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Jacob: Welcome to PayPod, the Payments Industry podcast. Each week, we’ll bring you in-depth conversations with leaders who are shaping the payments and fintech world from payment processing to risk management and from new technology to entirely new payment types. If you want to know what’s happening in the world of fintech and payments, you’re in the right place. Hello, everyone. Welcome to PayPod. I’m your host, Jacob Hollabaugh. And today on the show, we are taking a look at the world of accounting and financial operations for small businesses. And as someone who has way too many spreadsheets and inputs, the same data way too many times just to try to get a lay of the financial land of my own small business. I feel like this is a conversation I’m personally going to learn a lot from. Join me to provide some of that knowledge and explore these topics is Jesse Rubenfeld, founder and CEO of FinOptimal, the company using tech and team to transform how businesses do accounting and how accountants do business. Jesse, welcome to the show and thank you so much for being here.
Jesse: Thank you so much for having me. Jacob It’s a pleasure to be here.
Jacob: Pleasure is all mine. Let’s start here. When you founded FinOptimal, what was the gap in the market? You saw the problem that small and midsize businesses faced in accounting that you thought creating FinOptimal could help them solve.
Jesse: Well, in a nutshell, there was just a lot of inefficient, painful processes in the accounting process. A lot of VLOOKUPs. A lot of manual data entry. A lot of double data entry. It was painful to do at the beginning of my career. It was painful to do. It was painful to watch others. Once I started to find my own solutions, mostly in Microsoft Excel at the time. And ultimately I started looking for ways to buy myself time just so that I could be more productive in my own career. And once I started having success there, I wanted to find ways to share those improvements with others.
Jacob: Yeah, that’s awesome. And I heard you talk a little about your background before and that you were doing that, if I remember correctly from another podcast, I think I listed you with you. You had gotten your workweek down to like a very low hour number based on like the innovations you were able to do. And when I heard that, I was like, Man, it’s really awesome that this person didn’t then just take advantage and just be like, Well, I’m just going to milk this and only work a few hours a week, but instead have the foresight to be like, I can bring these solutions to a lot of other people across the industry.
Jesse: You know, it’s funny, when you start an accounting job, what you learn in accounting is so different than what you’re practically doing in ten years ago. Entry level accounting role. It’s very, very removed from the theory of debits and credits. That’s can be exciting and is an intellectual exercise to learn about accounting. But when you start and you’re doing a lot of data entry, you’re processing vendor bills. When I started, we were still filing paper. You say to yourself, This is not what I signed up for, but it’s not that you don’t like accounting, it’s that the processes are so cumbersome they can really get in your way of advancement if you let them overwhelm you in terms of how you spend your time. So a lot of this is sort of taking back the profession, taking back my job, taking back control of my time so that I can advance and get better at the things I want to get better at, not at getting paper cuts.
Jacob: Love that. Can you give us an overview of the services that FinOptimal offers and the types of companies and industries you’re working with?
Jesse: Sure. Our services encompass what you’d expect from traditional bookkeepers. The only things we don’t handle are tax returns and FPNA. So using a blend of tech and team, we handle all the other Finops and accounting tasks from AR and AP through month end accruals and allocations to reconciliations, monthly close and financial reporting. And in a nutshell, we do it better, faster and cheaper because we’re using automation in places. Our competitors, both in-house and other outsourced shops, are doing manually. They just don’t have the same level of tech and process that we do.
Jacob: Yeah. Is there anything about the accounting world specifically that you feel like it why it would maybe lag behind in some of the innovation than maybe other areas within the business that have seen fintech like companies come in maybe earlier?
Jesse: That’s a great question. I would summarize it as sort of there’s a mythical persona that’s largely missing in the market that I like to call the accounting engineer warrior, someone who can live at the intersection of the accounting profession and technology, where instead of having to ask a software company to build something, or instead of being an engineer and saying, Hey accountant, what do you need? You can try to merge those two things together and just quicken the feedback loop, right? Oh wow. Wouldn’t this payroll automation, wouldn’t this Stripe accounting workflow, wouldn’t this Shopify accounting workflow be simpler if we could just pull the data from the API and transform it like this and create journal entries and push them straight into QuickBooks? And because like in either case, the accountant is missing the tech angle or the the tech person is missing the accounting angle. I think all over the place there are examples of processes that don’t correctly pair the people and the software process sits between people and software. And that’s what we try to help our clients and customers with.
Jacob: That’s really awesome. Do the majority of your customers come to you looking for like cost reduction is their main goal error reduction, speed improvements, possibly all of the above. What’s the biggest pain point that drives businesses your way?
Jesse: All three for sure. Jacob Speed is definitely, you know, people come and say, we want to close by business day 2 or 3. That’s fast. But we’ve got some clients with 200, 300 employees that are still on QuickBooks Online, and they can do that because the processes that we’ve helped them put in place. Another thing would be scalability. Hey, we want to grow. We have grown a lot. We don’t want to have to scale our accounting department linearly with our revenue. It’s more money, but it’s not necessarily the number of transactions has multiplied by ten, but that doesn’t mean the process itself needs to take ten times longer. Let’s have some batch processes, let’s have some automation. So speed, scalability, and yes, some cost savings in the form of I’m not paying an expensive accountant. Accountants are very expensive right now to do things that automation can do.
Jacob: Yeah, absolutely. I have I’ll follow up at a later point on the expense side of things, because I do have a couple questions related to that. But first, to narrow in on your services a little more even, do you offer your own total software solution then, or are you integrating on top of current software? Is that an SMB might be using? I know a lot of it, you know, runs and integrates with QuickBooks. Is your purely integration APIs or are you have your own software solutions whole cloth as well?
Jesse: That’s a great question. So we started as a services business where people were paying us a monthly fee to do their books and to do a bunch of other accounting related things we did build API connectivity on. With QuickBooks Online. All of our clients are on QuickBooks Online, and most of the new clients that we take on are willing to migrate to QuickBooks Online in order to work with us. It’s a little difficult to articulate, but I would say about 80% of the service work we do is automated by these tools that we’ve built internally to help us do our clients work. And we are now starting to productize, which is to say sell as a standalone software as a service. Some of what we think are our most marketable, powerful tools that we hope other accounting professionals can adopt, use for their clients and get more leverage from their time.
Jacob: Makes sense. So then your growth angle is we’ve proven concept that these all tools we’ve built work for us doing the accounting work for businesses. Now we’re going to other accounting firms to say, Hey, we can’t be the accounting firm for everyone in the world but others that are doing this. You can use our tools now. Our tools are products we can sell as well.
Jesse: That’s exactly right. Jacob And that’s where I think we really set ourselves apart from other software accounting software companies. We are. We’ve been using these products for eight years with 100 clients. They’re battle tested and we know the edge cases that our customers are going to think of where we think and hope our competitors are going to have to give out Amazon gift certificates and run focus groups to figure out the little niggling edge cases that are ultimately an important part of a well designed product.
Jacob: And I imagine that you just alluded to it that would make like R&D and future products that much easier to implement by having the ability to we’re going to use them in-house with our clients over here first, not send them out to someone and say this is a new product. Let us know if there’s any bugs. If there’s anything that works great, doesn’t work great, you’re using it yourself first before then. Being able to move it to the other side of the business to sell. I imagine that kind of makes that R&D or possible new additional products a little bit easier and a nicer clean pipeline to create those.
Jesse: I think that’s very well put. I think there’s almost a thin optimal labs concept there. I think it’s interesting to make these products marketable. We’re imminently launching one called the Accruer or the handles, deferred revenue recognition and prepaid expense amortization. We have to slim down the feature set enough so that an accountant not familiar already with how we work can reasonably be expected to figure it out. And without too much help from us, we’re certainly willing to offer help, certainly to our early users to try to gain adoption. They need to be able to figure it out so we’re slimming down the feature set that we use with our service clients. We’re really trying to help more accountants escape the tyranny of bad process and start to unlock the potential gain from using tools that really pare your people with QuickBooks better than your current process does.
Jacob: And with QuickBooks Online being that major general ledger that you integrate with, was there a reason going with them first, other than just size of scope of how many people were already using that? And are there any plans to eventually integrate with other similar software providers?
Jesse: You know, that’s a great question. We think about our own go to market strategy a lot in terms of how it stacks up with Intuit’s. Intuit’s done a great job of. Gaining adoption by millions of small businesses in the United States. They were really smart about gaining the trust of accountants, which is no easy feat because accounting products come and go and accountants are mistrusting that, Oh, great, you get me to use your product and then you get bought and you go away or you just go away. And all my clients are mad and have egg on my face. And QuickBooks has done a great job of steadily improving their offering over time and improving their API in particular. You asked why them? Their API is very complete. You can do almost everything with the API that you can do as a user on the web, and that makes it a very, very powerful platform for third parties like us to build software on top of it to extend the capability that they’ve already built.
Jacob: Yeah, makes perfect sense. So coming back to then, you mentioned the pricing earlier on and I had a question about that. We’ll come to that. Now. You work on a flat fee pricing model and that’s becoming more standard across the fintech industry broadly as it’s kind of a major selling point for a lot of fintech companies who are replacing traditional services that may work hourly different fee structures in the world of accounting services. Specifically, though, how unique is it that you’ve got a flat fee structure and how does that offer you and your clients benefits Both?
Jesse: I think it is becoming increasingly common, right? The hourly model places the burden of optimization on the client, whereas a flat fee model says, Listen, we have enough confidence in the way we do your books, that we’re willing to bear the risk. You know what closed books look like. We’re going to give them to you for this much a month. It’s on us to create margin where our competitors might lose money for that fee. So I think increasingly the world is moving in that direction. But slowly. And also it does place the burden of optimization on the firm as opposed to the client. And we think that’s a good development. We think we’re well positioned to compete for our clients business for that. But we don’t have to have a process every month where we send someone an invoice and they say, Well, what did you do? What were just 12 hours for? No, flat fee
Jacob: Makes it way more seamless for both sides. Changing gears slightly Then I recently was listening to another podcast interview you did where you spoke about having good business posture and how services like yours within FinOptimal assist in creating that. Could you explain the idea of good business posture and how automated financial tools like yours really create that posture, the benefits that that provides?
Jesse: Yeah, that’s so it really comes down to people process and technology. The comparison I made on Boris’s podcast was about the beginning of COVID and working from home, right? You’re sitting at your kitchen table in an uncomfortable chair that was the wrong height with no armrests. Neck was sitting down.
Jacob: Still had the most comfortable but better.
Jesse: Totally. Your setup was not built. Optimally for what you were trying to do and lots of other people there splurged on a totally new desk chair monitor. They threw a cushion on the seat, which barely helped. They overspent on the simple problem. So we see that with businesses. We see them buying expensive software, we see them adding headcount. But it’s just not quite that’s not neither by itself is the answer. Okay. It’s important to harmonize those new people. Sometimes you do need to hire new people. The shiny new software together so that you get greater than linear scale out of those increases. That’s what the posture is about. It’s about combining some new software, some retraining and if necessary, new people with a better underlying process that you can diagram, that you can map out that you know will get you a speedier close that’s still high quality with few errors and not just like life draining to execute for your posture, right? You’ve got to exercise. You can’t be like carrying around heavy suitcases all day and no accountant wants to be going through a rigorous, difficult, you know, painful close with lots of exceptions that they have to remember to oh, I got to remember to go do this and pull this from the bank. Otherwise this will be wrong and I’ll have to redo it twice or three times. That’s bad posture.
Jacob: Yeah, love that. Well, thank you for going through that again. Yeah, it was just blown away when I heard it before. And love having you explain it again here. I’d like to now kind of go into a couple of your specific services and ask about some specifics, starting with within the financial operations portion of your services. You’re doing invoicing, bill payments, chargebacks, etcetera. And with invoicing specifically this being a payments focused podcast or more so within the fintech world, within the payments world, are you actually sending invoices and facilitating payments or are you just automating the reporting and the accounting of those payments through the other services you’re integrating with?
Jesse: Great question. We are using QuickBooks for AR and AP. We use almost the full functionality that that suite offers for invoices. We are automating both invoice creation for our clients and sending those solutions look different for every customer. Some people want the PDFs downloaded, they want more process around it. Some people want an invoice created automatically when a deal is marked closed one in HubSpot or some other CRM and we have business rules that we can set up for our clients to make the system work exactly the way they want it to. All in QuickBooks Online. Okay. For payments, there are a few exceptions. We are typically not moving the money ourselves on behalf of our clients, but we are ensuring that the accounting and this is where I know I’ve listened to some of your other episodes, the accounting for payments. It’s so important to reconcile cash and correctly account for the fees, for example. And these are things that we really, really thrive on, right? When our clients have Stripe integrations or there’s a ton of different payment providers that we’ve integrated if necessary, just with Excel downloads like the client will download an Excel file from their payment provider and we’ll ingest that so that we can exactly predict what that cash flow into their checking account is going to look like and make sure that we’re accounting for the fees correctly when possible. We use an API of course, but yeah.
Jacob: Okay. That makes sense then. And it also a lot of as we talk through all this, I just keep going to little ways like I need to improve my own small business operations and things and like that was an exact example of yep, I’ve actually been there where the reports that are being spit out to me, either the fees are on the payments or the one thing that are either in the wrong spot or not being included. And then I’m like, why does this not match this at the end? And it’s like, well, because it’s not all linked up together, pulling from the exact accurate data, which it’s one thing to have the payment actually go through properly. Everyone get what they’re supposed to get. But then on the reporting side, that’s ultimately just as important that we’re actually monitoring and reporting it all the same. On the in the accounting portion of your services, then you’re doing automatic bank reconciliations. And when you’re pulling that bank data, is that also just what’s available through QuickBooks or the other third party software, or are you pulling data straight from the banks themselves or have any relationship with the bank from a data sharing standpoint themselves?
Jesse: That’s a great question. First, I want to tell you that if you’d like for us to take a look at your own payments accounting workflow, we’d be happy to give you the Hollabaugh discount and I’m sure we can figure something out there. We do automate bank reconciliation when we can. We get access through third party services, not QuickBooks as bank feed. A lot of our clients come to us using QuickBooks bank feed, but we like to save. Them having to use the mouse at all when we can. So we’ll pull transactions in. We’ll automatically compare that to what’s in QuickBooks. And ideally we only highlight the outages, right? So if we have an integration with Stripe and we can make API calls to book the disbursements from Stripe into the checking account and book the fees, we’ll book that automatically and we’ll already know what’s going to hit because Stripe’s API tells us. And then when we get the transactions from the bank, they’ll just reconcile because we recognize that they’re about the same date. It’s for the same amount. We know that that’s not an exception, that’s not an outage. So we really handle automated bank reconciliation by exception. What doesn’t tie out and let’s focus the accountant’s attention on those things. I think we take bank reconciliation to another level with APIs, regular expressions, all kinds of automations that I think a lot of accountants start to try to dream up and build in Excel and in Google spreadsheets, which is how I started. But when you can really apply software development principles to these processes, there’s just a lot of headroom for save time. Avoided errors quicker. Bank rec.
Jacob: Yeah, I can kind of imagine too. So I well, I didn’t study accounting. I was in a major business school in like my wife was in the accounting and finance department. A lot of my friends were. And every time I think of the accountants like trying to create something wild and crazy in Excel that you’re now, we can offer that without any of the legwork of you doing it. I just think back to remembering all my friends and people that would do like the Excel competitions and things like that and be like is going to render all of that null and void. There’s going to be some people out there, some Excel World champions that are being like, No, I like, I actually liked this part of it. But it obviously I’ll.
Jesse: Tell you what, though, Jacob, like those are the people that we want to buy our software like we love. I was one of those people and I love those people because those people take pride in, Hey, look how I improved my company’s process with this nuclear spreadsheet that I built. We’ve thought of having a competition where we say, Hey, how many deferred revenue recognition transactions can you book in a single hour? Let’s have a bake off your process versus somebody else’s. So yes, definitely. Once I discovered Python actually first it was Perl, then Python. I thought, wow, this plus spreadsheets plus QuickBooks is a dangerous combination. It’s kind of like in Jurassic Park, where the I hope I’m not dating myself too much, but the velociraptor like walks up to the door and they’re on the other side of the door feeling safe. And they say, wow, you know, we’re totally safe as long as they don’t figure out how to open doors. And then you see the velociraptor, like, start to open. Yeah, that’s how accountants plus coders. Yeah. Is like in the accounting industry.
Jacob: That makes sense. And yeah, I’m sure those folks would you can go back with your own new competitions to replace because it was definitely a competitive nature in some of those early finance and accounting classes. Those are the people you’d want to work with. That would probably be the natural like it’s doing the same thing. It’s just kind of a new sandbox to do the thing in versus Excel being the only way to optimize any of this. Well, pivoting topics again, if I may find optimal offers a lot of partnership programs and opportunities. And that was something that really caught my eye on. Looking through your website and everything. Can you speak to the philosophy behind promoting all these partnership tools? Is it simply that it’s additional revenue streams to add, or is there more to it and wanting to build kind of a unified industry within fintech?
Jesse: Great question. We really, really value partners. One of the ways we do that is we try to stay in our lane. We think we’re really, really good at this process optimization and we think that by itself is a whole business. And as such, our partners have a lot of confidence that we’re not going to suddenly start doing tax returns or audit work or CFO services. These are things that we have partners that can do much, much better than us that value the CFO services that work with us, love not having to spend their time doing pivot tables and things that can be gathered automatically with the software that we give them because they can take on more clients. At the end of the day, it’s about letting our partners take on more business in a way that helps us take on more business, all in a way that helps clients get more for their money.
Jacob: Yeah, I think that’s really, really smart. And there’s three main programs within that you offer and to ask about a couple of them specific with the affiliate program, what’s the offer to a potential partner and what’s the mindset behind who you’re willing to partner with? Will you take anyone who wants to be an affiliate or do you have a standard of who you’re looking to have as an affiliate partner?
Jesse: I would say we have typically these things happen via introductions. Hey, my friend’s doing CFO services. I think that they really they took an interest in your software they’re really working too hard on. And so there’ll be an introduction. Certainly we want services are high touch businesses. It’s important that we believe that our partners have rapport with their clients, are trusted advisors. Once we find that relationship and it’s clear we can help each other out, we’re talking about a percentage of revenue that we earn based on money that comes in from the association. Think of that as kind of the partner program. We have the affiliate program where it’s not necessarily a partner. It’s just somebody who’s a fan of ours and sends business our way. They’re a booster of ours. We pay them a percentage to at the end of the day. The real benefit is not the financial incentive. We do provide a financial incentive. It’s just common practice and good business. But it’s much more about all ships rise when we’re sailing in the same direction. And these programs are intended to filter for people that are partners who are sailing in our direction.
Jacob: Yeah, that’s fantastic philosophy and that leads me right into the final topic. Then I’d love to touch on is just in general, how to be successful within the fintech world. Our audience is full of business leaders in their own right. Lots of folks who work in lots of different areas of the industry always love to ask a founder like yourself these two following questions, the first of which is What characteristics do you see that make a company successful in the financial technology world?
Jesse: First and foremost, they eat their own dog food. Okay, It’s a SaaS verse VC first market. Everyone, meaning they use their own software actively as we do. We’re using the Accruer on our service clients books all day. Everyone wants to build a SaaS product and get a SaaS valuation. We view our service business as a strategic advantage because we’re constantly developing new features based on use cases we’re seeing firsthand. And I think any fintech company that can do that, find ways to use its own software, is going to be a step ahead of competitors that have to pick it up based on feedback from the market, which is a step or two removed.
Jacob: Just like that. We don’t have to give it to someone else for them to test it and come back to us with ways to make it better, ways it’s not working. We’re doing that all ourselves. That’s just going to help you in such a big, big way.
Jesse: Totally 100%.
Jacob: Taking that to the individual level, then what personality traits or characteristics stand out to you as ones that help an individual to be successful working within this industry?
Jesse: I would say personality wise, the ability to operate in ambiguity. You have to be able to make decisions in the face of uncertainty in order not to just go nuts because you’re building something that people aren’t already using necessarily. You’re showing them what they need, and that can be uncertain and at times scary. There won’t be a blueprint to follow when you’re building something new. Technically speaking, I think of I’m reading Anna Konnikova’s book. I think it’s called The Biggest Bluff. She talks about she’s somebody who didn’t play poker and then learned how to play poker very quickly. This concept of being a switcher, of being able to combine multiple disciplines. The Medici Effect is the book that I’m thinking of that talked about this where most innovation exists at the intersection of two disciplines, so people with multi multiple disciplines that they can bring together. I think that’s a recipe for success and the more the better.
Jacob: Yeah. And exactly what the foundation of your company and you’ve referenced multiple times a day of accountants who can code together brings this whole new innovation, this whole new way to accelerate the industry and add a lot of optimization. Well, Jesse, this has been a lot of fun and I’ve definitely learned a lot that could benefit me and my company in the future. I’m sure many listeners have as well. For those listening who might want to learn more about FinOptimal or who might want to follow you in your journey, where would be the best place for them to go to do so?
Jesse: Thanks so much, Jacob. If your listeners enjoyed this convo, they should follow me on LinkedIn. Jesse Rubenfeld I’m talking about these topics constantly and my DMS are open. If you’re interested in some help from us, please head to find FinOptimal.com. You can book a free consultation and if you’re interested in a Accruer you can use promo code PayPod capital P, a, y, capital P, o, d for an extended free trial.
Jacob: Love it. We will definitely be linking all of that, including that promo code in the show notes. Thank you so much for providing that for our listeners and thank you so much for all the time and knowledge. Jesse. It’s been an absolute blast and hope to speak again sometime soon.
Jesse: Thank you, Jacob. You too.
Jacob: If you enjoyed this episode and want to hear more, head on over to SoarPay.com slash podcast to subscribe on your podcast listening platform of choice. That’s s o a r p a y.com/podcast.
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