365 Advice Before You Buy A Practice Management System

Okay. I was talking with some other firm owners recently who are trying to like build their 2025 tech stack gang and I think I, I think I reached a breakthrough. I think I came to an important realization not only about how we need to make that decision this year, but what could actually be like reshaping small accounting firm tech over the next few years. These workflow tools coming in that are so darn good and what their place ultimately ends up being in the market and next to practice management systems and how those two are kind of butting heads right now and it makes makes your buying decisions really hard. So come on in, let's talk about it. How do I fit workflow tools alongside my practice management system? I wrote about this in my newsletter bit last week but wanted to share some more thoughts. Newsletter, it's linked down in the show notes, goes out every Thursday. It's the best way to keep up with more of my current events thoughts. Also like live events I'm gonna be at. I got a number of live events coming up the next few months. If you listen to the pod, definitely be on the newsletter. But step one for your tech stack, I still believe it starts with picking the right practice management system for you. And this whole like the current version of practice management systems is still something that is relatively new. Like if you think back to what these looked like years ago or even going further than that, seven or eight years ago you had like, you know, jetpack workflow, you had workflow max. Like you had some of the OG cloud practice management systems. But back then they were nothing compared to what we have now. Very limited, pretty hard to make a case for them compared to some of the legacy tools for all but the most simple kind of small firm applications for their time, like they were super impressive for cloud products. But what cloud products are has just come a really long ways since then. Now the last like three to five years we've kind of had this features arms race where people bolt like everything that they can onto a practice management system. And a lot of those systems are kind of trying to be the all in one and they've taken on now client portals and you can write emails from them and they're handling requests and they're doing all these different things with like varying levels of, I don't know, like veracity because some of those implementations are pretty bare bones, right. But on the other hand we have these like dedicated core workflow tools. And so what are the core workflows of most small US firms? It's income tax Prep, it's month end closes like for us firms, like that's most of it. And now we have tools that like from the bottom up are solving how that work gets done in a fundamentally different way. So I'll give you, give you some examples on both the tax and the bookkeeping side. On the bookkeeping side you really have Keeper here like reinventing what it means to be a bookkeeping workflow tool. The novelty of Keeper was they literally sync every single transaction from the ledger into their platform. And, and what used to just be like, you know, practice management systems are like task management. You got just this list of all these tasks keepers approach to that. It's like task management with the ledger transactions embedded like they are one in the same and you make modifications there that get pushed back to the ledger. It's like a single interface to manage all of your month end closes, whether that clients on QBO or Xero. For most people they will reconcile the bank and in the bookkeeping platform and then everything else about the month end close gets managed in Keeper and it's just a fundamentally like deeper level of integration with the ledger, enabling it to do like quality assurance and just all these different things compared to a practice management system which is more about like managing the flow of work from a higher level. Whereas Keeper for a bookkeeping practice is about really meat and potatoes like down in the weeds every single ledger transaction. Now some practice management systems kind of live in the middle there. Like a client hub is probably the most in the middle where it's very focused on like requests getting the client into the platform to complete tasks for you. And then you have other practice management systems like say Carbon or Canopy that really are more like over the top 10,000 foot view. They're managing the flow of everything throughout the entire firm. You, your time and billing. They have a client portal and we're actually going to get to that because each of these workflow tools introduce yet another portal for our clients that we may or may not want to put in front of them. But other practice management systems they are more kind of 10,000 foot view. And what I find as people are trying to make a practice management system decision, what I find is virtually everybody gets to a point where they're like okay, this is the best PM for me and I'm going to use it for, for you know, bookkeeping for tax, for both. That's workflow on the bookkeeping side, workflow on the tax side. Honestly, the last 12 months have been the most interesting developments that we have had. In tax software and maybe the last two decades. Like not an exaggeration because the tax software itself hasn't changed, right? But the workflow solutions around it have gotten really compelling really fast. And I'm actually like super excited to see what these look like 12 to 36 months down the road. But now we have really, really good tax intake systems that will take proforma data from the prior year, either scraping it from a PDF organizer, taking a backup file from your tax software. Some way or another, they're going to get pro forma data from the real tax return last year to generate a very, very contextual to that client questionnaire that that only asks them the questions they need to ask, doesn't ask any questions you don't need to. And arguably my favorite feature that a number of them now have is a client can take a pile of like 50 docs and drag and drop them into the portal and it will auto resolve all of the checklist items based on the docs that just got uploaded. So if you have a big old document request list for your client, they can just chuck stuff in there and the system figures out which document they just gave you that's so powerful. We've seen that now actually from all three. So there's. I have three top recommendations for these tax intake tools. Safe Send. A couple of months ago they launched Gather, which does this. It'll give you a document checklist and when the client uploads those docs, it'll automatically check those items off the list without having to upload it specifically to that item. Second one is Sorban. Sorban does the same. They also just, they also just shipped delivery automation, so when the return is done, they're going to help you deliver returns as well. And then Stanford Tax does this also and they've got kind of like a dynamic work paper sort of thing almost where at any point in the project the client could drop off one more document and you pull it in and it like updates that checklist. If you want, you can export it all out of the system to like a bookmarked PDF. But those are my three main recommendations for tax intake. Safe Send, Sorben and Stanford Tax. And all three of these are solving the core workflow of tax prep in such a compelling way that it can no longer be ignored. Couple years ago there were some versions of this happening and it was like, I can see how that's cool, but it feels like a big lift. Doesn't feel like the ROI is there quite yet. Now, regardless of what practice management system you're on. If you do tax work, you need to have one of these tax intake tools. I think the upside is big enough that it is worth it for just about every firm. And so the problem everybody runs into is first they have to pick their practice management system and they land on a pm. And then it's like you look over here and you're like, ah, but that tool's better for bookkeeping. You look over here and you're like, oh, that tool's better for tax. And I think the helpful thing to do here is to separate the job of your practice management system from the job of your core workflow tools. And I'm kind of making this terminology up, but I would define your core workflow tools today. Like the ones that absolutely you can't miss or that you need to be plugged into is a month end close management tool, like keepers, I think ahead of the curve here. And then on the tax side, specifically the tax intake, while there is other tax workflow automation, the tax intake part is the part that you absolutely can't live without going into 2025. But because practice management systems historically, like have been our workflow and the way that they actually hold out what they do, like, it creates a bunch of confusion around like, wasn't my practice management system supposed to do that? I thought that was supposed to roll everything up into one place and so that I wouldn't have to have all this fragmented processes and all these different client portals and a client list over here and a client list over there that has to stay in sync and files in different places. Wasn't my practice management system supposed to solve for that? It did. And then other tools came in that did the job better. And let's be clear, these core workflow tools are crappy PMs. They can't do the stuff that the PMs will do. But now since they have raised the bar for how great they can do those core workflows, our PMs now look like crappy workflow tools. Right? And it's a frustrating place to find ourselves in because you feel like you got to buy all of them. And like, spoiler alert, that's where I'm at right now, is you need to buy a PM that does PM things and you need to buy workflow tools that do workflow things. I think the upside is big enough to where we need all of those and you got to build systems around it to ensure everything can talk to each other. But workflow, like as it was defined a few years ago, I think everybody was looking at the PMs and saying like yeah, no, they've nailed workflow. But what really, really good workflow is like the ceiling for how helpful these tools can be has totally changed. And it's not the practice management systems that are pushing the envelope here. This episode is sponsored in part by Live Flow. A lot of folks using the new Live Flow dashboard features for all sorts of stuff. Among them actual internal dashboards that are connected to your client's ledgers. What? Excuse me. So normally you think about a dashboard being like a client facing thing where they can get some sort of insights, make decisions based on it, but you can also do the same thing for your internal bookkeeping team. Maybe you are monitoring bookkeeping that is kind of led by the client, or maybe you're using it for quality assurance, like a single dashboard to see the status of that company's books. Because Live Float will keep pulling in live data coming in from the ledger every single day. Or alternatively, you create that dashboard as a snapshot, more like a work paper that is like a view of it at a point in time. I know firms that use Live Flow for managing the month end closes for all of their clients because it's just more efficient than having to click around inside the ledger itself and like generate PDF work papers, all that, right? Interesting use case for dashboards. Learn more about Live Flow. Check out the link down in the show notes. This episode is sponsored in part by Client Hub. Recently did my practice management system recommendations for 2025. Guess who was on the list? Better believe Client Hub was there. ClientHub. They've got a four step framework for picking your next practice management system. The four Cs we're not talking about no diamonds. The third C we're talking about today. Clarity. Because there's massive value in how clear and approachable that platform is. ClientHub is nice. It's actually a nice place to be. You know how some software platforms you kind of vibe with, you get in and you're like I can imagine spider spending time here. ClientHub's designed to make everything as simple as possible for the firm owner, their clients and their team. Well organized, super clear layout features are powerful, yet simple. Means you spend less time having to support your team on questions, your clients on questions. Oh, ever had to train a thousand clients on a new client portal? It's not good that clarity is delivered by Client Hub. If that sounds like something you may be in the market for, check out the link down in the show notes. Now what we want to do is we want to listen to what our PM people tell us. Like take, take taxdome, who has really, really good like end to end workflows of how you build automations throughout the entire tax prep process. From sending out an engagement letter to requesting information to it gets to this status, you send that email gets to this status, you send them the 8879 this status, they get the invoice, they have to pay the invoice before the tax returns released. A lot of cool stuff that's very customizable in taxdome. But you know what? It doesn't do as good as the tax intake tools. Tax intake still got pretty boilerplate like flat, like not customizable client organizers. And of that entire process, while every single step in the process of doing that tax return takes time, I would argue the biggest waste of time is gathering information across all of your clients. We were doing about 2000, 1040s a year in my firm and there's no way around just the sheer volume of what that is, the amount of work that goes into making sure that they got us all the information when they didn't checking in to see like where they're even at have they started. The fact is in my 201040 firm I could have bulk sent out whatever you want to call them, questionnaires, digital organizers doesn't really have a name anymore because they're not really organizers. Right. But I could have sent that out for my 201040 clients and that system would have auto followed up with every single one of those clients until they got everything in. And we wouldn't start the project until we had everything in. But all of that work would have been managed by the platform. All of the chasing people for documents going clear out to October, we would have eliminated all that. Is there like going to be a couple of exceptions here for folks who are not online and you got to kind of work around that like for sure. But by and large, 85% of the client base, the machines are now doing the requesting and we're able to just focus on like the meaningful stuff that is the value of a good tax intake tool. And so even if I looked at at Tax Dome and I said this is the PM that does workflow the best, and I don't want to categorically say that right now, but it does do workflow very well. Even if you look at the very best one, it's not as good as dedicated tax intake tools. Similarly, on the bookkeeping side, you look at something like Financial Sense, which is really good, a really good all in one or for small firms, they've done a good job with that. It has some ledger connections, basic sort of uncategorized expense stuff. Client Hub, similar here as well. They're doing a little bit of uncategorized expense stuff. They don't go as far as a core workflow tool like Keeper that is deeply integrated into the ledger, handling, quality assurance and all these different things. But Keeper at the same time doesn't do a bunch of mission critical PM stuff that those platforms do. And so I think the most common blocker people are running into with PMs right now is, is they're buying a PM to do workflow, which I actually think is a trap. I think it's. It depends how you define workflow. Right. I think the more important job for a PM is the oversight of everything that's happening in the firm, probably time and billing, probably your client list, stuff like that. In a perfect world, if that system can talk to my workflow tools, awesome. But what's going to be really interesting to see is whether these workflow tools become the PMs of the future. Because right now they're awful PMs. But will they grow up into that and add more PM like elements to potentially squeeze out the PMs? Because I can tell you what's really hard to imagine is the mature PMs out there getting really deep into workflow. I think that's a hard thing to do for a mature company to execute really well on tax intake workflow, for example, or bookkeeping workflows. And by the way, they're already three years behind the tools that do this really, really well today. I remember seeing the very first demo of Sorban a couple of years ago. Some of the people in my community were like some of the very first 10 users and spoke into how that product was developed. And I remember the first time I saw a demo I was like, okay, yeah, like this is just a fundamentally better way of getting tax work done. And now they're like several years more mature. The category as a whole there now has developed and we even have tools like Lisio that to a degree is kind of pivoted into tax workflows. Where in the past I don't think they're really touching it. Now they're doing stuff with like pro forma tax information. And so that core workflow solution, that category has gotten stronger, which kind of muddies the waters when you're considering well then what is a PM and what do I want from my pm? And I've been telling everybody all year, go out and pick your PM first. And I would probably still say that's the right thing to do. But the way the cat these categories are developing, I could also see an argument for pick my core workflow tools first and then see what's left. What do I need after that? If I do bookkeeping and tax, maybe I really like Keeper, maybe I really like Stanford Tax. Each of those do different things. Neither of them do a lot of mission critical things I need from a pm. But what's the PM that just fills the gap there versus what's the PM that does a whole bunch of stuff that's duplicative. That's what's really hard right now. And maybe the biggest, most annoying example of that is the old client portal because we're just putting like way too many surfaces in front of our clients to do different things with us. You're trying to look all cool and modern like you got your stuff together and then you have to tell them like hey, look out for an email from this service and look out for an email from that service and you have all these different ways that you want them to work with you. That's the reality of where we're at right now unfortunately is that the most progressive firms who are leading leaning hardest into the really good workflow tech have fragmented services. Services, not services. Their platforms are fragmented heading into 2025. That's just how it is. And I think it is actually a trap to get two up onto your high horse and over over stress the importance of integrations and of systems syncing with each other. Take it from me, biggest AI nerd, automation nerd, no code zapier, all that stuff. There is too much shame associated with manual processes. If I can pick up a tax intake tool that is going to do a killer job across a thousand tax returns and it means I have to take the files from that system and put them in another system. That's not a hard thing for a human to do. You need a process for it and you need to know at what step does that happen? Whose job is it? How do we double check that it did happen. And I don't like that manual process any more than you do. But that's not hard. It really isn't. And hopefully it's not a thing forever. But the upside of what these tools can do is worth the downside of some manual processes. I think the most elite kind of automation elite among us A mistake that we can make is to say we're going to find the all in one that does the most because we're unwilling to connect these systems ourselves. But man, just think about how much you're missing out on like that. And that Delta, what you're missing out on, that has changed. That Delta has gotten bigger as the workflow tools have gotten better. The penalty for relying on a PM that doesn't do any of these core workflows and saying, oh, I'm not going to complicate my life, like doing any more than just rolling this 1:00pm There was a, there was an age where that was more feasible than it is now. In fact, last year that was much more feasible than it is this year and the year before. I think you were probably fine. I think that was probably the right way to run your firm two years ago. The problem is the workflow tools just keep getting better and better. There's too much to lose by not using them. So if I, if I can impart you with a bit of wisdom in how to navigate this one, don't be too afraid to have manual processes. Don't give up a really good opportunity because there's going to be a couple manual processes. And I get how uncool that sounds, but there is way too much shame on those things. Oftentimes it leads to actually ignoring processes that are real, processes that just aren't even getting handled because they can't be automated. Manual processes are uncool, but they're a reality. That's first, bit of wisdom. Second, solve the biggest, most painful stuff. And in my opinion, when it comes to tax, if you're doing 1040, the biggest, most painful thing, it's intake, especially on 1040. On the business side, it's probably bridging the trial balance to the tax software, Especially if you do the bookkeeping in house, the books are pretty much good by 1231, right? That's where a tool like Tally for is super helpful. That'll integrate that cloud ledger with your tax software. I think the equivalent of that pain on the 1040 side is just getting all the documents in. So that is your biggest, most painful problem on that type of work. On the bookkeeping side, it's everything going into the month end close. So solve for those biggest, most painful pains first and then build systems around that for whatever is left. This episode is sponsored in part by Ignition. Come, come, come, come. Here's the thing. Here's the thing about client billing. You can't bill for the time you spend Billing. You can't. You can't. It is pure waste. And we're bad at billing because it's, it's icky. You let things slide. You don't get paid. You waste time. Waste time chasing people for money. That's not what I did. I would just. I didn't want to waste time chasing them, and so I would just. I just eat it. Don't do that. This is where Ignition comes in. The leading revenue generation platform for accounts and professional services. When I was running my firm, Ignition wiped out our ar, it's true. And significantly reduced the time spent billing clients, saving our partners over a thousand hours in the first year because they didn't have to bill all that stuff manually. Man. With Ignition, we won more business with impressive online proposals. No more hustling, hustle and PDFs and Word docs. We automatically pulled payment up front or at the end of a job when it was done. No more dialing for dollars. We transitioned our firm to more recurring revenue and better managed scope creep. No more leaving money on the table. Ignition is making thousands of firms more money and genuinely made us more profitable. Check out why over 7,000 of the smartest businesses run on ignition@ignitionapp.com put a link in the show notes. This episode is sponsored in part by Carbon, the practice management system. 2025 recommendations just went out. You better believe Carbon was. Was on the list. Can I devote this whole ad read to their practice marketplace that they launched? I'm not supposed to do this, but this is my show. I'm gonna do it. Carbon released maybe the smartest thing that I saw this year. And that's not an exaggeration. It is a platform for buying and selling Carbon firms. And the only people that can have access are Carbon users. You go in, you see other firms that Carbon users have listed, because isn't that such a huge part of the. Doing acquisitions is tech migrations? Oh, my gosh, do your tech stacks align? Makes a really, really big difference. And Carbon can make a pretty compelling argument as a result of this that your firm might literally be worth more if you put it on Carbon. Like, that's what makes this so smart to me, especially if we think about all these firms, like, aging out, and everybody's like, I'm not going to touch it, because the tech stack's awful. If a bunch of these firms modernize their systems, came to Carbon, think about the marketplace that that opens up when all the other firms there can see what they're doing. And the notion of merging those things Just got way easier. Even on the back end, they've got some cool ways to like, either combine those practices or continue maintaining them as two separate instances of Carbon. Super, super smart stuff. To learn more about Carbon, check out the link down in the show notes. Third, consider the stakeholders on the client side side and who needs what type of portal access. This is actually a smart thing that came out of a session I did the other day in my community. It was actually Brian Davis that brought this up because we're talking about the kind of the problem of just having too many client portals and what one do you send the client to? In his case, he's actually sending admins or the ops folks from the client to the portal in one system. But then I think it was taxdome. The portal that the client uses, like the business owner, is the PM portal. So consider, like, is there actually a delineation there where some stakeholders on the client side would use one portal and the client themselves would use a different portal? Again, in a perfect world, we would just have one. But right now the upsides are so significant with those core workflow tools. And because everybody, like practically every tool has a client portal, for most of us, that isn't feasible right now. One last thought on like, the cost of all this. Um, I think we are, a lot of us accountants are, are cost sensitive for whatever reason. There's almost like a, a this level of like heightened fiscal responsibility that I feel like accountants have that make us maybe a little slower to pay for things that solve problems. And so it could feel very wasteful to buy a PM and workflow tools. And many of the workflow tools, like, they're not cheap, especially over a large number of projects, but it's always interesting. And anytime we do a demo day or talk about specific solutions, you will have two adjacent comments that are like, we absolutely swear by this thing and we'll never go back to doing it the other way. And then the very next comment is, this is so outrageously expensive. I can't understand how anybody would ever use this. And it's just worth remembering. And if you listen to this podcast, you know, I bring this up a lot. It is worth keeping in mind that software costs on a project by project basis in many ways are fixed. Like, not by the strict definition of, you know, economic fixed costs. But take a, take a 1040 project. If you're doing a tax return and you charge a hundred dollars for that 1040. And reality is everybody starts, everybody starts. Somewhere there's going to be people listening to this podcast who could only dream of charging $100 for 1040s and people listening to this who are like, that's unthinkable how you could ever charge that little. We are all like, at different spots in the same food chain. Even if you're charging 10 grand for a 1040, there's somebody out there who could not Fathom only charging 10 grand for a 1040. But for that 1040 project, the cost of your software for that one 1040 project, because most of these tax workflow tools, they charge by 1040. It's the same for the 1001040 as it is for the $10,000 1040. And this is why they are justifiably people who are like, this is unthinkably expensive. Like, if it's $35 a return, there goes 35% of my margin straight off the top, just into one tool. Are you kidding me? How could I ever do that? And I think right now there is a part of the ecosystem that's priced out. Like, there really is. The same thing applies over on the bookkeeping side, keeper. I think they still charge by client. So if it is a month end close that somebody pays you $10,000 for, the cost is the same as if it is a month end close somebody's paying you $100 for. And when you add all this stuff up, like, there actually is a group of firms within our ecosystem that are totally priced out of that right now because they are price takers at this stage. They don't have the leverage to be able to say, like, no, you need to pay me this. And as much as we like to look down our nose at everybody that's further down us in that ecosystem, the reality is last year you were further down that ecosystem too. If you think about where you were when you started out, I tell you what, the people who are still starting out that are tuning into a podcast like this, I would hazard to guess they're ahead of you where you were when you were starting out. Because however long it was ago, five years ago, 10 years ago, 15 years ago, when I started this stuff, we didn't have thought leadership stuff like this. Like, nobody was getting on a podcast and talking software recommendations. And like that was, there were a few little pockets of that stuff, but nowhere near the level that we have now. Not the same level of transparency between firms. You know, you had like, like accounting firm sort of member groups and that sort of thing, like forums. But these days, if somebody wants to pick a tool, like they hop out, they Post something on social media, a bunch of people share their experience. There is greater fluidity of information than there's ever been before, which is a great thing. So even those people who are still starting out the information they have at their fingertips, man, it is going to help them grow so much faster. And that is the one thing I think you have to keep in mind when it comes to struggling with the cost of that software tool is on the spectrum of the $100 1040 to the $10,000 1040 or the $100 a month and close to the $10,000 month end close. I think that what I actually want to do is make the software buying decision that is going to accelerate me down that path from $100 to $10,000 if I don't buy that software. You could see how I could kind of be mired in that like hundred dollar ten forty reality because I can't get the volume of work out to help me turn through clients and find higher value clients and all that stuff. You could see how it kind of feels like you're running in quicksand a little bit because you can't get to that critical mass where you can start plugging those tools in. So I don't care like what, what percentage of revenue your software spend is or anything like that. I think what we actually need to have our eyes on are what are the tools that will actually accelerate us down that path. Because once you've reached escape velocity, if you're selling that $10,000 1040, then when that becomes an $11,000 1040, buddy, that thousand bucks that just went straight in your pocket, that's what we're trying to get to. Like, let's overcome these software costs because especially those which all of the core workflow tools we're talking about today are priced per project. Once we overcome those costs, the upside beyond that is all gravy for us. All the gravy, baby. Kind of a weird time. I wish we didn't have to buy as much tech as we do. It's a testament to people building cool stuff in our space. And I hope it continues to get better. That's kind of how this issue has been created. And like, remember, just by being here and thinking through these things and having these conversations, like you are truly in the 1% of the 1% of the profession. You really, really are. We are in like, if you're hanging out online, we are in a, an itty bitty echo chamber. If you're tuning into this 25 minutes into a nuanced thing about core workflow tools and PMs. Like, you are the 1% of that online crowd. So as much as we can analyze this stuff to death, know that just by being here and thinking through these things, you are so ahead of the curve. What you can't ultimately do is, like, be so paralyzed that you can't just make a decision. You still gotta commit. But don't be too hard on yourself, because, like, just by thinking through these things, you're ahead of the curve. Okay. Hey, thanks for coming in the hanging. Go get that gravy. All right. See you later. Make 20, 25 gravy.