70% of American adults could be getting a nasty tax surprise, and other news you may have missed
A majority of U.S. adults may not realize that living and working in two different states could require multiple state tax returns. And that presents a marketing opportunity for accounting firms.
Fewer women than men feel that they’re being reimbursed fairly for working from home expenses. I've got a theory why.
New Zealand-based accounting software company Xero has struck out in the US. But the future for Xero is much brighter when you zoom out to the world view.
Bonjoro is a fun and effective way to better convert prospects into customers (depending on how you feel about seeing yourself on camera).
For this and more of my top stories from recent episodes of the Cloud Accounting Podcast, keep on scrolling.
🌍 Xero lost the battle for the U.S. but the world is up for grabs
Xero is good with numbers but its numbers don’t look good. Not in the United States of America, anyway. The New Zealand-based accounting software company added just 10,000 U.S. subscribers between March and September 2020. At those rates, Financial Review calculates that it would take them 152 years to catch up to Intuit’s 2019 subscriber total. One big concern is whether Xero can produce the much-hailed network effect, wherein one user who signs up organically brings in other users just by using the platform in the way it was intended.
The bottom line: Although this isn’t great news, you are not reading Xero’s obituary. When you look at the addressable market for accounting software worldwide, it’s close to 54 million. Even if Intuit claims the very big lion’s share of those, say 85% to 90%, that still leaves Xero at least 5.4 million users to peel off, which sounds even better when you recall that QuickBooks Desktop’s subscriber list peaked at a few million. It helps that Xero caters to multiple currencies. Simply put: This is not a Xero-sum game.
💵 NetSuite introduces SuiteAccounting, complete with a tempting tie to its referral program
NetSuite is making ERP more appealing for accountants in public practice with the introduction of SuiteAccounting. Clients who are already using NetSuite with an outside accountant will appreciate no longer having to designate a paid seat for them. But Oracle really wants accountants to bring in new customers, too. In addition to providing access to NetSuite licensing and training courses, each member of SuiteAccounting gets one free license, plus a 10% commission on the first year’s license for every referral they bring in.
The bottom line: This move was obviously calculated to compete with rival products such as QuickBooks Enterprise. It might just work. Although the exact pricing structure remains frustratingly opaque, NetSuite’s prices are becoming more competitive, to the point where it’s easy to reason that any extra cost is worth it for the additional features. Plus from a purely mercenary viewpoint, those referrals would bring in a nice little bonus.
📒 HubSpot for QuickBooks unites two SMB software favorites
Here's some exciting integration news for both marketers and accountants: Intuit has launched HubSpot for QuickBooks. Created in collaboration between the two companies, rather than outsourcing to a third party, many of the best features should streamline the back-and-forth between sales and accounting. For example, salespeople will be able to create QuickBooks invoices and track the status from inside HubSpot. You’ll also be able to automate workflows: if, say, a client doesn’t pay an invoice in time, the software will generate an email with your company’s branding in HubSpot to remind them it’s overdue.
The bottom line: HubSpot’s marketing and CRM capabilities have already made it popular with SMBs, and introducing accounting capabilities through another respected software company will only help entice more customers. Plus, you’ll be able to generate reports that combine marketing and accounting aims and outcomes. The integration works on the free, premium, professional etc. versions of each software, but the HubSpot integration designed for the QuickBooks Online Advanced option has the most features.
📥 Acuity introduces separate accounts receivable service
Modern accounting firm Acuity announced via its blog that it’s giving new business owners exactly what many of them have been asking for in the form of a separate accounts receivable service.
The bottom line: Having a service dedicated solely to managing invoices and payments will help attract new customers without forcing them into something beyond their ideal scope too soon. When they are ready, Acuity will be able to move in with an upsell to its other services. It's a good investment for Acuity. Ensuring proper accounts receivable practices from the start should mean less mess to clean up later down the line.
📹 Bonjoro helps you create personalized videos to turn curious customers into converts
Get ready for your close-up. A post on app integration enabler Zapier’s blog demonstrates how short personalized videos can more effectively turn vaguely interested customers into clients. Guest author Matthew Barnett explains that in 2016, he used Zapier to integrate the Intercom sign-up form for his SaaS platform with his task list. Whenever someone signed up he got a notification, and he recorded and sent the new users a 30-second personalized introductory video. According to Barnett, the company saw a 200% jump in conversions for customers who received a video compared to those who didn’t. It was so popular that he turned the sign up-to-notification-to-video premise into a company called Bonjoro.
The bottom line: Potential customers are much more likely to convert to real customers when provided with evidence that you’re a human and not a calculator hiding behind an email inbox. Setting aside issues of on-camera vanity, this is a quick, easy and effective way to stand out from competitors.
🥑 What millennials really want from their accountants (it’s not free avocado toast)
Many business owners experience financial matters as a metaphorical pain, and accountants need to anesthetize it if they want to win over a certain segment of the population. A survey by accounting software company Xero found that what millennials really value in an accountant is someone who takes the stress out of dealing with money. At the same time, a third of millennial business owners only hear from their accountants twice a year at most.
The bottom line: “Reducing stress” is millennial for “automate as many processes as possible.” Make it easy to send documents and book appointments over the internet, and when you have to communicate directly, do it over text. No millennial has made a phone call they absolutely didn’t have to — especially not to a stranger — since 2011. And speaking of direct communication, reduce their stress further by offering the opportunity to have a monthly check-in. They’ll feel loved but not pressured, which is the ideal millennial situation.
🏠 More women than men feel out of pocket over COVID-induced working from home expenses
Some employees who made the switch from office to working from home feel that one perk didn’t come with them. A survey by expense auditing software company AppZen found that only 59% of women compared to 80% of men feel that their companies have adequately reimbursed them for expenses accrued while working from home. In addition, 51% of workplaces haven’t updated their expense policies since the pandemic started, likely adding to confusion over what employees can and can’t claim.
The bottom line: These two findings may explain the gender disparity over expenses. If companies aren’t making it clear what people can and can’t expense while working from home, only those who ask for reimbursement for specific expenses are likely to get it. Research has shown that men are typically more likely to be assertive at work than women, so they may be more likely to submit expenses without waiting for company policy to change.
Another potential factor comes down to what companies are reimbursing for. The survey found that significantly more companies have started assisting employees financially with working from home costs like internet access, extra monitors, comfortable desks and chairs and even food deliveries since COVID began. But only around 20% are reimbursing for childcare, which often falls to women in heterosexual relationships even when both parents work. Even if people of all genders are getting their standing desks comped, men may not even consider expensing for childcare if it falls to a woman in their life — but women will definitely notice the cost.
🤑 The PPP loans were doomed to invite widespread fraud from the start
PPP loans have been catching heat since they were rolled out. And the Wall Street Journal just added further fuel to the fire via an article and an episode of its excellent podcast the Journal. The argument is that the emerging widespread fraud is the result of the original terms being too broad. When PPP loans were introduced in April 2020, almost every business owner in America could have made a case that they were facing impending economic uncertainty and therefore needed a loan in order to keep paying employees.
The AICPA and 82 other organizations penned a letter to Steve Mnuchin and co, arguing that retroactive efforts to root out possible fraud via the loan necessity questionnaire are punishing companies that managed to survive or even grow during the pandemic. In addition, as President and CEO of CPA.com Erik Asgeirsson pointed out, when Congress finally authorizes further economic relief, companies that are still being hounded over the first round might be less likely to apply for it.
The bottom line: The federal government’s insistence on questioning companies that benefited from a scheme it designed to benefit them seems to indicate that the scheme itself was badly designed, while also shifting the blame to the companies themselves.
However, the argument that the PPP loans were essential to many companies’ survival perhaps overstates the program’s positive impact. The WSJ article quotes research from MIT which found that the PPP boosted employment by about 2.3 million jobs — at a cost of about $224,000 per job. So yes, the program did contribute to employment levels: but given the messy aftermath, expense and fraud claims, perhaps the money would have been better spent on other solutions.
😱 70% of American adults didn’t realize they might owe state taxes in multiple places
Nothing sends employers and employees alike rushing to their CPAs quite like the phrase “tax surprise” in a negative context. A poll from the AICPA indicates that just such a stampede may be coming.
As CNBC reports, seven out of 10 American adults admitted that they didn’t realize that telecommuting for a company in a different state could mean they’re on the hook for income tax in multiple states, and that they should have adjusted their withholding to reflect that. In addition, employers with employees telecommuting from other states may also have to file multiple state tax returns.
The bottom line: Before joining that metaphorical stampede, taxpayers should investigate whether they’re actually affected. Certain neighboring states have deals with each other which excuse people who live in one of the states from paying multiple state taxes if they work for a company based in another. For example, if someone lives in Virginia but works for a company based in Pennsylvania, they can breathe a sigh of relief.
That said, tax season is barreling towards us faster than the tax-averse may like to admit. There is still some time for the formerly unaware 70% to avoid getting knocked down by an unexpected bill: but media-savvy CPA firms may have just found the meat of their next marketing campaigns.
🕵️ The IRS plans to investigate more (but not many) small businesses in 2021
If that headline made you spit out your lukewarm coffee, take a deep breath and pour yourself another cup. Yes, the IRS has announced that it plans to increase the number of small businesses it investigates by 50% in 2021. However, even if it achieves this aim, that would still only bring the total number of investigations into the very low hundreds. As Accounting Today reports, of the more than 4 million partnership returns that were filed in 2018, the IRS investigated 140. That’s 0.00004%, which is even more shocking when you learn that the bureau was at 0.5% in 2010. It’s a similar story for returns filed by S corporations: the IRS audited 397, about 0.01% of the total.
The bottom line: This latest combination of righteousness and incompetence has not won the already beleaguered IRS any fans. CPAs were already frustrated that the bureau has been sending out warnings and fines to clients whose taxes they filed months ago. The section of the IRS responsible for processing filings is way behind, but the punitive branch is right on schedule.
However, it’s worth looking past the IRS to the real root of the problem: budget cuts. The IRS can’t even put together enough money to cobble together a COVID crisis hotline, so it’s not surprising that there are shortfalls elsewhere.
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