Mackenzie Thota from Hash Basis on Starting a Crypto Accounting Firm

[00:00:00] Mackenzie: I never wanted to be like a Partner at a Big4 firm. I never wanted to be a CFO.

[00:00:05] Mackenzie: And as an Accountant, like I guess the way to make the most money is to have one of those two roles, and I didn't want that.

[00:00:11] Mackenzie: So I guess for me, the pinnacle of my normal career would've been a Controller.

[00:00:16] Mackenzie: And so I looked it up and apparently in the US the average salary is between a $100,000 to $140,000 a year.

[00:00:23] Mackenzie: And so that was, let's say, my maximum earning potential. And so comparing that to what the business has generated, it's like multiples and multiples like upon that number. 

[00:00:33] Umar: Welcome to The Accountant Quits podcast, where we help accounting and finance professionals learn how to manage a business using crypto.

[00:00:41] Umar: Mackenzie Thota is the CEO and Founder of Hash Basis, a crypto native accounting and tax firm. Mackenzie had a stable nine to five job as a crypto accountant at Figment, but she walked away from her comfort zone and went fully entrepreneurial.

[00:00:57] Umar: Based in San Francisco, Hash Basis works exclusively with companies operating in the digital assets space.

[00:01:04] Umar: To win her first clients, Mackenzie focused on building credibility in public, speaking regularly at web3 accounting conferences, submitting comment letters to the FASB on the accounting of crypto assets and publishing deep technical articles on DeFi accounting.

[00:01:22] Umar: And in only three years, she's one of the most respected voices in crypto accounting.

[00:01:28] Umar: Mackenzie, what questions do you ask on a sales call with a lead? 

[00:01:31] Mackenzie: A couple of those questions that I might ask, like, what's your tech stack like? What banking providers do you have? What's your payroll system? Are you on a subledger? Do you even have a QuickBooks set up? I'll also ask, what's your entity structure? How long have you been around?

[00:01:44] Mackenzie: And then if they have a crypto treasury, I'll ask more crypto specific questions.

[00:01:48] Mackenzie: How many wallets do you have? What chains are those wallets on? And just in general, what's your on chain activity? I'll probably ask about the volume as well, and then I'll get a sense of their token flows.

[00:01:58] Umar: In this episode with Mackenzie, we'll unpack how to find your first clients when starting out, how to onboard crypto clients, the tech stack to run a crypto accounting firm, how to choose a crypto subledger, building a remote team of crypto accountants and more.

[00:02:16] Umar: And before we dive in, a quick note about The Accountant Quits community platform for web3 accounting and finance professionals.

[00:02:23] Umar: Inside the platform, you can connect with peers working in web3, join focused chat groups, access job opportunities, and attend practical workshops on web3 finance.

[00:02:35] Umar: You can join for free by heading to the theaccountantquits.com/courses and selecting Free Membership. The link is also in the show notes.

[00:02:44] Umar: And lastly, if you're new to this channel, make sure to like this video and subscribe.

[00:02:48] Umar: It really helps the channel to grow and spread our message to more finance professionals.

[00:02:53] Umar: Now let's get into my conversation with Mackenzie.

[00:03:01] Umar: Mackenzie, welcome back to the show and thanks for making the time to be here. 

[00:03:06] Mackenzie: Of course. Thanks for having me on for round number three. I believe it is.

[00:03:10] Mackenzie: Happy to be here. 

[00:03:13] Umar: So one of the first decisions to start an accounting firm is choosing your niche. A lot of the listeners might be sitting in the nine to five job right now.

[00:03:21] Umar: Maybe thinking in 2026, I want to start my own crypto accounting practice. Mackenzie, you've been there. You had a stable role at Figment, one of the well-known blockchain validators working as a Crypto Accountant, and you decided to walk away at only 25 years of age to go fully entrepreneurial. Can you walk us through what actually pushed you to make that jump?

[00:03:44] Mackenzie: Sure, there is definitely a couple of different factors that led to my decision to ultimately start my own company. Now, I think one of the biggest ones was that around that time I had moved to San Francisco. Before I was living in Phoenix, working a job there. And Phoenix is not known for being a very entrepreneurial city.

[00:04:01] Mackenzie: But fast forward to the beginning of 2022, I moved to San Francisco. And I think being in that environment, everyone either is working at a startup or they have their own company, or they're an investor. At least those were the people that, I found myself surrounded by, and so I guess I, I got the entrepreneurial bug just by virtue of the environment that I was in.

[00:04:20] Mackenzie: So, that was definitely a big factor. I almost had FOMO (Fear of missing out), like, why don't I have my own company? So of course that wasn't the main driving point, but it was very inspiring to see so many other people in my age bracket that were fully like on their own, had their own company as well.

[00:04:35] Mackenzie: The next factor was that I come from an entrepreneurial family. So my grandfather, we call him oppa, he actually started a bunch of businesses back in my hometown in Florida and he started bowling centers. And so he started that, I think in the 1960s, I wanna say. And so my whole life, I always grew up with my oppa saying, you need to work for yourself, be an entrepreneur, like work hard and make your own money.

[00:04:57] Mackenzie: And so I feel like I had that like on repeat in my head really since I was born, since my grandparents, they live like the right down the block from my family house. And so that was a big factor. I was like, well, it would be nice to make the family proud by having my own company.

[00:05:12] Mackenzie: And then the last part, or last factor, which really sort of pushed me over the edge was that there was just market demand for it. I was, working at Figment, very happy with my job, but I kept getting requests from random people to help them with their crypto accounting and their crypto tax, and I was not really seeking this at all.

[00:05:29] Mackenzie: Now at this point, I had written a couple articles at Figment about proof of stake accounting and I had, I guess, developed a bit of a name for myself just by putting out these articles.

[00:05:38] Mackenzie: And I spoke at a couple conferences while I was all still at Figment. But I think because of just putting myself out there. People just naturally sort of came to me. They were like, nobody else really understands what's going on, can you help me? And I didn't really wanna do a bunch of work outside of Figment, and so I figured, okay, like this might be the time to start my own company.

[00:05:56] Mackenzie: It looks like there's demand here. And at the time I was 25, I didn't really have much else going on. I was like, well, I can afford to take a risk right now because it's just me looking out for myself. If I don't do this now, I might not get a better opportunity. So yeah, I'd say there was a lot of factors.

[00:06:11] Umar: Now, two months ago, we ran a workshop , like it had a similar title, Starting a Crypto Accounting Firm. Mackenzie, you were there as a guest speaker. One of the questions that came up from an attendee, I'll paraphrase this was. She asked you, do you actually make enough revenue to support both the business and yourself compared when you had a nine to five job?

[00:06:32] Umar: I'm sure that's probably a question sitting at the back of some listeners minds. When people ask you this, what do you tell them?

[00:06:40] Mackenzie: So short answer is yes, I definitely do make enough to support the business and myself and my family, like my husband and I. But I actually wanted to share an interesting statistic with you that I brought up, but I guess before I share it.

[00:06:51] Mackenzie: So for context, I never wanted to be like a partner at a Big4 firm. I never wanted to be a CFO and as an accountant, like I guess the way to make the most money is to have one of those two roles. I didn't want that. So I guess for me, the pinnacle of my normal career would've been a Controller.

[00:07:09] Mackenzie: And so I looked it up and apparently in the US the average salary is between a 100,000 to 140,000 a year. And so that was, let's say, my maximum earning potential. And so comparing that to what the business has generated, it's like multiples and multiples like upon that number. So if you're worried about that, I would say don't be worried.

[00:07:30] Mackenzie: Especially because there's a shortage of accountants in the US. I know a lot of people have been talking about that. Now, there's also the conversation of how AI is gonna impact accounting, but I don't think that accountants are just gonna go away. If anything, I think decent accountants are going to be needed even more.

[00:07:44] Mackenzie: So, long answer yes or short answer yes. 

[00:07:48] Umar: Now, before we go into the different frameworks to or checklist to start a crypto accounting firm. I first want to ask you if you could share an overview of the different services that you provide at Hash Basis, and you are based in the US. Do these companies also have to be US based?

[00:08:05] Mackenzie: Yeah, so our services have definitely evolved over time. When we first started, I basically said yes to everybody that was coming through the door, which I think is okay. Like, I needed business, right? I needed to learn, I needed to make money. But our services are a bit more, I guess well-defined now.

[00:08:22] Mackenzie: And so the main service that we provide is monthly accounting services, so that includes fiat accounting and crypto accounting. Now, we still just work with companies in the crypto industry. We've been pretty strong about that niche. We're like, we're very specific about it, but our customers, they'll have their books, we go in and we complete them for the month, right? Make sure all the entries are posted, all the reconciliations are done.

[00:08:43] Mackenzie: So that's really become our bread and butter because it seems that's just what companies need. Now, in the beginning, we used to work with a lot more individuals, so doing their individual crypto taxes, helping them calculate gains and losses.

[00:08:54] Mackenzie: But we've moved away from that service line just to, to focus more on businesses because that's, just what I'm naturally more excited about and I enjoy doing that work a little bit more. So that's the main part.

[00:09:05] Mackenzie: Now a lot of our customers also have us do their tax return, so business tax, so we'll do their monthly accounting and then annually we'll do tax preparation.

[00:09:14] Mackenzie: And that also includes things like 1099s, like that's coming up, in the next couple of weeks here, and then random tax questions that they might have. So I'd say those two services together are very intertwined, and that's what we're doing the most. Now there's also some other services we'll do like sub-ledger implementation, so sometimes customers just want us to come in and implement their crypto sub-ledger.

[00:09:33] Mackenzie: Let's say they already have an accounting team that's doing all the manual entries, but they need someone to just come in and get the crypto up to speed. We'll definitely help out with that. And then actually I'm looking at our services page on our website. I had this other bucket called special projects, and you'd be surprised at random accounting things that companies have come to us asking us to do.

[00:09:53] Mackenzie: So some examples are drafting revenue recognition memos in accordance with ASC 606. We've done payroll tax audits before, like if there's a restricted token awards or restricted token grants. We went ahead and reviewed all those records in detail, so we're definitely open to doing these one-off projects that maybe someone's just looking for, like a crypto tax or crypto accounting expert to come in and just do this one thing.

[00:10:16] Mackenzie: I actually love those because they're just, out of the ordinary. Very interesting. 

[00:10:20] Umar: Now, if someone listening is thinking about launching their own crypto accounting firm, they'll probably have to start by defining who they are, like the company, who they're gonna serve, what services they're gonna offer.

[00:10:32] Umar: Will they offer both accounting, tax, both. Are they gonna be service, servicing individuals or corporates, how they're gonna price, et cetera.

[00:10:41] Umar: Looking back, if you have to give those listeners maybe. I'm framing it like this, but a practical checklist for starting a crypto accounting firm. What would you include and what would you tell them not to overthink early on?

[00:10:56] Mackenzie: Yeah, I'll tackle the second part of that question first. 'cause I think it's important to emphasize this, but don't feel like you don't know enough and so you can't start your firm, definitely don't fall into that trap of being like, oh, I've only been working for a couple years. I don't know enough. Therefore, I'm not qualified to start my own firm. There's not some body out here saying whether someone is qualified or not to start their own accounting firm. Like anyone can start a company at any point in time. And so that was something when I was first starting, I guess imposter syndrome might be the word for it.

[00:11:27] Mackenzie: I was like, oh, like am I actually cut out to do this? I'm 25, I've been outta school for three years. What do I even know? But then I realized like I just learned so much on the job. And if a client asked me a question that I didn't know, I just go and research it. And now we didn't have AI tools back then, so I had to use Google and actually talk to people.

[00:11:46] Mackenzie: But there was always a way for me to find out the solution. And yeah, don't think that you can't do it for X, Y, Z reason. If you feel this calling and if you feel like you're really meant to do this, then you just have to go ahead and do it.

[00:11:57] Mackenzie: Now, in terms of the checklist for getting started, we definitely did have some like processes or items that we went through. So I know Umar, we talked about business plans and we actually did put together a business plan and I did find that to be very helpful. We also read a lot of books, at the beginning. So for example, starting, what was it called? Oh, the Partnership Charter and then oh, I forget the name of the book.

[00:12:21] Mackenzie: What's the one by Ron Baker Like? It's about subscription pricing. But yeah, basically we read a lot of business and accounting books and books on starting your own company. That was also very helpful. And then things like setting up your website, getting business insurance, even incorporating in the first place.

[00:12:35] Mackenzie: We went ahead and did all of those, or like legal items and that was very helpful for us to be a bit more structured about it. I wanted to make sure we had all of our liability limitations in place for us before we took on any clients. But I will say if you're the type of person that just likes to plan and plan but doesn't actually do anything, maybe don't go so heavy on the planning part and just jump in and find like your first client.

[00:12:58] Mackenzie: For us, my co-founder and myself, we always knew that we were going to actually do it. So the planning was, it was very helpful to us versus just stalling us doing something and maybe not even doing it in the first place. So hopefully that answers your question. 

[00:13:11] Umar: Yes, it does. And some firms are only doing tax. Some firms are only doing accounting. Some offer both. You offer both. Looking back, do you think it's better to start with both crypto accounting and tax, or pick one and expand later?

[00:13:26] Umar: Are there some trade offs that you experience from a business and operational standpoint? 

[00:13:32] Mackenzie: I think it depends what prior knowledge you're bringing to the table. So when we first started, I pretty much was just doing crypto tax for individuals because I didn't really have a lot of experience doing fiat accounting.

[00:13:45] Mackenzie: I hadn't even filed a tax return, like I don't even do my own taxes, and so I did not offer that right out the gate because I didn't really know how to do it. So I would say start with what you know and then build on from there. I remember the first tax return I ever did I paper filed. It was for the DAO that I used to work for, and so I had this 1120.

[00:14:05] Mackenzie: I printed it out, I was filling out everything, and while it was a really painful process, it taught me how to actually do a tax return. At least like a corporate income tax return, from 1120. And that was invaluable. I learned so much. But it's not like I did that right at the beginning. I don't know if I even charged the DAO for it.

[00:14:21] Mackenzie: I was like, hey, this is my first time. I'm just trying to learn. And they were really game for me to do it. And so I will say though, I'm a strong believer in offering both tax and accounting services because if your accounting is good, then doing the tax return on top of it is usually a piece of cake.

[00:14:35] Mackenzie: Like it's pretty early or pretty easy. Now what I, the problems I've seen is that a customer will maybe come to me and they'll say, hey, if someone else did our books, can you do our tax return? I rarely take on those types of engagements because I don't really trust that the numbers are correct. It has to come from a firm that I know really well and that I trust.

[00:14:53] Mackenzie: So yeah, I do think those two things go very much together because tax and accounting, the two sides are the same coin, like how I book something can, it will impact the tax return. Like book to tax differences are a real thing and I think it's very powerful to have an accounting partner that understands both of those concepts.

[00:15:09] Mackenzie: So that's actually been, I'm actually a very strong believer in that. 

[00:15:12] Umar: Now, a lot of times I'm speaking with accountants, traditional accountants who underestimate how many clients there are actually using crypto today, or like how big this industry is.

[00:15:25] Umar: So a lot of these traditional accountants, because they underestimate how many companies use crypto, they underestimate this opportunity to do crypto accounting and tax.

[00:15:35] Umar: So my next question is actually how to find your first clients. There's not obviously a one size fits all playbook to find your first clients, but as a Founder, you'll have to build those sales muscles yourself. When you were just getting started, what actually worked for you in landing those first clients?

[00:15:52] Mackenzie: Yeah, I would say definitely going to conferences and in particular speaking at these conferences like, ETHDenver and then Bitwave's conference. Those were the ones I did early on and I just met a ton of people through there. Not even clients per say, just general word of mouth of getting the Hash Basis name out there.

[00:16:08] Mackenzie: That was really critical. In addition to writing thought pieces or like thought leadership type articles, like how to do accounting on this protocol or the tax implications of this DeFi project. So I think that was also really necessary because those articles would get shared to, let's say, the Controller at a company that had that particular crypto problem.

[00:16:29] Mackenzie: And so I think those two pillars together were really important. And I also wanna emphasize not just on the conference part, not just gonna crypto conferences, I also went to a lot of I guess normal accounting conferences like QuickBooks Connect, I went to, there's also another one Ensuring Success.

[00:16:43] Mackenzie: It's like an online, like a webinar type conference. But that was great because not only I kind of got outta my crypto sphere into the normal accounting world, and that was cool for me to see, but also good to get the Hash Basis name out there too. So I just would say marketing, like in person or the podcast, things like we're doing right now, just to establish that I'm a legit person in this space and that I think I know what I'm talking about.

[00:17:07] Mackenzie: So hopefully that, comes across to people. 

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[00:18:48] Umar: That's also what I usually tell them. If you're traditional accountant, you've not really, you don't really know how many companies are using crypto. When you go to a conference and you see the sheer number of, let's say, at a conference like ETHDenver in the US or ETHcc in Paris, there's so many companies there and everyone needs an accountant.

[00:19:08] Umar: Everyone who uses crypto actually needs an accountant, so it's actually not that hard I would think to find your first clients.

[00:19:17] Umar: Now, once you've launched your practice, now you're starting to receive leads. At the beginning, I suspect one won't be too selective with the clients that they get, but over time, your ideal clients can evolve.

[00:19:30] Umar: Maybe there's some clients that energize the business, others just drain it. What are some factors for you, for deciding what your ideal client is? 

[00:19:40] Mackenzie: Yeah, definitely a lot of factors and actually wrote out a list of them. Now, I will say before I, I get into the list most of our referrals now, it's all just word of mouth.

[00:19:48] Mackenzie: We do some marketing, like articles and stuff still, but the goal of those articles is not really to get clients, it's just because I like writing and videos and stuff like that. Mostly all of our business just comes from people referring us. And so that's actually one of the first criteria that I look for is how did this potential customer or how did this lead come to us in the first place? If they're coming from someone that I trust already, then they're way more likely to make it through our screening process versus someone randomly filling out the contact form on our website. Of course, like we look at that, but it's the trust factor isn't really there because I think having a client, it's a two-way relationship, right?

[00:20:24] Mackenzie: You both have to trust each other. So besides that though, there's a laundry list of some other factors when determining my ideal client or who's gonna be the next Hash Basis client.

[00:20:32] Mackenzie: First one is entity structure and this is something that I look at a lot more closely now, especially since we pretty much just work with businesses.

[00:20:39] Mackenzie: So if you're an individual. Sorry, but if you're a C Corp, then that's something that we're way more interested in working with, just because we have more experience and that's where we're kind of focusing our firm on now.

[00:20:50] Mackenzie: Second is size, and this is something that I look at a lot. Are you a startup, like a really small startup, like seed series round, or are you series C? Series D? Do you have like 200 plus employees? I definitely look at the size because that determines the kind of work that we're gonna do. If you're a really tiny company, then yeah, we can do everything. We can do all of your accounting, we can do all of your tax.

[00:21:12] Mackenzie: But if you're this huge company that's very complex, I don't really wanna do the tax return for that. I don't even wanna do the fiat accounting for that. Maybe I'll just come in and do a little bit of the crypto accounting.

[00:21:21] Mackenzie: Profit profitability. That's something I've started to look at a little bit more now. Now, of course, in the early days nobody made money in crypto, at least the company. So everyone was just generating net operating losses.

[00:21:31] Mackenzie: But now, at least in my experience, I found that a lot of the customers that we see are starting to actually generate a profit. And so that is something I'm starting to look at a bit more now because companies that are generating profit have a little bit more money to spend on accounting services, and they actually care a lot more about accounting because of the income tax that they owe.

[00:21:49] Mackenzie: So, whereas if they're just running now operating losses, they're trying to reserve their runway for investors. And so they don't really wanna spend anything on accounting. So I look at that as well. I look at software stack for example, do they already have a QuickBooks account or are they on Xero?

[00:22:04] Mackenzie: Are they on NetSuite? What does that look like? And along with that do they have a crypto subledger? If so, which one.

[00:22:11] Mackenzie: Now, the two other components that I look at is messiness, how messy are your books? Are they generally okay or is a lot of co-mingling going on? And especially when I was first starting co-mingling in the sense of like the founder's personal financial activity and the business activity were co-mingled.

[00:22:28] Mackenzie: I used to see that all the time. And those were the worst kinds of clients. Just because it was so difficult to detangle everything. And the risk was just inherently really high. At least from my perspective. So that's a big one.

[00:22:40] Mackenzie: And then the last one, which I love talking about is vibes. I guess, like will you actually enjoy working with this person? Because as I mentioned, this is a relationship that you are entering into. You have to like the other person because this client might be pinging you all the time. And if you don't like them every time you see that ping, then you're just gonna wanna like cry, you know?

[00:23:00] Mackenzie: So you have to make sure that at least the other person is someone that you respect and that you can work with. So that was a lot, but those are definitely factors that I look into when deciding to take on a new client. 

[00:23:10] Umar: Now, you've previously written an article titled Best Practices for Accounting Firms to Onboard Crypto Clients. In this article, you mentioned that you actually treat these initial calls as how a doctor would be seeing a new patient. So I wanna ask you what are maybe some questions you would ask on that first call? How do these answers basically shape whether you would say yes, how you will price, and how you scope the work?

[00:23:37] Mackenzie: Sure. So I'm a very intuitive feeling type person. So when someone gets on an initial call with me, I keep it very open-ended and I ask. So tell me about your books, like what's your accounting journey been so far? I try to lower the pressure a little bit 'cause sometimes people get really stressed talking about their books and their taxes, especially if they're not in a great state.

[00:23:58] Mackenzie: And so I just try to bring a very calming presence to the call and turn the tables to them and be like, so just tell me what's going on, and that's why I say it kind of sounds like being a doctor. 'cause I, I'm asking these questions at a very high level, but all this time I'm really trying to diagnose what the real problem is here because that's potentially gonna be something that I have to work through and that I have to solve.

[00:24:18] Mackenzie: So I'll keep it very high level. And I'll also ask questions like, what are your pain points so I can get a sense for what's not working. Now, once I have the general overview, then I do have a list of more specific questions that I will get into a little bit more once the lead is comfortable sort of sharing everything with me.

[00:24:34] Mackenzie: So a couple of those questions that I might ask, I'll start with the softball. Like, what's your tech stack? Like, what banking providers do you have? What's your payroll system? Are you on a sub-ledger? Do you even have a QuickBook set up? So I'll start there. I'll also ask, what's your entity structure?

[00:24:49] Mackenzie: How long have you been around? And then if they have a crypto treasury, I'll ask more crypto specific questions. How many wallets do you have? What chains are those wallets on? And just in general, what's your onchain activity? I'll probably ask about the volume as well, and then I'll get a sense of their token flows.

[00:25:04] Mackenzie: So I'll ask questions like, how do you actually make money? Like, what's your business model? Because I found, I find that zooming out and just asking that question is really good. You have to understand what the customer's doing before you can really take them on as a client. And then I'll probably not really end with this, but I will ask somewhere like, how do you feel about the state of your books?

[00:25:22] Mackenzie: Like are they in pretty good shape or are they messy? And even with that open-ended question, I can get a sense for if the customer's confident in their books or there's actually like a really big problem that I'm gonna need to go in and look at. So yeah, I guess that's what I ask in the first question or the first call.

[00:25:38] Umar: And that's a good segue onto my next question, which is are there any red flags, you listen for on a sales call that will tell you, I think this client will be a bad fit, or, and do you have any examples from the past? 

[00:25:51] Mackenzie: I have lots of examples. Yeah. So co-mingling, as I mentioned before, that's a big red flag.

[00:25:56] Mackenzie: Before I used to take on those customers, but now I just don't because I don't wanna deal with it. Like there's plenty of companies that don't have that going on. Also they have a lot of foreign entities now. Not that's a red flag in and of itself, but that definitely complicates the tax return. And I, I don't really enjoy doing tax returns when there's a bunch of wholly owned foreign subsidiaries. I just don't really have that much expertise on it. I'm trying to get better. But yeah, I try to avoid customers that have those.

[00:26:23] Mackenzie: And then the other parts are more like, they're kind of shady, and that's more, again, just like a vibe or a feeling that I get where they, for example, want me to back up their tax position that I think isn't very good or very defensible according to the IRS rules.

[00:26:37] Mackenzie: I have gotten that a couple of times. And then potential leads that just want everything done now. And they come to me in a very panicked state. They're like, we need everything done now. Like when can you start? And I just don't wanna enter into that high pressure situation because they're usually coming to me maybe at the end of the year, around tax season. And I already have my plate full with customers I've been, for me, been with us for years now. So I just don't really wanna enter that type of situation. 

[00:27:02] Umar: Now, let's say the contract has now been signed, so now the real accounting and tax work will begin. Can you walk us through your client onboarding process?

[00:27:13] Umar: What information the client needs to provide upfront? And how do you structure this so you're not constantly chasing, missing wallets, documents for transaction hashes, and basically where you end up spending most of your time with this new client in that phase. 

[00:27:29] Mackenzie: I think chasing still happens no matter how well you set it up at the front.

[00:27:32] Mackenzie: It's just kind of inevitable and I've accepted that at this point. But the first thing that we'll do is we'll just have a kickoff call. So I'll have myself and then any key stakeholders on the customer side. And I'll just run through some housekeeping items. A big thing is just getting access to all the applications in the first part.

[00:27:48] Mackenzie: It's much easier to get access to the bank and payroll, the sub-ledger, all that kind of stuff upfront, rather than later. And then I'll also get into, like how are we actually going to clean up your books? That's probably the next biggest thing. That's why they hired us in the first place.

[00:28:01] Mackenzie: Now, if the customer's books are okay, like I don't really to go in and do major surgery and fix it, then. We'll just set up all the reconciliations the way that we like to do it, like all the bank recs, the crypto cost basis, forex, et cetera. And then we just start doing our monthly close, and there's really nothing else to it.

[00:28:17] Mackenzie: I wish more customers were like that, but more often than not, customers will have books that are just a little bit messed up. And so we have to go in and kind of do this like open heart surgery to fix everything in the books. I'm actually going through one of those clients right now. They're awesome, but at the same time, it's really hard to get a sense for how the books are when you're just sort of going through this initial sales process.

[00:28:38] Mackenzie: You really don't fully know until you're actually in there cleaning everything up. And, if there's a big cleanup that's required, then I'll definitely put together a plan, like a schedule, like how are we gonna attack this? How are we gonna make sure that the opening balances are clean so that I can go ahead and do the next month end close and be successful at it?

[00:28:54] Mackenzie: And that really varies by client, depends what balance sheet accounts are messed up. I usually start the balance sheet. I'll reconcile that first. And then I'll take a look at, okay, like how do things on the P&L actually look? So I guess, yeah, that's usually how the onboarding process goes. Oh, and one thing I wanted to mention is that if you know that the client does have messed up books that you're gonna need to fix, always try to bake in like a setup fee or some kind of onboarding fee.

[00:29:18] Mackenzie: I don't usually, I don't always charge an onboarding fee, but I will if I know that the books aren't in a great state and I'm gonna have to do a lot of cleanup. Now where you kind of get into trouble, and I think we're gonna talk about this in the pricing section, is where like when you don't know that the books are messed up and so you just take on the engagement, but then they are, but you didn't charge a setup fee.

[00:29:35] Mackenzie: And so that's just something that happens and that you just, you learn over time. But yeah, we can get more into that later. 

[00:29:41] Umar: Well, maybe we can go through pricing now as well, so looking back.

[00:29:44] Mackenzie: Okay, sure.

[00:29:44] Umar: Were there any pricing mistakes you made early on? For example, under scoping work? In a monthly retainer arrangement, let's say.

[00:29:52] Umar: And how would you handle that conversation with the client later? 

[00:29:56] Mackenzie: So many pricing mistakes, and I've said this before, but pricing is definitely still something that Hash Basis is figuring out because there's so many ways to do it and it's so bespoke. You could do the flat fee model, like the subscription pricing.

[00:30:09] Mackenzie: You could do value pricing, you could do hourly billing, which I know is probably most common or at least like legacy accounting is all based on hourly billing. And so, I've tried a mix of all three and just a heads up, I'm still figuring it out, but have definitely made a lot of mistakes along the way.

[00:30:24] Mackenzie: First one is just charging too low, for our services. And the trouble with that is when you do a flat fee, like a subscription model, let's say. And you charge too low at the beginning, then you're sort of locked into this recurring low flat fee. And then you have to bring up the conversation to the client and be like, hey, I think we need to increase our pricing because of X, Y, Z.

[00:30:45] Mackenzie: And then that just introduces a lot of friction, and no one really wants to talk about money that way, you know? And so it's just uncomfortable for everybody. You have to have that conversation. So yeah, that's definitely the most difficult, or the most prevalent pricing mistake that we've made that we are just always trying to get better about.

[00:31:02] Mackenzie: And then along with that, I think another issue with this flat fee is that you don't scope well enough. And so when I first started out, my contracts were pretty broad, I'd say. Okay. I'm doing your monthly crypto accounting, your monthly fiat accounting and ad hoc accounting requests as they come up.

[00:31:18] Mackenzie: Oh, I wish I could take that clause out because ad hoc accounting requests can mean a heck of a lot of things, and so I definitely don't put that in there anymore. But I found myself just doing a bunch of extra work that wasn't there when we first signed the contract, but now that I'm locked into it, I can't really do anything about it.

[00:31:37] Mackenzie: Well, the thing is, I normally just have a conversation with the client, and this gets back to liking your clients. And for me, I, they feel like they're all part of the Hash Basis family. And I really do deeply care about the people that I serve and that I work with. And so since we already have that good relationship.

[00:31:50] Mackenzie: I, I can bring up pricing and I don't feel really awkward or like dirty about it, you know? It just seems natural and at the end of the day, it's just business. And I think I've brought up, when I bring up pricing, I don't think everyone, anyone's ever said no. Like, no, you can't charge us more. Usually they recognize the value of what we're doing and they're reasonable people, you know, so it's okay.

[00:32:10] Mackenzie: So, but that's definitely the scope creep is such a real thing. And then I mentioned before, yeah, not charging like a setup cleanup fee. When I probably should have. 

[00:32:19] Umar: And what pricing model did you then stick up with? 

[00:32:24] Mackenzie: It is a flat fee subscription.

[00:32:25] Umar: Okay.

[00:32:26] Mackenzie: That's what we do most often. But I do have still have some clients where we do hourly because they're not like a monthly crypto or fiat accounting customer. I, I still do that. And then sometimes we do just do one-off tax returns, and that will be just like a flat fee, which I guess you could call a value pricing because it's not recurring, it's just once a year. But yeah, so I guess we kind of do all three. 

[00:32:48] Umar: Now I had a follow up question when we spoke about onboarding a little bit earlier, which was how do you actually define that a client is a complex client?

[00:32:58] Umar: Is it based on their transaction volume that they have every month? Is it just the type of business activity that they have, the number of non-recurring transactions or something else, or a mix of all of what I just mentioned, and how do you learn to avoid these bad surprises later on? 

[00:33:16] Mackenzie: So when I was thinking about this question, I was looking at my client list and I thought, okay, who's actually complex, out of all these customers, and there's definitely some characteristics.

[00:33:23] Mackenzie: Now I actually really enjoy complexity and so it's not something that I really shy away from. I sometimes wish my clients were a little bit more complex, knock on wood. But there are some that, that are complex and some characteristics of that are, they have lots of volume across multiple manual wallets.

[00:33:39] Mackenzie: And so my customers that have a lot of crypto assets they all have a subledger, right? But sometimes they're on tail networks, as in it's a network that the subledger doesn't natively support. So the data's not just syncing in and then I just apply an account, it's done. It's not like that. I have to go and grab the data from the block explorer, reconcile it, and then manually upload it myself.

[00:34:00] Mackenzie: I'd say customers that have a lot of those manual networks are challenging, not from a complexity perspective, but just from a volume perspective. It takes a lot of time to grab that data. And then sometimes the subledgers upload tool doesn't work and so you have to try again. And then sometimes it uploads like 15 outta 20 transactions and to go and find those five that I didn't upload.

[00:34:19] Mackenzie: So yeah, that just adds a lot of manual intervention at month end. Multi-entity is also tough. And so that kind of gets to the point of having like multiple wholly owned subsidiaries, but I do have bigger customers that are more complex and you have to book like liabilities or expense accounts by different entity.

[00:34:37] Mackenzie: And so that's just something I haven't had much experience with. But it definitely, it's, it gets pretty complex.

[00:34:43] Mackenzie: And then the other thing that I wrote down here is the client has a lot of on chain activity, but they don't really tell me what it's for. And so a lot of the complexity sometimes just arises from the client not communicating what they're doing. And so it might not be complex at all, but I can't fully tell what's going on. 'cause I need them to tell me, oh, this was to pay an invoice, not to see a liquidity pool or something. 'cause in crypto, like it could be either. And so that just gets complex because I'm lacking information.

[00:35:09] Mackenzie: Like, even though everything is on chain, there's still a lot of input that the accountants need to make sure that everything does get coded properly.

[00:35:16] Mackenzie: And then how do you, how have you learned to avoid bad surprises? I'm still learning. I don't know if I have a good answer for that, bad surprises still happen.

[00:35:25] Mackenzie: But again, I always say that accounting, everything in accounting is solvable. It's all debits and credits that tie out at the end of the day, I have not encountered an accounting problem like I haven't been able to solve, like through sheer will in determination. 

[00:35:39] Umar: So to remain on the bad surprises in the web3 space, a lot of these companies are smaller startups and not all of them would be going through an external audit.

[00:35:49] Umar: Have any of your clients actually gone through an external audit and maybe what are some of the learnings from that? 

[00:35:55] Mackenzie: Yep. I've definitely had a couple of clients go through external audits, and I would say that you really have to have your ducks in a row before the audit starts because in these cases, like the books weren't fully done or fully cleaned up, and that made the audit very painful.

[00:36:10] Mackenzie: Now, the things were fixed, of course, in the course in the course of the audit, but I wish we had everything done in the first place. And a good example is just making sure your crypto subledger is fully up to date and everything's reconciled, as in your subledger ties out to onchain, like all the ending balances tie out and their support and screenshots for all the ending balances.

[00:36:29] Mackenzie: And then on the other hand, your subledger ties out to your ERP system, so your QuickBooks or your NetSuite, you really need that two-way or three-way match before the audit really even starts and audits require reconciliations. Like so many reconciliations for every balance sheet account, every P&L account, like everything.

[00:36:47] Mackenzie: And so the crypto rec can be huge, and that, that really needs to be done before the audit starts. 

[00:36:53] Umar: Thanks for sharing. Now my next question is on tools. So if people listening are not familiar, a practice management software is what accounting firms use to organize and run their day-to-day operations.

[00:37:09] Umar: Some examples of these tools include Karbon, Ignition, Canopy, Double, and a lot more. Now for listeners who are not familiar with these tools, could you walk us through how you actually use a practice management tool at Hash Basis? 

[00:37:25] Mackenzie: Sure. So we first used Financial Sense, but I just didn't really have a good sense of how to use it, to be honest.

[00:37:30] Mackenzie: I don't think I set it up correctly. And so we actually switched to Double. Which was recently, it was called Keeper, but they rebranded and now they're called Double and we implemented them. It's been at least six months now, I think. And it's been honestly so helpful because for me we use it as just a master month end, quarter end and year end checklist.

[00:37:48] Mackenzie: So we just list out all the customers that if we have to do work for, and then under each customer, I have all the tasks that need to be completed. And so for example, like the bank reconciliations, crypto rec, payroll rec, I'll list out each of those items. I'll tag the relevant reconciliation, like the spreadsheet that we have.

[00:38:05] Mackenzie: And then what's really great is that I can assign it to one of my team members so everyone knows exactly what the responsible for. And I also put in due dates as well. So actually I can pull up Double right now. It's been so helpful, honestly. 'cause I can also keep track just at a high level, what work is still outstanding.

[00:38:21] Mackenzie: And they also have a timer feature, which I know we were just talking about pricing. So the customers that we still do like hourly billing for. I can just throw on the timer on Double and then it will just tell me at the end of the month how much I need to actually bill a customer. And the good thing about Double as well, and I think probably the other software is that they connect to QuickBooks.

[00:38:40] Mackenzie: And so for each customer I connect their QuickBooks and syncs to Double. And then Double actually pulls in all, basically all like the ending account balances. And then I can also make edits to, for example, like bank feed transactions and then it'll sync back to QuickBooks. So it's like a two-way connection.

[00:38:56] Mackenzie: So I have found that to be really useful. And then they also have a 1099 feature. I'm using that out for the first time, like today or early next week. So we'll see how that goes. But oh, and they also have receipt management or receipt capture, and not just Double, but other softwares as well, where it's really cool.

[00:39:13] Mackenzie: Customers can just send an invoice to a dedicated Double email, and so they'll scan in like a PDF of their invoice receipt or bill, and then it'll automatically match it to the transaction they see coming through the bank feed. So I've actually really liked that feature. Of course, they just sync the bank feeds.

[00:39:31] Mackenzie: They're not syncing all the crypto transactions. So if the customer has a lot of crypto, then. Double's only helpful from like a checklist, tracking perspective. But if a customer has a lot of fiat activity, then, yeah, using Double's great because of that two-way sync. 

[00:39:43] Umar: All right. And besides the practice management software, are there other tools worth, mentioning?

[00:39:49] Mackenzie: Yeah, I can go through the tech stack that we use. It's actually pretty lean, I think. We use Google, like Google Drive for all document storage and just for email. And we pretty much just use QuickBooks. We have a couple bigger customers on NetSuite, but for the smaller customers, everyone's on QuickBooks.

[00:40:05] Mackenzie: I still have yet to have a customer come to me on Xero. It's not that I'm anti Xero, it's just that literally no one's come to me with it yet. So, and then Double of course, we use our various crypto subledgers. I mostly use Koinly and Bitwave these days. We also have some customers on Integral, so we do use a fair amount of those Slack, Notion, DocuSign, Airtable, MailChimp, and Perplexity.

[00:40:26] Mackenzie: So that, that's our AI tool. 

[00:40:28] Umar: Perfect. Now. Besides these tools that you just shared, the other critical piece of the stack for crypto bookkeeping is what's commonly referred to as a subledger. If people are not familiar with a subledger, so let's say you're using your normal accounting softwares like your Xero, your QuickBooks, your Oracle NetSuite.

[00:40:49] Umar: But these softwares the problem, they don't natively support crypto, so you also need this specialized crypto accounting software known in the industry as a subledger, which would extract, process and feed these transactions from the blockchain into your main ledger, into your P&L and balance sheet.

[00:41:06] Umar: When selecting a crypto subledger Mackenzie, what are some important factors to consider, because I know you've used so many different subledgers. 

[00:41:14] Mackenzie: Yeah, so there's definitely several factors that I look at here. So one of the first ones I look at is what chains does the subledger natively support syncing for?

[00:41:23] Mackenzie: Because most of them do Ethereum and EVM type chains. A lot do Solana now, Bitcoin. But if I have a customer that has a lot of random networks, I will look to see what subledger has overlap with those networks. 'Cause I do prefer. If the subledgers sync in data, I don't love going and grabbing manual data.

[00:41:40] Mackenzie: It's just what I do a lot of the times because the subledgers don't natively support it. But that will be my first check. And also in addition to chains, in addition to chains, also API connections. So if they're on Kraken or Binance or Coinbase, I'll just make sure the subledger also has a good connection there.

[00:41:55] Mackenzie: Now, I also make sure that the sub-ledger supports the cost basis tracking method. Now, most do obviously LIFO and FIFO, but I have some have had some customers on cost average, and not every subledger supports that. So just make sure whatever the customer wants to use for their cost basis relief methodology that the subledger actually supports.

[00:42:14] Mackenzie: And also the reporting I think is a huge thing. So if it's a smaller customer, I'll just usually put them on Koinly. Now that's more of an individual tax software, I know that. But it can definitely do business accounting as well. It's just that the reporting suite isn't really built for businesses. It just gives me a transaction dump.

[00:42:32] Mackenzie: And I have to go in and build my own entries and come up with the ending balances and things like that. So if for a small customer I can do that. But if it's a bigger customer that you know is maybe going through an audit, I will get a more enterprise ready tool that has the roll forward schedules built out.

[00:42:46] Mackenzie: It has the lots, it has multiple inventories that I can choose from, basically just has the bells and whistles that, that a bigger company might need. And then another thing that I look at is if the customer has a lot of tail networks, as in networks that are if not natively supported via syncing. How is the manual upload capabilities of the subledger?

[00:43:05] Mackenzie: Because you'd be surprised, a lot of subledgers are quite inflexible when it comes to uploading your own data. I run into a lot of issues with that. For example, if I'm trying to just make an internal transfer, I can't do it in the subledger. I have to contact the support team to do it for me, which that doesn't really make any sense.

[00:43:21] Mackenzie: So if I had to do a lot of manual data, like I already know that, then I'm gonna choose a subledger where it's really easy for me to do manual manipulations around. So, yeah, I guess those are some of the factors. There's a bunch more that I have, what pricing is a subledger using? Is that compatible with the pricing that I've set?

[00:43:37] Mackenzie: And also an important one is customer support. Like how nice is the team? Are they gonna respond to you when you're pinging them about a bug on their platform? Definitely don't underestimate like the customer support team being nice as an important factor. 

[00:43:50] Umar: Now there's a lot of subledgers on the market.

[00:43:53] Umar: All of them don't have uniform pricing. So some of them are more premium in terms of pricing. Some are more low to mid range. Would you be recharging the cost of the subledger back to the client or do you absorb it as an expense? 

[00:44:07] Mackenzie: It depends. So for my customers that are smaller and on Koinly, when I first started out, I absorbed the cost because I just didn't think to charge the customer, to be honest, because the pricing, the price is pretty small for Koinly, especially because as an accounting firm, like if you set up a profile as an accounting firm, you can buy these bundles of licenses that are super discounted. And so it didn't really seem like that much money to me.

[00:44:30] Mackenzie: But now, if I have new customer signing up or using Koinly, then I will pass the cost onto them because like I, I don't pay for QuickBooks, for example. So we have to change that. And then if it's a customer that's on a more enterprise sub-ledger, then yeah, they're definitely paying that themselves. 

[00:44:44] Umar: Now, if someone's thinking about launching their firm, they're thinking about the initial investment outlay that they'll be doing.

[00:44:53] Umar: Maybe a rough figure doesn't have to be exact because it'll vary. How much would that minimum viable tech stack look like for their practice management software, maybe like Koinly, those first softwares that they need. 

[00:45:07] Mackenzie: Right. So I actually pulled up my P&L here so I can tell you exactly how much we spent on the first year.

[00:45:13] Mackenzie: So, so these are annual figures, so if you're trying to figure out the monthly amount, just like divide by 12, but for the first year we spent roughly 3,300 on software subscriptions. And, but that's separate from, I separate out my books, the software from the subledger expenses, so spent around, 3.3K on software subscriptions.

[00:45:31] Mackenzie: And then for the subledgers, I spent an additional 2K. So let's say about like 5, 5.5k on software subscriptions with which annually comes out to what, like $400, $420 maybe, like around there. And that cost has actually stayed pretty consistent. My, my software costs have gone up a little bit year over year.

[00:45:49] Mackenzie: But it's not, it's not due to the crypto. The crypto costs have stayed pretty consistent. So yeah. But I also, when I was looking at the P&L, those are not the only costs that you're gonna incur when you start your company. There's also gonna be business insurance. That was definitely a big cost for us.

[00:46:03] Mackenzie: We spent around like two grand on E&O insurance, just like liability protection. So that was definitely a big cost for us. And then also we were starting legal fees. We paid a law firm to look over our partnership agreements, our incorporation documents, just making sure everything was set up properly, which I do recommend doing, I know there's AI that you can just use to set things up, but I do still think lawyers are useful and very helpful to actually look at things.

[00:46:27] Mackenzie: And so that, that was a big cost as well. But we haven't really needed to do any more legal fees since the first year. 

[00:46:34] Umar: Perfect. Thanks for sharing. Now my next topic is actually about AI and running automation workflows. Have you implemented some automation workflows to any core process? Might not be AI, but just some automation workflows, maybe in the bookkeeping with crypto related bookkeeping, with data entry, reconciliation, but then also with your client communication, your monthly invoices. Are there any automation workflow that you're running as an accounting firm, and what kind of tools would you be using? 

[00:47:04] Mackenzie: Would you consider writing rules in a subledger? Is that an automation, like I know it's not AI, so

[00:47:10] Umar: Yeah, sure.

[00:47:10] Mackenzie: I guess that's the biggest automation that we do. I feel, I'm kind of embarrassed to say it, but we don't really use Zapier like any of those types of automations because listen, we're still like a pretty small boutique accounting firm, and so we just don't have enough volume or scale, I think that really necessitates that kind of automation. But on the subledger level, yeah, I'll write rules for the transactions. For QuickBooks, I don't really do a lot of bank feed rules just because I just don't really like the QuickBooks bank feed rule design. A lot of the times it categorizes transactions and it, like it auto categorizes in a way that doesn't make sense.

[00:47:43] Mackenzie: So I actually, I turn all the rules off on QuickBooks that maybe they're fixing it, but a lot of that is still pretty manual for me. I guess we don't really use that, that many automations because especially with like messaging clients, I want them to know that it's coming from me.

[00:47:56] Mackenzie: Everyone knows what it feels like to be on the other side of getting an automated AI message. Everybody hates it. Nobody wants that. And so I don't wanna be that person sending an AI message to my client. I want them to know that I'm here and that I actually care about them. Now, I will say, I mentioned this a couple times, but we do use AI for research like Perplexity.

[00:48:14] Mackenzie: I use it all the time just to research provisions of the tax code, like just to make sure I have my deductibility rules correct or something like that. Or if I'm having difficulty reconciling something, I'll ask Perplexity for help on it. And I actually use their browser called Comet. It's like an agent browser and sometimes it can like it, it has really cool features you can use as well.

[00:48:34] Mackenzie: And then a really good use case that I used recently was one of my like Koinly doesn't have a lots report, which is really frustrating. They really need to get that. And so I asked Perplexity to help build a lots report for me and actually do that. It basically runs a Python script in the background based on your transaction dump, and then comes up with the ending lots report.

[00:48:52] Mackenzie: And so that's been a good use case, but it's not like I'm using it to like do the tax return or anything. 'cause first of all, AI is like, it's not really good enough to do that yet. And I don't fully trust dumping in all this client data. So maybe not as much automation as some people are doing, but it's enough for us right now.

[00:49:09] Umar: Yeah, probably you don't need to right now, but as maybe the firm grows bigger and bigger. Yeah. Thanks for sharing. Now, in one of our previous conversations, you mentioned that in hindsight, you should have hired much earlier when you were just getting started. How do you approach attracting talent today at Hash Basis?

[00:49:27] Umar: Do you hire remotely and yeah how does your hiring process look like? 

[00:49:32] Mackenzie: We are a remote first firm. I'm working outta my bedroom right now. I don't think I'll ever be in an office ever again. Who knows? But yeah, so everyone that works for us it's, I'm the main full-time person and then we have contractors, and our contractors are in the US and also in the Philippines.

[00:49:48] Mackenzie: And I guess I just, I happen to find people through word of mouth, especially the people that helped me out in the Philippines. I just, I met one of the people, one of the accountants I was helping, one of my clients, I asked them, hey, do you know, do you have any friends? And they're, they were based in the Philippines.

[00:50:02] Mackenzie: So I got a lot of referrals just through word of mouth there. And I got extremely lucky. The people that help me are great. And they're, yeah, they're very reliable. And so in terms of hiring though, I went through this phase of wanting to get a full-time US employee, but it just never really worked out for a couple of reasons.

[00:50:18] Mackenzie: One was the cost. It's really expensive to hire in the US and I just, I didn't feel like I found any candidates that had enough experience to command the salary that they wanted, and so. Just for me, I just didn't really think it was worth it, especially since, again, our business is really not that big.

[00:50:35] Mackenzie: Like we are small. I don't need a ton of full-time employees and we don't really have plans to grow a ton because I like, I wanna keep it small. But the people that I did hire, the contractors. We definitely went through not a strict hiring process, but there was a personality fit assessment.

[00:50:52] Mackenzie: So I just wanna see, are you a go-getter? Are you motivated? Do you care about crypto accounting? Like, do you have that desire to research and are you curious? So I definitely try to assess that. And then I also would just give them like a technical type of case study. I forget exactly what I did, but I think I would list out some transactions and then I'll ask them to do the journal entries for it and then maybe explain some protocol to me in accounting terms, like how the accounting work for this protocol. And so with those two together, you can get a pretty good sense for how good someone's gonna be at crypto accounting. 'cause even if they don't have any crypto experience, they have to still be accountants.

[00:51:26] Mackenzie: Right. And so most of the times they can get like a simple staking rewards journal entry correct. Like debit crypto, credit revenue, like that's all I was looking to see. And you'd be surprised, a lot of like accountants, they can't even do that first step and so that was definitely something I was looking at.

[00:51:41] Mackenzie: But yeah, the people that I hired did not have crypto experience, but they had accounting experience and I think it's much easier to teach the crypto side than to go back and try to teach accounting fundamentals. 'Cause at the end of the day, crypto accounting's not special. It's just accounting for crypto assets.

[00:51:56] Mackenzie: No different than any other type of accounting. So yeah, you really have to understand like how financial statements work, how journal entries work, and then you just layer the crypto on top. 

[00:52:05] Umar: Now, let's say this person is a strong accountant, but they don't have a lot of crypto accounting experience. How would you train them in the first month?

[00:52:12] Umar: What are maybe the first set of tasks that you want them to do? 

[00:52:17] Mackenzie: I am very, I guess, practical in the sense that I'm not gonna teach them all this crypto theory. I'm just gonna throw them into something and be like, and just do training. I'll walk them through, here's exactly how I did it. Do you have any questions?

[00:52:28] Mackenzie: And I, I love when people ask me questions. I wish I got more of them, but I'll make sure that they at least have like a baseline understanding of what I'm trying to do here. And then I'll just kind of throw them in and see how they do. Now when I train, I do a lot of videos, like Loom videos are my favorite thing ever.

[00:52:45] Mackenzie: So for most of our customers, for most of the processes, I've created Loom videos for basically everything. Like, here's how to do this crypto reg, here's how to do X, Y, Z. And so a lot of my training is not really, I don't have to be present for a lot of it because I've already built like this whole library of videos that my team can just watch.

[00:53:02] Mackenzie: And that's how they learn how to do it. Now, I do try to provide some high level knowledge as well. Like, you know, for example, if they don't know what staking is, I will tell them, hey, here's what staking is. Here's what a delegator is. A validator. Here's the whole purpose of why people do it in the first place.

[00:53:18] Mackenzie: So I definitely will give like high, higher level context, but when it comes to doing the actual tasks, you can't break it down into actionable steps and you don't fully have to understand the theory of the crypto that's happening. It's great if they wanna learn and if they wanna do that, I highly encourage it, but to do the day-to-day tasks. You don't fully need that.

[00:53:35] Mackenzie: Especially since a lot of our clients' transactions are on the simpler part of the spectrum. Like it's gas fees, it's paying contractors, maybe it's some liquidity providing, but that's something you can teach in a Loom video. 

[00:53:46] Umar: Mackenzie, I'm looking at the time. This conversation has been great so far and maybe there's a last topic that I wanna go through with you. You spend a lot of time in the trenches of DeFi. You regularly publish a lot of technical accounting content based on real world cases on your website. Are there any new DeFi primitives that are you find particularly challenging in terms of their, or what could be their crypto accounting or tax treatments?

[00:54:13] Mackenzie: Yes, there is one that I'm thinking about now, and I'm gonna do my best to explain it, but I'm sorry if I butcher it. So, to set the stage, there is this protocol called Aerodrome, and there's also a sister protocol called Velodrome. Velodrome is on Optimism. Aerodrome is on Base and they're, DEXs on Layer2 essentially.

[00:54:31] Mackenzie: They're competing with the Uniswap and SushiSwap. And they've been around for a couple years now and have been very successful. And the way that you can use it. So the first way is just to use it as a DEX, right? Just to swap assets in your wallets. But you can also use it for governance purposes.

[00:54:46] Mackenzie: Like they all have the each other native token. So like  Aerodrome has the AERO token, Velodrome has the VELO token, and that's the governance token. So you're able to earn rewards in those tokens. Like if you're liquidity providing through there, which you can do, you earn the rewards and those native tokens, but then you're able to lock those tokens into positions and they call them veNFT positions.

[00:55:08] Mackenzie: So let's say. I'm a liquidity provider. I've earned a bunch of AERO and VELO and I'm locking it into the protocol and when I lock it, I get this NFT back. So that's the first step. But now, there's this other company that I'm thinking of they're called 40acres.finance, where you can take your veNFT and collateralize it, at least you essentially deposit it as collateral and then you can borrow against it through their protocol.

[00:55:33] Mackenzie: I think it's the coolest thing, and I'm still trying to figure out like the accounting and tax ramifications here, because the way that it works is once you borrow out of the protocol, it's automatically like your loan automatically gets repaid by the rewards you're earning from the liquidity pool on Aerodrome or Velodrome, so you don't have to repay it like a lump sum in the future, I think you can do that, but it's essentially auto repaying and so there's no risk of liquidation, like your veNFT is never gonna get liquidated because the rewards that you're earning from being a liquidity provider.

[00:56:06] Mackenzie: Or at least from having this position, get auto-routed to 40acres.finance to pay off your debt. Now what I'm trying to figure out on the accounting and tax side is, are those rewards that the person who holds the veNFT, are the rewards that you're earning are those taxable or not? 'cause technically they never land in your wallet.

[00:56:23] Mackenzie: They just immediately go to pay off your debt. And so it's really weird 'cause onchain you don't see anything but in the background, I know something's happening. So I guess that's something that I know that's very specific, but it definitely is a hairy problem that I'm trying to figure out right now.

[00:56:38] Mackenzie: So hopefully I didn't lose everyone with that. 

[00:56:41] Umar: I think you actually just published an article on this, right? On this merger, and you went through some of the accounting implications as well. 

[00:56:48] Mackenzie: Yeah, the merge is something separate. So  Aerodrome and Velodrome are set to merge into one protocol called Aero sometime, I think in Q2 of this year.

[00:56:57] Mackenzie: But that's definitely gonna be interesting from an accounting and tax perspective 'cause a new token's being issued. And so your existing positions are essentially being rolled over into this new token. You're still waiting for more details to be released on what the merge or the upgrade actually looks like.

[00:57:10] Mackenzie: But that's definitely something I know my client are gonna be asking me, hey, is this taxable? And as of right now, I'm like, I don't know. I need to see what it actually looks like and then I'll research. 

[00:57:20] Umar: Perfect. Mackenzie, it's probably a good time to wrap up the episode. The title for the episode today was Starting a Crypto Accounting Firm.

[00:57:28] Umar: Has there been anything, that we didn't go through today that you'd like to share with the listeners, or how would you summarize this episode for the listeners? 

[00:57:37] Mackenzie: I guess just in general, starting a crypto accounting firm is not really for the faint hearted. There's a lot of work that goes into it, you can't see on camera here, but I've got lots of gray hairs that are forming right now and I think they're because of the, because of Hash Basis.

[00:57:51] Mackenzie: But honestly, I wouldn't have it any other way. I love my clients. I love the work that I do, and I really do enjoy the sense of responsibility. Like it's a lot, it's a lot on your shoulders, but I think if you feel the calling, if you feel like you can do it and you believe in yourself, then you should just take the leap and do it.

[00:58:06] Mackenzie: If anything, if it doesn't work out, you're an accountant, you can go get a job literally anywhere else. So I don't think the stakes are really that high, so I say just do it. 

[00:58:15] Umar: Perfect. Mackenzie, if people want to reach out to you, if they want to get in touch with you for Hash Basis, where should they go?

[00:58:23] Umar: What's the best way to reach out to you? 

[00:58:26] Mackenzie: LinkedIn is the best way. It's just my name Mackenzie Thota on LinkedIn and then Hash Basis is hashbasis.xyz. 

[00:58:32] Umar: Perfect. Mackenzie, thanks a lot for joining in today for the third time on The Accountant Quits podcast, and we'll be in touch. 

[00:58:39] Mackenzie: Of course. Thanks for having me. Bye everyone.