The Rise of AI in Accounting: How Technology is Transforming the Finance Function

Randy Wootton (00:04):

Well, hello everybody. This is Randy Wootton, CEO of Maxio, and you've joined us for SaaS Expert Voices, where we bring the experts from all around SaaS to join and talk about what's going on today and what they see going on tomorrow. So I'm really honored to have Matthew May join us, who I've known for a couple of years now. He's had a great experience primarily in the audit space where he started off at Ernst & Young for a while and then went to Cherry Beckert. He is now president of Acuity and has a YouTube video, The Tech CPA, and is CEO of VerifyIQ as well. So Matthew, welcome and wow, you got a lot going on.

Matthew May (00:44):

I have a couple of things going on, so it's nice to be here.

Randy Wootton (00:47):

So maybe let's talk a little bit about the YouTube videos. I got a chance to watch some of those. How have you developed that as a channel and what was the inspiration for it and what are you doing with it these days?

Matthew May (01:01):

Yeah, the inspiration for YouTube was we saw that search was moving from kind of text space to video and more people are consuming and searching on YouTube. It's passing Google, or at one point, I think, I believe YouTube passed Google as a search engine. So the YouTube channel was my attempt to stay relevant. So we started with a podcast ourselves, like having it on the YouTube channel that moved into short form video, and we also have shorts on video that we try to maximize, trying to leverage TikTok. Mainly it's a skill I'm just trying to learn and exercise so that if we can monetize it, we also have an e-commerce channel for our e-commerce vertical that's way more successful as 10,000 subscribers talking about accounting for e-commerce. So we're using that channel as a model in the SaaS space to try to replicate some of that content expertise and just be helpful in the domain.

Randy Wootton (02:00):

And what are some of the lessons you've learned? I mean, we've just kicked off this podcast. It sounds like you're way down the path in terms of taking the podcast and turning into YouTube and optimizing for search. What are some of the lessons learned in terms of publishing your own content, because you also have a blog as well, across those different channels?

Matthew May (02:19):

Consistency is the single most important thing. So that's the number one lesson. The second lesson we learned is authenticity can't be duplicated. Even if somebody's successful in something, don't just be a copycat, make it your own. You have to stay authentic to your own personality, your own brand, things like that. So those are probably top two. Number one A and number one B, maybe, even.

Randy Wootton (02:44):

Great. And then consistency, you mean just regular consistent publication every week it's coming out.

Matthew May (02:50):

If you can do it every month, every week, every day, whichever one you go to, it compounds on it. I see that with all the successful podcasts, content creators I've looked at all the video creators. Their key is consistency. They have a cadence and they follow it and they don't miss, and their followers appreciate that.

Randy Wootton (03:11):

And I think that your point about authenticity also is spot on in terms of, and you got a lot of authenticity on your YouTube channel. So I recommend for folks that are looking to learn more about accounting. So yeah, so let's shift the conversation. Obviously SaaS experts is focused on broadly on the SaaS industry, but primarily focused on the evolution of the role of the CFO and the potential transformation of the office of the CFO. And in your role as in audit and being a coach and an advisor for many CEOs, especially in the tech space, I mean you're the Tech CPA. What are you seeing has played out over the last couple of years in terms of how finance folks think about their function or their role?

Matthew May (03:49):

Well, the macro trend I see as the CFO kind of merging towards the COO role in many cases, I attribute that primarily to tech, right? So the technology's moving fast-forward in so many ways that the finance function is being automated out from under a lot of people in a lot of ways. So that organization from just a number of people perspective is shrinking and shrinking in every organization that I've seen. And that's kind of gone to this other trend to where the CFO has kind of expanded to fill the space as technology's improved in just the accounting and finance function. So that's probably the biggest macro trend I see, and I don't see it slowing down anytime soon.

Randy Wootton (04:33):

Great. That's one of the things we talk about in terms of the revolution in the office of the CFO. Part of the reason I came to join Maxio having spent 20, 25 years in go-to-market tech was we saw workflow automation transform the way that marketers did their roles. And similarly with sales and sales enablement and the CFO, the office of the CFO had seemed more resistant to embracing technology. And I think it came down to a couple things. One, they don't like to spend money. Number two is it feels like most CFOs come up through the accounting track and are very focused on dotting I's and crossing T's, and they want their Excel model that they've built and you can pry their Excel from their cold dead hands. They want to own it and they want to keep a silo of the financial tech so that they can control the insights and they can control the things that are published. At the end of the day, it's their rear on the line when they're signing the financial statements.

(05:29):

What do you think when you say technology is revolutionizing the office of the CFO, the key pieces of technology that are enabling them to have more capacity to step into the COO role?

Matthew May (05:40):

Well, I think it starts with the general ledgers. The general ledgers back when I started, people were 10-keying in the journal entries, the transactions and stuff like that. That's almost every general ledger now consumes information straight from the bank, straight from the transaction level. So usually it starts in accounting, it seems to have started from the bottom-up transactional level seems to be being automated, data is getting richer. That's been a big, huge problem preventing technology from moving forward. A lot of ways is just the data that if you start from where the information is consumed, and that's at the bank level, the US banking system is a very big obstacle if you're trying to do this at scale. We have 600 clients we're trying to do this for at the same time. So you can imagine in the US as opposed to Australia or New Zealand where there's one or two or three banks, the US banking system is so diverse.

(06:43):

So the dataset that we have that we're consuming is also so diverse that it's been slower in the US I feel like, to adopt this technology change because the data's so much more diverse. But that said, we're seeing those obstacles starting to be overcome in the last three to five years toward data's more consistent. Technology's able to move the needle on that transaction level that does a lot of things at the office of the CFO. You don't have entry level jobs anymore, so you have to change your whole training system, change who you recruit, change who starts with you. I think people talk about this problem with not having staff in the US or this dearth of talent. One of the problems is in Big Four, for example, where I grew up in, it wasn't Big Four, but the number shrinks every year, I call it Big Four.

Randy Wootton (07:42):

This is more consolidation.

Matthew May (07:46):

But they started offshoring a lot of the skills, but that was the training system they used to have. So I think there's a training problem at Big Four and in accounting because of technology, accountants are lazy. They used to just rely on that grunt work for us to learn the business when I was growing up.

Randy Wootton (08:06):

Oh, interesting. Yeah.

Matthew May (08:09):

So the office of CFO has changed in that there's this excuse that there's no talent there, but really what there is there's just a harder training problem that people haven't solved yet. Right?

Randy Wootton (08:21):

Yeah. So that's super interesting, because I think we may have been at the AICPA a meeting once, which is the American, I don't know, CPA association. And it was the big topic that there was not enough talent in accounting. And I think what you've identified is really two dimensions. One is because of the ability to automate the data collection and the representation in the actual journal entry that is resulted in people not having the training that they need to figure out how do you do the ledger, how do you think about credits and debits? So once you get in, you don't have the training, but what do you think about this idea? Just fewer people are going into accounting writ large. Do you think that's going to be offset because of the efficiency gains we get from technology or do you think there's an addition to a training problem or recruiting problem and how do CFOs of the future need to think about that?

Matthew May (09:16):

Well, I think that's only if you are using a US-centric lens, that may be a true statement. If you're a CFO and you have a US-centric lens, you have a different problem. So I mean, we have a global workforce. We are only 150 people, and 46 of us are internationally based now, and we don't have any problems recruiting people. So if you are US-centric, I will give you that. And I could see how the AICPA, which is American Institute of Certified Public Accountants-

Randy Wootton (09:47):

There you go. American Institute, that could have [inaudible 00:09:50].

Matthew May (09:50):

... care about that because they're very US-centric in their lens. But I think the office of the CFO has to be more broadly thinking, because I think if you're even 100 person company and you're not thinking about a globalized workforce, I think you're going to have lots of other problems in your company regardless because you're not thinking it the right way.

Randy Wootton (10:12):

And I think that's super interesting. I think you're spot on. I just literally came back from the Manila in the Philippines where I was at a conference speaking for a company called DOXA Talent, and they provide folks primarily in the Philippines, but also in Vietnam and Columbia, and they're looking at Kenya in Africa, and their tagline is Borderless Talent, and this idea that we're all living in a world where there's going to be capacity and capability that we can access to in large part due the technology as well. You have Zoom and you have Google Docs and you have all these things where people can work on it. So that's an interesting point. I think you're spot on. I hadn't thought about that in terms of the lens of trying to get accountants in the US in the roles. So your global staffing is one of these things that's transforming the function.

(11:02):

So your ability to acquire talent or go out and hire talent. And then I think the other point you were making was train the talent. So the ones either you have in the Philippines for example or other areas, how do you incorporate them into the teams, and then the CFO moving into the role or into the office of the COO. One of the things we've chatted about internally is this idea of the CFO moving from the back office to the front office, moving from being the compliance person, the one that gets the financial statements out, to being the one that actually can help inform go-to-market strategies. How have you seen that played out for your clients, those that either you're doing that strategic advisory services for, or as they fleet up a CFO, you're augmenting that capacity and capability. How have you seen the finance function have to step more into that advisory strategic partnership?

Matthew May (11:55):

I mean, the way we actually execute our business model, we have 11 CFOs on staff. They have to be forward focused. The way we explain their job to our clients, and I think their job should be explained is 90% of their job should be forward focused, strategy focused. They should be looking in the past, if you have somebody looking at the back in the rear view mirror, that should be a controller or somebody that's really dealing with compliance and thinking about that. So I think that's appropriate. I think one of the struggles people have because technology's moving so fast, is they're needing less and less of that person's time because to be focused on accounting and finance, and we're seeing this move, one of the trends we see is the traditional way that finance like CFOs used to help companies was like, I call it translating accounting into entrepreneur.

(12:59):

So they spent a lot of time with a balance sheet and the income statement in helping a CEO understand what that was and understand what those numbers meant, right? The problem now is first of all, CEOs are learning that faster. That's less of a hurdle. I think, especially at certain levels. Once you get to the mid-market, certainly those people have that skillset where they can look at a financial statement and understand it relatively quickly in the SMB market. Below that, there's definitely that hole. A lot of my team spends a lot of my time still doing that because those people haven't gotten there. But in the mid-market, when you think of the Maxio clients, to me and the people that have kind of passed that first stage, those CEOs are relatively savvy. The CFO had the challenge now of moving to this historical monthly data, which is kind of like seeing what happened to more of a KPI mindset where you're looking from a monthly number, you're looking at more of a weekly number, and you're trying to identify a different set of data that is a red flag of something you need to change.

(14:12):

So when you get to the monthly number, it's not bad, which is not revenue. That's further up the funnel. If you just think of in the marketing/sales world, you don't worry about sales at the end of the month, you worry about sales, you've got to know when it's off track, when the number of meetings is wrong or something like that, or if the funnel's wrong. And then you've got to go back to marketing and say, fill the funnel. You know what I mean? What's the action? And it's a totally different data set, and it's a little bit uncomfortable for CFOs that have been in the business a long time because they came up when they had to translate the accounting for you. Now they're going back and getting into operations and figuring other stuff out.

Randy Wootton (14:57):

There's a lot to unpack there. Just to come back a little bit, you have 600 clients, you have 11 CFOs on staff, so you have a broad breadth of client base. Where do you find that inflection point usually for that first time CEO, when they start to have some fluency in accounting? Is it like $10 million, series A, series B, or is there-

Matthew May (15:18):

No, it tends to be closer to $3 to $5 million in revenue. We're starting to see it where they're really starting to translate, starting to understand that. If you think about somebody that's had to go through a series A raise where those are, they really have to understand the drivers in their financial statements. And if you think of this from a modeling exercise, right? It's like once you see financials and present financials versus build a model and you see what drives it. This is the shift I'm talking about.

Randy Wootton (15:49):

No, I think spot on. That's what I was going to suggest was does it come when you take your first professional money? Because you're going toe to toe with professional investors that all they do is build models and pattern match. And if you're a CEO, at that stage, you may not even have a CFO with you. You may have an outsourced CPA who's acting as your advisor who could be in those meetings with you, but at the end of the day, you're the one raising the money. You got to be able to have those conversations with those potential investors. And that means you have to have some literacy in accounting.

Matthew May (16:21):

That's right.

Randy Wootton (16:23):

The other thing, I think it's this distinction you're drawing between the historical lookback, the lagging indicators, and then the leading indicators, which I don't know if the distinction is valid in terms of financial metrics versus operating metrics. So you were talking about revenue as being what I would describe/fall in the bucket of the financial metrics from the financial statements. But the operating metrics that you were describing in terms, I was just doing our marketing funnel report and we were looking at marketing attribution in terms of how many sales accepted opportunities were we having come in from different channels and what did it look like from the inbound versus the BDR? And the CFO was right there, the CFO was right there.

Matthew May (17:03):

The better your CFO is, the less they talk to you about financial statements and the more they talk to you about operating metrics.

Randy Wootton (17:09):

Yeah. Spot on.

Matthew May (17:10):

What I think most CEOs would say.

Randy Wootton (17:14):

Yeah, and I think this is where the quick advertisement for Maxio where it changed my life. So I've been a three-time CEO. Second time I was at a company Percolate, which is about a $30 million company, and we didn't have SaaSOptics at the time, and I just remember this rhythm that my CFO and I were in where the CFO would spend the first eight to 10 days trying to close the books. So just get the financial statements done, get the P&L cash, et cetera. And then we would start to look at the Excel model and try to figure out what the heck happened in terms of customers and go-to-market engine and churn. And we'd spend another eight to 10 days working through the Excel model and someone would fat finger a cell and it'd all be off and then we'd have to start over.

(17:59):

But when we took on SaaSOptics, you could press a button, effectively, press a button on day two, and you had your ARR and your revenue. And it just changed the types of conversations I was having with my CFO. We could spend a large part of the month talking about, "Hey, what's happened?" Especially at the end of the quarter or something along those lines. So in your practice when you're working with your clients, do you have a board pack that you help put together or do you have a regular meeting that you're doing on a monthly or quarterly basis to help frame the business for your clients?

Matthew May (18:34):

Yeah, depending on the service level people have. We have a substantial number of our clients are sub $1 million of revenue, so we have to kind of modify this, but for our larger clients saying the $3 million revenue range, the goal would be to have at a minimum a monthly meeting where you're going through the old financial statement if that's what's happening with you. And then if they're farther along because you're kind of meeting them on this journey that they're on, you kind of meet them where if they're at the level where they're ready to get to the operating metrics side, that tends to be more of a weekly engagement in meeting. And there's tools like Maxio reporting tools that are specialists like Sift or Jirav we use in the same vein with regard to different pieces of that puzzle.

Randy Wootton (19:26):

So that was going to be the question I was going to ask is, so in thinking about enabling that capability so you can do that at scale for your clients, what are some of the other technologies other than Maxio that you've found, that you like and that you would recommend for people to adopt?

Matthew May (19:43):

Yeah, I mean a couple of them that we like from just a KPI, just a straight KPI basis is like sift from a modeling basis, something that's a little more robust, a tool called Jirav. If you're thinking about modeling, one that we're using internally right now internally, internally I can just tell you it's great. It's a tool called 90, which is for companies that have adopted EOS, which is the entrepreneur's operating system, and it allows you to track by team the top KPIs by week. That's really shifted my mindset in ways of thinking as I'm running this business, it's gotten to be a big business, 150 people. We have teams, people that I've not met yet and stuff like that. So you've got to keep things going, but the KPIs are relatively consistent. But moving our firm, the last 24 months has moved from reviewing financial statements to the predictive KPIs ourselves. And I think that's just a maturity level. Once you get to certain stages, even accountants can mature.

Randy Wootton (20:52):

So I think absolutely we talk about the monetization ecosystem and how you have these different components that you need to put together to get the most out of how you do your pricing and packaging and reporting that informs your go-to-market strategy. And a couple of components that you described, one I would call it as a FP&A solution, Jirav fits in that, forecaster Basis. Other ones that I think really fit under the FP&A function where you're doing modeling and planning, super helpful. I think we talk about tax, having tax plugged in, we use Avalara. There's another one, NROC out there that we find a lot of people use.

Matthew May (21:26):

NROC and Avalara are the top two.

Randy Wootton (21:29):

And then we're finding an interesting, I'd love your perspective on CPQ systems. So CPQ historically has been something I would say runs up through sales op or what people describe as revenue ops, and it's a CRO decision to buy because it's usually a salesperson that's using it. One of the things we found is CFOs are now influencing that decision in a way because they want to make sure the contracts sort of order to cash, that the contracts accurate. They can ingest it from the CRM system into something like a Maxio or have it go into the other financial systems. What's your experience with companies at the size that you're working with embracing a CPQ system? Or is it mostly PLG, and so they're not really, they don't have robust sales led motions at the time?

Matthew May (22:16):

Well, a lot of the SaaS guys are using pretty simple CRMs to me. Not simple necessarily. Like Salesforce isn't simple, but you've got your major ones because doing some kind of funnel management on the marketing side, they're probably the most sophisticated of all the metrics in the marketing realm, right? Where you have a HubSpot, you have a Salesforce that can feed into Maxio or whatever. So you can do the contract management from Maxio, right? So I think those are the two primary ones we see in the SaaS world is using one of those two Salesforce or HubSpot in just getting the data from those that marketing funnel into their sales team. But sales and marketing is way farther ahead of every other group at these KPI functions than any other group throughout the organization. And part of that is the nature of those folks are very aggressive. Part of that is the company's willing to invest more-

Randy Wootton (23:20):

That's right.

Matthew May (23:20):

... in that function because they see that as growth as opposed to back office spend. But the same concepts there, you can apply across the organization once you get buy in at the exec level that that's an important thing to do.

Randy Wootton (23:34):

I think that's right. Having sold across all functions, I think the salesperson can bang their hand on the desk and say, "I need this technology or else I'm not going to hit my number." And everyone's like, "Okay, here, go ahead."

Matthew May (23:46):

They don't even ask. They just go buy it. And the bill comes. I've never seen a salesperson ask anything.

Randy Wootton (23:53):

Yeah, I'd be interested. A comment and then a question. I saw report recently that said, companies that are less than 500 people have on average 170 internal software tools spending something like $8 million a year and adding four to five applications a month. So you have this incredible proliferation of software use cases, and to your point, it's driven primarily. You have individuals with credit cards that can just charge it and it goes under the operating expense and there isn't a deal desk for purchasing when you get bigger. I think maybe IT inserts itself, one rule of thumb I've heard is companies should think about 2% of revenue going against internal software across all software, across all functions. Given your view of all the customers you work with, do you have a rule of thumb as you think about either in terms of number of applications or dollars spent on internal software?

Matthew May (24:52):

No, I don't really think of the world that way. I tend to think more by benchmark, by department. I don't know why but that's my mind kind of works, but just to that point though, I think the last 12 to 18 months, we've started to seeing some app fatigue for the first time, we saw it for a decade. To your point, these apps kept taking things. So one thing we are watching really closely right now is app fatigue and consolidation in the market with some interesting things with Intuit kicking some of the bill paper riders out of their platform, which was an interesting thing that happened last year with Bill.com and Melio kind of being rejected from that platform. So it's something we're seeing now at the... We've heard it from users, that there's app fatigue, but now we're starting to see it with some of the bigger players, kind of like consolidation or whatever you want to call it.

Randy Wootton (25:51):

Yeah. Well, I think-

Matthew May (25:52):

It's very different than the last 10 years to me.

Randy Wootton (25:55):

Absolutely. I think a couple of points. One, so we just launched our end of year fiscal year 23 Maxio Institute growth report where we look, because we have about $15 billion of billing and invoicing data flowing across the platform, about 2,300 customers. And for this report took a lot of effort manual work, we were able to associate specific industries to every single customer. So now we have an industry view, and one of the things that's interesting is we have a lot of marketing and sales companies that we had over the years. Their growth rates were 40% in 2020 and 2021, and they're down at like 8% this year, 6%.

(26:31):

So one of the ones where has been enormous pullback has been on that discretionary spend in marketing and sales in particular. And I do think there is a limit in terms of when I was at Salesforce and then I was at Seismic, a sales enablement company for a little while, and we would think about, well, how much is a head of sales willing to pay in technology per seat for every AE to get their body armor and their weapons? You're like, how much do you willing to outfit? And that was what you were working for. It was the share of that piece. And I think that has become less overtime in terms of what people are willing to pay.

Matthew May (27:08):

Oh, certainly for SDRs too, right? BDRs and SDRs, people are doing less and less, especially as email gets cracked down on, and we're starting to see some trends around that, that's kind of makes some people nervous, but that just shifts money to marketing. There's just fascinating stuff going on. It's like whack-a-mole if you're a CEO, right? You got to stay on top of all the trends and keep things moving because you got to grow.

Randy Wootton (27:34):

Yes, amen. And figuring out where do you allocate the marginal dollars for the return and how do you drive the efficient frontier? Yeah, totally. So we were talking a little bit about one of the trends is this app fatigue, this consolidation. As we get the last couple of minutes of this interview, what are some of the other trends that you're seeing people think about or starting to explore in the accounting space or in the office of the CFO writ large?

Matthew May (27:59):

Well, we had three people in the industry at our annual conference this year all talking about how they're doing building AI into their products. And we didn't allow them to talk speculatively. We only allowed them to talk about what was going to be in their products in 2024. So those really interesting conversation, it ranged from a superficial chat kind of feature to more substantial content generation and more substantial activity that displaces accountants, which was fascinating to me to see how they're going to navigate taking work away from the accounting channel when a lot of these people depend on the accounting channel to grow.

(28:46):

So that's the main thing I would say from a technology thing that almost everybody's... Well, I think everybody was enamored with ChatGPT, but it's kind of like, oh, it's kind of cool having talked to some of the CROs, sorry, the chief product officers at some of the larger players like Bill.com and Intuit. There is something to really track there this year, and I think we'll see even in the first half of this year, I think we'll see the leaders or the people stuff baked into their products start releasing some really cool features.

Randy Wootton (29:21):

Yeah, it's interesting in terms of the rich get richer. If you have a lot of resources and you can hire data scientists and you have an enormous data set, then your ability to take advantage of something like generative AI is going to be better than the small companies that have to figure out how to apply it within their systems.

Matthew May (29:40):

Even the decision, talking to them how they thought through whether they building their own generative language model or use one of the existing ones was a fascinating conversation. And you have some of them building their own with the most resources, you can imagine who that is. And then you have other people who are using partnerships with OpenAI and other players out there to build their tools, which is fascinating as well.

Randy Wootton (30:09):

Yeah, I do think that's the big difference. I was a CEO of a company called Rocket Fuel, which is a real AI company. It was first gen. We're doing predictive AI in the marketing space, and we built our own data centers because it wasn't cost-effective to use AWS at the time, and we had 23 data centers around the world, had spent $200 million or something, had the Cadillac version of all the servers, and it was like a huge DevOps team. It was wild. And then to think at the level of abstraction we are with AI where you just pull it up on a website and get an enormous amount of power from the models because of the open source. We've entered a whole new age. Obviously everyone's saying that. And so I think a couple of points. One is I would suggest everyone needs to be playing with it, even the CFOs, figure out, get comfortable with it.

(30:57):

Number two is for their specific function is taking advantage of the tools and again, sort of playing with it, but how do you do? I did a presentation in the Philippines. All the art was generated by AI. I had an agency do it with Midjourney, and the person who did it was super talented. But when you think about that, that would've taken three weeks for an illustrator. I had this cool retro racer X type background and original art generated by machine, changes, transforms the way the agency creative department is going to work. So each function using AI differently. And then I think for the executive team, understanding what sort of data they have, what are the sort of questions that they would want to address by introducing models and building the capability for it. We don't have any data scientists at Maxio right now. We have enormous amount of data, but we're working with a partner who's coming in and helping us figure out our data strategy. Is it structured correctly? What can we do and how can we layer in an intelligence layer on top of our product in addition to the workflow automation that we offer? So I do think we're in a brave new world.

(32:06):

Any other trends that you're seeing? So we've talked about hiring, the need for training and rethinking the roles, we've talked about the app fatigue, the potential consolidation, the impact of AI.

Matthew May (32:18):

The international side. No, those are the main things that we're trucking this year.

Randy Wootton (32:24):

Awesome. Well, let me close with one thing. We mentioned in your intro that you're also CEO of a company called VerifyIQ. You guys made an investment and then you took it over. So you're now president of an audit firm, well, a client advisory services firm that's helping technology companies, but you're also running a company on both sides. What are the-

Matthew May (32:46):

I'm running a startup. It's crazy. And you can tell me what-

Randy Wootton (32:48):

What does that feel like? What are you learning on that and what makes you better in one role versus the other?

Matthew May (32:56):

Well, I mean, I think anytime you're in an operational role, you understand the kind of data that's really valuable to decision making.

(33:06):

So if you think about accountants sometimes, and I think CFOs have to think about this. Accountants sometimes think of their deliverable as the financial statements. One of the reasons I left audit was that when I did the audit report, it was typically stale data. Some of the data was 18 months old, we're delivering an audit report in March for January through December of last year. So some of that's 15 months old, some of that's recent, but it's pretty stale data. And when you're doing private company audits, even worse lag. And there's lots of stuff about gap being esoteric. Well, monthly financial statements now are starting to have that same issue. So by the time you get your monthly financial statements, I assume that you are no longer expecting to have surprises, right?

Randy Wootton (33:58):

Right. Right.

Matthew May (34:00):

That's supposed to be in the weekly meetings now, right? We're expecting things to happen. And I don't think that was true a decade ago or 15 years ago. I think that expectation has changed. And I think the nature of CFOs and career progression is to get to the top, it takes time. So a lot of the folks that have emerged to that seat need to make sure that they're thinking about what's available today, staying in tune to all those things and trends. The place that they were going moved, and the CFOs that I've always dealt with, sometimes part of their strength, oddly enough, is that they kind of hold the line. They're resistant to change. And if they do it right, they have to do that in some sort of balance, right? In an environment where technology's changing faster than it has historically, they have to change faster too. And that's not necessarily a strength. I think the great CFOs will learn to adapt to that. And that's just a tough thing because their biggest strength is making sure the organization is safe, right?

Randy Wootton (35:15):

That's right.

Matthew May (35:16):

And you change it the right thing.

Randy Wootton (35:18):

I hire them so I can sleep at night. So I want my CFO to be able to tell me, "This is how much cash we have, and I am 100% sure this is how much cash we have and here's our burn rate." But I think your distinction that you're drawing, it's almost your level of altitude between daily, weekly, monthly, quarterly, annual. What are the metrics? And then how, as an operator, what do you want to be looking on a daily basis? I want to be looking at my pipeline every single day, every single week. I want to be looking at the forecast, right? On a monthly basis, maybe you're looking at churn. So you have the full month of data of churn to be able to look at that and better understand. So I think you're right. I think there's absolutely-

Matthew May (35:56):

And when you get to it, you don't really want churn. You want tickets, right? Where you could stop the churn.

Randy Wootton (36:03):

That's right.

Matthew May (36:03):

Get in front of it. So one of the big changes that I had just as an operator was I always thought took the accountant view like, "Okay, I just want my financials." So I just want, the metric is just revenue. Well, the metric wasn't revenue. When we got from monthly, it was monthly, but then we went to weekly. We didn't care. That wasn't helpful at all anymore. So then you had to go a level deeper. So I think that's the big challenge for CFOs is what's the level deeper? And then now the great CFOs get out of their comfort zone outside of financial into the operating metrics that are the triggers. The funny thing is in accounting, we have this concept of prevent and detect controls, and they're completely different. So the financial statements are detect controls. They've got to find the prevent numbers, the wind that stops it while it's happening. So if they think of it that way, maybe it makes more sense to them because you would never use the same detect metric for prevent control. So financial statements are detect controls, it's already happened. How do you find the prevent stuff and how do you get that on a weekly cadence where it's meaningful so you can take an action and it doesn't go two weeks with what's a bad readout, right?

Randy Wootton (37:19):

I love that distinction. Detect versus prevent. That's great. So last question for you. I know I'm putting you on the spot. I didn't pre-read you on this. We've been talking a lot about metrics. As an operator, what is your favorite metric? What is the one that you look at either on a weekly or monthly basis and you spend an enormous amount of time thinking about trying to optimize?

Matthew May (37:40):

Employee churn.

Randy Wootton (37:42):

Okay. I don't disagree, but yes.

Matthew May (37:46):

I think that's the number one thing that every person needs to put on their radar and then back up from there to prevent controls for that. I think that is the number one thing. Almost everybody in our business across the thing, human capital is the thing that we're struggling with the most as business owners. I think everybody across the board would say that. So to me, that has to be number one on your radar for KPIs, and you have to develop a way to score that and see what the health looks like there.

Randy Wootton (38:19):

Oh, that's great. Have you seen any change in terms of attrition over the last year or so? There's been an enormous amount of layoffs. I saw one data point that said we've lost a million jobs in technology between 2022 and 2023, and we had the great resignation in 2021, 2022. What have you seen broadly across your client base or for your company in particular? Have the conditions changed in terms of people leaving versus systemic issues of addressing employee engagement?

Matthew May (38:53):

I mean, the systemic issue that changed was the VCs and the private equity move the goalpost. They moved the goalpost from growth to profitability. And then we're still seeing the outcomes from that because that trickles back down. The private equity companies did that immediately. The VC companies did that next. Now everybody's kind of working their way back through the system. So I think for the mid-market and the small businesses I think that are kind of SaaS growth-oriented businesses, we see that trickle back down. So that's the macro thing and that affected employees in a huge way.

Randy Wootton (39:30):

That would be people getting laid off versus people quitting.

Matthew May (39:33):

Correct.

Randy Wootton (39:33):

So have you seen in that environment where there aren't as many jobs, have you seen at your company's more attrition going down? Because employees are like, "Look, I'm going to hunker down. I'm glad I got a job and I'm going to stay here for a while."

Matthew May (39:47):

I have seen attrition go down on people leaving voluntarily, about a half. Generally-

Randy Wootton (39:54):

Like 50% reduction?

Matthew May (39:56):

Yeah, like a 50%. So people that were losing 30% of their staff were losing 15 people losing 15 or losing seven. If you look at it for who's doing the kind of turnover side.

Randy Wootton (40:09):

That just reminds me. So I've been in technology for a while. My first job at a business school, I was at a company called Avenue Way, which became aQuantum, and I started in 1999. In 2001, we had the internet dot com blow up, and at the agency, it was a tech enabled service. We had 500 people, and the next day we had 250. And I was one of the people that was employed, and I was super grateful for a job. And I just always remembered feeling like, oh gosh, I'm grateful to have a job. And there are friends of mine who got laid off in that recession who never made it back into technology, because it took a long time for that to come back, and they went and they had to find another field.

(40:46):

So I do think you're probably right that there are people who are hunkering down and going to get the work done. And then if the economy turns again, they may pop out. And I think to your point, this is the opportunity for great employers to reinforce the social contract with employees, make sure that they're feeling valued, make sure that they're making an impact on the broader organization and that you're developing that relationship, especially in this hybrid world where they may be working from home is how do you build that connective tissue and make sure they feel like they're invested in the success of the company.

Matthew May (41:25):

That's right. That's definitely a key.

Randy Wootton (41:29):

Well, awesome, Matthew. Thank you so much for your time. I really appreciate it. If people want to find you, they can find you on YouTube, they can find you on LinkedIn. Is there any other-

Matthew May (41:37):

I'm pretty much The Tech CPA everywhere. Twitter and LinkedIn and-

Randy Wootton (41:42):

It was awesome you bought that keyword. You got it everywhere. But yeah, that's a great place to be. If someone wants a CPA in the tech space, you're the guy.

Matthew May (41:50):

That's what we try to get that message out.

Randy Wootton (41:53):

Well, thanks again for your time. Really appreciate it.

Matthew May (41:55):

Thanks.