innovating in that ecosystem. That's why you know, the QuickBooks Marketplace and the Zero Marketplace, those app ecosystems, that's why it's like so powerful that those ledgers are the backbones of all of these other things because you have so many creative things happening. But that world doesn't exist today within the domain of the tax software providers. But again, I will happily be convinced otherwise. That's just the state of affairs right now. So I shared that list of where I think people need to be starting. Like what are those? Like in my mind this is like the list of S tier apps. Your first round draft pick is one of these apps that I've listed and I've put links to all of them in the show notes. You're like backbone starting app. If you run a firm of under a hundred employees, to me right now needs to be one of those. Now a couple of things that I think we don't pay enough attention to, a couple biases to acknowledge. One, I think that we are probably, and this is speaking from personal experience, I get this wrong. I think our brains are too biased to optimizing our internal workflows over making life easier for the client. And that is because we spend our days working in our systems while our clients spend their days working in the client facing systems. And I think if we were our clients and we spent 40 hours a week, if we spent 40 hours a week using the client systems, 80 hours a week, whatever life you're living right now, if we were living on the client side, I think we would be a lot more mindful of what that experience looks like. And my framework for this right now is kind of there has to be this filter over the top of it just has to work for you and it has to be sustained for you. So like off the top, like that has to be a thing. Like it has to fundamentally work for you. If it doesn't work for you, then what's the point, right? But just below that is the client experience. Because ultimately running a profitable firm is about how you can price your service and pricing your service comes down to the level of the client experience. How specific of a problem are you solving and how are you making their life easier? Their life better. And thinking and talking about pricing is harder than talking about workflow. We talk about workflow a ton. It feels like this untapped thing, like, oh, yeah, next year we're gonna, we're gonna do this new thing. We're gonna increase our productive output when ultimately that doesn't generally make you more profitable. Unless you're planning on going out and making this big change that turns out to be a big raving success and then cutting staff, you're not gonna make more money because of it. So where we need to be focused instead is on how we price the work that we already do. Which is why the client experience, I think, probably doesn't get enough attention in our decision making. Two other thoughts that I'll leave you with. Another thing you need to be thinking about when you hit your wagon to that kind of first draft pick is what is the rate of progress of that company. There's a massive spectrum in how much these companies are investing in their products. Software products oftentimes will genuinely reach a point where there is no investment going into the product. There's probably still investment going into marketing. But there are big products out there that, that aren't changing, that aren't being invested in. So it's worth looking at and being really mindful of. What has this company done in the last 12 months? What have they developed? Like, what new things have they pushed out? Give me a peek into the roadmap of the next six months. The rate at which these companies progress, honestly, is like almost every bit as important as what those apps will do today. Because ultimately you're hitching your wagon, hopefully to this company for the long term. Hey. This episode is sponsored in part by Canopy, the practice management system. Canopy unlocks the firm that you always wanted. Think about it. Close your eyes. Lean back in that chair. What is the firm that you always wanted? Oh, wait. Canopy unlocks it. And they do this by unclunking accounting firms with an end to end solution that makes your tech stack feel a little less stacky. Cause it's end to end. Putting our customers first with world class user experience, support, education and innovation rooted in customer feedback. Working and working well anywhere and for any size or type of firm, wherever you are now and wherever you're going, multiplying your efforts so your practice requires less proverbial midnight oil. You know, sidebar. If you go to the conferences, Canopy's got like, they always do some like really good little like sort of, you know, the stuff that they use to like trick you into coming to the booth. Well, this year they've had like Legos out there. Maybe, maybe a double down on the midnight oil thing, you know, maybe like, I know, give away a little, little, you know, little actual midnight oil. I guess it would need to burn too, but that one's free. I think it's a good idea delighting your clients with a modern, easy to use portal that helps you get the info you need when you need it. That is Canopy. Check out the link in the show notes to learn more. This episode is sponsored in part by Client Hub. Come on in. Recently on Tails from the Hub, the team at super smart accounting firm adopted Client Hub. And recently I talked about the trade offs of optimizing for the firm experience versus the client experience. You may have seen some discussion on that super smart accounting firm. They were thinking along the same lines. What they ultimately decided they needed an option that optimized the client experience, that exchange of information. They chose Client Hub because it was designed for an amazing client experience and their clients love it. They love the mobile app, they love the intuitive interface. Even better, client communications no longer scattered all around and siloed email inbox. It's all in one place. Everyone describes Client Hub as simple, intuitive and efficient. Everyone. Ask anyone. That's what they say. That's the magic of Client Hub. And it transformed this firm, buddy. This year they are raising prices because that client experience is off the charts. And everybody's tickled about it. They love it. They just, they're having so much fun. Sounds good, right? Right? Hey, that's it for this week's tales from the Hub. Check out Client Hub at ClientHub app or the link in the show notes. Now it's really hard to buy software on the promise of something in the future. And honestly, you should probably never do that. It is still good to know what do they have planned, what's in the works? Because you can actually tell a lot from a company about what their roadmap looks like. I've seen this a number of times where you have a company that builds a killer core offering and you love it. But there's ways that it can be improved. But the company's focus is over here. They actually want to build this adjacent new thing or they just raised a new round of money on the premise that they can now expand into this other thing and charge users more. But oftentimes I'm like, I don't want that. I love this core thing. Keep making this core thing better for me. So one reason to be mindful of that Roadmap is if you look at that and all this stuff is like over here, and you're like, I actually don't want that. That doesn't add value to me at all. If anything, it's probably just gonna put pressure on me to pay more for stuff that I don't want. That's something to look out for. What that company has built to date is not necessarily the same as what they're going to build going forward. Especially in the world of venture backed software companies where every round of funding has to be tied back to, okay, what are you doing now? What is going to make your company more valuable? Oftentimes that thing, the premise that that next round of funding comes on may not be a thing that you want. So be mindful of that last. Oh my gosh, so many massive decisions are made on the back of what salespeople are telling you. And it feels really obvious. Don't take salespeople's words. Like you have to weigh it and the whole overall equation. But you know how those people are incentivized. Yeah, they're not looking out for you, they're looking out for number one. And social proof to me when it comes to like tech decisions and that sort of thing is one of the best reasons to be investing in building your professional network. Because if you're thinking about going, going down and like picking a new practice management system, you have two people. One has a great professional network, one does not. The one that has no network, who they gonna rely on that firm that the, that the software company will refer to them like the one that they have chosen that had a good experience and maybe there's even like a quid pro quo behind the scenes and they have to go like take a call with a prospective company every quarter and they get a discount or something like that. Like, no, that person's probably like not looking out for your best interest. But the person who has the professional network can say like, hey, has anybody picked up this app in the last year? Can like you give me the real talk on behind the scenes, what works and what doesn't work? Because none of these apps are perfect and we all run like one thing I've learned. The more accounting firm runners I've talked to, we actually run things very differently, much more differently than I assumed. Because ultimately when you run a firm, you have tunnel vision for just what you do and the paradigms that kind of your team is working within. You'd be shocked how differently people will do the same thing. And so like the Tools will not support all those different workflows the same way. None of them are going to be perfect. And oftentimes we can get stuck on this fact and not make a decision because you just haven't found the quote, unquote right one. Meanwhile, you're still living on the wrong one. But if you have a network of people who can give you the real talk on, like, hey, how did onboarding go? Like, what about this thing I'm stuck on? And, like, I can't quite get my head around how to do this. That is so gold. Because there's no more real world, like, experience. Like, there's nobody better suited to speak into whether this is gonna be the right decision for you than someone who does what you do. They just did it 12 months ago, right? This is like future timeline. You coming back in time saying, yeah, like, ooh, look out for this, look out for that. And if you do end up making this decision, those same people can actually cut, like years off of the learning process too, because you're gonna steal their best practices. It doesn't mean you don't still go and talk to the product people to say, what's the best way to navigate this and that? But again, like, weigh both of those things. If your only source of truth is the vendor man, you're going to come into that with some serious blind spots. Now, kind of the, like, biggest, hardest, spookiest, scary thing about all of this is not change for you, but change for your clients. Practice management systems, once you have trained your client base on how to work with them, are incredibly sticky. Like, I cannot think, maybe tax software is an attack. Software is probably like the stickiest software imaginable because it just requires relearning so much muscle memory to go to a different one. But practice management systems, once you have trained your clients to use them, oh my gosh, the notion of having to change, you know, it's one thing to change and that upset everything you do internally, but to then change the optics of everything about working with your firm, for your hundreds of clients, your thousands of clients, oh my gosh, that is painful. So if you are going into a new system, this would be my recommendation. It's okay to go into a new system with some, like, the promise of some really great client facing upsides. And you absolutely should be thinking about the client facing, client experience and all of that when you go into a new system. But let's say you have a false start with the system and it is fundamentally not what you thought that it was. Going to be if you put that system in front of your clients day one. And that was like the very first thing that you did, man, you were going to look like a big old dummy when you pull that rug right back out and be like, just kidding, we're actually going to go back to this other system or do this different thing. So all of that is to say, I think the most sticky thing in this whole sort of decision making framework is what are your clients going to use that honestly, to me it feels higher stakes than what is my internal team going to use? Because I don't want to retrain them on a new thing. The optics of it are really bad. It's like you don't know what you're doing. It's honestly, like, this is why, honestly, companies like Lisio exist where they are purely a client interaction layer. Because the notion of being able to have a client interaction layer that never changes, but then still gives me the flexibility to change whatever I want behind the scenes. That's really appealing right now. There's like, in a perfect world, you would just have one app that did absolutely everything right. But is that realistic? So think about, you know, as you go to a different practice management system, there are so many parts of that process, from project management to billing to like client, like CRM stuff. Be mindful of how quick you are to force that new client experience on your clients. Because if you end up like changing directions, that's no fun. It's no fun internally, but it is doubly no fun when you gotta like pull the rug out from under your clients and go to a totally different system in the ways that they interact with you. That's probably the scariest part of the whole system discussion to me. I get really excited about changing internal stuff and I think that can be much. That stuff can happen faster and it's easier to do testing with that internal stuff. And it's why, like, honestly, the internal stuff's just more fun. Like, we can geek out. We're technical people. The scarier, stickier, the stuff that feels higher stakes is those client touch points. Now that is not a reason to not have client touch points in your software. As we've talked about, using this system to manage requests is, I still think the single greatest productivity unlock that firms aren't leaning into. We're spending a huge amount of our time requesting information from clients and then re requesting information, then going back and being like, did they ever get me this and that? And then figuring out that list again and then re requesting it. If you're a tax firm and you're not doing, like, request lists up front, I would venture to guess your team's burning 25% of their time in tax season doing this. That is a functionality that is so core, so important that it needs to be really front of mind when you're building this new tech stack. Just don't get it wrong, right? Cause changing the client experiences, that's no fun. Was that helpful? I still can't give you advice to say, yeah, go choose this app or that app. But for me, it's almost like a draft system of what's gonna be the most impactful one. How can you find some other people who have used. If you got three finalists, how can you pick the brains of a few people that have made the switch to it recently to ask them some real hard questions? Cause at some point you gotta pull the trigger. Like, I get that it's scary. I get the software is changing right now, but it also doesn't make sense to, like, continue burning time on the wrong system. Right. Hopefully that's helpful. If there's anything. Is there any other ways I can fill in the gaps or, like, additional nuance on that? Check the question. Check those questions in below. We'll hit them in a Q and A and good luck.