Earmark Podcast | Earn Free Accounting CPE

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Blake: [00:00:00] Hello, everyone, and welcome to another episode of the Earmark podcast. I'm your host, Blake Oliver, CPA, talking today with Michael Alliman. Michael, welcome to the show.

Michael: [00:00:11] Thank you very much. Very excited to be here. This is going to be fun.

Blake: [00:00:15] So the reason we're talking today is because you've been a long time listener of the Cloud Accounting Podcast, and you heard us talking. Me and David, my co-host, talking on the show about I think it was QuickBooks Live. It might have been more in general about just these kinds of software companies that are adding services, right? Bookkeeping software plus a service and talking about the difficulty of competing with those types of businesses, especially when their prices are, say, $200 a month, which I believe is the current price for QuickBooks Live. And I think [00:00:53] David made an offhand comment. I might have agreed with him that it's impossible to build a bookkeeping business at something as low as $200 a month, [00:01:02] so nobody's going to be able to compete with QuickBooks Live and we're all going to have to move up or something like that. Right. Which is I think, kind of commonly accepted wisdom, if you will, or or maybe it's not wise, maybe it's wrong. And [00:01:18] so you disputed that. You recorded a voice mail, sent that in to us and said, hey, actually, I have built a very I don't know exactly what your words were, but what you feel is a very successful business at the $200 month price point. [00:01:33] And that really got me intrigued because, well, I think if you can do that, you can be really successful because I think there's a lot of business owners out there that would be happy to pay that. So but the challenge is, of course, making it work. I worked at a large firm and yeah, we struggled to do that. We struggled to do bookkeeping for less than $1,000 a month. So, Michael Alman, thanks for joining me. Let's talk about $200 a month bookkeeping.

Michael: [00:02:02] Sure. No, be happy to. Just a little bit of background. I was I'm a CPA and and I was practicing tax accounting for two of the back then. They were the big eight firms back then. They were called Pricewaterhouse. And then the other firm was Deloitte Haskins and sells age me. But that was a bad fit for me. I thought it was. I thought it was the firm I worked for. It turns out it was me that was the problem. And so I jumped out of there into industry. I had a good friend that was managing a business in Florida, which is where I lived at the time, and he hired me to come in and they were they were implementing a new software called a S400 that is now a relic, but [00:02:50] they were having a lot of problems with their inventory and they needed somebody to come in and just help them with with the inventory function of their new software because all the pricing was wrong and nothing was right. So long story short, I got into this business, which is essentially high speed food manufacturing, which [00:03:08] is.

Blake: [00:03:09] High speed food manufacturing.

Michael: [00:03:11] Salads in a bag is what most people call them. So when you go to the grocery store and you see the cut up vegetables and it's in the bag ready to eat, that was what we did.

Blake: [00:03:21] That's all we're working on. We like survive on those in my household. We're all about that bag salad. And they've gotten really, really good. Actually.

Michael: [00:03:30] They have. And it took a long time for us to get the technology right to be able to ship it from California to Florida and still be edible, you know, because of the sun on the trucks and stuff. So we had to do a lot of experimentation, spent a lot of money on films and how to do it and all that. And I won't get into all the technical stuff, but we basically had to learn how to do a [00:03:51] nitrogen back flush into the bag so that it would slow down the respiration. [00:03:56]

Blake: [00:03:56] Yeah, that's so that's how you keep it from spoiling or turning brown, Right. It's okay. There's gas in there and the nitrogen. So that's like with wine, right? There's those devices where you can like inject nitrogen gas into the wine bottle that you've opened so it doesn't spoil. Same idea.

Michael: [00:04:14] Basically the same idea. And it's, it's certainly advanced since then. But, but, [00:04:19] but what that forced me into is learning to be a cost accountant because when you're dealing with we you know, [00:04:24] we we would ship £1,000,000 a week of fresh cut vegetables and we had no down to the to the fraction of a cent of what each component was costing and things like that. And it's vegetables. So there's an acre, you don't know what your cost is going to be until it's harvested and brought in because it depends on the yield per acre and all that stuff. So but I did that for, for several years and then later in my career I had worked for two companies. The last two companies I worked for were both sold and. They swapped out the old management and brought in their own. And so I got tired of that part. So I went into so I took what I had learned and went into a different kind of manufacturing, which was [00:05:11] basically slow speed manufacturing, but still had the same cost analysis requirements. So I was working for a government contractor that was building parts for helicopters and things like that, and basically the same thing at a much slower pace. And [00:05:27] that company also ended up getting sold. So I decided at that time I had purchased half interest in a human resources consulting firm and thought that I would add accounting to their human resources. It's sort of a one stop shop for potential clients and that they the human resources side grew great, but it took all of my focus, so I ended up not so much doing the accounting part.

Michael: [00:05:56] And then we sold that firm and and then I dabbled around. I rented myself out as a CFO for a while. So in other words, I would I would go in as a consultant, but ask them to put me on their payroll so that so that I had that kind of input into the business itself and did that for a couple of different firms, which was interesting. I learned a lot about the the short term lending, high, high, high interest expense lending, did that for about a year. And then finally, in 2018, I just decided that I was going to just work for myself. I was I was not going to do this anymore and had the luxury of having enough time to kind of explore what I wanted to do. And and with the vote of confidence from a friend of mine who who did a little bit of funding on the front end, [00:06:52] I started a bookkeeping service at the at the time I started it, [00:06:57] I wasn't I was sort of taking on the work for friends and people like that, like I was doing a coffee shop, a veterinarian, a couple other things like that. And then I was talking to a a woman who is a coach inside of Keller Williams real estate company, and she coaches the agents. And it wasn't even related to my my search for what I wanted to do. But she said she was frustrated because her agents either didn't have pals at all or if they did, they weren't in the format that's prescribed by Keller Williams and they use that to compare them to to other agents and other teams.

Michael: [00:07:39] So I went and looked at the book that that was written by [00:07:43] Gary Keller. It's called a Millionaire Real Estate Agent. And in that he he has a full chart of accounts and that he suggested for agents to use. [00:07:54] So I called the woman back and I said, look, I could do this. I could set up the custom chart of accounts. But but it would be not. It's I couldn't use it for any other clients because it's so very specific to what they do. And I said, So I need to know that there's a market big enough. And she came back with something like 127,000 Keller Williams agents in the United States and Canada. And I said, okay, there's a market to start with. And and so I put it all together. I put all my marketing materials together. [00:08:23] But in the meantime, I got a referral from her to a client that needed this help. And that client became my first client. And that client referred me and she referred me to others. So all that stuff I spent on marketing was useless because my entire business was built on marketing, on referrals [00:08:42] and yeah, on referrals, sorry. And, and so we have a website. Somebody asked me about it the other day. I went and looked at it. It's so out of date. I have to work on that. But but we just we don't get anything that way. It's just it's just client referrals.

Blake: [00:08:57] And so. So you started with one Keller Williams real estate agent. They refer you to others and and that was basically the genesis of today's alum and business group.

Michael: [00:09:10] That's it. Yep. Yep. That's, that's exactly what happened.

Blake: [00:09:14] And go ahead And then you said Keller the the I am assuming whoever founded Keller Williams had he wrote a book and in the book he had a chart of accounts for real estate agents.

Michael: [00:09:25] Yeah. [00:09:25] Gary Keller is the is the Keller of Keller Williams. And, and he wrote a book basically to teach agents how to become a millionaire real estate agent. [00:09:36] And and it's very lofty and it's and and it would take a lot of work to get there but he's but he's very systematic. So he broke it down to every level like how many calls you'd have to make, you know, to build your database to be able to eventually get to that place where you were making a million bucks. And in doing so, he said, this is the recommended chart of accounts and it's different from how you and. I would normally look as an accountant. You know, we we we don't set it up the same way because he wanted to break everything down into nine expense categories and everything that we did had to fit under those categories. And so it's very specific to real estate. And so I used that model. I didn't use it entirely, but [00:10:20] I use that model to set up the chart of accounts that we use for for everyone. And I decided right up front that it was all going to be virtual. So a QuickBooks Online was my only choice. [00:10:29] And I built out, you know, I modeled the whole thing out for the first three years of what I could expect to to do. And one of the things that I wasn't sure about is what I tried to do is discover if there was a general market rate for for that kind of work, for the for in real estate, and there wasn't nothing that I could find. So I did find one other woman that was doing this, and she spent a week with me kind of showing me what she did and and showed me her pricing. And so I just thought, okay, I backed into the numbers. If this is how many hours I'm going to spend and I think this is what I'm worth, this is the price. And we came out initially at $179 a month. And that doesn't include the book, The QuickBooks subscription. I want to make that right upfront.

Blake: [00:11:20] Doesn't include QuickBooks. So and do you pay for the QuickBooks and then charge the client or do they pay it directly?

Michael: [00:11:27] Generally, I pay for it and roll it into their price. But that was also back in that time and 20 1819, we were getting all those offers from QuickBooks where you could buy a five by five subscription, five for $5 each. Yeah, and they did that twice and so I bought them all up. So, so I was, I was, I was only paying $5 a month for several of those clients. The first ones, we used those up pretty quickly but. So we actually started at 179 and we realized pretty quickly that that was not scalable or it was scalable, but it wasn't going to be doable because it just couldn't throw off enough profit. [00:12:10] So we set a price point at 199 and built it out from there, excuse me, built it out from there, and immediately, because it was so popular, ran into capacity issues. And so we turned to the software industry to try to look for solutions. And one of them that added a lot of capacity that we that we brought on was click up. [00:12:35] And and it it just works for us. My partner is in Florida. I'm in California. [00:12:41] So and because it's real estate, there's it's very document driven. We have to have all the closings and all the documents that go along with it. And so we were very email reliant and lost emails, [00:12:54] became a thing pretty quickly forwarded emails that I don't know she ever got or back and forth. So we found that solution.

Blake: [00:13:03] Is it just you and your partner or do you have employees? Okay, just you and your partners. And you've been doing this since you said 2018.

Michael: [00:13:11] March of 20.

Blake: [00:13:12] 1818. Okay. Yeah. And yeah, So is it all Keller Williams agents now, is it?

Michael: [00:13:20] Well, generally, yeah. [00:13:22] The bulk of our business is Keller Williams, real estate agents and or teams. And. And that includes a single agent who's, you know, closing a few deals a month to my largest client will do about four and a half million dollars in revenue this year. [00:13:39] So with a huge team and so.

Blake: [00:13:45] How many agents do you have are teams.

Michael: [00:13:50] [00:13:50]I have 84 bookkeeping clients that we are producing monthly financials for. I also have a handful of advisory only clients. I also do profit first implementation. Okay. And so I have a few clients. That's all I do for them. I have a couple of clients that we sit down once a quarter and review their books and I just make suggestions. But as far as monthly, it's 84. [00:14:11]

Blake: [00:14:11] 84 monthly bookkeeping clients, fixed fee and is the is the team making 4.5 million in revenue or it's 4.5 million in houses? Or is that like revenue.

Michael: [00:14:26] Revenue, top revenue?

Blake: [00:14:27] Yeah, 4.5 million in revenue. Are they paying $200 a month?

Michael: [00:14:30] No, no, they're not.

Blake: [00:14:32] Okay. Got it. So that's a starting point.

Michael: [00:14:35] That's a start. That's yeah, [00:14:36] we have tiered pricing. [00:14:38] So. So if you just called me and said, hey, I'm a single agent, I work with buyers, you know, what's your pricing? It starts at 199 and then then can go up. Yeah. No, we have clients that are spending five times that with us.

Blake: [00:14:55] That's amazing. So, yeah, so let's go back to my sort of the question that I had or the challenge I had where I was at a larger firm and we were pricing everything fixed fee in our [00:15:07] CAS practice. We called it outsourced finance and accounting. [00:15:10] But I was I had an hourly rate as a manager and my staff had hourly rates and they were all very high. I think I was built out at like 225 to 50 an hour, right? My staff were built out at about half that. And so when we were computing the fees, like the least I could ever seem to figure out how to fit into a budget would be $1,000 a month. And so we just weren't even able to take on anything smaller than that in terms of the fee. So how do you, with 84 clients and you and your partner, like how do you balance all that? How do you how do you how does it work from a cost standpoint? And and you're a 20 year cost accountant, right? So, yeah, you must have thought about this. Yes. This is a big barrier to like doing this kind of work is like, [00:15:55] how am I going to how am I going to make money on these engagements? [00:15:59]

Michael: [00:15:59] Yeah, absolutely. And it's it's if I if I heard me saying this without the knowledge that I've gone through, I'd say exactly the same thing. It's just not possible. But there's there's a lot of things that worked in my favor. Number one is that I, [00:16:14] I had the time to seek out clients. [00:16:17] You know, I wasn't working another job while I was doing this. [00:16:20] I got some seed money from a buddy of mine that wanted me to succeed. Not a lot, but enough to carry me for the first few months. [00:16:27] That's one. The second thing is that [00:16:29] I chose a niche, a very, very narrow niche [00:16:32] or niche and using the French very, very narrow niche. And so we we didn't take on a lot of clients that came to us. I've had lots of requests from other people and other industries, but we just decided to focus on this. [00:16:47] And the other thing that's really important I think, for for this conversation is that none of my clients have a P and a R is. [00:16:55] So we're not doing any of that. [00:16:56] We're not full charged bookkeeping. We are doing we're the data aggregators. But but that even that we couldn't do without technology. So we've had to click up and then we found live flow. Live flow made all the difference in the world to us because it stopped us from having to send monthly reports. It stopped us from having to go do the back and forth requests back and forth for information for them to, [00:17:28] you know, we'd get a call a day, say, Hey, can you send me my September 2020 pal that we didn't have? So we'd have to go back and create it and send it and things like that, those kind of things. Now we just no longer do We got it.

Blake: [00:17:43] So you're not doing R or AP, which I can see how that would save a lot of time you're doing. [00:17:49] I take it cash basis bookkeeping. So you're you're aggregating the data, you're getting the transactions in from the credit cards, from the bank feeds, coding those into that standard chart of accounts every year. [00:18:02] Exactly. Okay.

Michael: [00:18:04] So I up. Oh, go ahead.

Blake: [00:18:06] Well, bank rules write bank.

Michael: [00:18:08] Automation.

Blake: [00:18:09] Like [00:18:09] you can automate like 90% of that these days if you're and especially if you're niched. Right. Like I'm sure a lot of these real estate agents have the same expenses or types of expenses. [00:18:19]

Michael: [00:18:20] Yeah, the same for a lot of them. [00:18:22] They have exactly the same expenses because they use the same software, for example, for their CRM. Well, most of them do. And other things that are just typical of the industry that, yeah, we set up the bank rules, never see it, it just flows right through. [00:18:36] But, but [00:18:37] one of the things that I was really important to me when I started this business was to not to not have to have my clients change the way they do business to work with me. So we tried all kinds of. Cost management software. And you know, to a person, they all came back and said, I don't want another app on my phone. I don't need another log in. You know, those kind of things. And so we bent our practice around them, around the way they work. Also, most of my clients are millennial and younger, so they live off their phone. So to ask them to get to a desktop somewhere to do something is just not going to happen. So we we make accommodations for them based on the way that they work and that that made our lives simpler once we set up the systems that that allow us to do that. It was a lot lot easier. And then to go back to it again, it's it's having that niche. It's [00:19:33] just there's every client is the same.

Michael: [00:19:35] The numbers are bigger or smaller, but what they do is exactly the same. So I don't have to learn anything new. [00:19:42] I go to a lot of their trainings, their financial trainings that set up for for the agents to participate in. I, I go to those trainings so I can sort of hear what they're saying to each other and what they're saying about the the, you know, the financial life of of an agent. And so I sort of learned to speak their language. I know what it is that they're looking for. I know especially what their coaches are looking for. [00:20:06] Most of my clients have coaches within Keller Williams that train them. And so I have a good relationship with a lot of their coaches and and that just it just makes things simpler across the board. And and I should also add that that even though [00:20:23] I still do have a starting place of 1.99 for for any client that everything beyond the basic bookkeeping monthly reporting is as an add on. So if I'm going to help them with budgets, we charge for that. If I'm going to help them with payroll, we charge with that for that separately. But just to come on to be a client of ours for monthly bookkeeping services, yeah, you can still get it at 199 plus the subscription for QuickBooks. [00:20:50]

Blake: [00:20:50] Do you also fix the fee for budgeting work for customized reporting for payroll, or is that different?

Michael: [00:20:59] No, it's a fixed fee, but it's but it's it's pretty inclusive as much as I can. I automate that too. So all of my clients are on QuickBooks payroll if they any time we can. We just set that up to automatically auto pay each each pay period. [00:21:15] So yeah, we're way about efficiency. That's that's the biggest driver for us. That's, that's the way we're being able to do it is to get as efficient as is reasonably possible. [00:21:25]

Blake: [00:21:26] You're not supporting five different payroll systems.

Michael: [00:21:30] No, no. Well, I mean, we I mean, we have clients that use gusto at QuickBooks Payroll and Paychex and all that stuff, but I'm not doing their payroll right. [00:21:40] I'll set it up and I'll even administer it. But I'm not entering their hours each each week. Got it like that. So, yeah, we push that back to the client as much as possible for two reasons. One is, is time consuming, the other is just for liability. I don't want to get caught. You know, somebody's getting paid incorrectly. [00:21:58]

Blake: [00:21:59] Oh, no, that's worse. I mean, the worst days of my life as a firm owner were when I had a staff that only happened one time in my entire firm existence. But we forgot to run a payroll and it was a big client. And I had to call the client and say, we screwed up. And so, yes, I'm with you on having them run it. Let them make that mistake.

Michael: [00:22:18] Oh, yeah, Yeah. If payroll is the bane of existence. But anyway. Yeah, so, so, so.

Blake: [00:22:28] So you mentioned a couple of apps, right? You mentioned live flow. You mentioned click up. [00:22:33] Let's talk about how the apps fit into automating this thing so you can have this many clients, [00:22:39] 84 monthly bookkeeping clients and many, I'm sure more than that that do other stuff with you and not go insane. Right. So well so so let's start with clickable since you mentioned that first is that that's a task management app project management app that general purpose I've used it myself. I know a lot of people in accounting love it and we've adapted it for running an accounting or bookkeeping practice, right? Yeah. Tell me about like how you selected that, [00:23:05] why you use it versus a why do you why do you use it versus a, say, an accounting specific task management tool or project management tool? [00:23:15]

Michael: [00:23:15] Well, when I looked at the the practice management that, you know, Lucio and Carbon and all the other ones, I mean and Canopy we went through all of them and, and the, [00:23:26] the issue that my clients had with those was having to log into something else and rather than have it just be there for them. And so we, we got a lot of pushback when we tried even we tried client and which works great, but I just couldn't get my clients. Use it again because another app on the phone sort of thing. And [00:23:55] so we we pulled back from that. And and [00:23:58] the reason that we ended up with click up is this is going to sound silly, but it was because of lost emails and click up as a feature that it sits right inside my Gmail. I use Gmail for my business email and has it little emblem right inside each email that I can just click the emblem and it opens up a new task which I can assign it to the clients folder and notifies my partner that it's come in. That's the most important thing, so that she knows that there's a new task that's been created. [00:24:25] We tried just forwarding emails back and forth, but as you know, emails get lost or don't get and and you have no way of knowing. And we tried some of the emails, we tried front, we tried Pixie or whatever it is. We tried a whole bunch of them. It just never found it to work as well as click up, which just automatically puts it and it tags it in my email showing me that it has been in fact uploaded to it.

Blake: [00:24:51] So. [00:24:52] So you're using email to communicate with these agents. They send you Something needs to become a task. It's something that needs to be done, right. You're using the is it the Chrome extension that they have and that so that that creates a little button in Gmail. And this is something that I don't know if they even have this an outlook but it's like my favorite thing about Google Apps is this ability to have plug ins to Gmail like that. [00:25:18] And so you click the button and then it becomes a task and imports the email into your software. Now, [00:25:22] do you email clients back from click up? Are you able to do that? [00:25:27]

Michael: [00:25:27] Yep. Yeah, I can. You can email it right from a task and, and so if we for the few clients we have bank requests or, you know, bank statement requests, most of us, most of them give us an account log into their bank. But for those that don't will email it from click up and ask for your your bank statements. And [00:25:46] then because we've initiated it from click up, when the bank statements come in, they come back right into that task. [00:25:52]

Blake: [00:25:52] That's nice.

Michael: [00:25:53] They're they're already held there. So [00:25:55] but the main purpose for us, though, is because it's real estate. There's a document for every closing, there's documents that are that go with it, and we need those documents to properly account for it. So again, my clients are generally not at their desktop, they're generally on a phone. And so they get the email, the documents emailed to them, they just turn around and email it to us and then it becomes a task and click up when it's come in. And so you can automate that as well. Yeah. [00:26:24] So.

Blake: [00:26:25] [00:26:25]So I think the obvious objection to this workflow from many CPAs I know would be security. How can you ensure the security of these documents if they're being emailed to you and not uploaded to a portal? But you just said that the documents are being emailed to the realtor in the first place. Yeah. [00:26:43] Or the agent, I should say.

Michael: [00:26:45] So, yeah.

Blake: [00:26:45] Yeah. So, so I guess nobody really cares. Nobody's really worried about the security of these documents.

Michael: [00:26:52] Oh, I tried to make them worried. That's. I really wanted to use one of the practice management software so that we could avoid this altogether. They just there's just, there's, you know, I have a I have two kids. I have a three year old daughter and a 32 year old son. And they both say, I [00:27:07] already know they know everything about me. They just don't take online security very seriously. They just like that's my clients are that same way. [00:27:16]

Blake: [00:27:16] Well, I love what you said about I forget exactly what it was, but it was something about, you know, [00:27:21] not making your clients adopt to your systems. It's adopting to their what they do now. And if email is what they do, it's going to be really hard to get them off of it. And [00:27:31] I tried. I was there with you. I tried using Podio to try and get my clients to use that to communicate with me. I had to build my own practice management software because it didn't really exist. Right. And I got maybe 50% adoption at best. And so then I wasn't really that much better off because now I've got two places, I'm getting.

Michael: [00:27:50] Stuff and [00:27:50] it was actually my partner that came back to me. She said, I am so tired of having to check in three different places for new tasks. She says over it, You know what she said? I'd rather just go back to emailing each other. [00:28:01]

Blake: [00:28:01] So and [00:28:02] I've told this to practice management developers in the accounting space and maybe, I don't know, maybe somebody's listening, we'll hear it. But until you figure out how to allow me to deal with the email inside of your app as as well as whatever improved solution you have, I have to be able to do both things in your system or I can't use it because otherwise it's multiple places now. [00:28:25]

Michael: [00:28:26] Yeah, no, I completely agree. And they're trying. I know, I know this you just recently introduced that into their program, but the other problem that I have with them is I'm paying for stuff that I'll never use. You know, I don't do taxes. I don't need all the tech stuff. Oh, yeah. So what do you do?

Blake: [00:28:43] What do you do for taxes? Like, what do you tell your clients to do? Do you have referral partnerships? Do you?

Michael: [00:28:48] I have a series of tax accountants around the country, a series. [00:28:52] I have a handful of them that I use that I recommend, but most of them come to me already with tax a CPA and and a lot of them that come to me. Their CPA had done their bookkeeping. [00:29:04] But as we kind of said at the beginning, you know, you're kind of going to get what they give you as far as reporting. You're not going to get you're not going to ask your CPA to implement the mirror format into their chart of accounts just for them, unless they're only doing this kind of work. Mm hmm. But I can't imagine how you can make a living as a CPA doing just real estate agents. So tax returns. Yeah. Yeah, So? So, but [00:29:31] I've got a couple that are that I've referred to because the they're they, they know what they know the system. [00:29:37]

Blake: [00:29:38] Have you thought about bringing the tax in-house and doing that as well as part of your fixed package price.

Michael: [00:29:44] I, I've thought about it and the closest I've got to it is there's a gentleman out in Florida that he and I are talking, he's a tax accountant and he's he and I are talking about him being the tax arm of our business and just just doing that. But I, I, I was a tax accountant for your public for four years. And just I there's just no way for me to keep up with it all. I just don't I'm ADHD on top of I should have probably said that up front too. So I, I have the attention span of a three year old. So if you could see my office right now, there's whiteboards everywhere actually back here. The shiny stuff that you see, that's that wallpaper whiteboard. Yeah, but it's everywhere with my tasks and I've got sticky notes all around and I alarm set. I had to turn my phone off because I have alarms that go off all the time to remind me of things.

Blake: [00:30:34] So, you know, [00:30:35] I actually think that that could be a an advantage in bookkeeping or running a cast practice or this kind of work because I have that trouble. I've never been diagnosed as ADHD or anything like that, but I have trouble focusing and remembering things. And, [00:30:51] you know, there's people who can remember deadlines in their head, like, you know, my wife's one of those people. She can remember her doctor's appointment, not put it in her calendar and still get there on time. If that happened to me, like if I didn't put it immediately in my calendar, I'm not I don't even know I have one. Right. Right. And and so [00:31:07] I've always had to design systems to save myself from myself. [00:31:10] Right.

Michael: [00:31:12] Right. Oh, that's that's it entirely. I mean, you would we have them hidden now, but like, if you opened my kitchen cabinets, there's some of that white paper stuff in there not to write down what we're out of. And then when I go to the store, I just go around and take pictures of all those white boards because there's no possible way I will remember, you know, if I think to myself, Oh, look, we're almost out of coffee, that I'll shut the door. It'll never come up again until tomorrow when I got to make coffee. So.

Blake: [00:31:40] Well, I may have. I think I've taken us off where we were. We were talking about apps and we had gotten to click up, and I want to make sure that we get to the other. Anything else you want to add about practice management, what you're using internally to make sure all this work gets done and you don't forget.

Michael: [00:31:55] Oh, well, [00:31:56] we've just done a lot of automation in Google sheets. So if you looked at our month end worksheet, it's just nothing but columns of checkmarks. If this has been accomplished and then and then that automatically lights up another one that tells my partner that this is ready to review or whatever. So it looks like a like a New York Times billboard with all the different colors and checks. But so now we've had to create whatever we needed. [00:32:19]

Blake: [00:32:19] So month end clothes checklist in a Google sheet and you just roll that forward, I guess, for each client. Yeah, makes sense. Spreadsheets will never go away. Still still work. Great.

Michael: [00:32:31] Yeah, I know. They keep trying to kill them, but no, that's that's pretty much how we operate.

Blake: [00:32:36] Well, you mentioned life flow and they are replacing spreadsheets for reporting purposes. So tell me about how you're using that.

Michael: [00:32:43] Well, it's funny because I initially I heard about life flow on your show, the Cloud Cloud Accounting Podcast Show. And I went and looked at it. And when I first saw it, [00:32:53] I was really excited, mostly because what I wanted more than anything else was to not have to go into QuickBooks and download into Excel the Uncategorized expenses and and then put it into an Excel and then pretty it up so I could send it to my client so [00:33:11] they could fill in the blanks to tell us what these expenses were for, because that took us, as you can imagine, with all the clients that we have, that we had to do that back when we first got it was we had 70 clients, so we had to do that drill every month for 70 different clients. And so when I first saw [00:33:27] life flow, which for those who aren't familiar with it, it connects directly into my QuickBooks Online for all my clients. And it and it snags the data. It's a one way search, so it just pulls the data into a Google spreadsheet. And so I wanted to just use it to create those month end Uncategorized expense worksheets and. And and it worked fine. But [00:33:51] it. But then as I talk to them more, the founders I got had several calls with them. First because I was frustrated because they didn't do some things that that I wish that it would. But then then I then I realized that I could create these financial statements that live in my Google drive.

Michael: [00:34:13] My clients can access, but they're they look like a spreadsheet. They're not pretty like what you would get from a management report from QuickBooks. And so we tried initially to just have our clients go there to see their their month end financials. And that was met with lukewarm, lukewarm appreciation, I guess at best. But then I changed that, realized that I was thinking about it all wrong, that [00:34:41] I didn't need to present the financials through live flow, but I could present through built on life flow. Using life flow as my back end database. I started building custom reports because each one of my clients, even though they have the same business, they their emphasis is on different things. So I have built out custom reports that are interactive, so you can click, click here and pull down September of last year, your pal, compare it to the year before and then and then on the side I built KPIs, [00:35:16] you know, just things that they look at, each client looks at specifically ratios they want to see or or whatever it happens to be. And so I got into that world and suddenly everything just made a lot of sense. So now any new clients that I bring on, we don't even offer the the monthly reports from QuickBooks. We we build them as customer reports and then we teach our clients how to get them when they need them, if they need them for a bank or if they are for for lending purpose or their CPA or whatever.

Blake: [00:35:46] They can help me understand this from a client experience standpoint. So I. You've closed my books for the month. Mm hmm. I get an email from you. Or is it something an email from click up or something? And what am I seeing? Am I getting an attachment? Am I getting a link? Do I have to go log in somewhere?

Michael: [00:36:03] Well, we do. We send a link because. Because nobody will bookmark it. But so then we accommodate, [00:36:11] we send a link. It's the same set of financials that's always been in the back end. And they all the beautiful thing about it is that they all update automatically. You know, they update once an hour. So any changes that we make in QuickBooks appear in the live flow reports within an hour. [00:36:26] And that's.

Blake: [00:36:27] The live flow reports live.

Michael: [00:36:29] In my Google Drive. So it's.

Blake: [00:36:33] Google sheets.

Michael: [00:36:35] Their Google sheets. Yeah. Okay.

Blake: [00:36:36] Got it.

Michael: [00:36:37] So yeah, so we send them a link. The reports are finished for the month. Click here, go see them. And we've got a set of five standard reports PAL monthly PNL by month, year to date balance sheet and I include a cash flow statement, even though none of them look at it. They do when I inform them that they're running low on cash. So suddenly it's very important to them.

Blake: [00:37:00] [00:37:00]So there is some security here because I mean, you can with a Google sheet or a folder, you can permission it, right? You can say view only comment, only edit. [00:37:11] Exactly. And most people I feel like most people have a Google account, so like that is not as much of a barrier saying now you have to log into this specific reporting software just for your monthly reports, which is with practice management software portals becomes an issue. Right?

Michael: [00:37:26] Exactly. And it's a link so they can just click it and go over to it and take a look. And we've figured out how to make them fairly presentable. You know, it's still a spreadsheet, so it's never going to look exactly like, like a nice report. But but the other, it gives us space. [00:37:45] So we've turned our reports into narrative reports as opposed to static report. So they're all interact. You [00:37:50] can pick the month or year to date whatever, click here, drop it down C September, C, October, whatever it is that you want to see the year to date and, and all of the, the details that they want to see are right there on the same page. So I know for a fact that most of my clients never look at their financials unless we get on the phone together if they have a question. And so I don't the redundancy of doing that each month just became another place where we could shave off a few minutes per client and a few minutes per client, you know, turns into hours saved if [00:38:27] we can if we can just direct them to to their own folder. And again, each one of their customer reports is custom to them. It's not just a generic custom report, it's it's for each client, depending on what their hot spots are. What is it they're looking for? So right now, everybody's looking at cutting costs as far as the real estate market gets more. [00:38:47] With interest rates rising and things like that, they're all looking at their costs. Well, we just set up these reports for them that show them their expenses by vendor by month and all those kind of things that they're available in QuickBooks. But this is now a live report that they can refer to back at any time.

Blake: [00:39:03] So so you're customizing the reports for each of your clients. But the key is you're only doing that once. You're not having to do it every month because live flow connects to the QuickBooks data and pulls in the new numbers for okay, yeah, I can see how that would save a ton of time. Just, just exporting to. Well, we used to spend a lot of time just exporting to Excel from QBO or Xero and then combining all the multiple Excel files into a single workbook and then PDF ing that workbook and then sending the PDF. And then if you had a problem where you had screwed up, you had to then read PDF and it was or maybe if you were unlucky, you had to export all the Excel files over again. Yeah.

Michael: [00:39:48] Yeah. I just described. Yeah, you described our whole routine. Yeah. Because there's always changes. Not with everybody, but every month there's changes. Oh yeah.

Blake: [00:39:58] Well, so. So those click up, live flow, anything else that is like key to the efficiency in your firm.

Michael: [00:40:04] We, [00:40:04] we started using uncapped for the Uncategorized stuff. It's especially for if we knew clients with a history that has to be brought up to date. [00:40:14] It's a beautiful product just and again, it just sends a link. You know, they call it the magic link, but my client clicks on it and they're on their dashboard of everything that we need to see.

Blake: [00:40:28] [00:40:28]What I love about this is just how easy it is from the client's perspective. You're making it as easy as possible for me as a client. I don't have to log in to stuff. I can just click a link. You're not making me go hunt for something in a portal. You're not making me log into a portal to send you stuff. [00:40:45]

Michael: [00:40:45] Right?

Blake: [00:40:46] And that that means a lot.

Michael: [00:40:50] Well, and also, I guess I should have said this upfront that [00:40:53] really, really good salespeople are generally not really, really good business people. [00:40:58] That's that's why we generally salespeople are hired by a firm to go work for them. And so so what I've got is a bunch of people that are making significant money that don't know how to run a business. And so they are looking at their financial statements is not something that they're going to spend any time doing unless there's a problem. And so we had to simplify things down as much as we possibly could to get the important information in front of them, which they would have to take their their PDFs and go through and, you know, use their calculator to figure out what their spend ratios are Or, you know, one of the big measurements from Keller Williams is their cost of sales, and they need it to be within a certain range to. Build their business. And so we just give it's right up front. When you log in to your financials right on the front page, you can just see your your total volume, your cost of sales, your net income, whatever else. Exactly. And it's right in your face so you don't have to go search for anything. Yeah.

Blake: [00:42:00] So what's your day look like?

Michael: [00:42:04] So generally I'm up at 445 in the morning. I go exercise for about an hour, sit. I log in at eight. My partner does a lot of the technical or not the technical, the the transactional stuff that needs to be done. She'll she'll go through each client and update their banking and categorize what she can. And then she sends me exception reports, like, here's the things I need your help with. She's not an accountant by training, although she's getting baptized by fire, so she'll send me an exception report. Here's the things that I can't I need you to take a look at. And then I spend a large part of my day. Now that we've created the time, [00:42:47] I spent a large part of my day actually interacting with clients on things that either I'm concerned about or I think they should be concerned about. And so a lot of my time is spent in in either writing emails to clients and or getting on a zoom call with them and just pulling up their reports and saying, here's areas of concern. [00:43:09] Most of my client, not most, I offer all my clients a half an hour of my time each month to go over their reports. Very few take me up on it. Some we meet every week for a half an hour, or some we meet once a month. So as I said before, once a quarter. And so that after this call, about an hour after this call, then I'll have one of those. I'm going to get on the phone with a client and just talk through some of their problem areas.

Michael: [00:43:36] And it's a little it's changed a little bit now because the market is so weird that because interest rates are up in some areas of the country, we're seeing a significant slowdown and others were not seeing a significant slowdown. So I am working with historical data with them and also just what I see in the big picture. What are other clients doing that are being successful versus what are we doing? So and I have access to a lot of that data as far as who's doing what and how successful they're being. So my day may look like like I'll tell you that I've got two new clients that I've got to build out their stuff this week. So I'll be I'll be working on that, their historical data, because we're going back to the beginning of this year. I've got a payroll issue. That's why that came top of mind that I've got to see if I can solve. And there's one other thing on my list for today. I have. I have. I told you I have nothing but sticky notes. Post-it notes. Oh, yeah. I've got one of my. The first client that I got has got some questions and wants to change up some things in their reporting just because their emphasis has changed. So I'm building out some reports for them so that they have better access to the data that they need. So. So it just depends.

Blake: [00:44:56] You log in in the morning, did you say 8 a.m. or before that 8 a.m.? Like when do you typically when you when are you usually done for the day?

Michael: [00:45:05] Funny you should ask. I have an alarm set on my phone. I have an alarm goes off at 3:00 just to remind me that it's 3:00. Because. Because the down or not, the downside. But one aspect of ADHD is that I can get hyper focused and forget to do things like eat because I get into something and the time just becomes meaningless to me. But I scheduled to be done at 615. I have an alarm that pops up on my phone that says Quit working at 615. But I also have the luxury of working from home. And so yesterday I had some medical things done, you know, that I took most of the day and just did that. And so today I'll work a little later to just to catch up on everything. But the goal is to be done by six, 8 to 6 plus on. I'm sorry.

Blake: [00:45:56] No, go ahead. Say, well.

Michael: [00:45:57] I'm in California, so and a lot of my clients are on the East Coast, so they're shut down by three, 3:00 in the afternoon. My time, they're shut down. So there's not much going on after 4:00 from my side. So I can I can go through out that way.

Blake: [00:46:13] I don't know what it is, but [00:46:14] I just have a really hard time working between three and 5 p.m.. [00:46:18] That's like when I hit my low point. That's, you know, in an ideal world I go take a nap, but I don't I can't because I have a kid, so I've got to go pick him up from school. But then he's going to do the homework and stuff and that energizes me. And then I come in and if necessary, I'll work in the evening. But I try to avoid it. I feel like if I'm really focused from eight until three, I'll just knock stuff out. And I know that I don't have a lot of time, so I got to do it.

Michael: [00:46:44] Well, it's funny that you say that because [00:46:46] I know my bio rhythms that one of the things, one of the therapists that was helping me with ADHD, she said you need to figure out when you're at your best for detailed work versus kind of more theoretical overview work. [00:46:58] And about 3:00, I'm done. If you need me to produce spreadsheets for you after three, it's going to be a long, long process. If I can do it first thing in the morning, I could get kicked out, you know, in a few minutes. But because I'm very sharp like that first thing in the morning. But by three in the afternoon, [00:47:15] I'm now I'm now I'm completely working on the business instead of in the business, you know, by three, because that's when my creative stuff comes out and I can't do any of that detailed stuff. It's just not even worth a try. [00:47:28]

Blake: [00:47:28] So, Michael, Sir, Mr. X Cost accountant, do you track your time?

Michael: [00:47:35] Yes.

Blake: [00:47:36] You do.

Michael: [00:47:36] Okay, I do.

Blake: [00:47:38] I do. Down to the client.

Michael: [00:47:40] No, we used to. [00:47:43] We both track our time, but. But it's become more of an exercise of of capacity. It's really a capacity issue for us because all we have to sell is time. [00:47:53] That's right. Yeah. And so it's like we're not taking on any new clients for the rest of the year because we have an imbalance in our work. Right now. I'm working more than my partner is, and, and that's just because I allowed it to grow that way. And, and so it's becoming tougher and tougher. So although we could take on clients from a capacity from her side, from the end, the review side, which is me, I just I'm full. I can't, I can't do it. And so we cut so.

Blake: [00:48:29] [00:48:29]So you're tracking time by like the type of work you're doing. [00:48:32]

Michael: [00:48:33] We're my partner is tracking time. She's just tracking her time. So she's just clock in.

Blake: [00:48:39] Clock out?

Michael: [00:48:40] Yeah. We have a spreadsheet. Of course. And then, of course, I've got all the analysis on it so I can see, because I wanted to make sure that that. Well, [00:48:49] I initially started it because I didn't want her to be overwhelmed. And so we got it to the point where she's not overwhelmed, but it's kind of shifted to back to me, not because only because we take on new clients. [00:49:03] My my part, the review part, which is essentially what I end up doing is, you know, we have 85 clients. We try to get everything out by the 15th at the latest. So if it takes me an hour per client, they've got 85 hours of time that got to be mashed into the first two.

Blake: [00:49:22] Weeks.

Michael: [00:49:23] Of the of the month. And we just can't at this moment. We can.

Blake: [00:49:30] Right. [00:49:30] And so that's how you're thinking about it in terms of capacity. You're saying okay an our client I've got 85, I'm maxed out at this point if I want to get the financials out by the 15th. Right. And I love how high level that is as opposed to tracking down to the client, which is what a lot of us have to do in public firms. And then you look at the budgets every month, you know, and see which ones you went over on or you have to Bill. [00:49:55] And by the time and I want to ask you a question, one more before we go. This is more of a philosophical question. Sure. So. [00:50:04] I have a theory that industrial cost accounting applied to accounting firms and service businesses is what causes them to really fail in a lot of ways because. You can't account for people the same way you account for widgets and machines. Do you agree or disagree with that? [00:50:20]

Michael: [00:50:21] [00:50:21]100% agree. I think timesheets are the bane of the accounting world's existence. Honestly, I just I don't think it makes any sense to track an individual down to that level of of detail, because there's some people, for example, my partner is much better at at just the transactional stuff in QuickBooks because she she doesn't get distracted. She just gets in. She does it. She, you know, she sets up the new rules, whatever it happens to be. So she can she can do. It takes her about half as long to do the transactional work as it would me, [00:50:57] because I start doing it and I think, oh, that's probably doesn't belong there. Maybe we should create a new category. I should call them and see if they want to track this separately. You know, if you're doing client events and you've got three a year, do you want to name them? And so for budgeting purposes next year, you know how much it costs. And so I go down these rabbit holes and she just gets in and chunks work out. So is she better than me or, you know, which that's that's not a realistic comparison. And I don't think you can do that at any level, you know, because, yeah, if I if I applied cost accounting to accounting firms, I'd probably recommend most of them need to shut the doors or do something different because. Oh.

Blake: [00:51:43] Well, one more question before we go. Sure. I lied about it. That being one more question. So, you know, it's you and your partner and you got 80 something clients. They're 80 odd clients. You're maxed out now. [00:51:57] So what are your plans to grow? Are you happy where you're at? Are you going to stick with it? Are [00:52:02] you going to hire? You seem to have a big opportunity with what did you say, 100,000 or more agents for Keller Williams like you could get really? You could build a really big firm if you wanted to, it sounds like.

Michael: [00:52:15] And there are some that are that are really big, but they've run into the same problem. As I mentioned at the outset, they become real standardized and you can't ask for anything special. You can't ask for special analysis or stuff like that. Or if you do, it's going to cost you tremendous amount of money. And [00:52:29] so we are kind of in that gap between the the super expensive CPA level bookkeeping type of stuff and then just the spreadsheet guy that's just taking your bank statements and putting them into a spreadsheet. [00:52:44] So we sort of fill in that gap. But I'm also very relational with my clients, and so I want to build in time for that as well. And now I say, here we go, add I completely lost track of what was the question? What was the initial question you asked?

Blake: [00:52:58] Yeah, where do you want to go with your business?

Michael: [00:52:59] Oh yeah, right. [00:53:00] So I'm actually in the process of training someone to become a bookkeeper just like me, and they're paying me to do that. And they will they will initially start off as an employee, not an employee, but they'll be one of the users on my QuickBooks. And so I can watch the work that they're doing as I start to refer to them. And so we're going to increase our capacity by however much he's able to take on. And then we're also in the in right now, we're looking at the best way to bring on somebody to take part of Amy, my partner's work on so that her capacity is freed up so that then she can move more into an overview role. And because she's worked with me for so long now that she catches this same things that I catch and so she can do more of the review process. And, [00:53:46] and to be honest, she's doing more of that now. But we haven't taken anything off of her front end. So she's doing more review work, but we haven't minimized her task oriented work. So we're going to the question is, do we bring on an employee? Do we do we go and find a virtual assistant someplace that, you know, has enough QuickBooks knowledge that they can do some of the transactional stuff without us. So.

Blake: [00:54:08] Well, Michael, you have an opportunity here because maybe somebody is listening and they are interested in being a part of this. Where should they go to find you online?

Michael: [00:54:19] Well, the best place is our website, which is all women business group dot com. And I mean, that's actually the only site and that will take you to that. That's our big overall business site. And if you click there's a link there to our bookkeeping site as well. And again, there's not a lot of information there. I don't have pricing on it or anything like that because I'd rather sell me rather than my price.

Blake: [00:54:46] Well, and like you said, you you had so much success with referrals that you didn't really need to do marketing. And so.

Michael: [00:54:55] You know, we've turned away we've turned away a dozen clients in just the last month that that you don't want to come in. And I say we can't not till next year. And we're also going through, I should say this, [00:55:07] I mean, we kind of based all this on on the pricing, but we are going through a price increase that we're that we're going to. Thoughtfully put out to most of our clients to because we have a target average that we want to hit each month. And we're close, but we're not close enough. And then we're we are rethinking the whole overall pricing scheme just as far as I mean, we'll still have the $200 entry point. But [00:55:34] as far as some of the other things that we do that we kind of give away, for lack of a better way to say it, you know, somebody somebody calls and says, hey, can you somebody state income taxes didn't get. Just didn't get into the state. The service says that they can't send it. So. So now I'm going to call Gusto and find out why the payments didn't get made. And then I'll call the state. And so and a lot of that I've given away in the past. [00:56:04] And so now we're just pricing it right up front, mostly to diminish that kind of work. To be honest, it's because it's not. I'm just the only one they know that could could speak the language of payroll. So that's why they asked me to do it so well. [00:56:20]

Blake: [00:56:20] Somebody's got to do it. It's good that your clients have you, you know, in their corner, so. Michael Ellerman, thank you for talking to me. I learned a lot today. I'm inspired now. I mean, I kind of want to go out and create a super niche firm like what you've done. It's very exciting and I hope our listeners enjoyed it as well. And a reminder to our listeners that you can earn free CPE Credit Naspa approved continuing Professional education credit for certified public accountants, Certified management accountants and even enrolled agents at earmark CPE. Download the Free app. Find this episode on the earmarked channel and register. Take a quick five question quiz and you can get your CPE certificate. We're coming up toward the end of the year. It is November 2022, and I know a lot of people are rushing to get their CPE before January 1st, so we've got it for you and you can do it away from your desk while you're walking around, while you are working out, while you're doing the dishes. I do all of those things while I earn my CPE now. So, Michael, thanks for helping us create this wonderful course and educating the profession. And I hope to talk to you again soon.

Michael: [00:57:36] Absolute pleasure. Thanks, Blake. This has been great.

Blake: [00:57:39] Now, don't go anywhere.