426 Invest Money In Software or People? 🤔

Today on Jason, on firms, we're talking about whether you should spend on people or whether you should spend on software, all else being equal. Say this is actually the quote that I heard recently is, is I, I, I realized I could hire somebody to do the work for the cost it would have been to pay for the software to do the work. Is that wrong? What are the scenarios where you invest in the people versus invest in the software also? Because you better believe it's a Q and A Friday. How many new client meetings should a firm be taken per month? And, and the current state of accounts payable solutions. Should people even buy AP software anymore? I may have some hot takes here. That and, and much, much more today on Jason Albert. Okay, how does this one land with you? I worked out that I could do the same by just hiring someone to do it. A rationale for not buying software. I think your, your gut reaction to this is probably very much. How do you feel in like your stage of firm running right now? I can tell you by the time I was done firm running, I was just so burnt out on the management of it all and the people of it all. And being the bottom of a 40 person funnel where every day somebody's going to have something going on in their personal lives, they're going to have some sort of really serious thing going on that I just like, like didn't know how to carry in a way that wasn't like very overwhelming for me. And if you'd found me in that headspace, if somebody came up and said you can trade any of these people, same cost year over year for a piece of software that gets the work done, I'd have been like, where do I sign, buddy? Can you terminate that person? Because that's uncomfortable. But 10,000 foot view, the idea of it would sound very, very nice. But I can also tell you that the very most rewarding part of running an accounting firm for me was the people that I hired that we brought in on the team, helping them develop, creating an awesome place for them to work. So you kind of can't have one without the other, right? And I don't want to be it depends guy, but the right answer for you. Spoiler alert. It depends. But let me run you through some, some considerations I jotted down here. Number one off. I most often hear this from folks very early on in running a firm. And if you are very early on running a firm, the answer is almost never going to be one or the other. If you could talk to yourselves 18 months in the future you almost always would have said, I wish I did both, because for most people growing a firm, not everybody, but for most people growing a firm, it all happens faster than you think. It all fills you up and like, overflows you quicker than you expect. And you're like, dang, I wish I would have had that person in the pipeline like six months ago so they were a little more ready to go now. Or I wish I wasn't having to roll out a practice management system when I was at 120% capacity, because we're sure not doing it well. So challenge the notion that both isn't the right answer for you, because it very well might be. Second thought, we can, we can really fixate on, on what is the norm inside of service businesses, but oftentimes we're not very good at thinking about, you know, the world the way that product companies think of them selling a ridiculous volume of, of things at a specific margin. I, I talk about this a lot more through the lens of like, creating content and selling digital products into a space. The notion that the person who's capable of selling an hour of their time for $200 in all likelihood is also capable of creating a 20 product that you can sell to more than 10 people. But we're, we're like, our brains almost don't even work this way. If you were raised in the accounting universe like I was, it was, it was realization, it was ours. Uh, you don't think about the world that way. An abundance of other businesses who, if you came to them and said, hey, somebody will pay you to do this thing, and you got to throw 50% of that money straight out the window or 90% of that money or 95% of that money straight out the window to let the software do the work. There's a lot of people that would be like, that sounds lovely. You mean I can trade money for software spend and I get to keep the difference. So depending how, on how like high volume this work is, the nature of the work itself, it still may not be a bad deal for you to pay a good chunk of that out if it means you're not having to get into the work yourself. Now, in a professional services firm, you've got stuff like, you know, liability coming from the work. And the one thing I, I learned to just always steer clear of was the really, really small dollar projects, because all it takes is one thing going sideways and that thing is 300% upside down. So, you know, taking like razor thin margins. In fact, I got this wrong. We've been talking about payroll lately. I got this wrong. Some internally prepared payroll clients to more payroll services like gusto and rippling and that sort of thing. Thinking. The thinking being, well, I really don't like that they're having to pay a recurring fee now to this software platform to do their payroll. So we're only going to mark that up a teeny bit because we won't have to do anything right. The payroll software, it'll, it'll do it all. The client gets one payroll notice in the year and the whole project for the entire year is now upside down. So if you're buying software for engagements that are going to end up being like very small or very low margin where a couple of phone calls or a few hours to troubleshoot something just made that thing go upside down, don't buy software, I would say to do that type of work because that stuff is just always going to be really hard. A few other thoughts. An argument for humans, they're much more adaptable than software. And especially if you're early in your firm running journey, what you think you need today will definitely change over time as you evolve, as your client base evolves. That is a great part of, of working with humans is they are going to be much, much more flexible than software in terms of the types of work that they can do. I really don't like, don't forget about the fulfillment thing. It's a very big like. Of all the things a human needs to be satisfied, a big one that many of us don't get enough of is helping is contributing to other people. Like that's a really big ingredient in um, people who kind of most report being satisfied with the state of things. And that's, that's, I think employing people and creating a good place to work really scratched that itch for me. But people come with, come with problems, they get sick, they leave, they create stress for you. So your appetite for that probably comes down to, to how you're wired. There's folks who, they love being managers and that's what they most enjoy. I learned there's a lot of aspects of that that I just didn't enjoy. Um, I think I was, I don't know, maybe too emotionally and you know, involved is not, is not the right way to put it. But like man, when you employ people you just see how much like messed up stuff people have going on in their lives. Like oftentimes through no fault of their own, really, really sad stuff. And beyond a certain number of people, there's always Something kind of awful happening to somebody in your business that you have to be mindful of. And that's, that was just, that was a lot for me. Now interestingly, I hate to be that guy. I asked AI, I said like, what are the arguments for and against this sort of thing? My, my biggest pet peeve is someone who will write an article and be like, oh, it's about AI. And then they'll be like, oh, we want to ask AI what AI thinks about this. And like that's just the most pointless thing you could possibly do because the AI is not aware of itself or the state of things. Like that is the last person in the world that you should ask. But in this case I asked AI, honestly, it actually gave a tremendous response. I think it says it kind of gave the arguments for both sides. Then it said ultimately choose a human. If the work involves creativity, emotional intelligence or frequent adaptation like managing relationships, crafting unique marketing or solving unpredictable problems, choose software. If the work is routine, high volume or precision driven, like payroll scheduling or basic customer support chatbots. So depending on the type of software that you are in the market for, for if the notion of like what problems you think that will solve for you, if they're human problems, if they're client facing problems, software can definitely help there. But you might still want that person to be a buffer for you. So where are you at in your firm running journey right now? If you see in the future that you need to get out of client communications or at least not be in 100% of them, and that's the first wall most firm owners hit, is they're like, okay, I just realized I can't handle all these comms and do all of the work at the same time. If you see that on the horizon, you probably got to invest in some humans that you can see getting to the point where they can take that stuff off of your plate, which is not, not all humans, but software. While it can relieve some of this, like using requests properly and using tax intake software, stuff like that, that mitigates the need for you to do a bunch of requesting for of documents from people. Software can help there. But ultimately the managing of the relationship like that is always going to be a human thing, right? If your main thing is fulfillment, not like personal fulfillment, but for fulfillment of work, getting more work out the door, I'm probably lean in tech. But if I, if I can leave you with one last thought to, to like think more about is why don't you need both? Because most people in their firm running journey. This is especially true for folks early on, we underestimate what we need personally, because when you're doing the mental math, you're never thinking of everything and you're not thinking of that new client that can come in, the new opportunity, the fact you're going to be sick for a couple of weeks. We always understate what we need. But I can tell you for most people, you also understate, like the growth of the business, the profitability of the business, the the awesome impact of doing the right hard things every single day before you find your business in a completely different, vastly superior place than you could have imagined 12 months ago. And so if that timeline plays out, you're going to absolutely wish you did both. This episode is brought to you in part by the fine folks at Cloud Accountant Staffing who help you find talented accounts in the Philippines, one of the fastest growing trends in small firm running. Honestly, ask around. Ask in the comments. Ask folks you meet on social media. A huge, huge number of people have started doing this in the past year or two. Not just accounting firms, tax firms as well. Yes, I understand with US tax you got 7216 disclosures and that's not a reason to not offshore. It's a reason to disclose totally manageable ways to navigate that thousands of firms are doing so world's getting smaller and honestly, it's never been harder to find folks that are excited about doing accountants onshore. Now does this change how you build your org chart out a little bit? It does, but I was, let's see, I was on a meeting with 22 other sub million dollar firms, tax firms specifically, and the prompt was what's the best thing you've done this year? A couple of different people called out hiring in the Philippines for the first time and they were super happy with the people that they'd found. Cloud Account staffing's background. They were an accounting firm. They started hiring themselves. Folks in the Philippines, hired some recruiters over there to do that directly and now they help other firms do the same thing. Simple as that. Is that something you want to explore? Have a conversation with me. You got nothing to lose. Learn more about cloud account staffing down in the show Notes. This episode is sponsored in part by Makers Hub. Hey, quick, quick win opportunity for your clients that do any sort of accounts payable even if you don't do bill pay. Send them to this podcast sponsor, MakersHub. You've heard me talk about Makers Hub before. We run several Demos on the YouTube channel. Ooh in fact, bonus points if you send your client one of my YouTube videos. Okay, this isn't your ad read. Jason. Makers Hub, they are leaning into AI vision models and large language models to enable a entirely different level of accounts payable automation. I've talked about this before. The, the, the single most disrupted part of the accounting profession right now courtesy of AI is accounts payable. And Makers Hub is a, a great snapshot of that done really well, really smartly. It's not one more platform to manage. It pushes all the data back into the QuickBooks file so you still got a single source of truth. I have clients who this would have saved an unbelievable amount of time for. And this is when we were running best of breed tech three or four years ago for them. This would have taken that automation so much further. If you do bill pay as a service, you need to be looking at this because this totally changes your business model. But even, even if you don't, if you have clients that struggle with this and a lot of them do haven't checked out mega sub super smart folks behind that, you're going to see him out at a lot of accounting conferences this year. Learn more Check out the link down in the show notes. Was that a wishy washy enough answer to that question for you? Let's talk new client meetings. This was a comment on, on the podcast I think Mortar rigs. Hey Jason, I have a fairly typical small tax practice, 350 returns, mainly 1040s. Regarding honing the client list, how many prospective client meetings should I be aiming for each month? For example, if I'm not getting enough good leads, my client list will take a very long time to improve. What's a healthy amount of new leads at the meeting stage of the funnel? Thanks. I wish there was a correct answer here. I would say for most small firms, I don't think of this as a, as a number that you have that you can like will into existence to really, really dial in. That's more of a thing when you go up market to larger firms where they're doing, you know, budgeting and forecasts and executing to more of a specific volume goal. But for most small firms, it is so much a product of who the right client is. So if I told you you should be having 15 meetings a month, well, you could go out and spend a bunch of money to get those meetings to happen on ads and that sort of thing. You could also have a website that's like we're great for anybody. Or you could have a website that's Great for, you know, exotic snake collectors. The volume of those two different websites are going to be much different. And the goal we're trying to get to, of course, serving a client that values us more. So they will happily, happily pay the bill, happily pay more for the type of work that we already do. That all gets a lot easier when you're serving a more specific type of customer. Specific in any way. Could be industry, could be demographics. Like any type of specificity is good specificity because it's easier to serve their needs. And so you have to do that filtering before you take that call. Like the wrong way to do this is open that up super wide and then take a whole ton of calls and, and try to quote, unquote, win business. They're either a good fit for you or, or they're not. And you know, the, the, there's kind of this legacy mindset of trying to, trying to win every person that you sit across and be the very best for all of them. But the reality is if you're trying to be the best for everybody, then it just means that you are giving more for less than everyone else. And that's not necessarily money. That could mean your cell phone number, could mean being willing to talk to them in the evenings because they work during the day. There could be a whole bunch of different flavors of that. But don't win on the foundation of doing more for less. So we're not trying to win every single person we sit down across. We're not trying to land every single person that ever visits our website. I would probably zoom out a bit and consider what are the behaviors that would drive to my firm, the clients that I really, really want to work with. Because you know, we talked about, with the three tier proposal episode this week, we talked about the, the value that is a, a YOLO client saying yes. So you have three tier proposals. That top tier is a YOLO price that's like 2x the profitability of your normal work. You put it there because if you never put it there, no one can ever say yes to this. And you will find sometimes people do and you got to hit pause and reassess what you're doing with your life and be like, why does that person value me so much? I will take one of those YOLO clients in exchange for 50 low quality clients that find me from Google Reviews or my website or something like that. Because that yellow client just defined a new path for your firm to do a more profitable type of work. So rather than getting to a number of of how much we should have consider for you. What is that YOLO client right now? And that's, it's probably just a client that's similar to kind of your A profile clients who will pay top dollar, really, really like you because you're solving meaningful problems. What are the activities that would get you in front of more of those people? Maybe that's going to a trade show for those folks once a quarter. Maybe that's being interviewed on somebody's podcast or guest writing a newsletter or, or, or I, I, I would, I would go more towards a metric like that that would increase the likelihood that you're going to attract the right type of client, even if it's a small volume. Because a small volume of the clients that will pay you really, really well if you run a small firm. And a small firm for me is like sub 500 employees. That's what you really want is not three more clients at your today's C client prices, but one more client that's an A client because that client's as profitable as those other three clients combined. And what makes this hard, like why this is uncomfortable for us is we want to feel like we have more direct, like our hands on the wheel of the ROI of those efforts. Like, we really want to be able to say, like, okay, if I'm really going to commit a day, a week to this or whatever it is, then I need to get specifically these outcomes. I will say the benefits of, you know, like my approach to sales and marketing, it is, it's networking, it's content, it's getting to know more people. I think a massive advantage of that relative to doing like paid acquisition is you're building a network that will aid you the rest of your life. You're, you're meeting people who can make connections for you, introduce you to other folks, and that stuff never goes away. And my career journey, it, it, it is that it, it can be seen in like this network of the people that I've met along the way and what they've enabled for me and where I'm at now with my network, just through my visibility turning up online consistently. I'm, I'm just in a totally different universe than I was five years ago or even two years ago. And the fact that you can call that networking or you can call that advertising for your accounting firm, that's really cool. So I would lean into those activities, ask yourself, how many of those events should I go to each quarter? How many newsletters should I send to that, that kind of group of people. How many posts should I put on social media for those exotic snake collectors? I'd more focus on those activities, set some goals for the inputs, but then monitor the inputs to see what are the highest impact things that I'm doing and what are the things that aren't making a difference. Really helpful here. If you haven't read the book Atomic Habits, it is just about how to design your daily cadence in a way to ensure that they are the daily habits of the person that you want to become. So if your goal is to attract, you know, 10 of those perfect clients every single quarter, consider what are the habits today that you think would drive that outcome a quarter from now and just commit to doing that stuff every day or every week, whatever that looks like for you. Last Accounts Payable Man Mike Mellinger asked asked this one a while back. What technology are you recommending for accounts payable? Almost none. Almost none. Software I think AP is, most AP stuff is, is on the way out. It's not the work, it's not the job that it used to be. Maker Sub I I've, I've been a big fan of Makers Hub from the beginning because they're just AI nerds through and through and they totally get it. We do a lot of sponsored stuff with them but that's because I I like what they do and I recommend them. So the only, the only brands we do sponsorship stuff with is like I will recommend a brand and then we'll do some outbound and say like hey do you want to sponsor any content? But Makersub's been one of those brands. Maker Sub specifically solves really hairy more, more involved accounts payable needs where you have like item tracking and inventory and all that stuff. And what got me so excited about them early on was I we, we somehow ended up in this niche of like serving folks for this specific flooring retailer. You would have like franchise locations and the, the stores within this industry were all working on this super outdated kind of operating system that had an accounting module and a receiving module, inventory management point of sale and all these different things. And the I guess the franchisor like the retail group was like we really want you using this platform to run your stuff. And as sucky as it was, we became experts in it and that was a huge rarity. A CPA firm that not only did tax but we also did managed accounting like back office cast stuff and we could hustle this platform that virtually no one else used. And I saw doing a bit of that work, it was, it was really our only foray into non just cash basis pretty simple stuff. I saw in the in in that just how ugly the receiving process was, inventory counts all like I hadn't been around any of that stuff before and it was all made worse by this being a really pretty rough legacy system. And when I saw Makers Hub and I saw this is what they are doing for extraction, like kind of a peek of how it works behind the scenes with the AI vision models and the large language models. I'm like, I immediately thought of those clients that we had who we did accounts payable stuff for and, and that AP stuff was a huge, huge, huge, huge amount of work and we didn't even do all of it. They had people on their side that were entering item details and that was just such a ridiculous, ridiculous volume of work. So saw Makers up and I'm like that's like 80% of that stuff out the window. And that's, that's the ugly stuff. Like that's the complex sort of thing where if I was setting up that engagement five years ago I'd be like yeah, no, you're gonna need a lot of somebody on my team's time to keep that stuff up. And we had somebody working on that like a couple hours every single day. And they had a full time kind of in house accountant on their side that didn't do any financial reporting. They mainly were doing like receiving and, and some other odds and ends. So a combination of two things I think in my opinion are, are kind of shrinking the accounts payable market. You have AI really doing a good job of automating the complex stuff. But at the other end of the spectrum we've got more banking platforms than ever before that do a really good version of bill pay. So you look at, you know, your relays, your ramps, your Mercury's, they now do a version of bill pay that's like, I mean it's what bill.com was, was not that long ago. And it simplifies so many things when you can keep all of that admin within a banking platform. Some of these are not technically banks, but you know what I mean, a spend management platform. And so because those have gotten so good, if I have a client on that spend management platform, I'm not even going to recommend an AP tool unless they have really advanced needs. Otherwise we're going to keep bill pay like almost on that spend management platform. They do it to vary to varying levels of complexity. There's also standalone approval tools like you know, like an approval max where you can build your own totally custom approval workflow for more advanced stuff. But I'll be totally honest, like the, the middle then of the AP market has kind of gotten smooshed. There's not as much need for the regular kind of everyday bill pay platforms because spend management is doing it really well. And at the other end of the spectrum you've got people specializing on the ugly complex stuff, plugging AI in and doing some really exciting things there. Less than a week ago we talked with, we didn't talk with them a bill pay platform that wanted to do like a big partnership and all this stuff. And I'm like, I honestly cannot imagine a use case for you. They're a very big name. I'm like, I can, in running my firm, I can't think of a single client situation across our 800 small businesses where I would have actually plugged that solution in because I'm either going complex like to the more involved end of the spectrum or it's just going to be part of the spend management system. So unfortunately that's, that's a bit of a non answer but I, I would say use traditional bill pay tools as a last resort. Spend management tool. That's, that's the first place to start. And the only three really that I'm recommending, Relay, Ramp and Mercury One to watch is Ro Rho. They're growing and coming more into the Advisor space as well. All very mature platforms. That's the place to start. Will those platforms do what you need? Only then do I look at actually pulling in in a bill pay solution. Oh. This episode is actually sponsored in part by Ramp who I'm a Ramp user, I really am. My business actually runs on Ramp. It is a super, super solid spend management platform which is a phrase that they made up because they can't call themselves a bank. So they're not a bank. But like spend hygiene and getting our clients onto better banking I think is, it's a really, really big opportunity right now. And it's one of those things where we don't necessarily like interject ourselves to say like oh no, we should be opinionated with how you manage your money. But then you see like what a headache is to track down receipts across your team for just getting the month end close done. You see stuff like people passing around the office card where the numbers get stolen every nine months like gang, there is a, a solution for this, a way, way better way to do this stuff. We've done a couple Demos on my YouTube channel now for Ramp. I would Recommend you check those out because you may not even be thinking about, like, I don't even know what quote unquote, spend management or a good version of this looks like. Give it a look. Solves a whole bunch of headaches, is like the responsible thing to do. Like, if you run a small business, I'm thinking, like, put this information in front of your clients. If you do any type of bookkeeping, it can be a big old workflow hack to make your life easier too. Learn more about Ramp. Check out those videos on the YouTube channel or the link down in the show notes. Okay, gang. This podcast is sponsored in part by TeamUp, the folks that help you find super talented accountants in the Philippines and hire them directly. Team up just launched a. What do they call it? A salary guide. A salary guide for hiring accounts in the Philippines. But it's so much more than a salary guide. You know all the embarrassing, ignorant questions we're afraid to ask about hiring people in the Philippines. How much does it cost to get this type of person? Can I even get, I don't know, a tax pro, an accounting manager, an executive assistant? Is that a thing? This guide, and it's going to be linked down in the show notes. It'll show you not just how to like get each of those different types of people, but what they'll cost. How to build out a job description. All of the questions that you have been too embarrassed to ask to find folks at Team up, they put them into a guide that you can swipe. Get that one down at the link in the show notes. And if you think about kind of, you know, where things in general are headed with the rate at which AI is getting better and AI agents like controlling our software for us and all that accounts payable, like, it's on the chopping block big time. And I've, I've said the, the area in accounting, if you can call the accounting accounts payable department, it is like that's an accounting function. If there's one domain that's been most impacted so far by AI, it's. It's AP for sure. And I don't see that changing. I see AI just coming into that more and more and making that increasingly trivial to, to handle. It's still an opportunity for your clients because your clients do not have very mature workflows around paying bills. I mean, the vast majority of our small business clients, we're still mailing out paper checks, which, it's amazing. And we, we would, we would push them and be like, hey, let's get you on a spend management or a bill pay platform. And they'll be like, oh, the security. And I'm like, you're literally mailing your bank account number all over the country a hundred plus times a month. So for those clients, I mean, there's a bit of an arbitrage opportunity to come in and be like, we're going to, we're going to handle your whole back office for you and we're going to automate a bunch of this stuff. We're going to pull in our favorite bill pay solutions, receipt management solutions, all that stuff. We'll get that baby humming. That was a lot of what we did. I've shared before. We did a lot of stuff with dentists. We did. We somehow got into this retail flooring stuff. We also started working with nonprofits, like religious organizations because it was, it was one of those situations where oftentimes we could come in, we had kind of a preferred stack of tools that we would recommend. You had a couple of people in the back office and we would start by augmenting them and doing the stuff they didn't want to do and maybe weren't super adept at. But over time, oftentimes those folks would get pulled into other responsibilities where there were needs. And we're like, but we can step into this part of the person's job. And increasingly we, we were kind of the accounting department in the box for these organizations. And why that worked for us is the arbitrage of we know how to do this stuff really, really well because we do it for a lot of people. We're going to automate a lot of things that you're doing manually, but you don't worry about that. Like these are our responsibilities now. We do have more efficient ways to get those things done. Done. We were replacing, you know, F FTEs basically they have folks who are doing this work who they will happily repurpose to go do other things. And we would come in, do that work to a much, much higher level at oftentimes the same or, or less cost. And that's, that's an opportunity for accounting firms like that is, it is not their fault that they don't know how to do this stuff as well as you can. It's the thing that got me excited about running a cast practice. I was, I, I was a tax guy for like the first 10 or 12 years. And there's only so much that tax tech will take you right now. I looked at cast and running a bookkeeping practice and I'm like, man, I see a lot of situations where it's not just let's do bookkeeping better, it's I see your whole back office that, that the organization has, be it a 10 person company or 150 person company. And I'm like, I, I know that we can do that better than some person that is just stumbling through that, that doesn't know the tech that we know and all that. And that's the opportunity, that's the margin where we can come in, set up like best practices, tech stack and all that. And that was honestly a really fun business to run because that's like fixed recurring fees. They're not looking at you through the lens of bookkeeping costs. They're looking at you through the lens of FTE displacement, not displacement augmentation maybe. Because the alternative is they're going to go out and hire somebody. So I can say like no, we'll come in and do this for you know, five grand a month and you won't have to make that other hire or yeah, you want to repurpose this person that you've got on your team. We can, we understand kind of half of their responsibilities here. Like we're, we'll step up the monthly, another three or four grand a month and we're going to step into those responsibilities and before you know it you've got like a really cool couple million dollar cast practice. And it's funny, in my experience those people just adored us when you're doing tax work for somebody, like everybody's kind of spooked with taxes and, and it's a bit of a, what do they call it, not a grudge purchase. There's a, there's a term for it. Basically they make the purchase begrudgingly. In our cast practice when we were doing back office stuff for businesses, kind of their accounting department in a box, they loved us at, to a level that I never experienced on the tax side of the business because the, the accounting department was their, like their least favorite part of running that business. And for it to be done to a really high level with people that they enjoyed working with and to just have it like off their hands, like to not have to fuss with it. They were so, so, so appreciative of us and that was really fun. That was like, that was one of the more rewarding things that we got into, I think. So I'm not hot on AP stuff right now, honestly, unless it's like cool, novel solutions to complex stuff. Otherwise I don't just be part of the spend management solution. If you got a different take though, ma', am, drop that down in the comments. I'm sure there's exceptions to that more industry specific stuff too where you may have to be more reliant on on bill pay solutions. Thanks for being here today. If you got any questions, drop them down in the comments. Always fun to do the Q and A on Friday and I'll see you next week.