Softledger CEO Ben Taylor // Web3 Accountant Radio Ep10 Transcript
Ben Taylor is the CEO of Softledger.
SoftLedger is cloud accounting software designed for small and medium enterprises upgrading from QuickBooks or Xero. A powerful and user-friendly alternative to NetSuite and Sage Intacct, SoftLedger streamlines business management for CFOs and controllers.
SoftLedger helps companies consolidate multiple entities using multiple currencies, manage digital assets, and more.
In this conversation, we dive into:
1. Current Issues which Softledger is solving at the moment?
2. Consolidation for web3
3. Elimination in Consolidation
4. Why Softledger instead of SAP / Oracle?
5. Why did Ben decide to enter the Web3 space?
6. What is Ben looking forward to in the Web3 space?
And more!
__________________________________
Connect with Ben & Softledger 👇
Linkedin: / bentaylor8/
Website: https://softledger.com/
Email: [email protected]
Hi everyone, welcome to the Web3 Accountant Radio, the podcast where we dive into the fascinating world of Web3 Finance and Compliance. I’m today’s host Diana and today my partner is Wei Xiang. Hi Wei Xiang.
Hi Diana. Today we have Ben on the show and we are very lucky to meet Ben when I chanced upon Softledger a few weeks ago and I happen to like the consolidation functions of this this software itself and that’s why I invited Ben onto the show to share with us his knowledge on consolidation. Yeah, Ben Taylor is the CEO and co-founder at Softledger, a cloud-native accounting platform that is easy to learn, adapt to your business and connect easily to other applications.
It is designed for small and medium enterprise upgrading from QuickBooks or Xero. A powerful and user-friendly alternative to NetSuite and SAP, Softledger streamlines business management for CFOs and controllers and helps companies consolidate multiple entities using multiple currencies, manage digital assets and more. Ben is a highly experienced finance professional with 20 years of financial reporting experience gained from EY and Fannie Mae among the others.
Yeah, nice to meet you Ben. Nice to meet you as well and yeah thanks again for having me on. Yeah okay so maybe we can start off with Ben, can you tell us what is the current issues that Softledger is solving at the moment? Sure, so we mainly help our, so we’re a cloud accounting software for companies that have outgrown QuickBooks or Xero or other bookkeeping systems and are looking at a mid-market system like SAP or Oracle NetSuite, something like that and mainly the problems we solve are multi-entity consolidation, multi-currency management and then if a company has uses digital assets in their operations we have a crypto module that handles that as well.
Thank you, so just now you mentioned that they have outgrown QuickBooks or Xero, so what are some common issues which accountants or finance managers would face when you mention outgrown Xero and QuickBooks? Sure, it really comes down to volume of your business, whatever that means for your business, so it varies depending on industry. It’s when the complexity comes said differently I guess, so that could be, we usually use headcount as a proxy, 40 or 50 employees up to 300 to 500 employees is kind of our sweet spot, but with certain industries that complexity can come a lot earlier, with digital assets for instance you could have a 10 employee company and have very complex problems, so hope that wasn’t too vague, but yeah usually we go off of headcount. Yeah, sounds good, so back to today’s topic on consolidation itself, so when would finance managers need to take consideration for consolidation? Because today we would have many listeners which come in on maybe a single entity background where they have two years of experience with Web3 finance, they know how to book the accounts into Excel, so into balance sheets itself, so maybe we should understand a little at the start, when do we need to start doing consolidation? Sure, sure, good question, so particularly in Web3, the whole idea is it’s distributed all over the world, right? It doesn’t matter where you are, but as we all know, as an organization forms, there are physical organizations that have to form as well, and often those are in different locations.
As soon as you have multiple reporting requirements, you have an office in Singapore, you have one in Beijing, you have another in New York, you need to get a view of your whole organization from a financial perspective, and if you don’t have one system to consolidate all that, then you’re doing something manual to bring everything together, and then when you bring everything together and something invariably changes in one of the entities, then you have to rerun the consolidation through the manual process, and it’s time-consuming, it’s prone to errors, and all that comes with that. Sounds good, I mean, the other one I understand is also regulators would require the consolidated financial statements for their use, and also sometimes investors would require such consolidated statements? That’s right, yeah, there are real requirements from stakeholders, whether investors or regulators, that’s a real thing as well, and that’s often what leads to the charge. We like to promote that it’s more important actually to know this just so that you can manage your company, because these are complex business models that Web3 companies are engaging in, and you need to have the certainty that when you’re going in to do this new business model, that you’ll be able to know how you’re performing, which is a big it’s a big if for a lot of companies out there.
Yeah, so okay, so other than maybe inter-company elimination that we need to do during a consolidation, this is just a little that maybe I know about consolidation, maybe you can walk us through some of the challenges that an accountant would face when they need to do consolidation. Sure, yeah, so a great, maybe a simple example to walk through that gets complicated, especially as you have a lot of these, is you have, let’s use that same example, I had with three locations, and then there’s a parent location that has to, a parent entity that consolidates them all, or let’s say New York is paying the bills on behalf of Shanghai and Beijing. Well, the Shanghai office enters into a vendor contract that is an expense that should sit at Shanghai, but it’s getting paid by New York.
What has to happen is the money has to get, leave New York and pay the vendor, they have to be satisfied in that way, but it’s a Shanghai expense, so you have to move the expense down and eliminate it so that it doesn’t, it’s not reflected in both places. And that’s just, it’s just complicated to do that as you’re running your business. If you have a hundred payments like that per month, then it’s what if you just pay the vendor, and then you don’t remember to do the inter-company entry on the other side, it gets the end of the month and you have that, and you have two different teams maybe trying to close and figure out what happened, and it just gets really, really tricky to do.
And really what this all comes down to is then it just takes more time to figure out how you’re doing financially. So one thing is just trying to remove friction in that process as much as possible to help all the stakeholders in the organization get financial data they need as quickly as possible. Okay, using the example that you have just mentioned, I understand that if I’m in Beijing, there is a very high chance my functional currency would be in renminbi, and then maybe my New York entity would use a US dollar’s functional currency.
So in such case, how do I eliminate the numbers? So then as soon as foreign currencies are introduced, especially if it’s different reporting currencies per location, it gets more complicated. So the process-wise, it would be the same. You would still need to eliminate this inter-company entry, but how it would be eliminated is dependent on each entity.
So you would remeasure any foreign currency transactions at Beijing, for instance, and then when it gets to the parent entity, and then at New York, so they’re at the same level. So New York, you’re paying it in USD, and then when it comes to the Beijing entity, it’s actually taking the USD-denominated bill and converting it to RMB. And then at the consolidated parent, it’s bringing all that up together, and whatever reporting currency that is, it will book the elimination in that currency, because it’s a kind of, excuse me, the elimination is a reporting function.
It’s got to separate each piece so you can see separately and then together. I guess is a very quick way of describing it. Yeah.
And also, I think the other challenge that many Web3 accountants would face when they are trying to, if we go one step further now to somebody who is actually doing it already in Excel itself, we talk about crypto, we have many different tokens and with many different tokens, we would have many different pricing. Using your example of Beijing pay for Shanghai, although China do not accept crypto at the moment, but we might have Beijing recording the USDT at a certain rate, and then China recording the USDT at a certain rate. So I think at this point, without a software, it is really challenging, unless your materiality is very high.
Yeah, yeah, exactly. That’s it. I mean, some of this stuff, it doesn’t even take, at a few hundred transactions per month, trying to unwind what’s going on in Excel, no matter how good you are with Excel, it’s not possible at some point.
We’ve tried. And so, yeah, you need a system that has a scalable process to run through and crunch, set all the cost layers for each transaction, pull them out as you realize your gains or losses and allow you to go back and fix things and update that in closed periods when you’re done. And it’s just, it’s just going to be a mess that you have to deal with and try to wrangle and make sense of.
Yeah, I think, I think that is, that’s very, that’s, that’s very important. So, you know, to have maybe your Shanghai and your Beijing and your New York, back to your example of the three entity using firstly the same software and after that consolidation with the same software. So this is, this is at a time where the person which have the overview would be able to see clearly where all the numbers are flowing, at which exchange rates may be for foreign currency or may be for crypto.
Exactly. Yeah, because it’s, yeah, the crypto is kind of this, that’s priced in the quantity of crypto and then which is, has to get translated to the foreign currency, the fiat foreign currency reporting requirement. And so it’s just, yeah, exactly.
There’s, there’s kind of foreign, if we’re just dealing with foreign currencies, it would already be pretty complicated. And then you’re adding crypto on and trying to convert those to foreign currencies in various reporting currencies and consolidating it. I don’t, there’s no way to do it in Excel.
It just gets, it gets too complicated to do that. You know, if you could just take a snapshot and pause everything and you weren’t running a business, maybe that’s fine. But it’s, you know, as you’re continuing to go, you just really need to get all of this into a software solution.
Especially when finance need to do analysis. So that’s where they would have to look back at the previous numbers to get the analysis itself. So that is where we need a software to give us a screenshot.
So before we move on to the personal sharing session, just one last one from me is, if we talk about consolidation software, we all know, you know, SAP, Oracle, Hyperion, these are popular consolidation software. Today, if I’m a web 3CFO listening in, why should I think of contacting SoftLedger instead of, you know, looking for SAP or Oracle as a standard mode of contact? Sure. I mean, I guess if you have a team of, you know, 50 in your finance and accounting department, maybe those, maybe those solutions make sense.
But if you’re running very lean and you want, you don’t want to have to retrain everyone on this new big solution. You don’t want to have to pay the large implementation costs and the ongoing fees to implement those. You know, we’re a great fit for small teams to be able to manage this stuff.
And also, none of them have any capabilities specific to digital assets. That is something unique to SoftLedger for an accounting system. Yeah, thank you.
I think this is a very good sharing itself on the consolidation part. And just now you mentioned that SoftLedger actually has a crypto module. Can you walk us through the crypto module briefly? Sure.
So it is, we started with, we had an inventory module to track physical inventory, and we tried to put crypto in there and it didn’t quite work. So we realized, okay, there’s some, there’s some differences with crypto. You don’t, I like to say, you don’t pay your vendors with, you know, physical inventory.
Like if you’re, if you’re selling shoes, you don’t pay your vendor with shoes. That doesn’t make any sense. But that is kind of the same, it’s, it’s tracked in a similar way when, like, you know, physical inventory or stock or, you know, things that need to, you need to track each cost layer.
Crypto is the same, but crypto kind of functions more like cash. Like you could pay your vendors with Ethereum, a lot of our customers do, or stablecoin. And if you need to track stablecoins, just like any other crypto asset, and you’re not doing, doing one-to-one with the underlying currency, it, it just, it requires its own set of functionality.
So we built this module borrowing some of the concepts from inventory. So physical inventory items are coins in our system, which are general purpose financial assets. They can represent anything.
And so we, we use those in conjunction with wallets, which are kind of like inventory warehouses to allow companies to, you know, kind of stitch together whatever their data model is for, for digital assets. You know, for exchanges, for instance, we have, we have several exchange customers. They, they, they like to use this to, to be able to, to, to denominate or represent their customer holdings on their balance sheet separate from their internal holdings of a asset.
And they could have another version of the same asset at a liquidity provider. We have the customization in our, in our coins or financial assets that, that allow us to allow them to do things like that. So that’s, that’s kind of how our module is differentiated from really anything else out there because we, we then partner with sub ledgers to get all the data in from the various sources.
So we don’t run any nodes. We don’t run, have direct exchange integrations. We can ingest data from anywhere.
You don’t need a sub ledger, but often our customers will want to automate that piece of the process and not have to build it themselves. So that’s the way to think of us as the kind of conduit for crypto that, that kind of helps this all work together when it’s just, it’s tough to just take a crypto sub ledger and point it at a legacy accounting system and get this, this, this problem solved. It’s a, it’s a complex problem to solve.
Nice. I think you have put a function here to actually let maybe Lukka or, you know, Node40, your partners to actually have a lot of crypto data to put into a sub ledger very quickly and very easily. Yep.
Yeah. It’s been great working with both of them. And we, and we have some other partners as well that, that helped to, to yeah, to provide a complete solution to, to this problem.
Nice. Thank you. Diana.
Okay. Crypto and the digital asset was mentioned in the last question, we would like to move to the free talk session. And in this session, I would like to ask some questions related to the Web3 space.
The first question is, why did you decide to enter the web series space? Well, we got interested in it. And so Jeff and I, Jeff is my co-founder and the CTO, we’ve known each other since freshman year of college. And so we, we, as we were building SoftLedger which we just, we started as traditional accounting, just mid-market accounting system to replace the, the existing systems out there.
And then we got interested in, in 2017 in, in crypto and realized, oh wait, this is kind of a complex thing to solve. This is really complex to track. And then the ICO boom happened and we, I, alarm bells went off.
We thought, well, these are kind of like mini IPOs, you know, whether or not, you know, or STOs, whatever you want to call them, you’re issuing these fractional things that are financial assets. Really these are going to need to be tracked at a, at a pretty high level of sophistication. And these companies don’t have financial reporting departments.
They don’t have legal departments. They don’t have all of the, the normal infrastructure that a public company has when they go public. So that’s, that’s where we started is just, okay, you know, this stuff needs to be tracked.
It needs a specific set of functionality. And, and so we released that just over six years ago with our first paying customer. And we’ve been iterating ever since.
And, and it’s been interesting to see the space evolved. It probably, you know, companies weren’t taking it quite as seriously as we had hoped right from the get-go, but over time, you know, it’s, it’s really ratcheted it up in seriousness. And, you know, we have a lot of, a lot of companies that have, you know, weathered the storms are the ones that have taken this really seriously.
That’s because if they don’t take it seriously, I mean, they either end up in jail or they just go missing. So it’s quite legislation coming in. Right.
Exactly. Yeah. Or like it could just be, you did, you literally didn’t know how you were functioning as a business.
You didn’t realize you were, you were completely out of whack. You can’t do the, you know, back of the napkin, whatever that was scribble on a spreadsheet. Like what, if that’s how you’re running your business, like getting it into, you know, a, a true like full, full accounting system, having everything tracked properly in, in, you know, conforming with the regulatory requirements, all this stuff helps to helps you to actually, you know, provide or run your business using the best practices that, you know, the best companies use.
Okay. And during the career working in the crypto and the digital asset, can you share your idea about what are you looking forward to in this area? Oh, sorry. Are you looking forward to in the future in this area? What am I, what do we kind of think, think is going to happen in the future? Okay.
I mean, the biggest thing is we, and the thing that we’re most excited about is there, there’s all this promise of what’s next. And there’s not, there’s still not as much on-chain economic activity, real economic activity as, as we’d like, you know, that, that’s really what’s interesting is, is, you know, when businesses are really conducting a lot, a lot of their business, that’s not a financial speculation, not, you know, like some of the, the, the very hyped up pieces of crypto, but they’re doing real, like, you know, real components of their business on-chain. That’s where things get really interesting because then you can start to automate those.
You can start to standardize, you know, how, here’s how this supply chain use case works on, you know, Ethereum or Hedera is doing a bunch with that. And, and then, you know, how is this financial services case work on Avalanche? And, you know, we can standardize, oh, this is how this thing works. And then once that all forms, then you can start to like, us as a software provider, we can’t say, okay, we’re going to build this thing specifically for Avalanche, because we don’t know, we don’t really know, is that going to be the same? Is that really going to take off? Is it going to be, is that, that use case actually going to be on this other blockchain? So it just, we have to be very deliberate with every product update we make.
And so we have to stay very general purpose, but as soon as more on-chain activity happens in a specific, in a particular area, then you can start to automate, really automate this and take and fully take advantage of, of all the benefits of blockchain technology. Okay. Thank you very much.
And because the time, because this podcast have lasted for about half an hour, so maybe it’s come to the end of today’s podcast. Thank you so much for sharing your insight and experience with us today. And to our listeners, thank you for tuning into the Web3 Accountant radio.
If you enjoyed this radio, please subscribe and leave a review. Do you have any other words to our listeners, Ben and Wei Xiang? Yeah, I think for me, I want to add a closing statement that I’ve done consolidation at OKX, one of the biggest crypto exchanges around. And I’m very happy to say, I’m very thankful for Ben to be on the show because when I chanced upon his software, you know, we talk about digital asset, we talk about consolidation.
I think if I can summarize this whole episode into one sentence, the one thing I learned is if you are still running your whole company on spreadsheets, I think something is wrong. So do look, do, you know, give a shout out to Ben himself to look for the Softledger team and we will include the contact in the description below. Sounds great.
Yeah, couldn’t have said it better myself. And yeah, very much enjoyed the conversation. Yeah, thanks.
Thank you very much.