145 The Wrong Way To Run An Accounting Practice in 2023

Should we still be trying to build.

Accounting practices in 2023 when it looks like another level of automation is just around the corner? We're talking about how to prepare for that.

Should we be worried about asking clients.

To DIY too much stuff like give them these big questionnaires, make the whole process feel like turbo tax?

If I wanted to do it all myself, why would I have engaged this accountant?

Right?

How do we navigate that and what.

It'S like meeting Ryan Reynolds. The. The Ryan Reynolds. We're talking qvc.

Come on in. It's Q and A Friday. Fresh off the boat from QuickBooks Connect.

Got a little bit of Vegas lung.

With me still, but made it back.

In one piece mostly.

If this is your first time, welcome.

Every Friday we DO Q&As on the nuance of running small accounting and tax practices. Getting into the nitty gritty stuff. That's what we're doing today. Lilyp left a YouTube comment on a podcast we did around how we're actually getting pretty close to fully automated bookkeeping, or at least taking a big step closer to that. It was a podcast we did three months ago from a bed in a.

Las Vegas hotel, and the comment was so starting a bookkeeping business right now is probably not the move.

Or is it? And here's some, I don't know, some advice that is not only for new firm runners and people looking to get into it, but for existing accounting firm runners. Like with the stuff that is going to change over the next 24 months, how do we position our business to be safe on either side of that? The reality is, and this has been the case for a while, it's hard to make money just doing bookkeeping. And when I say bookkeeping, that is like classifying transactions, reconciling the bank. If that's all, all that you're doing right now, it's really hard to make money and it's just gonna get harder down the road. Now I'm thinking like simple SMB small business books. The way to escape that and the reality that services like QuickBooks Live Bookkeeping, which is $200 a month, and Bench, which is $300 a month. Reality, those are gonna keep getting better and coming up market more and more. The way that you escape that number of things that you can do, one is just do that bookkeeping for a much more specific type of person that has specific needs. So for example, crypto accounting is like very nuanced. There's aspects of that that are really challenging and that is not your run of the mill, basic small business bookkeeping. It's an example of something that is something that, you know, a service like bench or QuickBooks Live bookkeeping isn't going to do well for you. So is there a level of specialization that you could lean into that would make you perfect for that very specific type of person? Right. 100 examples of this, I mean, could be manufacturing anybody with a nuanced accounting need. So be thinking about specialization as a defense to that. But also bookkeeping is great because I would argue bookkeeping is a gateway to much more valuable work. So my background was in running a tax practice and historically in the US Tax bros kind of looked down on bookkeeping like oh, you can't charge as much for it as tax work and all of that. But within my tax practice I was super excited about launching a new accounting practice and kind of the legacy partners that were on the way out like just could not get their head around it. And the reason I was excited about that was not because there was a ton of value in the bookkeeping itself, but there was a ton of value in bookkeeping being the entry point to actually a lot of other helpful things that we can do for them within their business. So I would argue the people who actually control the books in a small business are like kind of the air traffic controllers for the way that almost all the data flows through that business and it puts you in the driver's seat to do a bunch more value add stuff. So the sort of things that we would wrap around those bookkeeping engagements would be like cash reporting, cash planning, a lot of folks running cash pretty tight. And we would send them reports several times a week so that they knew where things were at, talked about bill pay. We did that for a lot of folks, payroll support, some basic kind of advisory stuff around the financial reporting. And the reality was we didn't set up any of these engagements really to make money on bookkeeping. What we wanted was to get them in the door, be responsible for the books because we needed quality books to do all the other stuff, but then look for like very nuanced needs that that client had. And one of the examples we've talked about in the past was working with dental clinics. They had this issue of being able to like reconcile cash deposits that were going into their practice management systems with what was actually coming through the bank. And this was hard for dentists because they couldn't trust their practice manager to do this. They wouldn't give them full banking access. But then those practice management systems had all the patient information in it. So, like, that wasn't something that we even wanted access to. And we developed this, this basically cash reconciliat that was very specific to dentists and the problem that they had. And we could charge, honestly, we could charge top dollar for that because that wasn't something that anybody else was really doing. And it was a really painful problem for dentists. It was the leading source of theft in practices. And so if you look at something like bookkeeping, where, like, the price is kind of set and people are kind of devaluing that more and more, as opposed to this cash reconciliation service, I mean, we would charge clinics as much just to do this cash reconciliation service as we would charge to do the bookkeeping. Even though it was much, much more simple, it wasn't commoditized and it was very, very relevant to the pains that they had. So they assigned a greater value to it. And it was those sort of opportunities that we really looked out for that we wouldn't have been exposed to had we not been involved in doing the books. And our engagements went as far as oftentimes we had a partnership with Bench and we'd actually pull Bench in to do the bookkeeping. Bookkeeping. And we may pay them, I don't know, a couple few hundred bucks a month to do that stuff for us. But in the scope of, say, a $2,000 a month engagement where we're doing a lot more, I'm not concerned about the bookkeeping. We still need to get it done. It needs to be done correctly. But I want to find a way to make money on all the other stuff. And when AI automates classifications and bookkeeping on a whole nother level, which it absolutely will, and that's going to be great. It's going to make it all the more important that those engagements are not super focused on the bookkeeping piece. So should you start on a bookkeeping practice this year? Yes. Should you say, if you're a tax firm, get into the accounting side? I think you should. But ultimately it's not to do bookkeeping. It's to get you into the door of, like, a more complete engagement where you're doing all sorts of stuff, maybe even like systems consulting and helping getting them on a better app stack so that that data flows better and all that. That's the real value of being a bookkeeper these days, is all the stuff that goes well beyond bookkeeping.

Gang. This episode is sponsored in part by Live Flow. Live Flow is the easiest way to.

Sync that QuickBooks data back and forth to your spreadsheets.

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Check that one out at liflow IO. This episode is sponsored in part by Forwardly. Are you tired of waiting for payments that seem to operate on their schedule, not yours? What the heck. Say goodbye to slowed ACH transfers and rising credit card fees. Welcome to Forwardly, where you can receive payments instantly in 22 seconds. What? Okay, sidebar thought experiment. I just initiated a payment to you put a pin in that. Receive payments instantly 22 seconds for 80% less and no monthly fees. I like that. With automatic payment options and automatic reconciliation with QBO and Xero, Forwardly streamlines the whole payment process. Same day ACH man, I don't know why this hasn't been normalized like everywhere. Why are we not doing more same day ach? By the way, your payment that I just started, it just arrived. It's been 22 seconds. How fast was that? Legal has informed me. I need to say I have not in fact paid you. Just to just clear that up. Just a mental exercise. The future of business payments is here. It's here and waiting for you@forwardly.com check out the link in the show notes to learn more.

Here's a common thing that comes up in accountant discussions. The notion of putting too much back on the client, like asking them to do these big long, complex questionnaires. And then I'm kind of being like, if I have to do all of this stuff, what am I engaging you to do? Right? And what brought me to this is we actually had a super cool sponsored video on the main channel On Wednesday. It is a tool where you can feed it and this is for us income tax preparers. You feed it prior year tax return stuff for a client and it'll generate like a questionnaire with pro forma data. Like really quickly. Gives like clients a modern way to hop in and do all that stuff. If you do tax prep in the US you know just what a pain it is to just get the pro forma prior data out and present it in a professional manner to your clients. David Cram brought up this question though. That kind of got me on this path. He said, super slick tool from my perspective. The downside is the client experience may feel a little TurboTax esque and get them wondering why they even need us. I totally get it. And there's actually this goes well beyond U.S. tax. I think there's a bunch of examples of if we think to what the fully productized approach is, where maybe all the requests are in a platform and you've got this big modern platform that asks all the right questions in an automated way, which is kind of the holy grail and from a tech standpoint what we want to get to. Right. Can't the machine just ask everything that I would ask and do that in an automated manner so I can just get the work done? But is there risk there and going too far down that path and it beginning to feel impersonal? I would say what kind of muddies this conversation oftentimes is the really dumb questionnaires that we see and that we put in front of people. Sometimes the questionnaires that are where only 20% of those questions are relevant to the client. Right. And that is something that we can all universally agree is really big bad. But the fact that those exist kind of muddy this conversation sometimes, I think. And so let's throw that out and let's. Let's agree that there is no single boilerplate questionnaire that I think is really a very good thing to put in front of your client. If you're putting the exact same thing in front of all of your clients, I don't think that's a good thing because there is no way to capture everything that you need from all of your clients without putting a bunch of pointless questions in front of them. So let's all agree that is bad, that's not a good thing. But if your questionnaire can be intelligent and only ask the questions that need to be asked, then the reality is like it's a question of do I want the machine to ask those questions or do I Want a human to ask those questions.

And to me, that just comes down.

To, like, a service delivery preference, assuming that that questioner is actually intelligent enough to ask just the right questions, which is. That's a big assumption because most of the platforms we use are not that intelligent. But let's say in a perfect world, they did just as a thought exercise, if a machine would ask all the exact same questions as you, and so this is like a perfect questionnaire where it would ask all the exact same questions that a human would. Let's say we had that in a hypothetical world, would you still put that in front of your client? I think it's more a question of knowing your business and knowing your customer. If I'm the firm that's like, going in person to the retirement home and like, helping these elderly people complete their tax returns in person, like, obviously, no, you wouldn't do something like that. If it's more a white glove type service where people would just want to talk on the phone or people want to come in and meet, then, no, like, those people are still going to appreciate a human having those conversations with them. Could you get more done if those people would go to a machine and have those conversations? Like, yes, you could. And I think we all feel that, and we all feel some pressure to, like, oh, man, if I could just. That would get me, like a half hour back a day. That would be such a good thing. But we can't lose sight of the fact that people make buying decisions based on all those touch points because they don't understand the technical nature of what you do, and they can't benchmark the quality of your work to the quality of somebody else's work. They're gonna make buying decisions based on how they perceive, like, how modern this experience is or how good of an experience that they have with, like, all the humans along the way. And generationally, people are definitely trending more towards, I only want to talk to a human if I have to talk to a human. Like, I do think that's definitely the case where younger generations are, like, if I can just do this with a software tool, just give me the software tool to do it and I'll talk to a human. When I have to talk to a human. I would say older generations in general, and there's obviously a big generalization, would much rather work through that stuff with a human. And it's not to say in all scenarios that there aren't situations where you need to work with a human to kind of work through the nuance and build that rapport and that sort of thing. But different clients are going to have different preferences. So as with many things, an accounting firm running. I don't think there's a right answer here. The only wrong answer is when the approach that you choose does not align with how you hold out your services. So if I'm sending this portal to all the elderly people at the retirement home, obviously that doesn't make sense. If I want to run a white glove firm and charge top dollar for this stuff and it's very concierge and maybe these are like high net wealth, net worth people where like they don't get excited about going through web forms themselves, then yeah, figure out how you can do that over coffee or something like that. Instead. I want that tech that can do the really intelligent questionnaires because even if I don't serve that up externally to my client, I still want that as like an internal set of tasks for my own team to manage. Here's all the things that we need to track down and we can like tick those off once we have those items. So I still want that tech involved somehow, whether it's served up to the client or not. But I think it's only problematic when like the approach and the client experience doesn't align with kind of how you hold out that service. Right. I want to call this out. Heidi Hartley had left a YouTube comment. Thinking back to the bill pay episode and just how much nuance goes into that. She mentioned, you know, thinking about how to even like push clients towards your preferred software platform. There's so many options. Bank bill pay, third party bill pay, making payments via website. How do I get the bills? Do I pay all their bills or just some of them? If just some, then if there's a new vendor, do I reach out to the client to ask if I'll pay the bills for that vendor or is it up to the client to reach out to me just acknowledging there's like so many super fiddly aspects of running a service like that and trying to standardize it across different clients. And I actually had this conversation with a number of people at QuickBooks Connect this week, just that there's an abundance of really, really shallow content out there for firm runners. And I would argue the bulk of the content from, you know, from software vendors who are speaking through the lens of kind of high level best practices to even just the fact that these days people don't really engage with very long form things. So like, are you going to read a 5,000 word blog post?

Nope.

Are you going to be able to dig into that context in like a social media post? Like probably not. And that's kind of what's interesting to me is like podcasts seems like podcast podcasting seems like the final format where people will consume long form stuff and it hasn't been like edited down to like this super, super, super concise kind of short version of things. But the reality is where your headaches arise, an accounting firm running is oftentimes these little fiddly nuanced things that you gotta nail down. And I don't know really like where these conversations are happening. Obviously they're happening on these podcasts. On this podcast. This is the value to me of like those peer connections where you can ask those really nuanced questions and really go deep. But when it comes to the content and the thought leadership that's put out there and the webinars and like even the conference talks you go to, you don't get this nuance from slide decks. And I would love to see more like really nuanced, meaty stuff. And obviously it's hard to do. And there are the people who can do the high level stuff well and then the people who can do the nuanced stuff well. And that's a much, much smaller group. That's maybe not something you're gonna be able to expect to get from your software vendors, but that stuff's gold and I would love to see more of that and hopefully that's something in this podcast that we can do well. Is the really nitty gritty stuff. I love the nitty gritty questions we get because this feels like a lot of stuff that just isn't explored and isn't discussed all that much. On the subject of nitty gritty details. Warmteach YouTube comment mentioned. How do you pick an AP extraction tool? Is there a particular app you recommend for OCR type stuff like pulling the stuff out of. Out of the bills? There's a whole bunch of solutions in this space. My framework is when it comes to extracting stuff from invoices, it depends on if you're going to be paying those bills or not. I think every SMB needs to be on a bill pay platform. So my recommendation is start with the bill pay platform and see what sort of extraction it does. Different businesses have different needs for the level of extraction that's required. Sometimes the aggregate like total invoice amount, that's totally fine for, you know, 90% of the bill pay clients I had. That was all that we needed. To do other clients that have to do like receiving and inventory management, all that need that hyper granular line item detail, right? And like all those items need to be tracked in their system so that inventory is updated and so that they're billing that stuff through to customers correctly. So it's going to be dependent on the level of detail that the client needs. But start with the bill payment platform, see if that does enough for you. They used to be really basic. Actually, these days most bill payment platforms have pretty darn good extraction setups. But there's other variables there too. Like for example, approval Max has been around for a long time as a dedicated, really nuanced approval workflow. So if your bill payment platform doesn't handle the complexity that you need for your approval workflows, like only then does it make sense to pull in a third party tool. We had a sponsor video on the main channel maybe a month back from a tool called Makers Hub, which is like a super, super flexible way of pulling very granular detail out of bills. And man, I had some clients where we had to do this stuff just in an extremely manual way and it genuinely would have saved probably three quarters of the time that we spent on this stuff. So it is really important to find the right tool for the job, but it's going to be a bit dependent on the level of detail that your client needs. Now, whether you do AP for your clients or not, this is an area where you can be a tremendous resource for them. You look at like bigger retail or manufacturing companies. Like there's a lot of human time and energy going into the really menial aspects of managing these bills as they come in. And there is such a tiny fraction of SMBs that are leaning into the best of how tech can enable this. I mean, there's so many SMBs still writing, you know, paper checks and using legacy systems and stuff like that. If the upside of going to that fundamentally better system can be attributed to you, even if you didn't do all the heavy lifting yourself, that's a huge amount of value that the client assigns to you. Because getting bill pay processes right, like generally genuinely can save like entire FTE's worth of time, especially in the really complex situations.

This episode is sponsored in part by Copilot. Okay, gang, circle around, bring it in.

It is change management season for most accounting firms. You're going through some hard tech decisions.

Honestly, it is spooky and like high stakes and really hard to decide because.

There'S a bunch of solutions out there. Frankly, a lot of Good solutions.

But it is high stakes because if we go like switch all this stuff, how are we gonna ever unwind that? What if we don't like it? Or if we go put this thing in front of a bunch of clients, what if they all revolt or we don't end up liking that? And the more stuff we're changing, the more risk there is inherent in that. And I actually think this is a solid argument for Copilot, who is only tackling the client portal problem. And if you've watched much of my.

Stuff, you know how adamant I am about the value of client requests, about.

Clients being able to self service in a portal to come get a tax return or a month end close or so they don't have to email you for that stuff because it's 2023 and you should have a website where people can get that stuff. But if you're stuck on changing, I don't know, too much at once, or the notion of chucking all your stuff into this all in one tool where it's like, well, what if I like the workflow better over here in the portal over there? Actually think this is a solid argument for Copilot. All they're doing is trying to give you the most flexible client portal experience out there. You can embed stuff from external services, they got a bunch of their own built in goodies, but they are really wanting to build a platform not like a super opinionated portal so you can.

Customize it to be whatever you need. So that sounds good to you?

Check out Copilot at the link in the show Notes. 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.

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And then open that up to other firms. Basically that's the story we've been talking 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 cloudaccountantstaffing.com I.

Want to call out this comment. It was on the main YouTube video that I did about leaving my firm. Worst decision I made in my life to take up accountancy. I'm trying to get out of that career. Bless your heart. Thanks for playing. I hope people realize and they don't. But like we have such tunnel vision for the like circumstances that we are in and the company that we work for and the manager that we have within that current role. And like it's so hard to see beyond that and see the diversity of different types of firms and how they run and how they incentivize their team and like just the massive spectrum of quality of work at different types of accounting firms. And it super bums me out when people leave the profession altogether because they work for a crappy practice. Right. And I don't know how to enable more transparency of that rather than just like continuing to talk about like more modern approaches to running accounting firms. But if you think about the state that this person was in, worst decision I made in my life to take up accountancy. There's so many things that I suspect went into that that have nothing to do with accounting and everything to do with their work environment, expectations of performance. And you know, that employer not aligning with what's going to be best for that person, oftentimes the inability of the employer to set boundaries around the expectations clients will project onto your team and as a result they, your team like becomes the punching bag for clients, you know, demanding unrealistic things. And I think the, the accounting firm runners who are like exposing themselves to more progressive approaches and going to conferences and learning and all that stuff, they see that stuff.

But you know, who doesn't see that.

Stuff is like members of your team and people coming into the profession and firms that are not that way. And it's too bad. And I'm not sure how to find those people honestly. Maybe like YouTube and social media and stuff like that. Like maybe that is how you get in front of those folks. But it's a shame when we lose people to the profession just because they got a crappy employer or one that doesn't align with, you know, the best ways for them to work. Okay, so QuickBooks Connect was this week, it was a ton of fun.

Ryan Reynolds was there.

Oh, there are two human beings on this earth that I will fanboy over. Donald Glover and Ryan Reynolds. And Ryan was there. He did like, a 30 minute sort of fireside chat. And then afterwards, there was a meet and greet. Got to get a picture with Ryan. Three things I took away from that.

That guy is tall.

Super tall. Like, too tall. I'm six two.

If you Google how tall Ryan Reynolds.

Is, it says he's 6 2. But in the picture, that guy's like, at least 6 4. And don't make this about my height. I know how tall I am. He is taller than 6:2. Second realization. That guy's got a huge melon. I have a really big head. It's been a problem all of my life. Clear back to, like, playing sports, they couldn't find helmets that would fit me. And like, playing football, they would have to give me, like, a lineman helmet with, like, a. Like, a bar down the middle of the face mask. When I was, like, the smallest guy on the team because I had such a big dome. I still can't find hats that will, like, fit on my head. My children, bless my wife's heart, all of my children came out 99th percentile head size. In fact, our third, the pediatrician said he was 100th percentile, which I'm pretty sure means that's the biggest head that a baby's ever had. That's neither here nor there. I got a huge head.

If you look at my head next to Ryan Reynolds head, that guy's head.

Is way bigger than mine. Not sure what it means. I'm feeling slightly vindicated. Third thing, Ryan, he was, like, more. I don't know if affectionate's the right word. More warm than I would expect somebody to be in a scenario where you're just filing a whole bunch of human beings past them to take a picture. Like, he was very friendly. Like, say hello, give him a big smile. Like, put his arm around them, lean in for the picture. Like, compared to some of the other people they did photos with who are, like, kind of awkward and they may give you a fist bump, and then they just kind of weirdly stand next to you. Like, Ryan was very, very friendly.

And so I got to put my.

Hand on his back while we took the picture.

That boy's got a thick back.

Oh, my gosh. Like, superhuman. And they're going back to shooting Deadpool 3 right now, and so I'm sure he's gotta be in, like, peak shape. For that. So that Hugh Jackman doesn't look too much bigger than him, but Land O' Lakes does. That boy got a thick back.

And just the fact that I know.

That and that I got to have that experience, it was special.

QVC was a ton of fun. We had the biggest ever meetup of.

Folks who were in my accountant community. There were like 25 folks that made it out for breakfast, and there were still a ton more people at the conference who weren't able to make was such good vibes, man. Whenever we get together in person, like, I think that is what makes that community special, is it's not advertised. We don't talk about it anywhere besides, like, 25 minutes into a podcast where we're talking about Ryan Reynolds thick back. So as a result, the people who get into it are, like, very into the content, like, very into geeking out on, like, very nuanced stuff and oftentimes techy stuff. And those are the only people that find their way to the community. So when you get a whole bunch of those people who are into that same stuff together, like, the vibes are so good. Like, conversation is just, like, flowing with everybody. Everyone's super jacked to meet everybody and having a great time. And it's just a really cool reminder of, like, the power of online communities and the power of making a killer friend that does this. Like, that was the biggest, most impactful thing for me. And if my community enables one thing for anybody, it is just to make a couple of friends that do this stuff, that understand the struggle, because this.

Can all be a really isolating thing.

And, like, I can come home and my wife is super supportive, and she's like, you're doing great. You're so good at this stuff. And I'm like, you got no idea if I'm any good at this stuff or not. But I understand that you're being supportive. Thank you. But to make friends that do this stuff that you can commiserate with and, like, share ideas with, that is all so energizing and makes this all feel so much more sustainable. And I think, like, that is the very best thing that we can do for our quality of life, is just build relationships with other people who do this stuff. That was a ton of fun if you were there. Thank you very much for coming and hanging.

Met a whole ton of people that.

Listen to the pod.

Thank you for introducing yourself. Whole lot of.

Here's the problem. When I go to stuff like this.

People are afraid to introduce themselves, but they also give the lingering looks? And when you give the lingering look? I know that you know?

And I wish you would just come introduce myself, because what I can't do in that situation is be like, hey, and come over and, like, act like we know each other or something. Like, it becomes a real weird thing. So I get it's weird for you. Just know it's weird for me. Please come introduce yourself. It was great putting a bunch of names to faces and chatting conferences are a lot of fun. I'm gonna be a digital this year. Next month, I'm gonna be at New Money Summit in Orlando next month. 10 out of 10. Highly recommend. And for goodness sake, if you see me, please introduce yourself. That's it. See you Monday. Toodaloo, Sam.