Some tech companies plan to dock the pay of remote workers moving away from expensive cities — will accounting firms follow?

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Welcome to my bimonthly news roundup at the intersection of accounting and technology. Subscribe here so you never miss an issue!

Highlights:

  • A Sage cloud accounting outage in South Africa that lasted over two weeks jeopardized small businesses already struggling during the pandemic.

  • Most CPA firms have seen productivity increase while their employees have been working from home. Yet some companies are cutting salaries of employees who are taking the opportunity to move somewhere less expensive.

  • In fundraising news: Rewind raised $15 million in a Series A; Pilot doubled their fundraising efforts so far to $120 million; Stripe helped Check raise $35 million; and Melio’s $110 million raise turned it into a unicorn.

  • Syndio’s PayEQ app could help companies live up to their promises of greater equality by automatically analyzing salary data and flagging disparities among diverse groups.

  • Expensify has introduced free invoicing capabilities for all its users — and there are some important things you should know.

For this and more of my top stories you may have missed, keep on reading. Also, thanks to my sponsor, Freshbooks, for making this newsletter possible! Check out their new accountant partner program to learn how you can work better together with clients.

😠 Sage users suffer two-week cloud accounting outage in South Africa

South African Sage customers were ready to riot when an infrastructure update reportedly put the accounting software out of action for more than two weeks. Business Insider reported that starting on January 17, Sage started experiencing technical problems and outages, with users who managed to log on coming face-to-face with error messages before being kicked off the service. By January 28, users were threatening protest and even arson.

The bottom line: A Cloud Accounting Podcast listener from South Africa called in to add context to the situation. He explained that the dominant accounting software in South Africa used to be a desktop product called Pastel. Sage bought Pastel several years ago, and started transitioning users to a cloud accounting model. Which is all well and good until the entire system breaks and leaves everyone unable to send invoices or pay taxes for two weeks. Imagine if QuickBooks Online went down for two weeks causing businesses to miss a tax filing deadline, and you’ll understand why our listener said that this has been worse for small businesses than the pandemic. I wouldn’t be surprised to see Xero and QuickBooks gain significant market share in the coming months.

On February 3, the Sage South Africa Twitter account tweeted: “The Sage Business Cloud Accounting service in South Africa is operational, with a high volume of users accessing the service this morning.”

🏡 Yes, remote work is more productive

It’s been nearly a year since remote work became the only form of work for many people, which means we now have data to dig into. CPA Trendlines reports that the typical CPA firm has actually seen an increase in productivity of between 5 and 15 percent.

The bottom line: The explanations for this increase in productivity will also shock no one who spent the last year rolling out of bed and into their desk chair. 

First, when people don’t have to spend up to three hours commuting, they’re able to put that time into other things, which ultimately improve their productivity. They tend to work more, and they also exercise more, which helps staff feel more alert and productive. Not having to get dressed (from the waist down, at least) also saves time that can be better spent on other things.

It’s not just time spent preparing for work that’s been cut down. With no water-cooler moments to distract employees, those minutes previously spent gossiping are now going towards actual work. Even the opportunity to pepper a conversation with emojis and gifs can’t make Slack as tempting a distraction as in-person conversation.

🤫 Penny-pinching companies are driving employees to lie about where they live

Employees who decided to ride the remote work wave away from expensive cities are being thwarted (in part) by their companies. According to an article on Going Concern, some businesses are responding to these moves by cutting salaries. In particular, tech companies in the notoriously expensive Bay Area of San Francisco are being named and shamed for indulging in this stingy practice, although it’s likely going on elsewhere. In turn, employees are finding ways to hide where they’re living from their employers.

The bottom line: It’s understandable that you would want to keep your company in the dark about where you’re really making those Zoom calls from if it means making more money. Even if it means you’re still paying higher taxes. However, this kind of deception could put you and your company in legal trouble, so honesty is likely the best policy.

⚖️ Syndio helps companies more easily identify pay disparities

Companies that want to put their money where their mouth is when it comes to reducing inequality among their workforce now have an app to help. HR analytics platform Syndio has created a pay equity app, PayEQ, which plugs in to payroll and HR software. It compares employee data such as job title, length of time at the company, and experience level to identify salary disparities. Syndio recently raised $17.1 million in an investment round led by Bessemer, which topped off a $7.5 million Series A round back in May 2020.

The bottom line: Even companies sincerely committed to pay equity would struggle to get this kind of big picture perspective on potential pay disparities without a dedicated app. But even smaller companies could benefit from having it laid out this clearly. Although SMBs aren’t Syndio’s target, I’m willing to be that HR and payroll software companies servicing them will eventually build something similar into their own products.

⏪ Rewind wraps up a $15 million Series A round

Cloud backup and recovery service Rewind is moving forward fast, rounding out January by closing a $15 million Series A round led by Inovia Capital. The company’s revenue has grown 1,113 percent over the last three years, according to a report on the raise by Insightful Accountant.

The bottom line: Most cloud accounting software companies do a good job of backing up your data, but they often don’t offer version control. This is one reason Rewind has become so popular. Think of it as an “undo” button for your QuickBooks Online account — and soon Xero. Rewind says the money will go towards accelerating development projects already in the pipeline and growing the team. Full disclosure: Rewind is a sponsor of my Cloud Accounting Podcast.

 

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🦄 Melio is the latest cloud accounting unicorn

Is it a bird? Is it a plane? No, it’s a shiny new "unicorn (a tech company valued at over a billion dollars) called Melio. Having grown 2,000 percent in 2020, the accounts payable platform serving small businesses is now valued at $1.3 billion after raising another $110 million, not long after a previous $144 million round.

The bottom line: Cloud Accounting Podcast co-host David Leary, who spends his days as Melio’s Director of Accounting and Bookkeeping, has no plans to quit and make podcasting his full-time gig. In fact, David and Melio are on a hiring spree. They’re looking for engineers, marketers, salespeople, product developers, and, yes, people for the accounting partner team. If you have a tech support background, are interested in sales, and like talking to accountants and bookkeepers, David wants to hear from you. Unfortunately, the only information I could get out of David is that the plan is to keep growing. So much for having friends on the inside.

✈️ Pilot raises a $60 million Series C, but will the engine fall out?

Pilot, which offers “bookkeeping, tax, and CFO services for growing businesses,” has raised $60 million in a Series C round, doubling the total funds it’s brought in since it was founded four years ago. In a press release on the company blog, co-founder and CEO Waseem Daher writes, “With Pilot’s unique ‘people + software’ approach, it’s now easier than ever for founders and business owners to focus on growing their business, instead of worrying about the administrative overhead.”

The bottom line: After the failure of a similar “software plus a service” startup called ScaleFactor, I’ve become even more skeptical of this type of business model. These companies get valuations that you’d expect from developing software, but they are reliant on (comparatively unreliable) people to deliver their service. The gross margins aren’t great. I hope most of that first $60 million that Pilot raised went to building some amazing automation, because if not, that’s a lot to have spent on acquiring around a thousand customers.

✅ Check raises $35 million to create an API for payroll

Stripe democratized ecommerce by building an API for credit card processing. Now Check aims to do the same for payroll.

Launched barely two years ago, the startup just raised $35 million in a Series B round. The promise is that it will enable all sorts of software companies to build payroll into their applications without having to start from scratch navigating the complex rules of 50 states and thousands of local jurisdictions. .

The bottom line: Possibly the most notable little nugget hidden in this story is that one of its key investors is… That’s right, Stripe!

If the relationship eventually escalates to an acquisition by Stripe, it would complete Stripe’s API trifecta: it would have the technology to allow companies to process credit cards, deposit the cash to a bank account, and pay employees, all in one place.

That would definitely be a checkmate for the competition.

🧾 Expensify rolls out invoicing

After recently adding bill pay capabilities, Expensify has now also released invoicing. Could the expense management company be headed toward becoming a full-on accounting platform?

The bottom line: At the moment, it’s not possible to turn off the option to get paid by credit card, which some small businesses might have a problem with, especially since it means getting lumped with the approximately 3 percent Stripe fee. Deposits are weekly, and the alternative, ACH payments, can take up to 10 days to go through. 

Large companies also have an issue with the invoicing, which has been rolled out to every Expensify user, with no option to take it away from them. Pity the CFO holding their breath at the thought of what Dennis in sales or Miranda in marketing could get up to with invoicing power just a few clicks away…

📱 5 recommended text messaging apps for small businesses

If you’ve been listening to the Cloud Accounting Podcast or reading this newsletter for a while, you know that I’m an proponent of finding ways to communicating with clients via text — but without giving up our personal mobile numbers. Now Zapier is joining the cause, releasing a list titled “The 5 best SMS apps for small businesses in 2021.”

The bottom line: To make the shortlist, Zapier specified that apps had to be capable of holding an effective two-way conversation, not just a means of blasting out promotions.

Twilio is the most well-known app on the list, with a lot of customization options. But if you’re looking for something simpler, the others on the list make texting with clients super easy, with functions including shared inboxes and individual numbers for different people in your firm which can be centrally managed. No more excuses!

 

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Some tech companies plan to dock the pay of remote workers moving away from expensive cities — will accounting firms follow?