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Technology Can Be the Solution to Today’s Finance and Accounting Talent Crisis with FloQast – Futurum Tech Webcast

Technology Can Be the Solution to Today’s Finance and Accounting Talent Crisis with FloQast - Futurum Tech Webcast

In this episode of the Futurum Tech Webcast, Mike Whitmire, CEO and Co-Founder of FloQast joins host Keith Kirkpatrick, Research Director, Enterprise Applications at The Futurum Group, for a conversation about workplace trends, focusing specifically on the accounting industry, and the frustrations that many accountants struggle with, day-in and day-out, and what that means for today’s organizations and the future of the accounting profession. They also discuss how technology can be the catalyst for ensuring that the accountants of today are able to continue to do meaningful work, while also properly positioning the industry to continue to attract bright and innovative workers for years to come.

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Transcript:

Keith Kirkpatrick: Hello, everyone. I’m Keith Kirkpatrick, Research Director, Enterprise Applications with The Futurum group, and welcome to the Futurum Tech Webcast. Today we’re going to dive into an interesting discussion on workplace trends, focusing specifically on the accounting industry and the frustrations that many accountants struggle with day in and day out, what that means for today’s organizations and the future of the accounting profession.

We’re also going to discuss what can be done by employers to address the situation, ensuring that the accountants are today are able to continue to do meaningful work while also properly positioning the industry to continue to attract bright and innovative workers for years to come. Now, joining me today is Mike Whitmire, CEO and co-founder of FloQast, provider of accounting workflow automation software. Now, in addition to leading FloQast, Mike is also an experienced CPA and a fellow SU alum. So welcome to the podcast, Mike.

Mike Whitmire: Thank you so much for having me, Keith. I appreciate it. And yeah, go orange.

Keith Kirkpatrick: Exactly. So Mike, let’s just start by talking about what’s going on in the market. We’ve heard a lot about changes in the labor and workforce because of the pandemic, the so-called Great Resignation and the Quiet Quitting Movement. We’ve seen a lot of stories about how there’ve been shortages in some industries like retail or hospitality, but apparently the accounting industry has also been hit pretty hard as well. Can you tell me what’s going on in the profession? Is there a workforce crisis going on right now with accountants?

Mike Whitmire: Yeah, we’ve been covering this a lot at FloQast, but there’s definitely an issue with the talent shortage in accounting. And what’s interesting is I actually think it’s unique from some of those other industries. I don’t think it’s COVID-driven, necessarily. It’s a challenge we’d be facing whether COVID happened or not. It’s been a slow burning trend that’s been slowly getting worse and worse over the last, call it 20 years.

But what we’ve seen is there’s a drop-off in people majoring in accounting and getting their CPA licenses. That’s been a pretty consistent trend over the last 10 or 15 years. We see people entering the major declining, as well, so that doesn’t bode well for the future of that statistic around percentage passing the CPA exam. And then we also see people leaving the profession at a pretty alarming rate.

That’s a, “Maybe there’s more meaning in my job I can find, or I’m sick of this rote boring work.” Or the other one is a lot of accounts end up being very entrepreneurial and go off and start their own companies and do their own thing from there. So they’re going to leave a full-time job and potentially go start an accounting practice or something like that. So that’s a really tough situation. On the other side of the equation, there’s always more business. Capitalism marches on. Hopefully GDP increases in the United States, and with that there’s going to be more demand for accountants.

And how do you plug the gap if you have fewer and fewer people in the profession, people leaving the profession, less people entering the profession. However, we all have a goal of our economy continuing to increase through capitalism, so something’s got to give and it’s really starting to break and we can see with how hard it is to recruit accountants these days.

Keith Kirkpatrick: Right. Mike, you mentioned something interesting there. If you look at some of the reasons why accountants are getting frustrated, you mentioned something about, was it routine work or they’re just getting frustrated? Is it also that sometimes there aren’t the tools that they need to really do their jobs efficiently and they wind up just getting, honestly, buried?

Mike Whitmire: Yeah, I think those two are very interrelated. We end up doing a lot of manual, and I like to use the term rote work. It’s so boring. And the problem is you have to do all that work because of how manual the job is because of a lack of technology. And that’s not what you learn in college. So you major in accounting and you learn about the principles and the theory of accounting and it’s sort of comical to me that people think that if you’re good at math, you’re going to be good at accounting. Adding and dividing numbers is not what makes you good at accounting. That’s what Excel and calculators are for.

Accounting is a puzzle. It’s about problem solving. It’s about understanding rules, regulations, guidance. How do we apply it to our business? How do we apply it to any given transaction? And how does that show itself in the financial statements and help make business decisions from there? So it’s a really important job and when you’re majoring in it, it’s all really interesting because you’re piecing together this puzzle and you’re solving all these problems.

All of a sudden you get to your job and you’re not solving problems. You’re just manually entering data all day. Or maybe you’re reconciling two spreadsheets where you’re just going line by line and doing this and it’s not mentally stimulating. You don’t understand where you fit in the bigger purpose. What’s the big picture here? Why does this matter? And so I think people get jaded with that.

And then because there’s a talent crunch, people have to work a lot of hours to make that happen. And, speaking from personal experience, I worked a lot in accounting, a lot of hours in accounting and it can burn you out and at some point something’s got to give, and for me it was quitting and starting my own company. For others it’s quitting, trying a new field, maybe going back to school. It’s kind of all over the place.

Keith Kirkpatrick: Right. Well, I think the great Steve Jobs actually once said, “The only way to do really great work is to love what you do.” And it sounds like today’s accountants are just getting mired in things that they absolutely hate to do. They’re not doing strategic work and they need other things or would like to be doing more fulfilling work. So what can employers do right now to support their existing employees to help them pull them out of that drudgery of rote work?

Mike Whitmire: Well, I’ll throw out something a little bit controversial. A lot of the reason people major in accounting is for job security and they’re going to make money. I think a simple thing we can do to make people feel a little more fulfilled at their job is pay accountants more. This is a thing I’m really realizing is accountants, put simply, they’re underpaid. And when you look at other professions and inflation-adjusted salaries and everything over the last 10 years, no wonder you won’t go into accounting. They actually make less money, inflation-adjusted, than they did 10 years ago, and that’s in the middle of a talent crunch.

So I would say for starters, everyone who controls budgets, maybe open up the purse strings a little bit more to recruit and retain really good talent. I think that’s the first thing that’s got to give with a lot of this. Then, when you’re working in a job, the work that you hate the most is probably the most automatable at that point. So you’re going to take a look at software to do that, and that’s where you get to take, “Hey, I have this big problem where I’m doing all this work that’s not enjoyable for me. It’s not a good use of my time. I could be doing better things to put my knowledge to use. Let me go find some software that can help solve that problem.”

And what’s really nice is, to solve that problem, you’re now applying the accounting principle, problem-solving guidance that you really start to learn about in college. You’re starting to apply the more fun stuff to automating this boring problem that you don’t like. And so I think a really good way to find some fulfillment in your job is to actually solve the biggest problems that you have internally, whether that’s by improving processes or bringing in technology, whatever it is. There are different ways at this point to really focus on improving the department, and selfishly, you’re going to work less if you do that. You’re also going to have a really cool opportunity for career progression with that and probably make more money as well.

Keith Kirkpatrick: Right, right. Well, let’s talk a little bit about technology and how it can be used. What technology solutions does FloQast bring to the table to really help these organizations?

Mike Whitmire: Yeah, so as you said during the intro, we do accounting, workflow automation, and the story of FloQast has been pretty interesting. We really started with a focus on the month-end close and reconciliation process. I was a senior accountant before. I hated that part of my job. It was so manual, and so I literally was like, “There’s got to be a better way to do this.” Left my job, started working on FloQast to automate big chunks of the month-end close process.

So we have a purpose-built workflow for the month-end close, checklist items, documentation, reconciliations, collaboration, communication, all that good stuff, and reconciliations. That all lives in FloQast. Over time, we’ve fanned out more broadly across the workflows that live under the office of the CFO, really. So we’re able to help all these different processes that aren’t necessarily the close, but they’re either upstream from the close, downstream from the close, interact with the close.And that’s allowed us to go much broader and really help drive accounting operational excellence across the whole department.

And then more recently we continued looking at like, “Hey, what’s downstream? What makes sense for us to help with from a workflow perspective?” And we found a really big need with our clients that our clients have around the compliance world. And so a lot of the information that you need for compliance lives as part of your business processes, the main one being the month-end close. And so we’re integrating all that and pulling it together and bringing it to one screen for everybody.

So yeah, there’s been this evolution over time and we’ll continue to evolve as we build out our platform. But accounting workflow automation and taking a lot of the mundane work off the whole team’s plate is what we’re focused on.

Keith Kirkpatrick: Right, right. It makes a lot of sense. The other thing I wanted to dig into a little bit here is you guys have an integration between FloQast and SAP, right?

Mike Whitmire: Mm-hmm.

Keith Kirkpatrick: It seems that there’s a lot going on behind the scenes to really improve automation and make it a friction-free experience for accountants. Can you talk a little bit about what the integration really entails and how everyday accountants are actually going to benefit from the combination?

Mike Whitmire: Yeah, happy to. There are a couple integration points with SAP. I’ll start with a high level just trial balance integration. One of the big exercises we do at the end of the month is I’m going to look at my reconciliation over here. I’m going to see a certain ending balance, call it 10 million bucks, then I’m going to go to my ERP, I’m going to look at that ending balance inside of my ERP. It’s going to say 10 million bucks, and then I’m going to go to my Excel workbook, I’m going to type in TB, which says I agreed this number to my trial balance. And then that’s your process. That’s how most companies close their books and that’s the end of it.

The problem you have is you now have an Excel spreadsheet that’s disconnected from your ERP. We would all love to be locking down our periods and being perfect about it, but the reality is that doesn’t happen in practice. So sometimes somebody might book a journal entry to your account in SAP, you might not be aware of it. Maybe somebody messed up the Excel workbook and that one no longer ties out. So what we do is we integrate with that Excel workbook. We pull over the ending balance, we integrate with SAP and the trial balance. We pull over that ending balance, and so we link those for you dynamically now.

So your team will go through that TB exercise, the controller can review it, you’re done with it. But then if anything changes after the fact, like those risks that I just mentioned, you get alerted in real time that, “Hey, this number changed, go fix it before the auditors find it,” is basically the message to be sent there. That happened to me personally at my job. It’s embarrassing to admit, but that exact thing happened to me and the auditors caught it. So that was one of the main ideas that we wanted to focus on. That’s the highest level.

And then when you move into more layers of detail, we pull in transactional information then for different accounts, to help with automating the reconciliation process. A lot of that’s going to be around the bank accounts, credit card statements, the high-volume transactions like that. But another area is we have a product around variance analysis. So we help our companies with their flux analysis process, which is how much a balance has changed period over period and explaining the fluctuation of those accounts.

And then there’s our budget to actual product, as well, which compares your actual financial statement results against what your FP&A team had budgeted. That requires more of the intense integration work and pulling in that transaction-level detail. So you can look through that and say, “Hey, fixed assets increased by $15 million because we purchased all these laptops for this office in this country,” or whatever. You get that level of insight around that information.

Keith Kirkpatrick: Wow, that sounds like these integrations really are going to deliver a lot more efficiency, smoother workflows. But I guess one of the other concerns, though, particularly of large organizations, is that they have this just massive amounts of critical sensitive business data and they’re obviously concerned about security, particularly when you’re talking about integrating it with other systems. How do you go about protecting that data that is obviously very important and very critical?

Mike Whitmire: Yeah, great question and very top of mind for us forever. Our approach to going to market I think would help with some context here. When we started the company, I came out of a mid-market accounting department. I helped take the company public. We were growing really quickly, and so we kind of built the product for the needs that I would’ve selfishly had at my prior company. So mid-size businesses, which, in that area early on, we were able to check the boxes from a security perspective for a lot of companies within that space.

So we were very early on making sure we had our SOC reports, we were going through penetration testing with a third-party vendor, they were checking our code, all that good stuff. And then as we move up-market, every company has another compliance requirement that you have or another security angle to knock off and all this kind of stuff. So after eight years of selling FloQast, we have about 2,500 customers today. We’ve gone up market and we’ve been able to meet the security requirements of every single one of our customers at this point.

I’m not intelligent enough to go into the nuances of everything we do from a security perspective. I know we have a lot, and there’s a whole security engineering team, which by the way, they’re not cheap employees. Security engineers make good money. If you want to get out of accounting, check out software security engineers. That’s a good space to be in. But we have our actual internal security team that’s watching out for the application and making sure there’s no bad actors getting into the database.

And then we have a really intense compliance function, as well, that oversees the ISO 2700, the SOC 1, SOC 2, Type 1, Type 2. We go through annual audits around all that. I mean, one of the nice things about my background is we were aware of how important audits, security, compliance, all that stuff was, starting the company. So we were very early on all these different areas. And yeah, fortunately, no issues so far.

Keith Kirkpatrick: So, basically, that’s sort of been baked in with your DNA, essentially, not tacked on as an, “Oh, we have to do this,” instead of-

Mike Whitmire: Exactly, yeah.

Keith Kirkpatrick: I think that’s important. I also wanted to talk to you about, I guess, you guys had done a study looking at some of the frustrations of accountants, and I think there was a stat in there that I found pretty interesting. They said something like 61% of those that you surveyed said that they doubt they can complete the work that they’ve been assigned, but even with all that, they still want to take on a more strategic role in the organization. That to me is really striking to me that you have this group of really motivated people who are just being honestly hamstrung by the rote, day-to-day muck work, essentially.

Mike Whitmire: No, I completely agree. Because the strategic work, it can’t be you’re doing your day job and this, at this point. People are too burnt out. The thing about accounting that’s a little bit unique is the deadlines that we have in accounting are non-negotiable. The SEC is not going to be like, “Oh, we understand that you had a rough day and you weren’t able to close the books on time and your financial statements didn’t get out. They were a day late. That’s totally fine, don’t worry about it. We’ll take it.” That does not happen. Your stock price gets pummeled. The CEO and the CFO look horrible, and it’s not a good look on your business. You can lose hundreds of millions of dollars in market cap if somebody doesn’t hit their deadline, so non-negotiable.

So the team is always going to focus on the stuff to get the job done that month or that quarter or that year, whatever they’re really focused on. It’s just the whole treading water is so accurate because of how much work we have to do. So we need to automate some of that work before we can carve out our time to focus on more strategic areas. And what kills me is having the time to focus on the strategic areas is how you free up the time to focus on more of the strategic areas. So you have this chicken-and-the-egg game that you’re trying to figure out, and, really, it’s a tough spot to be in.

Keith Kirkpatrick: Yeah, absolutely. And I guess that leads to the next question, which is, obviously it’s 2023. We’ve been hearing a lot about generative AI, all of that kind of stuff. How do you see that technology working its way into whether it’s in your own solution or just the industry in general? Because to me, it sounds like there could be some real opportunity there to offload a lot of that repetitive work.

Mike Whitmire: We internally have gone through the whole hype cycle of AI. We’ve played that out internally and we’ve landed on what we think is a pretty pragmatic line of thinking around it. We think AI is going to be very impactful in accounting. We think it’s going to take longer to be adopted than it is to be built. I think that’s an interesting thought around this whole thing. I don’t envision where there’s some black box where we don’t know what’s going on, and accounting is just automated. We don’t see that world.

What we see is AI being leveraged throughout workflows, throughout our application in seemingly small ways. But when you add up all that AI, the impact becomes really big and is removing a lot of that mundane work. So that’s really where we’re focused on is, what are the specific use cases within each of these accounting workflows that we can use to automate a lot of this work? And then how can we think differently about how data’s presented and people interact with applications to make it a little more interesting and have it be more like… The conversational thing is super interesting, and can you turn accounting into more of a conversational thing than whaling away on spreadsheets, an Excel type of experience.

So there’s a lot of interesting things you can do with it, but what we’ve noticed is, time and time again, it’s automating the work that people don’t want to do, it’s allowing them to level up what they’re doing, and to work, this is the really cool part to me, is to leverage AI tools appropriately and be really good at it. That’s where you need that accounting knowledge that you learn in college to be able to do that. And the whole prompting thing, just personally as a little side anecdote, I’ve been fooling around with a bunch of these programs. Midjourney is one.

Midjourney does image creation. And so I’m an accountant, whatever, but I like doing this. And in fiddling around with it, I’ve realized how important it is, the fact that I did not major in art history or photography or anything like that. I don’t know anything about how to prompt this thing.

Meanwhile, you see other people like, “Give me this illustration in the style of this person and this rendering,” and all this kind of stuff. And they put out beautiful imagery. I’m just some guy fiddling around with prompts and not producing anything nearly as cool. That concept’s going to be the same in accounting. If you’re the person who majored in accounting, you’re going to know how to use all the AI tools really well because you have the background, the context, and you know why. It’s not going to be a thing where I think just an average person off the street can pick up accounting AI tools and be really, really effective.

I say all that because I think it’s going to level up the function in a really big way and have it be more interesting and hopefully just close the gap of… You can envision capitalism marches on, accounts continue to drop off. There’s some subset of work that just has to be automated in the meantime for this to work out. And hopefully we can automate enough of it to keep accounts sane over the next 50 years. That’s my big hope.

Keith Kirkpatrick: Right. And then I guess, finally, you keep going back and referencing when you were in college you were obviously training and learning all the accounting concepts and all of that kind of stuff. And then of course you get out into the real world and you’re not always doing that. But what else can you do? What else can the accounting industry do beyond… I loved your comment before about pay them more. But what else can you do, as an industry, to really make accounting something that people go, “Hey, I really do want to work in this field because I am fascinated with the concepts there. Not the muck work, but the concepts.” What could be done?

Mike Whitmire: Well, I think we could do better positioning around what majoring in accounting will set you up to do in the future, whether that’s in accounting or not. And this is a really powerful one for me. I think that there are personalities who are well suited to remain in accounting, and maybe you’re a little more risk averse and you like having the 40, 45-hour a week kind of job. And that’s great. You can do that in accounting. There will always be a job available for you. There’s always job security. Cool, great job picking that major. That’s great.

Then you maybe have people who are willing to take on a little bit more risk, do something different. And what I found is, in accounting, you learn it’s the language of business. The old Warren Buffett quote, it’s very true. And Warren Buffett’s a big believer in learning all about gap accounting before you make any investment decisions with that. And when you do learn accounting, you genuinely learn the language of business. And for me personally, it put me in a much better spot to start a company than I would have had I not done anything in accounting.

I found it was very frequent in our first year of starting the company. I would just know something that was coming around the corner for us or something that was happening because I’ve been in the space before and you have employees just like, “How’d you know that? Blah blah,” and it’s like, “Because I did that in accounting.” It was really interesting how much I would refer back to like, “Oh, that happened on this audit engagement,” or “This happened at Cornerstone that one month and we did that.” So it was really cool to see that accounting knowledge genuinely play into FloQast and just the entrepreneur side of FloQast, not the, “We build products for accountants.”

That’s really important, but the actual starting a company side of it, it was super helpful, regardless of what type of business you’re starting. It’s great to have that as a foundation. So if we could pitch that a little bit more, rather than I feel like the pitch you get today is, “Go to audit. You can become a partner,” and there you go. There’s not much talk around the other options that you have coming out it when you major in accounting, whether it’s going private or different things like that. So I think a better job pitching career opportunities would help, in addition to paying more, yeah.

Keith Kirkpatrick: Right, right. That all makes sense.

Mike Whitmire: The coldblooded reality is students are very good at looking at how much student debt am I going to take on, how much money? They have access to Reddit, they have access to Glassdoor. They can read all about what it’s going to be like entering these professions and how much money they’re going to make. So a lot of them are doing coldblooded math and just being like, “This one pays more. I will pay student debt down this much faster. As such, I’m going to do this job.” And you can’t blame anyone for doing that in this day and age, right?

Keith Kirkpatrick: Right, right. Absolutely. And I guess, finally, what’s on the horizon for FloQast as we move out of ’23 and into ’24?

Mike Whitmire: Business-wise, continuing to grow. International expansion is top of mind for us. We’ve seen FloQast work really well across the globe. And then for our product, it’s continuing to broaden our footprint across the office of the CFO, help with as many workflows as we possibly can and continue to automate that with a really big focus on the compliance side of it. How can we help with all these compliance requirements that live under the CFO and the CAO, as well? So yeah, broadening the platform, expanding internationally, hiring more people, and then of course continue to support our customers, make them happy and help them close their books faster.

Keith Kirkpatrick: Great. All right. Well, Mike, I really appreciate our conversation today. Lots of great insights and hopefully a bright future ahead for the industry.

Mike Whitmire: Yes, I hope so. I hope so, as well, and we’ll do everything in our power to make it happen.

Keith Kirkpatrick: Great.

Mike Whitmire: All right. Thanks for having me on, Keith. I really appreciate it.

Keith Kirkpatrick: Thank you.

Keith Kirkpatrick: All right. I’d like to thank everybody for joining me today on the Futurum Tech Webcast, and I’d like to thank again my guest, Mike Whitmire, CEO and co-founder of FloQast.

Thanks to everyone for tuning in. Be sure to subscribe, rate and review the podcast on your preferred platform. Thanks very much and we’ll see you soon.

Author Information

Keith has over 25 years of experience in research, marketing, and consulting-based fields.

He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.

In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.

He is a member of the Association of Independent Information Professionals (AIIP).

Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.

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