Oct 6, 2023
42 min
Episode 2

FRESHBOOKS: Kenji Kuromoto, Acuity - 'Beginner's Guide to Accounting Advisory'

Twyla Verhelst - Freshbooks  00:04

Hi, I'm Twyla. I'm a CPA, and I'm Head of the Account Channel here at FreshBooks. FreshBooks is a leading cloud accounting platform built for small business owners and accountants. A big part of my role is helping to build a community of modern accounting professionals. My team and I ensure accountants and bookkeepers are connected with the right tools and resources that not only make their work easier but also help them build client relationships and practices they can be really proud of. As someone who is deeply involved with the accounting community, I'll tell you that there's some topics that both divide and unite accountants, one of which is that of advisory services. It's funny: when you ask a roomful of accountants about advisory, they don't all agree on how to define it, and they have very different approaches to how they'll deliver it. But what they do agree on is that advisory services are highly valuable for clients. And yet, some still find it challenging to get clients to see the value and buy into an advisory engagement. 

That's why today I'm having this conversation with Kenji Kuromoto. Kenji is the founder and CEO of Acuity, an accounting firm designed to build and maintain the financial functions for innovative entrepreneurs. Through Acuity, he's provided thousands of companies with a full range of financial solutions from high-level strategic counsel with its fractional CFO practice, all the way to virtualize Bookkeeping and Tax Services. Kenji is also a valued member of our FreshBooks Partner Advisory Council, or what we'd like to fondly call our FreshPAC. Since Kenji is a pioneer of advisory in the profession, he and I are going to talk about some of the key ways to win client buy-in for advisory services, providing practical tips to make this an indispensable part of your client offerings, and how to pitch and price them so your clients can see the value. Kenji, thank you so much for joining me today.

Kenji Kuromoto  02:09

Glad to be here.

Twyla Verhelst - Freshbooks  02:10

Great. Let's dive in and get into our topic for discussion. You and I met quite a number of years ago, I probably won't don't even want to say how long ago we met. But it was quite some time ago. And at that time, I was operating an advisory firm, you were operating an advisory firm. And of course, we had some great conversation right from from first meeting, because most firms really, at that time, hadn't started a firm with advisory first. And so I want you to tell us about advisory at Acuity and how you started winning buy-in for advisory services.

Kenji Kuromoto  02:44

Well, when we started Acuity, I didn't know that I had a choice to really not do advisory only because it's really what we had just been doing previous to entering Acuity or starting Acuity. I'd worked in, you know, one of the big global public accounting firms, I became a controller and CFO of a tech company. And so when I launched Acuity, I thought, well, I probably should just deliver some services that I was accustomed to delivering. And I think at the time, I didn't even know that the notion of advisory versus compliance was really even in my head, I just knew that I'd been, you know, the controller and CFO for tech companies. 

And so I started just by offering up those services. And buy-in took a little while, to be honest. I think there was some need for patience, from a buy-in perspective, because initially, it was a little bit difficult trying to explain to people what I was doing, because they'd asked me like, “Oh, are you an accounting firm?” I said, “No, no, no, no, I don't taxes. I don't do audit anymore.” And so I had to try to describe, like, how I can help them. And, you know, trying to get them to imagine, “Hey, I really want to focus on your future states of the accounting function”, which I believe a lot of advisory really is very future-oriented about how do we build things to improve your ability to see important financial metrics and things there to make better decisions. Or how do we strengthen the accounting function? Or how do we do planning and forecasting? 

So it did take a lot initially, it took a lot of trying to explain what we were doing, and maybe sometimes changing some notions of what they thought we were going to be doing. And usually would land in like, and I'm not kidding when I said this, like, I would just tell people, “I tell you what, I feel like there's some things I can help with. Would you be okay with me just coming out, like, I'll come out next week for a day free of charge. And I'll just come out and look at some things and we'll see afterwards if I can help.” And so I used to kind of try to find my way just to get on site, get this to work with a client a little bit, and then try to start observing some things happening in their accounting function that I could say, “Hey, I think we could maybe change a few things here and there.” But very relational had to kind of start with really getting an understanding the business and a bit of a deeper level beyond just the accounting function. 

So yeah, I will say that even today, being now that we have compliance services, advisory takes a little bit longer, it takes a little bit longer to build the relationship and develop an understanding of the business. It wasn't like I could just go in and say, “Well, hey, we're just gonna go in and categorize transactions, or we’re gonna go pay bills for you.” It took a little bit of a deeper understanding. So we had to invest more time in that and sometimes get them to kind of work a little harder to trust us, which maybe meant giving them some things upfront to let them give us a shot at the advisory work. So that's kind of how we started. But I kept thinking that's all I really knew how to do coming out of my previous job, I really didn't know much in the way of bookkeeping, like, I don't think I could have done the bookkeeping. So I was like, “I can't tell them. I can do that. Because I hadn't really done much of that at that point.”

Twyla Verhelst - Freshbooks  05:41

Yeah, you know, I'm not naive to how different of a career I had in accounting, which meant that I had this exposure to work that was more what we now call advisory. And I was far better at that, although I did know how to do bookkeeping. Because my start had happened to be the, you know, that kind of front-end person in the workflow doing bookkeeping when I first started in my accounting career, but I honestly was better at advisory than I was at tax. And to this day, I try to avoid taxes like the plague, as they say, and advisory came more naturally to me and was something that I had more experience with. So very similar in that way that it was really where your experience lied, and where you thought you could add value to the clients who started to work with it sounds like.

Kenji Kuromoto  06:27

Absolutely, absolutely. I think it also helped that I enjoy conversations, just like whether it's this other podcast or talking to people. And so I think there's surprisingly– Just being able to have a conversation and show some interest in what that business is doing is actually kind of a first step into advisory. So that part I always felt comfortable with to like, “Oh, tell me, tell me more about your business”, because I was just innately curious. So yeah, those things worked in my favor, I guess.

Twyla Verhelst - Freshbooks  06:50

Yeah. Yeah. You asked the right questions to the clients and got those conversations going. So, you talked about how you started even some of these services free of charge, or going out to a client site for a day and offering up that service or that value or type of engagement that the clients weren't familiar with yet. So tell us then, you know– Obviously, we wouldn't want to recommend any accounting professional, and I'm sure that Acuity doesn't do this, that they continue to do it for free. 

So let's talk a little bit about pricing. And, you know, we know that pricing can be a big hurdle. In fact, I’ll often hear accounting professionals say, “My clients won't pay for advisory.” And I'm sure you've probably heard that as well with the conversations you've had with the profession. So tell us, what are the things that you recommend for overcoming this challenge of pricing, or even, “My clients won't pay for it.”

Kenji Kuromoto  07:42

I think pricing is one of the really big objections that comes across when it comes to advisory. Because guess what: it's expensive, it tends to be. If you were to take a look at it on just a purely hourly rate basis, it is more expensive. It is a higher level knowledge focused work that is more expensive, and I don't think people and clients and prospects are unaware of that. But when they see it, they just kind of pause a little bit more and think, “Oh, gosh, this could be really expensive.” And so to your point, you do the things you do early when you start your firm just to get clients to at least try you out. So doing it for free. That was one strategy, I don't recommend that anymore. We try not to do that anymore at Acuity. 

The thing that I found was a good iteration, or maybe a good advancement in that, was to do our best to try to find a particular project or a particular initiative sometimes because advisory can be very broad, it can mean many, many things, I think we have a hard time defining it in the profession, which certainly means that our clients have a hard time understanding it. If we're not defining it very well, they don't understand it. So what we found was getting into something very simple and discreet, a project, kind of a door opener, if you will. And one of the ones I used to really like doing was some form of an assessment. And what we would often do is say, “You know, I'd love to come in and assess your accounting function, or maybe a particular piece of it.” 

Hopefully, during that conversation we just talked about having, you were listening for where there were friction points, where there were problems that the business was having. And you could use it to say, “You know what I'd like to dig in deeper into that. What I'd like to do is put together a small project where I'd like to come in and assess your account’s receivable and invoicing function, I'd like to understand why it sounds like it's taking a long time for customers to pay you. What I'd like to do is put together a small engagement at the end, it'll take me about about this much time. So that means it'll probably cost X”, I would put a number on it, you know, a few thousand dollars, something very discreet. “At the end of it, what I'm going to do is give you an analysis or finding that you just take and do whatever you want. I can maybe help you with some of the things but I want to just give you something you can walk away with. And then from there, that'll at least help you on to your next steps.” 

And that was fairly effective because we were taking all the uncertainty and the big, you know, all the unclear about how long is this going to take and kind of boiling it into something that I was relatively comfortable with from a pricing perspective, and then giving them something of value, they knew they were going to at least walk away with something that said, “Hey, here are the recommendations you need.” And what was happening also at the same time was I was building relationships with them, and I was getting a feel for the organization. I'm scoping more work, I'm finding more places I could help while I'm doing this work. At the same time, they were getting a feel for what it was like to work with Acuity like, “Ooh, what is this like?”, you know, “Kenji is asking questions, he's here, he's doing some things, how does he think?” 

And so I found that to be very helpful as a first start into advisory because what usually happened then was, you maybe lined up a few more projects based on an assessment, you could maybe go discreetly bucket those out, or even in some cases, clients would just say, “Oh, my gosh, that was so helpful. Whatever your rates are just, you know, could you work with us and go forward?” Oftentimes, they completely did a 180 where they were no longer concerned about the rates, it was, “Hey, how much time can I get access to you? Because I think you're showing through your advisory work that you have the ability to see some things that we don't know how to see, because we're not accounting experts like you are.” 

So I like a little warm-up, something like that that's low stakes, that's very well defined, that, again, you can just tell them, “You don't need to use this at all afterward, why don't you take this to your other accounting team or another CFO or your own team to do it?” Very often, that didn't happen, they would come back to say, “Oh, actually, you did a nice job with this, we'll have you do it.” 

So when trying to take on advisory, which is very difficult to scope and predict the amount of time, at least start with something very well defined. And then you can see where it goes later on: more projects in the future, or, oftentimes, if you do that well enough the first time, they'll kind of open up the, you know, just, “Hey, come on in and make sure you send us an invoice each week for your time”, et cetera. That's how we like to get started. That's typically a better way than just kind of going in and doing it for free, I think.

Twyla Verhelst - Freshbooks  12:04

Yeah, yeah. For sure. Well, I would think that based on that approach, you know, when you said that you're curious by nature, and you ask questions of your clients, that you probably have an opportunity to tailor to what it is that they're going to value right now. Is it something around invoicing? Is it something around people management? Is it something around profit margins? Is it something around vendor relationships? Or, you know, what it is that matters to them, to start with something that's really going to be a good piece for them to lean in and be like, “Okay, you got my attention. I'm listening.” 

And then as you mentioned that inside of that project, like, you can't complete a project like that,\ without asking even more questions and getting into other areas, like you said, where you're like, “Oh, this actually leads me to what I think could also be valuable”, in order to broaden the scope or make this more than a one-off project, and add it to their ongoing recurring engagement. So that's a really, really interesting approach. And I think something that feels like it could be bite-sized, right? And I think that sometimes, you know, it feels overwhelming to the client, and even the accountant, to say, “Okay, I'm gonna have this ongoing advisory and, you know, hopefully, I can give you value every month.” It’s probably what you're sitting on as a new advisor, feeling, like, versus, like, “Okay, so one-time project, let's see how this goes for them and for me, as the accountant and figure out, you know, can I do this ongoing?”

Kenji Kuromoto  13:27

You nailed it, Twyla: making it bite-sized. I think sometimes when we think about advisory, it's like, “Oh, wow, this could be big and huge. And it's got this opportunity to be one of the biggest components of revenue and these big engagements.” And they really can be, but I felt like they're much more successful when they start very bite-sized, as you put it, small. And then you work your way in. And oftentimes, again, that will go very fast. If you do the bite-size piece well, you're getting this assessment of the scope of more work. That's what I kind of learned from my time as an auditor, when I was in the insurance practice, we'd go in and ask lots of questions. And you could find all these other things that you could help with. 

So being curious there upfront, giving them something to take away, it'll open up some doors down the road. But I think the mistake I've made before is not being specific enough: they just see these high rates, and they can't really connect it to an outcome. That's difficult. That's difficult. Once the relationship and the trust have been established, that's much easier. They’ll say “That's fine, Kenji, just show up next week, next month, and just find some things to help us with.” That doesn't happen until you create that level of trust, which often can be done in bite-sized engagement.

Twyla Verhelst - Freshbooks  14:33

Yeah, absolutely. And that's where, you know, when people are saying, “My clients don't want pay for advisory”, I can't help but think, like, maybe if you go a few layers deep, like, is there some underlying relationship challenges kind of in the way or lack of trust that you may not be identifying yet that's in the way from opening up that door? And then how do you build it? So yeah, that's great. 

I'm curious to know, then that probably helps you internally inside of Acuity, uh, you know, you've had a number of years experience doing it now. But have you found that okay, this is generally what we need to price at for this type of advisory engagement that you've just learned over time? Like, it's hard to scope advisory that there's no doubt about it. And it's hard to know exactly how many hours, but have you learned that over time now, to be able to create this kind of base model of this is what this client should be paying for those services?

Kenji Kuromoto  15:25

Yeah, I think through experience, you certainly learn. And you can start with– You know, people sometimes go, “Oh, gosh, I don't want to use hours. We don't want to track time.” And that's okay. I get that. I think it is what we just talked about trying to put things into projects and discreet offerings. But I think it's okay to start with something that is relatively familiar and known by accounting firms, which is time, and saying, “Well, let's see, how long would an assessment take? Or if it's just the payroll or AP cycle, how long do we think that would take? And you can kind of get it to where you can get a decent range of estimates. The more you do them, certainly, you're gonna get a really good tight estimate of what it takes to put together a forecast or anything else. But I think that using an estimate of hours is okay. 

And I would give… What I would tell other firm owners is trying to be perfect at that is going to be a bit of a problem. I think we always worry about “What if I under or overscope it?” The answer is you're probably going to by some degree, but go ahead and be okay with that. And I think going into it, the mindset of “I'm going to learn something, I'm going to gather experience having done it before.” Gathering experience is so valuable. So go into it knowing, you know, and I guess, probably, that was my take on why we do some things for free was, “Well, what I'm doing here is clearly under scoping” because I wasn't even charging for it, but I knew I was going to learn some things, I was going to get some experience like, “Okay, now I know how much that is there.” I think that's important. You will gain that experience over time, but make it easier for it. Don't try to be perfect. 

Even if the client says “I understand that you work hourly”, almost every one of them will say, “Give me an estimate of how many hours it's going to be.” And yeah, I think that, you know, I would caution in that to dig a little deeper with them. Let's dig deeper and deeper. Versus sometimes you might be tempted to say, “Well, gosh, if I don't answer this question for them, right now, they’re gonna say no and hang up on me.” And instead of saying, “Oh, 10 hours or making something up”, I think there's an opportunity to kind of dive a little bit deeper into that and say, “Well, what kind of forecast do you need? Who's going to use this forecast financial model? What's the purpose of it?” And then you can start kind of getting a little bit deeper and maybe end up at a spot where you say, “I’ll tell you what: we're gonna keep it within this range, 10 to 15 hours, or whatever it might be.” And so play around with that a little bit. 

I know, it'll feel uncomfortable, because you're having to make a guess and you're not going to be right about these, but I think the learnings and the takeaways and the opportunity to see that prospect think alongside you and just interact with you is more valuable than getting it exactly scoped perfectly from a pricing perspective, that tends to jam up a lot of accountants there. Because it is just harder to scope and plan for advisory work.

Twyla Verhelst - Freshbooks  18:13

So Kenji is one of our fresh pack members, you got a sneak peek into what we've now just launched here at FreshBooks, which is an entirely new way for accountants to seamlessly work with their clients on a single platform, something that we call Collaborative Accounting. And for the listeners, in a nutshell, Collaborative Accounting allows clients to focus on the day-to-day front end of their workflow or front-end of their business. So invoicing, managing expenses, projects, time tracking, etc. And then it frees up the time of the accountant to take care of and lean into what they're really meant to do and what they're really valued doing. So that can be some compliance work, reconciling closing the books, but then also things like interpreting financials and giving these forward-looking advisory services, or even some strategic advice or optimizing for taxes. So I'm curious to know, how you see Collaborative Accounting fitting into the broader landscape of advisory.

Kenji Kuromoto  19:21

Well, the reason why we added a bookkeeping practice was because, when we were doing advisory, right, this is an interesting takeaway, because we were only advisory is that we would get new clients very excited for us to help them maybe raise capital or go renegotiate a line of credit at the bank, which helped them improve their accounting function. And everybody's excited: Acuity’s excited, client’s excited. And what would happen: we'd get there and the underlying transactional data, the day-to-day was not being done well, and we honestly couldn't get to the work. We couldn't do the work, we couldn't. How do you go and build up a financial model when no one's reconciled anything in forever, and they haven't even– “Whoops, we're behind about a month in entering bills into AP.” All these things kind of started adding up and we saw a lot of opportunities missed from an advisory perspective because a lot of the day-to-day accounting wasn't getting done correctly. 

So had there been Collaborative Accounting back in the days when we were doing this, maybe we would have said, well, we don't need to have a bookkeeping function. Now, I'm very grateful we created a bookkeeping function at Acuity, we did it to address this particular need, but we saw that very clearly. Without those day-to-day tasks being done by somebody, we decided to go ahead and do it for the client. Without clarity on who was doing what we couldn't get to the advisory work, or if we did, it was non-optimal work. It wasn't done with much accuracy, because the data was tough. 

And you knew what else winded up happening, Twyla, was when we would go forward, there would be a lot of finger-pointing. And I mean this in the sense between us and the client of where they'd say, “Well, that financial model was way off”, or “Why did it take so much time?” And you'd go, “Well, you didn't tell me that no one had closed the books in many months.” And so there was a lack of clarity on who was doing what. They thought, “Well, you're supposed to come in and do accounting for me, doesn't that mean you're doing everything?” And we would think, as accountants, “You asked us to do a financial model, like, how are you not reconciling your checking account on a regular basis? 

And so what I like about Collaborative Accounting, I think the thing that just jumped off the page to me when I first heard about it was clarity, clarity on who's doing what. The clients are asking us to partner with them to help them in their accounting functions but how do you effectively partner if we don't have clarity on who's taking on with responsibility? 

So I will tell you that if there's not that clarity of who’s handling some of the day-to-day accounting work, and you're trying to do advisory, it's gonna get very complicated. You're not going to have the information you need to do advisory work effectively. Or you might get pulled down into work that you thought was gonna be advisory that is actually, like, doing bookkeeping. Well, try doing bookkeeping work at an advisory rate for a while and see how well that goes with a client. Like that's not gonna go very well. Right?

Twyla Verhelst - Freshbooks  22:18

Not for long!

Kenji Kuromoto  22:21

Not very long, I think can be alleviated with clarity of who is handling what roles. We want to partner effectively and if you can partner in one platform to know which of the supporting activities in the accounting function are being handled by whom, it really opens up that opportunity to really dig in and do advisory. So I think it has, it's gonna have a massive impact on accounting professionals’ ability to advisory just because we can then have some trust and understanding of “Here's where the client is very clearly doing certain parts of the accounting function”, like whether it be invoicing or timekeeping. 

Those are places where we want to know they're doing it, and two, in many cases, it's more efficient for them to be doing it, right? Where does it make sense necessarily, for a client to be sending us the advisors a big spreadsheet full of “Here's everybody's time, we put it into a spreadsheet. Can you go into it in FreshBooks for us?” Well, actually, what if you just entered the timekeeping in yourself, and that generated invoicing? You're actually being more efficient, more effective, you're keeping the spending and the accounting function down as well, too. 

So there are numerous benefits, which is why I got very excited about the concept of Collaborative Accounting and the fact that it opens up that clarity and transparency about who is doing what. That's gonna allow people to be more specialized and things like advisory.

Twyla Verhelst - Freshbooks  23:38

Yeah, you said that word before, when you talked about Collaborative Accounting, the word “clarity”. And, you know, certainly, the model and the methodology was designed to make it really clear who does what, and that division is based off of who is best enabled to do what and who shouldn't be spending time doing, like, bookkeeping at an advisory rate. 

You know, on the flip side, your client shouldn't be doing some of the complex reconciling or interpreting the data because they don't have the skill set. So it was this real division of who does what, but also taking it one step further to ensure, “Okay, if we're going to ask the clients to do some of this work, they should be able to do it more effectively than you as the accountant.” So we've also set them up for success with a tool where they can do that. 

And, you know, as you're talking about, you know, the finger pointing, it kind of brought back this time inside of our firmware. We had promised advisory to a client and, in retrospect, I can see we didn't set that client up for success to do their work. And it was this constant friction, which was, you know, an anomaly inside of our firm, thankfully, but it was this constant friction of him saying, “Can I pay myself this month or am I gonna pay my contractors this month?” And me saying, “Well, have you completed your invoicing for the prior month? Because I can't cash flow project without knowing what you've gotten in the pipeline?” And then him begrudging like, “Ah, no, I haven't completed my invoice since”, and him being annoyed that I hadn't been able to tell him on the spot “Can I pay myself, my contractors?” and instead, it's like the finger pointing goes back to say, “Well, have you done this?” and “Well, have you done that?” And it was really not the relationship that we wanted to build. 

And it wasn't built on this foundation of, okay, clarity, who does what, and enabling that client with the tools to do invoicing? Because I'll sure tell you that that night, nine o'clock at night, I got a text message, “I don't remember how to enter–” Ah! Gosh, okay. I haven't served up the right tools for you to be successful and you're not getting the advisory work from me as your advisor. So I think there's clarity in the workflow, clarity in the model, which I love that you've got that from what you've learned from it so far. And then also the platform has to be there, in addition, to enable it.

Kenji Kuromoto  26:05

Yeah, I love your analogy. When you said that, I'm like, “Oh, my gosh, that took me back to, I don't know, only 10 different situations like that over the years.” Exactly.

Twyla Verhelst - Freshbooks  26:12

I wish I didn't have a story like that to tell. But it was definitely a learning and certainly learning that went into building this model, to be honest. 

So in talking about technology, let's shift then to talk about that a little bit more. And as we think about human relationships, and then how we interact with technology, AI, or artificial intelligence, is certainly a hot topic in this profession. How do you see the future of advisory services evolving now with the emergence of technology like AI?

Kenji Kuromoto  26:43

Well, I think it's, you know, emerging in a few ways. I'm very excited and optimistic for AI. I think that the reason why is because I tend to think of it, regardless of how it's going to look –I'm not sure any of us know exactly how it's going to look in the future–, I do have a belief that AI is going to create an environment where each of us as accountants, and hopefully, as individual people, will have these amazingly helpful, customized personal assistants who will know me and will know Twyla, you know, better than anybody. What things we need to do to be effective in our day and in our personal lives and at work. 

And so I like to just imagine that, regardless of what we see happening today or tomorrow, ultimately I do believe we'll see some form of that. It'll affect workflow, it'll affect tools, all kinds of things. I think what that's going to do is, first, there are still many of our team members at our firm and many others who are down doing work that’s still relatively manual, that’s relatively time-consuming, task-oriented, and repetitive. And I think AI will be in a great place to help take those tasks and do those for team members. 

I think that emphasizes that the accounting profession is a profession full of knowledge workers, yet sometimes we get pulled into routine day-to-day tasks that really don't allow us to use our knowledge. We have to just go and get bills paid, we have to go categorize transactions, those things all have to happen. But I think we're getting close to where AI is going to do a lot of that for us. 

Now the second piece of it is to, I think, help elevate some people who have advisory capacity who don't have the time to do that today because they're down doing manual tasks from that first piece. The second piece, there are folks who are already doing advisory, some of our team members who are doing advisory today, and they need support and assistance as well. That may look a little bit different for them. One of the ways I like to use AI is just in research and just thinking. 

I like to think out loud –it drives my team crazy– because I always want to have conversations because it helps me to think through things. I, myself, kind of will go in and have conversations with ChatGPT. And I imagine the future like I'll have this great assistant where I can say, “Well, gosh, this client right now is trying to raise a big round of capital. They think the runway is only this long, let's think about who the best venture capital firms or investors out there to focus on. You've got this great research assistant kind of right there working with you. And I can just imagine being able to kind of throw ideas back and forth. “Well, what would that look like if the raise was this large versus this size?” Or, “What does that do to the cap table?” And I'm just kind of playing this out loud. 

But I think these are the things that– Conversations are really helpful and advisory, because so much of advisory –most of advisory, my belief is– is kind of going into the unknown, you're having to do scenario analysis. So if you've got the help of incredibly effective assistants, who can help you run all kinds of analysis and you, the advisor, are not like, “Okay, let me make one more change in the Excel spreadsheet and do version 13.8 of this because I want to change the headcount”. But you're having an assistant help you with that, you're still directing the thought process, you're still helping a client think throughout possible outcomes, you're not in there down there doing the work. So I get really excited thinking about AI helping in terms of just taking manual non-knowledge based tasks off of people who have the ability to do advisory, and then enhancing those who are already doing advisory by just being a great assistant that you can spit-ball ideas, run infinite numbers of scenarios with very quickly. It's going to be very, very exciting. And so I think we're on the very cusp of that right now. 

But I can't wait to see what AI is going to do to empower the accounting profession, I think it's going to have a huge ability to improve the value that we as accountants create. I think it's also going to drive more people into the profession once they realize they're not going to spend their day-to-day just categorizing or doing debits and credits or bank recs. There's a lot of exciting work to be done. I think AI is going to have a big, big role in that.

Twyla Verhelst - Freshbooks  31:03

I agree. Do you think as, you know, I'm listening to you, do you think that there's any… Let me just rewind. Accountants, generally –you probably don't quite fit this category, Kenji, but generally– are quite introverted. And I think that some of that challenge with coming out from behind the desk exists, right? That there are people in the profession who do like that reconciling and filing taxes, and that's what lights them up. And if they're trying to expand into advisory, do you foresee that AI could actually take them further from their client if we aren't really conscious about how we leverage advisory? Or do you think, “No, no, it's going to force us to still lean into the relationship in order to deliver what we might garner from AI?”

Kenji Kuromoto  31:47

That's a really interesting question. And I guess I haDn't thought about that context, Twyla. I guess I've thought about that question more in terms of overall human interaction, so maybe it could be useful in terms of how we think about an accountant, and maybe a more transactional-based accountant working with a client. I think there's going to be great opportunity for people who maybe are a little more independent, maybe introverted, who do like to kind of do the work there, where AI can be something they actually are able to work on, maybe feel –I won't say make them feel more human, they're incredibly human already–, but to maybe practice those interactions. Maybe there's places where they're not as comfortable and so chatting with, interacting with AI might help give some skill sets where someone who's maybe not comfortable with that can utilize their AI to help them have better conversations with clients. 

I've already seen this before, you may have too, where we've had team members at Acuity who, when they interact with people over email, or Slack or written, it sometimes comes across a little harsh or tricky. And I know some team members have said, “You know what, I'm going to use ChatGPT to help me a bit interact with someone there.” And it's been really amazing to watch those interactions come across just saying, “Well, I needed to tell them that this needs to be fixed”, maybe it's a co-worker, “but I want to put it in ChatGPT and make it come off in a way that's still supportive and helpful.” And we watched those happen in a much more positive fashion to where it's encouraged those team members to want to reach out and connect with people more because they feel like they've got some good assistance there. So I think that's helpful, I think there's a great opportunity to, where used appropriately, it may facilitate some human connections. 

The other side I do worry about a little bit is I do think chatbots, AI will never take the place of a human connection, and so I think we have to be careful that people don't just pull further in, away, outside of community and try to use AI to be their community solely or to stand in their place in absence of community. And so I think that I worry a little bit about that, we might see that divide where AI can maybe help people who want to be more connected but also it could drive people toward more loneliness, where, “Well I don't have to talk to people anymore”, or “I can just chat with my bot here and that's all I need.” I would be worried about that person, I would be worried about that. 

So I think we have to be cautious of both sides because I think I would like to see the AI being used to give team members who might struggle on communication a little bit, or a little bit shy, to give them some assistance and help saying, “It's okay to be shy, you can have something that will help you still make communication because, ultimately, at the end of the day, communicating effectively within somebody, with another human being is incredibly rewarding for people. But I think that some people get stuck just because of the way they were all wired, the way we're all wired differently that's not as comfortable for someone. I would love to see AI solve that but hopefully it doesn’t drive them into a place of more seclusion. That's my kind of high-level take on it.

Twyla Verhelst - Freshbooks  34:57

Yeah, it sounds like we need to be really conscious about how we adopt this next, you know, next wave of technology and ensure that it is helping us come closer together not helping us, you know, start to drift further apart. 

All right, you've given us some great golden nuggets. I want to round out our conversation today with one final question. I'm confident, Kenji, that, you know, as well as I do that many accountants have been trying to embrace an advisory model, roll it out in their firms, and they've been challenged in doing so successfully. So can you leave us with what's your key piece of advice to overcoming this challenge?

Kenji Kuromoto  35:36

So I think this challenge comes from the fact that many of us, including me, are saying that everybody's capable of doing advisory work, which I believe in, I believe everyone is capable of doing advisory if they want to, if they find it fulfilling. I think the mistake that I've made, that a lot of other firms have made –let's just say a team member who has been doing bookkeeping, expressed interest in advisory work– is allowing them to do both. I get very concerned, we've made the mistake of when, if you try to have someone say, “Well, sure, you can do all the transactional accounting work and also be their advisor”, I found that to be very difficult to do. 

And I guess the analogy I would give –I mean not the analogy but the example– is I think about who does advisory very, very well today. And that would honestly be you look at the big accounting firms, firms, I've you know, global public accounting, all of them have spun off billion dollar public advisory practices, so they do it very well, the KPMGs, the Deloittes, even the top couple 100 accounting firms, they do advisory well. You don't they suck at universally? They suck at CAs. They're really struggling getting the CAs work done. I think that there's a problem doing both of them together. 

And I've been in the role to where I've kind of sat in this seat as the CFO, at the same time I sat in the seat as the bookkeeper. And I think doing those two things simultaneously is just too challenging. It used to force my brain into like, “Well, I did all the work, can I really review my own work?” Or looking at work and the accounting work I did, and kind of make some hypotheses about the future. And I think it's very, very difficult. There may be some brilliant people who can do that, but I think it's very hard. 

And so I would be cautionary of, for firms, saying, “Listen, if you want to do advisory, I would try to make that a discrete team.” I would say, “If someone wants to do that, great, let's clear some of their plate on some of the transactional work. And let's make this shift over to advisory.” There's a commitment behind that that might feel scary, but I think it sets people up better to be able to get advisory going, versus saying, “Well, we're gonna take a couple of our controllers and bookkeepers and have them do advisory at the exact same time they're doing the transactional work.” That is really hard, even for a great CFO who knows bookkeeping. 

And it's really hard to do either of those very effectively, which again, kind of points back to why I think Collaborative Accounting is important, right? Because then we're dividing up the roles, we're segregating some duties and roles, not just for purposes of security, or compliance, like, you just almost need to have your head in a different place for advisory work than you do for the transactional accounting work. And any one individual trying to do both, that's a tough task on them. So I tell other firm owners, “Try to separate those functions out of it. If people want to make the transition, try to give them the space to really do advisory, without being like, ‘Hey, by the way, though, I need you to do 75% of your time doing bookkeeping, or account reconciliation, and I need you also to act like a CFO at the same time.’” I think that's a really hard place. 

I've seen people say, “Well, we tried it in our bookkeepers just couldn't make the transition.” And that may be the case where someone doesn't quite have the capabilities, but I think it's probably more of a capacity issue. I think it's the capacity of saying, “I think that the way that we're thinking about separating people's time, we need to give them space to try a new skill set out.” And blending the two, advisory and transactional compliance, at the same time, if you have to do it great, try to do it quickly and get through it, and give people the space to really try advisory as a whole. So trying to keep those practices a bit separate would be one of my pieces of counsel.

Twyla Verhelst - Freshbooks  39:12

That's great. And I think that whether you're having your clients do more of that workflow and take on some of those pieces, or you're having different teams inside of your firm –different teams can even look like two people, right? It doesn't have to be big built-out teams yet if that's not where the firm is at– I think that's an interesting way to consider it. Because you know, the side then who's doing advisory is coming in with this fresh set of eyes and this look into the data, and an ability to analyze it without being pulled into the transactional pieces too deep they almost get too close to the data. What's the saying of “Can't see the forest for the trees”? It is so deep that it's almost like, “Oh, yeah, I don't even really have to look at it because I saw these all run through” versus “Huh, let's look at this was a level of skepticism to make sure that it's right, but then what does it really mean? And how can this be interpreted in a way that's going to provide the client value or help them grow or help them raise capital or whatever is important to them?”

Kenji Kuromoto  40:10

Yeah, once again, Twyla, you had the perfect tight analogy there. It's a forest from the trees issue. And I think just being able in your firm to kind of separate those, and allow those two things to happen, will be helpful in people getting those advisory practices going.

Twyla Verhelst - Freshbooks  40:22

Yeah, that's great. Thank you. Thank you for sharing so much about, you know, your experience in advisory. You know, when I called you a pioneer in advisory, you were probably thinking, “Geez, how old is she making me feel?” But you truly are one of the changemakers and one of the people who have really led the way for us in the profession around advisory, and I know that many folks look to Acuity as to, you know, “How are you all doing it, I want to do it too.” 

So thank you for sharing some behind-the-scenes and parts of your journey with advisory at Acuity and really, you know, helping us understand what that's been like for you, and then how we take it forward now with technology, Collaborative Accounting, and a new way of working with clients. So thank you, Kenji.

Kenji Kuromoto  41:03

Well, thanks for having me on and be here to have this conversation. And just thanks to you, and the FreshBooks team. And honestly, the fresh way that I think that you're thinking about how to help accountants and their small business clients. We work on a platform, a new innovative platform that's going to facilitate better connectedness and better clarity on who's doing what. So thanks for having me on. And thanks for all your team does to help facilitate this.

Twyla Verhelst - Freshbooks  41:28

So there you have it. Some great tips on winning buy-in from your clients for advisory services. First, focusing on pricing and coming up with a model that best suits your clients, even insofar as starting on a smaller project to dip your toe into advisory and give their clients that “Aha!” moment and see the value of advisory. Then not being afraid to use technologies like AI to automate and make our lives easier, so you can focus on what matters most to your clients, providing indispensable strategic advice. If you're interested in exploring Collaborative Accounting to enable more advisory in your firm, I encourage you to join the FreshBooks Accounting Partner Program at freshbooks.com/accountants. Thanks so much for joining us today. Bye for now.

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