The Accounting Podcast

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Blake Oliver: [00:00:04] The vast majority of partners, they get that title partner and they are theoretically equity owners in the business, but the way they are treated is basically like employees. They are told what to do and they are assigned work, and they are told to work more hours than anyone in the firm.

David Leary: [00:00:23] Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: [00:00:30] Hello everyone, and welcome back to The Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver.

David Leary: [00:00:37] I'm David Leary.

Blake Oliver: [00:00:38] Nice t shirt.

David Leary: [00:00:40] Oh. Thank you. We didn't plan on this, but we're matching. Yes, we're.

Blake Oliver: [00:00:43] Both wearing our earmark shirts. A reminder to our listeners that you can earn free continuing professional education credits for listening to this episode. Just get the free earmark app or go to earmark app in your browser. Find our channel. Register for the course, take a quick quiz and earn your Nasba CPE certificate. It's already September. It's getting toward the end of the year. Those of you with a calendar year renewal, just get started now. Don't stress about it. Don't be doing hours and hours of CPE the week of Christmas like nobody wants to do that.

David Leary: [00:01:22] That is like I kid you not, I don't even remember the stat 10% of all the CPE we did last year. We did between Christmas and New Year's. It's crazy.

Blake Oliver: [00:01:30] Only 10%.

David Leary: [00:01:31] Last week, 10% was the last week it was of.

Blake Oliver: [00:01:34] Well, what about December?

David Leary: [00:01:36] Well, yeah, 25% of all the CPE is just in December, but 10% of the entire year is in the last week. It's crazy.

Blake Oliver: [00:01:43] Right? Which is like, well, that's not that crazy because what it's like double what it would normally be if it was spread out throughout the. No, no, because it would be 2% per week approximately.

David Leary: [00:01:52] Yes.

Blake Oliver: [00:01:53] Okay. Yeah. So it's like five times as much as a normal week.

David Leary: [00:01:57] Yeah.

Blake Oliver: [00:01:58] Yeah, that makes sense.

David Leary: [00:01:59] So don't week of the year for CPE is the last week of the year. It's crazy.

Blake Oliver: [00:02:02] Spread it out. Don't make it a check the box thing. Make it a, uh. Make it a thing that, like, means something. Actually learn something. That's why you listen to the show, right? David, let's thank our sponsors.

David Leary: [00:02:14] Our sponsors. This week we have team up rippling and digits. So team up. Are you turning away clients because you can't find enough qualified accountants? You're not alone. Finding reliable accounting talent has become one of the biggest challenges facing growing firms today. Here's the thing there's a better way than traditional outsourcing or bpos. Team up helps accounting firms hire top accountants directly in the Philippines. And when I say directly, I mean they work for you and only you. No middlemen taking a cut. No third party messing up your culture. Think about it. When you hire through team up, you're building your team. These accountants follow your processes, share your values, and join your meetings. It's just like hiring somebody remotely in your own country, except you're tapping into an incredible talent pool at a fraction of the cost. The best part? You get to keep the team as long as you want. No BPO politics, no forced turnover. Just talented accountants who become a real part of your firm. To see why forward thinking accounting firms are making the switch to direct hiring, head over to The Accounting Podcast. That's The Accounting Podcast. Thank you. Team up.

Blake Oliver: [00:03:20] Welcome to our live stream, viewers. We've got Nathan here with three coffee emojis. I am on my third cup of coffee as well today. Nathan, a numbers girl. Great to see you. Good afternoon from Oak Island, says a numbers girl. We've got Ashley. Hey, Ashley. Ashley says I need to know what's the significance of the coffee emoji? Are we sharing how many we have had today? You know, I never really thought about it, but that's. I assume that's what we're doing here.

David Leary: [00:03:49] I wish that was a gift when people were giving us coffees.

Blake Oliver: [00:03:53] It's like more coffees is like, this is how excited I am to be listening, to be tuning in live. So show us your excitement. Give us some coffee emojis or whatever emoji in YouTube you feel represents how you're feeling today. It is September 5th. We are rolling in to the September 15th deadline. The October 15th deadline. Man, it feels like summer was so fast.

David Leary: [00:04:21] I got.

Blake Oliver: [00:04:22] A call. Here we.

David Leary: [00:04:22] Go. Aicpa. We were prepping for the show to get my return signed and pay my bill.

Blake Oliver: [00:04:26] So welcome to Mo from Bethesda. Bethesda, Maryland, one of my favorite game studios. Bethesda. Great to see you here. Okay. We're going to talk about who is getting no tax on tips. That list of jobs leaked. You may be surprised to find out who is not going to pay tax on their tips. I wonder what kind of tax planning we could do. In this regard, we're going to talk about that. We're going to talk about why firms struggle to implement technology. This is a tale as old as time. But we've got some new data that might help us figure out why. I've got my opinions. David has his opinions. Of course you'll hear them all. The IRS is backing off on its plans to fire people. Except the problem is they already fired them. Now they're trying to get them back. Yeah, maybe firing all those IT staff was actually a bad idea when they haven't yet modernized their systems. And we've got updates from zero at Xerocon Brisbane in Australia, which we attended from afar. Uh, they announced new AI features. We're going to rip those apart and tell Xero everything they're doing wrong, because it's only fair, because we were so mean to Intuit and the QuickBooks developers about their AI. The good news for Intuit is that Xero hasn't figured it out either. So we'll talk about that. But before we do, I want to tell you all where I'm going to be in the next month or two because I'm hitting the road. I am going on a journey. I'm going so many places, David. I'm really excited. But also like, why do I do this to myself every year? I have a problem.

David Leary: [00:06:09] Every year, places I'm not going to go to so many conferences and then Blake signs up for them.

Blake Oliver: [00:06:13] Where will I be next week? Next week I'm going to be in Toronto for camp ATX 2025. This is an invite only conference you can apply to attend. So if you are an e-commerce firm, if you specialize in that, this is where you want to be. You can join 60 over 60 e-commerce accounting leaders from around the world. And it's usually in I believe it's always in September. Beautiful time of year to be in Toronto. We are bussing out to cottage country, Which I've never been to. I've never been to. I've been to Vancouver, I've never been to Toronto. And we're going to stay like at a at a camp.

David Leary: [00:06:55] A camp they literally camp. Yeah.

Blake Oliver: [00:06:57] Well, no, no, it's like a resort. It's they call it camp ATX. But I looked it up. It's like a resort. So. Yeah, we'll be okay. I'm gonna survive. Don't worry about me, David. And I'm going to be talking about AI agents. A lot of the stuff that I've been talking about on the show, it's been in preparation for this presentation that I'm going to do about AI agents and how we can integrate those into accounting, like the way that we're going to do it and, and why we need to do it that way, and how to understand what they are and all that stuff. So very excited to do that. Then the following week, I'm going to be at the gusto showcase. That's September 16th in San Francisco at gusto headquarters, and I'm going to be on a panel about AI. And so I think this is the sort of thing where just anybody can go. So if you are in San Francisco, go to search for Gusto Showcase 2025. You can get a free ticket as a small business owner or operator or an accountant bookkeeper, tax pro. It's it's free. So register for it and, uh, come hang out at the at the event. I'll be there all day. You're going to have the founders of gusto. You're going to have, uh, who else is going to be there that we know Chris Williams from system six. Who else? Yosef Yusuf West from relay. Um, Erica Goody is going to be there. Oh, I didn't even know Erica was going to be there. That's awesome. I'm looking forward to that. And there's me. Fantastic looking.

David Leary: [00:08:28] You want to do when you're there is you want to buy Blake's book and bring it so Blake can autograph it. That would be the ideal situation.

Blake Oliver: [00:08:35] We haven't gotten to the book announcement yet. David, you ruined the surprise.

David Leary: [00:08:38] Um, that's called a pitch. I'm tossing you the ball.

Blake Oliver: [00:08:42] Pitch. Okay, Well. Thank you. So, um, we'll get to the book. Uh, forget you heard that, because I want to tell you all about where I'm going to be after gusto next, which is the advisory amplified tour. It's a road show tour coming to Seattle, Los Angeles, Chicago, Austin, Atlanta and Boston. Go to advisory, amplified comm and grab your spot. It's all about how do we move to advisory? And it's practical. It's not like all this thought leader stuff that you hear at conferences where they talk about how important it is to, you know, do advisory, but you never learn anything about how to actually do it. This is a whole day dedicated to how you actually start transforming your firm. And AI is, of course, a big part of that because it's going to be huge for helping us do advisory. So I'm presenting there. I am going to be presenting a session on your technology stack and how that ties into advisory. And I'm also going to be recording a live podcast episode at the end of each day. So you get to hear me record a podcast.

Blake Oliver: [00:09:47] I'll do a podcast interview, live a different person in each city, a few different people, and that'll come out on this feed too. So if you can't make it, don't worry, you'll get to hear those episodes. If you can make it in person, you get to hear from Jason Blumer, Ian Vacin, Twyla Verhulst, Jeannie Whitehouse, Madeline Reeves, Nicole Porter, Logan Graf, Valerie Heckman, Wesley McDonald, Martin Kaminski and Dan Gertrudes and your MCs are going to be Kenji Kuramoto, Kaela Hill, Traywick and Jeannie Whitehouse. Depends on which city you're going to, who's going to be there, and the MCs. But check it out again at Seattle, LA, Chicago, Austin, Atlanta and Boston. And that's between September 23rd and October 9th. So check the website for your particular city and grab a ticket. They are quite a deal. They are $99 a ticket so anyone can come. You don't got to spend thousands of dollars. And I think there's going to be CPE there as well. Uh, earmark is not doing the CPE for that event, but we will be offering the CPE for the. David, you want to do this.

David Leary: [00:10:57] One count conference. So this is taking place in Mesa, right in our backyards. Easy, easy trip, easy travel. Uh, it's, um, October 21st through the 25th. This historically, I think, was an invite only conference at one time, but now it's opened up to everybody. It's a much bigger conference now. And they've I think it has a new board of directors, new leadership that's organizing it. So definitely check out that conference. What's the URL for that.

Blake Oliver: [00:11:23] That is AF org. That's the Accounting and Financial Women's Alliance a org. And then if you go there you'll find the women who count um Conference under events.

David Leary: [00:11:39] And we'll both be there and the weather in October. It's not hot anymore, so it's worth a trip if you want to travel in.

Blake Oliver: [00:11:47] And earmark is going to be providing the live CPE CPE for this event. This is a new feature in beta. You probably haven't seen it. It's in the earmark app, but it's hidden. You can actually get your CPE at a live event by taking a picture of a QR code or typing in a code, and the app tracks all your attendance. There's no sign in sign out sheets. It's, uh, it's basically taking this idea of how easy can we make it to earn CPE for on demand, or for self-study and applying that to live. We're trying to make.

David Leary: [00:12:21] It is you don't have to go get a another app. You just you already have your earmark app, you open it up and you get your CPE for a live event. You don't have to get a second app at a conference.

Blake Oliver: [00:12:31] After women who count. We've got the big one, The conference to rival all conferences in accounting technology. Intuit connect 2025. David and I will be there as the accounting podcast, as media covering the event. Always amazing to go there to Las Vegas and see what Intuit is cooking up. You can register now. There are still tickets, I believe. It's October 27th through 29th at the Aria Resort and Casino in Las Vegas. As Intuit describes it, Intuit connect as the premier event for multi-service accounting firms. That's an interesting phrase. Multi-service accounting firms. I've never heard that before. I've heard full service.

David Leary: [00:13:13] But it's.

Blake Oliver: [00:13:13] Multi-service.

David Leary: [00:13:15] At one time it was QuickBooks only show. Then last year they kind of started to make it a little bit. It was the verbiage was very enterprise. They wanted to really get enterprise accounting firms at enterprise clients. Now this multi-service is interesting because this means they want client accounting firms that do tax and do audit and do cast like who are the who's the audience? It's an interesting.

Blake Oliver: [00:13:38] The audience.

David Leary: [00:13:38] Direction are they.

Blake Oliver: [00:13:39] They told us when they when they when they put out the submission what do you call it. Request for speakers.

David Leary: [00:13:47] Who.

Blake Oliver: [00:13:47] Submission portal. I mean, it's last year was the first year where they changed it, right? It was QuickBooks connect. Now it's Intuit Connect. Was it last year was the first time.

David Leary: [00:13:56] I think so last year.

Blake Oliver: [00:13:57] It's more it's more larger firms because of the push towards Intuit Enterprise Suite. That's the crowd. So you know if you are in a regional firm or what we would call a midsize firm, not a small firm, but not a large firm, this event is designed for you. So come join us. I'm not going to be speaking. I'm just going to be there attending. But I would love to meet up. Uh, you know, let us know if you're going to be there. Uh, you can email me and David at the The Accounting Podcast at Earmarked me. That's The Accounting Podcast earmarked me and let us know where you're going to be. Like, just want to send us a message. Do it. We love hearing from our listeners. All right, David, that's all the events so far. I think there's stuff in November, but I'm not going to go that far. I want to tell you about my new book. Uh, lots of announcements here. I have written a book. I know, I guess it was about time. It's called building a Sustainable Accounting firm. And this is not an e-book. It's. It's actually published. It is. I mean, it's self-published, so. But it is a book. You can buy it, you can order it, it will be shipped to you. It's called building a sustainable accounting Firm strategies for the Modern Accounting practice. And, uh, God, it's like, bigger than I thought it would be. It's 200 and 237 pages, and it is everything that I know about how to run, to build, to run, to sell a modern small accounting practice. And it's based on my experience, but also the experience of many, many brilliant people who have.

Blake Oliver: [00:15:50] I've had the privilege to interview on my podcasts. So it's not just me telling you, hey, this is how you run a firm because I don't believe that works. Like, I'm not a fan of coaches who, like all they're telling you is how I did it. There's a lot of ways to do it right. So I interviewed people who did it, and I shared that along with my thoughts in this book. So also, um, I think the accountants, I hope my accounting audience will our accountant audience will appreciate that it's organized, uh, like an income statement. So we start each section is a different section of the income statement. So it starts with revenue. So that's obviously like sales. And then we go into Cogs which in an accounting firm is your cost of labor since you're staffing. And then we go down to opex, which of course is you know, your technology stack. And then we get to, um, profit, which, uh, what how would I describe profit in this book? It's basically building the firm so that you get to have a life, which is like the whole point of having an accounting firm, if you ask me. It's like you can go make a lot of money being an employee and working a lot of hours. But like if you if you want to have freedom, that's why you that's why you should start an accounting firm is to have freedom. So that's the profit part. So how do you actually build it. So you have a life. You can get this book. You can order it right now. It is available on Bookbaby.

David Leary: [00:17:18] The link in Amazon already down below.

Blake Oliver: [00:17:21] Okay, great. Um, I'm not sure. Actually, I haven't seen that book yet or that link yet. I didn't know it was on Amazon. We put it, we published it on Bookbaby, so I guess you can buy it on a lot of different places. Um, if you go to my website, you can go to like if you're listening to this on the on the pod and you're not in front of your computer later, just go to @BlakeTOliver com slash book and there's a Order Now button. And that'll take you to the Bookbaby store where you can order it for the low, insanely low price of $20. I'm not making money on this book. I think that covers the printing and shipping. And I did that because, um, like, I want this information to get out there. I don't want to be there to be like a big barrier for people to get this. And, you know, I'm not in the business of, like, I don't know, selling courses and selling books at this point. So versus this is.

David Leary: [00:18:13] More like books. This is cheap. Very cheap.

Blake Oliver: [00:18:16] Yeah. I mean, it's like if you bought this anywhere, if you bought a book like this from one of our I wouldn't even I wouldn't call it a competitor because we don't compete. But it's like if you bought a book like this from somebody else in the accounting profession, they'd be like charging you like 100 bucks for it, right? Or 200. Or maybe more. I don't know. Um, but, you know, I don't. It's like it's a lot of insights from other people. Like most of them, it's people I learned from. And I feel like, I don't know, that's kind of wrong to, like, take all their ideas and then sell them in a book and make money from it. So, um, thank you everyone who was on my podcast who, you know, gave gave me insights that I could share with everyone. I really appreciate it. And I should probably send out a copy to everybody who was in the book. That's still on my to do list.

David Leary: [00:19:01] I'd like to get a.

Blake Oliver: [00:19:01] Copy by the book to find out if you're in it, by the book, to find out if you're in it, you might be in it. So let's see. We talked about the book. We talked about where we're going to be. Where do we go. The no tax on tips. Let's get to the news. Right. But actually before that why don't we thank our second sponsor, which is, uh, rippling.

David Leary: [00:19:20] You want to grab that?

Blake Oliver: [00:19:22] I got it. Introducing. Rippling the all in one platform that unifies your client's HR, finance, and IT in a single system. Accountants. If your team is stuck juggling payroll, benefits, time tracking, and it margins slip away fast. What if all those systems actually worked together? That's what rippling does. One platform where adding a new hire automatically updates payroll, benefits, compliance, and laptop access? No more chasing tickets or wrestling with spreadsheets, just more time to focus on higher value work. With rippling, firms can turn workforce advisory into a recurring revenue stream. You'll give clients live visibility into labor costs, overtime trends, and compliance risks while offering insights that shape business decisions. It's how firms move from reactive admin work to trusted strategic advisors. You protect margins and build stickier client relationships along the way. And to sweeten the deal, when you book and complete a qualified demo, you will receive a $100 gift card. If you're ready to elevate your firm's advisory practice and get free money in the form of a $100 gift card.

David Leary: [00:20:30] You could buy five books, five of Blake's books.

Blake Oliver: [00:20:32] You could buy five of my books and distribute them to your team. Head over to The Accounting Podcast. That is The Accounting Podcast. And David, maybe we should get rippling just to, like, send out copies of the book for a promo. That would be a great idea. We should figure out how to do that. We should send out copies of the book. We should have a contest. Um, right now the book is just the paper version, but I'm going to have an ebook version. And, um, so, you know, get the book. I like reading book books, but if you like e-books, then there will be an e-book version. I don't know, is there one on Amazon? David, if you click that link.

David Leary: [00:21:10] Does an e-book version yet?

Blake Oliver: [00:21:12] Not yet. We're working on it. Uh, we went old school first.

David Leary: [00:21:17] Well, you're going to want it. You're going to write things. You're going to bookmark, put bookmarks in it, you're going to fold over pages. You're going to tear pages out. You're going to want the paper copy of this book highlight things. It's important to have.

Blake Oliver: [00:21:29] Our number one fan boring accountant says, who is your book's editor? Chatgpt. So I'm going to be honest, I tried writing the book with ChatGPT when I started this project, which is embarrassing to say. It's like over a year ago. It took me like over a year to write the book, and I tried using ChatGPT ChatGPT at the time and it just it couldn't do it. It could help me edit, it could help me do certain tasks, but it couldn't piece it all together. And that was the hardest part, honestly, was not writing. It was it was figuring out the whole big picture structure. Like, what is this book about? Even the title, right? It wasn't originally building a sustainable firm. I sound like a hippie with this, you know, title here. It was something like, I don't I don't remember what it was, or it was like building a subscription firm. And as the book started to come together in the outline, I realized, well, a subscription is not an end unto itself. What does it do for us? What is the point of building a firm where your customers, your clients, subscribe to you? Well, the point is that you can have a profitable firm where your team enjoys their jobs. You like your job, your clients are happy, you're all making money at the firm, and you have plenty of time to enjoy life.

Blake Oliver: [00:22:57] That's my ideal. That's my ideal firm. And it's totally possible. And the firms that are horrible places to work, where people are unhappy, they're overworked, they're not making enough money, and the owners are depressed. Like that's your own fault. That is not a given. That is not how accounting has to be. And my experience and the experience of many other accounting firm leaders proves it. And if you think otherwise, you just lack imagination. Or you can buy my book and figure out how to do it. So, uh, by the way, actually the inspiration for this book was Ron Baker's book Time Up, which I have in the back here on my bookshelf, but I can't reach it right now. And, uh, that was this book about the subscription economy and applied to accounting firms. And, you know, Ron Baker, he is a brilliant, brilliant thinker. And I love that book. It's my favorite one. It's my favorite, he wrote. And this book is basically the playbook for how to implement his theory. So he says this is how a firm should be. And this is how to get it there. That's the idea. And he was kind enough to write the foreword. So I got the foreword by Ron Baker.

David Leary: [00:24:21] Cool.

Blake Oliver: [00:24:22] Um, we should probably get to the news.

David Leary: [00:24:24] News? Yeah. So we talked.

Blake Oliver: [00:24:26] Tax.

David Leary: [00:24:27] No tax on tips. So the list of 68 jobs that will not will that'll have no tax on tips has been leaked. It's the draft list from the Treasury Department. Um, it revealed 68 occupations across food, service, entertainment, hospitality, personal services and more. Um, they plan to have the full list published by October 2nd of 2025. And these jobs must have been customarily regularly received tips on December 31st of 2024. So. So these are all jobs that used to get tips. There's no new we can't say, hey, we're podcasters. We get tips now. So it's really going to be no no jobs that got tips.

Blake Oliver: [00:25:10] Right? Right. So what they're saying is these are the job types or the the job titles that can qualify.

David Leary: [00:25:18] Exactly.

Blake Oliver: [00:25:19] Okay. So here is the opportunity. How do we reclassify our clients into these categories in order to get no tax on tips. And I'm seeing a lot of options here. Okay. There's the usual which would be hard to do like food and beverage service right. We're not we're not reclassifying any of our staff or any of our clients into like bakers and dishwashers and bar staff. Uh, but entertainment and events, there's casino workers. That makes a lot of sense. They get tipped. But performers, musicians, DJ's and most critically, digital content creators. What are we, David?

David Leary: [00:26:03] We're digital content creators.

Blake Oliver: [00:26:05] Podcasters.

David Leary: [00:26:07] We get a lot of tips.

Blake Oliver: [00:26:08] We make digital content. So, dear listeners of the podcast, please be prepared for our tip jar. We're going to have to figure out some technology platform so that you can tip us.

David Leary: [00:26:20] It's built into QuickBooks. I'll just send out our invoices for a dollar and I'll just have a suggested tip amount.

Blake Oliver: [00:26:27] Suggested tip amount. Yes. Uh. It's amazing. So that's an option. And basically anyone in professional services, I think there's probably an argument to be made that you could, like, get some of what they do into that digital content creator job description or job title. I wonder if they're going to have job descriptions to go with these, because if it's just a title.

David Leary: [00:26:55] I mean, if it's like maids and housekeepers and maybe people that historically maybe aren't using an accountant to file their taxes, this might help drive demand. Because if you can be I'm the expert. I will help ensure you get your no tax on tip credits properly. Come see me. It probably is a way to get relationships with new, new potential customers.

Blake Oliver: [00:27:15] That's true. And you know the the people to focus on from like a prospect or client perspective that could benefit. It's the high earning tip, folks. I mean, there's a there's a phase out, but the phase out is like.

David Leary: [00:27:30] 150,000 for single.

Blake Oliver: [00:27:32] For single and 300,000 for married. So, I mean, if you're like a married casino worker, you can make up to you and your spouse together, can make up to $300,000 and get all the no tax on tips, which is it's the deduction is capped to 25,000 annually. But that's a significant deduction for somebody who's probably making $100,000 a year. I mean, a casino worker, I believe at a top resort like on the strip can make six figures. So I mean that's a that's a huge deduction. So so yeah, I think I think if you're like, you could build a niche around helping those folks get that deduction. And there's a lot of tracking that has to go into it. I guess they're going to add it to the W-2 right. That's the that's the new other news. The IRS is updating the W-2 to include overtime wages and tips wages.

David Leary: [00:28:36] I didn't see that. I don't know if you saw that.

Blake Oliver: [00:28:38] Maybe it won't be as hard. Maybe this will just be a play for the, uh, you know, do it yourself tax prep companies or, like, H&R block or something. All right. So that's the no tax on tips. We are going to be digital content creators definitely for this for 2025 tax year. Since we're talking about taxes we might as well talk about the IRS The IRS planned to cut its workforce from 100,000 to 60,000 people and already shed about a third of its IT staff. David. But now they're desperately trying to hire people back after realizing they actually need workers to do the work. The agency is even asking previously laid off employees to return and rescinding resignation offers to plug critical staffing gaps. This comes after the IRS headcount already dropped 26% overall. Some departments, like Transformation and Strategy, lost 95% of their staff. Another challenge is that 63%, over half of the IRS workforce is eligible to retire within six years.

David Leary: [00:29:42] And I imagine some of the technical staff that got let go. This is what we always known, known for a while. We've talked on the show, the computer, the IRS computer system is old. So it's probably.

Blake Oliver: [00:29:54] One of the oldest.

David Leary: [00:29:56] If you let these people go and then who's going to be able to operate it ultimately?

Blake Oliver: [00:30:03] Yeah, that's the problem. So they so they eliminated Doge came in and eliminated strategy and transformation, which I assume is the group that would actually lead the modernization effort internally at the IRS and Doge. Cut that and then said we're going to do it. But then Trump cut Doge. So now there's no one to lead the transformation or strategy. So you've got all these people that are now overworked because they're running the exact same antiquated systems with a third of the people, and they're all they're all approaching retirement. So picture mid-career to late career IRS employees, like they're not going to modernize it. They're just going to try to survive until they get their retirement. So I think that the the the lesson here is that or the takeaway here is that things that the IRS are going to get without a, without a change in administration or without a change in. I mean, it's not going to they're not going to change their policy. They're not going to like fund the IRS suddenly. Right. So unless there's a change in administration, the IRS is going to get worse and it's going to get worse. And so what's that? At least two more years of the IRS getting worse.

David Leary: [00:31:18] Yeah. And if it's getting worse faster and faster like they these are not decade long changes. They're starting to happen on a yearly basis now.

Blake Oliver: [00:31:28] So that's sad. That's sad for tax pros. I feel bad for them. I guess let's move on to.

David Leary: [00:31:37] I have a tax related story. State tax related. Okay. Let me jump into that. So last night is the start of the NFL football season. So it's I get to combine my love of NFL football with our podcast which is great. Tonight's game though is in Brazil. And I don't know if you're like do you know about with pro athletes, maybe musicians? This is true too. But like when you go to other states for the game, your salary because you get paid for that game, maybe you get $100,000, check that state you're in taxes you.

Blake Oliver: [00:32:07] Yes. So you have to file a state return for every state you have a game in.

David Leary: [00:32:12] Yes. So the Kansas City Chiefs are going to play the San Diego Chargers. But instead of the game being in San Diego, it's now going to be in Brazil. So the Chiefs players are saving about $175,000 because. Or I'm sorry they sorry state the factor. So in general the Chiefs players per game are paying about $175,000 in taxes.

Blake Oliver: [00:32:36] They're getting they're getting paid in Missouri.

David Leary: [00:32:40] They pay that. But wait I'm sorry.

Blake Oliver: [00:32:42] I'm sorry. What is $175,000 number mean?

David Leary: [00:32:45] That's that's the taxes California collects. Missouri collects from the players. If a game is in Missouri, not per player, but.

Blake Oliver: [00:32:53] Oh just.

David Leary: [00:32:54] Total total total.

Blake Oliver: [00:32:55] Okay. The whole team pays $175,000 in taxes when they play a game in Missouri.

David Leary: [00:32:59] In Missouri.

Blake Oliver: [00:33:00] Okay.

David Leary: [00:33:00] But when they play a game in California, it's about $287,000 in taxes. So it's a significant hit. Right. If you go to California. So because they're going to Brazil, they don't have to pay this tax anymore. Now Brazil does have a nonresident tax. Um, that's going to be a total of about $1 million for both teams. But you get to offset that against your federal. So specifically when you talk about a specific player. So Patrick Mahomes, he's going to avoid an extra $35,000 in tax liability because the games in Brazil instead of California. So just. All right. Just eliminate the taxes gone. You don't have to pay it now. I wonder how long California might let this go on. Right. Because California is famous for, like, trying to claw back things, right? Yeah. But if the players in.

Blake Oliver: [00:33:43] California residents, there's nothing they can do.

David Leary: [00:33:45] Yeah, they can't do anything about it.

Blake Oliver: [00:33:47] But this is the beauty of our system. If if one state or a few states get overly aggressive, then you know the other states can attract business, attract individuals, attract players like I love I love our system. It gives it creates a little bit of competition.

David Leary: [00:34:07] This is why they think there's some theory with NHL hockey. The reason these Florida teams keep building Stanley Cup championship teams is because Florida has no income tax. And with the salaries of hockey, that is a significant amount of money.

Blake Oliver: [00:34:23] Oh, it makes a difference.

David Leary: [00:34:24] And so so so free agents will sign in Florida to get a paycheck there which keeps their overall. So the the team gets to spend less overall. But the players actually in their pocketbook in their bank account, they actually have more money because they're not paying taxes. And because there's this phenomenon where these Florida teams keep winning the Stanley Cup championship in hockey, and it's probably because of the tax situation.

Blake Oliver: [00:34:49] We're going to turn to Xerocon in the AI announcement there. First, let's thank our next sponsor. And that is digits. Let's be honest, accounting software hasn't changed much in decades except for rising costs and declining service. Now there's finally a reason to switch and never look back. Now you can do your. You can now do your bookkeeping on digits. Digits is AI native accounting software that works for you, not the other way around. While other platforms just slap ChatGPT on old workflows and call it AI. Oh man, this is like we're about to talk about Xero and their AI. This is kind of on the nose. Okay. Anyway, continuing. While other platforms just slap ChatGPT on old workflows and call it AI, bookkeeping demands more than a chatbot. It demands precision, auditability, and trust. Digits rebuilt ledger software from the ground up with probabilistic categorization and human review prompts. The result over 95% of transactions auto book with unmatched accuracy. 54% better than ChatGPT style models so you can close faster, stay in control, and finally stop wrestling with your accounting software. Low value clients are now high value four years worth of cleanups. Now take just two hours, all while your clients get visually stunning reports, streamlined collaboration, and the insights they need to make better decisions. To see why hundreds of firms are making the switch to digits, head over to The Accounting Podcast. That's The Accounting Podcast. And now let's talk about the future of small business. According to zero at their Xerocon conference in Australia in Brisbane. So the big announcement was this new AI financial super agent.

David Leary: [00:36:35] Yeah, they used that term financial super agent.

Blake Oliver: [00:36:37] Yes. And its name is Jax J which stands for Just Ask Xero. And that term financial super agent. You know what it makes me think of, David? Does it? Does it bring anything to mind for you? Remember what David Barrett used to talk about? The financial super app?

David Leary: [00:36:56] Oh, the super app. Okay.

Blake Oliver: [00:36:58] What? His vision for Expensify, anyway, reminds me of that. So they're calling it an AI financial super agent. But I got to say, based on what they announced at the conference, I love Xero. Don't get me wrong, love em, love the product, but it's not quite a super agent yet. So what is this AI agent actually do? What does Jax do? It's a chatbot built into Xero, and here's what you can do with it. Now get access to financial data right at your fingertips. Jax will give you instant access to your cash flow, PNL and balance sheet data. For example, you can request a gross profit trend for the past year and see it visualized in charts and tables. The feature is rolling out first in Australia, followed by the US, with more regions to come. So here's the example on the screen. The prompt is show my gross profit trend for this year. And then there's a little narrative and a chart.

David Leary: [00:37:54] Can't you just run a report that shows that? Isn't that just like a couple clicks away already?

Blake Oliver: [00:37:59] Well, it's already it's already on the dashboard that the analytics.

David Leary: [00:38:03] That's what I mean. Like.

Blake Oliver: [00:38:04] Yeah.

David Leary: [00:38:04] So I feel like are something being solved here. A pain.

Blake Oliver: [00:38:08] No. Exactly. That's what I was going to. That's what that's my takeaway is like who would ever ask this question. What business owner is ever going to say show my gross profit trend for this year? And what does it mean to even see the gross profit trend in isolation? What can you do with this information? Like we're looking at this chart, David. Let's say this is like earmark. And we see okay we had we had gross profit. That kind of like went up a little bit in March and April and then down in May. And then it went up again in June and really went up in July. Okay. Well Where's the next question? The next question is why was my gross profit higher in July? Can Jack's answer that question? That's what I want to know, because that's the sort of question that an advisor.

David Leary: [00:38:55] Yeah, because if you're not doing true accrual accounting, it could just be like a bunch of people paid you late. So it looks like July was a good month.

Blake Oliver: [00:39:02] Well, if it's cash based. Well no I mean because so this is gross margin right. So this is revenue minus cost of goods sold. And that's your gross gross margin. So you can you can ask what was my gross margin. But the the the question you really want the answer to is like why is it different than a previous period. What happened? So can this agent actually look into the cost of goods account and figure that out from the accounting data? And often the answer is no, because the reason that your cost of goods is higher is stuff that's not in the accounting system. And this brings me faster than I thought I would get to, to this idea of these embedded agents in accounting. I just don't think they're going to be that useful. Because the answer to the question, why is something this on the financials is often not from data that's in the financials. You can drill down to the individual transactions, and you can look at what makes up this expense account for this month or what's in this asset account. But then there's also lots of data that's just like not even in there.

Blake Oliver: [00:40:16] So I might have a bunch of purchases in, you know, like if we drill down into gross margin, we're going to what are we going to see? It's like if we've been using inventory items, we're going to see that, you know, you know, that inventory value is right as being taken off the balance sheet. It goes into cost of goods. But like what made that inventory cost costs more. If our margin is down, was it tariffs? Was it our supplier increased their prices. Was it we missed out on discounts that we used to get. Those kind of questions are the ones that matter. And these AI agents can't answer those because that's not in the accounting system anyway. Moving on. Here's another example. What is the average revenue of a restaurant with five employees. So this is just like a general question. And then it gives you a response very much like ChatGPT would or perplexity would. It tells you an estimate of the average annual revenue for that kind of restaurant. It gives you some more data and cites references.

David Leary: [00:41:21] And this was they partnered with OpenAI now. And this was part of that partnership where it's going to go get external data to bring it back to, like you said, to benchmark.

Blake Oliver: [00:41:30] So I mean, this is just a ChatGPT wrapper. This is you can just go to ChatGPT and ask this question. It's it's going to be probably a better response as well, because you can define how you want the agent to reply in ChatGPT. You can personalize it more. In this instance, zero has wrapped it, so they are building their own like layer on top, and they say they've done something to reduce hallucinations or whatever. Well, you know, that might not be helpful. It might actually reduce the quality of the information. So I'm just warning you that like this is you can just get this with ChatGPT. So this is nothing to be wowed about. Um, the next is the more promising and more interesting feature, which is this automatic reconciliation of bank transactions. You're going to have a new reconciled page where you can see bank and accounting details together.

David Leary: [00:42:29] Can we clarify the word reconcile? Because I think in zero in in Australia it's matching. And here in the US reconcile is a completely different thing. Right. It is matching but it's matching to a total at the end. It's not just a transaction's matching a bank feed.

Blake Oliver: [00:42:46] So in zero yes. This is like the the language the different language of Xero and QuickBooks. Fundamentally in Xero when you do that transaction matching that is the reconciliation. And in Australia and New Zealand the accountants there say that's enough. And then we just run a report that shows that the bank balance, as calculated in the GL, matches the bank balance from the bank on the bank statement. And that's what they consider a reconciliation. In QuickBooks. You have the matching. And all that does is clear the transaction. And then you have to do a reconciliation to actually mark it as reconciled. So it's a two step process. Arguably the US way. The QuickBooks way is, is more thorough, and that's why us accountants got messed up when they tried to switch to zero, because they didn't have this second step. And so they would they they would say, oh, I thought it was reconciled. And then the balances are wrong because of a missing transaction or something. It's because they never ran the report. So.

David Leary: [00:43:50] Um, so when it says it's going to reconcile, like we hear that and I think it's going to be like, oh, maybe it reads the bank statement, it gets the ending balance, it matches the transactions. But but maybe it's just quote unquote the zero version of reconcile.

Blake Oliver: [00:44:06] Yeah. Well and it is reconciling like according to how Xero does it, which is a 1 to 1 transaction match. See, QuickBooks doesn't do that. Quickbooks does not QuickBooks.

David Leary: [00:44:16] Because QuickBooks AI has the bank feeds matching AI, right? It's but their equivalent. I would say they're probably equivalent, like neither of them are doing reconcile. I would argue from the US definition of reconcile.

Blake Oliver: [00:44:30] Well, you know, we could debate this. We could debate this, but nobody cares. In the end, what matters is that the transaction gets into the accounting system and gets categorized. Right. That's what it's categorizing the transactions automatically. So so AI will now be able to categorize transactions manually. And you can see on this very low resolution screenshot that we've got a list of transactions. And over on the very right hand side we can see the method. And you've got rules as a method. So that's I assume the old zero rules. You've got this match method. You've got memory. You've got prediction. So the AI is going to be helping you to reconcile. And it'll tell you how it did it. Now what I wonder is is it going to surface transactions it wasn't sure about. How am I going to have confidence that on this screen, 113 transactions that were auto reconciled were done correctly in the last 30 days? Am I going to have to go like look at this report constantly. The implementation of this is the sticky part. That's that's where this could work. Or this could fail. Because if I say accountant, don't have confidence, I'm not going to use it. I'm just going to keep using rules. And that's why I always thought that, like, zero in QuickBooks would be better off if they just used AI to help us create the rules, because we know the rules work. So instead of like trying to bypass the rules and just do everything with AI, just help us make the rules, just auto suggest the rules and we accept it.

David Leary: [00:46:00] Or color code it and shades of green based on a confidence level. And so you can just hey, these are all easy. It's pretty confident these are right. And then these ones that are in yellow I need to look at are these ones in red I need to focus on because you can't you're not going to if you have to review every transaction that AI categorized. What's the point of using the AI at all? It just doesn't. It doesn't make you more efficient doing that.

Blake Oliver: [00:46:21] So one of our listeners, we talked about this in the last episode. I was we were complaining about the AI bank feeds in QuickBooks and ProAdvisor were not happy with it because of this issue. And one of our listeners was listening and said, hey, I actually built a tool that does what you're looking for, which and it's called Bank Rule tool. Com Bank rule by Andrea Still CPA build hundreds of bank rules and minutes. So you with this tool you you grab a QuickBooks online report. You set the dates, you export it to Excel. And then you drag it into this box on her website here. Bank rule tool. And then it will make you what it what it appears to do based on the demo I watched, is it will make the bank rules file that you can then import into QuickBooks. And this to me is basically what they should have done in Xero, in QuickBooks, or it's what they should do in Xero zero. And what they should do in QuickBooks is just go through the GL and look at how we have categorized things historically, and then based on that, use AI to generate a giant list of potential AI rules and allow me to go through and select which ones I want to implement.

David Leary: [00:47:40] Yeah. And I think they have that. I think I remember being at Coopers Connect. They were demoing that like on a migration like the first use, the first time you connect your bank account and it goes and grabs 900 transactions, it gives you these suggested rules. But you're right, that's the way to do it, because you don't want AI every day having to rethink about how it should categorize a transaction based on all your history. Like look at the history once, make the rule and use the rule going forward.

Blake Oliver: [00:48:05] Right. And AI Jen AI is statistical and probabilistic and we want 100%. I don't want to have to deal with a small percentage of transactions all the time getting miscategorized because the AI is not deterministic. So use the AI to create the The deterministic rules. That's the way you get the best of both worlds. And if you do that, you could also use AI to like just suggest coding the sort of thing we've had for a while where if a transaction comes in, it just says like it's like maybe in italics, you see, like the expense account that is recommending you code it to or whatever, like do that, do the suggestions with AI, but don't actually do the coding. Like don't automatically reconcile transactions with AI at this point. Nobody's going to trust it.

David Leary: [00:48:53] The other thing they called out, which is weird because Intuit leans into this too. It talks about Jax, how Jax and even it'll draft invoice emails for you. And I feel like Intuit leans into this, too. Like, I don't need AI. It doesn't. How much time is being spent sending an email you owe me for this invoice? Here's the link. That's. Yeah, like the.

Blake Oliver: [00:49:17] Drafting emails.

David Leary: [00:49:17] Part. Special, Sure harsher email written or a friendlier email. Or like these custom ways to write a collections email. Just a template is good enough. I just don't understand. Like they talked us up. Like it's a benefit. Like to write an email. Really.

Blake Oliver: [00:49:32] I think it's because the product people are like, what can I do? Okay, can write emails. All right, let's build that. We know how to build feature.

David Leary: [00:49:41] That's a feature.

Blake Oliver: [00:49:42] That's a feature not because it's something that people actually want. Here's something that's a little more interesting. Um, you can chat with Jax and ask it to create invoices. And the the prompt is create an invoice for Jolly Jumpers for what? I invoiced PCU Clothing in July 2025. And then Jax goes and creates the invoice and gives you the link to it to review and approve. I like that kind of stuff. Just letting me do stuff in Xero by talking to the chatbot. But here's how it could go wrong. If the only thing it can do is create an invoice, then I'm going to be pissed off when I say, hey Jax, please lock the books at the end of last month. And then it says it can't do that. So if you're going to create an agent that can take action in the accounting system, it needs to be able to do all the stuff that I normally have to click around and do. Otherwise, you're going to get the, you know, the Amazon smart speaker problem where people try to do stuff and it just doesn't work because it can only do like a limited menu of things. It's going to piss people off. So one of the other things that's neat too though, is you can do it. Jax can work via WhatsApp. Now, I don't I don't know, like who uses WhatsApp to communicate with their accounting software. But I know it's big internationally, so I guess that's that's neat.

David Leary: [00:51:17] I've seen a lot of apps do this, and I think it's some orchestration level. They might be using a third party tool that really is behind the scenes, using WhatsApp to do the communication back and forth. But I've seen this a lot. A lot of companies are doing this. They build their chat interface and then you can also use in parallel WhatsApp, WhatsApp. And so there must be an orchestration layer of something. I don't know necessarily. It's a feature. They're claiming it to be a feature. But I think it's it's just the it's the tech stack they're using. Are they purchased to do it.

Blake Oliver: [00:51:49] The uh yeah. Oh, and the other way you're going to be able to create invoices, and this is the one I think actually is really helpful is just forward an email to As jacks. So you can take a thread of an email discussion you had with a prospect and or a client, and you can just forward it in and say create the invoice based on this email.

David Leary: [00:52:11] Yeah, QuickBooks does that too. And it's okay ish. But you you don't want that elbow room on the invoice, because then the invoice is different from the next person's invoice, and because you want to have items and you want to have control over invoice to have, or you don't get good reports later on. Right?

Blake Oliver: [00:52:25] Well, so that to me is a problem with the sophistication of the agent. So like if I built an agent and I, I could define that, I could say always use service items and try to figure out which service items to use based on my email and do it this way and do it this way. And so when Xero and QuickBooks create these agentic features, but they don't give you the ability to reprogram and customize the instructions, it really limits the usefulness because everybody's got a different way they want to do their invoices.

David Leary: [00:52:57] And that was the gripe last week. You don't have control over the AI in these accounting systems, and whoever builds that first is going to get a lot more. Believers. Like you have to be able to massage and you want to make Jack's work how you want it to work for your accounting system. And right now, none of them are even close to letting us do stuff like that. They did have non-ai announcements, though, Blake as well.

Blake Oliver: [00:53:20] Before we go to that, can I just, you know, I know Gator NYC is saying, when are you rebranding the podcast as the AI Accounting Podcast? We already produce an AI accounting podcast. Um, we talk a lot about AI because, I mean, I think it's like fundamentally going to reshape the profession. It's like it's cloud based accounting. We used to be the Cloud Accounting podcast.

David Leary: [00:53:46] We're a.

Blake Oliver: [00:53:46] New show, but.

David Leary: [00:53:48] All the news articles are about AI. Most of the news articles are about AI. Like, well, the interesting ones.

Blake Oliver: [00:53:53] I mean, we got we got a list of like 100 stories we could talk about. We could talk about Trump's tariffs. We could talk about. I mean, there's all this like we talk about, I don't know, there was something else I wanted to say about AI before we moved on, but I guess it'll come back to me. David, what else was new at zero?

David Leary: [00:54:11] Brisbane? They announced non AI features. So they now have they're going to roll out a beta for progress payments. So QuickBooks has always had this. You're doing a big construction job. You want to collect payments over time at a certain percentage of the job. So you're going to have progress payments. They're going to have one click multiple invoice payments rolling out. I'm assuming this is like bill payments. So if you have ten bills to pay you can one click to pay them all at once. So that's rolling out. And then customizable branded invoices are coming to more regions now as well. So non AI features real features. I don't say like AI features aren't real features, but real product features are rolling out as well. From zero.

Blake Oliver: [00:54:47] I totally forgot what the AI thing I wanted to talk about was with zero. Darn it.

David Leary: [00:54:52] I have an AI story that we could talk about while you're thinking about that.

Blake Oliver: [00:54:55] All right, go for it.

David Leary: [00:54:56] So, Grant, this just broke. I saw the story this morning. So this was news from yesterday. Grant Thornton has announced that they are going to spend $1 billion now on AI. And this is just like you start looking at all the firms. They've all made this announcement that you start going on top ten list. They all make this announcement. They're doing it.

Blake Oliver: [00:55:13] Yeah. It's almost like they're copying each other.

David Leary: [00:55:16] They've always done that right. All the firms copy each other. So central to this plan is a full rollout of Microsoft 365 Copilot. So basically they signed a Microsoft office contract and now are bragging about it. Right? And then and then the other part of this is proprietary AI tools. Like they have a tool called compile AI or Compli Compli AI. So that's an internal tool. And the way that was described, it features a comprehensive suite of tools including dashboards, task management, in-app commenting, notifications, a methodology document library, centralized file reports repository. These tools enable engagement teams to collaborate more effectively, access critical information faster, and manage projects with greater efficiency. So it sounds like it's their internal workflow stack that's rolled into this billion dollars of spend. But it's just it's they're all saying how much they're spending.

Blake Oliver: [00:56:14] It's a press.

David Leary: [00:56:15] Release.

Blake Oliver: [00:56:15] It's a press doesn't mean much. It just means that they're paying for like a $30 ChatGPT or copilot license for everybody at the firm.

David Leary: [00:56:23] For 15,000, 13,000 people. Yeah.

Blake Oliver: [00:56:25] Yeah. What is it, 13,000 times 30 bucks a month equals how much per year? Somebody do it in the in the live stream. Some. Somebody tell us how much is Grant Thornton spending. They've got 13,000 people and they are spending $30 per person per month. What is that annually. We can't do mental math on the show. So we're prompting you to do it for us. Please. And thank you. First person to answer gets, um, gets a copy of my book. I'm going to send you a copy of my book.

David Leary: [00:57:03] First person and then multiply that.

Blake Oliver: [00:57:05] Where are your ten keys? No answers yet. Oh, this is disappointing.

David Leary: [00:57:10] So it's 13,500 times. What's 30 bucks a month? Times 12 months. Times three years. And what's that number? How much of the billion is that number?

Blake Oliver: [00:57:18] Yeah, exactly. I would do that. Except my calculator app on my Mac doesn't have commas, so I can't like, see it with all the zeros. It's the dumbest thing in the world. Adam Zaki says 4.68 million. That's not $1 billion. See, that's what I wonder. What are these billion dollar investments? What does that even mean? They all say we're investing $1 billion and might I just think, okay, they're they're like valuing people's time. And they're saying we're all going to dedicate an hour a week to AI. Yeah. And that's like worth $1 billion. Like, that's such, such crap. Some report. Why are why is the press printing this stuff? Ask them where this money is coming from. How are they calculating this billion dollar number. They're accountants. Right? They should have the spreadsheet. Show us the spreadsheet, Grant Thornton. I would love to see it. And PwC and Deloitte and KPMG, whatever. Like, I don't buy I don't buy it.

David Leary: [00:58:13] Here's the other funny part of their press release from Grant Thornton. The firm is positioning this as a people first transformation, aimed at helping staff work smarter and faster and deliver more personalized client service. It's even though we've already covered how the big firms are now laying off people or hiring less because of AI, right? So it's like how over here you're going to you're not going to spend $1 billion on AI unless you plan on getting rid of lots of labor, because what's the most expensive thing in an accounting firm? People. Right.

Blake Oliver: [00:58:43] It's the people. Yeah.

David Leary: [00:58:44] Yeah.

Blake Oliver: [00:58:45] So and that's the that's like. Yeah. The private equity thing. Right. It's all, uh, let's, let's invest in a big firm and then let's replace the people with automation and AI and offshoring.

David Leary: [00:58:57] And they did take a deal.

Blake Oliver: [00:58:58] With.

David Leary: [00:58:59] They had the private equity deal with New Mountain Capital, who has a lot of exposure to AI companies.

Blake Oliver: [00:59:05] Yep. Um, and on that note, we saw where is it? Who laid off? Who laid off all their administrative assistants or executive assistants?

David Leary: [00:59:18] Sales force. Right.

Blake Oliver: [00:59:19] No.

David Leary: [00:59:20] Oh, no.

Blake Oliver: [00:59:20] It was an accounting firm.

David Leary: [00:59:21] It was a firm.

Blake Oliver: [00:59:21] That's right. It was. It was. Where is it? It was. Was it Grant Thornton in the UK? I lost the story. I had it here.

David Leary: [00:59:30] Well, look at this. Um.

Blake Oliver: [00:59:32] Yeah, here it is. This was in going concern. Grant Thornton UK just fired most of their secretaries and executive assistants to replace them with cheaper workers in India. This happened less than a year after a private equity firm bought a majority stake in the firm. Partners are reportedly, quote, really embarrassed unquote, by the decision and quote, definitely didn't want to do it unquote. But there's increasing pressure to to move the roles offshore between 40 and 100 positions were cut, with staff asked to leave in June. And EY did the same thing last month with their US based executive assistants, but they went with South American and Caribbean replacements instead. I mean, talk about a dumb move. You are taking the people who directly support your biggest producers, the partners in the firm. You're taking their their critical support, and you are putting that in another country. And you think that's going to be a good thing because you're saving so much money on these expensive executive assistants who are expensive for a reason, because they are really talented and good and responsive. Now you're going to put them in a totally different time zone. You're going to make them work like night hours. And you expect like what's going to happen is your partners are going to be more stressed out and less productive. And yeah, you save money in the short term, but you're going to lose those partners.

David Leary: [01:00:58] And it's probably a transition step to when they go to the partner next year and say, hey, good news. Now you have to use our AI platform we built. Yeah, that's going to our people first AI platform.

Blake Oliver: [01:01:09] This is the dirty secret of public accounting and big firms is that the vast majority of partners, they get that title partner and they are theoretically, you know, equity owners in the business, but the way they are treated is basically like employees. They are told what to do, and they are assigned work, and they are told to work more hours than anyone in the firm. It's not not a great situation when you have private equity coming in and then trying to flip that firm in 3 to 5 years. And the way you flip the firm is you juice EBITDA the bottom line. You you you bump net income up so you get a high multiple when you turn around and sell it to a bigger private equity firm. You take it public in 3 to 5 years is not long enough to do a business model transformation. So you're not going to fix the whole broken business model of public accounting. You're just going to like you'd say, David, you're going to what?

David Leary: [01:02:06] You're putting lipstick on that pig. You're just squeezing the diamond.

Blake Oliver: [01:02:09] You're squeezing the diamond.

David Leary: [01:02:10] Yeah.

Blake Oliver: [01:02:12] Okay. I remember what I was going to talk about. Can I take us out with that?

David Leary: [01:02:15] Absolutely. Yep.

Blake Oliver: [01:02:16] So Jack's these AI agents built into accounting software. I don't think they're going to like these chatbots. I don't think they're going to, like, be long term. Like something that's big for us because what people really want is what ChatGPT has delivered with ChatGPT five, which got all this bad press because the press loves to like, figure out how to take a story and turn it negative if possible, right? Like OpenAI had been getting too much positive press. So now it's time to like, find the negative story or the different story, right?

David Leary: [01:02:55] What are you doing?

Blake Oliver: [01:02:55] The truth is, the absolute truth is I will tell you 100% as a user of it, every day, all day long, constantly. It's an incredible product. And one thing that makes it incredible is the connectors. You can now connect your email. You can connect your calendar. You can connect your notion. You can connect your Zapier. There's a bunch of stuff that you can just connect and it just works. You can also build custom connections, and you can then use ChatGPT as your assistant on a screen throughout the day. And so I'm the ideal experience of AI when it comes to like having that chatbot experience. That personal assistant experience is not I go into every app that I use and I have to work with that agent. It's I work with that one agent that has access to all the apps that I use and can go do what I need it to do in those apps without me even having to open them.

David Leary: [01:03:53] And to make that really real for people, imagine if you had an Amazon Alexa for your bookkeeping, an Amazon Alexa for, you know, your travel plans, and you had ten Amazon Alexa on your desk, and you're talking to all of them at the same time at different times. That's nobody wants that. And that's why it doesn't work for these having chat in every single program, you need to have one universal chat that just looks at all your stuff.

Blake Oliver: [01:04:17] And it needs to have a full view. It needs to have everything, access to everything so that it has the context. And that's the problem with Jax. That's what I was talking about earlier. It has all the accounting data, but that is only one piece of context. And when it comes to finance, you need people data and you need operational data. And you need that joined with your accounting data. You have to have at least those three things. And Jax only has the accounting data, So it can't tell you anything like truly meaningful about your business. Yeah, it can give you insights into your accounting data, but that's all historical. It's just not that useful. And I think the reason that developers do this is because they actually have no clue about how you do forecasting or finance or accounting. They have no background in it. And so that's important. Yeah. Or what's important. So they're like, let's figure out how to make cool things happen with this agent plugged into accounting data. And they're like well what can we do? Well we can do a gross. We can ask about the gross margin. Like nobody cares.

David Leary: [01:05:24] I always thought that like, this goes back to my days at Intuit. Every time they hire an engineer, give the engineer 50 grand and tell them to go start a small business. And then after a year, have them come write code for QuickBooks.

Blake Oliver: [01:05:36] Or maybe actually like go work at the QuickBooks, like do QuickBooks bookkeeping.

David Leary: [01:05:41] Yeah, exactly.

Blake Oliver: [01:05:42] Like, you have this QuickBooks Live department where you've got people doing bookkeeping for small business owners. It's like you say, David, every developer ideally should work in customer support for some amount of time. You came up through customer support, right?

David Leary: [01:05:57] Yeah, I came up through support. It's important.

Blake Oliver: [01:05:59] That's why. That's why. David, you are like one of the few people in this world who has a, like, background, a developer background, right. Working at Intuit who actually understands accountants. I would say, like of all the people in tech who I meet that serve the accounting profession, which is like hundreds and hundreds of apps, right. That you and I together have probably come across thousands of them over the years. How many are actually run by somebody or have somebody key in them who actually understands accountants and likes to hang out with them?

David Leary: [01:06:37] I think the ones that come from the problem, like if they experience the problem that motivates them to go create something because they are an accountant or bookkeeper, or they're a business owner. Those, I think, tend to have more success, and the other ones where people are like, I got this technology and they try to like, oh, accountants are suckers. We're going to apply it. We're going to make force this technology downstream. That doesn't work. It has to be the problem. You have to start from the problem and solve it.

Blake Oliver: [01:07:02] You have to feel the problem, right? You have to be the customer.

David Leary: [01:07:05] Oh, this is what we're doing live. Cpe. Before we even wrote any code, I may, I printed paper, paper, Xerox copies of check in forms, and I went to a conference and had people sign in with pen and paper. And then I manually typed it in, like I had to feel the pain for us to build this the right way.

Blake Oliver: [01:07:22] And now that you felt that pain, you have figured out how to automate it. Same thing how I felt the pain of renewing my CPA license, having to go to seminars and webinars, and I said, hey, I want to do this on demand on my phone. Why do I have to go somewhere and spend all this money and time to do this, or sit on a webinar during my lunch break. No thank you. And that's why we created earmark. Earmark app. Go there on your web browser, download the free app for iOS or Android, and earn a free CPE credit for listening to this episode of the Accounting Podcast. And dozens. If not, I mean, it's got to be how many channels do we have on this app now? David, I wish we I.

David Leary: [01:08:02] Need our channels, but we have like 2000 courses.

Blake Oliver: [01:08:04] We have 2000 courses. So it's like, you know, dozens and dozens of different shows on the earmark app across tax accounting. I don't know what you call our show news analysis people just spouting opinions. You can earn continuing education for all of it because we've reverse engineered how to do it for podcasts, so you can get it for free too. That's the part that is amazing. It's free. You can subscribe if you want to support our work and get unlimited CPE. But if not, that's totally great. Earn one CPE for free every week. That's all I got this week, David. Next week, maybe we'll talk about how AI is killing the billable hour, and maybe we'll talk about some non AI stuff too. If, uh, you know, this AI news quiets down, but I don't think it is. You know, I was I was just describing I was just, I was just talking with somebody, um, and I was, I was thinking like, I think a lot when I'm in the pool swimming. Right? Because I swim every day. And like, one of these thoughts I keep coming back to is I was ten years old when the web took off, and I learned how to, like, design websites. My first job that I got paid for was I designed a website for a nonprofit. It was the United Way of Orange County, and I made it, and I coded it by hand in a text editor and uploaded it via FTP to a web host.

Blake Oliver: [01:09:31] And I made all the graphics myself in like Microsoft Paint, and I got paid $600 to do that, and I was ten, though. And at the same time, you had Jeff Bezos in his garage in Seattle, right? That's where he was. And he's, you know, building Amazon. He sees the potential, right? He was an investor. He was he was an investment analyst. He just helped invest the money. Right. And he saw the web and he was making these investments. And he thought, this is going to be so big. I better go do it. And he saw that someday everybody would be buying stuff online on a website. And this was when we couldn't imagine it. And that was only 30 years ago, 30, 30 years ago. Nobody bought anything on a website. You bought everything in a store. And he saw that someday we're going to buy everything on a website. Now, a lot of people saw that. But what Jeff Bezos did that was genius. As he said, okay, someday everyone's going to buy stuff on a website, but right now it's really hard. So what can I sell online that will get me to selling everything on a website?

David Leary: [01:10:48] And he attacked the the he attacked the book publisher, the two bookstores, the retail bookstores because he just they were easy targets.

Blake Oliver: [01:10:56] And books are easy to warehouse and ship.

David Leary: [01:10:59] They don't rot. Yeah.

Blake Oliver: [01:11:01] Right.

David Leary: [01:11:02] They don't break when you're shipping them. Yeah.

Blake Oliver: [01:11:04] Yeah. The easiest thing you can sell online at the time was books. And cheap. Relatively cheap to ship to because of the bulk media, you know, shipping through like USPS and all that. And full circle.

David Leary: [01:11:17] 30 years later, you're now selling a book on Amazon.

Blake Oliver: [01:11:22] Yeah. And it's the only it's it's print on demand is the way you get things right and you can't go buy it in a store. And I know the reason I brought that up is because I feel like right now, in this moment, we are there. What is happening now with Agentic AI, which is just the pretentious way to say agents and all of this gen AI workflow and technology. What is happening right now to me, feels like it has the same or even more potential than the World Wide Web did, because the web, it gave us a way to exchange information digitally. Like, if you think about it, right, the web was just the interface for the internet, for all of all of us. There were other ways to do it, but they just that was the interface. That's the web, the UX, the user experience, so that it made all of that stuff possible. And I think what is amazing about agents is, you know, like, what's the parallel here? Well, we've had Now that we can all work online, we've had the ability to create workflows and to collaborate online, and that allows us to create remote companies. Thanks to all this workflow software helping us move the data around, helping us do work. It's allowed us to create remote companies and and get the benefits of that and compete against brick and mortar services businesses, for example. Right. A brick and mortar accounting firm. And their costs are so high compared to a remote firm. It's just it's just crazy. So we can we can do that. But what AI is going to allow us to do is to gradually and eventually automate nearly all of the work. But we're going to get there in incremental steps.

Blake Oliver: [01:13:21] So we're going to start by automating these little tasks. And we're gradually automating automate bigger tasks and bigger tasks. Us. And ultimately, you know, the vast majority of the work that we are doing. Today, 80%, 90% of it that we are spending our time on could be completely automated. And that completely changes the economics of a professional services business. It flips it from being like, you know, like you said, David, the biggest cost is labor. In a professional services firm. Well, it becomes more like a software business. When you automate all the stuff like the the time that everyone's spending on just. Like those menial tasks, the, the, the stuff that AI can do. And yeah, it's going to put a lot of people. I mean, it's going to take away tasks first from people. And then ultimately, if it takes away enough tasks from an individual, it might take their job. But I think what it's going to really allow us to do is like to do a whole lot more for the clients, because instead of working like 50, 60 hour weeks just trying to get all the compliance crap done, we're going to spend, you know, 10 to 20 hours on that, and then the rest of the time is ours to either enjoy or to do that advisory stuff. We were talking about that that Jax agent and the QuickBooks agent are never going to be able to do. And we're probably going to be using ChatGPT plugged into Xero and plugged into Onpay, and, I don't know, plugged into QuickBooks and plugged into whatever our operational systems is. And we'll be asking the questions and generating the the reports. And that's a really exciting thing. Like AI is making me super dangerous, David.

David Leary: [01:15:08] But I think where there's like an unspoken part of accountants that I think is interesting with AI, especially with all this like coding tools. I've always felt like accountants are just engineers. They have engineer brains, but they just don't know, like when to put the bracket and the slash and all the context of coding. Right. Yeah. But if you look at Excel spreadsheets, all the formulas connected, these are complicated engineered documents. Yeah.

Blake Oliver: [01:15:35] Excel is code.

David Leary: [01:15:36] Excel is code. Essentially it's code, right? Yeah. And so think about like no, the no code, what they call vibe coding. Right. This ability to speak with the chatbot and create the app you need. I think accountants like are going to have an opportunity for that because it fits their brain mold. They can I think an accountant is going to be very is can be very good at describing what they need, what data they need, how the data needs to move. And they can have AI build that without having to actually code the code themselves. Because I think a lot of accountants have an engineer and a coding brain. They just never learned all the context, the type, the part you have to type it all in on, you know, the variables and the brackets and the slashes.

Blake Oliver: [01:16:17] And the people who are out there saying that like AI is going to automate all of our accounting jobs, like are totally missing the fact that. Yeah, you can create the output with AI, but you can create a spreadsheet with AI. But somebody has to like look at that spreadsheet and figure out if it's correct. Somebody has to be able to read it. And it's the same thing with coding, right? You can code your way to like a minimum viable product and get it working, but somebody has to be able to look at the code and to see what it's doing to read it. So, so my my view is, yes, you don't have to write code anymore and you don't have to write code anymore, but you have to be able to read it if you want to be able to like build an app and or you have to have people who can read it, and you may not have to like write Excel formulas anymore, but you need to be able to understand how they work and what they're doing. You need to be able to read that Excel workbook and make sense of it. And so that's going to be really valuable. We just don't need as many people to be writing. It's like the same way we didn't. We used to have a bunch of people that just sat there at tables in accounting firms and worked the ten key and we don't need them anymore. And we put them to use doing other stuff.

Blake Oliver: [01:17:31] Like that's the same thing with a lot of the work that we're doing right now. You know, um, if you're and there's plenty of examples, but like a lot of the things that I'm using AI for are stuff that just I would never have done before, like my favorite automation. I talked about this on the show. I don't know, last week or the week before. It's my calendar agenda maker. Yeah. So my meeting, my meeting note taker listens to all of our meetings, all of my meetings anyway. And then my AI agent grabs the transcript and turns that into a follow up agenda and attaches it to the next meeting. This is something that is a management best practice that everybody should be doing. Who leads every meeting in our company? I have always struggled to do it because it takes so much time. After the meeting. You then have to like review your notes. You then have to turn that into a structured agenda for follow up for the next meeting. You have to send it to everybody. You have you know, it's like a huge administrative task. And I've just now completely automated it. So I don't worry about missing stuff. If we talked about it in the meeting and we didn't talk about it being complete, then my agent's going to add it to the next meeting agenda. And we've been using it now for a week or two. And it's fantastic. I don't know, you tell me what you think.

David Leary: [01:18:45] If you go off track a little bit, that gets picked up and shoved in your agenda, then you talk about it again. And it's funny that things that aren't truly part of that meeting, if you talk about it, gets in the agenda, then it becomes part of the meeting. So you have to be really careful to like have very focused meetings, which is the downfall of most companies. Most companies have lots of meetings and they're not focused.

Blake Oliver: [01:19:05] Yeah, they have lots of meetings, they're not focused. And then people talk about stuff, but then nobody documents it or follows up on it, so it just gets forgotten in the next meetings. I would say that's honestly like the main reason why in the companies I've worked at, stuff just doesn't get pushed forward because everybody has like this, like amnesia. You come back to the next weekly meeting and nobody remembers what was talked about in the last one. Right. And in small companies, like small firms, that's really hard. It's like to do that. And this agent just completely does that. So that's an example of something where it's like we don't have somebody doing that right now in our company, and now we have that. So that's like the other side of this. People are looking at this saying, oh, it's going to take away somebody's job. Who does that? Well, we don't have somebody who does that job in our company now. We do. That's the difference.

David Leary: [01:19:51] Yeah. And that's actually an interesting perspective. You can look at it as AI taking away jobs, or you can look at it as a way of like it's giving a small business five new employees they never could have had before and would have never existed. And they could never even hire because the bodies don't exist.

Blake Oliver: [01:20:06] Yeah. Chris, thanks for joining us live. Chris Kahn says, thank you for saying that. I'm talking to accountants all day who think whether this kind of change is going to happen to accounting, the accounting profession. They should be asking when and how much? Not if. Yeah. It's when, how much, how fast. Um, and the good news is that, like, a lot of accounting firms are moving slow on this and they really don't know what they're doing. So, like, these big firms are making these huge AI investments. They're saying we're going to spend $1 billion, $2 billion, but they're probably going to waste their money because they have no idea how to implement AI because they have no documented workflow. They just have a bunch of smart people in the firm that they've, like, worked to death for years. So they, like, have no way to actually like they can give those people AI, but they can't integrate it into their workflow because they don't really have a workflow. Like it's shocking to me, but.

David Leary: [01:21:02] They're going to go out and consult. That's how they're going to get the return on investment on this. It's not internally. It's going to they're going to go to fortune 5000 and be the AI consultant and help these other companies, quote unquote, roll out AI, even though you're right, there's a chance they're.

Blake Oliver: [01:21:14] Gonna fail, though, because they don't know how to do it themselves. Yeah. Um, and that's that's like, I don't know. That's what I want to do. I need more time, but I can't, I need to there's there's a way to do this. So I'm, I'm talking about this at camp ATX next week, and my presentation is going to be all about how to implement it, how to implement AI effectively and how to get from where we are now to that vision of the future, the same way Bezos went from, I see the possibility of the internet for selling everything in the world online. I'm going to start with books. What is the books of accounting? Actually, it's kind of appropriate, right? What is what is the first thing that you automate? Where do you start and what do you need to start? Because a lot of firms aren't even ready to start with AI because they never freaking went to cloud. Really. And they never built workflow and they never documented their processes, so God help them. Yeah, you give ChatGPT to all your people. It's not going to have that much of an effect.

David Leary: [01:22:26] To write emails and that's it. Yeah.

Blake Oliver: [01:22:28] Or or yeah, they're going to use it for what they're going to do is especially if your business model is like time based and they're filling out a time sheet, they're going to take that hour long task, like the task they used to build an hour for. And they're going to delegate it to ChatGPT and they're going to go do something else, like look at videos on their phone while ChatGPT does the work, and then they're going to bill an hour. So you just it's great for the employees who, like, use it saves them a lot of time, but it doesn't actually change outcomes for your clients, and it doesn't change the profitability of your firm, because your business model does not incentivize anyone to actually become more efficient.

David Leary: [01:23:16] So this is great. So next week maybe you can give us a summary of your presentation. And I want to compare that. I didn't bring it to the show. But RSM is another firm that announced the billion dollar investment in AI as well. But now they've had some blog posts come out that explains how to roll out AI at a company. So maybe we can compare some of that to your notes and see.

Blake Oliver: [01:23:39] I'd love to. We've gone on long enough. Thank you everyone who stuck with us to the end. You only get one CPE credit for listening. I just want to warn you, because it's not worth making extra quiz questions and you get plenty of CPE already, so go grab your one CPE credit for this extra long episode of the Accounting podcast, and we will see you here next week. Thanks, everyone.

David Leary: [01:24:02] Bye, everybody.