00:10.770 --> 00:12.660 Johny Fernandez: For more than a decade Better Accounting 00:12.660 --> 00:17.310 Solutions CEO, David Roitblat has helped MCA companies manage 00:17.310 --> 00:18.390 their finances. 00:18.630 --> 00:23.280 David Roitblat: Our main focus right now is with the MCA space, 00:23.370 --> 00:26.910 there are two ways of calculating or recognizing 00:27.030 --> 00:30.510 income. Primarily, I mean, technically you can there are 00:30.870 --> 00:33.300 like seven ways of recognizing income for a funding company. 00:33.690 --> 00:37.230 But there are two main ways of recognizing income. And what we 00:37.230 --> 00:41.160 call cash and accrual for the MCA space. 00:41.190 --> 00:43.920 Johny Fernandez: Why is it important for an accountant to 00:43.920 --> 00:46.470 have knowledge of this specific field? 00:46.680 --> 00:49.740 David Roitblat: That's a good question because many, many 00:49.770 --> 00:54.060 accountants, from very nice firms that I've spoken to in the 00:54.060 --> 01:00.210 past, do not get the difference between an advance and a loan. 01:00.750 --> 01:02.910 Johny Fernandez: He shared with me the importance of choosing 01:02.910 --> 01:03.990 the right accounting firm. 01:04.320 --> 01:07.560 David Roitblat: Most funders, after having a five minute 01:07.560 --> 01:10.680 conversation with the whoever they're interviewing to do their 01:10.680 --> 01:14.520 accounting, they'll know if they understand this space. The real 01:14.520 --> 01:17.460 question is, even if they understand the space, will they 01:17.460 --> 01:21.810 be able to book all that information at one time, so an 01:21.810 --> 01:25.260 average company, let's say, their funding 40, 50 deals a 01:25.260 --> 01:31.230 month, the average deal, let's say is over seven months, you're 01:31.230 --> 01:36.180 gonna have compounding 40 deals that every month, and every 01:36.180 --> 01:40.050 deal, if we're going to book everything every day, for the 01:40.050 --> 01:45.270 payback, you're gonna have a bunch of debits and credits that 01:45.300 --> 01:46.920 you have to manually do. 01:47.250 --> 01:49.140 Johny Fernandez: Roitblat, explain how they can get the 01:49.140 --> 01:51.930 data they need, and why it has to be corrected. 01:51.990 --> 01:55.050 David Roitblat: The trick here is to know how to grab all that 01:55.050 --> 01:59.130 data, and make it practical for one person to do that, if you 01:59.130 --> 02:01.680 try to do that manually, you're gonna have every day's work is 02:01.680 --> 02:05.760 gonna take you three months, our firm that Better Accounting, 02:06.150 --> 02:11.700 perfected the art of doing this. So we went into the nitty gritty 02:11.790 --> 02:17.580 of each CRM system. And we grab all the data from there, and we 02:17.580 --> 02:23.100 have Excel do 95% of the work for us, and then we upload 02:23.100 --> 02:26.370 everything into QuickBooks. So that's how we capture 02:26.460 --> 02:30.990 everything. I do want to point out, it is super important that 02:30.990 --> 02:35.250 we that Better Accounting Solutions mission every month, 02:35.370 --> 02:39.000 let me repeat that Better Accounting Solutions mission is 02:39.000 --> 02:43.680 to give every month a proper income statement and balance 02:43.680 --> 02:47.040 sheet that our clients can make decisions off that they can rely 02:47.040 --> 02:47.280 on. 02:47.670 --> 02:50.070 Johny Fernandez: Is there anything particular to watch out 02:50.070 --> 02:53.910 for or think about when it comes to booking syndication, for 02:53.910 --> 02:54.510 example? 02:55.110 --> 03:01.860 David Roitblat: So yes, it's very important that you track 03:01.860 --> 03:06.060 syndication, you know, to the T, because, you know, you're 03:06.060 --> 03:07.860 dealing with someone else's money and you want, you want to 03:07.860 --> 03:10.860 make sure that if they ask for any reports, everything's gonna 03:10.860 --> 03:15.540 come back perfect. And you pay them back the amount that 03:15.540 --> 03:17.220 belongs to them, you didn't overpay them, you didn't 03:17.220 --> 03:19.950 underpay them. If you overpay them, chances are, you're not 03:19.950 --> 03:21.690 going to see that money. Again, if you underpay them you're 03:21.690 --> 03:23.700 going to hear about and you're probably not going to get get 03:23.700 --> 03:28.500 any further funds for them. So it's very important to always 03:28.500 --> 03:31.470 have everything that you post in the CRM system, starting from 03:31.470 --> 03:34.890 the CRM system match exactly what you know what have 03:34.890 --> 03:38.430 happened. In regards to syndication or paying back the 03:38.430 --> 03:39.060 advances. 03:39.330 --> 03:41.520 Johny Fernandez: Bad bookkeeping could jeopardize an entire 03:41.520 --> 03:42.630 funding business. 03:42.960 --> 03:44.940 David Roitblat: If you book things wrong, there's gonna be a 03:44.940 --> 03:49.380 lot of upset people. Of course, the funder is gonna be upset, 03:49.380 --> 03:53.340 but also, they're gonna lose the trust of all their syndicators 03:54.150 --> 03:56.760 and they're gonna lose the trust of their investors, the way they 03:56.760 --> 04:01.050 file taxes is gonna be wrong. So they may way overstate or 04:01.050 --> 04:04.110 understate their taxes, if they overstate, you know there could 04:04.110 --> 04:09.060 be, again, paying a lot more taxes than they should. And now 04:09.060 --> 04:12.030 they have less capital available to them. If they understand they 04:12.030 --> 04:15.720 may we be paying interest and penalties for overstating and 04:15.750 --> 04:18.630 that it can cause some legal issues. 04:18.630 --> 04:20.850 Johny Fernandez: Let's talk about the software that funders 04:20.850 --> 04:25.500 should be using to keep their books in good work in order to 04:25.500 --> 04:26.970 make sure things are organized. 04:26.970 --> 04:27.410 David Roitblat: We currently work with five main CRM systems, 04:27.410 --> 04:28.730 the end software is always going to be QuickBooks by us. So we 04:28.730 --> 04:35.210 typically work now with Len SAS, MCA track, MCA suites, Centrex 04:35.300 --> 04:43.670 and OrgMeter. And then some people have their own CRM 04:43.670 --> 04:45.530 systems that they built on their own and we work with that as 04:45.530 --> 04:49.850 well. And we have many clients that built CRM systems on 04:50.000 --> 04:53.870 Salesforce. And it's typically it's typically customized for 04:53.870 --> 04:57.950 the client. But you know, there all more or less the same if, if 04:57.950 --> 05:01.250 the client can use it. It's not rocket science. And we can, you 05:01.250 --> 05:03.530 know, we'll figure it out. Right now we're working with those 05:04.400 --> 05:08.330 domains, those main five serum systems, we know them inside 05:08.330 --> 05:12.020 out. And we're pretty satisfied with all of them. 05:12.060 --> 05:14.010 Johny Fernandez: His advice for those looking to hire an 05:14.010 --> 05:15.900 accountant is to choose wisely. 05:15.900 --> 05:18.390 David Roitblat: The number one thing before anybody hires an 05:18.390 --> 05:21.810 accountant or a bookkeeper, they should always make sure that 05:21.810 --> 05:25.380 they understand the principles of accounting. And the reason 05:25.380 --> 05:28.890 why that's so important is that when you when you book an item 05:29.430 --> 05:32.460 in QuickBooks and a CRM system, eventually that ends up on the 05:32.460 --> 05:35.580 income statement balance sheet. If you book that item wrong, 05:36.750 --> 05:39.510 you're gonna mess up the income statement and balance sheet. If 05:39.960 --> 05:42.480 the person you're hiring, understands accounting 05:42.480 --> 05:47.670 principles, they're, they're not likely to make those same 05:47.700 --> 05:52.140 typical bookkeeping mistakes. So that's number one, is to be more 05:52.140 --> 05:57.180 specific with the MCA space, you want to make sure that the that 05:57.180 --> 05:58.770 whoever you're hiring understands the difference 05:58.770 --> 06:01.650 between a loan and the difference between an advance. 06:02.430 --> 06:06.870 And all parts of that, they have to understand how syndicators 06:07.290 --> 06:09.960 want to see their reports, they have to understand how Hedge 06:09.960 --> 06:12.000 Funds want to see thee reports and they have to understand how 06:12.450 --> 06:16.230 a typical investor wants to see the reports. And then of course, 06:16.230 --> 06:18.960 they also have to understand how the owner of the MCA wants to 06:18.960 --> 06:19.740 see the reports. 06:19.920 --> 06:21.660 Johny Fernandez: Better Accounting Solutions office 06:21.660 --> 06:25.230 never closed. And Roitblat says he saw the way clients handled 06:25.230 --> 06:25.740 COVID. 06:26.050 --> 06:29.290 David Roitblat: During COVID, there were two ways of dealing 06:29.290 --> 06:35.770 with the situation. Either you stopped funding, just until 06:35.770 --> 06:37.720 things got better, you know, you want to make sure that you're 06:37.720 --> 06:43.300 safe. Or you took advantage of the situation. And because there 06:43.300 --> 06:47.470 was less supply of funders, the demand went up. So you were able 06:47.470 --> 06:51.010 to charge a higher factor rate for a shorter period of time. 06:51.790 --> 06:58.690 And be very picky on who you decide to approve. So my clients 06:58.690 --> 07:02.950 that were funding during COVID, were earning three, four times 07:03.220 --> 07:07.030 the front profit per deal. Because of that, because it was 07:07.030 --> 07:09.040 in a shorter period of time, so they're turning over to funds 07:09.040 --> 07:12.610 sooner, and they got safer clients, because there was a 07:12.610 --> 07:15.400 very high demand and there wasn't a big supply of funders, 07:15.430 --> 07:20.140 and they had less defaults. So all that played into the 07:20.140 --> 07:24.370 compounding effect. So the clients that funded during that 07:24.370 --> 07:27.370 period on the clients that the actually or the merchants that 07:27.370 --> 07:30.670 they actually funded, they actually earned probably about 07:30.700 --> 07:34.570 three times more, on average, over that period. 07:34.750 --> 07:36.730 Johny Fernandez: And despite COVID Changing the market, 07:36.790 --> 07:39.250 Roitblat predicts changes will continue to come. 07:39.480 --> 07:41.070 David Roitblat: So in my opinion, I don't think the 07:41.070 --> 07:43.950 market's settled yet. And we keep on having these waves of 07:43.950 --> 07:52.020 the government infusing cash into into the market. And it's a 07:52.020 --> 07:56.280 good for MCA companies, it's a good thing and a bad thing. It's 07:56.280 --> 08:00.150 a good thing, because those merchants have more funds. So 08:00.150 --> 08:02.520 they're able to pick a business and with that they're able to 08:02.520 --> 08:04.500 pay back if they're going through a hard time their able 08:04.500 --> 08:08.910 to pay back those advances on time and sooner. And so there's 08:08.910 --> 08:14.010 less defaults, but it's not a good thing for MCA, MCA 08:14.010 --> 08:17.730 companies, because when they're getting those advances, let's 08:17.730 --> 08:22.680 say SBA loans, or PPP loans and things like that, at that time, 08:22.680 --> 08:27.630 they don't need advances from the MCA company. So we keep on 08:27.630 --> 08:29.910 seeing these waves every time the government gives money 08:30.570 --> 08:34.710 there, you know that those months, we find that the MCA 08:34.710 --> 08:38.670 companies are funding less. But the amount of funds that come 08:38.670 --> 08:43.380 back for the following month, or two or three usually is a better 08:43.830 --> 08:47.280 ratio on it from a default point of view. 08:47.280 --> 08:47.990 Johny Fernandez: And he shared what trends he's seen in the MCA 08:47.990 --> 08:54.860 industry. So What trends are you seeing in the MCA industry right 08:54.860 --> 08:55.250 now? 08:55.750 --> 09:01.210 David Roitblat: I do see a lot of brokers at some point, become 09:01.210 --> 09:05.440 funders. I've seen a lot of that. And it typically starts 09:05.440 --> 09:08.380 with most brokers like to syndicate on their own deals, 09:09.790 --> 09:13.120 which is acceptable, and it's beneficial for to merge for an 09:13.120 --> 09:15.580 MCA company to allow them to do that, because they have skin in 09:15.580 --> 09:17.170 the game. They're gonna make sure that they're they're 09:17.170 --> 09:21.790 bringing them good deals. But at some point, the brokers see that 09:21.790 --> 09:26.890 they're doing so well with syndicating on their own deals. 09:26.920 --> 09:30.580 They're like, why shouldn't I open up my own company? Now, 09:30.580 --> 09:32.950 there are issues that come with that. If you open up your own 09:32.980 --> 09:35.410 company, you have to know how to underwrite. You have to have a 09:35.410 --> 09:37.450 collections firm, you have to have a proper legal team, you 09:37.450 --> 09:39.460 have to have a proper CRM system that's going to track 09:39.460 --> 09:44.560 everything. You have to have a proper accountant. That's why we 09:44.590 --> 09:50.020 typically when we are approached by a broker that's looking to 09:50.020 --> 09:53.740 open up an MCA firm, we will hold their hand through the that 09:53.740 --> 09:58.810 entire process. We'll connect it will connect them to a legal 09:58.810 --> 10:02.110 team we'll connect them to a collections team we'll collect 10:02.110 --> 10:06.280 them to an underwriter. We may even connect them to investors 10:06.280 --> 10:10.570 and syndicators so they can get off the ground. And of course, 10:10.660 --> 10:14.050 we set them up with a proper bank that is friendly to the MCA 10:14.080 --> 10:17.110 space, we'll set them up for the proper CRM system, the proper 10:17.110 --> 10:20.830 ACH, whole company or program. And then we'll make sure that 10:20.830 --> 10:25.030 everything is smooth from the start. And then it's easier to 10:25.030 --> 10:28.060 get investors, you can be in business for six months, and 10:28.300 --> 10:31.300 bring in investors that will, will be happy to put in two to 10:31.300 --> 10:34.390 $5 million. If you have proper books, and you're set up 10:34.390 --> 10:34.840 properly, 10:34.900 --> 10:37.540 Johny Fernandez: His advice for new market entrants is to not 10:37.540 --> 10:39.190 skimp on the nuts and bolts. 10:39.330 --> 10:45.600 David Roitblat: It's super important that you have a good 10:45.600 --> 10:48.300 relationship with your accountant. With your legal 10:48.300 --> 10:52.080 team, you're set up properly from day one. So if something 10:52.080 --> 10:55.860 happens, you're protected. If you don't do proper accounting, 10:56.910 --> 10:59.970 a typical example that most people don't realize, if you 10:59.970 --> 11:05.730 spend personal expenses through your corporation bank account. 11:07.890 --> 11:13.620 And you get sued one day, the opposing attorney can argue that 11:13.620 --> 11:18.780 you're using your your LLC or corporation as your personal 11:18.780 --> 11:21.690 bank account, and you should not have the protection that an LLC 11:23.520 --> 11:26.700 protects, they'll kind of help pierce the corporate veil. 11:26.940 --> 11:29.040 Johny Fernandez: And for someone who wants to be a broker? 11:29.040 --> 11:30.770 David Roitblat: And you're asking if someone's going to be 11:30.770 --> 11:33.530 your broker. And they're gonna get into that they want to know 11:33.530 --> 11:36.890 what they're gonna what they're really getting into. My advice 11:36.890 --> 11:41.660 would be to really just sit at a brokerage firm for two days, 11:42.110 --> 11:45.650 you'll understand very well what you're getting into. So, you 11:45.650 --> 11:48.110 know, as long as you just need to stand and listen to the 11:48.110 --> 11:52.610 conversations, and listen how how the brokers deal with the 11:52.610 --> 11:55.310 merchants, and then you'll know what you're getting into, you 11:55.310 --> 11:58.340 know that they're always the right way of doing things and 11:58.340 --> 12:01.130 the wrong way of doing things. And you want, you may just you 12:01.130 --> 12:05.840 may be at the wrong broker firm and that might not be for you, 12:06.200 --> 12:09.410 try at another brokerage firm, they may be more honest, more 12:09.440 --> 12:11.900 straightforward with their clients, and that's why they're 12:11.900 --> 12:15.530 growing. So you know you will just want to be careful and who 12:15.530 --> 12:17.630 you're going to business but if you're going to work for 12:17.630 --> 12:21.170 someone, you will make sure that their team is a honest team. 12:21.680 --> 12:23.900 Johny Fernandez: In Manhattan. I'm Johny Fernandez with 12:23.900 --> 12:24.920 deBanked News.