2312 - Navigating the Complex World of SMB Accounting with Basic 365 Accounting's Rhett Molitor

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0:58With us right now, it is Rhett Molitor. Rhett, you are the CEO and co-founder of Basis 365 Accounting. You're found on the web at basis365.com. Rhett, it's great to have you. Good to be here. Thank you, Josh. Before we start geeking out on all things accounting, what have you been geeking out on personally outside of work? You always love just kind of breaking the ice with finding out the things that people are passionate about outside of work. So I don't know, what have you been into lately? a few things but i think the main thing i've been focused on this month is i don't know if you can see in the background there a little kind of travel related objects this is actually indiana jones but yes i know that's the staff of raw and then i forget what they call the little statue guy does he have a formal name not that i know of but yeah that's the guy from from the first one so yeah we're planning a uh work from trip we do that sometimes so we're going to mexico city for a month in October to just work from there because everything that we do is virtual.

2:01So I love travel, international travel, road trips and things, but sometimes we just do a work trip and take extended weekends to check the place out. Yeah. So how long do you go out? And tell me how that ends up logistically working. Yeah, we'll work from the Airbnb or we'll go to a coffee shop if we can find one that has good internet to do what we do. And then, yeah, just maybe take Friday off as well so friday saturday sunday go go somewhere so we'll be going to tot wacan uh those pyramids down there in mexico city to it's going to be during el dia de los muertos the formula one race formula one's going to be there and the tail end of it as well so yeah just kind of go around and hang around with the people how was your espanol yeah uh not good at all took german took german in high school so it doesn't get me very far down there Yeah, I just started about 200.

2:53I think I'm on day 235 of Duolingo Espanol. So it's slow going, but I'm having fun. Impressive. Yeah, I can't stay consistent on those things. So we'll wing it down there. Yeah, good, good, good, good. So tell me about Basis 365 Accounting. Yeah, we started 2012. Background as a CPA, as an auditor, not a tax guy. So CPAs do audits and they do tax typically, among some other things. So started back then, went into software world, where, you know, helped with software that was sold to CPAs, taken paperless, digital, kind of modernized those processes. And in 2012, my business partner and I kind of left what we were doing and started Basis.

3:36And we didn't want to create a CPA firm and be an auditor because an auditor is sort of a bad guy. You're there to find mistakes. We wanted to be good guys. So we thought we would create outsourced accounting and really help businesses kind of scale and formalize and get use out of their accounting. It took a little bit of time in the beginning to figure out who needed our service and what level of service applied to what types of customers and so on. So it took some time to kind of zero in. But right now, our services are crafted to help businesses get from that$1 million to$20 million in revenue.

4:10Up to$1 million, you can kind of wing it with your accounting. You can look at your bank and kind of know I'm doing okay. but at some point after a million you won't know how things are going and you'll get hit by surprises and so we kind of go in we have a fractional team and say okay let's get this in order like let's clean some things up let's get some processes in place let's get this thing a little more mature and then hopefully you know utilize that data to help them grow so it's usually it's craigslist bookkeeper hiring full-time employee which is expensive so our service kind of fits that gap where you're above the bookkeeper, but don't have enough work to hire a full-time person.

4:48That's the idea. Well, what I like about your services, they seem quite productized, which is helpful. Certainly, I like it because it's very clear for a potential client, but you've got bookkeeper, accountant, controller, and CFO. Do you mind maybe just kind of going through each of those? And by the way, you've got your prices all listed. I won't share what that is on the podcast just in case that happens to change. to change. Yeah, exactly. But I will just say it's fair, it's pretty accessible. And that's pretty exciting, I think, for someone who would love the skills of a controller, for example, and maybe like, whoa, I can't afford that normally.

5:29But I would say that, again, your pricing is very accessible. Do you mind going through the four quadrants and maybe talking about who typically engages you for that level of service? Yeah, sure, sure. And those are starting at prices too. So it depends. Because they're fixed price, we have to scope what customers want. Sometimes we'll do their AR invoicing. Sometimes we won't. Sometimes we'll do their AP. Sometimes we won't. So when anybody reaches out to us, it's let's get on a Zoom. Let's chat about what the challenges you're facing. How can we help you? And then I'm also trying to figure out like, what are we going to do?

6:01And what are we not going to do to come up with that fixed monthly price? The plans themselves, Well, it's like typically what most people think is I need a bookkeeper or I need a CFO. Like you've probably heard those two terms kind of thrown out there. They don't know what an account, like the accountant plan or accounting manager or an analyst would do or a controller for that matter. Unless you've worked in corporate, you might not have ever heard of controller. So we have the bookkeeper, we have the CFO. But as you can see, there's things in between. Most customers need things in between those things.

6:32so almost all of our customers are on the accountant plan or i should say they all start on the accountant plan typically so that's just get things processed like your transactions coded all the way to the financial statements at the end of the month and that could include accounts receivable accounts payable payroll services like i mentioned it could could be a little bit of cash flow planning and things like that but ultimately it's just we need to get your books solid on accrual accounting you know processes in place we write procedures that I will not handwrite with my hand, but we have procedures written down, which most companies never have.

7:06Like any customer comes over to us, there's never one thing documented on how things are done. And so that's the accountant plan. Then once you have that kind of stability, that foundation, then you can move to the controller plan. And that's a little more budgeting, forecasting, kind of getting an idea of the numbers, cash flow, understanding your cash flow so you don't get surprised by a 50K bill that you didn't see coming or something like that. And then once you have that, right, so I've got numbers, I'm going to measure myself against them. Then maybe you can go to the CFO plan where it's a little more KPI, trend lighting.

7:40It gets greater in that area. Like we have very customized plans that are controller CFO-ish. But from the website, it just seems clearly to kind of bucket them that way. But we customize to what they need. But yeah, so you can kind of scale up, scale down. It's month to month. I mean, you're not normally bumping around from plan to plan from one month to another, but as business is growing or during COVID, that is scaled back. You know, when you have the fractional approach, we can dial the team in or ramp them down very quickly, which can't really do with hiring. Yeah. Are there, you know, this is what you do every single day.

8:19and to the outside world, I'm curious if AI has been either disrupting or enhancing the accounting world. I would say most of us are sitting back and waiting for somebody to come in with a silver bullet or something. So we use AI to do various things, chat GPT, things like that, Gemini. But in terms of the day-to-day accounting, there was already automation in there. There's already OCR that can populate fields and push things to applications. So that's not really AI. I think sometimes it kind of gets gray where people think it's AI, but it's just automation. But in terms of AI, like one of the challenges with what we would see for AI or we thought would happen, I'm sure they'll solve it, is accrual accounting.

9:05So if something comes in, let's say like an insurance premium, most people would just book it to insurance expense. It should go to like a prepaid account and then you expense one 12th of that over the life of that one year of the policy, things like that. AI would need to not just see its insurance and say, code it to insurance expense, but say, wait a minute, this thing is for a period of time. I need to do multiple things in the accounting system. Nobody's doing that yet that we can see. Intuit with QuickBooks, we saw is entering in their agents. And so our team is kind of exploring how those work.

9:42Xero, another application that we kind of prefer over over QuickBooks just, I think, released through their roadshow, some sort of AI thing. It was just yesterday I saw it, so I haven't looked at it. So again, we're waiting. It's going to happen. And how does that play with what our team is doing day to day? And then how can we utilize that for our customers? Yeah, yeah. Well, Rhett, if you're speaking to a room of SMB CEOs, and you were to kind of have a couple of headlines that you would share with that crowd, whether or not, you know, they've got somebody in house or they're hiring somebody, or maybe they're not quite at that level, but getting real close.

10:24Are there any things that you find yourself commonly sharing to that type of an audience that might be pretty helpful? Yeah, there's a lot. So my kind of overloaded my brain there, but I would, it's sort of tough. You know, accounting is typically the thing that's kind of set on the back burner, right? Because they haven't really gotten value from it per se. So if they're going to like prioritize their projects, it's going to be sales, it's marketing, it's HR, you know, my staff training or whatever. And usually they're only looking to switch or solve an accounting scenario when there's a problem, I should say, right?

11:01Very rare does happen where it's forethought. Let me plan ahead and do this. That's great when that happens. But a lot of times it's reactionary. Their accountant quit. They got hit by some cat, you know, bill that they weren't expecting or something, whatever it is, isn't working. I need to find a different solution. So I would say like we can do a health assessment and kind of look at the data quality and then look at suggest tactics on improving. And that's kind of one suggestion I would have is try to use it tactically. We just launched a newsletter this month called the Tactical Accounting Newsletter.

11:39And that's just we have what we call playbooks, different playbooks for different things. So be more profitable. If a customer is having profitability issues, the team goes to the be more profitable playbook and kind of read through various tactics that may or may not make sense for that customer to implement and implement them. And so it's just keep improving and figure out how to use it to improve the financial health of the business or whatever it is you're trying to solve. I think that's the main thing. Don't just let it sit on the back burner, get a P &L at the end of the month and go, okay, looks good.

12:12But like, what are you going to do next? How can you make an improvement? Just do one a quarter. It's not like do five things. Nobody's going to do that. And stay active. Just don't get complacent. I mean, there's a whole bunch of tactics we can suggest, but just at a high level, don't just sit on it. Find a partner that you can work with that's actually going to use the information, engage with you, and figure out how can you be more profitable, collect more cash, service your customers, whatever that is in the accounting realm. There's lots of things you can do. Yeah. Rhett, your website, you'd mentioned your newsletter, but your website is basis365.

12:56Where would people go after they listen to our conversation here? To get to the newsletter, it's all the way down on the footer. We just launched it so we don't have that peppered throughout the website. But if you want to sign up for the newsletter, the field's down there. great um in terms of the newsletter um what what is it like when people engage or like where do they go what do they do and how might they know that they'd be a good fit for you yeah i think the home page is a good start we've got a video on there of a long-term customer um a lot of people come in on the outsourced accounting landing page i don't have the the site pulled up but i know it's up in the navigation bar, just to explain it.

13:38But I would say most people, they kind of like, okay, land on the homepage, see if they fit or not, go to the plans and pricing, that's where most people go to see like, well, what does the service even look like? And then go to the talk to us and book a Zoom conversation with me. We have some industry pages, so agencies, software companies, those are pretty big buckets, especially agencies and consultancies like service-based companies. There's some industries that we're not a great fit for. We try to kind of focus on industries we have strength and a lot of background with. So, you know, let's say you're like restaurants.

14:14There's plenty of accounts that will focus on restaurants because it has unique accounting requirements. We don't do that. So kind of seeing where they fit. But, yeah, I think it's pretty simple exploration of what people do. The homepage has a lot of good information. But what I typically see is people like something's broken. So however they find us, they go on the page. It's like, okay, yep, I think they do what I need. How much is it? Let me go to that plans page. What does it look like? Okay, that's within reason. Do I want to give them contact information or not? And the conversations are similar to what we're doing now.

14:49It's not a sales pitch. I'm not a sales guy. I'm an accountant. So it's just very collaborative. Like, what are you doing? What's going on? What applications do you use? I'll give recommendations whether you work with us or not. So very collaborative conversation that we have. No sales pitch. But yeah, it's got a lot of webpages, but ultimately I try to keep it simple, just like our accounting. Try to, less is more in a way. You know, we sometimes get inherit books where there's, you know, 100 P &L accounts and it's like, that's too much. You're overkilling it. Like, just keep it simple. Focus on those things.

15:25If you're nailing that, then we can add more stuff. And that's kind of how we approach it. Excellent. Basis365.com. Rhett Molitor, again, CEO, co-founder. Congratulations on 13 years, getting on 14 years. Congratulations on that. Thank you. Yeah. Time's flown by. Excellent. All right. Thanks so much for joining us. Again, the website, basis365.com. Thanks, Rhett. Yep. Thanks, Josh.

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