Practice Success Podcast

Joe Woodard on Transforming Accounting with AI and Outsourcing

• Canopy • Season 3 • Episode 3

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Joe Woodard shares his extensive background and insights into the current staffing crisis affecting accounting firms. We discuss the impact of technology and AI, and the growing popularity of outsourcing as a temporary solution.

KC Brothers:

Welcome to another episode of Canopy Practice Success. I'm here with a well known individual in the industry today, Joe Woodard. Joe, how about you go ahead and, I mean, people most likely know who you are, but give us a little background first.

Joe Woodard:

Um, yeah, well, thank you, Casey, and it's great to be here. Uh, best way to describe me is, is I provide education, coaching, resources, professional communities, and consulting to accounting firms. to empower them to enrich their clients. That's what we do over here at Watered. And I've been honored to be a thought leader within a recognized thought leader within this profession for about 20 years now. Um, I've taught over 150, 000 accountants in my career. So been at this for a little while.

KC Brothers:

You've seen it all. You've seen everything that could go right and everything that could go wrong.

Joe Woodard:

Yeah. And a little bit of everything in between. That's exactly right.

KC Brothers:

I love it. Um, so. I mean, we, we had a lot of, I've talked to a lot of individuals that may have very well been inspired by you. You are one of the biggest organizations that does what you do. I've spoken to several individuals who do this just as a, a one stop shops or not one stop shop, uh, it's their job. They're a single individual consulting firms. The nice thing about, of course, you having. Done this you said for 20 years and having now a large organization with lots of people is you really get a A rather representative pulse of the industry and what's going on. And one of the things that still blows my mind, I feel like I first saw headlines on this 18, maybe even 24 months ago. And I'm sure there were maybe even things before that, um, is just the, the supply demand chasm of talent, of accountants. What's going on there? Why, why is this still so pervasive?

Joe Woodard:

Yeah, it, well, it, it's not just a symptom of COVID, though COVID did impact it. Um, it's a symptom of this next generation of humans that are coming out of college and what they want to do, how they want to engage the world. Uh, and, and a mix of the fact that accountancy is a branding problem. So there's a lot of. A lot of factors going into play, and I'm going to address several things I've seen that have been driving the staffing crisis, but I kind of want to usher a weird elephant out of the room when it comes to staffing while we're seeing headlines that say we're in the middle of a staffing crisis. We're also seeing headlines that say very large firms, including the big 4 are laying off hundreds of workers. How do we reconcile those two things? And, um, it's because the nature of the worker is changing. So we'll get to that a little bit more. And so, uh, they don't have the right kind of worker for the next generation of accountancy, but let's get to the staffing crisis as a whole. And then we'll kind of deal with that next generation of worker. But, um, and the 2 are, there's a Venn diagram overlap between the 2, but just talking about the staffing crisis as a whole. Okay. There are more specialized requirements that are necessary when I hire an accounting professional. It used to be if I have a degree in accounting, or I've been to a trade school, and I know my debits and credits, um, T accounts, we used to call it way back in the day, then, uh, or I know how to interpret a tax organizer to get the information into a tax preparation software product. I'm done. I'm, I'm a qualified person to work in your practice, but now. I hope. It's more like we're, we're hiring technicians who are software experts that happen to also know how to do debits and credits or also know how to fill out tax forms and not everyone is necessarily capable of navigating the technological landscape that way. And if they are, they're not necessarily thinking. Accountancy is the place I want to deploy that, you know, they're, they're, they want to use those schools and, uh, those skills and those natural aptitudes they have in something that's more directly related to the computer fields, right?

KC Brothers:

At this point, you're not necessarily talking about people who have chosen to go and study accounting, get a degree in counting, sit for the exam. You're just talking about. Yeah, the generation

Joe Woodard:

at large, the pool of people that may, you know, we draw from a lot of non degree, degreed resources with accountancy, especially with bookkeeping and tax preparation. Um, there are a lot of people that just developed the trade skills or went to trade school or went to a junior college. Those folks were never headed for a career in quote unquote accountancy. And then so many times the accounting finds people. It found me. I mean, my bachelor's degree is in classical Greek, not in accounting. I studied accounting at the graduate level after accounting found me and after I was hired by a CPA firm. So there are a lot of people that, that came at this, this profession sideways. Those folks just, um, they either have a proclivity to technology or they don't. But now if they don't, the intersection doesn't happen. You know, back whenever I intersected accountancy, they saw aptitude in me for the actual work of accountancy, and then they discovered that I had an aptitude toward technology. Now, It has to be a technology first person who happens to have an aptitude for accountancy and that, and I can't stress enough that that category is out there. The people with a strong technology proclivity do exist in plenty in this next generation of workers. The problem is. They don't naturally gravitate toward accountancy with their technology aptitude. They gravitate to other business segments.

KC Brothers:

There are, and there are so many. There are so many more options in that regard. Yeah.

Joe Woodard:

And options that pay better, have, are more exciting, and have better career opportunities, better work life synergy. Which gets me into the next problem. Our brand problem isn't all perception. Our brand problem is, is, is also reality. Um, We, we, we have a seasonal workload that is heavily tax driven. We have a realization and utilization measurement, uh, that exists pervasively in our profession that values the timesheet over meaningful outcomes. And we have the. Brand and I would think the reality of burning out college students. I mean, the idea is that you endure a trip through the enterprise firm world to earn the right to go hang your shingle so you can struggle as a small business owner for the rest of your life and then retire, maybe, hopefully to sell your portfolio at something around one X revenues. Uh, yeah, that's a recruitment pitch. Um, so, so really, exactly. We got to change the profession. We've got to pay our people better, which means we have to change the way we engage our clients around outcomes instead of inputs. And we have to make enterprise firms a place you want to stay, uh, and you want to engage for all of your life, like they might engage Google, or they might engage Microsoft from a technology side, um, or, or, or they might engage CNN, or they might engage ABC as a journalist, and they just make a career out of that larger world that takes care of them, that treats them well, that pays them well, that provides good benefits, that fosters work life synergy. Instead of what we have today, which is endure purgatory in order to then go struggle as a small business owner. Uh, it's not a good value problem.

KC Brothers:

Yeah, I mean, it's so interesting. I think back, um, to myself, um, I was in economics undergrad with aspirations. I remember interviewing at Goldman Sachs and. Different places, but you know, the reputation they have is similar is 60, 70, 80 hour work weeks. Um, and you, you put in the time for several years with the hopes. I mean, I didn't feel like, and maybe I was a naive undergraduate, but I didn't feel like the prospects for that path were as grim as the ones you've painted here. And I felt like, but the same thing of like, okay, if I. Earn my stripes, then I'll be free. I'll make money. And the thing that kept me from doing that was like, I was a young single girl. It was like, I, I would be miserable. I'm an extrovert. I wouldn't have a social life. I couldn't exercise. I'm like, I would. Emotionally die.

Joe Woodard:

Yeah. And I'm not, and I'm not an expert on that segment of the, uh, uh, the market, but what I can tell you is most segments of the market at least provide a big enough carrot at the end of the stick so that if somebody does want to work themselves in 70 hour work weeks, there, there's a stronger prospect. For well, from the other side of that equation, um, we don't have as strong of a prospect for wealth on the other side of the equation. And if we got there, we got there by climbing up the rigorous and painful partnership ladder, which is now being undercut by the P. E. Infusion so, so much the best way to describe it is the, the fear, the uncertainty and the doubt that exists around our profession right now, including the potential of what our professions even going to look like after this massive M and a. It's, it's just not the sort of mind filled into which a college graduate would like to step,

KC Brothers:

but there's still so much need for accounting. Like, it's, it's not the

Joe Woodard:

need doesn't go away. That's for sure.

KC Brothers:

Yeah. So you've talked about it being a staffing crisis. And, and there is because the work is still there. The work still exists. Yeah. There are still small businesses. There are still individuals who need their taxes done. Like what's, what's the disconnect? Why? Why? Aside from those things, um, well, I guess those are pretty good explanations. Well,

Joe Woodard:

I got an, I've got an explanation there. We're in the messy middle. Yeah. The messy middle. between the human effort being required to do that work and the technology evolving to the place, including AI, evolving to the place where it is going to make significant productions. It's going to create significant productions to mimic the actual work of a human worker. And it's a messy middle. Because this next generation of workers, it's not like they've done some AI analytics, but they're reading the tea leaves. They're listening to college counselors. They're, they're hearing the pitch from recruiters. They're reading the headlines. So they're gleaning. That accountancy is about to be smaller than it is today because the bots are going to do more and more and more of the work. Um, a company out of California startup just came out with a big press release. They planted their flag now to say, we are the first company that has ran, uh, that has run a complete bookkeeping cycle for an entire month for a client. A test tube laboratory outcome result, but they've declared it solely by AI. with all of the variables that have existed for a real life company with no human intervention. All right.

KC Brothers:

And, and no errors. And no

Joe Woodard:

errors. Zero errors. So now we have the laboratory proof case that AI can do a complete bookkeeping monthly cycle without human intervention with all the complexities and without, without error. Um, so now to scale that. You know, that's going to be a completely different horizon, but it exists now in a laboratory and the whatever that that arc is between the laboratory and systemic adoption, those kind of headlines cause talent to say, well, I'm not going to invest in a career that could likely be displaced within a short horizon, you know, but. But we're not quite there yet. So while we're, we are repelling a talent because of the fear, uncertainty and doubt of our future as a profession, we aren't yet to the place where AI is actually carrying the lift. And that messy middle means there's a supply demand problem.

KC Brothers:

Yes. So, okay. I want to dive into a, but I feel like there's still so what is there still a human element that people need to be considering right now?

Joe Woodard:

Yes. And I would say it's outsourcing outsourcing and that's why you're seeing an explosion of outsource services because that's the gap filler for the messy middle. And it's, it's a bubble. Uh, the bubble will burst once the bots replace the outsourced worker, but the offshoring worker. But right now, the, the companies out of India, South Africa, the Philippines, even, even Latin America, they're exploding right now, uh, as a way of filling in the gap between where we were and where we're eventually going to be.

KC Brothers:

I'm, I'm reminded of, um, just a basic user adoption curve with this of like, you've got your early adopters on the far left and you've got your laggards on the far right. And this sounds like a classic case of please don't be a laggard. Like let's, let's adopt this early because, um, if, if yeah, we've got this laboratory case setting where it's executed. Perfectly on work that many of our listeners do. Don't drag your feet.

Joe Woodard:

Yes. But then if you tell the listeners of this podcast, I'm assuming are largely accounting professionals. If you tell them, yeah, just go out and buy AI or go out and code AI. I mean, no, I mean, that that's not setting up people for success. So the way you embrace AI is to embrace the AI powered technologies. I mean, let somebody else is already doing all that work for you. And I know this is, this is Canopy's podcast, so I'm not pandering to my audience here, but, but Canopy's a good example of this, right? They, they, they've, they're infusing AI and have infused AI into the product that you're already using. I love the, the email reply assist, right? So that, that could save someone 10 minutes, 15 minutes, 20 minutes on each reply to a client. Well, you know, you, you add those up. And it'll add up to 2080 hours as a full time equivalent across a scaled organization. Um, that's one way to address the staffing crisis. Um, and then when it comes to actually doing the bookkeeping work itself, there's this entire category of AI powered month end close that will help the bookkeeper. workflow is in Canopy. That's where it should be. The process on how to do it should be stored there. The document handling with the client. Use the workflow, use the document handling. But then when it comes to actually closing the books in Xero, closing the books in QuickBooks, Zoho, whatever you're using, there's another layer of AI powered tool that will go in and assist with that monthly close, streamlining the amount of work that has to be done, including reviewing the entries that others have recorded. And so now the job of an account manager with empowered by these AI driven tools, an account manager might be able to support 40 clients instead of 20 clients or whatever, you know, the ratio is, um, depending on complexity, uh, they might be able to double double their portfolio. Now, the work might still be done. It might be done in, in, in whatever offshoring company you're using. But that review cycle could cut an entire full time job on the account review side. Um, especially since part of their job is, is interfacing with the client. You streamline the document handling like you, you all do over there. Canopy really well, you streamline my responses to the client through some AI powered email responses, then put in an AI review and close tool. You, you've cut headcount.

KC Brothers:

Yeah. You make a really good point too, about like the way you're approaching AI. Um, AI has a huge learning curve if you're going to try and do it directly with an AI tool.

Joe Woodard:

Yes. You're going to code.

KC Brothers:

Yeah. It's, it's tricky. It's tricky to incorporate it the right way, to feed it the right information, to prompt it the right way. But when you have good software. That has already incorporated it in. You don't have to worry about those mental processes of wrapping your brain around. How do I get this to give me what I want?

Joe Woodard:

Exactly.

KC Brothers:

And if

Joe Woodard:

anybody's used chat GPT, which I think is everybody listening, you know, that how you ask the question is 90 percent of the battle and you end up spending all of this energy, figuring out how to ask the question. And, and so even if there are solutions that are calling to generative AI. Maybe even calling to the same AI platform that you're interfacing with directly at ChatGPT or wherever, whatever you're using, Copilot, whatever it may be. It, it's their lift to figure out the exact way to frame the question underneath the surface, um, to get you just that right email response or get you just that right, uh, month in close analytic.

KC Brothers:

Right? And that's just generative. But then there's the examples of, um, the word I'm thinking of is. Uh, contextual of like, okay, I've got AI where my data is, let me use the AI to interact with the data to, in some examples, you've said, um, review, um, the work, but in something like canopy too, you've got all of your, your firm data. You've got. Time, you've got invoices, you've got documents, you've got client information. Let's use AI on top of a platform like that to help you find information to, um, I'm gonna just let the cat out of the bag here. Um, we've got some really cool new AI functionality to help you summarize content within an email thread. Those things can get hairy and you don't want to.

Joe Woodard:

Yeah. All these last 20 exchanges. These are the three action items, that kind of thing. It's huge.

KC Brothers:

And even helping someone not just generate a response based on a prompt, which we have now, but suggesting an appropriate response to match the writer's tone. Which saves even more time. Um, you mentioned documents. Doc I often talk about clients being the lifeblood of the accountant and documents being the lifeblood of their work.

Joe Woodard:

That's a good way to phrase it.

KC Brothers:

You are stopped in your tracks when you don't have the documents you need. Um, but having a I layered in with your documents to help you check. Did they? In fact, give me everything they need. Are they labeled correctly? Are they classified the right way?

Joe Woodard:

Or even just going in and mining out the data that you want, you know, instead of trying to find that basis statement. For that particular Schedule D that you're working, item you're working on right now, could, might you just, and it's not theoretical, it exists, be able to ask AI, what is the basis of this? Particular investment and you don't even even if you know, you can go straight to the report. You even know where on the report to look. It's so much faster just to ask the question and have the question answered almost like a, like a, an internal Google search on steroids. Right? And that's where you're going to see AI cutting tax prep way down. I, whatever I did tax prep and I spent years doing it. The schedule D and specifically the basis research around schedule D, me. That was about half of the energy of the 1040s. And what if you could cut that back by 90 percent to that kind of data mining activity? You know that that's where I see a I creating a solve for the staffing crisis. But I also then think we get back to the part, first part of the conversation. That's where I see AI shrinking the profession. I, I believe in the future we will have a smaller profession and hopefully a better compensated one with better work-life balance, work-life harmony or, or synergy. I like to call, I like to use word synergy. Hopefully it'll be a better profession. But there is nobody I don't believe who has questioned it will be a smaller one because tax preparation and bookkeeping and financial analytics and so many of these other disciplines that require human effort are going to be done by the bots. So, you know, if you're in a situation now where we're kind of like in the future and you're the president, I'm facing a tax season, I can't find workers, right? AI is not yet to the point where you can go just say, Hey, do my tax returns, right? We're not there yet. Um, you still have to find candidates and I, I, the time we're recording this, we're going into the big 2024 tax year. And, um, so a couple of things I found that work well, Casey is, is online recruitment tools. They're really good. Um, the, the negative side of them is you're going to get a ton of resumes and even some spammy stuff. You got to cut through all the noise. But if you cut through the noise, um, there, there are diamonds in the rough. Right? Uh, if you, if you've had the ability to do the admin lift on it, um, recruitment agencies, if it's a good 1, great, just still screen the candidates. Don't assume that because they hand you 1, it's a fit. That's the big mistake you make with those. LinkedIn is a great place to find workers because now they have job postings like any other kind of online service. Um, but if you are going to use LinkedIn to find people that work within your profession, just make sure that you're, you're doing it respectfully. You don't want to get into the poaching activity, right? Um, you know, at least that's my personal ethic, but, but, uh, so, so make sure you're not too aggressive with it, but still, you might find people that, that nonetheless would be good candidates. They often have their, their, where they live, if local matters to you in their profile. And it's heavily searchable, but the most above board way to do it. And probably the most effective is just create a job posting on LinkedIn. And we found that typically it's a higher. Qualified candidate to number of, of resumes ratio. Um, and I want to address this kind of part time contractor, seasonal worker thing. I know to get through this next tax season, you may have to do whatever you have to do, but I I'm not a fan of the part time worker. I'm not a fan of the seasonal worker. And because the work is more than the production, it's about the team you build and the culture you build. Right? And bringing somebody in just to kind of work the shop for 3 months and they come and they go and there's a different person coming and going or the same person cycling in and out. Are they ultimately representing your brand, your vision, your mission, your purpose? Do they have year long relationships with clients? Are they looking for opportunities to engage clients in July rather than in February around tax analysis and tax planning? They just don't have that frame of mind. Um, so, in as much as possible, it's better to hire full time people on one side of the equation. And then if you have bubbles of production, then use a combination of bots and outsourcing to get the actual entries into the right fields, but keep that person who's client facing with you around year round, pour into their life professionally. And as a team member year round and let them always be representing you from a brand perspective, because, I mean, could you imagine going to Disney World and and the experience being people who are temp workers who only have a 6 week stint with Disney, you would not experience the same culture. As engaging a year round team member who's been through their training, who understands their vision, mission and purpose. Um, and has been inculcated into that culture. That's the experience we're giving our clients if we're not careful.

KC Brothers:

You, you make such a good point because again, it's not about how necessarily well, I mean, you, you need to do it right. A tax return, a bookkeeping service, um, outsource CFO work, whatever it might be. But where business is made and broken is in the relationship, is in the human interaction, and if If you're hiring someone, you, I've never heard someone talk about season on part time work like this, just because it's such a mainstay of the industry.

Joe Woodard:

Yeah, well, and we're, we're big on culture over here in our coach program. So it, it becomes the, the plum line and the compass for, for all that we, that we do with our ideal practice bottle. And that's given us that particular lens to look through. Um, impracticality of it because, you know, canopy is always improving. So now you've got to retrain that person every year. If you use canopy, um, what the latest features are or the latest way you're using the workflow and there's going to be inconsistencies of delivery there. Yeah.

KC Brothers:

Yeah.

Joe Woodard:

And

KC Brothers:

yeah, you could have switched any system or software.

Joe Woodard:

Yes, exactly.

KC Brothers:

The software landscape today is not what it was 20 years ago.

Joe Woodard:

No, it's volatile would be the word I would use. That's a little bit harsh, but yeah, it's a volatile environment. Yeah.

KC Brothers:

For the user side. Yes. Um, I mean, a little bit even from the software side, like there are always new competitors popping up and it keeps us on our toes, which I like, you know, like keeps us hungry and healthily competitive.

Joe Woodard:

Yes. Yes. And, and therefore also, I mean, just this week, you know, we saw that Dext was acquired by Iris. Um, you know, SIFT was acquired by Xero within the last 2 months. So when these kinds of things are taking place too, it, it, it creates a volatility, uh. You know, within, within the user market that we have to navigate, navigating that with seasonal workers and part time workers just adds extra challenge. Now, some people might ask, well, if I'm outsourcing, don't I run into the same thing? So, when you're choosing an outsource company, you want to choose an outsource company that takes what is called a pod approach. So, say that I'm a firm on canopy. And I want to outsource some, some monthly bookkeeping work, or even some seasonal tax bubbles. Then I'm going, then that outsourcing company is going to train an entire pod on, actually they may train an entire floor of their operational canopy, depending on how many of your users outsource with them. So they're going to, there's going to be canopy expertise spread throughout their organization. That's why I like going with a scaled player like Canopy because the outsourcing companies are cross training on you, right? Proactively. But within your pod, the pod is going to be trained on your process in Canopy and your document handling in Canopy. So if you've got a seasonal spike from January to March, January to April, um, then that pod might have three or four people in it. If, uh, all the way up through October, you might be resourcing from one person in the pod, but there's always one person remaining in the pod who has always worked with you throughout the year as the pod scales up and down. And that creates a continuity of knowledge that you can offload to the outsourcing company, um, and not have to retrain the teams. The retraining of the teams is actually one of the benefits that you gain. That's their lift, not yours. Yeah.

KC Brothers:

Seriously. Yeah. The, the cost of acquiring a new customer can be applied to the cost of acquiring a new employee too. And

Joe Woodard:

absolutely

KC Brothers:

ramp speed and time to which they're become productive. And then if you lose them, Shoot. You got to do it all over again.

Joe Woodard:

Exactly. Which is another reason I don't like the part time model because it's more susceptible to employee turnover than the full time is. You're not their entire livelihood. You haven't invested in them as a career. They haven't invested back in you as their career. Um, they're not a full inculcated member of your culture and therefore they're more ripe to be poached or just to. Take their other part time employer and choose to go full time with them. The risks of employee turnover are really strong there. And just very briefly, I want to mention this contractor thing, because this is, this is where some, some firms listening in, you may be stepping into a danger zone that you haven't fully thought through. Um, on one side of the contractor equation, it, they really are employees. And I think if anybody understands contractor versus employee and understands how to walk the line, it should be the users of Canopy. We should be the guardians of our small business in this. And we know what your, you should know what your state's rules are on this. In order for a contractor to not be an employee, you can't give them equipment and make them use it as soon as you do. They are your employee. You can't dictate the systems that they use to produce the work. So as soon as I make them use Canopy, they're an employee. So what is happening, we are bringing in what we're calling contractors, but we think because we're paying them for short amounts of time, or because we think that they're not, we're not their primary source of income. We're only using those two qualifications to say their contractors will go back and read what your state's requirements are. Your Department of Labor is probably saying if you make them use canopy, they're your employee. If you issue, uh, if, if you make them, uh, hit certain deadlines that are you, you know, saying you have to get this work done by deadline. How the work gets done, when the gets work gets done, when you show up, when you go home, all of those things for most states make that person an employee. It makes your firm out of compliance. So we're going to, I just want to take contractor off the board as being impractical, unreasonable, unlikely. And that really just leaves us with full time, part time outsourcing. Part time is highly volatile and cultural problems, as we mentioned. So now process of elimination, we're down to full time outsource.

KC Brothers:

And then AI.

Joe Woodard:

And AI. Yes. Now you've got a third player on the board. I love it.

KC Brothers:

Yeah. A lot of things for firms to learn now, but I would say. More hope than I've heard in a long time in regards to staffing crisis and AI that like the combo of it Like I think for me at least relieves, um some pressure of finding talent and opens up opportunity to say There are so many developments and lots of progress being done with AI I just need to find it and then implement it and even that could even be Um, something you use to attract the next employee. Yes,

Joe Woodard:

I'm a modern AI powered firm. Absolutely. And just a couple of things on that. Yes, the future is bright. The reason that you may be listening to this and you don't feel that brightness or even see that light at the end of the tunnel yet is because you're in the messy middle. But just remember it's a middle. Push through folks and, um, and I, I, I'm sorry about the, the, the sort of the name drop here on my conference, but I'd be remiss if I didn't say the nation's largest accounting technology expo is my conference and it's in June. Canopy will be there. You guys have a nice big spot. Come see your friends at canopy at scaling new heights this coming June. Where these AI power tools are going to be out there to explore. It's a great place to take that next step.

KC Brothers:

Well, awesome. Thanks. So I think with that, we'll wrap up. It's been a pleasure talking to you today. It's

Joe Woodard:

great to talk with you, Casey.