https://www.listennotes.com/e/72a8c761e2c84565bed77322eab17f2d

Welcome to the Accounting for Innovation podcast, where we explore cutting-edge strategies and insights into the world of accounting and finance. Presented by Decimal and the Radical CPA, each episode dives deep into industry trends. Whether you're a seasoned professional or a budding entrepreneur, join us as we unpack key concepts and share practical tips to drive success. Welcome to the Accounting for Innovation podcast. I'm Jody Padar, the Radical CPA, and I've been at the forefront of innovation in the accounting industry for over 15 years. I have with me my co-host, Matt Tate, the CEO of Decimal, which is one of the fastest growing accounting companies in the country. And he's also a great accounting innovator.

Thank you, Jody. In this episode of Accounting for Innovation, we're gonna spotlight the burgeoning landscape of startups reshaping the future of accounting. Join us as we explore the innovative approaches and disruptive technology these startups bring to the table and delve into their potential impact on the industry. We'll uncover exciting developments that are driving transformation in both accounting and tax practices. So, Jody, tell me, as you think about the technology and innovation in this space, overall, What kind of comes to mind?

I think when we think about technology as accountants, we've always kind of been behind the eight ball because we rely on vendors who don't necessarily think about our customers as they develop technologies for the accountants to create, to do their work, right? So when we go to an old school vendor such as Thompson or Intuit or CCH, their creating technology for us to use, but they haven't necessarily placed the customer in the conversation, right? They're starting to now, but for many years they didn't. And what we're competing against though today is technology companies that are building technologies for the customer first, and then they're putting tools for the accountant as well. And it's like a new way of technology shaping how someone who performs professional services delivers services to their end user. And what's happening in this space is there's all these startups that are coming in developing these new technologies that are going to be competing with CPA firms and accounting firms across the country. And I kind of have a little bit of privy to it that a lot of people don't necessarily have. because of my positioning in the industry as the radical CPA, a lot of these technology startups come to me and say, Hey, Jody, what do you think about this? Or what do you think about this technology idea? And so I get to see a lot of these stealth startups that haven't even gone public or like they're not even selling to end users yet, and they're showing me their tools. and in the past, we always had these generic ones. And again, we had the pilots of the world. We have, you know, Zenni is one of them. There's quite a few accounting companies, software companies out there that have created software and are selling accounting services. Now there's this new next level of service provider where they've said, I'm going to do something very specific for a very specific customer. and I'm going to sell that service. So if we think about it in terms of tax, there's a company out there called Lettuce that is selling S Corps specifically to freelancers who make over $100,000 a year. Right? And their software is going to be niched out that tightly to someone who, a freelancer who's making more than 100K and Would be optimized by an S corp type of service offering. Lettuce is not the only one who's doing this, right? So it's kind of this no, 100%. Level of technology company that's, that's meeting a specific need. And another way of thinking about it is when you think about, you know, Salesforce came in and created CRM technology, right? And now there's all these different CRM technologies that are specific to a user base. So maybe it's like, CRMs for massage therapists, right? Or CRMs for salon owners, right? So is that the next level of hyper specialization for accounting to meet these very specific niche offerings? And if so, how does that help or hurt accounting professionals who are still struggling with the tools that the big vendors are providing us? and don't even give us that opportunity. And how is that shaping the market? So that's what I see. Plus FinTech and, and, and the other piece of that is now FinTech, who's making money on money. And now they have that money to reinvest in their technology stack to service customers greater. And those are the, the technology tools that are kind of coming into the market that I don't think most professionals even are aware that they exist.

You know, it's funny. When I started at a pretty decent size accounting firm, I always thought it was hilarious that when you brought in recent college grads, you almost had to dumb them down to the technology that they were going to use in their day to day lives because that was just what was being used in the industry. To me, I don't know about you, but I actually throw technology advancement in the accounting industry into three distinct buckets. and you've kind of alluded to all three. Bucket number one is the tools that accountants are using that their clients are also using are changing. You have your Intuit, you have your QuickBooks, you also have your bill.com, but you're seeing the next generation of each one of those tools that's now coming into play into the market. And so that's number one. Number two is the internal tools that the accounting firms, tax firms are using are also changing. And that can be with the carbons of the world or the keepers of the world. There are a bunch of great new startups and companies that have been around for a little bit of time that are making it easier to do the work within an accounting firm. And then you also, on top of that too, I think there are some really cool examples of gay right works. where it's an older type software model that most of them, that most of what they support has, but they're adding these new technology layers on top to really start to revolutionize how people do the work. And then the third bucket that I put people in that you also alluded to is the, we are doing the work bucket, like a lettuce, like a pilot or a bench, which is we're gonna pull out your bookkeeping or we're going to pull out your tax. We're going to do some of these things that traditional accountants and accounting firms have done, and we're going to do it with technology. And to me, those are the three big buckets that I look at. Am I missing anything in that?

I think the interesting thing about it is these tools are coming so fast and there's so much money that's being pushed at them to innovate faster. and, you know, just even a few years ago, let's just say even like right before the pandemic, let's just go back five years. There was no, there wasn't the amount of money coming in to push these tools to move faster. Plus, just the advances in technology where you can build things a lot faster because of AI, you don't need all the developers. You don't need the, it's cost less. for a software company to create software. They can just move faster and do it cheaper, right? Because of the way the technology has evolved. And so I think it's like the perfect storm that's happening that, you know, we're able to access these tools. Now, the interesting thing is, is accountants have always been slow to change and They don't necessarily adopt the new technologies as fast as they come out, right? They're a little bit risk averse. So what happens when you have these accounting companies who are accepting these new technologies and moving faster versus, I'll say, even, I don't even want to say an old school firm, a firm that is adopting technologies but not adopting them nearly fast enough or not experimenting with them nearly fast enough. Where does that kind of leave the industry as a whole?

You know, I think it's a tough place to be, but I also think that there's there are right ways and wrong ways to do it. So I fall into this accounting company space, not being a true account accountant myself. And we do move fast, but we put a very discerning process around how we move fast. And so we've actually built in change management, testing processes because we want to see everything that's out there. And I think you're right. The rapid pace of change is only, only going to increase. And we're going to, I mean, if you think about it, when I was born in 1983, there were no cell phones. Internet sort of existed. And now I carry a computer in my pocket. every single day. What my kids have in the next 20 years is going to be insane. And I have no idea what that's really going to look like. So if you're an accountant and you're running a firm today, whether that's big or small, you should allocate a specific amount of time and resources to figuring out new tools and better tools, period. You should build that into your P&L or into your time. Now, there are ways to look at these technologies that I think are important. For instance, if they haven't achieved a series A, really, I'd look at a series B for most firms, then I just watch them, get to know them. Because to me, traditionally, a series A meant you're fueling growth rather than an idea. And so if they've got a pretty good size series A from a pretty reputable venture fund and we can put out a list of what those reputable funds would be, then I think you can trust that they're going to be around. Because I think ultimately what accountants are afraid of is they're not going to continue to be around. And we've all used software that either got bought or into it buys it and then it sucks.

Right.

Yeah. You know, those types of things exist kind of regularly. The other thing is asking to talk to their leadership, their leadership at these newer tech companies. You should be able to get a VP, a CP, a CTO.

Yeah, absolutely. They want to talk to their customers. They are like hot to talk to their customers.

And if you, if they hold that back from you, run. They should be able to ask them, what's your vision of the future? One question, secret question I was saying on another podcast a couple of weeks ago is ask them how big their company is and how many of those people are in their engineering department. Because if they have a hundred people, if 20 of them are engineers, you're not going to get a lot of good product growth. If 80 of them are engineers, that product is going to keep getting better and better.

Yeah. And my favorite thing is to ask to speak to the product person, not the salesperson. Oh, 100% have to talk to a product manager.

Yeah, give me insights on where you're going. Like do some research and then try it. Find one of your great clients that you've known for a long time or use it yourself. Try some of these new products that you think would be helpful. Even with we just changed task management internal softwares. And when we did that, we put a small percentage of our clients on that and we ran it for a month. Then we put a larger percentage on it, we ran it for a month. And now we're moving everything over there. We ran a very slow methodical testing process and we really built out exactly how we wanted to go through that.

You know what always amazes me is we're accounting professionals, but how many of us take advantage of the R&D credit?

100%. I always, somebody asked me the other day, what's the best thing I can do for my business? Go look for free money. Start there.

But the only way that this stuff is going to happen in firms is if you make time for it. And if you say it's part of our culture to be innovative, it's part of our culture to adopt new things. We have to make space for it and allow for, again, when I talk about like the billable hour, how it kind of creates the, it holds firms back, right? like you have to make time and space for this kind of innovation to happen. And if you're not making time and space for it, it doesn't happen. And then, you know, next year you're back to the same place saying, oh, what am I doing?

Right?

And it's hard because there's lots of shiny apples in this, you know, you're like a kid in a candy shop. The people like to be first in line, but if you're not always looking, for kind of what's out there, you're never going to be able to innovate and iterate on your business fast enough to keep pace with everybody else who is out there doing these kinds of things. And technology companies, especially startups, have innovation in their DNA. They move fast, they iterate quick, they fail fast, and they keep going. And the profession is a little bit at a disadvantage because they're aversion to risk. But on the flip side, I think what you just laid out is a reasonable path towards moving towards kind of this change management that needs to happen.

And I think it's a balance, right? So anybody that says go all the way over and try everything and do everything, that's totally wrong. Anybody that says do nothing is also 100% wrong. to me, there are two things that have to change. And these are have to. If you want to be in business in the next five to 10 years, you have to continue improvement, period. Figure out what that is for you. There will be no one size fits all. If somebody tells you that there is a one size fits all way of doing things, they're wrong. Use what you are comfortable with and what you're comfortable showing your clients. Number two, the comment, this is the way we've always done it, is wrong 100% of the time. So if you find yourself as an accountant, as a service provider saying, well, this is the way I've always done it, immediately build into your mental repertoire, okay, what I just said was wrong. It is time to relook at this. And I think that's really hard. Look, I'm a recovering attorney. It's hard for me and for lawyers to do this. It's also hard for accountants to think, okay, I now have to change. That's different. But you have to.

Well, you absolutely have to, and Sally doesn't live here anymore. So Sally is same as last year, right? So should the accounting firms be afraid of this new technology and For me, I think it's exciting. And I think that's the thing that we really have to like, look at it like it's exciting that there's money coming into the space. It's exciting that there's innovation coming. It's exciting that there's a little bit of competition that's not the firm next door or the firm, you know, across the country. Or should we be afraid?

That is ultimately a choice. I think it's exciting. I think that it is absolutely amazing to be in a space that people are investing because it's how do we improve this? How do we make the lives of accountants better? How do we make the lives of their clients better? That is the entire premise behind all of this change. If you boil it down is people have stood up and said we can make things better. So being on the right side of that will make your life better. And there is no tax accountant on April 12th that doesn't want to have their life improved. I mean, you've done taxes before. This is the prime time to think, gosh, what can I do so that this year doesn't let next year doesn't suck as much as this year does.

And when you think about it too, it's that financial wellness. that we want to give to our customers. It's the ability to make a difference in their lives. When you ever talk to an accountant, they always say, I love my client. That typically when you say, why do you get an accountant? Or like, why did you go into business? Why did you decide you wanted to be an accounting professional? They always say, I like numbers. It came easy to me. And then they say, I love helping my client. And I think when we put the customer there as a kind of why we want to change, I think also it makes us say, okay, like there might be a little bit of discomfort as we go through this innovative process if we're not used to innovation. But if we know our customer and their need for financial wellness is at the end of it, maybe that's the incentive to make these changes. Cause sometimes it's easier to do it for someone else instead of doing it for yourself. And I think maybe that's where we need to focus instead of worrying about ourselves so much.

I agree. Look, this is an opportunity to make your life, your employees lives, and your clients lives better. And that to me is the power of all of this technology and all of this change. And I think a very reasonable starting point for any accountant is to say, all right, I'm going to devote X percentage, two and a half, 5% of my time to thinking about how I can make my life, my clients lives, my employees, lives better. So with that, thank you for tuning in to the Accounting for Innovation podcast brought to you by Decimal and the Radical CPA. You can find more insightful episodes of Accounting for Innovation wherever you listen to your podcast. And please do not forget to pick up Jody's new book, Radical Pricing: How to Optimize Profits, Delight Clients, and Build a Top Value Firm. Interested in joining the conversation? conversation. Jody and I would love to connect with you on LinkedIn.

Thank you.