Hello fellow accountants and bookkeepers! This week, I learned some surprising things (surprising to me, anyway). I thought I’d share them with you. I hope you learn something too.
1. Intuit is Killing ChronoBooks for Non-QBO Advanced Users
ChronoBooks is a popular online backup and restore solution that Intuit purchased back in November 2019. According to Insightful Accountant, Intuit has announced that ChronoBooks will become an exclusive feature of QuickBooks Online Advanced, included at no additional cost.
This is bad news for users of the product who don’t want or need to upgrade to QBO Advanced, which is the most expensive tier of the product at $150/month.
Top QuickBooks Proadvisor Caleb Jenkins mourned the decision on Twitter, saying that he has over 60 QBO multi-company “client clusters” on ChronoBooks, and now has no affordable solution for backup for these clients.
2. Accountants are losing faith in the FASB
Peter Margaritis wrote an opinion piece on Accounting Today that lays out perfectly the problem with today’s Financial Accounting Standards Board (FASB): Accounting standards and guidance have gotten more and more complex over the past few decades (which creates full employment for CPAs and auditors) but creates little value for business owners and other stakeholders. In his words, “GAAP is out of touch with today’s economy.”
This is particularly evident in reviewing the financials of SaaS companies, which derive their value from intangibles such as recurring revenue and number of subscribers. You won’t find those numbers in the financials, but they are the numbers investors want to know. Worse yet, the (relatively) new ASC 606 Revenue Recognition rules skew the GAAP numbers even further out of whack.
3. The California Consumer Privacy Act is already a disaster
According to the California DOJ and a study they commissioned, the California Consumer Privacy Act (CCPA), which took effect January 1 of this year, will affect between 15,000 and 400,000 businesses, with up to 50% of them being small businesses (even though the law was supposed to exclude SMBs). Furthermore, the total cost of initial compliance will be approximately $55 billion, or about 2% of California Gross State Product.
And this law doesn’t just affect California businesses — any business with over $25 million in revenue or data on 50,000+ California residents must comply.
4. How to build a financial model for an accounting firm
I’ve been at Jirav for just over three months now, and I’m happy to report that I’ve finally learned how to use the product! 😅
This is a big part of the reason I joined Jirav — I want to learn how to do financial modeling. Modeling, forecasting, planning, and budgeting was something the CFOs at my accounting firm did, and got paid twice as much (or more) to provide this service to our clients. I’m always looking to move myself up the value chain, so I’ve made it my mission to acquire those CFO-type skills however I can without having to go back to school.
I motivated myself to learn this skill by scheduling a webinar in which I’d have to do just that, live for 350+ attendees! Thankfully it went pretty well. You can watch the recorded webinar here.
5. The “Buffet Indicator” says we’re doomed
According to a scary ratio, the U.S. stock market is significantly overvalued. That ratio is the so-called “Buffet Indicator,” named after famous investor Warren Buffet, who really seems to know what he’s doing.
So what’s the Buffet Indicator? Simply put, it’s the total capitalization of the stock market divided by GDP (Gross Domestic Product).
Buffet says that long term, this ratio can’t get too far away from one, since in the end, what backs up the value of stocks is production, not speculation.
As of January 19, the indicator is at 155.7%. To put that in perspective, just before the Great Recession, the Buffet Indicator was at 137%. Before the Dot Com bust, the indicator was at 146%.
Total Market Cap verus US GDP by GuruFocus
Are we due for a significant market correction? Buffet seems to think so. As of November 2019 he was hoarding $128 billion in cash. I imagine he’ll put that war chest to good use buying up equities at a discount when the market bottoms out.
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David Leary and I discussed these stories and more on the latest episode of the Cloud Accounting Podcast. Listen on Apple Podcasts, Spotify, or anywhere fine podcasts are given away for free.
