00:00 – Arvid (Host)
Hey, I’m Arvid and welcome to the Bootstrap Founder. Today I’m talking to Conor Turland. He is building Ceedar C-E-E-D-A-R dot I-O. It’s a software business that tries to replace bookkeepers, tries to get rid of them completely. Conor is an expert in all things accounting and he’s going to teach me a couple things about accounting. First and foremost, that it’s not boring and that it’s actually quite enjoyable. So it’s going to be a conversation all about the financials of businesses, how he’s building a business to help others, what he’s choosing as its target market, where he may or may not want to go with the business, how integrations work, all of these things. It’s going to be very insightful.
00:47
This episode is sponsored by Paddle.com, also a company that helps you get rid of one thing with regards to financials that you may or may not be very interested in. That is, taxes, all those things reporting taxes. If you’re interested in doing the actual work in your business instead of dealing with taxes, you might want to look into Paddle as the payment gateway of your choice. That’s Paddlecom. Now let’s talk to Connor about all things accounting. Welcome to the show. You have a wonderful SaaS business called Cedar and you’re aiming to replace tools like QuickBooks and Dext for startups. I really like the headline of your website and I really, really think it’s a very aspirational goal to replace QuickBooks. Love this, it’s ambitious right and I wonder how this one come up with the idea to change this very slow moving industry accounting industry accounting.
01:46 – Connor (Guest)
well, the fact that it is slow moving in some ways like is a hindrance but also can help you because it makes, like that fruit more ripe. Um, in a way, right, because a field where there’s already people pushing all kinds of things on the cutting edge in a way uh, it is, it’s going to be even that much harder to compete. So so, yes, it is ambitious because QuickBooks is owned by Intuit. It’s a massive business. They have infinite resources, you know. But I heard like again and again that you can get started and you’ll be shocked at how not quickly they can move and how beholden to certain old ways of doing things they are, which creates the opportunity for us.
02:25
But why it was accounting specifically, I think was really through our direct experience of, like, building an agency before this.
02:36
This is me and my co-founder of Cedar, who’s my wife.
02:39
We built this agency before this and that’s when we were growing the business and started to need bookkeeping and first time filing our taxes and going through these things.
02:52
And then that’s when we kind of realized that, like so many things, especially in the Canadian and kind of American tax systems, it’s highly complex, but it’s also made to be highly complex. There’s this huge consulting industry that’s built up around it and you get to feel that it’s a bit of unnecessary complexity meant to put certain people maybe founders in that sense at a disadvantage or getting the short end of the stick, and I think that struck that little sense of like this isn’t right. How can we take a step back and reevaluate which parts of all this complexity are just fabricated and which parts are real? And so, if we can trim away all the fabricated stuff, we can just get left with actually something that can be simple and yeah, so we just started. We are kind of crazy and I think that that just became like wow, there’s this big challenge, this big opportunity. Let’s like dive into it and start seeing what happens.
04:06 – Arvid (Host)
So what I hear is that you’re trying to compete with QuickBooks on a level where you try to fulfill the same needs that your audience has, but you have a different, much more specific audience here as well. Right, like you’re talking about founders and startups? Yeah, exactly.
04:21 – Connor (Guest)
Yeah, they try to be everything to everybody and end up doing none of it well and so like, for example, they have all these features that are technically there from a sort of a checkbox standpoint, but basically they just do that literally to fill a checkbox on a feature list. And then one clarification to make too is that we’re going through something kind of a redevelopment of the website and also kind of a rep. One of the questions for entrepreneurs is like who are you stealing dollars from in terms of where’s the market share come from that you want to take? And for a long time, you know, software competes with software. But now we’re going through this phase shift where software is competing with services, and by services I mean people, what people do with services, and by services I mean people, what people do. And that’s where we want to play.
05:31
Is we want to actually replace bookkeepers and bookkeeping and fully sort of turn the corner into. You know, bookkeeping has been around and being done kind of the same way for like 500 years. So maybe this is like the time when it could go through a change and something that always seemed like the type of thing that should be automated can be automated without applying all the old school thinking of like, oh, we do it this way. The accounting industry is like, we do it this way because it’s always been done this way. That’s like, well, that’s exactly what we don’t want. Um, we want to do it because it makes sense to do it, um, in this particular way. So just classic, like just first principles, um thinking trying to bring first principles to the bookkeeping space, which is kind of absurd.
06:23 – Arvid (Host)
Well, I love it and, as a founder myself, I really dislike the process. I don’t like keeping track of things that are not like variables in code or anything like it. I’m too technical, I guess, for this to enjoy that number crunching that has no code equivalent. But, honestly, I probably have a couple things that I personally believe that are not true about accounting and bookkeeping, but I try to stay away from it as much as I can. So anything to help me automate this in a way that I can understand and replace the person that I need to talk to that doesn’t get me or that I don’t understand, is very helpful. So how are you going to approach this? What’s the novelty of the business in terms of automating away that bookkeeper and these accountants? What’s happening there?
07:10 – Connor (Guest)
Well, first of all, I like that you said that you don’t want to do the work, but also you want to have comprehension and control, and that’s what we saw was kind of missing was that there’s this power asymmetry. That’s that’s what we saw was kind of missing. Was that, um, there’s this power asymmetry that’s existed between, like, accountants, um, and bookkeepers, uh versus um first founders, where um founders are kind of left in the dark and then it’s not often the case that they actually become enlightened through the process. Um, they’re kind of kept in the dark and there it’s not often the case that they actually become enlightened through the process. Um, they’re kind of kept in the dark and there’s a there’s a bit of an advantage to that over time, um, to it sort of being that way. So that’s like the gatekeeping thing and and the power asymmetry and um, and that’s what we want to sort of reverse. So we want founders to have not to have any of the make work aspects, but to feel all the control and the enlightenment, especially about their finances, and overall just control over the process too.
08:17
Like, for example, one of the ways that this gets resolved in terms of, like, bank feeds getting connected so that there’s automation, but one of the things that happens is like sometimes they won’t say that they do this, but then they’ll ask for your bank login.
08:35
The bookkeeper account will ask for your bank login because they’re trying to save you work so that they don’t have to ask you for bank statements that you download and then email to them. So you can see, there’s kind of a reason why this is also relates to gatekeeping on the bank’s part of like financial information, especially here in Canada, but that’s changing. So you have that happening, but founders don’t really you know they’ll do it because they’re desperate not to have the make work of like downloading financial statements and emailing them. However, they definitely have expressed to us many times over, like the discomfort and handing over their banking logins and stuff to their bookkeepers. So if you can break down those and there is a bit of a vector there for abuse that has happened not to give bookkeepers, generally speaking, a bad name. That’s not fair and not right.
09:32 – Arvid (Host)
I mean it’s very unprofessional, right? That’s the thing, like giving somebody your credentials instead of giving them an authorization token or giving them some kind of symbol of being able to access on your behalf. That’s just the unprofessional layer there right.
09:48 – Connor (Guest)
Yeah, exactly, and if they don’t do that technique, then they’ll have to kind of be chasing you and hounding you and asking you for things. So it’s a bit of a double bind on their part, but also one that can actually especially like. As we move it’s like 2024, 2025, there’s changes in our ecosystem, in our banking ecosystem, bringing more of this sort of the token methods, the authorization methods, a lot. These things are like being forced on the Canadian, the big five banks, through open banking. And yeah, it’s great, it’s going to be great when we kind of have that ability to break that down. So there’s a bit of a good timing thing for Cedar there as well, where the time to automate has been kind of constrained, that a lot of businesses have actually left Canada in terms of trying to serve Canada because of, like, the ecosystem Bench used to operate in Canada. They don’t operate in Canada anymore, this type of thing. So, yeah, so the options have been limited, particularly in the Canadian market, and that’s the first kind of market that we’re addressing.
11:13 – Arvid (Host)
I do want to talk to you about your local limitation of being in Canada being a good thing and a bad thing maybe, who knows right, I want to explore this with you, but before we do this, I think I’m also one of those people who started an American business operating out of Canada, though, because it is so much easier to deal with Mercury as a banking provider than having your account locally at a I don’t know a TD or BMO or whatever other Canadian bank exists, like the fact that I can go on their website. They have a REST API, they have a really, a great app that actually works. And then I have my local bank, like my small town bank, that has no understanding of what a software business is and no understanding of me wanting to fetch my information digitally, but giving me some weird PDF with, like, read and write protection, password protection, that kind of stuff. It’s so bizarre to see this, particularly as I’m a German. I come from Europe, where all of this is regulated more, and Europe has FinTS, this kind of banking API interface, which is really really cool and really really accessible.
12:21
So coming to Canada, seeing how crazy old school it is and then trying to build a business there. Obviously this can displace a lot of people, and it does right. Trying to build a business there. Obviously this can displace a lot of people and it does right Because even in the States some banks offer that, some don’t, but the ones that do the more digitalized banks, they get a lot of the entrepreneurial crowd. So I really hope that there is change in there in the making. But let’s talk a little bit about Canada as a choice. Is it convenience for you or are you trying to fixate on a particular market that is not the United States at this moment?
12:55 – Connor (Guest)
Well, one we saw a little bit more of like a sense of the founder market fit in this market just off the bat, where we’re like this is a system that we’re familiar with.
13:06
We’re already kind of we’re working our way into the accounting and bookkeeping space from backgrounds outside of it, and so it’s it’s already kind of an uphill battle that way. So, finding familiar parts to kind of compliment the unfamiliar parts that we’re like, uh, we’ve deeply trained ourselves in and and and learning there. There’s so much, um, there’s so much knowledge to acquire, and at some point that’s going to be knowledge that we can hire in as expertise as well, and we do actually do some of that as well. But, let’s say, for going into the US market, it’s like being able to bring on some of the expertise that we would need to go in and solve this bit of like just appetite in people for something, that even like excitement to get something first. You know, oh, if this could come here first, that’s really cool and exciting. And so, yeah, just building traction, building an audience and working with what we know. Some of those are some of the factors in addressing this market.
14:36 – Arvid (Host)
I think it’s a pretty smart move and I say this as a Canadian, obviously biased wanting you to build a cool, canadian-centric and a Canadian-serving startup.
14:45
That’s wonderful, but just from my own experience, I got a lot of messages over time for PodScan, my podcast scanning platform, for people from France or from Germany or from Japan, asking me when their language would be integrated into the platform, which is always hey, you started in the English-speaking market, now it’s time for these other markets, don’t you think that’s the kind of message that you get, and almost always I said no, that’s not going to happen. First off, I want to be in control of the language of the market that I’m in, which is pretty much what you’re saying. I want to have the local expertise, I want to understand what’s going on and I also want to see the numbers. I want to see the transcripts that I generate and be able to read them so I can see if they’re right or wrong. I couldn’t do that with Japanese. I certainly could do it with German, but you know, it starts becoming a problem once you try to extrapolate it to too many other markets. So I think it’s a good way to start in your local market.
15:40 – Connor (Guest)
Yeah, well, out of curiosity, like that’s partially, you tend to want to operate the business like, I don’t know. Is it as a solopreneur, or is it like almost solopreneur? Like, um, it’s essentially like you in the company.
15:56 – Arvid (Host)
Yeah, it’s that. That’s what it is for me, like solopreneur, with an asterisk of of people helping me out on the side on a contractor basis. Ideally, this will last me solo as long as I can, but I’m also not completely in opposition to hiring people to do the job for me. It’s just like in your case. You have a lot of like legal expertise that you need to either hire in or build yourself. And then there’s this whole thing about being responsible for providing correct information. Right, you have to be insured and you have to deal with the potential pitfalls of that.
16:30
Particularly, we’re going to be talking about AI. This is a whole other thing in that field, right, because it’s not clear who is the agent that actually takes an action. Is it the builder of the AI or the AI itself? But even for me, I don’t have that much responsibility toward factualness and accuracy of the podcast. That’s kind of with the people actually producing the podcast. I just transcribe them. So for me, it’s fine to stay in a smaller company without too many cooks, I guess, but I would love to see it grow. I mean, that’s always a thing for a business is to grow to a point where it’s actually beneficial for others to join right In so many ways. How about you? You’re a couple, a founder couple, and I’ve been part of a founder couple, which has probably been the best experience that I ever had in entrepreneurship. Do you want to grow the family, so to say?
17:21 – Connor (Guest)
Yeah, we’re super keen to build the business into a team and to bring together interdisciplinary talent.
17:34
That’s been a passion for both of us and I think what predisposed us to entrepreneurship in the first place is that we both really are kind of out of the box, like interdisciplinary kind of thinkers who value bringing together people with unique perspectives and ideas and talents to create new things.
18:01
So we’re really excited about kind of getting to that stage of the business and so far it’s been the two of us, although when we ran the agency before this, we actually had some folks who worked for us in the agency and so we got to build a little bit of experience with team building and yeah. But yeah, it’s really interesting kind of. You know, it’s been interesting fending off the idea in a way, talking to people that this is like a family business, um, like there’s a. There’s a tendency to kind of um gravitate towards that um, to the assumption that it would might be something of that um variety. But uh, but we see ourselves. Or the ambition is to build a really big business with a large team and um, and to build something that really goes well beyond just the two of us.
19:02 – Arvid (Host)
that makes sense to me it makes sense to me because the the field that you’re going to be serving, with every new customer maybe not every single new customer, but every new variety of customer, every new kind of business that you have to support, every new industry that you get recommended into right it becomes complicated because what you said, like the legal groundwork, the legal foundation is also complicated to the fault right. Complicated because it’s supposed to be complicated and it makes perfect sense that you would then also grow the business to be able to support all of this. I think that makes a lot of sense.
19:38 – Connor (Guest)
Yeah, and our product ultimately is essentially like peace of mind for founders.
19:44 – Arvid (Host)
Yes, I love that.
19:46 – Connor (Guest)
That’s like the heart of what we should be able to bring, and so we need to actually have every capacity and thing internally that we need to be able to guarantee people that.
20:04 – Arvid (Host)
Yeah, I think it’s such an important realization, what you just said, that so many businesses that are peace of mind often don’t understand that they are exactly this. The founders of these businesses are very technical and they think, oh, I’m building a cool product, I’m building a solution to a problem. But the solution problem cycle that happens when people use the product right, they have a problem, they use it and then it’s solved and then it’s good. That is just a technical perspective. Often people buy this so they don’t even have to think about the potential complexity of stuff. That’s what peace of mind is. That’s right. I really like that you describe it as such, because that also allows you to position it as that.
20:42 – Connor (Guest)
Yeah, this was our big mistake, in a way, was not sort of going more cleanly and clearly into making that offer in terms of, yeah, essentially like we were facing this sort of dilemma of where to sell, a lot of people would say, well, you should be selling to bookie person accountants, and we really always push back on that notion because we’re like, well, that defeats you know, our goal, sort of Like I can see why you would say that from a business, just from a pure business point of view, or like, maybe, like you’ll have an easy time, like you know, getting your first revenue.
21:33
But sometimes you’ve got to say, hey, this is the hill we’re climbing and we do actually have our reasons and there is actually a business case for this. But it is more of a long game and one should, as an entrepreneur, be aware whether they’re playing the long game or a long game. And one should, as an entrepreneur, be aware whether they’re playing the long game or the short game and make sure that you sort of come to terms with and are not naive about like about which one of those you’re you’re playing, so that you can come to acceptance and find the best process along the way of like, okay, wow, this, the hill is pretty steep right here, um, you know, but I remember I put on my climbing shoes so that I could, like, climb this steep part of the hill. Like, um, this is what I, this is the choice that I made, and and actually I can keep my eye on the big that’s the founder’s way right.
22:33 – Arvid (Host)
It’s ambitious, but you’re prepared and you’re willing to do it because you want to change something meaningfully, and I think you mentioned it earlier. You see too many gatekeepers in the field. You see all these companies that exist purely to exist because the law was made to allow these companies to even come up in the first place, and it would be almost a betrayal of your own idea to sell to these companies, to perpetuate their position as gatekeeper, even becoming a new gatekeeper in the line of gatekeepers along the way right. It just wouldn’t feel right.
23:04 – Connor (Guest)
Yeah, no, exactly, and it’s amazing how often sort of there’s some type of a line of conventional business wisdom that steers you towards things that may be moneymakers but don’t necessarily have all of the groundwork of. Like what inspires you to do this? Like, um, why are you going to be willing to get up every day and um and get back to work, um, on building the business? Um, yeah, so, so, just to finish where we were, um, this sort of the peace of mind, and then there’s, um, the fact that what we’ve really gone into now is we deliver the bookkeeping fully. So it’s done for you bookkeeping, and that wasn’t the original offer. It was mostly done for you bookkeeping, but, unfortunately, mostly done for you bookkeeping. It’s not at all what founders want?
24:05
Definitely not Because there’s the question of like, what do you mean? It’s mostly done, like I still need to hire a bookkeeper to review it, or else I need to acquire the knowledge Like you make it still work for me, and so there just wasn’t product market fit for that, and it’s been incredible how big of a shift it is to say, hey, it’s done for you. Bookkeeping, it’s total peace of mind, it’s reviewed by you know everything. After the AI sort of gets done with it and all that stuff, it’s reviewed by a professional human, because we need to have those checks and balances, those controls still just like self-driving, you know. However, like self-driving has been a good metaphor because it’s incredibly, you know, it’s also heavily regulated and there’s tons of compliance and you need to run sort of the safe experiments in terms of, like, deploying it and putting it out on the roads. So we’re kind of doing the same thing right now with AI bookkeeping.
25:17 – Arvid (Host)
That’s super interesting to me. Ai anything is super interesting to me, but AI bookkeeping in particular that’s my dream. My dream is just have the agent, the AI agent, deal with all this stuff and then I get something that a person has actually validated and checked. Yeah, exactly that to me, is the pinnacle, right now at least, of how AI should be used Do the work, do the work mostly right hopefully super right, but at least mostly super right and then have a person with a sane, calculated and experienced approach figure out if it’s right or wrong. Tell me about how you, how you did this, how it doesn’t have to be like super technical and and a detailed implementation, but what is your approach to setting up a business that relies on what I assume to be agents of ai?
26:03 – Connor (Guest)
yeah, well, it’s evolved even in the last year because, like, there’s been so much um, there’s been so much movement from just AI prompt chat completions into the assistance APIs and stuff like that that are built on top, and so there’s been changes just in the last year, the first year of building this technology. And, of course, like any, I think, of the AI building, like evals are really important, evals being where you’ve got like a data set which show what the correct sort of classifier, because some of it’s a classifying problem, obviously for categorizing transactions, that’s one that’s a task that you can define quite well, cleanly and say, in fact, this is like how can we leverage LLNs and this for the classifier problem that is like categorizing transactions. And then you have the fact that a lot of that, there are these back ands between bookkeepers and business owners and the point of that back and forth is to gather narrow or detailed context, like what was this transaction for, and the fact that that communication has been done in like email inboxes and has had to just be kind of like chains, email chains or so one of the big pain points is like that founders get these like emailed like Excel spreadsheets or Google Sheets of like outstanding items, and then maybe you have to go through and provide responses that way and these end up getting backlogged in founders’ inboxes. And so I mean, one of the reasons why that happens is, I think, because it’s like a staff, because it’s human labor, there’s a real. They say like we’ll close your books, meaning we’ll kind of do at the end of the month, and realistically, maybe it happens a couple weeks into the next month after the month has ended, and so by the time that email comes in, you know, in a founder’s world, years have already passed in like a couple of weeks. And so the email, it’s like what these things were and what those things were, and you have to go and dig back through it. So you’ve already kind of it pulls you out of your flow, it pulls you out of your focus and you’ve lost. It becomes a little a small mountain.
28:45
And yeah, so I think that there’s opportunities with real-time automations and real-time classifications, where you’re like, oh, we can do this really, we can process information really quickly regarding, like, a transaction or um, something that can be chased or followed up very quickly relative to when it happened, which makes it really easy to respond to the, to the query or the, the, the inquiry, um, just because it’s like fresh, it’s top of mind, um, not hard to answer and um, and it doesn’t create like an email in your inbox with the mountain of stuff to do, so it just fits more casually into workflow. So that’s an example and that’s just like we don’t. You know, we will have like an agent that you can chat to and have kind of the full back and forth that you might kind of expect. That’s something that we’re in the process of building out, but I actually think that it’s been overstated what the utility of that is, the kind of just chat for chat’s sake. So I don’t think it’s all about that.
30:02
I think a lot of it is about strategic or surgical use of AI in these places that make it quick and intuitive to get some job done that previously couldn’t get done and question everything.
30:20
This is something we’ve just said, like why should this be done manually? Every time you kind of go and build in an edge case, think about how can we make the system smarter, capture more breadth, what context is it missing that meant that it was unable to answer this question or to understand this piece of the business and then focus on building more context about the business so that you can have this broader intelligence and apply it in the bookkeeping process. So that’s kind of the philosophy. And then I don’t know, I’ve read some really fun stuff that excites me about the future from Toby that Toby tweeted out. Toby LePref from Shopify that he also spoke about in his keynote, about like reasoning loops and that kind of thing. So I can see that there could be some really interesting stuff there where you could actually do more analysis. You could set it loose on a bit of analysis or that type of thing that could deliver higher level insights. But for now bookkeeping is the main goal and so just getting really good at that job to be done.
31:32 – Arvid (Host)
Yeah, for sure, and it’s an important one, right, because it’s just a regulation thing.
31:37
Can’t avoid it.
31:37
Like, every founder has this problem, no matter what business they’re building, and I think that’s a really smart industry to be in, because it’s all industries, but just that one segment of it, that one layer.
31:49
And there’s something that I see in building AI classifiers or AI automations in my own work. There’s something about having a lot of data from a lot of different businesses and seeing how they potentially could interact and benefit each other. That’s the great thing, right. Like when you start out for a particular industry, a particular kind of startup, you will now train an AI to be really, really good for that startup, for that particular industry, a particular kind of startup, you will now train an AI to be really really good for that startup, for that particular startup, but also for other similar startups in the same industry. And all of a sudden, your classifier now understands what Stripe is, or it understands, like, what Mercury is, an example. I use that for my business itself and the people that do my bookkeeping they’re always asking me what these weird little credits are that I sometimes get on every single payment, and these are just Like Dropbox.
32:37
Yeah they didn’t really know what is a Dropbox, what is this? Again, I mean, that’s a bad example. But some services they don’t get the idea that they have a cashback system in Mercury. They don’t understand what are these credits Like? Just cashback that. What are these credits? Just cashback? That’s every single transaction. That’s like 5%, and you have to explain it to them. Obviously, once you explain it to an AI once, once the AI understands okay, this happens with this bank, this happens with this vendor. That knowledge can be extrapolated to every single other application of the same agent on a different business?
33:07 – Connor (Guest)
Yeah, absolutely so. Collectivized sort of learning without completely anonymous to any of the content of the data, or cross pollination or you know that’s like with that, without any of that, you can still safely apply benefits of learnings from one business to another. It’s a really great. That’s a really great insight and the fact that you could save that’s a really great insight and the fact that you could save so many founder hours of time spent answering those types of questions. That’s the true calling, I think, for Cedar is to let founders cook, you know, let founders um reconcentrate, find their focus, uh, put their time and money onto um the hard problems in the growth, um, in the growth side of their business. Um, that’s where, that’s where all founders really, I think, tend to um want to focus. It’s just, you know, revenue is know, revenue is the exciting part. It’s important to keep an eye on your expenses and that’s part of building a healthy business, but I think, like, the passion comes from revenue.
34:26 – Arvid (Host)
It’s certainly amplified by it, I think, for lots of founders. There’s this technical aspect to solving a problem that other people have never solved before in this particular way, or there’s the social aspect of the impact that this business has for and you probably feel the same way for people who have yet to be supported in this particular area right Like you see people using it, they love it, they get like 20% more done and you’re responsible for it.
34:50
Obviously that’s more exciting than getting your books in order to a lot of people, but I think that’s a kind of a self-limiting belief, because it can be exciting to do things right. I wonder maybe you can dive a little bit into this. As a founder who, personally, I consider myself not capable, or at least not very skilled at that particular side of the business the financials Can you help me take a couple quick maybe, or just impactful steps towards becoming more confident, to becoming better in that particular field? Looking at financials, looking at numbers maybe, in a more benign, more positive light? What should I do?
35:28 – Connor (Guest)
Yeah, I love this subject. It brings to mind for me like a moment when I went through a moment of transformation, which was when we were building the agency. And I went through this experience because, working with Pega, she’s often been one to kind of take a critical look at some system, like the tax system or even the financial statements, and say this is something we don’t understand, but it’s important for us too, so that sometimes she drives that, whereas I would take a more classical, like sort of let’s just hire someone. To take a more classical, like sort of let’s just out, let’s just hire someone to get this job done for us, kind of thing. So she kind of created this like impetus for us to prepare our own financial statements, at least just to kind of gather all of the information and stuff like this, make sure that we weren’t paying someone for stuff that we could easily do ourselves. And the question was, was it going to be easy or not easy? And so what? Okay, the profit and loss, also known as the income statement, felt relatively easy because it was an outline of our income and our expenses, which are both relatively easy to reason about. You already have the mental models for that, but when you look at the balance sheet, it really implies the whole framework of double entry accounting, which is what really, I think, scares people off, like that there’s debits and credits and double entry accounting and there’s all this jargon around it, and that the balance sheet is driven by this fundamental accounting equation. I don’t know. I’ve really enjoyed just even certain people who post things online, like this Twitter account called your CFO Guy and he creates these visualizations. Yeah, I would recommend like people to look at his stuff because he just it’s like what was it? The universe of financial statements, and so it’s like it’s just these planets and how, these visualizations that make it kind of fun and, I think, easier to look at what a balance sheet is. So his information and there’s other ones, like there’s a book called the Joy of Accounting and they’ve got a really simple framework for teaching these things Not that I’m encouraging people to look into, you know you don’t necessarily have to go and read those documents but I will say that it was transformative for me to spend time trying to balance the balance sheet this time, because it forced me into that coder’s mindset of like there was something that didn’t balance.
38:27
So you got like you know, assets on one side and liabilities and equity on the other side of the balance sheet, and so assets has to equal liabilities plus equity and there’s something not balancing. And then I was forced to go in and use the debugging process, start to apply that mindset to it and say process of elimination, the problem’s not over here, it’s not over here, it must be over in this area. And eventually, when balance sheet finally balanced, that was sort of a moment of like aha for me, a moment of like transformation, where I discovered this feeling that I can understand these things. They’re not magic, they’re also not that complex, and accounting, through its jargon, has been made to feel more complex than it is. And yeah, there’s words and we do this in Cedar that you can just replace like accounts payable and accounts receivable. We just call that, you know, owed and owing instead of a fancy term.
39:41 – Arvid (Host)
That’s often it right. Yeah, it’s often in the intentionally complex, legalese way of describing things. And also this seriousness that people trying to teach it teach it with and that’s my experience in this at least like the joy of accounting, sounds like a very refreshing approach to something. That where people, once they try to teach it, turn into this erudite professor who will tell you exactly what the reality is and don’t question it kind of thing. Right like it’s. Yeah, it should be something that is is an important part of the businesses and the life that we live. I mean, we have to account for all kinds of things on a personal level as well, not just in the businesses, and being being willing, being able to understand it, should be a joyful thing, not a chore, yeah.
40:31 – Connor (Guest)
Here’s one fun sort of fact about accounting, which is that you have the profit and loss statement and you have the balance sheet, and I think most people, including me, struggle to understand how the two are connected to each other.
40:52
And there’s this account called the Retained Earnings Account and that account has this unique little bit of importance in that it is how, basically, your net profit whatever is your net profit from your profit and loss your net profit is what flows into your balance sheet in terms of through the retained earnings account. And somehow, to me, if you focus on just learning a little bit about that one account that retains earnings and the fact that it connects the two financial statements, I found it was kind of like a lever to a larger understanding, because you can see right, of course, this is going to be after a couple of years into my business, it’s this retained earnings which really helps me in my. That’s what gives me equity in my business. After you know, I’ve made some profit over a couple years. That’s where my profit sits or that’s where, um, that’s where my assets are kind of um, it’s in the equity, it’s, it’s in equity. Uh is where it actually lives.
42:04 – Arvid (Host)
Thanks for sharing I appreciate this because it’s also I’ve been wondering about the connection between these two. I mean, you, you kind of almost uh, innately, understand that there is a connection, yeah, and you know, you kind of feel it. But to give it a name and to give it a placement is obviously beneficial. See, that’s what I’m trying to say. Like, I don’t think I’m incapable of wanting to become more knowledgeable about this right, or incapable of understanding the complexity of this, or incapable of understanding the complexity of this. It’s just you need somebody to explain it to you on a level that you’re capable of integrating it into the other 1,000 different things that you need to do as a founder. That’s really what it is. There’s so much nuance to this.
42:43 – Connor (Guest)
Just open your mind to it, open your heart a little bit. Just like you have to do with other areas, I had to open my mind, open my heart towards sales, um, where it’s like I had all these predispositions about sales. You know, like I just had these feelings about sales. I was like it’s a bit of an ick, actually like, and at some point, until I, um was able to tweak that sort of bit of attitude, that bit of inner feeling, I was not able to really step up that side of our business, the sales side, and so it can be similar with accounting. Yeah, so I’m excited for you and other people you know and access like Investopedia and Chat2PD, like, especially something the more like reasoning models like the O1, stuff like that. I think you know you get a little more credibility using those models than just 4.0, where there’s a greater risk of it just making stuff up.
43:51 – Arvid (Host)
Yeah, that’s always the risk with AI system, but that’s also the risk with people.
43:56
I feel, like there are also people who claim to be professionals and then they just kind of resort to using crutches that they always use. That may be outdated, that may not actually be correct or true. Right, you always have to have the validation in there, and I think you’ve been talking about how you validate it through people, how you have this final step of actual human interference, I guess, in the process. I think that’s very important too with any AI system, like the moment we have AGI maybe different, but for that I guess you also need a team right? Like I’m personally with my software, I try to automate every single thing Data extraction, like host guest data, like the topics people talk about. That can all be automated. I don’t need to cross-check it, because it is likely true and if it’s not, somebody could tell me and I can fix it. You’ve got a low enough low stakes.
44:43 – Connor (Guest)
That’s right. Stakes are different for you Stakes for false positives or whatever.
44:47 – Arvid (Host)
Yeah, that’s pretty much what it is Like. You don’t want to do this when you submit your tax report or anything. You don’t want to have an assumably false positive in there. You definitely want to get those out. Man, this is exciting, I think. First off, thank you for talking so enthusiastically about balance sheets. I don’t think I’ve talked to many people with this level of genuine curiosity and a willingness to try and explain it to somebody like me. I really appreciate that. Also, thanks for sharing the story and the ongoing journey of your business. I think it’s really cool for you to have picked a business in a market that is not the United States just yet. I think that might be in your future anyway, but Canada is a good place to start because people here really need it and to go into a market that is slow, more traditional and incumbent heavy, that is really cool If people want to follow you, see this journey unfold and look into what your business has to offer. Where do you want them to go?
45:47 – Connor (Guest)
Check us out. Cedarai is the website and we’ve got an X account. All. Check us out. Cedarai is the website and we’ve got an X account. That’s Twitter. That’s CedarHQ over there.
45:59 – Arvid (Host)
Okay, yeah, I’m going to put those links in the show notes as well. That’s really cool. I’m also in a kind of revelatory phase where I’m trying to understand okay, yeah, this is actually not that complicated, just understanding this. It’s really about phrasing. Moment of enlightenment. It’s what you said earlier with this accounts payable, accounts receivable things that always confuse me, but you can just translate it into something that you understand. You could just, like you translated your process into the developer process of just debugging. You can translate all these weird complicated legalese phrases into regular people language and all of a sudden it becomes more accessible.
46:34 – Connor (Guest)
That is really cool.
46:35 – Arvid (Host)
Thank you so much for sharing this. Really appreciate it.
46:37 – Connor (Guest)
Thanks for having me, Arvid. It’s a pleasure to be here and to talk with you and to see your curiosity and enthusiasm.
46:45 – Arvid (Host)
And that’s it for today. Thank you so much for listening to the Bootstrap Founder. You can find me on Twitter at ARVIDKHL. You also find my books and my Twitter course there and I would really like if you could recommend this podcast to your friends. You’ve got to ratethispodcastcom to submit a rating and a review. Really appreciate this, and if you want to help this show, please mention PodScan as a tool that helps people find mentions of their brands and businesses on podcasts to your friends. That’s all I need. Thank you so much for listening. Have a wonderful day and bye-bye.
