ChatGPT Beats Humans at Financial Statement Analysis

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Blake Oliver: [00:00:05] The VCs in Silicon Valley are talking about how this next decade will see the first billion dollar, one person startup, or maybe a handful of people, because you just don't have to hire an army of developers anymore to build a really cool concept.

David Leary: [00:00:24] Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: [00:00:29] Hello [00:00:30] and welcome back to the show. I'm Blake Oliver.

David Leary: [00:00:32] I'm David Leary and Blake. It's like I only see you once a week now. Like you've been traveling again this week.

Blake Oliver: [00:00:38] I broke my rule, which is I always should take a week off between conferences and travel. And I did two weeks in a row, first at engage. And you caught up with me at the end of last week when I was back from engage. And now I am just back from two shows, the Lee Global Leading Edge Alliance, Global North American Conference that was [00:01:00] in Dallas, and then the IMA, the Institute of Management Accountants, that was in San Antonio. So I've been in Texas, but now I'm back.

David Leary: [00:01:11] Like any good barbecue.

Blake Oliver: [00:01:14] Um, it was okay. I, you know, I didn't make it off property at any of these places. So it was just, you know, hotel hotel grub. But these were nice hotels, you know, like the renaissance in Dallas is not bad. And the IMA, they did theirs at the [00:01:30] JW Marriott in San Antonio Hill country. That's beautiful. What a great property. It's a great property. It's basically like a similar layout to the one in Desert Ridge here in Phoenix. Very nice. And it had a water park, you know, and our listeners will know that I am a swimmer and I love water parks. And, uh, I did manage to sneak out after the conference, and I got to go on the lazy River. I did a loop around the lazy river. I took a ride down the slide. Good, good. You know, [00:02:00] you got to. You got to enjoy life a little bit, too, when you're on the road. So it was fun. It was great. Um, they were totally different conferences. Lee is a firm alliance, so it's 220 public accounting firms that are members. And this is the conference where they're, uh, managing partners, IT directors, heads of marketing. Right. The executives come to this conference, and I got to get up on stage and talk to them for an hour about.

David Leary: [00:02:27] So that's just like a broad audience, like, what are [00:02:30] do they have breakouts and sessions like the IT guys go over here and partners go here, or is it all just one full agenda? No.

Blake Oliver: [00:02:36] There's breakouts. Um, but to be honest, I'm like, this is new to me. I just was sort of like flying in to talk, and I'm not. I didn't get to go to any of the other sessions. I just in and out kind of thing. But yeah, it was fun. Um, you know, I'm not sure how well they took to my message in my presentation about AI, which is, you know, I mean, I basically said. I [00:03:00] theorized that. Apps. Fintechs, technology companies will figure out how to insert themselves in between clients and auditors. And we've talked about this before on the show, David, about SOC two audits and how there's these technology companies that are cropping up that are automating SOC two. Technology audits, right? Security data security audits because they themselves had to go through these. And they hated the process. It was expensive. It was slow. It uses antiquated [00:03:30] technology when you do it with a traditional firm. And so they've built workflow software. They've built apps to to automate the soc2. And then the auditor is just at the end signing off. So I posed that as sort of an existential threat to these firms. Maybe that will someday spread to other types of audit. Why couldn't it? Right. Somebody could come along and figure out how to automate financial statement audits, perhaps for a certain kind of niche. And then the [00:04:00] CPAs just signing off.

David Leary: [00:04:01] I think for every startup that's in our space, every accounting related startup apps, things that do an audit, tax, etc., it's usually because the founder had a different startup and had to interact with an accounting firm about something and got frustrated. So they just I'll just build an app to do this instead. I think that's the motivation and same thing, the audit, they go through their own soc2. They hated it. They say, forget my company that I was trying to make. I'm going to build a new company to attack Soc2 audits. Yeah.

Blake Oliver: [00:04:28] I also told them that [00:04:30] I believe that I will be the end of the billable hour, so I presented that as a possibility just based on my experience with cloud based accounting. Once you automate 80 or 90% of the rote work, how do you bill hourly anymore? If you do, you're going to just cut your own fees. So those were kind of my two key points for that audience. And then I went over to San Antonio to the IMA conference, the management accountants. These are the in-house folks, the industry folks. And if there's anyone in industry [00:05:00] or thinking about going into industry, let's say your staff and you're thinking about jumping out of public accounting, going to industry, the IMA is the place to check out they they run the certified Management accountant designation. They have an exam for that. You do work experience, right? This is a growing certification unlike the CPA which has been shrinking. So it was great to go there and to meet people. I met two accountants from Chandler here in the Phoenix area. They work [00:05:30] at a company that makes nail polish. Like massive amounts of nail polish, okay. And they do accounting and and that was really neat.

Blake Oliver: [00:05:39] I met so many listeners of the show. So thank you for listening. Thanks for tuning in. Um, and and that was really neat because they gave me the chance to open up the I day. The last day of the conference was all about I and I got to come in and do a 20 minute, 30 minute keynote on the future of accounting with AI. And then somebody dropped out of [00:06:00] a session. So I even filled in for a session where I demoed, I demoed. Using AI tools. And this was an interesting audience because probably when I did a informal survey raise of hands in the audience, only about 20% had been using AI so far. Which doesn't surprise me, because, you know, a lot of companies, corporations don't even allow their employees to use AI yet, especially with nonpublic financial information. So I just showed them what I was doing, what we're doing. David [00:06:30] and I showed Process Street, I showed Zapier, um, I showed perplexity. I demoed my my favorite prompts, which include creating detailed meeting notes. And people love that. So that was a lot of fun.

David Leary: [00:06:43] One of the two conferences you're at this week, you posted a picture with a lot of younger people. They might have been students. Yes. Frame that up. I didn't read your post because it's just like there's a lot of noise and I can't read everything Blake posts. But I did see the photo.

Blake Oliver: [00:06:55] This was one of my favorite things that's ever happened at a conference is three students from [00:07:00] Northeastern Illinois University were attending the IMA conference, and when I asked them how they got there, um, they said that. They they run the accounting club at Northeastern Illinois. It was the president vice president, and I can't remember the third person. It was Marcellus. Uh, Autumn and Annie, I think. And they're all in the accounting club together. And they went to their school and they said, hey, we really want to go to the IMA conference. [00:07:30] Will you give us funding to do it? And the school gave them funding. So they got a paid trip to come to the IMA conference to experience it and go to a nice resort too. And they had some really great questions. Came up after the session and we're talking to me, I think it was Annie who said asked the great question. She said, why? Why are all of these, you know, why are all these older folks I don't know exactly what word she used, but basically she said, why are all of these more experienced accountants afraid of AI [00:08:00] taking their jobs? And they they couldn't they didn't understand.

Blake Oliver: [00:08:05] And I had to basically explain my theory, which is that we've all been scarred by the Great Recession and offshoring and layoffs that have happened over decades. So we think that naturally AI is going to result in a lot of layoffs. And that's the fear, right? But for them. Right. There's so few young accountants that I don't think they really have to worry as long as they learn these tools. Right. [00:08:30] So you want to be the one running the AI agents? Which was also part of my presentation. I think that, like Aaron Harris at Sage says, we are going to get to the point where controllers and accountants in corporations are managing a team of AI bots, and these AI bots are going to do tasks like accounts payable and payroll and reconciliations and. To [00:09:00] me. Actually, that sounds like pretty great. Wouldn't it be nice to manage a team of robots that don't talk back to you, that do their job, that you don't have to, you know, worry about?

David Leary: [00:09:09] They work 24 hours a day? This is the dream of a partner, right?

Blake Oliver: [00:09:12] This is great. So that's the picture I tried to paint as to where I think things are going. And you know that it's all possible, right? We we have demoed on the show Zapier Central, which is this like very early version of AI agents. I've got a story about that. This episode. They've they've released [00:09:30] a new Chrome extension where you can access your agent in like, your browser. I think we're going to get productivity savings of 80% eventually. But I also said that the reason it doesn't feel like this is happening, like the reason why it's hard to believe if you're not in it right now, is that we're only two years in to this tipping point, this AI tipping point. Right? A GPT 3.5 came out two years ago. We've only had GPT four for like a year, a little over a year. And [00:10:00] it didn't really get good, in my opinion, until GPT four came out and we saw Claude three opus. That's all very recent, like that's a year old. And I looked to some other tipping points in history. The rise of the internet, the birth of the internet, right? That happened in 1993 when the World Wide Web became broadly available. But most Americans weren't using it until five years later when the iMac came out.

David Leary: [00:10:25] Yeah.

Blake Oliver: [00:10:25] So it takes five years, right? Same thing with smartphones. First smartphone with a camera, [00:10:30] 2002. When did the iPhone come out? 2007.

David Leary: [00:10:35] Yeah.

Blake Oliver: [00:10:36] And Apple's a great example to use because they kind of lead the way in in consumer sizing or productizing these new technologies for consumers and.

David Leary: [00:10:45] Not first to market, they usually refine.

Blake Oliver: [00:10:47] It. They don't come up with the original technology. They take existing technologies and they make them easy to use. Right? They make them work. They make the user experience. That's to me, that's what Apple is. It's [00:11:00] a user experience company that happens to make hardware because hardware is really hard to get right. So they tackle that really challenging problem. And now we see that they're going to do it. We just had a big announcement from Apple that they are going to be adding AI in the form of ChatGPT into like more than 2 billion devices. And that's going to happen by the fall. Did you watch the announcement? I don't watch Apple announcements.

David Leary: [00:11:27] Come on now. Did you watch the.

Blake Oliver: [00:11:29] Summary of it?

David Leary: [00:11:29] I [00:11:30] did listen to this, a small summary of it. But one of the major things is Siri is going to now have AI from ChatGPT, right. Or OpenAI. Right. That's going to build into that. And then there's no financial things like Apple's not paying them. They're not paying Apple.

Blake Oliver: [00:11:46] Well I'm not sure actually what the deal is. I feel like Apple's got to be paying OpenAI.

David Leary: [00:11:51] My understanding is that that's what I saw and I was confused by it, is my understanding that there is no financial money taking place. And and that the theory [00:12:00] is, is they assume more people like chat, right? Or chat bots are going to replace search. You've said this on our podcast before.

Blake Oliver: [00:12:06] We're seeing it happen already, but perplexity AI is replacing Google for me.

David Leary: [00:12:11] And what's interesting or confusing about this is Google pays Apple $80 billion a year to get Google Maps, Google Search and all that onto the iPhone. So. Why would Apple try to replace that? Unless one day they think they're gonna be able to charge ChatGPT more than $80 billion a year to be in the phones? It's [00:12:30] just it's I feel like, is this a contract negotiation? It's kind of interesting.

Blake Oliver: [00:12:33] What's interesting is it seems like ChatGPT will end up paying Apple in the sense that all of the queries that people are running, all the prompts that people are running on, Apple devices are going to run through. Um. Well, some of them are going to run through OpenAI servers in the cloud. A lot of it is going to run locally on the device, which is great for security. And Apple has been like really promoting that. This is going to be secure, that your data is not training the models. Right. Like and I [00:13:00] of all the companies to trust on this, I would trust Apple. They have a really good record with privacy and data security. Right. But like ChatGPT, OpenAI is going to absorb the cost of the prompts that get sent to them. And you will have the ability to add in your or to log in to ChatGPT if you're a pro or a team subscriber so that your prompts use the better models, the GPT four, advanced models, or whatever it is. So I guess in that sense, you know, ChatGPT is going to add all this [00:13:30] functionality to Siri that doesn't exist, and they're going to pay for the compute power to do it. So that's in a sense paying Apple, right. Apple doesn't have to pay for it. They're giving access. And then I think OpenAI hopes to make money because people will upgrade to get the better models. And they'll pay them 30 bucks a month.

David Leary: [00:13:46] Yeah.

Blake Oliver: [00:13:47] So.

David Leary: [00:13:49] Not a bad deal, goes back and says, hey, we'll pay you $160 billion a year to use us instead of OpenAI, which could also be the the march there on. So you talk about like, if you're going to trust anybody to do this, you should [00:14:00] trust Apple. Well guess what? Company people don't trust Blake.

Blake Oliver: [00:14:04] What company do people not trust? Uh, Boeing at the moment.

David Leary: [00:14:08] That's opposite of Apple.

Blake Oliver: [00:14:09] Opposite of Apple.

David Leary: [00:14:11] Microsoft, right.

Blake Oliver: [00:14:13] People. People don't trust Microsoft.

David Leary: [00:14:15] Not in the grand scheme of things. Not not in Microsoft Excel. Man, Excel is the.

Blake Oliver: [00:14:20] Granddaddy of accounting apps. We got to trust it.

David Leary: [00:14:23] So Microsoft announced they're going to delay the launch of their I recall tool. So have you not been paying [00:14:30] attention to Microsoft announcements?

Blake Oliver: [00:14:32] Well, I have, but I haven't heard of this recall tool. Fill me in.

David Leary: [00:14:34] They were going to launch in, um as part of their new copilot PC features. You will have a thing running on your computer all the time. Screenshotting it recording kind of what you're doing, indexing that and keeping it all in your hard drive, all local. And then later on.

Blake Oliver: [00:14:52] You use your.

David Leary: [00:14:52] Computer, call it. You could, you know, maybe you. What was that thing I was working on about three days ago. And you might be able to search and you could recall what you were working [00:15:00] on, on your computer. And it's going to connect all this fragmented things you're doing on your PC into, like this unified chatbot experience type thing. Um, well, it seems like a great idea, but everybody freaked out because nobody trusts Microsoft, so there's a bunch of backlash. Yeah, right. Because this was just going to be turned on automatically. So now Microsoft decided to scale this way back. They're only going to make it available as a preview and as part of their Windows Insider program. But [00:15:30] I they think the big long term trust is like even though Microsoft says, yes, it's only going to be on your your computer, your hard drive. Now, what does that mean a year from now, two years from now, do they open it up? And I think that's the challenge Apple will always have. Right?

Blake Oliver: [00:15:43] Yeah. Well, I think that once Apple rolls this out, if they do it right and their track record says they're going to do it right, I, I believe they'll do a good job with it. I think it's going to change everybody's mind about AI. It's going to make it real for people, because Siri is going to get smart and [00:16:00] be able to do stuff across apps, do stuff for you in apps. It will it will no longer be a frustrating experience where you have to issue a specific command. You can just say what you want and Siri will be able to understand it the way an AI bot can these days, and with access to all your information, it'll have the context to give you really, really smart answers. And I like the example they used in the presentation, which was asking it what time should I pick up my mom for the from the airport? What time should I leave? That's [00:16:30] a question where you have to go into the email. You have to find your mom's flight information that she sent you, and then you've got to, like, figure out where the airport is and you've got to map that. And then you've got to tell Google if you can even figure out how to do it, set an arrival or departure time. It takes minutes to do.

David Leary: [00:16:49] Open in 4 or 5 apps on your phone. You have the screen. In theory, this all could just be done with your little earpod, right?

Blake Oliver: [00:16:54] Yeah, exactly. Siri could figure that out for us. And there's all sorts of little things like that throughout our daily lives [00:17:00] as consumers, as individuals that could be automated. And so this is where we're going to get to a really, really cool experience for people. Um, but again.

David Leary: [00:17:08] I wonder, does this give people like Microsoft and Apple who basically own the desktop or own the phone, a huge competitive advantage long term over I yeah.

Blake Oliver: [00:17:17] Whoever has the data and the ability to connect to to all the different databases is going to succeed with AI because I by itself is not that helpful because you got to copy and paste, [00:17:30] and that's what we're doing. We're basically doing a lot of copy and paste, and most people don't got time for copy and paste the patients. Yes. Right. So that's why Zapier, I think, has a humongous advantage in building business AI tools because they already connect to all the apps. So this agent tool, this Zapier central tool, allows you to build an agent that can act according to your English instructions or whatever language you can write it in and and then pull from [00:18:00] pieces of data spreadsheets, Airtable, databases, CRMs, whatever it is, whatever you give it access to Google Docs and then act in all the applications you use. So. That's what's being built into ERP systems over at Sage and at NetSuite. And Xero is working on AI agents. We have a demo from Xerocon London that we could play if we have time, where they they show you like talking to zero in WhatsApp and zero [00:18:30] updates, quotes and sends quotes just from a WhatsApp conversation. So it's going to get really, really cool. And I just tell people have patience because these tipping points take five years or more and we are only two years in. So we got a few more years to go unless the pace picks up, which it certainly could. But you know. It's at least a few more years in my opinion, and I'm.

David Leary: [00:18:55] Sure Apple will tie this into new hardware purchase. You gotta buy the.

Blake Oliver: [00:18:58] Right, because you got to have the [00:19:00] chip on your phone that can run the large language model quickly, and that's how they're going to preserve their incredible market capitalization and value. And it's why we're all going to upgrade. Because who wouldn't want. The experience of the movie her, which everyone needs to go watch that movie. It is such a great I.

David Leary: [00:19:20] Watched it, I might have.

Blake Oliver: [00:19:20] To watch it. You got to watch it. It is such a great. It's a little bit dystopian, but it's because. But it's also it's also [00:19:30] a really great visualization of or imagination of what this will be like when it actually happens.

David Leary: [00:19:35] And it was done, what, 15 years ago or something.

Blake Oliver: [00:19:39] It's, it's yeah, it's not a new movie and it's just really well done. And Scarlett Johansson plays the voice of the AI. And that was the whole kerfuffle with OpenAI and Sam Altman. And we talked. I think we may have talked about that.

David Leary: [00:19:50] So why don't we stay on I. Why don't you tell me that? So you have this headline here. Chatgpt beats humans at financial statement analysis. Can you? Yes. Tell me the story.

Blake Oliver: [00:19:59] That's the title [00:20:00] of our episode today. And this ties into something I saw at the IMA conference. Uh, your part time controller was at the show, and they had a booth, and they were demonstrating this tool. They've built this app, they've built that does financial statement analysis for their clients. It's an internal tool right now, but they are building it so that eventually other firms could purchase it and use it. And the way it works is exactly how we [00:20:30] imagine it should, which is it takes financial statements from Ipdc's clients, pulls them into a data set. And then runs, prompts and sends the data securely to OpenAI and can generate financial statement narratives. Variance analyzes all the starting points of what you need as a comptroller or CFO to deliver insights to your clients who do not want to read financial statements. They want you to nonprofit [00:21:00] space.

David Leary: [00:21:01] You have these boards that some a lot of people on the boards aren't even business people at all, right? Not at.

Blake Oliver: [00:21:05] All. They have no experience reading financials. So you need to really explain it in a narrative, a story, tell a story. And AI is really good at translating information from one format to another. And so this is a really great application. And I got to see it in action. And I've asked them to send me the video so that we could play it on the show. I don't have it for this episode, but we'll we'll try to get it for another one. So how does this tie into ChatGPT [00:21:30] beating humans at financial statement analysis? Well, a study by the University of Chicago's Booth School of Business found that a fine tuned ChatGPT model predicted changes in company earnings with over 60% accuracy, outperforming human analysts who had an accuracy of just under 53%. So using financial statements, you take these financial statements, you send them to ChatGPT and you [00:22:00] say predict the company's earnings based on the financial statements. Right? That's the main purpose of financial statement analysis. If you're an investor, is to figure out what are future earnings going to be based on this historical information. And the notes in ChatGPT could do it with 60% accuracy, and the humans had 53% accuracy. So just slightly outperforming the humans. And imagine how much effort it takes a human to analyze a set of financial statements. It's a lot of work. They are really.

David Leary: [00:22:27] Just a set. It's historical. Right, because you're trying to guess [00:22:30] what's happening next. You have to look at a history of financial statements.

Blake Oliver: [00:22:32] You have to look at the trend over time. And that's not always presented in the way you need. So then you got to go and find all the historical financials and put it into Excel and do the analysis and, you know, back out the, you know, interest and depreciation and amortization so you can get EBITDA and all that right. It's a lot of work. I've never done it myself. But I learned how to do it from a book. There's like this this, uh, the portable MBA book has like a whole chapter and how to do this kind of analysis. [00:23:00] And it's really a lot of work. They used financial statements, standardized financial statements from 1982 to 2021, and applied chain of thought, prompting to enhance the model's analytical capabilities and chain of thought. Prompting is where when you run a prompt, you ask it to operate in stages steps. You don't just ask for the final output, but you have it do the analysis like a human would in stages, and you get so much better results that way. So [00:23:30] this is kind of mind blowing. Think about it. How many people are employed doing financial statement analysis at investment firms? Now, will they be out of work? No, but one financial analyst will be able to run all of these financial statements through AI and then check the outputs and become five, six, seven, eight, nine, ten times more productive.

David Leary: [00:23:55] Yeah, it's a multiplier, right? It's gonna. Everybody always forever has been like, why can't there just be two of [00:24:00] me? I could get so much more work done. Now you can have two of you or five of you.

Blake Oliver: [00:24:04] I want to welcome our live stream viewers. Hello, bacon memes. Bacon memes has been to all the shows, but who is counting welcome bacon memes? I would always love to say the word bacon memes in an episode. It just makes me happy to say that. Alex. Welcome! Alex says the CMA is the perfect certification for industry. I started working in industry in 2015 and passed the CMA exams in late 2015. [00:24:30] Congrats Alex! Awesome boring accountant says a lot of executives and boards do not value or understand the value of accounting. So if an AI accounting service promises the quote, same unquote solutions at half the price, accountants or firms will be let go. That's true. But. Why do they not understand the value of the accounting? That is our fault. I mean, we have to take responsibility for it, okay? If our clients [00:25:00] don't understand the value of what we're doing, maybe it's because what we're giving them is not the right thing. So that's why you can't just send over the financials and say, here's your May financials. Good luck. You need to explain it. So the most successful firms that I see in the virtual CFO space, they schedule very frequent meetings with the clients. Weekly meetings in the case of Anders Summit, CPA. Summit CPA, which [00:25:30] is now part of Anders who I saw at Lee global, that was I got to have lunch with Anders. That was really cool. And um, yeah, they they do very frequent meetings, very low client count. A virtual CFO might only have like a dozen clients, and they meet with them frequently and the work is done in the meeting. There is not like a I do this work and then I come back to you like there's a lot of work done together.

David Leary: [00:25:57] So just make sure I'm capturing my brain [00:26:00] correctly. The normal process is I'm doing the bookkeeping all week. Um, or maybe monthly. I might meet with the client, but during that month, I'm sending emails I need. What's this receipt for? What's this for? What's this for? Yeah, because. And you're doing that because you're like, hey, we'll be asynchronous. It's cheaper than meeting with somebody, but they've kind of found, hey, if we just sit down for an hour, 90 minute phone call together, we'll just do all your bookkeeping at once and be done. And we don't have any of this tic TAC stuff over and over again. Well, and.

Blake Oliver: [00:26:26] Then you find out all the stuff that you wouldn't find out if you were just going [00:26:30] back and forth via email, all the stuff you can help with, right where you can add value. The question.

David Leary: [00:26:35] Because they're meeting with them, they perceive it as just valuable. Exactly. They are. My bookkeeper sends me emails and.

Blake Oliver: [00:26:41] You have a relationship.

David Leary: [00:26:43] Right?

Blake Oliver: [00:26:43] Just like you and I meet every week, or our listeners join us every week. There's a relationship there. If we just emailed this information out to our listeners, it wouldn't be as valuable. There wouldn't be the opportunity for back and forth. This is why the live streaming has helped our show double our listener count. [00:27:00] Yeah, David says, I think one of the most necessary technological advances is being able to text photos and videos between iPhones and Samsung without terrible quality. That is something that is going to get fixed in the new release. That did not go unnoticed. Um, yeah. It is really sad actually, when you when David has an android and I have an iPhone, you know, and when we try to send documents to each other like screenshots, I'm like, I can't read this, David.

David Leary: [00:27:30] I [00:27:30] can't. I just bypass people. I just send it to a I invite people to the Google Photos drive and get it from there. High quality.

Blake Oliver: [00:27:36] Deborah says. Her the movie her came out in 2014, so that's a pretty great. Yeah. A decade ago they really predicted and nailed what's going to happen with AI. And um, it's going to be great. You know, I get frustrated. Maybe I'm just getting older, but like, I hate taking out my phone and looking at it all the time because I feel like it takes me out of the world I am in. And I feel like it's [00:28:00] rude to do at conferences, right? Like especially when you're talking to people, you just can't. So sitting there in your in your pocket. But like if there's some like critical piece of information I need, I would love if. My personal AI assistant just spoke it to me in my ear. When I'm not speaking to somebody, right? Like I'm shifting around to a new spot in an expo hall or at a conference and like, it just surfaces that critical notification. This is something that I could help a lot. Yeah, right. Like especially the one [00:28:30] where it's like, you can't put away your phone, you have to leave it out on the table because you're you got to make sure the babysitter isn't calling to tell you that the house is burning down or something, right? Like, or your kid is like throwing up all over the place, right? Yeah. You know.

David Leary: [00:28:44] That's what the watch was for, right? But I don't know if that delivered on its promise.

Blake Oliver: [00:28:47] Nathan says, let's be honest, for someone like me who wants to open their own tax and accounting firm, am I too late studying CPA right now? No, Nathan, you are not too late. You [00:29:00] have so much opportunity. You could either start one or you could take over one, because there are so many firms that are without succession. They have no plan. And there are going to be more and more of those. So you could either buy a fixer upper right, or you could start from scratch. It's. All possible, but you need to be able to adapt to the new tools. So [00:29:30] if you buy the fixer upper, you're going to have to modernize it and or buy into the fixer upper. Right? Or if you start from scratch, you have the opportunity to build a firm in the cloud remote using AI. That just blows all the traditional firms out of the water.

David Leary: [00:29:46] Yeah, it might even be a better time now. I mean, if you think about the last decade, you've had a laptop, you go to Starbucks, you could basically start a firm a cloud accounting cash firm. But now but if you want to grow it, you kind of had to add some bodies. But now, in theory, you could start [00:30:00] building a new firm from scratch at Starbucks and use a lot of AI and have an even bigger firm, you know? So. So maybe it's the perfect time to start a firm.

Blake Oliver: [00:30:09] The VC's in Silicon Valley are talking about how this next decade will see the first billion dollar, one person startup, or maybe a handful of people, because you just don't have to hire an army of developers anymore to build a really cool concept. Um, that's an extreme example, right? [00:30:30] But I could I could see an accounting firm where you have like one virtual CFO and perhaps that's you, and then you have a lot of bots doing the work, and or you have a few, you know, key people that are overseeing the bots. You're just not going to need as many hours, right? It's going to be eventually over time. And this could take ten, 20 years to happen because it took that long with cloud. Cloud was like a 20 year journey, right? But in the end, we got a 80 to 90% [00:31:00] reduction in manual labor. On the bookkeeping side, the data entry side, we are going to start to see that in other areas. That's my theory. I lived through that one. I profited from that one. I had no clue what I was doing. And I started a firm and I made a lot of money selling it. So like, it's all possible, but you have to be willing to learn those tools as they come out, and they're all so fresh right now.

Blake Oliver: [00:31:23] Now, there's not a lot that's been built into the accounting software. We're starting to see it happen. But if you pay attention and you really pay attention in the [00:31:30] next five years, you could build something really valuable. And and it doesn't mean you have to sell it like I did, right? I got burned out, so I sold it. But it could be a really great cash flow opportunity for you, right? A really great lifestyle firm. And if you're one of the younger people who's looking for more of that, you know, four hour workweek or four hour a day somewhere in between that kind of lifestyle, I think you could have it, you know, you could you could live in a lower cost city and serve, you know, half a dozen [00:32:00] clients, a dozen clients work on one a day, a couple a day. Have a great lifestyle, you know, just work in the mornings or in the afternoons, whatever you want. Right. Um, that's all possible. And because of the labor shortage, you'll be able to you'll be able to find those small businesses, mid-sized companies that can't find somebody to work full time in the office.

David Leary: [00:32:21] So it's like a it worked. Uh, Nathan just posted that, uh. Great insights. You changed his mindset for sure. Yes. So that's.

Blake Oliver: [00:32:28] It.

David Leary: [00:32:29] We got one accounting [00:32:30] industry.

Blake Oliver: [00:32:30] We kept somebody in the profession. That's great, Nathan. And, uh, stay tuned to the show. Because when we launch the earmark community this summer, which, uh, I want to do that in July, I am not traveling in July, and I really want to.

David Leary: [00:32:43] While you're gone, I've kind of decided I want to shoot for a July 1st launch, so July.

Blake Oliver: [00:32:47] 1st. Okay, great. So hopefully we got two weeks. Now, David has set the launch date of July 1st. Um, and we're going to create a community. It's just a very simple, you know, [00:33:00] forums, but it's a way for you to come in and ask questions. And we'll have a space dedicated to the accounting podcast and maybe a few more. Michael Lee is interested in doing a how to buy or sell a firm space, so we'll try to get him in there. Anyone else who wants to share their expertise? The idea with this community is, you know, a lot of them are very exclusive, really expensive, to be honest, like a, you know, $200 a month gym membership kind of thing. And we want to make this open to as many people as possible. [00:33:30] So we're going to we're going to have it just open to anyone to start. Like if you listen to this podcast, you can join the accounting podcast space. So maybe we'll have some premium spaces at some point. That's how it'll.

David Leary: [00:33:39] Start, right? It'll just be, yeah. Us chatting about the topics on the show with our listeners. Yeah. On on the non recording days.

Blake Oliver: [00:33:46] So like we can't get to all these questions right. And this will be a way to get to those questions like uh shipra asks what are the AI financial reporting softwares to look forward to. And I would say that one from Iptc, from your part time [00:34:00] controller, when they release that, that could be a great one to build out financial statement narratives for nonprofits.

David Leary: [00:34:05] And that would be great in the forum, a forum post or community post, because then we can other members can put links, put the other products that talk about the other ones.

Blake Oliver: [00:34:16] Uh, it's David. Sounds like you have something to share next.

David Leary: [00:34:18] Yeah. Um, this one I've been watching for weeks, and I have not brought it to the show yet. Um, a listener actually alerted us of this, but I finally connected all the dots. So, Blake, I think a [00:34:30] while back, you still have you still have an accounting client? Correct.

Blake Oliver: [00:34:33] I have one client family friend that will never leave me, which is good, because it keeps me fresh.

David Leary: [00:34:40] And I think you were telling me that, like, you were sending bill payments out and the vendor was getting the check, cashing it. The vendor was happy they were paid, but then the money never cleared the bank account on your client side.

Blake Oliver: [00:34:51] It was driving me crazy. I'm trying to reconcile this account. We're making payments with Melio or Melio. I can never say it right. Melio. Yeah. [00:35:00] Melio. We're making payments with Melio and the vendor got paid. I confirmed with the vendor that they got paid, but I'm not seeing any transactions in the bank account to match. Right. So like the vendor invoice is still showing. Well, the the payment the vendor invoice is paid. But it's not clearing the bank like it's not clearing in my register. It's not reconciling. There's no matching bank transaction. And I cannot figure this out for the life of me. Like, how could the vendor get paid [00:35:30] and we didn't get a debit on our bank account? Yeah.

David Leary: [00:35:34] So I've heard.

Blake Oliver: [00:35:35] My solution was eventually I just like I just forced through the reconciliation. I'm like, well, you know, my client's happy. Like, I don't I don't I'm not going to waste time digging into this, I guess. I don't know what happened. Did Maleo just pay this bill and and never charge my client for it?

David Leary: [00:35:49] Yeah. And I've had other accounts. Bookkeepers tell me similar stories, right? When they're using, like, these fintech apps and banks, you know, check was sent and cash never hit. The bank vendor got paid, money was withdrawn. [00:36:00] It never made it to the vendor. I voided a check, but it was still cashed or processed. Yeah.

Blake Oliver: [00:36:06] I'm thinking, how is this? This is crazy. Are they just paying bills for free? Yeah.

David Leary: [00:36:09] I mean, even this week I got a notification for melio about a refund check for $10 that is on its way that I created during a demo in 2021. It's just like you said, it's very confusing and a lot of accountants have had these and and unfortunately, I feel like the apps that you've gone to and you try to get support for these strangenesses, they don't have answers really causing frustration [00:36:30] for you and your clients like nobody has answers. But I think finally, I have a story that can help us all understand what's been happening under the covers.

Blake Oliver: [00:36:38] I must know.

David Leary: [00:36:39] Tell me so. So, do you recognize any of these names? Evolve Bank and trust relay. Mercury row. Right. These are our, you know, uh, a real bank of all beacon trust. And you've come, uh, apps like relay, Mercury Row, evolve.

Blake Oliver: [00:36:53] Bank and trust and a thread Bank. Those are the ones that I know that are being used a lot for these fintechs, and they're the [00:37:00] actual banks with the charters.

David Leary: [00:37:02] Exactly.

Blake Oliver: [00:37:03] And then you have the companies like Relay Mercury, Brex, yadda, yadda yadda. There's a lot of them. Yeah, that are Crescent that are all apps that look like banks, that layer on top of the banks that do. Exactly. Okay.

David Leary: [00:37:18] Right. And and so. Maybe we'll make it easier. You and I want to create a bank for earmark. Let's create a checking account in the earmark app. So the earmark users could use the earmark checking [00:37:30] account. Right.

Blake Oliver: [00:37:31] Sounds like a great Ponzi scheme. Let's let's keep on working.

David Leary: [00:37:34] It's not a scheme. But to do this, we're going to have to go find a bank to partner with. Right? Right.

Blake Oliver: [00:37:38] We could do this. We could actually do this ourselves if we want to do. Yeah.

David Leary: [00:37:42] Build our own API calls to the bank, start taking deposits, cashing checks, paying bills. We could do this, but it might take us months, if not years to build all this. Get the relationships, the legal contracts, all that set up. Or we could just use this company called synapse and their APIs. We don't have to have relationships [00:38:00] with the bank. We just start coding the features in our app. And maybe we launch this in weeks using a middleman.

Blake Oliver: [00:38:06] Okay, so would you say that like synapse is like a Zapier for this kind of banking functionality?

David Leary: [00:38:11] You can think about it that way. They are you're going to you if, let's say you're, uh, one of these, uh, one of these apps like, yeah, we we're.

Blake Oliver: [00:38:21] We're earmark financial.

David Leary: [00:38:22] We're going to talk to, uh, synapse. And synapse is they have the relationship with the banks. So they've built the API partners. Yes.

Blake Oliver: [00:38:29] They've built. [00:38:30]

David Leary: [00:38:30] Okay. And it's many banks. So one of our listeners could deposit $1,000 into their earmark checking account. Right. But who knows what bank that money's really going into. It could be in multiple banks. And when they pay the bill, it could come out in another bank. So it's very kind of intermingled.

Blake Oliver: [00:38:45] Synapse. Synapse is is like I get it. Yeah.

David Leary: [00:38:49] So so it's very um intermingled and so but it makes sense because simplicity is going to win. Right. If you're an app developer, you want the fastest [00:39:00] path to market and you want to build customer solutions and apps faster. Right. But on the back side, synapse and the banks, things were a mess and got really messy. And to the point now where synapse is now in bankruptcy.

Blake Oliver: [00:39:14] Oh no.

David Leary: [00:39:15] And it's so messy that the, the basically they have $85 million unaccounted for in customer funds that are across lots of neobanks because there's neobanks for consumers, there's investment ones, there's lots of neobanks. We're using synapse.

Blake Oliver: [00:39:29] So [00:39:30] they how did it okay. Well, you got to tell me how they lost $85 million in funds.

David Leary: [00:39:36] Well definitely getting into that.

Blake Oliver: [00:39:38] And who's this impacting. Like like our our customers end users not do they don't have their money.

David Leary: [00:39:43] Well so do you remember um, even because we use relay last fall, we had to migrate to a new relay. Remember, our bank account numbers changed because they moved off of synapse, and now they have their own partner bank. Uh, Mercury announced they have their own partner bank, Rose on their own partner bank. [00:40:00] Evolve Bank and trust stopped working with synapse. Right. So a lot of things have happened, right. To where they're not using synapse anymore. But here's the the kind of the crazy thing that was learned from this bankruptcy filing. So the trustee she is Jelena McWilliams. She used to be the former FDIC chair, um, from June 2018 to February 2022. But now she's part of, like, a legal consulting firm. So she's the trustee. Okay. She stated, because they have zero funds, they cannot they cannot [00:40:30] even hire a forensic accountant to follow the trail of this money.

Blake Oliver: [00:40:33] So okay, so synapse went bankrupt. They have no money. Nobody knows where the $85 million went. This is this is customer funds that synapse was supposed to be holding as a custodian.

David Leary: [00:40:44] Well, if they have that. But the problem is the partner banks, the app synapses, ledgers, they don't match up. Nobody's ledgers match each other.

Blake Oliver: [00:40:54] So the money might be there, but nobody knows whose money is what it's all. It's all mixed up. It's all.

David Leary: [00:40:59] Mixed up. And [00:41:00] then. And then basically this has led to now currently people have lost access to funds. About 200,000 customers are completely locked. Right. Last fall is when things really started to break and at that time, evolve just withheld a $16 million payment to synapse. And that started like this big domino. Um, and they claimed it was because synapse was in breach of contract and that they were terminating the relationship. Wow. I was able to find an article from October 2023, in Fintech Business Weekly that has lots of screenshots of spreadsheets, [00:41:30] emails, and a lot of information about discrepancies. Obviously, these two companies are a lot of finger pointing on both sides, but they have, for example, a spreadsheet photo of checks from Relay Rho Mercury checks that were voided but were still paid.

Blake Oliver: [00:41:48] Right. So that's what that's how my checks for my client got paid. Right? Kind of. Yeah, exactly. My client never paid for it. Yeah.

David Leary: [00:41:56] And and both sides for about five years. [00:42:00] Four years, five years. Knew things were off and they were off by $100 million daily. They just never. And nothing ever reconciled out, right?

Blake Oliver: [00:42:08] It got out of control, right? Like once, once a once a clearing. Basically this is a clearing account, right? Yeah. So once this clearing account stopped tying out. You know, there's just so much going through it.

David Leary: [00:42:20] Yeah. Everybody's blaming each other whose records are correct, not reconciled whatsoever. And then. And then if you think about this though, remember Silicon Valley Bank crashed [00:42:30] in March. Yeah. And all the rails for that. So in 2023 the rails for running transactions around was a little bit of a roller coaster, kind of a mess. Right.

Blake Oliver: [00:42:39] So you mentioned that a lot of these banks now these neo banks have moved off of synapse. Correct. Are they using some other middleman or are they now just working directly with banks?

David Leary: [00:42:51] I think I can speak safely for relay Mercury and Ro like these are neo small business banks. I was able to research that they all look like they have direct relationships [00:43:00] with the banks now. Got it. So so they're they have a legal contract with the bank and they're working with the banks APIs.

Blake Oliver: [00:43:06] So there's no middleman that could do bad bookkeeping basically and mess this all up.

David Leary: [00:43:11] Yeah. And this was um. That's good. The the middleman apps. Right. They, they called this banking as a service. Right, right. And this might not have to exist in the future because now the banks have built.

Blake Oliver: [00:43:24] Those.

David Leary: [00:43:25] Catering to developers better. Right. Um, and then the only other follow up news, I guess [00:43:30] synapse is going to be acquired by Tab pay, but Tab pay backed out in May from the deal. So this is like this. Money may never be accounted for or moved to the right place. It's just gone. Maybe you just burn it all. It's bankruptcy, right? You just burn it down.

Blake Oliver: [00:43:44] Well, it sucks for the end users who had no idea. Probably that synapse was even in the mix. And now, because of this flaw in the in the tech stack, they're out a bunch of funds. Yeah.

David Leary: [00:43:56] And it's even like, I mean, neo banks for consumers like Dave, there's [00:44:00] all these other neo banks for consumers. They've been using this technology.

Blake Oliver: [00:44:03] Is this like FDIC insured or are these customers just out because it didn't happen with the actual bank? They bank with it happened with some like. Middleman partner. I mean, who's really impacted by this, David?

David Leary: [00:44:16] Well, I'm sure we have listeners with clients that have been you were impacted by this mess of these transactions.

Blake Oliver: [00:44:20] But not in a negative way. Right? We not huge. We had a gain. Yeah, right. We didn't we didn't. We got our vendor got paid and we didn't pay.

David Leary: [00:44:28] But there's lots of stories of like people, [00:44:30] you know, over time where the vendors weren't getting paid. Yeah. Hey, I sent this payment. They never got it or it got delivered to the wrong place. And then I'm starting to think maybe this isn't hacking or data entry errors on the end users, right? This is flat out. It was just a mess.

Blake Oliver: [00:44:45] Wow. Well, if you are listening and you have a client that was impacted by this, we'd love to know the story. Let us know. Send us an email at The Accounting Podcast at earmarked me that is the The Accounting [00:45:00] Podcast at earmarked me. I've got another technology story here. Going back to I, did you see that PwC has become the first reseller for OpenAI's ChatGPT enterprise?

Speaker3: [00:45:15] Yes. Yeah.

Blake Oliver: [00:45:17] This deal allows PwC professionals to access the latest version of ChatGPT. So basically we get a big headline because PwC signed up for ChatGPT teams. Yeah. Wow. Great job.

David Leary: [00:45:29] But the biggest [00:45:30] user the biggest user.

Blake Oliver: [00:45:31] They are the biggest. Um, they are also going to be assisting clients in utilizing ChatGPT enterprise for improved business solutions and provide a playbook for scaling AI infrastructure while sharing real time experiences from its own AI transformation consulting opportunity.

David Leary: [00:45:49] And I think we talked about this six months ago, that when the big and it might have been PwC, but the big firms were saying how they see like an $8 billion opportunity in AI, a $12 billion opportunity [00:46:00] in AI. And that's because they're going to get the fortune 1000 to hire them to roll out AI. That's right.

Blake Oliver: [00:46:05] They are also in their assurance practice, launching an internal AI research tool, Chat National. Is that really the name of it which integrates with its accounting? Sounds like an insurance company. Yeah. Chat. Chat. National. It's it's your new chat based bank chat. National. Uh. So. There you go. Big firm signs up for ChatGPT teams and gets a huge headline in [00:46:30] accounting today.

David Leary: [00:46:30] One of the things in the article, I thought that was interesting when they talked about internal use of it, they say they identified 3000 internal gen. I use cases driving an end to end transformation within its own business. Like it's not really specific what those are, but and like when they say identify that means like you're using gen I to to solve these now or are these things that possibly could be solved?

Blake Oliver: [00:46:54] I don't know, it's like it's like when a firm says we're spending $1 billion on blah, blah, blah, like, really, [00:47:00] I mean, I, I'm just going to announce it right now. The Cloud Accounting podcast is going to spend $1 billion on modernizing the accounting profession. We actually had a headline like that. Who was it this week? Ui, UI is spending $1 billion to do what? David?

David Leary: [00:47:17] They're going to spend it on compensation for early career compensation and dot dot dot AI technology. It's kind of a weird press release.

Blake Oliver: [00:47:28] So yeah, because [00:47:30] the AI, you know, could mean that they don't need to hire these people or pay them more, right? There's just a.

David Leary: [00:47:35] Sentence in this that doesn't make any sense. So they're going to spend $1 billion over three years in talent and technology to revolutionize the experience of early career accounting professionals and improve the attractiveness of the profession. The investment includes, so they have a couple of bullets, a significant increase in early career compensation. All right. I'm on board. Pay people a little bit more. Okay.

Blake Oliver: [00:47:56] Wait. Hold on. Let me stop you there, David. Yeah. How about instead of announcing that [00:48:00] you're going to pay people more, you just do it and then you announce it because they've all been saying, we're going to pay people more for years, and they don't pay people more. They pay people a little bit more, but it's just inflation adjusted. So it's not really more like, let's actually pay people more after inflation and then make a big announcement and brag about it. But until you do that, keep your mouth shut.

David Leary: [00:48:22] And they talk about how they're going to have a new 360 careers experience, outreach and support for college students, enhanced well-being benefits. [00:48:30] And then they have a bullet for artificial intelligence, AI enabled audit and tax platforms. So they've tied probably the majority of the billion dollars is probably going to be spent on software, but somehow they've tied it into what they're going to compensate young professionals at the accounting firms to get that number. It's just really like like, why is that part of this release, unless it means the career stuff and what they're spending on compensation wasn't worth it. While of a press release, they needed something to make it be [00:49:00] $1 billion.

Blake Oliver: [00:49:00] I know. Right. They took two things, added them together. Well, hey, you know, speaking of big firms, let's talk about job hopping because they love that. And that's the best way to increase your compensation. According to a new report from Big Four transparency, the crowd sourced compensation data website, the headline of this newsletter issue from Big Four transparency is how much of a loyalty tax are you paying? So when you stay with a firm and you are loyal to a firm, you tend to make less money than if you jump around. [00:49:30] And the biggest difference is at the first year manager level. Um, but I'll start with the first year seniors. So if you are a first year senior and you are promoted internally versus hired externally, you will be making 8.8% less. You'll make 8.8% more if you come in from another firm. First year managers, it's even more 13.9%. So firms are paying 13.9% [00:50:00] more to managers they hire from other firms than that they promote internally. So think about that. If you did both those steps right and you got hired externally as a first year senior, that's uh, 8.8% more, right? So I'm going to say 1.088. And then I'm going to multiply that by 1.139. And that's a 20 like round up to 24% [00:50:30] difference. Over that short time period of your life, right. That's a lot of compensation difference there. I didn't say it exactly in the best way, but you get the idea, right? Um, interestingly, once you become a first year senior manager, the difference kind of goes away. As much. It's only a 3.6% difference. So it indicates that firms are having a really hard time promoting managers internally. Because guess what happens? People [00:51:00] quit before they become a manager. They leave.

David Leary: [00:51:03] And it's it's not very logical if you're running a firm because you're now going to have to hire somebody that costs more, but you're also going to have to spend money trying to recruit and hire somebody when you could just have been paying somebody more to begin with. And have them long term. It's more that the way Costco treats their employees or Starbucks treats their employees, right.

Blake Oliver: [00:51:23] I should say that's in tax and audit, specifically the traditional areas of accounting. If you're in consulting, it's even more. It's [00:51:30] 13.1% for first year seniors and 16.2% for first year managers. Wow. Yeah. And this is the difference of average compensation. So like think about that. Just by switching firms. When you go from senior to manager you could be making 16.2% more on average. Why wouldn't you? Right? So if you're one of those people and I talk to them who, like, feel this loyalty, [00:52:00] you know, don't I wouldn't feel that loyal. If you know that your firm is paying people that come in from outside 16% more than you for staying around. I mean, that's a great way to reward loyalty, interestingly enough, um, the difference is not as pronounced in Canada. I don't know, maybe they're just more socialist or something, but in in Canada, the difference for first year seniors is 8.5% in tax and audit, and then it's only 1.9% for first year managers. All right, David, [00:52:30] what's next?

David Leary: [00:52:31] There's a bunch of fake news out there about stimulus checks.

Blake Oliver: [00:52:35] Oh, let's dispel some fake news. I saw this headline. I don't know what's going on. What is the fake news about stimulus checks?

David Leary: [00:52:41] The more I look into it, the less I know what's going on. But essentially, a bunch of social media, websites, search engines, they've just been flooded with all this IRS stimulus, stimulus checks, articles with titles like $1,200, monthly stimulus checks for everyone in June 2024, $2,500 stimulus checks 2024 [00:53:00] how you can claim the payment $12,000 stimulus Payment Date 2024.

Blake Oliver: [00:53:06] I didn't think that they were.

David Leary: [00:53:08] Flooding the internet. These articles, so credit to Fast Company. They compiled a lot of this together. And so you have these fake articles over here then. Now Google is referencing these articles. So if you ask about, you know, one of these stimulus payments, it's using one of these fake articles as a reference. So now it's breaking search which I suspect would break I too. And then now [00:53:30] it was even a trending topic on search. Like so the this it's just this viral thing happening right now, but nobody knows who's creating these articles. Nobody knows why they're creating the articles. Right. And then here's where it even gets more confusing. There is a chance that, uh, Biden wants to have some sort of, um, plan that would maybe begin on June 15th, but there's nothing on the IRS website. There's nothing anywhere.

Speaker3: [00:53:59] Okay, so this.

Blake Oliver: [00:54:00] These [00:54:00] are just completely fake stories.

Speaker3: [00:54:03] There's 100%.

David Leary: [00:54:03] Fake.

Speaker3: [00:54:04] So what's the point?

Blake Oliver: [00:54:05] What's the point of it? Why would why are people on TikTok saying their stimulus checks that aren't don't exist?

David Leary: [00:54:11] Well, is it because is this political election related propaganda? Is it to scam people like, I don't know.

Speaker3: [00:54:19] Is it like, DM.

Blake Oliver: [00:54:20] Me and I'll help you get the stimulus check, give me your personal information, that kind of.

Speaker3: [00:54:23] Thing.

David Leary: [00:54:24] And I also noticed like because, you know, then people on social are like, I cannot believe they're going to issue [00:54:30] more. They're replying to these articles. I cannot believe they're going to the Democrats are going to do more stimulus. And it's just this like this whole fodder from fakeness.

Speaker3: [00:54:39] Yeah.

David Leary: [00:54:39] And and even the articles that are out there that are like dispelling this, like, hey, these are fake articles, even those articles, I don't know if they have accurate information in them. It's it's created. It's like kind of that garbage in, garbage out and like, and this is going to be harder with AI, right. Because AI is going to go learn from all these fake articles. [00:55:00]

Speaker3: [00:55:00] Right? Right.

Blake Oliver: [00:55:01] And that's the problem that Google had. They got in trouble for their AI box at the top of their search results. They've added it was telling people to do stuff like if you want to make cheese, stick to pizza, better add glue. And it turned out that the source of that statement was a Reddit post and some guy was just shitposting on Reddit. Right? So if if your I can't tell the difference between sarcasm and truth, [00:55:30] you're going to give people the wrong answer. So that's a real challenge, right? Maybe sarcasm will be the shibboleth of humans versus AI, uh, meaning that that's the way we'll be able to tell the difference, because AIS will not be able to understand sarcasm.

David Leary: [00:55:45] I would lean into this as a firm owner and with my clients. I'd basically tell my clients every single thing you see about taxes or accounting or bookkeeping or tax law or tracking expenses on the internet is 100% fake. You should always come to me first. Like I would lean [00:56:00] into this. Just lean into the meme that all tax articles and all tax news is all incorrect and fake. Lean into.

Speaker3: [00:56:06] It.

Blake Oliver: [00:56:07] Well, in the few minutes we have left, I'd like to get to some listener mail. Um, this came from a listener. Adam who said, I'm a podcast fan and we met in Vegas at an earmark event. Thanks, fun. I want to share this email with you. It should brighten your Friday. It's not really for public consumption because this was a private email, but. [00:56:30] And then you put a screenshot of it. So I'm not going to read the email because it was written to Adam and not intended for public consumption, although it is from a board of accountancy and that is a public person, right? Like so. Their emails are not private. You could request them that sort of thing. Um, but basically the gist is that Oregon, the Oregon Board of Accountancy, um, is. Moving away from 150 semester hours for CPA licensure. This is from the Executive director, [00:57:00] Martin, and they are going to take a bill to the 2025 Oregon Legislature that will include the removal of the 150 hours specificity, and likely instead, a 120 hour floor in statute, or allowing them to specify pathways, including semester hours by rule entirely. Flexibility and adaptability are key, including around the pathway issue you raise, as is mobility, as is maintaining mobility and the ease of reciprocity that this profession has built. All right. [00:57:30] So this is. This is happening at the state level. We're starting to see boards of accountancy push for legislative change, to give more flexibility to get rid of this idiotic 150 hour rule and move toward more competency based, licensure and experience based. Very pleased to see that. Another listener message. Alex said, [00:58:00] hi fellas. I'm hoping to have my CPA license by the end of the year depending on the score release schedule, and I've been really interested in starting my own firm on the side for busy season 2025. I have only worked in corporate accounting after graduating in 2020, and never wanted the hours of public accounting. What would your advice be for someone in my situation regarding starting a firm? I'm obviously light on experience and I'd want to provide a good product for my clients.

Speaker3: [00:58:27] I guess. You got any advice?

David Leary: [00:58:28] What kind of ferm. Right? Right [00:58:30] are you going to do? Cass, are you gonna do tax? You're gonna do audit. Like, what services are you going to do? Um, and then maybe while you're finishing up, get a job in another firm a little bit, like.

Speaker3: [00:58:40] Do work on the side, find.

David Leary: [00:58:41] A client. Yeah, work on the side.

Speaker3: [00:58:42] Now, um.

Blake Oliver: [00:58:44] My my suggestion was. When I wrote back to try to find clients that are in the same industry that you're in right now. So you're in corporate accounting, right? What is your industry? He didn't specify in the email. But ideally [00:59:00] you have expertise in that industry now, right. Can you work fractionally for other businesses to help them. Maybe smaller if you're in a big corporation but in the same industry. So you have that experience and you can sell that to them, right? You can say, look, I have worked in corporate accounting in your industry for X years, and now I am doing this for others. Maybe if you have a really forward thinking employer, you can even convince them to become a client. And you can start out with a big client like right away, right? [00:59:30] They probably don't want to lose you. That's how I started my book Keeping Company, as I was working part time for a big HOA, and I convinced the executive director to become my first client. That is a fantastic way to start. A firm gives you that security you need. Joe says tell him he has nowhere near the experience and expertise needed to be of value. Oh, Joe. Or is that because this person, Alex, doesn't have the CPA license yet? [01:00:00] I mean, we don't know how long Alex has been working. You know, we do know working in corporate accounting after graduating in 2020. So, you know, four years of corporate accounting experience, you know.

David Leary: [01:00:11] Has some value.

Blake Oliver: [01:00:12] There's some has value, right. Like like at that point, depending on what you're doing, you could you could get to the manager level. Right. We've seen people rise quickly, so I wouldn't be. So I wouldn't be so quick to say you don't have the experience. I think it depends on what kind of services you're going to offer to your clients. If you're going to offer like Controllership [01:00:30] kind of services, you know, I'm going to do your accounting. I'm going to run your payroll, help you pay the bills, like be your outsourced accounting department. I think that somebody with four years of experience could potentially do that. So I wouldn't write it off. And if you don't have that much experience, just look to me. I never worked in corporate accounting. I never worked in public accounting. When I started my firm, and I was able to build a successful firm, and we did good quality work for clients. So you don't have to be doing super complicated stuff to build [01:01:00] a profitable firm. We were doing basic bookkeeping. We were putting the books together, creating financial statements. We didn't call them that. We called them management reports. We did bills, we did payroll. We did a little bit of sales tax stuff, you know, not too sophisticated. Just we just did the core work. It doesn't have to be complicated. You can make a lot of money doing pretty basic work that just needs to get done. And the beauty of it is that if it's not that complicated, you can hire other people to help you, right? You don't have to be the one to [01:01:30] do it. Yeah. So I'm big on like not necessarily going into advisory or into the CFO. I mean, if that's great, if that's what you want to do, but.

David Leary: [01:01:41] The nice thing is it's low risk. You could start a firm. Yeah, you have no costs. It's not like you're opening a restaurant where you have all this financial capital outlay. To open a restaurant, you need a laptop and a and a coffee at Starbucks. And you could start a accounting practice.

Blake Oliver: [01:01:56] I would say do what you know. Right. I was working as a freelance bookkeeper. [01:02:00] I knew how to do good books. And so that's the business. I started just doing it for a lot of clients, and with automation, I was able to take something that was relatively low paid. I think I was making 20, 20, 20 bucks an hour at the time, maybe less, and I was able to increase my effective hourly rate to $100 an hour using tech five times productivity increase, which is the same thing I think we're going to see with AI in other areas. Right? So, you know, people who are making [01:02:30] effectively like as employees, like 50 bucks an hour could be making 500 bucks an hour someday with AI.

Speaker3: [01:02:38] David.

Blake Oliver: [01:02:39] That's about all the time we've got for this week. Thanks everyone who joined us live. Don't forget you can subscribe to us on YouTube. Hit that notification button and you will get notified when we go live. You can join us and chat with us. We love your questions! Awesome having you here. If you want to earn CPE for listening today, download the earmark app. [01:03:00] You can get one free CPE every week. Come back next week. The course will be online on the app, and you can take a quick quiz and get your CPE certificate and email us The Accounting Podcast at earmarks Me? Let us know your thoughts on these stories or anything you think we missed that we should cover.

David Leary: [01:03:19] David, in two weeks, you won't have to email us because we'll just jump into earmark community. Yeah, and participate there.

Blake Oliver: [01:03:25] That'll be fun. I cannot wait to have like, a way to talk about this stuff beyond just [01:03:30] this one hour week. There's obviously so much that we don't get to I have like it gives.

David Leary: [01:03:33] Us a place to paste stories we don't talk about.

Speaker3: [01:03:36] Yeah, yeah.

Blake Oliver: [01:03:36] Like I have like one, two, three, four, five, six, seven, eight. I got like 15 news stories that were in my top stories that I didn't get to cover. I mean, are we ever going to talk about Sam's Club switching to AI to check receipts at the exit? I just love that fact. I guess we just did. That's the story. There's not going to be a person anymore checking your receipt at the exit. There's going to be a camera and AI [01:04:00] making sure that you didn't steal a bunch of stuff from.

David Leary: [01:04:03] By people in India who are counting what's in your cart.

Speaker3: [01:04:06] Probably.

David Leary: [01:04:07] And on that note.

Blake Oliver: [01:04:09] David, see you here next week. Thanks, everyone. Bye.

Creators and Guests

David Leary
David Leary
President and Founder, Sombrero Apps Company
ChatGPT Beats Humans at Financial Statement Analysis
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