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Sholto Macpherson, Author at The Latest on Accounting Tech For Future Focused Firms - Page 4 of 4

Blink and it’s a Bank: Intuit Blurs Boundaries of Accounting Software

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A funny thing happened on the way to the forum. Accounting software turned into a front-end for SME banking services.

The evidence was abundant at QuickBooks Connect 2018. CEO-elect Sasan Goodarzi outlined the three pillars of Intuit’s vision. The first? Smart Money.

“Cash flow is the lifeblood of success,” Intuit confirmed in the event press release. “New features help small businesses get access to more money when they need it, and keep more money in their pockets longer.”

The most important “new features” are not improvements in the accounting software. They are financial services baked into it. Eg.

  • Next-day payment for online invoices. An SME that sends an online invoice through QuickBooks will receive the money the next day for credit card and Automatic Clearing House payments (usually two to three days for credit cards and more than five days for ACH).
  • Same-day payroll. SMEs that subscribe to the separate QuickBooks Payroll service can deposit wages in their employees’ bank accounts the same day, rather than paying it five days (or apparently up to 14 days??) in advance.
  • QuickBooks Capital Loans and credit score. QuickBooks Capital has funded $140 million in cumulative loans in the past year. Intuit has added “new lending limits” and access to businesses’ credit scores.

 

The two software features in that Smart Money category were definitely worth noting. Progress invoicing is a hard thing to get right in accounting software – Xero still isn’t there yet – and will be good news for SMEs that want to bill customers throughout a project or get paid incrementally.

Likewise, the upcoming self-service portal for 1099 contractors that lets them do their own W-9 forms with e-signatures is a neat feature.

But these two improvements didn’t get the same cheers as same-day payroll. It’s the banking services that create the biggest product differentiation with Xero in the US, show off the depth of Intuit’s ambition with big data, and demonstrate the threat of accounting software to conventional banks.    

Intuit isn’t pumping money over the US’ rickety banking network any faster than other financial institutions. American banks have to wait until the money arrives from a payer before they can send it onto the receiver, which takes at least a day each way. Intuit just sends the money to the employee or SME from its own funds as soon as it gets the signal from the accounting software, cutting the trip in half.

Intuit’s visibility of bank accounts and accounting data so complete, and its risk modelling now so powerful, that it knows the money will definitely arrive.

Intuit is using data to speed up banking activities. No-one else has the same quality of data: the banks have all the transactions but only accounting software vendors have an army of accountants coding them to a chart of accounts.

 

Follow the Money

If product releases are too subtle an indicator, you could just ask the incoming CEO. A guy who doesn’t mince words.

“Don’t call us an accounting platform. We’re not in the accounting business,” Goodarzi told Accountingweb.co.uk’s John Stokdyk, who spat his tea (Gd bless the Brits). “We are a platform to help small businesses succeed and a critical part of it is to make accountants successful.”

Goodarzi is charging hard towards a shared vision. Intuit and Xero both showed early interest in vertically integrating the collection, processing and reporting of accounting data with the assessment and delivery of financial services. But in its home market Intuit is several steps ahead of Xero and accelerating.   

Take a look at the points at which Intuit collects money from its SME customers.

  1. The QuickBooks software subscription ($10-$30/month, consistently discounted from $20-$60/month)
  2. A clip (10%-26% annualised) on QuickBooks Capital business loans promoted through QuickBooks
  3. A clip on payments made through online invoices (2.8%-2.9%) sent through QuickBooks (Intuit Payments)
  4. And soon, a clip on pre-payment of sales invoices sent through QuickBooks (the invoices are counted as assets for increasing limits in QuickBooks Capital, so same rate 10%-26% annualised)

Note that the SME pays the software subscription just once a month while the others are percentages of payments and loans. For many businesses the subscription price is likely to be significantly lower than the monthly totals of the other three.

Hence Intuit’s hell-for-leather discounting of the subscription price to $1 a month for a QuickBooks Online file in emerging (non-US) markets.

I would add insurance as the most obvious next step. Intuit is already measuring risk at a granular level for each SME through accounting data mixed with credit check and other databases.  

Now let’s take a look at the accounting software in the way that Intuit really sees it: as a funnel for financial services.

  • Top of the funnel = pain awareness: promotions placed directly in front of SMEs in a highly trusted context (their accounting software) when they most need it (cashflow shortfall).
  • Middle of the funnel = research/information: the SME most likely fires up a comparison site to see if they can get a loan as cheaply. What they can’t research easily is whether they would get approval.
  • Bottom of funnel = purchase decision: If the SME sees the offer it means Intuit has already approved the loan. All the SME has to do is commit in a couple of clicks and the money is in their account the next day.

Take it from the trillion-dollar, one-click ordering expert, Amazon.
Convenience wins.

 

Attention Follows Opportunity

US banking infrastructure, with multiple-day payment windows, is still decades behind the leading countries. Australia is just rolling out instant payments between bank accounts, available 24×7. So QuickBooks Connect’s banner announcement of next-day payments for invoices was met with head-scratching by the Aussie contingent.

The UK and other European countries are similarly advanced. This all underscores the size of the opportunity for Intuit in the US market. Intuit can disrupt the socks off American banks; on lending, payments, payroll, etc. Two thirds of its 3.4 million subscriber base are in the US.

Goodarzi and crew must be eyeing the mountain of cash sitting on the table by upselling those 2+ million businesses. A publicly listed company looking to increase ARPU (average revenue per user) or top-line revenue will inevitably focus on the US first.

The opportunity is too great to ignore. What happens if Intuit decides to add retail banking accounts?

This all has interesting implications for Intuit’s plans for rest of the world. Yes, embedding lending into accounting software is still a great way to disrupt the small business market. But Intuit doesn’t have the same opportunity to improve banking infrastructure in the developed markets where it is most heavily investing.

My call: Rest of World is a slow burn for Intuit. The action is States-side.

Looks like it’s going to be a hell of a show.

Sholto Macpherson travelled to QuickBooks Connect in San Jose as a guest of Intuit.

Firm of the Future 2018: Regional Business Services (AUS) – app stack and business model

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Meet the other finalists:

Recommending apps is clearly one of the strongest ways to increase the relevance of your firm. Ian Yesberg of Regional Business Services, in Australia, has adjusted the composition of his staff by hiring more tech-savvy juniors to research apps and find recommendations for tradesmen and health professionals.

FIRM STATS

Name of CompanyRegional Business Services Pty Ltd
Location of CompanyTownsville, AUS
How long have you been in business? 18
Number of staff?8
Number of clients?0
Staff to client ratio0
Do you outsource bookkeeping or accounting work?No
What % of your clients are on value pricing/fixed fee?50
What % of your clients are on cloud accounting software?99
What % of your clients are on QBO?95

 

Digital First: Why do think you are a finalist?

Yesberg: We’ve probably gone a little bit harder, a little bit faster, than other people that we come across in the ProAdvisor community. That’s the only reason. I see a lot of us are all on the same journey; we just seem to have got there a little bit quicker. You can count on one had those we don’t have on cloud accounting software. We do some advisory, and we get involved in social media, to expand our reach.

 

Digital First: With advisory, what exactly do you offer?

Yesberg: There’s the standard financial accounts and we use Fathom for that. I’ve been doing this for 18 years. Prior to that, I had 25 years in commercial finance in a bank. Back in those days we actually pulled apart financials. Since I left the bank we’re now creating the financials, so we’ve got a fair insight into that. We’ve always talked to our clients if we think things are moving not quite right.

We also take advisory to mean introducing small business productivity apps to help get their business more efficient.

 

Digital First: So what type of apps, and how many apps do you feel comfortable recommending?

Yesberg: We stick to a smaller number. The apps we use ourselves in our office environment, and then point of sales, mainly job management type software, point of sales, your Google Drives. ServiceM8 is a big one. They’re the main areas.

FIRM APPS

What apps do you use for productivity?Office 365
What apps do you use for workflow?Work
Tax and Statuory accounts?QBO, Gov Reports
Electronic signatures?Adobe
Document storage?Google, One Drive, Hubdoc
CRM?none
Time tracking?QBO
Expense management?Hubdoc
Credit Control?none
Management reporting?Fathom

 

Digital First: And how do you recommend apps? Do you have one person in the business who does it, or does everyone who’s client facing has some experience?

Yesberg: There’s three of us who get involved out of eight staff. One spends all their time in it. In term of the apps, we do a bit of research then go to the client, and offer them three packages. Which is really we’ll get you up and running and then you’re on your own, through to we will help you fully implement it, train you in it, and provide support for two or three months while you’re getting things going.

 

Digital First: How do you find the time to train yourselves in all these apps so that you can train your clients?

Yesberg: Not easy. The two or three of us who do it are probably all tainted with the same brush; we just like to fiddle with things. It’s more an interest, and probably more done outside of normal work hours. But if we come across someone who’s done something similar, we see things that work with other clients. We’ve got a couple of hundred clients, and they tell us about (a new app), and we then go away and focus on that or look at the alternatives that others are recommending.

 

Digital First: Do you focus on any specific industries?

Yesberg: Two or three. The health industry is our target for the next 12 months for bookkeeping, advisory or working with them on their KPIs. We’ve been working with that industry for 20 odd years, so we know it inside out. Then probably the tradie industry. We’re not specifically targeting that as such but we get a lot of referrals in that area. And that’s more your plumbers, using apps like ServiceM8 and simPRO or Tradify,, which are fairly common in that industry.

 

Digital First: Do you think that you’ll look for staff who are interested in technology more than accounting?

Yesberg: We’ve just started with a third year accounting student in the last couple of months. We’ve hired her specifically because she’s far more advanced in their knowledge and skills in tech than I will ever be. It’s native to them, where it’s not to me. We’re using that as a bit of a test, but if that works out, we’ll bring on more staff with those skills.

 

Digital First: And do you think this is a model for accounting firms, that clients would be turning to accountants for technology?

Yesberg: Yeah. We’ve had a deliberate strategy. Our staff are aged from early sixties through to Catherine who’s 20. And we find that that works really well because the clients I’ve got a rapport with are all starting to think about selling their businesses and moving on. The younger people can react far better on a day-to-day basis. So in some ways, it’s a deliberate strategy to make sure we’re remaining relevant to all sectors of the market, to all demographics.

 

Digital First: And in terms of automating the compliance work flow, what have you found has made the biggest impact?

Yesberg: Without a doubt, it was the bank feeds, that started with us. Then we started 18 months ago with Hubdoc. Even simple things like a rule in Outlook that when a statement or an invoice comes into the customer’s inbox, a copy is automatically sent straight through to Hubdoc. When an item comes into Hubdoc, it can automatically save a copy into the QuickBooks and the client’s Google Drive.

So when clients go looking for what used to be bits of paper – invoices, statements – they can actually access that in Google Drive without necessarily looking into QuickBooks, which we’re working on all the time. So the little things within the apps, if you really know the detail of what they can do, it can really make that automation experience that extra step.

So it’s really knowing your products intimately that we use in-house, that is what makes the difference.

Firm of the Future 2018: Reconciled (USA) – app stack and business model

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Meet the other finalists:

Michael Ly is convinced that the rapid growth of his three-year-old firm to 18 staff is connected, at least in part, to the location of its head office. The firm, Reconciled, is in Burlington, Vermont, a city and state associated with the good life.

Not that all 18 staff live in Vermont. Reconciled has a distributed or remote team that communicates via video (Zoom, Google Meet) and chat (Slack). The work-at-home vibe contributes to a culture that flows through to better customer service, Ly says.    

FIRM STATS

Name of CompanyReconciled
Location of CompanyBurlington, Vermont USA
How long have you been in business? 3
Number of staff?18
Number of clients?100
Staff to client ratio10
Do you outsource bookkeeping or accounting work?Yes
What % of your clients are on value pricing/fixed fee?100
What % of your clients are on cloud accounting software?100
What % of your clients are on QBO?100

 

Digital First: Why do you think you are a finalist?

Michael: The reason that we are a finalist is the Intuit is recognising the work that we have been doing over the past three years. We have 18 people, working in five states, and we have established ourselves as a pioneer in the online bookkeeping space.

We are a distributed virtual team and we leverage all the technology that Intuit has given us as a firm to serve our clients, as well as the app ecosystem.

(Other reasons for our selection include) the team that we have built here at Reconciled and obviously the growth that we have been having as a firm.

 

Digital First: How are you a pioneer?

Michael: I think we have built a brand that customers can trust. When our customers look at the landscape of what’s being offered to them with cloud based accounting firms they look for a brand story, a trusted brand that they resonate with. They see my story in starting Reconciled and it resonates with their own story as an entrepreneur.

Cloud based accounting firms might be the norm in the rest of the world but it’s not the norm in the US. it’s still a small percentage of firms that are cloud based and distributed.

 

Digital First: What is it about your brand that makes you trusted?

Michael: I think that they want a genuine, authentic person behind the brand. I moved to Vermont to raise a family and I wanted to find a way to build a business and a legacy for my family while doing it from a small state and city like Burlington, Vermont. Burlington is known for high quality products. When we talk to customers a lot of them say they like that we’re in Burlington, Vermont. Even though we’re not in the same state we resonate with the story and what Vermont represents – high quality products and services, progressive values, as well as a meaningful life.

You hear a lot of stories coming out of Silicon Valley but a lot of entrepreneurs desire the higher quality of life that Vermont has to offer.

 

Digital First: I don’t know anything about Vermont. What high-quality products does it produce?

Michael: Ben and Jerry’s, a famous ice cream brand. Seventh generation is a high quality cleaning brand. Lake Champlain Chocolates. We also have the highest amount of breweries per capita in the US. We have really high quality alcohol. A number of tech companies have come out of here.

Probably the most famous guy to come out of here is Bernie Sanders. He’s down the street from my house.

 

Digital First: So your clients are getting a slice of high-quality life by using you as their bookkeeping firm?

Michael: Yes, and they can see that our employees are not hurried or rushed. They work as a distributed team and from home so they are able to enjoy their lifestyle and work. Rather than getting in a car and driving to an office (every day) our employees can invest that time into their families and community. Our clients understand that they are much more fulfilled.

I’ve believed that if I could give quality of life for my team it would resonate out through their services. Because the work that they are doing can be repetitive work – reviewing financials and transactions. It can also be stressful. We built a work environment and we have given them a normal amount of work that a normal human being can do.

I really think our team is happier and fulfilled and that reflects in the way that they communicate with our clients.

 

Digital First: So culture is a big selling point?

Michael: Yes.

 

Digital First: Do you provide advisory and software implementation?

Michael: We have a standard software stack for clients. We use Receipt Bank, Bill.com and QuickBooks Online. Then about 25 percent of our bookkeeping clients sign up for advisory services. These would be anywhere from cashflow forecasting, estate planning, helping them raise money with a bank or investors, big debt negotiation and general management and advisory services. We also do app implementation and heavy research in apps when our clients request us to – it could be inventory or supply chain or e-commerce reporting. We demo the apps to the clients and implement the software.

FIRM APPS

What apps do you use for productivity?G Suite, Slack, Zoom, QBOA Work
What apps do you use for workflow?QBOA Work and Slack
Tax and Statuory accounts? QBO
Electronic signatures?Practice Ignition
Document storage?Receipt Bank, G Suite, Sharefile
CRM?Hubspot
Time tracking? TSheets
Expense management?Expensify
Credit Control? N/A
Management reporting?QBO

 

Digital First: How do you charge for the R&D?

Michael: Almost all of our work is done on value pricing. We can estimate the amount of time that it will take to do the implementation and the value it will bring to the client.

 

Digital First: You must have multi-skilled people to cover that range of apps?

Michael: We have technicians who understand not just the bookkeeping side but understand the apps. We designate our team specialists; they choose one or two specialty areas in their research. We have a person that is into e-commerce related apps, another on sales tax for multi-state sales tax reporting, we have somebody on our team who is a blockchain expert and a cannabis expert. There are a variety of different areas and we let our team members choose what are they want to specialise in.

 

Digital First: Isn’t that a strategic decision about which industries to go after? Why let teammates choose?

Michael: We have been able to define our strengths and skillset. We target e-commerce companies, digital marketing agencies, breweries, distilleries and wineries, so we have a few areas of expertise. We also actively work with cannabis companies. There are only a few accounting firms that will work with cannabis companies because cannabis isn’t federally legal on the hemp side. Some firms are avoiding working with them until it is federally legalised.

(It’s the same with blockchain.) Not many accounting firms understand the nuances and questions that blockchain companies have to deal with.

 

Digital First: What are those nuances and questions?

Michael: Some of the questions that come up – are smart contracts legal in the state I’m operating in? Will they be acceptable in a court of law? In an open blockchain who are the owners and partners of the company if you have miners that participate in creating a blockchain and making the blockchain bigger? Are miners considered partners or owners?

Do people exchanging coins on your blockchain receive 1089 forms or are they considered contractors? Should you do a coin offering or not and what are the tax implications?

 

Digital First: Do you have a larger R&D budget or training budget?

Michael: We require all our bookkeepers to receive their certifications before they can start working with the client. That usually takes them a week or two to finish them and start getting familiar with all the internal apps. We use Slack internally to do efficient communications as a team. Often we’re the first company that introduces them to tools like Slack or Zoom or Google Meet.

 

Digital First: Are you using QuickBooks Online Accountant and Slack?

Michael: We’re probably one of the largest firms using that integration. We have a private slack channel for every client that we’re working on. We can integrate QBOA’s work tab with that. It’s been very helpful as a reminder and a pulse of where bookkeepers are at with their work.

Firm of the Future 2018: Cloud Bookkeeping Services (CANADA) – app stack and business model

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GLOBAL WINNER: FIRM OF THE FUTURE 2018

Meet the other finalists:

One of the hardest things about moving to the cloud is the shift in pricing models from hourly billing to a fixed fee. Some firms publicise fixed fees and modify them to fit clients, while a rarer few will explore pricing theory to come up with the best match.

Tanya Hilts of Cloud Bookkeeping Services in Canada has invested a lot of time trying to understand the art and science of value pricing. She has studied under pricing guru Ron Baker and learned the hard lessons testing out prices on her own clients.

This skill is useful to all SMEs. Hilts now helps her business clients price their own services and products – a welcome service that can improve sales volume and margin.   

FIRM STATS

Name of CompanyCloud Bookkeeping Services
Location of Company Belleville, Ontario Canada
How long have you been in business? 31
Number of staff?3
Number of clients?39
Staff to client ratio13
Do you outsource bookkeeping or accounting work?No
What % of your clients are on value pricing/fixed fee?90
What % of your clients are on cloud accounting software?99
What % of your clients are on QBO?99

 

Digital First: Why do you think you are a finalist?

Hilts: I think it has to do with education. There are a lot of other firms doing the same thing, moving to the cloud, selling advisory services.

The real difference is the educational component. We are educating our clients and bookkeepers through our bootcamp program. How to turn around and offer true advisory services and take those services to the next level.

 

Digital First: What are true advisory services?

Hilts: That to me means moving away from the old days when we were reacting with the data. We can now be proactive – start to advise the client and help with their decisions. We learned very quickly that everything that we added to our practice such as value pricing we could teach to other services business.

A lot of our clients don’t want to pay for advisory services. So we give it to them for free for three months and show how it works. We select clients that are a good fit for this and we can show them the value.

They are taken to the next level without really realising it, just by us partnering with them to help them grow their business.

 

Digital First: Which type of client is a good fit?

Hilts: Ideally service based business. We have many in retail but it’s not as easy. They want us to take a look at staffing needs and inventory needs. We can’t teach them the same sort of things. Our first client had a podcast business and we taught him to value price. He offers gym membership support plans to clients who wouldn’t have used podcasting services to begin with. He lets them pick certain times (to go to the gym) on smaller packages. If they don’t use the slots that’s ok, because now he’s got income even if no-one is coming to the gym.

He sends out an email every day saying here are the slots you can use. He’s been making $1,000 a month in residual income from clients who would not have used his services before, by filling slots he wouldn’t have filled with his regular clients. It’s like sampler packages – someone might only use the services every two or three months.

 

Digital First: Why is value pricing so important to your clients?

Hilts: Value pricing is about how you’re offering value to clients, and the value and efficiency in the firm. Sometimes it’s how you position things to clients. Clients need to know how it will help them and benefit them. So part of the education is how to position it in a way that makes sense to our clients’ customers.

 

Digital First: How did you train yourselves in value pricing?

Hilts: In 2012 Intuit had (value pricing guru) Ron Baker do a four part series. I watched it and I was really intrigued. I watched every single video and cyberstalked Ron and Mark Wickersham. Then I was lucky enough in 2014 to be a member of the Black Swan program and I mentored under Ron for nine months. I learned so much from him.

And then it’s just been a matter of modifying it because it’s not the same for every client. That took time to learn how to do that. It sometimes meant I priced clients too high and lost them, or too low and lost money. So there was a large learning curve for that as well.

FIRM APPS

What apps do you use for productivity?Microsoft Exchange, Slack, Google Drive
What apps do you use for workflow? QBOA Practice Management, 17Hats
Tax and Statuory accounts? QBO, Profile
Electronic signatures? 17Hats
Document storage? Google Drive, SmartVault
CRM? 17Hats
Time tracking? TSheets
Expense management? Receipt Bank, Hubdoc
Credit Control? InvoiceSherpa
Management reporting? DryRun, Chata.ai

 

Digital First: If you compared your profitability before Black Swan?

Hilts: In three years we went from an average of $40,000 gross to over $200,000 gross this year. I have personally been able to bring home double compared to the year that we grossed $40,000.

It was just myself originally. Now we have two of us and another joining full time in November.

 

Digital First: Can you train your other staff to do value pricing with clients?

Hilts: Currently I’m the principal person and I have my pricing partner Leanne who is my operations leader. I’m sure she could easily price someone on her own. Her main role is sales and marketing. She brings the clients in and we sit down with all the information from the client. Sometimes she thinks I’m too high, sometimes I’m too low. I think you do need a pricing partner because I think it’s natural to undervalue ourselves. Leanne has enough that she could probably do that, we just don’t price alone. If I needed to be away I trust that she would use our template.

 

Digital First: How do you manage the onboarding process, which you can automate more easily with fixed fee packages? Isn’t it more inefficient to do value pricing?

Hilts: We don’t call what we do value pricing, it’s right-sizing. The right client on the right package for the right price. I have a formula – and it’s not always right – as long as I basically know how many bank transactions. It’s a little bit based on numbers and the type of services they want and their pain points. We pull together pricing for three packages. Our middle package is where we want them to be.

There’s not a big difference between the small and middle packages, and the big one has more advisory services and can handle more pain points. The small solves one pain point, the medium solves two, and the big package solves three or more pain points. The price also  includes the type of apps we might have to bring in to solve these pain points, or the level of knowledge required to solve.

It’s not easy to come up with the pricing but we have come up to a pretty good process.

 

Digital First: Do you have a list of pain points?

Hilts: It depends on the information we collect from the client. We have some questions to understand their business. In between the questionnaires and our notes they may have an issue with accounts receivable. We can bring in an app like Invoice Sherpa. Another client may not understand why they’re not profitable, so we might bring in a cashflow app. Each conversation is different depending on what’s happening with clients.

 

Digital First: How many apps do you need to be familiar with to address client pain points?

Hilts: We are aware of a lot of the apps out there but we have a small base we like to pull from. We follow KISS (Keep It Simple, Stupid). We have our favourites for cash flow, forecasting and budgeting. We are aware of the differences. If we know someone who comes in with something unique. We probably have I’d say around eight or so that are in our immediate toolbox and then 10 or so that are on the fringe. Some clients may only need two or three.

Every client has QuickBooks Online, Receipt Bank and HubDoc.

 

Digital First: You use Receipt Bank and HubDoc together?

Hilts: We do. Receipt Bank is awesome, their phone app is great. We have a few clients that that use HubDoc for fetching bank statements. The odd client may just use HubDoc – like charities which want everything arranged and we can pull reports a little easier for them versus in Receipt Bank.

Latest trend for firms? Data engineering. Seriously. – Accountech.Live 18

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The most interesting trend to break out in 2018? Data engineering for accountants. Yes, it sounds crazy and it will no doubt take a long while to reach the prime time. But the signs are already there.

The Big Four firms are already retraining accountants as data engineers to pull information from SMEs’ systems for reporting and advisory services. Even small and mid-size firms are getting in on the act.

Dan Beck, an accountant who now provides technology consulting services through the Toowoomba, QLD firm, made the transition to data engineer under his own volition. Dan joined me for the Accountech.Live preview webinar last Thursday and explained why this career path will become increasingly common.

Could data engineering be the missing piece, the bridge between compliance to advisory? Does it provide a data-driven approach that gives accountants the confidence to make solid recommendations to business owners? Accountech.Live explores these themes in detail. You can get your ticket here.

I hope you enjoy the following interview as much as I did!

Digital First: I think a lot of people will be saying at the expo, “What the hell is data engineering, anyway?” Can you give us a layman’s explanation of what it means to you?

Beck: Yeah, so this is a common question that I get. Most accountants do data analysis, whether they realise it or not. Data analysis is taking the data and analysing it for trends, looking for outcomes in data. A data engineer presents that data to you in a clean and consistent manner (so you can perform the analysis).

If you’ve had to build a house, you’ve normally got an engineer who makes sure that the structure’s right, that it’s clean, that it meets codes, and then there are builders who put other pieces together.

It’s a similar kind of thing. (A data engineer pulls) data together into a consistent format to sample and analyse it. It’s a skill that takes a little bit of effort but it’s very worthwhile. And without it, what we find is you can jump to the wrong conclusions (with reporting) because you don’t have clean data.

Digital First: There will be people on this call thinking, “Yeah, I do data analysis. I don’t need a data engineer to do it. I just open up an Excel sheet, and export from my accounting software, and analyse the data.” When do you actually need a data engineer?

Beck: Think of it this way. Say you’re doing self-financials. You’ve got no bank statement, you’ve got no bank clerk. You can start having a look, you can see what someone else has provided you, but how do you know that the data is quality and it’s consistent? Being able to pull data in a format that you can then consume and utilise, and making sure that you don’t accidentally delete data becomes massively important.

Digital First: How do accountants clean up their data for analysis in a spreadsheet differently to a data engineer?

Beck: All we’re talking about here is making sure that the data is in the same format. So columns, rows, everything else like that, that is essentially data engineering. It’s just about removing things like headings, titles, things like that don’t provide any value to the analysis point of view.

Digital First: But that just sounds like formatting a spreadsheet.

Beck: Correct, but how do you do that automatically in real time? How do you do it consistently, so that nobody ever has to touch it? And that is where it gets really, really cool. Some of the things that we have been doing with clients is how do you pool that financial information in real time, to present to them in real time, and then analyse that data?

We’re working with one client, at the moment where they need to know all transactions that come into their bank account. Easy. Someone could run a profit and loss report or we can simply load that data from Xero and present it in real time to them.

Digital First: What type of business was that? What were they doing with that list of transactions?

Beck: They were a removalist business. So they needed to be able to see, in real time, when the invoices were paid. They run very much on a cash payment basis, so that they could then see the data coming in real time to know, “Hey the client’s paid.”

We’ve used different things like pulling it from their financial packages, pulling it directly from their bank accounts and bank feed, to present the information in real time so we don’t have that delay in communication.

Digital First: But you can’t pull real time bank feed data from Xero, can you?

Beck: You can pull real time bank data in certain circumstances with certain payment platforms.

Every situation and every client has a different set of circumstances and requirements. And so being able to take something like Xero end file for one client might work. For another client, they might have an information system or ERP.

Digital First: So you’re kind of like a plumber. A data engineer is like a plumber who plumbs together all these different systems.

Beck: Perfect analogy.

Digital First: So what was the firm doing before you got into this whole data engineering thing? How would you have helped that removalist company in the past?

Beck: With manual work. What’s really interesting about this example was at first they came to us to say, “Hey, do you know anybody we could hire as a receptionist?” And our adviser asked, “What are you looking for?” They said they wanted someone to get information from one system and copy it across to another system, which took them three hours a day.

But the rest of the time they wanted the receptionist to do something completely different – customer service, possibly sales. All we had do was the data engineering piece, which was to connect the various different systems together so that they would talk to each other. And now we’re helping them find somebody who knows customer service and sales.

Digital First: So what skills do you need as a data engineer in general and to do that specific job?

Beck: I’d like to break it into a couple of different things. First is problem recognition. In this instance, the problem that came through we need somebody to perform the role. But looking at the problem, we’re not actually trying to find a person to do that function. We actually can do the function differently by looking at the problem in a different way. And this is why I think that for advisory firms, this is why (data engineering) becomes so important.

At the moment though a lot of firms go, “Okay, that’s too hard. Let’s go and find the receptionist.” What we do is build a connector using existing technologies. It started off as a consulting session, working out exactly what the requirements were, and then talking to the client’s IT provider. The accountant was there throughout the entire process. None of this stuff happens in isolation. What you need is a mix of skills. You talk to the IT guy, you talk to the accountant, you talk to the client.

Digital First: So what’s the bottom line for Power Tynan, as an accounting firm? What kind of services do you offer your clients?

Beck: Power Tynan has an undocumented catch-cry which is “Yes, we can”. What we started finding was that more and more we weren’t getting hit with financial issues. They needed to fix an operational issue. Clients said, “We know that there’s a way to fix it, we just don’t know where to start.”

And that’s as simply as to how it all started. We took a business problem and turned it into a business solution. We started from a low base – probably a higher base than a lot of other firms. I had a few skills in IT and a few skills in advisory, but on the whole we learnt as we did.

Digital First: How do you market and sell that service?

Beck: It’s a hard thing to describe. What we often do is sit down and talk about pain points.

Digital First: Fascinating. So that’s really the pitch isn’t it? You can’t really go and say, “Hey, we got this data engineering service, you really need it.”

Beck: To tell you the truth, we don’t really pitch it as a data analytics or a data engineering service. We’re actually pitching it around process and efficiency improvement. Because as soon as you start talking about data engineering, most people will go bye-bye. It’s a bit like anyone starts talking about machine learning and AI. People immediately go, “Okay there’s gotta be some rocket scientist that looks after that. It’s not for me, let’s move on.”

Now what if you had all the information you needed to be able to do that analysis? What if you had all that information right when you needed it and automatically?

Digital First: So you mentioned you’re already working with firms who use your data engineering service. How do they get to the point where they realise that the firm can do more analysis than what’s in the Profit and Loss? “You know what would be really cool, if we got that data from that system over there.” Is that a certain type of firm that’s ready for that?

Beck: Most of the firms that are doing it are medium sized firms, multiple partner firms who have got the want and the need to see what is there beyond the future. A lot of them are doing compliance and they’re wanting to do advisory type services. They don’t know what it is, but they know that their clients are asking them for more information. And what they don’t want is another firm to come and offer the service and then lose the client to the other firm. So they want to skill up their team to offer some of these services and learn how to use the tools that are in the market at the moment.

One firm had a client who needed to bring together inventory, a franchise system and HR data together. The firm was saying to us, “We don’t know how to do it but we want to learn.” I run workshops for them, and if they have a problem with a client they give us a call to talk about the client, what the client and data requirements. We’ll jump in and help them if it’s too big for them to source the data, they still do all the analysis themselves.

Digital First: Power Tynan has roughly about 50 staff, yeah?

Beck: Yeah, correct.

Digital First: Do you expect that firms of a similar size will inevitably develop or hire somehow, someone with data engineering skills?

Beck: I think that we’re going to see this as a trend that increases over time. I got a phone call two weeks ago from another firm that has said, “Hey, can you help us find someone to bring on to the team and start building these skills and capabilities?”

I think absolutely it’s going to be a major area. I get questions when people start talking about this who say that as we get more cloud technologies, we’re going to need to do less of this stuff. My response is I think that the need is going to actually increase. Yes, we’ve got these cloud technologies that all talk together, but we still have to pull the right information at the right time for the right purpose. And that’s what a good data engineer will do. They’ll be able to identify what the problem you’re trying to solve, what information is needed, and when. For instance, there’s no good pulling information every 30 seconds if you’re only looking at it at a point in time. It’s no good pulling information once a month if you needed to know for a meeting that’s coming up in the afternoon.

Digital First: Do you think it is possible to deliver quality advisory services to SMEs without some type of data engineering going on?

Beck: I’m gonna have a biased response to this answer. Do you need to a data engineer to delivery advisory services? I’m going to say no, you don’t.  Everything comes down to time, effort, and money. Do you want to do a cost-effective service? Then I think you need to add that (data engineering) element into your business. We’ve got friends out there who are doing things like pulling together information from inventory systems, financial systems, HR systems, other operational systems, but they do them semi-annually. They pull the data once a month and it gets delivered two weeks later.

This information doesn’t happen weeks later it happens now, and when I say now, like within the last hour. We do our firm reporting hourly at times. It’s not waiting to a mystical end of month or end of quarter period.

Clients are used to getting their data regularly. We had this massive transition from bank statements to bank feeds. We used to get a bank statement once a month and we’d reconcile it. Now if you’re not getting it daily people are wondering how the hell you manage your business. And I see the same kind of thing happening and why we will see this as a field that keeps growing is to pull that information together quickly and more accurately.

Digital First: You get some reports in your firm hourly? Is that just a humble brag or is there an actual use for having it?

Beck: Absolutely! We do it for things like when we’ve got workflow issues. When somebody is getting stuck on a job and you can see and analyse that data in real time to know, “Hey buddy, you’re stuck on this, we can see you’re stuck on it.” There’s no pride in sitting there trying at a problem that we can help you do it. So absolutely we do data analysis in our firm hourly.

Digital First: And you use an app to track workflow versus staff satisfaction? How does that work?

Beck: We use an app called Everperform to upload data from our practice management system on a regular basis. Now where this stuff gets really cool is that can you also have a series of non-financial KPI questions about how the team’s feeling, and how they’ve got everything they needed to deliver. We’re actually able to do a little bit of trend analysis and sentiment analysis, and see the correlations between how they’re performing and how they’re feeling. So we actually start addressing (staff) issues before they start becoming (workflow) issues. It’s truly remarkable, once you’ve got that flow of information, the insight that can come from it.

Session: How a regional firm uses data engineering in advisory

Presenter: Dan Beck, Director, PT2

When: 4:25pm – 4:55pm, Tuesday 13 November

Register before Nov 12 for free entry to Accountech.Live.

About D1

Digital First covers news and opinions on accounting technology and is read by tech-savvy accountants who understand the importance of technology in establishing competitive advantage.
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