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Blake chats with Amy Vetter at the AICPA Controllers Conference about how modern modern accounting departments are refocusing to become proactive service centers as opposed to reactive cost centers; David shares news about Xero from Xerocon London, including Xero’s half year results; Gusto releases simple time tracking; ACH continues to grow; and how AI is helping companies reduce rampant employee fraud on expense reports using automation.
Show Notes
Show Notes
VIDEO: Blake chats with Amy Vetter at the AICPA Controllers Conference — LinkedIn — I caught up at the FloQast booth with award-winning executive, author, and keynote speaker Amy Vetter at the AICPA Controller's Conference to chat about how modern accounting departments are refocusing to become proactive service centers as opposed to reactive cost centers.
Xero’s half year 2019 financial & operating results — Xero Blog — Xero is up to 1.6 million subscribers, with 380,000 added in the past year. Revenue is up 37%. Annualized monthly recurring revenue increased by 40% to $589.1 million.
Xero increases dominance of cloud accounting with 37 per cent growth — Canberra Times — Xero has 981,000 subscribers in Australia and is growing quickly in the United Kingdom, where it increased subscribers by 40 per cent to 355,000. Its growth has been slower in North America, where it has 178,000 subscribers but CEO Steve Vamos said it was "relatively early days" in that market.
Xero to spend NZ$10m on Instafile purchase — ZDNet — Instafile is a cloud-based accounts preparation and tax filing solution that connects UK accountants, bookkeepers, and small businesses to UK compliance bodies.
We’re accelerating our UK banking connections with five brand new fintech integrations — Xero Blog — Here are five brand new Xero integrations with leading UK fintechs: Tide, Starling, TransferWise, Revolut and Soldo, all of which were made possible by Xero's new Bank Feeds API.
10 new ways Xero will transform how small businesses, their employees and accountants work together — Xero Blog — A roundup of all the new features announced at Xerocon London.
Gusto — Simple time tracking — Gusto — Gusto’s new, simple time tracking syncs perfectly with payroll. Review and approve hours with one click, then run payroll as usual.
How Small Businesses Ride Their Payment Rails — PYMNTS — NACHA released new statistics late last week on the growth of ACH transaction volume in the U.S. According to the firm, B2B transactions were a key driver of ACH transaction growth in the third quarter of the year, leading NACHA Chief Operating Officer Jane Larimer to describe the ACH Network as “thriving.”
Tempted to Expense that Strip Club as a Business Dinner? AI Is Watching — Bloomberg — AppZen, an 18-month-old AI accounting startup, has already signed up several big companies, including Amazon.com Inc., International Business Machine Corp., Salesforce.com Inc., and Comcast Corp. and claims to have saved its clients $40 million in fraudulent expenses.
Four In 10 Road Warriors Use Corporate Cards For Personal Items — PYMNTS — Carlson Wagonlit Travel has debuted a study that shows that as many as 46 percent of American and European business travelers have said they used company cards to make personal transactions. In the Asia-Pacific region, that tally stands at about 38 percent.
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What is The Accounting Podcast?
The Accounting Podcast (formerly the Cloud Accounting Podcast) is the world's #1 accounting, bookkeeping, and tax podcast! Join us weekly for a roundup of accounting news, analysis, and interviews. Plus, earn free NASBA-approved CPE credits for listening with the Earmark app. Learn more at https://earmarkcpe.com.
David Leary: This episode of The Cloud Accounting Podcast is sponsored by Elefant. As a listener of this show, I'm pretty sure you've already embraced technology, and practice efficiencies, but sometimes, it's hard to find training in those areas. Some of you look to your state societies to get CP credit, but those tend to be tax-, or audit-focused, and, quite frankly, from what I've heard, pretty boring.
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Blake Oliver: Welcome [00:00:30] to The Cloud Accounting Podcast. I'm [00:01:00] Blake Oliver-.
David Leary: And I'm David Leary. Blake, you are traveling? You're not in Southern California, in the fires, and the smoke?
Blake Oliver: I'm not. I'm out in the desert. I am in Las Vegas, for the AICPA Controllers Conference - Caesars Palace - and I am recording from my hotel room.
David Leary: I was in New York City, the last couple days, and a big storm rolled in there, and I managed to get out. I booked an earlier flight; got out maybe three hours early, just in time, or I'd probably still be in New York City, probably without a hotel. I don’t know what I’d do then, at this point …
Blake Oliver: What were you doing in New York? [00:01:30]
David Leary: I had a meeting, but, coincidentally, the AICPA has an event, there, going on about female leadership, or something?
Blake Oliver: Oh, yeah ...
David Leary: I think there was about 700 ... It's funny, because I ran into ... Rachel Fish, from Sage was there, and just had a drink with her, fast. Not really planned, it just happened that we were both in the same town at the same time.
Blake Oliver: I got to meet a few folks. Amy Vetter was the keynote speaker at the Controllers Conference. We hung out a little bit, and got to talk to her about what she thinks [00:02:00] accounting teams, inside of corporations, can do to be more ... She calls them cherished advisors.
I was curious how this presentation would go, because it's something that I think she does, normally, for people in public accounting - the idea of being that advisor, being that cherished advisor to your customers. I'm thinking to myself, "Well, how is this gonna work, when we're talking about accountants who are working in industry?"
She had a really great point, just one thing, the takeaway that I got, out of many, which is [00:02:30] that controllers should encourage their teams to be service centers, rather than cost centers. It's actually a whole mind shift in how you think about your finance, and accounting organization.
Rather than being these after-the-fact, "I put together the reports; I rat everybody out for whatever, not meeting their budget, or whatnot, you, instead, look at your organization, or your team in the organization, as being consultants. Going out and trying to be proactive; encourage [00:03:00] your staff to go out, and help other departments meet their goals.
One of the tips she suggested, or one of the tactics, was doing NPS surveys - Net Promoter Score surveys - internally, asking other departments, like marketing, and sales, "How do you like working with accounting, and finance?" Trying to improve the organization that way.
David Leary: I find that's kind of interesting, from a service-center standpoint, because, right now, I think bigger companies think their accounting department is just this thing that has to be done. They just shove data over [00:03:30] there, and the accounting department eventually gives them a report, but that's kind of it.
Really, moving to like, "Hey, we compiled X report for your department," and when they come back, you just don't give them the report back. You're actually, "Hey, we noticed the ratio of this number's a little high," or, "You might have this problem in your department, because we noticed these numbers are trending this way." That's a really, really good point. I'm surprised nobody's brought this up til now.
Blake Oliver: Yeah, it's definitely the first time I've heard it. I love the idea of treating other [00:04:00] users of the financial information in the organization as customers, rather than ... I don't know what else you would call them. Be customer-service oriented.
David Leary: That's good to see. Trends that are happening in small-business bookkeeping, and cloud accounting - bank feeds - you're starting to see that move into the corporate level. Now, the way that ... The advising, and treating of clients, and customers; doing net promoter scores, now, that's starting to work its way up into bigger firms - internal accounting controls. It's really interesting to see these trends.
Blake Oliver: Yeah. You [00:04:30] were in New York. I am in Las Vegas, and there was another big event in the UK. What was that?
David Leary: Xerocon happened this week, in the UK. We shoulda went to that, actually, in London. That woulda been a fun time.
Blake Oliver: Well, yeah. Anyone, from Xero, listening, if you would like us to record our podcast live at Xerocon, buy us tickets; business class, preferably, please?
David Leary: Just keep trying, Blake. Keep trying. I think the one thing we'd start out with is they've released their numbers, their mid-year numbers, or they call 'em half-year [00:05:00] results, which is a interesting term.
Blake Oliver: Yeah, they only report twice a year, instead of quarterly, as we do in the US.
David Leary: Yeah, makes sense. They reported that they had 1.6 million subscribers, now. They added about 380,000, the past year. Second article - it's two articles - the second article actually has a breakdown by country, which I think's interesting. There are about 981,000 in Australia; United Kingdom, they're at 355,000. Then, North America, it's [00:05:30] only at 178,000. They're really still-
Blake Oliver: That's small-
David Leary: They're struggling in North America, still. Yeah, it's really small in North America.
Blake Oliver: How does that compare to QuickBooks Online in North America?
David Leary: I think QuickBooks Online in North America is close to 3 million, in North America.
Blake Oliver: Yeah, so ...
David Leary: You can definitely see where that's a struggle, for sure.
Blake Oliver: If you wanna see these numbers for yourself, this is an article in The Canberra Times, called, "Xero Increases Dominance of Cloud Accounting with 37- Percent Growth." We will have that in the show notes. [00:06:00] What else is new? Did they have feature releases, product updates? What about this Instafile acquisition? What's this? What is this going on?
David Leary: Instafile, from what I can tell ... They have some sort of tax-reporting tool for the UK, for tax prep, and tax filing. I think this is kind of important, because of the UK markets having to go make tax digital, which is, essentially, no more paper. People are gonna want that work. They don't want standalone Instafile. If you have financial data in Xero, you wanna move it across to get [00:06:30] the reporting system out [crosstalk] They must be super-small, because I think the acquisition was only like ... 6.82, 6.82 million.
Blake Oliver: Kinda crazy, the UK going completely paperless. If Xero is able to integrate this tax-filing software into their application, then you can just go straight from your general-ledger reports to your tax, I guess. That's gonna be massive.
David Leary: They announced this when they were at Xerocon, in London. There's not much on it, other than they acquired them; it's gonna help the end-to-end workflow, which ... I [00:07:00] think they also have, I think, Workpapers in Australia, right?
Blake Oliver: Mm-hmm.
David Leary: They have full end-to-end workflow, and, to some extent, that's one huge advantage QuickBooks has in the States. They have QuickBooks, but then, they have Pro Tax, the Certs, Pro Series [crosstalk].
Blake Oliver: Yep, it all flows in-.
David Leary: -and they have the tax side, on the back side. That's something that Xero lacks. You kind of can almost see the numbers, where you don't have that back end of the tax workflow for accounting firms. It could hurt your actual bookkeeping software.
Blake Oliver: Definitely. There were a few integrations [00:07:30] announced with FinTech, in the UK, which is really growing quickly. I'm not familiar with most of these apps, except for TransferWise, which is an app to transfer funds internationally. Apparently, people are now transferring over £3 billion every month, using TransferWise, saving £3 million per day, when compared to traditional foreign-exchange methods. Now, you've got a Xero integration there.
David Leary: Yeah, and I think what's interesting about this article was that these are [00:08:00] integrations that are now using ... If I remember correctly, it's using the new bank feeds. Xero has a bank-feeds API?
Blake Oliver: Yes.
David Leary: What that is ... Intuit used to have this, as well. It had a different name. You know that everybody knows the bank feeds in Xero, or the bank feeds in QuickBooks, right? Imagine if there was a way for a developer to have access to that same information and read that down. Now, the interesting thing is Intuit had bank feeds, and had a bank-feeds API [00:08:30] that was public to developers. They actually shut it down, almost ... It feels like almost fully two years ago, the bank-feeds API at Intuit got shut down. A couple of different reasons, a little bit. I think some of it, you know, that's ... It's special sauce. I think the main reason; I don't think the banks like it. I don't think the banks like somebody harvesting the data, and then, reselling it.
Blake Oliver: Mm-hmm.
David Leary: That's essentially what you're doing, right?
Blake Oliver: Right.
David Leary: I don't think the banks, long term, like this. It'll be interesting to see [00:09:00] where this goes, for Xero, as they have this API, and they continue down that path. Then, there was competing products. People love to use things like Finicity, or Plaid. There's other services out there.
Blake Oliver: Yeah.
David Leary: The other thing is, I think, with bank feeds, what I think I was observing is people use the bank feeds to make Mint knockoffs, because you can pull the bank-feed data down; now, you can make a knockoff of personal-finance software, Mint, and there's a lot of that that goes on. Then, what's the next step? If you have access to the bank feeds, now, you just build a Xero knockoff, or a QuickBooks knockoff. It's also wherever ... [00:09:30]
With Xero, long term, will they start to change their mind? If your bank feeds are what are really the magic in your product, do you want people to have public access to that? I don't know, but I honestly think that what drove a lot of it is I think the banks don't like it. They wanna control the feeds [crosstalk] These banks now have APIs coming out.
Blake Oliver: Yeah, it's the only data that they have that's of any value, so, you would think they would wanna control it. [00:10:00]
David Leary: I think there's an added value. I imagine Xero's doing the same thing Intuit did, and some of these other ones, like Finicity, and Plaid, which is that bank feeds come down, but they're actually categorizing them, and such, so that a developer can just start using automatically categorized data, instead of starting from scratch in the bank feed. It'll be interesting to see, are the banks gonna start categorizing things for everybody, or is there still gonna be the need for a third-party API, in between?
Blake Oliver: Well, hey, speaking of app updates, Gusto, [00:10:30] the payroll, and HR app had an update. They now have Simple Time Tracking in their application, which they didn't have before.
David Leary: I didn't see the article. Did they build that themselves? Did they partner with somebody? Historically, they've been really deep with TSheets. Is this a TSheets integration?
Blake Oliver: No, no. They built it themselves. I didn't actually see a blog post, and maybe there was one, but the way I heard about this was on Twitter The product manager at Gusto, responsible for it, [00:11:00] tweeted out that it is now available, and she was very proud of it. That's how I found it.
David Leary: That's all we have is a tweet. We have one tweet that talks about this, so far. Okay.
Blake Oliver: That's how I got to it. I don't know, maybe there's some other stuff, but Gusto's got a time-tracking section on their website, now, and you can download a PDF, or you can see screenshots. Basically, employees log in on their phone. They can clock in. They can clock out. That's about all it is, at this point. There's an approval workflow, and then, all of it syncs into [00:11:30] Gusto Payroll.
David Leary: I see this PDF, here. Got it, got it, got it ...
Blake Oliver: No project costing/job costing, at this point, but I imagine they'll eventually build that in, especially given that TSheets now has that with QuickBooks. That was the big announcement at QuickBooks Connect was you can now have your employees track their time in TSheets, allocate that time to projects. Then, all of that flows into QuickBooks for job costing. I feel like it's inevitable Gusto's gonna do that, [00:12:00] too.
David Leary: Yeah, but Gusto's branding this. It's called Simple Time Tracking.
Blake Oliver: Yeah.
David Leary: Obviously, it's not going to do anything advanced, in any way, shape, or form. You said they have a mobile app for that. I guess what's interesting ... It kinda makes sense, because, if you have Gusto as your payroll provider, it's kind of employee-centric payroll. Gusto has an employee app, right, to view your pay stubs, and such, I think?
Blake Oliver: Yeah, yeah.
David Leary: If you're already in the employee's pocket, so [00:12:30] they can view their paychecks, it would be nice to just use the app, and clock in, and out. I don't know if they have a separate app, but it makes sense for them to ... If they're building employee-facing stuff, the time clock makes sense.
Blake Oliver: If you wanna check it out, go to Gusto.com/timetools.
David Leary: Yeah, check it out. It's another interesting piece of news. It's interesting the players that are doing other stuff. At QuickBooks Connect, I talked to Square, who now does payroll. There's a lot of players building other products now, which is really, [00:13:00] really getting interesting, as this continues on. I had two small articles that were really numbers, and we don't have to talk about it too much ... ACH volume for B2B transactions is up like 10 percent. People just keep using more, and more ACH.
Blake Oliver: 10 percent from when?
David Leary: Q3 year-over-year increase. There's 80 or 96 million B2B ACH payments were completed in Q3. I could see this even growing more, because, if people keep automating processes ... Nobody [00:13:30] wants a print a check and mail a check. You're gonna try, and pay through ACH, and you're gonna try to get every single vendor you have either to pay ... You wanna pay them through ACH, or even you get your customers to pay you through ACH. I wouldn't see this number slowing down, any time soon.
Blake Oliver: I saw an interesting article in Bloomberg, called, "Tempted to Expense that Strip Club as a Business Dinner? AI is Watching." It's about a relatively new app, called AppZen. They are 18 months old. They are an AI accounting [00:14:00] startup that specializes in expense reports. They seem to be working with some pretty large companies - Amazon.com, IBM, Salesforce, Comcast. They say that they've saved their clients 40 million in fraudulent expenses, so far.
What really caught my attention about this article was the examples. Employee fraud is always fun, when you have really good examples of people just expensing stuff that they should have no business expensing. A [00:14:30] great one ... Of course, the strip clubs as steakhouses is a common attempt. This app can figure that out. Somebody was charging yoga classes to a corporate credit card; an employee traveling for work checked his dog into a kennel and billed it to his boss as a hotel expense. I got more ...
David Leary: This is why we should have preproduction meetings, Blake, because I had an article, and I closed it. I was like, "Aw, we don't need to talk about that ..." It was about employee fraud. Anywhere between 40 percent to 60 percent, depending on the country, people [00:15:00] are admitting that they ... 60 percent admit they've used their corporate card for a personal item, when they're traveling.
Blake Oliver: The problem is that most of the time, managers have so many expense reports to review that they just sort of cursorily go through them, and it's up to accounting. If there is an internal audit, it's up to internal audit to go through, and figure out if these are legit. It's not like they're equipped to know. Like my trip to Las Vegas, how's the accountant back [00:15:30] home gonna know what I was spending this stuff on? They're really relying on a lot of honesty, if they don't have some sort of system in place.
David Leary: It's very expensive, as well. I've done it inadvertently. I think I bought something from Amazon, once, and put it to my corporate credit card, instead of my personal credit card once. The amount of work, and emails, and effort, and the cost to the corporation to get that all back on track, it probably ... A $48 mistake probably [00:16:00] costs the company hundreds, and hundreds, and hundreds of thousands of dollars in emails, and fixes, and reversals. Now, I've gotta mail in a check, and make out a credit to ... It's a little crazy. I think there needs to be logic in the control, but it needs to probably actually happen at the swipe. That's where that control really has to happen.
Blake Oliver: One of the fundamental rules of accounting, and I'm gonna probably say it wrong, because it's been so long, but it's that the cost of reporting should not exceed the value derived from it. The [00:16:30] same thing can be said of expense reports. If it costs you $20 to process an expense report, if that expense report is less than $20 ... If it's just coffee, $3 coffee, there is absolutely no value in a human being reviewing that transaction, and approving it, because it costs you more to have them do that than to just pay it.
That's why it's really interesting, you have companies like Expensify that are saying to their customers, "Look, use our [00:17:00] automation in our app to just automatically code, and approve any transaction for a small amount, because it is not worth you trying to look for fraud on that stuff." It just doesn't make sense. You might as well just trust your employees, and pay them automatically, than review it. That is really hard for a lot of accountants to accept, but, if you look at the numbers, it makes sense.
David Leary: I think, for accountants, or people that want a lot of control, and I'm playing with these things, right now ... Companies like Brex Card is out there, and Divvy, where [00:17:30] you're setting budgets, and you're setting approval limits, either on an employee's trip, or on the different portions of a trip. Like, "Hey, you have a $90 spend on food," and that charge card will not go more than $90 on food.
Blake Oliver: Right.
David Leary: Then, they have their charge card for Uber, and it can only go so much. In a way, if you have those controls up front, stopping the overages from happening, and the approved charges that are only approved for certain vendors, you [00:18:00] can really trust the automation on the back end, because the odds of something getting through that's not authorized gets very, very hard, at that point.
Blake Oliver: Combine the automation with the AI. Catch the really egregious examples that are actually costing your company money, and just automatically process all the small stuff that's not worth reviewing.
David Leary: Yep.
Blake Oliver: One more point, before we move on. The example at the end of this article is just great. A guy who's a principal at KPMG, in their Forensic Advisory Services, there's a quote from him, Guido van Drunen, saying [00:18:30] that he doesn't think AI is going to be able to spot all the sneaky ways that employees try to defraud their employers, so there's gonna be some element of human review. The example he gives is he was called in, after an employee expensed a live python.
David Leary: What?!
Blake Oliver: Like the snake, yeah. Everybody was jumping up, and down, and saying it was fraud. Then, upon further investigation, they discovered that the individual worked in sales, and had bought the boa constrictor, or the python as a marketing ploy for the launch of a new [00:19:00] product called Python; the programming-.
David Leary: Language, okay.
Blake Oliver: Yeah, language. What's funny is that, while the snake could be justified, the employee's purchase of $1,200 worth of steak, as snake food, could not, because pythons only consume live prey.
David Leary: Makes sense, makes sense, makes sense ...
Blake Oliver: They caught him on the steaks, and then, they approved the python. Just an example of how you are gonna need some human intelligence, because an AI [00:19:30] isn't gonna know that pythons don't eat ... It isn't gonna make the connection.
David Leary: Yeah, that makes sense; that makes sense, but, hopefully, it's just less, and less. You're really just looking at the exceptions, at that point. You're not looking at [crosstalk] transaction.
Blake Oliver: Not coffee purchases.
David Leary: Nope. Perfect. I think that's about it for this week. I know Thanksgiving's coming up, next week, so we probably won't do a show Friday, but maybe we'll try to, on Monday following, or something.
David Leary: We'll see what kind of news comes out next week. You never know. It's kinda slow. Actually, I think Intuit's earnings are next week, so, we're gonna have news to talk [00:20:00] about. I think Intuit's earnings are coming up.
Blake Oliver: It's funny, I've got so many articles here. I wish I could talk more, but we decided to keep the show to about 20 minutes, because that's the typical attention span; at least that's my attention span, anyway. I have heard feedback from folks who say, "Oh, I love going to the gym, and putting on a podcast, and, for me, 20 minutes isn't enough." I actually had somebody tell me that we need to make this longer, David. I'm curious to know what the consensus is from the listenership, so, if [00:20:30] you have an opinion, let us know.
David Leary: Tweet us out. I kinda feel like if an article's worth talking about, you talk about it, and you go long, or you go with what's worth it, but, I also don't wanna be like, "Hey, for sure, let's do an hour-long podcast," and then, the last 40 minutes are just ... We're reaching. We're going deep in the week [crosstalk] My opinion is you do what's right, based on the articles that came out that week. Twitter, I think people ... Maybe we do a little Twitter poll.
Blake Oliver: Yeah.
David Leary: We can set that up: should it be longer, or shorter? We'll [00:21:00] figure out a way to phrase that up, and let people participate in that. That's a good idea.
Blake Oliver: I'll leave that to you, David, because I think you're a little more popular than I am on Twitter [crosstalk] How are people going to find out about this poll? How are they gonna follow you?
David Leary: You're gonna follow me @DavidLeary, on Twitter. Where are they gonna find you?
Blake Oliver: I'm @BlakeTOliver. You can also connect with me on LinkedIn, where I just posted. It's the 16th. I just posted a video [00:21:30] of my interview with Amy Vetter, so check that out.
David Leary: Awesome. With that said, we will see you guys in about eight to 10 days. I really, truly think Intuit earnings are coming out, so we will have a ... We should have news to discuss in about two weeks.
Blake Oliver: All right. Looking forward to it, David.
David Leary: All right. Bye, everybody. Later, Blake.