The Accounting Podcast

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: [00:00:04] Eventually when you do a return with, I don't know, ultra taxed or whatever, uh, you'll be able to just tell the AI, here's all the information in this folder. Here's the program. Go fill it out. Go do it.

David Leary: [00:00:20] Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: [00:00:29] Hello, and welcome back to The Accounting Podcast, your weekly news roundup for accountants and the number one show for accountants in the world. I'm Blake Oliver and I'm.

David Leary: [00:00:39] David Leary.

Blake Oliver: [00:00:40] And we are back.

David Leary: [00:00:41] I'm so glad we do this show together, because I only saw you at Intuit Connect for 8.5 minutes total.

Blake Oliver: [00:00:47] I know right? It's just nuts. We're running around like crazy. And I see you more on this screen than I do in real life, but, uh. But it works, you know? Yeah. I'm eager to hear your thoughts because we didn't get to connect at connect at all. So I want to know everything. We're going to talk about Intuit's Enterprise suite. We saw a demo of that product. At least I did. I guess you missed it. And we both saw the keynote in which Sasan Goodarzi, the CEO of Intuit, uh, apologized to accountants, and we have a clip of that. I want to play that for everyone to kick things off. But first, let's thank our sponsors. Yeah, we.

David Leary: [00:01:28] Should thank our sponsors. This week we Live Flow, who I saw at QuickBooks connect. Relay, who is also at QuickBooks Connect and Cloud Accounting Staffing, who I don't think was at QuickBooks connect. But if if Jordan from Cloud Accounting Staffing was, we probably just missed each other.

Blake Oliver: [00:01:42] Thank you to our sponsors. All right. Now we are taking you to the keynote at Intuit Connect. Sasan Goodarzi did a fireside chat and he about 16 minutes in 17 minutes in, he addressed the elephant in the room, which was that TurboTax video break up with your accountants. So let's take a listen. Um, I.

Intuit Connect Clip: [00:02:05] Would just end with probably the last thing that I would say is the most important, which is, you know, we are in the people business and we've talked a lot about as a leadership team about how we up our game with all of you in terms of the relationships that we build. And, um, and you're going to feel and sense a very different intuit in these next couple of days. But also it's about our say, do what we do leaving this place. But also, you know, in relationships, sometimes you screw up, uh, and, and I want to acknowledge when, you know, as we're looking to transform the world with you and for you that there are, um, that there are going to be times that we may do things that, uh, where you may question our intention, uh, and. Why I don't get this kind of a response in a state of the company that I do. But so let's talk about let's talk about that. Um, and this is actually really important. And it's a really important point to, to, um, to sort of leave on because, um, you know, we, we ran and took off air very quickly, uh, tax campaign. And, and this is just important in terms of intentions and our relationship. And listen, when we make a mistake, we're going to own up to it. And this is my mistake, by the way, not my team's.

Intuit Connect Clip: [00:03:50] I own it. Um, anything good that happens? You know? It's my team. Anything not so good that happens. I own it, and. But the context is really important. And what we've learned and more importantly, the takeaway that I want to share is probably most important. You know, we serve 100 million consumers. And we hear a lot from our low income consumers that we serve that, hey, I want a better tax experience and I want it at a low price. I feel like I'm paying too much. And our goal, by the way, is that we have created a virtual expert platform where we can enable customers to get their taxes done from anywhere in the world. And by the way, we have 12,000 experts, our partners that have their side business, that are on the platform. Serving customers, experts is the key equation to all of this. But, you know, we made a mistake in terms of our how because the campaign that we ran came across as it's about the expert versus we're actually trying to create and communicate a very different experience because we're actually, you know, we're creating hundreds of millions of dollars of income for experts that are on our platform. And the very experts, by the way, some may be in the room, many are not in the room because many of you have different focus areas.

Intuit Connect Clip: [00:05:08] I share that context. Just so you know that, um, we have good intentions. Uh, sometimes we make mistakes. I will own up to the mistakes that we make, uh, and we'll get it right, uh, because the goal is we want to help consumers, small businesses, mid-market businesses. You are many of them and our accounting partners to thrive. That's our focus. And back to where I started, which is the relationship. You know, my entire team is here because and you can expect us to be here with you every step of the way, every day of the year, but also at every Intuit Connect, because we are really upping our game in terms of the relationship, because everything that we're trying to do with AI is to create a prosperous future for all of us. But the relationship matters. The intent matters. The trust matters. And when we screw up, we'll own it. And for what we did that we took off air. I apologize, I own that. Our focus is still serving consumers with you. Better experience the best price. Um, but we learn from it. And thank you for your feedback, because I've spoken to some of you, I've replied to many emails and I just want you to know, sometimes, although it may not feel like it, I'm on your side. We're on your side.

Intuit Connect Clip: [00:06:33] Do you have, um.

Blake Oliver: [00:06:35] All right, David, I want to get your take on this. I have my thoughts. First, we should point out that the applause was a bit thin at the end of that apology. And there were. Did you hear the laughter at the beginning of it when he. When he opened it up? Yeah.

David Leary: [00:06:54] And you playing this, though, is for anybody who was not at the event or watched the entire video out of context, this isn't so bad. It's kind of okayish. It's better than I remember it. But you have to understand, this is what, 14 minutes, 15 minutes into the opening. This is the opening keynote we just kicked off Intuit Connect. They bring out a VP at Intuit to interview the CEO. Right. And within 3.5 minutes, it was bombing. People were texting each other. They lost the entire audience. So by the time he got to this apology, most people were checked out. He already lost the room. Yeah. So? So in person. This did not feel very well delivered at all. Loosely, it was like I wrote the whole interview. And then. And then arguably, I'm going to make a joke here. Don't get upset. Like Suzanne was stumbling a little bit. And I'm like, It's Hassan I. And he's glitching. You know it got it was it was a very, very, very rough interview. Unfortunately for Sasson, he does not connect very well to the audience. He had to follow up Brad Smith I get it. It's impossible. And it was going to be able to live up to those blah blah blah. But over and over again Sasson is on keynotes and he does not connect with the audience. Then you compare it to like Ted Callahan. He comes out there. It feels genuine, right? So yeah, that's really the context of this. You have to take in the entire interview, not just the apology.

Blake Oliver: [00:08:13] Right. And and like you said, we were texting each other during the beginning of this fireside chat, and it felt like it felt like they didn't prep at all. I didn't understand what they were talking about. It was like supposed to be about AI and the future of accounting, and it just went all over the place, and it was not like it wasn't relevant to accountants. It felt like, um, so but but let's talk about this, like apology, just, you know, briefly if we can, because I was listening and in the moment, I don't really understand what he was saying. I had to go back and listen again and again. And it sounds sort of like. I mean, in many ways it was not an apology in the sense that he said, we got the how wrong. What does that mean? That means that they just said it the wrong way. But the actual message they're standing by, it sounds like. And what's the the the message is there are low income consumers who feel like they're paying too much for tax prep.

David Leary: [00:09:15] And they're trying to meet that gap gap in the market or market opportunity, if you want to call it that. Right.

Blake Oliver: [00:09:19] And that what is that? That means competing with other providers, tax pros who are charging more. So he's not backing away from that. Intuit is going to continue to compete with tax professionals.

David Leary: [00:09:35] And they have.

Blake Oliver: [00:09:35] Forever. And they're going to undercut them.

David Leary: [00:09:37] They have forever. If you think TurboTax it has since day one. Yeah. But so they they delivered this. They executed you, right? The execution was absolutely horrible this year. It was not needed. It was a dumb ad campaign. It created a bunch of headaches that did not need to happen. You just stirred the pot. It's. It's like that hornet's nest and you're up there poking it for no reason. Just let it be. Right? Right.

Blake Oliver: [00:09:58] Well, there's a difference between filling a gap and trying to take market share from accounting professionals, which is what they are doing, and which Soissons apology appeared to say they're going to continue doing. That's not going to change. They're going to continue to take market share from tax professionals. And the justification is that we have, you know, thousands of tax pros working for Intuit, for TurboTax. And we're we're paying them they're making money through us. Right. Yeah. Um, but it's still there. The competition is still there. And so there's no commitment to any changes. Right? It's just we're taking down this ad campaign and that's it. So, you know, I think that's why the the apology didn't get very good reception into it. Connect. Um, is it just damage control? Is it actually genuine acknowledgment? It's certainly not a strategy change. Intuit's strategy is to take as much of the tax prep market as possible from whoever, whether that is their accountant, customers or not. And like you said, David, that is nothing new. They've always been doing that. So I suppose that there is, you know.

David Leary: [00:11:13] When you talk to people at the conference over beer, you know, at the mixers and everywhere else, you know, people were talking about the apology and people were just like, that's it. 2.5 minutes. You get all these people in the room, you could say anything you want. And this is what was delivered. Yeah.

Blake Oliver: [00:11:27] And he ends with, although it may not feel like it, I'm on your side, but Intuit is not on your side when it comes to this. They are competing with you. And so of course, the the key is to just not compete with Intuit when it comes to TurboTax services and with QuickBooks services is don't compete with them. Move up market. And that's what everybody at Intuit Connect is doing. The conference included Intuit.

David Leary: [00:11:58] Themselves.

Blake Oliver: [00:11:59] Including Intuit them. Well, yeah, including Intuit themselves with their product, which we should get into talk about. Um, boring accountant says. And welcome to our live stream, viewers. Boring accountant says how can an organization take market share of clients when there is an accountant shortage? Maybe the shortage is not as significant as reported. Hmm. David, thoughts on that?

David Leary: [00:12:24] I thought, ah, I mean, their bet is they're gonna be able to do a lot more with AI, right? Or continually. And when we start talking about some of the product announcements, we can tie it back to, you know, with them getting into bookkeeping, there's all these great features that are happening to the bank feeds, and I think it's because they were doing the bookkeeping themselves. That's how these features come, uh, you know, get to the end users eventually.

Blake Oliver: [00:12:45] Martha, in the live stream on Twitter says problem isn't competition. It is offering 10% less. Right. So it's undercutting accountants. And actually, I would say that is probably the most offensive part of this is accountants struggle. We struggle as a profession to charge a fair price for our services. We often undervalue our services. And here we have Intuit undercutting our efforts to charge more for our services. I think that is very insightful, Martha. Thank you.

David Leary: [00:13:19] I'm actually the other way around. If Intuit ran a commercial that encouraged people to pay a premium for accounting services and tax services, imagine the reaction if they actually did that encouraged the market. But.

Blake Oliver: [00:13:32] Uh, so we kind of saw the the reduced enthusiasm for Intuit in general at this conference. And you saw it in the numbers. I saw a press release from Intuit saying they had 2400 attendees this year. That seems to be like 1000 less than last year when it was Intuit Connect. I think they had between 3 and 4000. Don't quote me on that, but it definitely felt sparser. It felt.

David Leary: [00:13:59] Smaller. I think the keynote room did feel a little smaller.

Blake Oliver: [00:14:01] Yeah, and perhaps that's because of Intuit's shift to this, you know, Intuit instead of QuickBooks focused conference. And then, you know, a lot of a lot of people who have spoken at the conference in the past were not selected because they were not focused on mid-market. They were focused on, say, small independent bookkeepers and accountants, that sort of thing. And maybe they didn't feel welcome. I think one of the strategic mistakes Intuit made when they launched the ticket sales for this conference is they made it an application, only you couldn't just go buy a ticket. So that turn probably turned some people off.

David Leary: [00:14:35] Which is ironic because the keynote on the first day, um, was, I don't know, was it Priya? Was that her name? She wrote a book called The Gathering or Gatherings, and the whole premise of that is about inclusion, including people making them feel welcome, to make them feel part of it. And this whole event was exclusionary. You excluded your typical like ProAdvisor that maybe just only does QuickBooks people and not doesn't go up mid-market you excluded. If you noticed the show floor Blake kind of smelled a little similar to a Oracle's NetSuite. There was no payroll apps and no bill pay apps because it's built into QuickBooks. Now, why do you need those apps on your show floor? So there was definitely exclusion happening, which is ironic considering the first keynote was exactly the opposite of that.

Blake Oliver: [00:15:19] That's right. Well, let's talk about the enterprise product, the Intuit Enterprise Suite, as they're calling it. I got to see a brief demo of this. You could schedule a 30 minute time slot to go to the Intuit booth and to see. And I got to say, I didn't get to see that much because it was one of those pre-done demos that you click through. It wasn't the live product. What do you call that thing where it's like just like a slideshow?

David Leary: [00:15:48] It's of the product. Yes.

Blake Oliver: [00:15:50] Yeah, it was a staged demo, right? And so I'm not sure if it like, is really in production yet. I guess people are buying it, so it must be. But here's the key takeaways. Okay. What this thing does. So I'm going to.

David Leary: [00:16:01] Put you on hold. We're going to do an ad and then we'll do the cliffhanger right after that. Let's do it. Cliffhanger. So our first ad is from Live Flow. I'm going to add the banner here. So are you a QuickBooks fan or do you prefer Xero? Well, I've got some exciting news for you. Live flow now syncs with QuickBooks and Xero to Google Sheets and Excel. You might already know that Live Flow has been a game changer for thousands of accountants and their clients, automating financial reporting from QuickBooks Online to Google Sheets. But if you were an Excel user or on zero. You were kind of left out until now. And Blake, here's something that'll blow your mind. You can create a consolidated reports for clients who have one entity on QuickBooks online and another on Xero Life who can speak to both at the same time and your reports. Your custom dashboards automatically sync in real time. But now, Blake, there's even more live flow news. Live flow now has dashboards built in. So now, instead of you having to create custom charts and graphs from scratch and Google and Excel, which is just a lot of clicking Live Flow now gives you the ability to create beautiful, customizable dashboards for your clients, and you can even give the client the dashboard as a PDF in case you know everybody has clients like that, you can't really give them the the real dashboard. You have to give them a PDF. So if you're ready to take on your take your financial reporting to the next level and to get 25% off your first three months, head over to The Accounting Podcast dot promo slash live flow. That's The Accounting Podcast dot promo forward slash l I v e f l o w.

Blake Oliver: [00:17:27] All right, thank you. Live Liv flow. And now let's talk about Intuit Enterprise Suite. So I saw a demo of the product, uh, a stage demo. And here's my takeaway. You've got a bunch of QuickBooks files, one for each entity. And this is for a multi entity business. So you know let's say you have I don't know a restaurant with five locations. You set up a parent entity and then you set up your five subsidiaries. And they're all linked together through the enterprise suite. And what this means is that they get a common chart of accounts. So they all share the same chart of accounts. They can have unlimited dimensions, and these dimensions can be shared between the parent and all of the entities.

David Leary: [00:18:11] That's 25 not unlimited, right?

Blake Oliver: [00:18:12] 25 the guy told me unlimited. So I'm just quoting what I was told.

David Leary: [00:18:16] Okay.

Blake Oliver: [00:18:17] Is it 25? It's limited to 20.

David Leary: [00:18:18] It's up to 25 deep. Yeah. And then it starts to get really crazy.

Blake Oliver: [00:18:21] All right. Yeah I'm trying to imagine how it could possibly be unlimited and they could actually do this reporting. So you get rolled up reporting so you can, you know, consolidate instantly all of the entities to the parent. And then you can also, um, uh, what was I going to say. You can consolidate all the entities and.

David Leary: [00:18:45] You report it out.

Blake Oliver: [00:18:46] You can do automatic allocations. So if you have a transaction come in at the parent or subsidiary level that needs to be allocated to different subsidiaries. You can do that into in in the in QuickBooks. And it will make the journal entries to the appropriate entities for the allocation. So let's say a rent payment comes through and you're paying rent for multiple entities from the parent. You can book the transaction and allocate the rent to the different entities, and it'll all get done. And then it does automatic intercompany eliminations. So if you have transactions right, let's say let's say one subsidiary sells to another subsidiary. That revenue has to be backed out, and that cost has to be backed out. When you consolidate because you don't want to double count revenue, right? Revenue like sales between subsidiaries, they don't count as real sales. So it that's what it that's what it purportedly does. And if it does it well that's actually really exciting. I mean that is the main functionality of a Sage Intacct or a NetSuite when it comes to multi entity accounting. And that's why a lot of people have to switch, because once you get to multi entity in QuickBooks, there's been no way to keep those intercompany accounts uh reconciled easily. And it was a lot of manual work and a lot of mistakes.

David Leary: [00:20:08] And we've been at intact and sit down. You talked to um business owners that are there and why did you switch? I bought another company that comes out of my mouth so many times or they're non profit. Yeah. Another location. They're nonprofit and they have tons of reporting needs that it doesn't handle very well. So definitely a market in general. I did sit through one of the webinars they did week before. Not super impressed. Some piece of me feels like this is QuickBooks painted blue, and then all the acquisitions they made along the way, they're starting to tie them together. And I actually even feel like that's the vibe of the audience. The audience there is not super sold on this product, but like, I don't think it matters. It doesn't matter what you and I think. It doesn't matter what the 2000 people that attended their think. And the reason why is I think we just witnessed a $3 billion a year revenue product launch.

Blake Oliver: [00:20:57] I agree with you 100%. There are there are between 40 and 140,000 businesses in this country that could use this product. And Intuit can capture significant market share from NetSuite and Intacct at a lower price point.

David Leary: [00:21:14] And so they've made all these acquisitions the last 5 or 6 years. Now this is going to be a go to market, a service support, marketing initiative and sales initiative that eventually lead to the engineering work to build all this stuff to make it work. Yeah, but if you do the math, 25,000 if some if they sell these for 25,000 apiece, that's only 120,000 businesses to hit 3 billion.

Blake Oliver: [00:21:36] So $25,000 a year apiece for this solution, which is basically lower than the starting price of.

David Leary: [00:21:44] Easily half as much.

Blake Oliver: [00:21:45] Right. I don't know what intact is coming in at these days, but I think that's reasonable. Okay, so $25,000 a year times how many businesses?

David Leary: [00:21:52] 120,000 businesses, 120,000 gets you to that 3 billion number.

Blake Oliver: [00:21:57] Okay. So that would be if they basically took all of these mid-market companies, at least the way I have defined mid-market in the past when I've worked at software companies. But I guess there might be many more that could use this product if it's just the multi entity that they need.

David Leary: [00:22:13] I mean, you could estimate maybe 10% of the QuickBooks base is quote unquote enterprise. There's definitely 150 to 200,000 using QuickBooks Enterprise Desktop. Still, I think how many are there? I think there's still 100 to 150,000 still using QuickBooks Desktop Enterprise. Okay, so.

Blake Oliver: [00:22:29] Basically if they can convert QuickBooks desktop enterprise customers to this product.

David Leary: [00:22:34] They'll hit 3 billion. It's. Yeah.

Blake Oliver: [00:22:36] But but here's the challenge of that right is what do people pay for QuickBooks Desktop Enterprise right now.

David Leary: [00:22:42] So I think if Intuit historically has gotten you for everything, they sold you everything, maybe 6 to 8. They might if they're getting more than eight from anybody for one business entity, I'd be surprised. That's probably the peak where it's at, but really why they're going to sell in godly amounts of this if because they're going to set it up, it's enterprise sales. So you're going to have this, you're the sales person, here's my needs. Here's the other products I not I have two entities. I have this many users I need payroll. And they're going to give a custom quote. But at the same time that person's shopping for that. They're probably also talking to the sales rep at Sage Intacct and the Sage at Oracle NetSuite and Intuit. They're going to get quotes at those places 40, 50, 90,000 learn that they have to have an implementation specialist. It could take a year 100 grand for that. And Intuit's going to come in at 20 K 25 K. And it's going to be a no brainer decision. And I've heard that it's only taking people a week ten days, 14 days to implement to roll out because it's just QuickBooks. It's the same QuickBooks under the covers. That's why all the apps still work.

Blake Oliver: [00:23:49] Gerrilyn says. Even single entity with dimensions price point to start at 7500 is a game changer for nonprofits who can't track grants. Well, now there are 1.5 million nonprofits in the US. So there you go, David. So so you think this could be a $3 billion business?

David Leary: [00:24:08] Oh, I think four. But I when I read my notes today, I thought I was crazy. But I do think it's for possibly for revenue. This is going to take Intuit from $16 billion company to a $20 billion company.

Blake Oliver: [00:24:19] Maybe more revenue. Um, so if, uh, if it generates that much, that would actually put it at the level of TurboTax, which generated $4.4 billion in revenue for fiscal year 2024. And here's my theory about why Intuit is moving this direction, David, because they don't have to. They could keep doing what they're doing and make money and just improve on QuickBooks and continue to make money and print money, and they're doing really well. Right. So why are they going to this huge effort? I think that Suzanne Goodarzi, although he struggles to connect with accountants and to effectively message in some cases, I think he is actually an incredibly brilliant, uh, entrepreneur, leader and and visionary. Right. He's a and he originally came up through product. Right. David. He was on the.

David Leary: [00:25:12] Turbotax side always. Yes.

Blake Oliver: [00:25:14] And so he knows how to build a product. And and he's obviously very in tune with what's going on with AI because that's what the whole keynote was about, even though it was way above. Uh, it was not the reason it bombed is not because what he was talking about wasn't relevant and important. It's because it was like way too out there for the accountant audience. Right? He was talking about like, like stuff that's ten, 20 years in the future and, and, you know, space age, like, like Jetsons kind of stuff. Right? So I think actually he has he understands where things are headed. And TurboTax is actually under an existential threat from AI. We are approaching the point at which we are going to have networks of AI agents that can complete tasks. So think of an AI agent as a single chat conversation. That's a very simplistic way to think about it, but think about it as one chat thread and like a custom GPT. We've talked about making these custom GPT that have one discrete task, and you can do that right now. So imagine that you had a bunch of these, and each one was responsible for filling out one tax form, just one form. You gave it the instructions and you you told it. Here's your function. Your function is to fill out this form. And what if you linked you? What if you created one for every single form on a 1040 or any tax return? And then you linked them together with a manager agent I whose job is to delegate the work. That type of AI agent relationship, like groups of AIS that operate as independent agents, will be able to complete an entire tax return in not too long, like in years.

David Leary: [00:27:09] I agree.

Blake Oliver: [00:27:10] And TurboTax is entire business is built on this deterministic rules based software that they have invested billions in building over decades. And that is all going to be supplanted by AI tax filing.

David Leary: [00:27:27] But who's going to build it first? Obviously lots of startups. Or is Intuit going to build it?

Blake Oliver: [00:27:33] Well, and that's the thing is that large organizations struggle to innovate because they cannot cannibalize their existing businesses without hurting their quarterly earnings, too.

David Leary: [00:27:43] It's one of the few companies that's been able to do it right.

Blake Oliver: [00:27:46] But to this scale, to the point where this is this is like 27, 26, 27% of their annual revenue. So they they have they definitely moved to cloud from desktop. But that was a conversion. Right. And they were actually able to charge more money when they did it. This is different because the cost is going to plummet, because AI startups are going to be able to create networks of AI agents that complete tax returns and charge a fraction of the price that this whole.

David Leary: [00:28:19] Complaining Intuit app made an ad for 10% of our fees. It's going to be 90%, probably reduction in the fees you're able to charge because of this. It's not that Intuit's under threat. The whole tax prep world is under threat.

Blake Oliver: [00:28:33] So I have this vision in my mind of like, you have a little fish, which is the tax pros, and you have a slightly bigger fish called TurboTax that's eating the tax pros, right? It's got its mouth open. And then you've got an even bigger fish chasing that one. That's AI. Tax prep. So in a sense all of this, you know, discontent brouhaha, whatever you want to call it about this ad is irrelevant because in a in in just a short amount of time, basic tax returns are like all the tax prep, filling the forms out, putting the numbers in the boxes is going to be completely automated and a chat bot or even a voice assistant. I mean, we're starting to talk to these agents, right? We'll just interview you over the phone, essentially, and ask you for your information and complete the return. Like just like TurboTax Full Service does.

David Leary: [00:29:28] Now or TurboTax live. Essentially, it's going to be a live AI, a AI agent you're interacting.

Blake Oliver: [00:29:33] With, and it will do everything. Yeah.

David Leary: [00:29:35] Should should we cover some of the other QuickBooks features that they announced and showed and that actually are being rolled out as we speak? I think we should are not enterprise related.

Blake Oliver: [00:29:44] But first, let's thank our second sponsor. Thank you to our sponsor relay. So, David, between you and me we have how many entities? Three, four, five, five business entities. We've got 20 checking accounts. We've got dozens and dozens of virtual cards. And it would be impossible for us to manage all of this if we weren't using relay as our small business bank, relay is truly a part of the tech stack that we use to run our businesses. Relay allows me and David to each have our own logins. We can grant access to our team and even our accountant without sharing passwords or two factor authentication codes. Relay allows us to grow and scale our banking needs without ever going into a physical branch. I recently added an account to receive inbound merchant services with just a few clicks, and had to create payroll checking. Again, just a few clicks and we instantly get access to ACH info to give to the payroll provider. Literally the account number and routing number is is there in seconds. And with relays virtual cards, we can issue debit cards to our team around the world for needed business expenses. We can spin these up. We can even get visa credit cards now, and we can set both daily and monthly spending limits. And when a team member doesn't need their card, we can freeze it until they never until they need to use it again. Relay also has automation features to sweep money automatically from one account to another based on dates, amount or target balances or percentages. So for example, inbound payments can be split daily to payroll, sales, tax payable, operating and savings accounts based on predefined rules and percentages. So to learn more about using relay for your firm and clients, head over to The Accounting Podcast dot promo slash Relay. That is Accounting Today dot promo forward slash relay.

David Leary: [00:31:35] Thank you relay. So so these are not in any particular order. They just showed things. And I wrote down these announcements they made and they showed. And really whether or not it got claps. So so people were happy about some things. And so you had like.

Blake Oliver: [00:31:49] An applause meter.

David Leary: [00:31:50] And yes.

Blake Oliver: [00:31:51] That would have been.

David Leary: [00:31:52] I should have tried to capture it that way. So they did have like 100 bug fixes scroll by on the screen, but I couldn't write them down fast enough, couldn't do that. But then they were talking about how even a small thing. So now in the bank feeds, if you hover over the bank description, it'll just show it to you when you mouse over it. Instead of having to click into each transaction, expand it to read the bank description. Clap claps. Lots of claps. They added more content to the grid of the bank feeds. So now classes, locations, etc. and that's in the app. Now I opened up my QuickBooks. It was in there. They added that that got lots of claps. Um, the bank feed AI is being used now. I'm sorry. There's AI using the bank feed to go get the description. So for example, if you see a charge for what's a restaurant, they give an example of where'd you eat in the Aria Hotel?

Blake Oliver: [00:32:40] Uh that patisserie.

David Leary: [00:32:41] Okay. And who knows? Is that a business expense? I don't know what that is. Well, the AI will go out instead of me finding it and googling it and sticking it in, it'll just go find it and bring back the information. It says, oh, this is a restaurant inside the Aria Casino. And then you can improve the expenses. So they're using it for that. That got a lot of loud claps because that's a lot of clicking that's eliminated. Um, I think a lot of these features are seeing is because Intuit's doing bookkeeping themselves and this slows down, doesn't let them scale. And every time they fix something like this. But again, if they rolled out to everybody, we all win. Um, one thing I thought that was cool is they're starting to use AI. So you've done this right. You're somewhere you get in this, like bizdev deal done on a napkin at a restaurant. Hey, this is going to be the invoice. We're going to charge you for this. You can take a photo of that. And I will basically create the draft of the invoice in QuickBooks. Now for you. You hand sketch an invoice and it'll put it in.

Blake Oliver: [00:33:35] So that is a very specific use case.

David Leary: [00:33:37] But I like it to be a napkin. But a lot of people handwrite things all the time.

Blake Oliver: [00:33:42] Could I, could I write it in an email and forward it in and make the invoice that way?

David Leary: [00:33:46] That, I don't know, you could try? That would be pretty cool that you can now edit paychecks for a 90 day window for paycheck corrections. So people are very happy about that. The one that got the biggest, biggest applause, apparently. Paypal and Venmo transactions keep getting set to uncategorized assets in the bank feed. And they fixed. That doesn't happen anymore. That got the most applause. One thing that was cool if you upload csvs of general journal entries, you can now review them all before they actually post to the GL. You can review them. There's a process to do that. Revenue, rec depreciation and fixed assets. Some of those are coming. The other one that got a lot of applause. You can now open multiple qbo companies in different browser tabs at the same time. Before you used to have to create like sessions that kept all the cookies separate. But now you can have all your clients open on a bunch of different tabs all at the same time, which is huge without having to multiple logins, etc. and then the last one that got a lot of applause is they're adding a bunch of CRM features to Qbo because for most businesses, Qbo is their CRM. But now if you think about all the things that extra you might want as a CRM with MailChimp, so they're making it really a true a true CRM because a lot of the CRMs I've seen over time, they're like, look, we sync to QuickBooks and show you all the sales for that customer all on this dashboard. Like QuickBooks has all the data. It makes sense for them just to have a better customer experience on the CRM side.

Blake Oliver: [00:35:08] And this is all part of SaaStr vision for QuickBooks becoming a business operating system, not just an accounting system. And that is really smart because once you get I mean, QuickBooks is already sticky, right? But once you get people using it as a CRM and for accounting, they're never leaving and they'll be happy to pay you twice as much, maybe more. So is that all? They just will.

David Leary: [00:35:33] They'll keep raising the price and they'll just keep paying.

Blake Oliver: [00:35:35] That's right. Exactly. That's why SAS is so brilliant.

David Leary: [00:35:39] I think that's all I really had. I mean, we talked about the overall vibe. We didn't talk about Blake. You did a talk at QuickBooks or Intuit Connect, and I heard great things about it. And tell us about your talk.

Blake Oliver: [00:35:50] Thank you. Yeah, I talked about it a lot last time, so I won't go into too many details, but basically I showed how to build your own off the shelf. Financial statement analysis tool using workflow software Zapier and the developer keys with ChatGPT, which anyone can do. So that session I'm going to redo on earmark webinars this year. I think I'm not going to be able to do it until December, but stay tuned. Subscribe to our newsletter. Our emails earmark Cpcomm. You'll get our weekly roundup of webinars coming up, and that will be there, so you can learn how to build your own AI agent into your workflows in your firm, and you can use it for anything. I demoed financial statement analysis, but like the possibilities are endless.

David Leary: [00:36:42] The two big pieces of feedback I heard was a they loved how you left in your mistakes. So. So you made mistakes and you had to troubleshoot to solve your mistake to fix something. And they love how you left that in and they love how you went. Click by click details because for a lot of people, they need to watch. Oh Blake did this for 10s hit pause. You know, if I'm fixing a toilet and I'm watching YouTube, I'll pause it, do the next step, press play. And people really love, like, the level of detail you went into. And they're looking forward to like, watching it, pausing it, playing it. Um, so kudos. It was a real eye presentation versus yes, it's high level.

Blake Oliver: [00:37:15] Click by click actual that you can see how I did it. Yeah. We have a question from a livestream viewer. Joseph asks as an accounting student who's interested in going into tax, is it safe to say tax preparation will be obsolete? And the faster I learn tax resolution tax planning, the better slash safer. I'll be 100%. Joseph. The actual act of taking the numbers and putting them into the returns is going to be handled by AI. I mean, we already got software that does a lot of it, right. It's crazy to think we went in like one generation from doing this by hand to having software that puts the numbers into the forms.

David Leary: [00:37:53] And I feel like for at least a decade now, Intuit's been. If you're a simple like 1040 filer, you just have like one job at W-2. The mobile app, you could just photograph your W-2, photograph your driver's license, file your whole return, and not actually do any data entry at all. So I think that's kind of been here. It's just it's going to happen now for complicated returns.

Blake Oliver: [00:38:10] Tax planning is great. But actually tax resolution you talk about a great area to get into because that's not going to be automated anytime soon right. The IRS is still working on modernizing their database like everything is manual. So like like no, I have a hard time imagining how anyone's going to automate tax resolution, but I don't know, maybe they will, but it seems like a good area to get into. So and if.

David Leary: [00:38:34] I hallucinates and files a bad return for you, you're going to need to hire a tax resolution person to get things back on track and fixed.

Blake Oliver: [00:38:40] And also, you know, when I say that AI is going to do all the prep I'm talking about, like relatively simple returns, which is like 80% of the returns out there, maybe 90%, but there's that like top 10%. That's always way more complicated and is going to be like protected for a long time. And you'll use AI tools to help with that kind of stuff to do the research, the planning and whatnot. But it's not going to be like done exclusively by an AI for a while. Speaking of AI, David, I wanted to show a video to everyone of one of the most amazing features to come out in the AI space since I started following this thing. Right, since the sense GPT four and that is Claude computer use. And this is like a great example of why we are going to have AI agents that can do basic tax prep tasks, because this tool uses AI and can actually move your mouse and type on your keyboard for you, so it doesn't have to have database access or API access to work in the programs that you are working in.

David Leary: [00:39:49] So from my old desktop legacy software, in theory it can interact with it just through the mouse and keyboard.

Blake Oliver: [00:39:54] Great. So think about what that means. That's tax software. Most tax software is still desktop based and you can't access into the program via the API. Well this is our way in. And so I think like eventually when you do a return with, I don't know, ultra text or whatever, uh, you'll be able to just tell the AI, here's all the information in this folder. Here's the program. Right. Go fill it out. Go do it. So let's watch it. This is not specifically text. This is like doing some web developer kind of stuff. But I think you'll get the idea. And for our podcast listeners, I'll do my best to narrate what's going on. If they don't, it's a little two minute video.

Anthropic Clip: [00:40:39] So I'm Sam and I'm one of the researchers here at anthropic computer use is something that we felt was going to be important for a while now. So today we're going to be talking about a very early version we have of computer use, and walking through a representative example of the things we think it's going to be useful for. We're going to be going through a quick demo today. In this fictional demo, a customer, in this case the Ant Equipment Company, has come to us and asked us to fill out a vendor request form. The data I need to fill out this form is scattered in various places on my computer. What we're going to do is ask Claude to look at the spreadsheet, check if an equipment is in there, and if not, move over to the CRM and try and find some more information there. Once it has this data, Claude is going to then fill out the form for us and hopefully transfer the information across to the vendor form.

Blake Oliver: [00:41:33] So here's the prompt. Please fill out the vendor request form for Ant Equipment Co, using data from either the vendor spreadsheet or Search Portal tabs in window one list and verify each field as you complete the form in window two. This is actually a very. This is a perfect task for accountants because we do this kind of crap all the time. So what's on the screen is a Google sheet is on the screen open and the vendor form is also open. Now this program, this cloud desktop app can see what's on the screen, and it can control the mouse and the keyboard. And it's going to try to do this task. So there's no integration with the Google Sheets. There's no direct integration. It's just looking at what's on the screen. And it's going to manipulate the desktop interface.

Anthropic Clip: [00:42:22] The first thing that's going to happen is Claude's going to start taking screenshots of my screen, and quickly realizes that the Ant Equipment company isn't actually in the spreadsheet. So the first thing it does is it swaps over to a CRM and searches for the company we're interested in.

Blake Oliver: [00:42:35] It's changing tabs, and now it's going to run a search so it understands the interface. It's learning.

Anthropic Clip: [00:42:46] Luckily, we get a search match and Claude then starts scrolling through the page looking for all the information it needs to fill out this form.

Blake Oliver: [00:42:54] So it's got to look for company name. Purchase order. Email. Accounting. Email.

Anthropic Clip: [00:42:59] Claude then autonomously starts transferring the information across without me having to do anything.

Blake Oliver: [00:43:04] It's copying and pasting for us. This is the end of copy paste and.

Anthropic Clip: [00:43:08] Goes through the steps and fills out all the information needed.

Blake Oliver: [00:43:13] It fills out the tax number, the primary contact, and.

Anthropic Clip: [00:43:16] Submits the form.

Blake Oliver: [00:43:17] And clicks.

Anthropic Clip: [00:43:17] This example is representative of a lot of drudge work that people have to do. This is available in the API. We're excited for people to try it, and we should expect things to get a lot better over the coming months.

Blake Oliver: [00:43:30] Is that unbelievable or what?

David Leary: [00:43:33] I'm trying to understand how it's being done. I think I have a guess how it's being done, because when I was in QA, we would do. We used a product called silk that eventually VMware bought and you would automate all your tests. You'd automate all the clicking and the pasting and the putting it in, and it would they would basically connect through the windows framework to identify the buttons of apps and connect in at that level. And every so often it just won't see a button. And you'd have to basically give it the pixel coordinates coordinates that were on the screen. And I think what this is doing is a is really good at analyzing an image quickly. I think taking screenshots. It's taking screenshots. Oh, that's a search box. And now it knows based on that pixel, I'm going to go to that box to do the next task. It's really it's an interesting way to attack something that's been done a very long time. Um, it's interesting where this is going to go. It's kind of cool.

Blake Oliver: [00:44:23] It's basically it's RPA, robotic process automation. But instead of being done deterministically with macros and a little bit of machine learning, this is completely done by an LLM. You give it the starting instruction Construction, and then it attempts to complete the task. And there's no. Additional sophistication built in like chain of thought. Prompting has been built in so that you don't have to explicitly say every step, and it has a memory, so it knows that. Here's my objective. I'm going to remember that objective. And then here's my different ways I've troubleshooted here's what didn't work. Here's what worked so it can correct itself.

David Leary: [00:44:59] Um, I'm all for it. I mean, every time my computer laptops, I replace the keyboard because I ruined the C and the V control C, control V, I ruined those two keys on every keyboard I ever had.

Blake Oliver: [00:45:10] Boring. Accountant says did it guess the tax number? Is it going to plug in the payment instructions to maybe to a Nigerian prince? You know, that's a good point, is I imagine that very soon we will start to see the first frauds perpetrated by AI agents. But also there's the potential for this to really reduce a lot of fraud, because it's the humans that are in the loop of all of these processes that are the weak point. And so, you know, an AI, unless it's trained to steal money, is not going to steal, right? It's not going to have the need that humans do. Uh, I find this fascinating. So I think this is going to be something that we start to use. I mean, you can actually use this now. I haven't tried it yet myself, but it's on my list. To do this month is to try this and see what's possible. Uh, you know, this is why it's so important. I was saying this in my session at Intuit Connect. This is why it's so important to document the processes in your firm. Because documenting processes is important for training humans. If you want people to be able to do the job, you need to document your processes. But now you're going to be able to hand your documentation to AI and ask it to complete the tasks. So this actually has serious implications for a lot of apps in the QuickBooks marketplace that simply automate tasks within QuickBooks, for instance, like categorizing uncategorized transactions or completing reconciliations. I think an AI agent will be able to go into QuickBooks. I actually want to try this, David. I want to say I want to get this program. I want to say, okay, um, please. You know, here's here's my online banking, here's my bank statements in a folder. Here's QuickBooks in a window. Now go and complete the bank reconciliation. That might be a little too much for it at this point, but maybe it could go and at least identify all the missing transactions and enter those. I could do it in stages.

David Leary: [00:47:11] And like I said, the the copy paste, the there's so much copy paste that's done everywhere and this would be huge to here's an example.

Blake Oliver: [00:47:18] It's just like give it the bank statement and an empty QuickBooks file and say enter the transactions. Now I've skipped an entire industry of software that's like OCR and bank feed import, right? I could just have it literally. I is going to be able to do the task that I started my accounting career doing, which was keying in transactions from bank statements. Yeah. Yeah.

David Leary: [00:47:41] I have a story that I want to make sure we get because I'm afraid after the election I can't have this as a story anymore, so. All right.

Blake Oliver: [00:47:48] But before we do that, I have to thank Blake.

David Leary: [00:47:50] It has fraud. Where do you want?

Blake Oliver: [00:47:52] That sounds great. Before we do that, though, we have to thank our third sponsor, Cloud Accountants Staffing. David, would you like to read this one? And I'll get the banner up on the screen.

David Leary: [00:48:02] Perfect. In case you've missed the last 100 or so episodes of the show, maybe the last 200 episodes of this show, Blake and I have been discussing almost weekly that there is an accountants labor shortage, regardless of the root cause.

Blake Oliver: [00:48:14] The wait, David, there's an accountant.

David Leary: [00:48:16] Labor shortage. Labor shortage?

Blake Oliver: [00:48:17] Oh my God.

David Leary: [00:48:17] Breaking breaking.

Blake Oliver: [00:48:18] Breaking breaking.

David Leary: [00:48:19] News. And the problem is real. Regardless of the root cause. My social media feeds are full of firms attempting to fill open positions on their teams. But how can anyone increase their staff size if everyone is attempting to hire during a labor shortage. That's where cloud accounting, a cloud accountant staffing comes in. They will help you hire full time team members for your firm that reside in the Philippines. How much would your firm change? Or for that matter, your life? If you could add 40, 80, 120 hours of capacity to your firm in 2025? Cloud accounting, staffing and staffing was founded by a firm owner who grew his firm by using offshore talent, and now he's applying everything he learned to help you grow your firm. If your firm is in need of expert bookkeepers, accountants, CPAs or virtual assistants, head over to The Accounting Podcast Dot promo CAS that is Cloudaccountingpodcast.com promo forward slash CAS.

Blake Oliver: [00:49:13] Thank you. Cloud accountant staffing. And now David let's talk about your fraud story. And this has to do with the election and canvasing.

David Leary: [00:49:24] It's even better than that. It has to do with Musk, Trump outsourcing fraud and QuickBooks all in one story. Blake got me hooked. Tell me.

Blake Oliver: [00:49:33] What is this? Just.

David Leary: [00:49:34] Just like everyone else. Campaigns, political action committees. They're handing off work to outsource labor. So let's follow the money. So you have Elon Musk. He wants Trump to win. Musk donate $75 million to America PAC to influence the vote in swing states like Arizona and Nevada. America PAC spends about $30 million of this to hire companies like Blitz, Patriot, grassroots, Echo Canyon and Synapse Group. That's not the synapse we've been talking about the API company. These companies, though, hire bodies, canvassers, quote unquote, to knock on doors, hand out fliers. I don't know if you've had anybody come to your door to tell you about the election or encourage you to vote either way. Um, but the canvassers, I'm guessing, don't care about the candidate or the company they work for. They probably just see this as a temporary job for two weeks, a year or two weeks every four years, and they want to make some extra money. So let's recap so far. Musk. Pays the pack. Pack pays the outsourcers Outsourcers pay the canvassers. Well, many of these canvassers have figured out how to get paid and never actually knock on the doors.

Blake Oliver: [00:50:38] What are they doing? How are they hacking the system?

David Leary: [00:50:40] Yeah. So all these outsource companies have apps that use GPS that the canvassers can log into each house they go to and log what they did at that house. You know, like, hey, I talked to somebody. Nobody's home. Left a flier to track what they're doing. Specifically, one of the companies, Blitz, uses QuickBooks workforce to track time using GPS of where these canvassers are. Well, the canvassers have outsmarted the entire system and are using GPS spoofing apps to fake their location and never actually go to the house or do any of the door knocking. There's even videos floating around of them showing each other how to do it with tips like don't do it too fast, so.

Blake Oliver: [00:51:18] Use a GPS spoofing app.

David Leary: [00:51:20] Yeah, so basically, I could pretend I'm at your house by having this app on my phone. Got it. So in summary, these canvases are just sitting in their living room, taking Elon Musk's money and not actually doing any of the work they're being paid for. And one guy was even fired for it at one company. One of the outsources. And then he just went and applied to the next one and got hired at that one and did the same thing. That's amazing. So yeah, you get it's, it's it's fraud and it's stealing. Yes. But it's also it's bad.

Blake Oliver: [00:51:48] They shouldn't do it but also they shouldn't do it.

David Leary: [00:51:50] Yeah. It's kind of funny. Yeah.

Blake Oliver: [00:51:52] I wish they would apply their ingenuity to stopping the text messages that I have been receiving. Do you know how many text messages I got yesterday? I think it was like two dozen. Like, maybe just because we live in Arizona.

David Leary: [00:52:06] My Android phone has really just is so good now. It just it all goes in the spam folder. I never see them. It's gotten very, very good at it.

Blake Oliver: [00:52:12] Iphone has a filter where you can like, say known senders and unknown senders, but you still see the number, the notification number, and then I end up clicking it and then it takes me to all the spam messages. So I just can't resist.

David Leary: [00:52:23] You can't resist.

Blake Oliver: [00:52:24] I just have to turn off the number. Ah. Nathan Brown in the chat says so. If I am wanting to run a tax and bookkeeping firm in my small town, am I out of luck? No, Nathan, I don't think you are out of luck. I actually think there's still plenty of opportunity, but it's not in the filling out the forms. And that's what a lot of small town tax prep businesses really are, is take the information from the W-2, take the information from the PNL for the schedule C, and put that into the return and file the return and, you know, get worse than that.

David Leary: [00:53:00] It's worse than that. Send the client an organizer. So the client takes that data, types it into an organizer, then gives it to somebody on your staff at your firm who takes what's in the organizer and types it into the tax prep software. There's a whole bunch of copy and pasting and typing that should not exist. So that's going.

Blake Oliver: [00:53:15] Away. So the question is, well, what is the job? What is the value you create if that is automated and that is in the human connection. It's answering the questions for the client. It's providing them the assurance that this is getting done correctly. And there's a lot of value in that. There are accountants on Twitter who charge $1,000 or more for a return, and yet the average return price is something like three 200 to $300, according to the National Association of Tax Professionals. So there's a lot of additional value in that. Now, will that exist at the lower end of the market? Probably not. Right. A lot of people who just want to pay to get their return done are just going to go use automated tools to do it. So, um, it's going to be a smaller market, but that doesn't mean that it has to be less profitable. It's sort of the same thing that happened with bookkeeping over the last 20 years. Well, how long has it been? I guess it's been 40 years now. When did when did Lotus one, two, three come out? It was like I think it was.

David Leary: [00:54:20] When I was nine, 81. 82. 30.

Blake Oliver: [00:54:22] Over the last 30 or 40 years, we've actually seen a decline in the number of bookkeepers by like a million. It's cut in half. And that's because spreadsheet technology, you don't need bookkeepers to do spreadsheets. Our bookkeepers making less money. No, I actually saw my my hourly effective rate go up five times five x. It went from like $20 an hour to $100 an hour. And I was adopting automation tools. So if you do that and you increase your productivity by like ten x, you can split the profit with your customers and you can actually make a lot more money. So maybe it means doing more returns, using better technology and providing amazing customer service. That could be it.

David Leary: [00:55:05] And in your target customer, the business owner who maybe is going to do their business return and their personal return and their bookkeeping, if you can bundle that together, they value their time and they're going to be willing to pay you for that time. I think individual taxpayers are like, this is something I have to do. How do I do it? As cheap as possible. It's hard to build a relationship just on a one off. 1040. Right. But if you can get better clients, you're going to be better off.

Blake Oliver: [00:55:29] Yeah. That's why you want to be there. Like financial advisor, right? You want to be doing their accounting, their bookkeeping, their tax planning. If you do all of that, that's not that's not going away for a very that's not going away. I'm happy saying like that's not going away because I don't really see how we automate that. And if we can then we will probably all be living in some sort of like robotic socialist Paradise where nobody has to work. If we have AI, that's that intelligent.

David Leary: [00:55:55] Socialist Paradise, right? Those two words down. That's funny.

Blake Oliver: [00:55:58] Well, it's like, what are you going to I mean, like, this is the question is every human technological development, we've always said it's going to put people out of work and nobody's going to have any work. But it's always we've always found new jobs for people. But maybe there's an end to that, right? Maybe if we achieve artificial general intelligence and I can literally do every single job that we won't have to work. You know, that's possible. I mean, that's the Star Trek vision that is that is like the you know, that's the funny thing about, like, Star Trek and the Federation and all that is, is that like, that's like a socialist society. There is no money anymore. Um, and that, funny enough, is what Elon Musk wants to create. So, um, what do we do next? Let's talk about EA resigning as the super micro auditor because, uh, it's kind of crazy. We talked about this on a previous show. Super micro was investigated by Hindenburg Research, a short seller. They released their report and then the Wall Street Journal. Um, or no. Was it the Wall Street Journal that reported reported the investigation?

David Leary: [00:57:09] Yeah. There was rumors that there was investigation happening. Um, and they've been convicted before in the past, and just for historical context, Deloitte had the engagement from 2003 to 2023. And remember, I think we covered on one of the previous episodes how they pretty much issued the same letter year after year after year on the on these financials. But this was the first year of taking on the engagement and EY was their.

Blake Oliver: [00:57:34] First year.

David Leary: [00:57:35] First year and EY. So they actually raised issues before the short seller Hindenburg came out with a report. So they already raised issues, and it caused the board to create a special committee to investigate investigate the company's internal controls. But EY is clearly wanting to separate themselves from this quickly. They because it's probably the next massive fraud mess that's going to hit the market, it's resignation letter said. It was, quote unquote, unwilling to be associated with the financial statements prepared by management, end quote. So EY wants nothing to do with this at all.

Blake Oliver: [00:58:09] And then they wrote a letter to the Securities and Exchange Commission dated October 29th. And I just have to read you this letter. Commissioners, we have read item 4.01 of form 8-K dated October 29th, 2024 of Super Micro Computer, Inc. the company and are in agreement with the statements contained in the first paragraph. The first sentence of the second paragraph. The third paragraph. The first three sentences of the fourth paragraph, the fifth paragraph, the seventh paragraph, and the eighth paragraph therein. We have no basis to agree or disagree with the other statements of the registrant contained herein. Ernst and Young LLP.

David Leary: [00:58:49] We agree with these these pieces here, but we're not going to comment on all the other ones. You can figure out if we agree or disagree, if we're just not going to do it.

Blake Oliver: [00:58:57] I mean, what a letter, right? Um, yeah. So what's interesting about this also is that the stock only plummeted by 3%. So even though the auditor has resigned, which is a huge step which indicates would would seem to indicate that this company is potentially perpetrating a massive fraud. Right. Because when do auditors resign? Like basically when it's no longer possible to ignore what's going on, right? Like it's so blatant that they're like, we got to get out of here.

David Leary: [00:59:39] And what's interesting is I think it had a 33% run up recently after the Hindenburg Letter because they had all these sales, supposedly. Yeah. Allegedly. I don't know, maybe they did, maybe they not because, you know, they're in the microchip. They're competing with Nvidia on these AI computing sales. And so they had this huge apparently they were selling things through the roof. So the stock went up 30%. And now it's right back to where it was before basically when the Hindenburg report came out. But you're right. If the auditors are bailing, shouldn't it keep falling? Or maybe there's hope.

Blake Oliver: [01:00:09] You would think that it would go to like it would go 90% down if. But maybe this is because investors don't really care that much about the auditor's opinions. Like potentially that's like that's what this indicates. And I have a follow up story related to this. Do you remember the appeals court decision about BDO and Amtrust? Our coverage of that an appeals court ruled in favor of, in a very strange ruling in favor of BDO to to dismiss an investor lawsuit of amtrust investors who lost a bunch of money because Amtrust, uh, you know, was was their financials were were not not not legit trustworthy, not trustworthy. And BDO signed off on the financials. They audited them signed off on them. And you know the investor sued BDO because they lost their money because Amtrust was doing a fraud or whatever. And the appeals court had previously ruled that BDO could actually not be sued because auditor reports are so templated and and and the same as to be meaningless. And I thought that was really funny when that happened because like, well, they kind of are right. Like that's always been my view is that like, what is the use of an audit opinion when there's so much, you know, uh, when audits are so problematic, we've got these massive PCAOB failure rates in audit firms. And then the audit opinion doesn't really tell you anything other than that the auditor signed off on it. And so the update is that the appeals court has reversed its own decision, and they have affirmed that audit reports are significant to investors.

Blake Oliver: [01:02:00] And this was after the SEC filed a brief with the court asking it to reconsider. And so the change allows the investors fraud claims against BDO for its amtrust audits to move forward. Because audits actually matter. So the investors relied on the audit opinion of BDO. And now they can sue BDO because they relied on that and thus were defrauded. And this was sent to me by Gerry McGuinness, friend of the show, who has defended auditors and the value of audit opinions in the past and always messages me whenever I have, you know, criticism of auditors. Um, but I want to say, like, here's the relationship between this and what we just talked about. The Supermicro case is that I agree that audits matter. I agree that audit opinions matter. The question is how much do they matter and how much do they matter now compared to how much they used to matter? Because it does seem to me that based on investor behavior, as we see here in the Supermicro case, that it doesn't seem to be as important as it used to be to investors, especially not since the heyday of, you know, the second industrial revolution in the United States when this whole industry was created, our profession was essentially created and audits were like considered absolutely essential to the point where we we we took the accountants from Scotland and imported them here so that they could audit our companies. Right. So that's my question. Jerry is all right.

Blake Oliver: [01:03:43] If audits matter, how much do they matter to investor decision making? I don't know how much they do really. Like is it is it 1%? Is it 2%? Is it 10%? Is it 100? It's not 100%. We know that. That's my question. And if we could make them matter more by improving audit quality and improving the relevance of financial statements. I think that we could increase salaries in our profession because when you create more value for investors, they're willing to pay you more. The audit committee of that board of directors should be willing to pay more for a higher quality audit that delivers value to investors. So we should be actively working to make financial statements more useful, to make them less complex and less dense, and to hide less information, to provide information that is relevant to investors, like subscription metrics. You know, our accounting hasn't changed in in 100 years in many ways. Like we've just been doing these nitty gritty little things and like just look at like lease accounting, the most useless change to GAAP that has ever existed. I cannot find a single person to say that that was like worth the effort. Let's actually like make accounting mean something when it comes to financial statements like make it more useful. And again, I'm not saying it's not useful, I'm just saying that it's like a hundred years old. Accounting theory has not changed much in 100 years, so maybe it's time the economy sure has changed. And that is the end of my rant.

David Leary: [01:05:19] Yeah, and you're right. If they if what's provided via the audit is different and what's looked at is different, like you said, subscription revenue, number of customers. It's not based on this old widget mindset. Maybe companies would have less elbow room to fudge numbers, right. Because a lot of these companies are operating in these gray areas of that didn't exist 100 years ago when the standards were set. Exactly. They get the massage and play with numbers, and it'd be a lot harder if there were the the current standards were there. I could see I could see where you're going with that argument.

Blake Oliver: [01:05:49] Yeah. Like, I don't know, like in the case of Supermicro. Right. What are the numbers that actually matter to investors? What does Supermicro do? David.

David Leary: [01:05:57] They build processors just the way Nvidia does for AI. The AI chips.

Blake Oliver: [01:06:02] So for example, there's probably a lot of intellectual property that is the biggest value to Supermicro, right? Probably a.

David Leary: [01:06:10] Factory. They're pumping real physical chips out there or something. But it's also.

Blake Oliver: [01:06:14] Like the technology itself. And information about that technology is probably something that's relevant to investors. But take a look at their financial statements and tell me if you see much about their intangible assets, because that's what's driving the value of supermicro. That's what investors care about is the intangible assets. And I'll tell you, the audited financial statements probably don't have anything about that on there, because unless you acquire intangible assets through some sort of like merger or acquisition, they never show up on the balance sheet.

David Leary: [01:06:47] And there's probably speculation, right? If you think about how much did, uh, uh, OpenAI want to spend? He wants to raise $15 billion to build chip factories or there Retrievr wants to do. Well, maybe the investors are betting. Maybe they'll just buy. A company like Supermicro and just have. There's your chip factory. Just buy it. And now you have a chip factory to create AI chips. So maybe the investors again, they're not using the audits. They're using speculation to invest. Right. That's why it has some value.

Blake Oliver: [01:07:14] So David I think that's all the time we have for today. But I once again, I did not get to this Reddit guy who automated his job or Google being under attack from AI. Actually, I can show that real quick. Um, so the.

David Leary: [01:07:28] Attacker the automate the.

Blake Oliver: [01:07:30] The Google under attack. So basically, um, there was a story about Google's like the threat to Google's ad revenue in the Wall Street Journal. So Google Wall Street Journal reported that there is a the ad market in search is $300 billion. And we are seeing Google's market share falling below 50% next year for the first time in over a decade. And that is because we've got these AI and social video platforms like YouTube that are now delivering up better search results than Google does. And if you want to see it for yourself, just go ahead and use perplexity AI. It essentially does a Google search for you and then synthesizes the results so you don't have to go through all the pages. And that saves a ton of time, right? What would I normally do when I Google search I, I Google search and then I hold shift and I click on the first ten results and then I read all of those pages. Well basically I can do that now for me.

David Leary: [01:08:35] And this is why when I Google shirt I'm now seeing this like on Google themselves, it's like I summary they're trying to build a summary.

Blake Oliver: [01:08:42] They're trying to do it right. But again that's only going to just maybe help people from leaving. But it also like people aren't going to click on the ads as much anymore if that summary is there. So it's a problem for their Search business. And you know, you can try this for yourself now because ChatGPT just released web search inside of ChatGPT. So you can click on this little web icon here that says search the web. And then we can search for anything. And it's it's not just going to go to Chatgpt's built in knowledge, which is fixed as of a certain date. It will actually do a web search and incorporate those search results into its answer, just like perplexity does. So David, give me something to search for. What is something that you want to know?

David Leary: [01:09:29] I just did this search last night on Google, and I want to know where did the best place to place electrodes if you have sciatic nerve pain. And then you can put tens, tens if you want. Well, I'm just.

Blake Oliver: [01:09:42] Going to spell it wrong anyway. So best place to place electrodes if you have sciatic nerve pain. So we're doing that search. And now we are searching the web. And we got an answer almost instantly and it's saying lower back and it's got a citation. American chiropractors and I can click here and I can actually go to the page buttocks. That's from the sciatica pain guide. Thighs. That's from roots of being calves also roots of being. And I can click on each of these and open up the page. And I like that page.

David Leary: [01:10:17] Now does it.

Blake Oliver: [01:10:17] Provide guidelines.

David Leary: [01:10:18] Here. So Google provided an image so I don't even have to leave. I don't even have to expand out the results and show me.

Blake Oliver: [01:10:25] Images of these placements. Okay.

David Leary: [01:10:28] Perfect.

Blake Oliver: [01:10:28] Let's see if it'll do that. And here's the images. And we can click on the we can click on the images. Let's see. Here's one.

Speaker6: [01:10:43] Yeah.

David Leary: [01:10:46] Down the leg. Across and down.

Blake Oliver: [01:10:48] Yeah. There you go. There's the placements. So why would anyone use Google once they start using this? Google is in trouble.

David Leary: [01:10:58] What do I have to type to go there? What did you just use?

Blake Oliver: [01:11:01] This is just chatgpt.com this is. If you have the subscription, you can now web search inside of ChatGPT.

David Leary: [01:11:09] So ChatGPT got it right.

Blake Oliver: [01:11:11] And again perplexity. I was the first tool to do this. But now maybe their business is going to be under threat from like why? Maybe you would just use ChatGPT because perplexity like layers on top of it. But I guess what I like about perplexity is that you can choose which LLM that you connect to the search results. So you can choose. I want to use Claude. I want to use ChatGPT. I want to use their own home brewed, um, llm. All right. That is all of our time for this week. Thank you everyone who joined us live. If you want to join us live, go to YouTube.com. Search for The Accounting Podcast, subscribe and hit that notification bell icon and you'll get notified when we go live and you can join us! Always. Great to see you everyone! Thank you. Boring accountant Nathan Martha Hasley Heather Joseph Aznab hooked Jerilyn. We appreciate you. Thanks for chatting with us as we stream live. And don't forget you can earn a free Continuing Professional Education credit for listening today. Go to Earmarked app, create your free account and find the The Accounting Podcast channel. The courses come out a few days after our episodes, so stay tuned. If you're watching this live and the course will be available. Anything else I forgot to mention? David.

David Leary: [01:12:38] Um, I think that's it. We have another conference coming up next week. Again. Already we're going to go to Avalanche Crush, which should be fun.

Blake Oliver: [01:12:44] Yeah, we'll be at Avalanche Crush in Austin, Texas at the Fairmont. So if you happen to be listening and you're going to be there, let us know. We'd love to meet you. It's our first time at an Avalara conference, and I'm going to be talking about AI on a panel.

David Leary: [01:12:59] And I guess the elephant in the room. The next time we talk, we'll have a different president. Maybe we don't know. We'll see. Maybe David, we might not.

Blake Oliver: [01:13:07] Hopefully, hopefully.

David Leary: [01:13:08] Hopefully we figured.

Blake Oliver: [01:13:09] It out. We'll know who the president is the next time we talk. Um, yeah. So go out and vote and make your voice heard. I got to go fill out my ballot this afternoon. I got it sitting on the counter. I'm going to do it. Take it to the. I went and.

David Leary: [01:13:23] Voted early because I'm working. Usually I'll just vote at my polling place, but I feel it's going to be really busy tomorrow. And I went to early voting. Early voting was busy, so it's good. Americans are exercising the greatest freedoms we have in the world.

Blake Oliver: [01:13:34] And you're going to be contributing, David, by working the polls tomorrow. So thank you for your service. Bye, everyone. See you next week.