481 Answering 14 Questions About Running Accounting Firms

Today we're doing an ama. My background it is in running accounting firms. I know, super cool if my 13 year old self could see me now. But today we're getting into what were the most upvoted questions on AI, on tech selection, on client management, nitty gritty stuff like how to transition to, you know, getting payment details up front from clients. Just hyper practical stuff as well as some kind of like what is the arc the industry is on sort of stuff. Okay, let's get into it. If you're new here, welcome. We we just talk shop on running accounting firms. Whether you do it now, whether you're thinking about doing it. About 1500 accounting firm owners tune in here every day mainly just to learn from each other these questions. They were overflow from an AMA I just did on a canopy webinar. They very kindly had me out to just talk future of the profession. Chatted with Davis Bell, Canopy CEO. I'll actually put a link to that down in the show notes if you want to catch that. It was a fun conversation but we way did not get through all the questions. That's what we're doing today. Let's get into it starting with. With AI. Right. Because that's what everybody wants to know about. Even the folks sniffing around running an accounting firm. Is AI going to wipe this stuff fast? Shave them be an accountant These days the TLDR is yes. Let's get into these questions. Six AI questions. Number one, besides the evolution of AI, what. What's something you think bookkeeping firms should be preparing for right now that most aren't? That wasn't an AI quote. Why is that in the AI section? Okay, besides AI, what should bookkeeping firms be looking out to? The honest answer here is you ought to be looking at all the like automated AI enabled bookkeeping companies out there that are raising loads of money. This is not a new trend. For a long time we've had tech bros that will come to the accounting space and be like we've solved bookkeeping. We've, we've fully automated it and they'll raise a bunch of money. And as fast as they raise that money, they're gone. Cuz they realize it's actually pretty hard to deliver on. But a side effect of AI it's not only how AI will support us, but how AI will support productized solutions. So for example, QuickBooks has their own first party bookkeeping service. QuickBooks Live Bookkeeping. They push it pretty hard. It starts at $200 a month or, or less money than I would ever be willing to take on a client for. And AI will make those solutions come up market. They will make them more, more powerful. And so for bookkeeping firms, especially new shops who, man, at the beginning you're kind of taking any sort of work that you can possibly get. We gotta look out for these product dye solutions. In fact, when we've got cheapskate clients who are like, I'm not gonna pay you $300 for bookkeeping. My meemaw just did it and I wasn't paying anything. Well, I'm not gonna do it for you for free. When you have that awareness of the ecosystem and alternatives out there, then your job then is to say, oh okay, go use this $200 a month service that's vastly inferior and I'll see you back here in nine months time. And then the price will be even more. There's a real risk to setting up shop in the same sort of price level and delivery style that these automated services are. It's another reason to not kind of remove the humanity from delivery because I also don't want to look like them and just do a worse version of what they're doing. But understanding the market as a whole and your place in it, that's super important and it prevents you from taking on low paying work. AI question number two. What parts of accounting do you think AI just isn't going to touch? At least not anytime soon? How can firm owners lean into those areas to stay valuable? That's a great question. A wild thing about generative AI is it's kind of the first type of tech that touches everything on the skill spectrum. Like we almost have this dogma programmed into us from past sort of automation trends where it's like, oh, it'll automate the tedious menial tasks. And AI certainly can. But unlike past tech, it can also automate more technical stuff. Like for example, right now, if you chuck a balance sheet and a profit and loss into chat GPT's O3 model and you ask it to review it like from a technical standpoint, review the balance sheet and the P and L, identify things that could potentially be wrong. The review points, it comes back with oh, also importantly, tell it to order them in the likelihood that they're wrong. So, so it may give you 12 things, but number one is the most likely thing that ought to be looked into. It does that today at probably a senior accountant level. Sometimes people will frame like the capabilities of AI through the lens of like, oh, it'll do this at a first grade level or a Graduate level. This is. We are, we're out of college at this point. It does technical review or like the version of technical review that it can do because it's just looking at the balance sheet and P and L. Right, does that at a really, really high level. And that's a high skill thing. That's not an entry level bookkeeper thing. It will catch errors that come across the desk of senior bookkeepers from junior bookkeepers, like, all day long. Which means it's a tremendous tool for our junior bookkeepers, like, to raise our bar. If we're still learning how to do this stuff, you're going to look like a big brain. If you are using AI to upskill yourself and not send, you know, bad work across the desk of your boss. And that's a really, like, interesting example to me of actually, like higher skill work being done by AI. I would say that for if we're going to lean into something that's durable, it's not around the nature of the work. Like, it's not to say like taxes safer than bookkeeping or this is safer than that. I would say the most important thing for us to lean into is actually a, like a people group, like an avatar, a type of entrepreneur, and have a deep, deep understanding of them. That is actually how we escape AI. Because as generalist AI tools like ChatGPT get better and better and better, what will I be able to do better than that? It will be the specialty stuff. It will be my very nuanced understanding of working with golf caddies or taxidermists or beekeepers or whatever that is. So I would actually invest in my network, in the specificity of the person that I serve. That to me, is a more important thing to focus on than guessing. This part of accounting will be safe and this part won't, one way or another. Like, what we do will for sure change. So equally important is like, well, what do we do on the other side of that change? What are the new tasks that we don't see today that we'll be doing more of down the road? So things will change. But anybody that comes along and tells you, like, this part is totally safe, they're guessing. Like, there's a lot of very smart people that can't agree on that. So I don't really want to, like, hedge my bets and go, you know, put all my money on bookkeeping or tax or something else. I want to connect with a group of entrepreneurs and always be there to solve their problems as those problems evolve. That's the move okay, AI question number three. When you talk to clients about AI or automation, how do you frame it so they still see the value in working with your firm? I imagine there's a fine line between being tech forward and making clients wonder why they're paying you. I think the more educated somebody is on AI, the more they understand what it doesn't do and what you need humans for. To kind of fill in the loop. So to hop in the time machine like early days cloud and moving to cloud apps for the first time instead of desktop software. A huge percentage of small businesses were taken on that journey by their accountant, their, their bean counter, who's not a, I mean, shouldn't be the tech advisor, but somehow we just end up being that person. We are the ones to help clients modernize. Similarly with AI, there's actually a really big opportunity right now is like if you are strong with AI and, and your clients are kind of trying to figure this stuff out too and kind of how to get there. It doesn't mean you're going to speak into like all aspects of AI and their business. But similar to the whole sort of cloud accounting shift and how we like helped clients get their accounting and all the connected finance apps in the cloud and talking to each other and all that, there's probably a world where you sort of end up becoming the AI advisor for how they build their finance kind of tech stack as well. And we, we will be like, you know, pump the brake, scooter. I'm no AI expert. Like, I don't want to put myself into that sort of conversation. But the unfortunate reality is, is if you don't, who will? Who's more qualified than you to make that decision? Are you going to let an AI expert who's an engineer and doesn't know anything about accounting, are they going to come in and tell the client how to build their accounting tech stack and how AI impacts all of that? I would actually say our job is to have a deep understanding of how AI fits into all the different things that we do and not gatekeep that from clients, but like help them go through that transition. If there's something that we do that no longer has value because AI will do it. I would argue our jobs are to be the, like, the ones to tell our clients, here's a better way to do this. I don't want to withhold information from them so that I can write out another, you know, 12 months of recurring fees or something like that. Like, the reality is the world's changing. Take accounts Payable. For example, accounts payable is probably the, the area of accounting that is most being disrupted right now. I had clients with very hairy sort of, they were like doing receiving and inventory management and having to match up purchase orders. All this stuff with the tech we have today. And this was, you know, four or five years ago, 80% of that accounts payable department I could replace with just the AI accounts payable tools that we have now. And you know what? My clients and the people on those teams would say, great, because there's about a hundred other things that I would rather be doing in the business than this AP function right now. And so I can step in and what I would do is I would come in and be like, hey, like we'll actually take over your accounts payable department for you. It will be less costly. We're going to use the best, best in class tech to do that for you. And you don't even have to worry about it anymore. That's what I would do for kind of our managed accounting clients where we'd handle their whole accounting department. But similarly, you've got like, you know, really good banking platforms now that are just infinitely better than traditional banks. I can run a webinar. I can send a little video to a client. Like I can still be helpful and show them the better path, even if that cannibalizes some aspect of my business. I don't want to be the one to gatekeep that. Like, I want to keep them sort of at, at the, at the bleeding edge, but like I want to keep them moving forward. That's just me being a good advisor. Like at no point is being a good advisor withholding information from them that'll ultimately help them. AI question number four. What are the best AI tools and software besides ChatGPT you recommend for firms to thrive and stay ahead of the competition. Any specific tools you recommend for smaller firms? You need to have an AI meeting transcript tool. Extremely important that we capture our meetings. My favorite tool for that is Fireflies. That is better than like your, your Google or your Microsoft Recorder because it works across all meeting platforms. Zoom, Google, meet Microsoft. Like wherever you're having that virtual conference, it will work in any of those systems. Also it has a very good mobile app that I can use as a recorder for in person meetings. That's incredibly important because how we organize that information, I mean imagine, imagine having like perfect recall being able to remember that thing your client said in a meeting three or four years ago, even if you weren't in the meeting. That's very, very valuable. But increasingly going forward, how we manage the collectiveness knowledge of our firm, which arguably advisory meetings are the best snapshot we have of what does our firm know. Building a library of that stuff that's actually a really cool opportunity for the near future is how we use all that information. We're looking now at knowledge automation. That is how we deploy, like the collective knowledge of the firm in interesting ways versus data automation, just getting the work done. And a very, very basic example of that is an AI assistant to support your juniors. Maybe they're going into a scary conversation with a client or they're just stuck on something they don't know how to answer that has someone else in the firm gone through that same situation before? Almost certainly. Right. And it's not a replacement, like a complete replacement for having a conversation with a senior and understanding the nuance and all that. But is it better than nothing to be able to throw all your embarrassing questions at this assistant A hundred percent. So if there's one thing you do, I would push you to pick up an AI meeting recorder. You know, some people are spooked by, like, they think clients are going to be afraid of meetings being recorded. If my clients will only ever talk to me like on a burner phone, those aren't conversations I want to be having to begin with. So I would dig into like really, like you're really that concerned about stuff being recorded? Am I willing to carry that liability on your behalf? Probably not. In my experience. It's like one conversation like that and they're like, cool. But like, I get it. It's gonna, it's gonna save us a bunch of time. It's gonna keep our team on the same page so we're not asking the client the same questions. And the client can have a copy of those transcripts too, if they, if they really want, so that they can refer to that stuff also. Okay, AI question number five. How do you spot when AI is getting it wrong? And what steps do you take to fact check? Fact. Fact check outputs using AI for factual stuff. Unfortunately, it is still pretty Easy to get ChatGPT to make up answers. And. And so it does require a little bit of education around what are the right ways to use it. Big things are use reasoning models. So for example, O3, O3 Pro, like those are the best reasoning models right now. They're gonna work through like real material in a much more logical way, a little less prone to mistakes. But also never just ask an AI tool a thing without understanding will it Pull that information from an authoritative source. And ChatGPT has gotten a little better at if you're asking something factual, always going out to the web and like browsing to find an answer. But the reality is, if I'm an accounting professional, usually I know where I have an idea of the source I want it to pull from. So you can say like a specific IRS publication or I can give it, you know, the, the, you know, 800 page bill or whatever it is that I want it to look into. Hallucinations happen most when there isn't like an underlying source of truth that I'm giving it or pointing it to. That wipes out a huge percentage of hallucinations. Most of the time, what you actually want it to do is give you the. The exact quotes that will kind of build a case to say, here's what the answer is. Then it's just a matter of going out and confirming those exact quotes rather than it making up an answer, being kind of a black box and not being able to see behind it how it got to that answer. Two related resources, actually, that I'll give you and put down in the show notes. One is a video I did a while back around how to use ChatGPT for research. And some of the AI models have changed since then. They've gotten better. But fundamentally, how you get it to go out and use authoritative sources to give you an answer that remains unchanged. I'll put that down in the show notes so you can check that one out if you haven't. But then, second, an interesting tool to kind of help you understand how this stuff works. I will link an AI assistant we have that's actually. It references all of these podcast episodes. So almost 500 episodes. You can go to this AI assistant Jason Bot and ask it a question. And when it gives you an answer, there will be citations pointing back to this transcript of past podcast episodes. And that's a. That's a very different way to use AI, right? There is a large language model just giving you a response. And so if I tell it, give me some funny jokes I can make about Doritos and Lego Ninjago, it will then make up a response. That's hallucination. That is the creativity of an AI model giving me something novel. But when I wanted to do something factual for me, then I want it to go to a specific source and only pull information from that source and not get creative. And it is in learning how to get it. Like, you know, if AI has two sides to its brain, kind of. It is in learning how to get it to use the side of the brain that you want it to so that it's not going to make something up. I would like. These days, hallucinations are way more of a headline than they need to be. There's ways that you can force it to hallucinate and like beginner users that don't understand that context can run into that. But it is largely a non issue now. As long as you're using it the correct way, it doesn't mean you don't need to double check it. We're accountants. We've never trusted anything. Treat it the same way as the intern bringing you some work that you still have to review. But we actually have studies, like a study from about six months ago on people doing work in legal firms. And this, this is with models that were vastly inferior to what we have today. They found the greatest gains for legal workers were in actually efficiency and getting work out the door, while accuracy was about the same with and without AI Obviously they're looking very closely at hallucinations and they found the number of hallucinations that the AI did was identical to the number of hallucinations that humans did where they misread something or, or misunderstood it or conflated some set of facts. The two were even. But for some reason, because it's a computer, we think like, oh, it's going to be super deterministic and do it perfectly every single time. It's good, but it's not perfect. And that's arguably why AI is well suited to work inside of accounting firms. Because we already don't trust anybody. And we have this control structure for how we review and ensure things are correct before they go out the door. So it definitely shouldn't bypass that. Right. But we kind of already have the machine that can accommodate that. Because when you hire an intern, oh, Lord knows they're not doing it right. Today's episode is brought to you in part by TeamUp. Who helps you hire direct in the Philippines? What is hiring direct? Hiring direct means you own the relationship with that person. You're not paying a middleman, a middle person. You're just paying the person that works for you. And that's all they do is work for you. It's. They're an extension of your culture. It's no different than hiring somebody in another state. You're responsible for training them. They're just part of the squad now. Things to figure out. The first time you're doing that, what does it look like? There are a number of Things to work out. If you do tax work, you've got some disclosure requirements. But that's why pulling in someone like Team up, where this is all they do is really helpful. In fact, Team up has been around for 26 months. These are, these are real numbers. They've now placed 250 hires into firms. 98 bookkeepers, 98 bookkeeper slash accountants 80 senior bookkeeper slash accountants. 42 tax accountants. 11 team leads slash managers. 10 EAs. They've recruited for 135 firms. Oh, and 184 of those hires are still with the firms. That's fascinating. 184 out of 250 hires. That's a pretty good number. And team ups even got like a six month guarantee where if that person doesn't work out for the role that you had defined to find another person. Team up. What they're really good at is direct hiring. If that's what you're looking to do, schedule a call with them at the link down in the show Notes this episode is brought to you in part by Missive. Missive is a platform for managing email in a team. And if you've heard me talk about email, you know we need to break down the silos where we all are managing our own email. Inboxes. Please. Email is the receiving bay of your accounting firm. Let's take the team approach. Okay, now Missive actually a huge percentage of Missive's users are accounting firms. Probably because most practice makes management systems these days. Like with very few exceptions their email implementation like the client for sending emails kind of sucks. But also outlook awful place to manage team based inboxes. Missive we talk about like building your org chart around pods and managing client groups and all that stuff. Missive will let you set up like email management the same way in pots. Everybody can have their own inboxes but you can also share those inbox as well. So people we can help each other out, cover for each other. Makes it way easier to delegate the work that's coming from those emails. Really cool platform. Some G2 reviews from actual accountants. It massively improved their workflow. Makes inbox management a dream. Fantastic tool from a busy accounting firm to manage multiple inboxes for clients. Missive is all caps amazing and I can't live without it. If you are wasting too much time on email man, give Missive a look more info down in the show notes. Okay, last AI question number six then we're getting into tech stacks. When looking to adopt AI, what security measures should be considered to make sure your client data is secure. The only thing that makes AI tech different from all the other cloud apps that you use is understanding whether or not my prompts are trained into the AI model. That is when I ask it, when I'm tucking my kids in for bed and I tell it, write a story with, with Lightning McQueen, Super Mario and oh, what's the frozen lady's name? I don't know. You get what I'm, you know, okay, I tell it to go write that story. Sometimes, depending on how you're using AI, that prompt that I just gave it will be trained into the model to improve the quality of future outputs. But you can see how the example we used earlier where you chucked a balance sheet and a P and L of a client into a model. You wouldn't want that, right? You can put all sorts of sensitive things in a prompt. You can give it a transcript, a meeting transcript with sensitive things in it. You put that in a prompt. You don't want that stuff being trained into the model. On the free Chat GPT plan, by default, all the prompts are trained into the model. This is the problem with not having an AI plan in your firm is whether you're giving your team permission to use AI or not. I can almost assure you a lot of them are going to use it even if you don't give them permission. So what I don't want is somebody going out and rolling a free plan to be more productive in their work. Instead, I want to use the ChatGPT team plan, which is a business plan where your prompts are never trained into the model. I put that into my team's hands. So they're not sort of choosing their own adventure there, right? So as long as the tool you're using is not training your prompts into the model, this is the case with the ChatGPT team plan. It's the case with all the Microsoft and the Google business level AI assistants. If it's not training your prompts into the model, then it's no different than any other cloud tool. Now we still have to do the same due diligence we would do for any tech that we use inside of our firm, but on the spectrum of common tools inside of the accounting vertical like the the day to day tools accounting firms use. ChatGPT right now I'd actually say is above average compared to to many commonplace apps because it has SOC 2 type 2 security compliance, you can enable multi factor authentication, it is no slouch. And if you use other apps that are implementing AI and are doing AI things let you in on a secret. Those apps, those use an API that is the exact same API the ChatGPT team uses. I wish it was teams and not team. It's so weird to say ChatGPT team, but that's the one thing you look out for are your prompts, training the model. You don't want that. Okay, getting into Tech Stack Tech Stack stuff. Three questions here. Number one, what's your favorite Canopy feature that you think is better than competing firm management software? Slash apps? You can tell these are questions that came from Canopy Webinar. I will tell you my favorite thing about Canopy, and it's not even a specific feature. It is that Canopy has a different level of polish and everything that they do than many other apps in our space. And when my practice management system's actually increasingly front and center for my clients, like they're interacting with it more. They're paying me there, they're submitting information in the portal, accepting engagement letters, all that stuff. I just don't want to be embarrassed by the tool I'm putting in front of my client. And that is kind of a bummer about our space. You have a lot of smaller software companies where the stuff that they put out is, like, just not super polished and impressive. Canopy favorite thing about them. Everything is very well thought out, like, down to, like, all of the views. Like, I can customize which columns and reorder the columns and sort on any column. Small stuff like that, where you go to another app and it's like, wait a minute, this view's like totally locked down. Or I can't see the custom fields. I would say my favorite thing about Canopy is those details and how they do them well. Tech Stack Question number two. What are some signs a firm's tech stack is holding them back? Here's the thing about having confidence in your tech stack is there will always be aspects of the accountant experience that suck. But because it sucks, that doesn't necessarily mean that there's a solution out there that will make it better. Similarly, there can be parts of the accountant experience that you think are great that may not hurt when you do them, but there might be solutions out there that will actually totally eliminate that work or make it even better. The only complete solution that I know like the most, the shortest path to having a tech stack you can feel confidence in, which is what we're actually looking for. We think we're looking for the best tech stack where, oh, if I could just find best app abc, then I'LL have total confidence. I'll let you in on a secret. When you find abc, if you ever do, and you probably won't, but let's say you did. You had total conviction they were the best apps. And you roll those three apps out on the other side of that, you're still going to be looking over your shoulder every time you get served a web ad for some tool that you haven't heard of, you. And you'll check it out. You're going to be like, oh man, I'm looking at this thing now. Is this actually better than this other thing? We all want a better tech stack, but what we're actually in search of is confidence. And the only way, in my opinion, you can get that confidence is by knowing other people who run accounting firms and being able to hear from them what works and what doesn't work. Because if you take your information from software salespeople, that's just not an independent source of information. Lots of ways you can build out this network. It's kind of the ultimate hack to being able to to run an accounting firm. Hanging out on social media. There are lots of smart accountants, like sharing, being super transparent about how they run their firm online. I mean, literally down in the comments of every single one of these podcasts, you got people sharing helpful stuff, just being part of, like, the conversation. You will make friends. Second, online communities. I run one. It's like the core of my business. It's the thing I'm most proud of. Almost 600 accounting firms are in there. You join, and within 30 days, I will have made you friends that run firms very similar to your own. Like, it is the ultimate hack, having those relationships and investing in making friends and meeting more people that run accounting firms. That, to me, is the path to confidence, to not perpetually looking over your shoulder and wondering if there's better tech out there. What you want is peace of mind so that you can actually put the tech conversation behind you and be like, I'm going to REVISIT this in 12 months because I got crap to do. That's what you want to get to. That's the dream. Last tech stack question. What's the ideal tech stack for a small bookkeeping or accounting firm? The sucky answer here is there is no such thing because it's very dependent upon the way that you want to work with your clients. So there's a lot of folks that still don't want to put a portal in front of their clients. There's other folks who are at the other End of the extreme and want like a two sided task management system to work with their clients. I will, I'll actually link a video. I've got sort of almost like a. If you've ever seen the Maslow's hierarchy of needs pyramid where at the bottom you have the most foundational stuff. I've got that sort of thing for how you build an accounting firm tech stack. I'll link that in the show notes. It's kind of a soup to nuts. How to build your tech stack and in what order to build it. Whether you know, depending on if you're a tax firm or bookkeeping firm, small firm, big firm. Core to that is you start with the tools that will do as much stuff as possible. So practice management systems like Canopy, there's oh over 50 of them now. Canopy is one of my top recommendations. You want that core tool to do as many things as possible and then you only layer on top of that the stuff to fill any gaps that are left. I'll link that in the show notes as well. That's kind of like my ultimate methodology for, for how to build out your tech stack. Two questions around client communications and change management. Ooh. First one, how do you tackle taking a legacy firm with legacy client pricing and communicating to an existing client base a large price hike, say at least 25% on most clients and some clients nearly doubling their price from last year. What's the best way to communicate that? I've done this in a 1600 client firm. Some people got as much as 3 to 4x price increases. I would love to tell you there's an easy way to do it. There isn't and man, does it hurt. Ultimately what we did was we sent out a letter, we said, listen, the whole landscape, how you serve this stuff, how you do this type of work, it's changed. It's harder than it's ever been before. You really don't want to go down a whole sob story path like people ultimately don't care, I think. But you, you gave a kind of a very basic justification of like here's what we're doing. We're, we have to do this to deliver the level of service that we know that people need. And part of that communication in my case was we're significantly cutting down the client list. And you're on this, you're getting this letter because we want to move forward with you, but we're just telling you it's going to have to change, it's going to cost more now. Very important to that this is actually the next question. How do you recommend we transition to upfront engagement letters? Very important to that is I have to give them some expectation of what I will now need them to pay me. And so we did this in concert with doing upfront pricing and proposals for the first time. And this was, I mean, traditional hourly firm. We had every reason to be like, oh, you can't actually do that. And we, we navigated all that stuff. It was actually a subsequent question that gets more into the details of how we did that. And so I'll share more about that in a bit. But in telling them that their price was going to go up, I had to give them a price or a range. And this was actually a great way to incentivize them to lean into this new proposal system that we were doing. That also, by the way, required them to provide a payment method so that when the project was complete, we could automatically bill it, completely eliminate invoicing. And I know if you haven't done this yet, you've already got a big old laundry list of all the reasons why this wouldn't work for me. And we'll address that a little more. But when it comes to sending out that communication, she got to do it, got to rip the band aid off. And I know very few firms who have not had to have this egg on their face at some point, if not once, several times. And as much as it kills you, you will not regret it. It was the very best thing. It was probably the most important thing I ever did running my accounting firm. This was an old 80 year old firm. We'd collected all these relationships from past partners and it just had all the kind of hangers on that you would expect in an old firm that most accounting firms still have. But you got to rip that band aid off, because I tell people that run firms, you are closer to running a wildly more profitable firm than you realize. Just from the math of how this stuff works, if you're running, you know, really cheap projects that are 30% margin project, say I'm charging 500 bucks for that, and that's a 30% margin project, doing these itty bitty 2 to 5% inflation bumps like they're getting you nowhere. In fact, the cost of your team and getting the work done and the additional tech we're buying and all that, like, you may be going backwards on those projects, but simply taking a project from 500 bucks to 600 bucks, that's a 20% bump in their price. But on a 20% margin project, you Just doubled your profit. And people like to say, like, well you, how can you even be a business owner if you don't understand this math? But I genuinely don't think that we think about this stuff enough. And I'm pretty sure that I, midway through that I switched from a 30% margin project to a 20% margin project. And so you're already questioning my ability to do math. So now we're saying that was a 20% margin project. If we increase it from 500 to 600 bucks, we got another a hundred dollars of profit. That's another 20%. It's now a 40% margin project. We doubled our profit on it. And that's a little cheap project. Oftentimes it's not even that huge of a price increase that can have a vast impact on the profit of your firm. And the profit is all that matters at the end of the day. Because in the time it takes you to do that project, that's now twice as profitable. Like you can do one of those this year and make the same money that last year you would have had to do two projects for. Right? So all of the problems and going to ferment and capacity working too late, not being able to find the right help, all that stuff gets solved by just having projects that are more profitable. And yes, that's obvious, but that's what makes this an imperative. Like the little itty bitty fee increases, they take you nowhere. Meanwhile you by being here and listening to this and tuning into webinars and developing yourself and just the passage of time, you are getting better the next time. All you give your clients in terms of a price increase is an inflation bump. What you are saying is I'm no better, no more capable, My team is no better than we were last year. And what makes that even worse is most clients tax situations get more involved, more complex. Each year your client's business did they go from eight employees to 12 employees? From a million in revenue to one and a half million in revenue? Are they paying half again as much as they did last year? Probably not. Maybe they don't need to. But surely the answer and what we charge them this year is not same as last year adjusted for inflation, Right? Because you got better, because they usually need you more and because we got to get you home in time for dinner. All right. This episode is brought to you in part by Makers Hub who's right now using AI to crush all things accounts payable. I was recently at scaling new heights in Orlando. Makers Hub kindly let us use their booth to host a meetup. We had over 100 people come out and hang. And it was funny, like the conversations meeting folks. Because we were at the Maker's Hub booth, a lot of conversations ended up that we talked about Makers Hub and I was surprised the number of people who have listened to my stuff, watched my stuff, seen the Makers Hub ads and they're like, yeah, it's actually pretty freaking good. Heard some pretty cool stories about like really hairy client situations that Makers Hub handled well. And that's kind of their sweet spot is complex accounts payable stuff. Do you do inventory management? Receiving? Do you have to fuss with purchase orders? I sure hope you don't. And do you work with vendors that send stupid invoices that have all these different nuances and fiddly things? Mega Sub is the first tool I've seen that is malleable enough to literally, on a vendor by vendor basis, pull those dumb details that ought to impact how an invoice gets processed, even. Even right down to handwritten text because they're using AI vision models. Really, really cool tool. Makers Hub. Even if you don't do this stuff for your clients, I've got a bunch of videos demoing it on my YouTube channel. If you got clients with gnarly needs like this, shoot them one of my videos. They'll be entertained for five to seven minutes. And it truly like transforms. Transforms the entire accounts payable department. Really, really powerful stuff. Learn more about Microsoft. Check out the link down in the show notes. This episode is sponsored in part by Verdot. Here's a hard truth incoming. Oof. Bomb. If you're still managing your own IT, relying on generic IT guy, you could be non compliant with FTC safeguard rules, IRS Pub 4557 and WISP requirements. That's exposure you don't need. But enter Barado's barrettgard. Barrettguard. Can I get some feedback on that? No? Okay. Beargard gives firms fully managed IT that's purpose built for compliance. That means your systems are monitored, patched, protected and documented continuously. Over 1400 accounting firms rely on Verito to stay audit ready. Gang, the reason we're actually talking Verito here. Can I go off script? About six months ago I put out a post on social media and I said, oh, first party hosting from the usual characters you've heard of. Not great. What's everybody using? What do you like? And I saw a level of love and fandom from Varado and I'm like, hang on, why is everybody so enthusiastic about like a hosting provider? I mean, don't get me wrong, it's important. And so verdo, they've had a place in my recommendations ever since then. Because firms are just like, do it. You won't regret it. Whether it's, I'll assert Drake QuickBooks Desktop, they speak your language because they work with a bunch of other accounting firms. Okay. To schedule a free consultation just to learn more. What do you got to lose? Check out the link down in the show notes. Okay, two questions on kind of career development if you're coming up through an accounting firm. And then last question, more tactically, how we transition from traditional hourly billing in a very practical way to charging for outcomes for like the transformation that you enable. Okay, two sort of career trajectory oriented questions. First, as an intern who aspires to one day become a partner, an internal you already thinking about partner track buddy, cool your jets. I'm just kidding. Sort of. What skills or mindsets should I be focusing on right now to set myself apart early on? Listen, you may hate what I'm about to say, but you have to like, keep perspective that if your whole world is this tunnel vision of the bubble that you're operating in where the only win condition is becoming partner, you gotta like recognize that that in all likelihood will probably not make you happy and serve as like an ultimate destination that is a for everything. So if you're an intern, the most important question I would be asking myself is, am I enjoying what I'm doing? Would I enjoy doing my boss's job? Does it look like they're having fun? Do their children know their names? Are they staying and working even later than me? Because if I get their job, that's, that's my reward. So like at the intern stage, I mean, I would try to be more self aware than I think we usually are in that situation. Because if you're a, an achiever, like I for sure was, all you have is blinders for playing the game that you're plugged into. But the world is, is so, so much bigger than that. And in this day and age, you probably won't guess on your first try. What's the thing that will be most fulfilling that you'll be most suited for? Like, it's a, it's a pretty big roll of the dice to come in and be like, okay, CEO, I'm going to have your job one day. And the only reason you say that is because it's the one at the top of the org chart. So I, I would, I encourage you to kind of maintain, like, keep perspective and try to be aware of the aspects of your job that you enjoy and the aspects that you don't enjoy. Because when you're the boss, be it a manager, a partner, whatever it is, like the tasks that you do end up looking wildly different. So for example, if you don't enjoy managing client relationships, you're not going to enjoy being the boss, because that's a big part of it. If you don't enjoy managing people, that problem's just going to get worse the more you move up the org chart too. Now this, this was a entirely unhelpful answer for the person who gave me this question. As an intern who aspires to be partner one day, what skills or mindsets should I be focusing on? The technical stuff will just happen. And technical stuff, those skills, they get developed just through repetition. But speaking for myself, I was a pretty mediocre technical people person. Like, I could get by, but there were always going to be people that were better than me at that stuff. I enjoyed working with people and I enjoyed the bigger strategy arc and conversations of like how we ran the whole firm that I found I was good at. And, and even today, like what I do in my business and thought leadership and going and speaking places and all of that, I didn't learn until later on that I'm a better leader of leaders than I am of staff. Like, I'm a, I'm a kind of a visionary person that, that I think works for a certain type of mind. And the technician, the person that's, that's in the weeds doing the work, I, I don't think that's usually the person that will get excited by my kind of the, the picture I paint of the world. But I didn't know that until I was into that role. So if you're coming up through a firm, the technical stuff will just happen. The, the, the difference maker. Like as long as your technical ability is like at least mediocre, the difference maker will be can you play in the sandbox? And like, can you, you be helpful to other people? Can you build allies along the way where you're helping them to succeed and so they want to see you succeed as well. Those are the folks that end up winning, like the jerks. Even if they're really good at technical stuff, they're not the people that end up winning. So a lot of it is sort of the soft skill stuff. Other career question, what's a non technical skill every accountant should master? Being able to listen, just being a better listener. What kiss Warren that was my wife not being a robot. Just like having an understanding of sometimes people just want to talk and your job is to listen, not to fix what. That was my wife, again, being able to meet people where, where they're at and kind of understand where they're coming from. Just kind of, kind of being human. Right. All right, last question. Unrelated to career stuff. Have you come across any accounting firms that have successfully shifted from billing for the work itself to billing for outcomes or transformations they deliver? The old value pricing debate, huh? This is always a fun one. I think a lot of the value pricing methodology comes from a very different world, in my opinion, where you're doing big old contract work, oftentimes one off work with very specific goals to get someone from A to B. And some accounting firms do that type of work. But many accounting firms, it's much more transactional. It's, well, somebody has to file my tax return or somebody has to do my books. But escaping, like getting to escape velocity on someone comparing your $80 an hour hourly rate to someone else's $40 hourly rate, that should always be the goal. You don't want people trying to compare you to everyone else in town. And even looking at your credential, like, if somebody is concerned about what your credential is, you've already lost the battle. I want that person to perceive me as the expert in what they do. You know, the barber who for the first time finds an accountant that just works with barbers and they can speak their language. And is the work really all that different? Probably not, but that's a. That looks like a totally different relationship for the barbershop owner because they finally got somebody that can speak their language. I mean, we all know, like, how low the standard is for the average accounting firm these days. Imagine being on the other side of this equation where you don't know anything about accounting, about tax, and having to go out to firms where it's pulling teeth to get somebody on the phone. You feel like an afterthought, like, that sucks. But to find somebody who works with people just like you can speak their language or return your calls, whatever that looks like for you. That is huge. Like, that's so refreshing. And the reality is, this is where the bar is right now. To run a successful accounting firm, you have to be able to return a phone call. And then, like, there's accounting firms that don't do phone calls and all that. I'm, I'm sort of generalizing. You have to be responsive, like, get back to them and to really excel, you really just need to nail down who you're going to be for. Is that beekeepers, is that endodontists like find that specificity in who you're gonna work with because that's the only way that those people will find you. Or that that's at least the easiest way for folks to find you. And the more optionality you have, the more selective you can be. Most accounting firms right now don't need more clients, but every accounting firm needs better clients. And that's what we're trying to do, is find a type of person who has the money to pay for you to solve very painful problems for them, will pay top dollar for that. You take on one of those projects, cut two legacy projects, that's the name of the game. Do that until you retire, whenever that is. And so when you think about escaping, like the hourly billing model, it's. I mean like the mechanics here are not really complex. In fact, like if we take our most transactional 1040 work that we did in my firm when we moved it away from hourly billing, it was literally just everyone in this dollar range. Like you're now tax return type one. In the next dollar bracket range, you're now tax return type two. Like this is volume work. Instead of splitting hairs over every single tax return, think of it more in terms of portfolios. How do we make sure that we don't go backwards on a whole across all these projects? That's the most important question to the business. And when like that level of abstraction kind of zooming out can eliminate a bunch of trivial stuff like manually invoicing every single project down to the penny. Because that's the most fair thing that's not in service of your business. It's taking the time of your most scarce person, whoever does the billing, usually the partner, when there's a simpler version giving them a price upfront, that assumes the same scope as last year. So it could still change if there's, you know, something big that, that comes up as a surprise. But moving them to a price that's agreed to upfront, that really is them paying for an outcome. But I do want the outcome to be more juicy than you did my tax return or you did my books in the month of July. And this is where finding entrepreneurs that have very specific types of pains we can solve. That's where that gets really juicy. Because I want that outcome to evolve into. The business owner didn't have to run a six person accounting department because we did all that stuff for them. This Last month, you know how much that six person accounting department cost them before? A whole. A whole lot. A whole lot. That's the transformation we enabled for them. But then for them, when they're not having to manage that team, what are they doing that's now driving business results? Like, it's not just the cost of the humans who may have done that work previously. It's the opportunity for the business to have greater focus and go do that next thing to repurpose that person on their team that can go and do that more, more valuable project that's, you know, revenue generating. I did a lot of work with dentists. Dentists have a very clear snapshot of what every hour of their time is worth. And so if I could take 3 hours of admin off the plate of a dentist, there's a very real ROI to that. That is I can now be chairside that much more. Most businesses have some version of this and getting to where we can confidently communicate the ROI of what we can take off of their plate, that's where we then start pricing based on the ROI rather than our inputs. And even if the client wants to know what your hourly rate is, they don't actually care at the end of the day how much you work to get that stuff done. All they care about is how much they have to pay relative to how valuable they perceive that thing is and whether there's any substitutes available. So if I save someone 10,000 bucks, most people will be happy to pay $5,000 for that, unless the guy across the street is $4,000. And so this is the value of specificity, being perceived as kind of one of one, the guru in a specific space. The more you eliminate those substitutes, the more your pricing and how you structure projects is tied closer to the ultimate ROI of what you do for people. But most of us today, frankly, we're still generalists and we're doing transactional stuff. You're doing the tax return because they have to have a tax turn. You're doing the books because they have to have the books to be able to do the tax return. And this is the power of finding a more specific type of person that you can solve. And this is the power of finding a more specific type of person that you can serve to better learn the language of like, what is the ROI of what we're doing for you, gang? Thanks for being here today. We do Q&As almost every week. You got any other questions, drop that stuff down in the comments. This podcast that runs on YouTube is also an audio only feed. Just go search, Jason, on firms. You'll find it. Because, man, it's never been a. It's honestly never been a better time to run an accounting firm. Like, it is a pretty darn good gig if you can kind of put some boundaries around it, like protect yourself from making the wrong decisions. If you've heard the quote, easy decisions, hard life. Hard decisions, easy life. Man, that is so true. In running an accounting firm, if you're willing to make some hard decisions, do some stuff that hurts your life on the other side of that is much, much easier. You can do it. Okay. Go do it. Hey, I'll see you in the next one.