The Future of BizTech Podcast

Epi. 57: How Lockstep connects accounting departments and automates sharing of accounting data – Matthew Shanahan, Chief Strategy Officer of Lockstep

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Find Matthew Shanahan on LinkedIn here:

JC: Welcome, everyone to another episode of the Future of Biz Tech. I’m your host, JC Granger. And I have another fantastic guest with us today. And listen, if you end up loving this episode, please show your love and appreciation by following this podcast wherever you see it and listen to it. A five star review would be really great, you know, some comments in there because that is how other techies like you and I find cool podcasts like this. Today, I have the absolute pleasure of interviewing the Chief Strategy Officer of Lockstep, Matthew Shanahan. Matthew, thank you so much for coming on the show. Tell me a little bit about yourself and what your company does.

Matthew: Yeah, JC Thank you for having us attend and share our perspectives. So as Chief Strategy Officer, my role is to figure out what products we make and how we get those to market and like how do we solve the problem and build a business model around that. So that’s the some of what I do. In terms of what Lockstep is all about. We’re on a mission to automate accounting workflows between companies. And that’s what we call connected accounting. So we’ll talk about that as we go through today. But that’s fundamentally the mission. We’re on automating accounting workflows between companies. 

JC: So who’s your kind of, you know, ideal audience for this, right. I mean, a lot of people have, you know, there’s always software accounting software is everywhere. So I guess well, first part, let me back up. Let me do a separate question. first. What makes Lockstep differentiate from from the competition in that sense? I mean, everyone thinks about, you know, QuickBooks or you know, Gusto and things like that. So what is it about Lockstep that appeals to your market?

Matthew: Sure, QuickBooks does the depth the accounting of one company at a time, that’s it. So you buy QuickBooks, you make your general ledger, you load up your transaction? Now you can get financial reports, track what payments you need to make, and you’re done, right? But the reality is your books, let’s say, you’re my customer, your books are interconnected with my books. If I’ve issued you 10 invoices, those same 10 invoices have to be inside your books, but you’re using XERO, I’m using QuickBooks – how did those two systems coordinate what’s going on? The way that’s done today is people send emails back and forth on this, and they hand enter all this information. That’s not automation. That’s actually a lot of manual work. And QuickBooks doesn’t solve the problem. NetSuite you know, any of these accounting systems on their own does not solve the problem. And that’s why we’ve created Lockstep.

JC: That’s interesting. So then, okay, how does it do that, then? I mean, just generally speaking, is it like an API integration? Is there native integrations between the major platforms, like how did you merge that because I see what you’re saying, right? Like, if I send an invoice, yeah. They pay, let’s say, online via credit card. Sure, that helps me, right, because my invoice was paid. It goes into my system and auto categorize it. So I’m good. But they just paid like on their AmEx, which doesn’t necessarily go in and resolve their accounting books for that, right? Because they have to, then there, they have to have a manual process between like, that credit card did pay that so they can keep track of it. So that’s actually really interesting. But how, just generally speaking, how does that work?

Matthew: So that’s why we built a network, right? And to your point, we’ve been building integrations into the accounting system. The challenge is actually one of these situations where you have to use Lockstep. And I have to use Lockstep in order for the automation to occur. And that’s where we really thought long and hard and said, wait a second, there’s an intermediate step. What if we simply made the email process between us 10 times simpler, as an example, right now, if you want to send me a reminder that I’m late on my invoice, what you would do is you’d go into your QuickBooks, if that’s what you’re using, you’d look it up, you download the the PDF document, you’d go into your outlook, you’d say new email, then you’d attach it. And then you’d write out a little sentence saying, oh, gosh, you know, “we’re sorry, we haven’t received your payment, can you give us an update?”, and then you hit send. In our system, all you have to do is, first of all, it will automatically do it for you if you want the rule to do it. So you don’t do any work at all. And secondly, if you want to do it yourself, you could actually hit a button, and it will go into the accounting system, it’ll grab the PDF, it’ll grab all the information, compose an email and send it out. So that’s one simple way that we get started. Now, it turns out, if you start to use lots of we’re both now using Lockstep, we can actually connect automatically and that’s what we’re doing is over time, we’re building this integration now. Lockstep inbox is actually unique. There’s no accounting software in the entire world that has an email inbox.

JC: Now that’s interesting. So I imagine there’s certain industries that need this more than not, right? Like there’s certain industries that have things that are more automated like I have a marketing agency right things that we do are a little more digital and automated, but that’s not normal across oh you know, you get manufacturing companies or more blue collar start right like flooring and roofing companies that you know they send out invoices out after the fact. So there’s a lot of industries that do exactly what you’re talking about, and have a very manual labor to that. So I like how you guys integrated something for people to get started with where it still works with their, in particular one, so they don’t have to switch, right? They don’t have to switch out of QuickBooks or anything like that. But they could they though, like, I guess my point is that, let’s say they’re using QuickBooks, and then they add in Lockstep to just help automate a lot of this manual labor with reminders and things like that for invoicing. If they said, Okay, well, we want to, we want to go further into that is Lockstep itself, its own accounting software also, or is it just that tag along that helps integrate accounting software’s with each other and automate the process.

Matthew: It’s really a network to integrate the accounting softwares together. So our goal is not to you know, we have no interest, that’s becoming a more commodity market, you know, to build just accounting software. And like you said, you can actually get free accounting software from different people. Our goal is really the automation between companies. And you know, some of what we’re doing is also moving those, you know, workflows, out of email and onto the web. So rather than sending you a PDF, right? I might send you to the link where you can see your entire account online, you can get any of the information you need. And you don’t need a password, because we can send it to you in a secure link that allows you to just click the link go in deal with your account and move out. So there’s a bunch of things that we’re doing step wise to allow people to migrate from email onto the web, and then ultimately, pure automation between the two companies.

JC: Okay, that I get. So then I imagine that there’s certain industries that would need this more than others. I for one, I imagine more enterprise level, right, bigger, you know, things that have more account receivables on the back end, you know, your net 30s, 60s 90s, whatnot. But what industries do you find gravitate more towards Lockstep than others?

Matthew: It fits into 100% of all the industries. And I know that sounds like a big statement. But the reality is, every accounting department has an inbox, whether or not you do a lot of invoices, or you do few invoices. And right now, every accounting department is left using their accounting software, email client, some spreadsheet to track status, and everything else. And then a document management system because they have to record all these different elements. And we take those four apps and put it into one now you only have to be in one app, you don’t have to work in for you don’t have to keep these in sync. You don’t have the manual cutting and pasting of the information between them. So the reality is, we’re in a lot of different industries today. Now, what we’ve noticed is certainly, you know, tech companies as an example, are more rapidly adopting technology than old school manufacturing. So you clearly have those differences. And that’s where we see more traction, right? In tech companies. We’ll get on board and actually start using this within 15 minutes. So the total setup time is less than 15 minutes, and we’re happy to onboard you guys.

JC: Like how fast was that? Again? I can spend 15 minutes like that.

Matthew: Because I think you probably have an accounting inbox, right?

JC: I mean, everybody does on some level. Right? So I guess my next question is in, how are you guys getting the word out? I mean, okay, fine. You got a PR team. You got podcasts? We’re doing random right now. But other than that, how are companies been finding out about you guys? Are you guys mostly organic? Are you doing, you know, paid ads? You know, a lot of the audience likes to understand how successful tech companies market themselves and helps give them ideas on how they can help themselves as well.

Matthew: Certainly, well, we want to be in the ecosystems where there, for instance, I mentioned tech companies, well guess what? Most tech companies use Sage intact. We’re NetSuite or QBO, or zero, it’s their accounting system. So what we do is we go get into those marketplaces. So if I’m looking for a solution, and I met the sage, intact user, I’m going to go to the sage in tech marketplace. And that’s where we want to be able to be promoted and understood. The other thing that we’re doing is we’re building in morality to the product, that’s ultimately where we see the difference of what we’re building. It’s a free product. So by the way, step one, you know, it’s a fully featured free-forever, adds a huge amount of value. And you pay as you add layers of automation based product, because it’s very valuable, then we’re building into that different points of morality, where, you know, when I invite you online to look at your account, it could say, Hey, do you want to set this up as well? There’s different points that we’re finding has AR and AP. They work together all the time. So my counterpart, I know exactly what they’re going to be in the midst of doing that if I can offer them new solutions that my AR solution can make. Tell that AP department, here’s a way to improve. That’s how we’re growing the pie.

JC: Let me ask you, one feature I have curious about if you have or if it’s coming, I noticed that some companies would send me like a W9 or something at the end of the year because if they paid me a certain amount of money for the year, they had to make sure they tracked it within their systems when they do their taxes. Given the fact that Lockstep deals with a lot of automation, what is typically a very manual process.. do you guys dive into that at all? Like, for example, you know, if it says, we’ve paid this vendor X amount, and we know that we’re gonna have to supply a W nine at the end of the year, or whatever, you know, tax form it is for the country, whoever’s listening, does Lockstep help automate that as well working on like, get that out to people that it knows is hit that threshold?

Matthew: Absolutely. So when we think about vendor onboarding, or customer onboarding, or maintenance of those accounts throughout the year, those are exactly the kinds of automations that are also in the system. Cool. So very simple thing is, let’s say, my tax exemption certificate, I have to provide that, you know, to my vendors, well, why not trigger that and have it go out automatically. And the other thing that we’re doing is because the information if we think of it as the LinkedIn of accounting, you have an accounting profile, you have an EIN, you have, you know, certain regulatory documents, etc. If I share you a link to my accounting profile, now, it can be actually kept up to date and your system automatically just by using that link. And that’s one of the things is to eliminate all of that manual labor of trying to keep each other’s accounting systems accurate about who do I email with invoices? What is your W9, where’s your tax exemption? Certificate? Oh, I need your proof of insurance, all that kind of stuff we want to simplify. That’s awesome. Okay.

JC: That I like because that does good. I was wondering how much outside of just the accounting side itself did, you know, does the automation workflow go?

Matthew: Well, we see the same, the inbox is not only just AR and AP, that’s where we started, we’re going into payroll, you know, when we think you’ve got a full Payroll Expense, Treasury, so you actually grew up in the mid market, you start specializing even more general accounting to close the books. General Accounting works with a lot of people outside of accounting, right in order to close the books. And those are, again, areas where we’re providing workspaces for teams to actually do that kind of thing, and use the email system that they know today.

JC: So on the emails, talk about the email site real quick here. Is it a plugin that attaches, like to their Gmail or their outlook? Is it something where they log into your system? To do this? How do they actually see this inbox with this automation?

Matthew: That currently they do log into our app called Lockstep inbox, and then they add a connection to their email. And so it’s a very simple setup, we are doing plugins, so we really liked the idea of plugins and just getting started that way, especially if you’re a really small business, it makes it super easy to get going. So those are in plans that we have, and should expect to see in the next couple of months or so. Cool. Okay,

JC: We’ll get back to that here in a second, too. So it’s called The Future of Biz Tech so let’s talk about the future, right? First question actually, is kind of what you already touched on here. What is the future of Lockstep? You know, let’s call it the next. You know, few quarters, is there anything cool coming down the pipeline that my audience can get a first dibs on information wise?

Matthew: Yeah, we’re doing a lot more for instance, in AP automation, being able to when you receive a bill to extract all the data out of there and enter it into the system, unlike a lot of you know, and that’s somebody would say, well, that’s not unique. There’s other systems that do that today. But most of them only do it at what’s called the header level. So that’s the overall invoice and kind of summary, they don’t take the line items. And then the in addition to the line items, what you want to do is use machine learning to encode those line items, what’s the GL code that should go on there? And how do I want to record that? So that’s one of the areas that we’ll be having some really cool technology coming out to serve that. Additionally, as I mentioned, we’re adding new workspaces all the time. So in one accounting department, let’s say you start out and you’re in an accounting department have one or maybe even part time, that’s going to be something that you’d say, well, okay, I’m using Lockstep. I have one accounting email address, it’s easy, I don’t have any team members, but then you grow up over time. And you have companies that have 10 people in accounting, and some are in you know, one in AR, some are in AP, and you need the separation of duties. And you got another one in general accounting, right. So all the different workspaces, but one tech stack, so you’re not having different apps, different tech stacks, simplifying that down. And the final thing that we point out is we’re coming out with our bookkeeper mode. So you actually have the ability. If I’m a bookkeeper over multiple clients, I can have one Lockstep account and actually access all of my clients and switch between them using Lockstep. So we think the bookkeeper mode is going to be a very powerful one.

JC: Oh, Some that’s good to see coming down the pipeline, let’s talk about the future of the industry. Right? So in the next, you know, two to three years or so, is there any major shifts that you see, between, you know, whether it be the technology, the machine learning kind of thing? The, is there any, you know, legislation or just about anything that’s effectual to, to you, you’re not just your company, but your competitors in the space as well, I think that’s going to be driving everything going forward.

Matthew: Yeah, we, you know, we see accounting at the heart of all business, and accounting is the business, there’s not a single portion of the business, you wouldn’t look at and say, “Oh, I’ve got to account for this”, right? And then I’ve got track expenses and everything else. So that’s how we see the world. And the biggest things that will change are things like credit ratings, if there’s a network that can show all of those transactions, not necessarily visibly, but can actually record those and there’s trusted and been signed, why do I need to go to Dun & Bradstreet to get a credit report? I can get it in real time through the so we think there’s massive disruption in just how credit is kept and maintained. Also audit, right? Why should I do sampling my books for audit, I should be able to have 100%, up to date, real time audit that’s always going on. And so we think the audit industry is going to change pretty dramatically around this.

The way I secure loans. Imagine the way if I want to loan factoring today, it’s a very manual process, I have lots of reporting, I would have to do or if I want a loan from the bank, the covenants I’d have to keep in the reporting against my covenants are it’s sort of astronomical. And so a lot of people just say it’s not worth the business loan, because I can’t afford the manual labor behind it. But now, if you’ve got automation between the bank, the bank can actually see your books, you provide them real time financial statement, they can automate that covenant monitoring. And you unlock a ton of working capital for business as a result of that, because it now capital is more accessible, because it’s more affordable. In terms of audit. The final thing we actually see government is changing right already in India, like you upload your books, and they send you the tax bill. You know, we think that a whole form of tax will change over the next several years as well. So there’s massive disruption coming?

JC: Yeah, well, I mean, for one, I mean, they just pass legislation to upgrade the IRS, essentially. And a lot of people freak out about they think there’s 80,000, new IRS agents coming to knock on your door for your pay, pal. That’s not how it works. A lot of people don’t know that 30,000 of those people are just replacing retiring one. So the other 50,000, though, I used to work in the tax resolution industry, and I can tell you that I knew tax attorneys who would be on hold for their clients just trying to literally just call the IRS to get a certain update on something like on a file or whatnot, and they’d be on hold for six hours. I’m not joking. Six hours, and that wasn’t abnormal, that was somewhat average. And so adding a lot of IRS personnel on support staff helps. So that, you know, anyone could call and someone to pick up within a few minutes. Like, if you have a question about a bill and how many errors the IRS made. And so makes is ridiculous. But again, they’re on really outdated systems. And they have a lot and there’s a lot of labor for the human error. Right. So personally, I think that adding, you know, 10s of 1000s of people, the IRS, it can be a good thing. Because I’ve seen the nightmares of trying to deal with the IRS when they make a mistake, this can help automate their system. So I say all this for a reason. My question is this, knowing that and that’s just I mean, that’s just past that is happening. That is a freight train that we keep moving forward. How do you see that new influx of personnel and technology adapting into what kind of like what Lockstep does or the industry itself?

Matthew: Well, in general, your like your example of being on hold for six hours, can you imagine calling into an airline these days, you need to do everything online. Or by the way, if you wanted to know the balance of your bank account that you had to call somebody to get that, you know, those crazy ideas. And I think that’s, that’s true around accounting, you know, today in accounting for the average b2b relationship. If I want to know my outstanding invoices, I’ll either email you or I’ll call you and ask you. Most businesses don’t have online vendor customer portals. That’s one simple example. And then that’s true of the IRS just at a minimum to have kind of a self service capabilities for people to go in and deal with this. But then on top of that self service is to layer the automation. So not only make it easy for people to do things on their own, so they don’t have to call a call center. But then make it really automated to do these things. They’ll take more than five years. You ask the five year question, I think, yeah, certainly in five years, I would expect more online accessibility to information for you know, broad array of different processes. Probably within 10 years is when you’ll see a massive wave of automation.

JC: Awesome. All right. Well, before I let you go, I do want to ask a personal question. What did you want to be when you grew up when you were a kid? And then how did that lead you to what you’re doing now?

Matthew: When I was a kid, I wanted to be an Oceanographer.

JC: Really?

Matthew: Yeah. And that’s what I need to be done. I wanted to be a dentist. And then I took a chem class and I said, No, I gotta find some other job. And I started, I read a Time magazine article about these two new companies called Microsoft and Apple. Oh, yeah, I started to become a computer programmer. That’s where I ended up.

JC: And you’re on the Seattle area, right?

Matthew: Yep.

JC: I went to high school out in Tacoma. So I almost went to (inaudible). I was with, you went to University of Washington?

Matthew: Yeah. 

JC: Yeah, yeah, I ended up coming out here to CU Boulder. So I still would like to watch the U Dub and CU games, you know, some sort?

Matthew: Well, yeah.

JC: It’s that’s a good one. You know, we don’t we don’t win very often on those. But.. we’ve got a good team. It’s getting more competitive. Listen, Matthew, how can people reach you personally, if there’s some high level deals that we’ll discuss? And then how can they reach the company? And you know, to go and just try out your system?

Matthew: Absolutely. So you know, go to Right on the homepage, there’s a you know, sign up for free. And you can get going, you know, we like we’d say you can say the day a week using Lockstep inbox, and you can start that in 15 minutes or less. So that’s one way to get started. The second thing is certainly reach out by email,  or LinkedIn, you know, online.

JC: Awesome. Well for everyone out there listening, again, if you liked what you heard today, be sure to subscribe to this podcast and give it a five star rating, preferably have some text behind it. And so other techies like us can find and enjoy learning about all these amazing and helpful B2B software’s on the market today, like Matthew, thank you so much for coming on the show. I really appreciate your time and want to talk off off air about your software a little bit.

Matthew: Thank you, JC Great to be here. Thanks a lot.

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