The Accounting Technology Lab Podcast – Review Of Datamatics – May 2024

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Transcript (Note: There may be typos due to automated transcription errors.)

Brian F. Tankersley, CPA.CITP, CGMA  00:00

Welcome to the accounting Technology Lab sponsored by CPA practice advisor, with your hosts, Randy Johnston, and Brian Tankersley.

Randy Johnston  00:10

Good day, welcome to the accounting Technology Lab. I’m your host, Randy Johnson with my co host, Brian Tankersley. Now Brian and I have researched a lot of outsourcing firms over the years, in the last few years, we actually have looked at many, and I would suggest to you, there may be a few 100 options for you out there. So that makes it confusing. Right off the bat, there are a number of outsourcing firms that I would keep you away from at almost all costs. And there’s actually about 10 or so that we recommend. Now it turns out Datamatics is an outsourcing firm that I think has a good reputation worthy of your consideration. The company has been around almost 50 years at this point, which is pretty stunning, about a $200 million company with about 10,000 staff and about 2000 clients. And they’ve been working with CPA and accounting firms for about 20 years, with about 1200 people focused in that area. And those are pretty strong numbers compared to many of their competitors. So you know, with the 150 or so CPA firms that they’re already working with it, you get some things with this team that you might not get otherwise. And that is experienced because of them working exclusively with accounting firms in this team, that they’re trusted, they’re working with small firms to large firms. They do comprehensive services, including tax audit and client accounting services. And they can actually minimize your investment in the overhead of hiring and training and retraining staff. All the work is done on your network. So no data is transferred in and out, which minimizes some of your IRS and sock and GDPR and other reporting. And they are GDPR and ISO certified. So Brian, I’ve kind of taken a longer cut on this this morning. But, you know, we recognize from the CPA trend lines, you know, Rick tilbyr, good friend of ours has basically published the 25% of firms in the US are now outsourcing. They’re doing hybrid remote work, there’s a talent crisis in the US, and there’s a talent surge globally. So, you know, that’s kind of a setup on this. So I think there’s probably three key drivers on this. So would you like to talk about outsourcing from those three key drivers?

Brian F. Tankersley, CPA.CITP, CGMA  02:43

Well, let me let me just first start out by saying that look, a lot I know a lot of you listening to this said you would be cold dead and spinning at 200 RPM before you went out and did outsourcing. But the reality of it is that the the even the big firms are having a hard time finding the right people. And the small firms are having a much harder time finding people. And I’m talking to all kinds of firms in small towns around the around the country, that are telling me that they’ve just they’ve accepted that if they want to stay in business, they’re going to have to do some level of outsourcing and some level of technological and process change. And the problem with process change is that it takes a while to do that. So it’s, you know, realistically, you know, if you’re waiting on the AICPA image campaign to come right in and save the day, or if you’re waiting on, if you’re waiting on the technology, the AI technology that’s that’s out there that’s being used in big corporations to make it into the accounting profession. You’re not going to make it till that, okay, it’s going to be a process of years, in some cases, decades to get to write this to get the direction fixed. So what what I would suggest to you here that, that you need to know about this organization is that they have, they have global teams, again, they’ve been doing this for 50 years. So there are, you know, there’s 50 years of history with this. They’ve got the technology worked out, obviously, and they have the culture worked out as well. Because that, you know, so they’re not new at this jumping in with a with a with an, you know, a my an offshore mindset, and then trying to learn the culture, the business culture in the US. They’ve been doing this for some time. Yeah.

Randy Johnston  04:36

So Brian, you know, your point earlier, you and I’ve talked about this too many firms that it’d be a cold day before they ever did outsourcing

Brian F. Tankersley, CPA.CITP, CGMA  04:46

and there’ll be playing hockey on it, you know, and they and you know, yeah, and I understand it’s Stanley Cup season right now, baby and they are going to town on that surface. Because it’s Just it’s the markets just do tough right now. Yeah,

Randy Johnston  05:02

that’s exactly what’s happened. So now automation may catch this up over time, by the way, and I have told outsourcing companies that their threat is automation that starts to work. But I figured that still a few years out, and I know you’ve written a book, a course for que tu this year on automation and outsourcing,

Brian F. Tankersley, CPA.CITP, CGMA  05:20

you know, and I just, I just did the emerging technology session for k two as well, too. I just updated it. And I’ve been looking at that Gartner hype cycle, and the amount number of years it’s going to be before these technologies hit, and they’re in the plateau of productivity. And I’m just going to suggest to you that I think you’re five plus years from getting meaningful AI, in, in traditional services, you know, traditional tax, bookkeeping, that kind of thing. I think you’ve got some today in expense reporting and AP processing and other things like that. But, you know, when it gets to, when you get to some of those other things, some of the more advanced things, you know, there’s just you and I know, the development roadmaps for these organizations, and they’re just not spending the money on this right now. And so you know, it’s a three to five year thing after you start spending money. And they’re just not spending the money on it right now. Yeah.

Randy Johnston  06:18

Now, it turns out the chunder Hotel, which we’ve known for a long time, has written a very nice document on how to pick out sourcing, which we’d recommend, but why on earth global teams at this point in time, what are some factors there, Brian,

Brian F. Tankersley, CPA.CITP, CGMA  06:35

the workload has gotten ugly. I’ve, I think this shortage of CPAs is out there, too. You know, I had a guy texting me last night. He has a closed restaurant chain, and he’s looking for somebody to help him do his tax work for the year he closed. And, you know, it’s April the fifth, as we’re recording this, you know, and I said, buddy, you’re getting extended, you know that, right? You said, Oh, I know, I’m getting extended, I just don’t want to go to jail. And the problem is that there’s this this people shortage, has made accountants do a lot of things with pricing with, with client retention, or non retention, and other decisions like that, where they’ve decided that they don’t want to participate, you know, I talked to this guy, but I assume that since he closed his business, they decided they didn’t want to deal with the year it closed. And so now he’s having to figure something out at the last minute. So you know, what I would, what I would suggest to you here is, as we’re looking at these, at the global teams, this lets you scale up and down very quickly. So you don’t have you know, we don’t like this scenario where we have a lot of people sit around the staff room doing nothing. But we also don’t like the situation where everybody’s working 18 hours a day, or, or you know, everybody’s burning out. So we have to be very, we have to be very balanced on this. And so this lets you do more picking of the kind of work you’d like to do. Now, you and I both, you know, we all I actually had a managing partner once said that, you know, I do all kinds of weird consulting services sometimes. But one of his consulting services was, he helped one of his one of his clients, that was a widow, go out and buy a new Cadillac every two years, you know, and that was that was part one of his services. And he said, you know, the, the problem is that, if I wanted to just do that there’s not a market for that service in this town. And so I have to do the tax work if I want to do that. Now, what if you can’t find the people to do the tax work, or you need expertise that, that you can’t get to let it delegate it. And that’s the reason why global teams because you’re opening up now, and you can get expertise and experience in markets all around the world, as opposed to having to wait on folks to come to your your area. You know, some of you may live in New York. But you know, you still have to get somebody that’s, you know, again to you still have to deal with the remote and everything else with, with so many people in big cities today. Anyway, this is really just another kind of remote and it has a cost advantage and potentially an experienced advantage due to help you get this done.

Randy Johnston  09:19

Yeah, so in effect, a global team lets you take care of the workloads while letting you pick tasks that you’d like to do that you can work with your firm’s culture may be being a little more client oriented in that, and that your client experience may actually improve because you’ve got extra labor to do the jobs. And you may be able to grow your revenue at the same time. So all of those things help I think with the global teams. Now what type of services are available, you’d have to ask carefully. When you outsource with data medics, they do bookkeeping and Kaz, and accounting and tax tax and payroll and audit, in other words, all of the core functions of the CPA firm. But this varies widely based on the outsourcing company you might ask. Yeah,

Brian F. Tankersley, CPA.CITP, CGMA  10:10

and the thing you have to remember here, when we get into even the applications, like the tax software applications and the audit applications and bookkeeping, and Kaz, you know, sometimes you, you have to use the outsourcer stack of applications, as opposed to the one that you want to use. And so we have to, you know, we have to, we have to watch and see that they support our applications, and that they’ll use them the way we want them to be used. So, you know, that’s that, I think, is a pretty important thing to catch here. Yeah,

Randy Johnston  10:42

in you know, another thing is, how long does it take to do and some of these to convert to outsourcing. And usually, these outsourcing firms can onboard you fairly quickly. You know, in the case of data medics, they they’ll do a discovery call and then do a follow up with operations calls. Once you start to sign the statement of work with say, you know, weekend, then a few more days of it, setup will make it where you get ready to go live. So if you think about it from making the decision to, to talk to somebody to being able to go live might be a week or two. Now, notice, I didn’t say your firm will be ready to use everything that they do. And that’s certainly not the way it works. But it can go fairly quickly. And in effect, the workflow that then occurred occurs and the workflows are somewhat different than you’re used to and your firm, you basically have an account manager, which then speaks to team leaders on projects. They have seniors and juniors among these teams. So the best way to think about them is as pods, and the experience level is at the account managers typically 10 to 12 years experience in US accounting, the team leaders typically have about five to seven years experience in US accounting. And the seniors are typically at three to five years, and the juniors at one to three years of experience in US accounting. So just think about how difficult in your market it might be to find somebody with 10 to 12, or five to seven or three to five years experience. And pretty much data Maddox has those people on staff as part of the way they do business. So in terms of the governance on this, the governance frequency I think also comes into play with your partners, you’ll speak at the executive level of data Maddix. At your option quarterly, your practice leaders will talk to the account managers at least monthly, the managers will speak to the team leaders weekly, and the seniors will talk daily or as required to the juniors or seniors on the data Maddox team. In other words, you’ve got two way communications that occur. And you will build relationships with your outsourcer at this level. Now, some outsourcing teams will talk directly to your clients. But many do not that should be a choice you make. Again, there’s often language barriers, or the firm’s that are based in India, like datamatics is, obviously you’ll have Indian accents. But even for firms that are based in the Philippines, like some of the other competitors, you know, there’s going to be differences in culture and language barriers in all of these different outsourced regions. So we

Brian F. Tankersley, CPA.CITP, CGMA  13:50

just we’re not throwing any rocks here, okay, because their English is a heck of a lot better than our Hindi or our Tagalog. Okay. So, you know, we’re not throwing any rocks here. But that’s the practical reality that we’re dealing with. And so if you’re, if you have clients that are sensitive to sending things offshore, or other things like that, that’s something you’re gonna want to weigh in to that decision that you need to make.

Randy Johnston  14:15

Yep, absolutely. So as Brian mentioned earlier, the automation that will replace this, I think is going to be a while now we’ve talked about automations, for example, like black or in other podcasts that are doing 1040 automation. But, again, how soon will we get there to replace outsourced labor? I think it’s going to be a while.

Brian F. Tankersley, CPA.CITP, CGMA  14:36

Well, even if you even if you wanted to shut off your existing tools and switch over to black or for example, for one of the products that’s actually working well. I don’t know that they’re doing all 50 states yet. So you know, it’s there’s just a lot of this. You know, there’s a lot of elephant eating that’s taking place right now in the account. Any industry with and we have a lot of things that we use, that have timelines that are denominated in years or even decades as opposed to, as opposed to getting done here. With this, you have a timeline where you can go from initial call to starting in as little as 10 days, according to the PowerPoint. Now, it’s April the fifth, as we’re restoring this, as we’re recording this. So I’m just going to suggest that there’s no way that you’d be able to do 10 days during during busy season. But I would think you could move, you could move very quickly. And I just want you to see that, that if you’ve got a key person that’s left, you may be able to be in a position to turn on some assistance. In a you know, in a pretty short order to fill gaps, if you know, you’re not going to be able to hire somebody, like if you had a key person that left with, you know, that key tax prep person, maybe a tax manager that left February the 14th. You know, first off, they’re gonna have a voodoo, you’re gonna make a voodoo doll of them, and you’re gonna be praying for their demise daily for years. Because that’s just something you don’t do. More importantly, here, though, I think we have to, we have to think that this is a potentially a way that you can step into that situation and and carve something approaching quality of life out of it on fairly short notice. So it’s something to just kind of file in the back of your mind that that, you know, doesn’t mean they’re going to necessarily have capacity at that time. But they their ability to scale will be much more robust than yours, or mine might be in a, you know, in your local community. Yeah.

Randy Johnston  16:48

So just a reminder, then that the data Maddix folks have produced her, Tanya has produced a very nice ebook on how to create your firm’s global team in just two weeks. It’s one of the best guides on outsourcing that I’ve read that I think is independent enough that it would be good guidance for you. Now that said, there. As I mentioned earlier, hundreds of outsource companies have very few around a dozen that we think are worthy of consideration. And datamatics probably falls into that group. So again, do your own due diligence here. But we have been very thoughtful about the types of things that should be covered in outsourcing. And you know, as I think about outsourcing, we could talk a whole lot more about it again, Brian, I know you just wrote a que tu course in this area where you talk about the services and the turnaround time and the skills and the security and the locations and what type of services are available and what the service level agreement should look like, and so on. So, again, that’s another probably a topic for another day. But are there any other closing thoughts that you’d have on datamatics?

Brian F. Tankersley, CPA.CITP, CGMA  18:06

I think generally that I think their experience speaks for itself. And I think having 50 years of experience really says a lot. In that way, if we’re talking about this, you know, there are all kinds I don’t know about you, Randy. But I find that I’m getting approached on LinkedIn, and Facebook and in all kinds of social media from people that want to do outsourcing directly, you know, people that are that are firms that are seeing the amount of money that these outsourcers are making and they’re just trying to reach out directly. And you know, you don’t know what you don’t know about these folks. And the challenge here is that when you pick an outsourcing solution here, this is very much like hiring somebody. And for better or worse, once you hire him, you’re married to him for a while. And for good or bad. And so you want to be sure that you can get comfortable with these folks, and that they’re going to work with your firm the way you want to be worked with, and that you know, you don’t have some kind of long term commitment in there before you really get good and comfortable with them. So, you know, I I think it’s I think it’s just generally important for you to do your that due diligence on folks here. Just like you would do a background check and check out anybody that was potentially going to come to your firm. You want to make sure you do that due diligence on the on the outsourcing firms out there. There’s there’s a lot of good there’s a lot of wheat out there, but there’s a lot of chaff too.

Randy Johnston  19:37

Yeah, I appreciate that. And your point Brian is actually spot on. I bet you I get a couple of dozen approaches a week for full outsourcing fact now that I think about it’s probably closer to 50 than 24 because I was just thinking about outsource labor when I was quoting the number but development teams approach is all bloody. Time. Well, hopefully we’ve given you an idea or two about outsourcing and about datamatics in specific. We’ll join you again in a future technology accounting lab. All the best good day.

Brian F. Tankersley, CPA.CITP, CGMA  20:16

Thank you for sharing your time with us. We’ll be back next Saturday with a new episode of the technology lab, from CPA practice advisor. Have a great week.

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