Apr 30 2019 - San Francisco, CA

Accounting Software: Michael Tannenbaum

Chris R:
Welcome to Brex in the Black. We've got our CFO, Michael here to talk about whether or not to outsource accounting. Michael, thanks so much for coming on.
Michael T:
Thank you for having me.
Chris R:
So you’re a young startup, do you outsource accounting or not? And what's the calculus of that decision?
Michael T:
Sure, the answer is usually yes. I think if you don't have someone who knows accounting or finance or what they're doing, you need to outsource because your company is going to work or it's not going to work. And you don't really need to be bothered [with accounting] and it's not that expensive. So my initial bias is typically yes. However, when I joined Brex, I was the first employee — yes, there's other people here who say they were the first employee. Whatever. Point was, I knew what I was doing so we didn't outsource. But if that's not the case, I mean, I had been a VP of finance before, right. But I think there's going to be certain tasks like payroll, modeling, accounting, closing the month, etc. It's just not worth learning all those things as you're trying to build a business, unless you're kind of like somebody looking for a job, and you don't really have one, but you're hanging around the founders — sure, go learn that. But otherwise, if you have things to do, I wouldn't focus on it.
Chris R:
So what's the best way to outsource accounting then?
Michael T:
So there's a bunch of firms. Actually, Brex, we have an accounting portal, where you can just look on our site and find an outsourced accountant that is wanting to work with you. But there's a whole sort of industry, if you will, of people that serve small companies and help with their accounting, finance, bookkeeping services. And there's even ones that specifically focus on startups.
Chris R:
And this is like boutique consultant kind of work?
Michael T:
There's sort of a range. There are sort of high touch boutique consultants, if you will. There's also some firms that are trying to use more technology as part of the process. And so there's almost startups themselves serving startups. Startups serving startups is a trend I hear these days.
Chris R:
Oh, do you?
Michael T:
Yes, I think Brex may have been a part of that trend. So there's those people. So most of these outsource people will use either QuickBooks or Xero, right? They won't have their own ERP, right, they will just help you put your financials into one of the standard ERPs. And I know we covered ERPs on a different podcast.

And then there are some startups that actually were like outsourced CFO firms, outsourced accounting firms, bookkeepers, whatever you want to call them, that actually have their own accounting software as well. So somebody like Bench, or I believe there's another one called inDinero. Both of them, they're not actually having you use your own [ERP]. They're kind of using their own ERP as part of their consultative services. So there, the decision would be, just know that if you're going with that, you're kind of making a decision to go, like really commit to that ecosystem.
Chris R:
Right. How do you determine whether a particular accounting consultant is good, whether you should use that person?
Michael T:
Yeah, so there's the Brex referral portal where you can sort of see how many other Brex customers like you have used the product, which is helpful. Referral and word of mouth is always a good — this is kind of one of those things where asking a friend or other founder is a good way to do that. If you don't know anyone, I think logos on the site tend to be good proof points. And I also think that asking your investors can be good, but in general, I think referral is probably the way to go. Particularly because — so accounting falls in the broad category of professional services. And with professional services, you've got the firm, and then you have the person you're actually dealing with, right? And so that firm brand is worth something, but a lot of time it’s going to be this specific person that you're dealing with. And that's where the referral is key. If you're using one of those more tech forward people, then you're sort of relying on the tech. One interesting company also in this space is a company called Botkeeper, which actually does on the back end, they're automating software for the accountants, but you may not necessarily be aware that they're using that. That's just a fun fact that I learned recently.
Chris R:
All right, Michael, thanks so much for coming on and talking about outsourcing.
Michael T:
No problem.
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