| By Scott H. Cytron, ABC
Michael Hsu, CEO of DeepSky Accounting, approaches the intersection of accounting and technology with a very unique perspective through outsourced accounting services; in fact, his website describes his work as a “New Age Accounting Solution.” I caught up with him to find out more about his company, DeepSky’s approach to service and where he thinks paperless technologies are headed in the next few years.
Scott Cytron: Where did the name, “DeepSky Accounting” come from, and how do you describe your offerings to clients and prospects?
Michael Hsu: The name DeepSky really breaks down into two components. The “Sky” refers to “Sky is no limit,” which describes the mentality of both the entrepreneurs we serve and ourselves. We believe entrepreneurs create riches in the world and are capable of anything we put our mind to. The “Deep” part of the name refers to the core, foundation or the root of the business that is still vital to the success of the business – in our case, the accounting and numbers aspect. This is the area where we provide our knowledge and support to our entrepreneurs to help them reach the “sky.” |
Michael Hsu, CEO |
Because we believe entrepreneurs are capable of achieving anything they set out to do, we want to be a part of their dream by providing them support and insight into their business. We do so by offering a complete accounting department they can use as their own. This accounting department is responsible for not just the day-to-day bookkeeping, but more importantly, converting all those numbers and data into meaningful business insights that can help the entrepreneurs build their vision.
Scott Cytron: What did you do prior to starting DeepSky?
Michael Hsu: I worked as an auditor and consultant for a top 100 CPA firm here in Southern California. Most of my clients were small-to medium-size businesses that do about $20 million to $1 billion in revenue. I specialized in internal control and processes design and testing that were meant to ensure the integrity of a company’s accounting efforts as well as operational effectiveness.
It was during that time that I realized businesses really needed help when it comes to the accounting aspect of their company – that we, the accounting industry, really needed a complete redesign of the way we do things. We need to bring back the radical idea that accounting serves the ultimate purpose of providing valuable insights to stakeholders and we need to leverage all the new technologies that have been invented in the last 100 years.
Scott Cytron: I love this quote on your website, “DeepSky offered us an entire accounting department for the price of a traditional bookkeeper. It doesn't take an accountant to figure this one out.” How do you go about convincing your audiences that outsourcing the accounting function is far more beneficial than keeping it in house?
Michael Hsu: It goes back to the simple idea of core competence. Take one of our very good friends and customers, for example. He is an entrepreneur in the fashion industry, and he and his team do their job extremely well. They know the latest fashion trends and all the news in that industry, they can tell which design will sell and which design doesn’t quite have “it,” and they can feel the difference between 100% cotton and 70% cotton.
He knows that it is important for him to know which shirt, at what price point, from which venue, sold more last season, but he doesn’t quite know how to get that information. He would hire an in-house accountant, but he wouldn’t really know what a good accountant looks like, let alone train one. He shouldn’t. It’s not his job. It is ours.
Everyone at DeepSky lives and breathes accounting. We are educated, trained and now practicing accounting on a day-to-day basis. We keep up with the latest industry news and technology. We know what good accountants look like, so we hire them. It is our job to be good at what we do, just like it is our customer’s job to be good at what they do. Most importantly, because we technically operate dozens of accounting departments for a variety of businesses, we learn at an accelerated rate. I can say confidently that DeepSky learns faster than any traditional in-house accounting department where learning occurs only through X amount of training classes each year, if any, or learning on the job where junior accountants learn from their seniors who learned the same thing from their seniors years ago.
Scott Cytron: Aren’t you concerned that accountants and CPAs might think you’re taking business that belongs to them to handle?
Michael Hsu: Traditional CPA firms offer services that break down into four categories: attestation, tax, consulting and bookkeeping/write up. DeepSky doesn’t offer any attestation or tax work. In fact, we are working to establish partnerships with CPA firms that offer these services, so the offerings become more of a collaborative effort. We don’t provide any stand- alone consulting work either; all the “consulting” is done as part of our outsourced accounting department service, so that leaves bookkeeping and write-up, which we indirectly compete with.
So an easy question we ask our prospects to set us apart from the traditional bookkeeping/write-up work is “why do you do your accounting?” If the answer is that they do it for compliance reasons and only care about using it to file tax returns, then they are probably better off staying with a write-up service from a CPA firm. If they are doing accounting in hopes of getting some insight about their business from it, then we are on the right track. A micro one-man CPA shop typically has at least 500 clients, so it would be difficult for this firm to provide any type of insight to its customer’s numbers. The firm offers bookkeeping so it can do tax returns, but we are not after the same market. Our biggest competitors are traditional in-house accounting departments.
Scott Cytron: You obviously see a trend toward companies outsourcing their accounting solutions, so are you also working with accountants and CPAs to handle some of their work?
Michael Hsu: Yes. Coming from the CPA firm world, I know many talented CPAs and CPA firms. DeepSky is a member of many CPA groups, maintains a good relationship with many firms and is actively discussing partnership opportunities so we can provide our customers a better service experience. Obviously, the biggest reason for this strategy is so our customers can obtain the best service possible. DeepSky’s core competence is accounting system design and build, day-to-day operation and creating reports that tell stories from those numbers. For everything else, including tax, audit and other services, we rely on other knowledge professionals for their expertise.
Scott Cytron: Are you outsourcing any work outside of U.S. borders?
Michael Hsu: No. I believe in building a company where my team is like family. I want to create an environment where we all work, learn and create magic for our customers together. The only reason to offshore anything will be to reduce cost and that is not our biggest concern right now. We are more concerned about providing our customers with what they want, which requires knowledgeable people who believe in our vision. We are also actively seeking out technologies that will completely replace the “grunt work” portion of our jobs that are currently being offshored by other companies. Offshoring is not a solution; it is moving the same tasks to a less expensive location. It’s better to go back to the drawing board and see how we can eliminate those tasks altogether.
Scott Cytron: What kinds of software and technology are you using? Who are your providers?
Michael Hsu: We use an array of software and technology to help us provide our solutions to our customers. We rely heavily on the Internet and collaborative software such as Skype, remote desktop and other SaaS solutions so we can work, with anyone from anywhere, in the world. There is only one filing cabinet at DeepSky and it is 80% empty because almost all of our own source documents, as well as our customers’ source documents, are stored online in digital format for easy retrieval and loss prevention. We are slowly migrating all of our customers’ accounting systems to a true online SaaS solution as well. Right now, many of them are on a hosted-QuickBooks solution.
Scott Cytron: I know paperless solutions are a huge part of your business. While there’s been quite a bit of paperless technology adoption in the accounting profession, how do you think the profession can work together to promote the benefits of going paperless?
Michael Hsu: By encouraging and showing our customers the benefit of being paperless. Letting our customers know that going paperless isn’t simply a be-green effort; that by going paperless will also make document storage, collaboration and the entire business operation more efficient and effective. Today’s “paperless environment” is still mainly people scanning in physical paper. In the future, a true paperless environment will mean that paper was never created in the process.
Imagine the day when we create an invoice in our accounting system and that same invoice appears in our customer’s accounting system ready to be paid via ACH, or when the customer reviews and approves that payment in his system and the money is automatically deposited into our bank account. Don’t believe it to be possible? It is already out there on small scale. And with that, we’ve completely trashed the “traditional” way accounting is “supposed” to be done.