Pushing Rocks Uphill: David Schnitt’s Journey from Deloitte to Global Innovation

Intro  

Welcome to another edition of inspired stories where leaders share their experiences so we can learn from their successes, how they’ve overcome adversity, and explore current challenges they’re facing.

Anthony Codispoti (13:10.368)
Welcome to another edition of the Inspired Stories podcast, where leaders share their experiences so we can learn from their successes and be inspired by how they’ve overcome adversity. My name is Anthony Cotaspodi and today’s guest is David Schnitt, president and CEO of IQ Backoffice, one of the leading firms in the finance and accounting outsourcing and staff augmentation industry with approximately 1000 global professionals.

Now before finding IQ Backoffice, he was co-founder and executive vice president of New Ventures for Resources Global Professionals, a publicly traded spinoff from Deloitte that provides outsourced specialists. David helped grow the company from scratch to more than $150 million in annual revenue in four years.

While a senior manager with Deloitte Consulting, Mr. Schnitt advised and assisted clients in re-engineering their finance and accounting functions, including the establishment of shared service centers, improving their operations, developing new strategy and business plans, and forming successful joint ventures. Mr. Schnitt has been responsible for the design, development, and implementation of several significant consulting projects.

with budgets of up to $11 million and staff numbering more than 8,500. If you listen all the way through to the end, you’ll hear about how to receive free process benchmarking from David, which has a value of $2,500. Now, before we get into all that good stuff, today’s episode is brought to you by my company, Ad Back Benefits Agency, where we offer very specific and unique employee benefits that are both great for your team and fiscally optimized for your bottom line.

Anthony Codispoti (15:00.19)
One recent client was able to add over $900 per employee per year in extra cashflow by implementing one of our proprietary programs. Results vary for each company and some organizations may not be eligible. To find out if your company qualifies, contact us today at addbackbenefitsagency.com. Now back to our guest today, the president and CEO of IQ Backoffice. David, I appreciate you making the time to share your story today.

David Schnitt (15:27.13)
Anthony, thank you. appreciate it.

Anthony Codispoti (15:29.806)
So David, you had a very successful career with Deloitte where you were helping clients re-engineer their finance and accounting functions, work that I’m assuming at least conceptually was kind of laying the foundation for what you would later do with starting IQ back office. But long before starting IQ, you co-founded a spinoff from Deloitte. Tell us about that venture.

David Schnitt (15:53.597)
Sure. So I actually kind of stumbled into it accidentally. So when I was in consulting, as you mentioned, we were helping a lot of companies re-engineer and improve their back office processes, accounting, HR, IT, all of those sorts of things. And what we found in doing that was obviously those things are not the core competency of any company. Those are things all companies have to do, but they’re not in business to do it.

And so we found a lot of opportunity to improve those specific areas. And in fact, once we delved into it, what we found was that there’s huge economies of scale and knowledge in those particular functions. And so I got the idea to, when I was at Deloitte to start working on outsourcing those particular functions for companies using the scale and the innovation to really drive.

orders of magnitude, cost reduction and process improvement in those areas for clients. And as I was meeting with people in the firm at Deloitte, I met one of the other partners and he said, Hey, I really like your idea. Let me show you my idea. And his idea was to start this other company. And so I kind of took the outsourcing thing and I put it aside and we, started a company which, which later became resources global.

professionals, but at the beginning we were a subsidiary of Deloitte and we grew from scratch to about 180 million in revenue in just I think about three years or four years, something like that. And we found an unmet need in the marketplace for senior level professionals to help clients with various sorts of finance and accounting issues that they had. And that was really a fun ride and we…

We started from scratch as a subsidiary. ended up spinning out and then a year after spinning out, we went public and we were one of the best performing IPOs of the year. So that was really a lot of fun.

Anthony Codispoti (17:58.978)
How did you guys grow so quickly?

David Schnitt (18:02.109)
As I said that we found an unmet need in the marketplace so We we found that at the time if you wanted to hire Somebody to do project-based work on the finance and accounting side Your only option was to go to one of the staffing firms and they basically focused on clerical level people Somebody to process invoices or you know pay bills, know stuff like that

but nobody was really providing senior level people that could help them, do an S one, which is a filing to go public or clean up a messy, balance sheet that they have, or, you know, work on other sorts of projects. And so, you know, we, we found this and we actually started out providing people at Deloitte who were not busy during the audit season.

And then we quickly found that we could get alumni of the big four accounting firms who had experience doing this work and clients love that. And as soon as we found that great niche in the marketplace, you know, things just took off. and you know, we had, we just were opening offices left and right and just found opportunities everywhere.

Anthony Codispoti (19:16.986)
So I think you answered what my next question was going to be, but let me make sure if I understand it. when, cause I was going to ask, how are you finding these high level folks to do project based work? Like don’t they want to be employed, you know, full time at a really good job? You know, clearly there’s, there’s demand for their services, but I think what I’m hearing you say is they all have sort of a slow season, right? Outside of audit time. And so this is.

David Schnitt (19:40.241)
Well, yeah, the auditors do, but the folks that we were hiring were really people who had been controllers, CFOs, accounting managers, things like that. And we found two sets of really good people. So one was people that preferred to do project based work. They didn’t want a full time job. they found that that was more interesting and more challenging than doing the same thing every day. If you’re in accounting, you’re closing the books every month and it gets kind of, you know, monotonous.

to do the same thing every month, every month, every month, and you’re working very long hours. That was sort of one group. And the other group we found were younger professionals that had small kids and young families, and they didn’t want the same thing that they were doing again, same thing every month. They wanted more flexibility in their schedule. And so we found just some amazing, you know, fantastic talent that really wanted the project-based work to fit better with their lifestyle.

And so those two groups we really found were great and that helped us really grow.

Anthony Codispoti (20:46.606)
Okay, so you found this unmet niche, this need that existed that nobody had really figured out a good solution for. You figured out how to find the people that can provide the service. How are you so quickly finding the clients? Is it just because you were able to tap into Deloitte’s network? There’s a big base of customers there, and so you had a very receptive audience. Because to go from zero to $180 million in three years, that’s pretty good growth.

David Schnitt (21:16.753)
Yeah. mean, a lot of it was being able to tap into the network at Deloitte, but it also kind of, you know, when you start a business, the way I talk to people about it is you’re pushing a rock uphill. You know, there’s, there’s no momentum. In fact, the momentum’s against you. Right. But once you reach critical mass and you’re at the top of the hill, then that rock starts to go down the hill on its own and you get some momentum.

And in that business and the resources business, we were able to hit the top of the hill very quickly. And it started, you know, gathering its own momentum very, very fast. And the Deloitte network certainly helped a lot at the beginning, but then we did a lot of, you know, sales and marketing activities as you would, as you would expect. There was a lot of word of mouth, as in our business today, you know, we work with a CFO at a client. They go to a new company.

And usually the first thing they do is call us and say, Hey, I’m in this new company. you help? So there’s a lot of that that goes on as well because senior accounting folks don’t stay too long at any one place generally, and they move around. And so there’s always a lot of opportunity, you know, when they change jobs.

Anthony Codispoti (22:34.232)
Got it. So you were involved in this very successful spin-up that went public, one of the best IPOs of the year. But at some point you decide, I’m gonna step away and do something else. What was behind that decision?

David Schnitt (22:49.319)
So as I mentioned, originally I had this idea to do outsourcing and I kind of put it aside to help get the resources business growing. And you know, after we were public, we had grown a lot and it was still growing and I wanted another challenge. And I’ve always been very entrepreneurial and wanted to do my own thing. So I left resources and started IQ Backoffice and I saw the need in the marketplace.

which has only grown since then. And that was basically it. And I didn’t look back.

Anthony Codispoti (23:25.454)
And so you’re starting in what year was it? 2002. Yeah. How’d you get your very first client?

David Schnitt (23:31.165)
2002.

David Schnitt (23:37.373)
well, interestingly, we wanted to have a solution set in place so we could really help clients grow and give them, you know, better control over these back office processes. So the very first thing I did was develop some software to help manage all of the transactional activities, across clients. And, my background before I was in consulting, I was actually in the software business.

And I designed, developed, and implemented accounting and what’s known as enterprise resource planning or ERP software systems for companies. So I built this software and then we started to go to market with it. And we put out a website and put out some Google ads and just started to get people inquiring as to our services.

And so our very first client that we got was a company that found us on the web and we grew from there.

Anthony Codispoti (24:41.238)
Okay.

And how were the early days? Was it moving quickly? You know, was it kind of growing at a similar place to what the Deloitte spinoff was doing?

David Schnitt (24:53.605)
No, nowhere near. At the beginning, and if I look back, we were probably too early to market. And any good entrepreneur will tell you that timing is one of the most important things. And our timing was off in the sense that we were too early to market. And so I think the market looking back wasn’t quite ready for what we were offering at the time. And so it was very hard at the beginning to get new clients.

Anthony Codispoti (25:00.684)
Yeah.

David Schnitt (25:21.277)
I mean, we definitely got some and we definitely grew quickly, but not as quick as I had hoped. But the market eventually caught up with us. And so it all worked out fine in the end. we were pushing that rock uphill for quite a long time before it reached the peak and started going on its

Anthony Codispoti (25:33.57)
Mm-hmm. Mm-hmm.

Anthony Codispoti (25:49.078)
Yeah, it sounds like you were in the stage where not only did you have to convince a client why you would be the best ones to work with, but you just had to even educate them on what it is that you were doing. Because it was a completely new category of solution for folks.

David Schnitt (26:04.157)
Yeah, people really didn’t understand what outsourcing meant and why they needed to do it. You know, when we were able to speak with them about it, they understood better. There’s a lot of economies of scale in back office processes. And there’s actually a great graph on our website that shows that mid-sized companies will spend 60 % more than large ones as a percentage of revenue.

to handle back office functions. And not only that, they generally don’t have the same technology. They don’t have the right controls. They don’t have the right infrastructure. And so when you compare mid-size firms to large firms, and when I say large, I mean about 10 billion in revenue and above, it’s just night and day in terms of what they’re able to achieve. And so what…

we’ve always educated our clients on and prospective clients is, you can try and do all this stuff internally, but at the end of the day, why are you reinventing the wheel on something that everybody else does? And why aren’t you leveraging somebody that’s got the scale and the technology and the best practices and the experience who can do it? You know, the old old saying better, cheaper, faster.

and give you better control over all of this stuff than trying to do it yourself. So, you know, we’re very consultative with our clients and every client’s different. And so we’ll always tailor things to them. But, you know, once they understand the foundational understanding of the benefits of using a company like us, then they warm up to it and they get it. you know, we’ve been growing, you know,

since we started, but that growth has picked up steam over time.

Anthony Codispoti (28:03.278)
So help paint a picture. Somebody’s listening to this and they’re trying to wrap their heads around it. Maybe they’re a business owner that, you know, kind of fits that sweet spot of revenue. Well, actually, why don’t you explain what is sort of that sweet spot of revenue? Do you find that it’s a good customer fit for you?

David Schnitt (28:18.727)
So most of our clients, let me explain. We have two service lines in our business. One is our outsourced finance and accounting business. And so that is really, if you think about it, in most companies, they have an accounting department with a controller, and then that controller has a team of people. And so we do everything from the controller on down. That’s one piece of our business. The other piece of our business we call offsite office,

This is our staff augmentation division, and this is where we will provide somebody to work for the client, but they happen to be sitting in our office in Manila in the Philippines. So there are two different models depending on what a client wants to do. So if you take the outsourcing piece of the business, we do everything from a single process solution. So we might just do accounts payable, or we might do accounts receivable.

or payroll or things like that, or we might, you know, do everything under the controller. So we’ll produce financial statements and close the books and all those sorts of things. Those clients are generally between say a hundred million in revenue up to about five billion. That’s kind of our sweet spot. We don’t really work with too many small and medium sized businesses below that. And we don’t work with, you know, fortune 500 companies.

we’re really focused in the middle, which we consider to be the larger end of the middle market and the large company market. In our staff augmentation division, it’s really anything. And we’ve got clients of all sizes, from large public companies to small startups that we work with. So those are really the market segments that we serve.

Anthony Codispoti (30:12.27)
So for the market segment that is on the bigger side, 100 million to 5 billion, I think I heard you say, do they generally know what it is they’re trying to accomplish? And so you’re not having to provide them consulting services on here’s what you guys should be doing, more like what you did with Deloitte? Or are they looking for that kind of assistance as well? How do we level up our back end?

David Schnitt (30:13.553)
Thank you.

David Schnitt (30:18.387)
No.

David Schnitt (30:38.609)
Yeah, they’re definitely looking for some guidance on the best way to approach this. One of the big problems right now is that there’s just a huge lack of talent and people available to do this kind of work in the US. In the US and Canada, UK, Australia, all of those economies have been growing much faster than the availability of talent. So that talent shortage

has really driven a lot of problems for companies. And in fact, if you see a lot of public companies have been stating that they can’t get their financials done in time because they don’t have access to enough resources and talent to do it. So it’s become a huge problem. And some of the statistics are really interesting. There’s 200,000 fewer accounting grads every year than there used to be.

three quarters of all the CPAs are retiring in the next three to five years. So the problem is only getting worse. And so you’ve got issues where there’s a lack of talent, which is driving up the cost of people. You’ve got, because of all those things, there’s a lot more turnover and attrition. And here in the U S you know, most people will stay at a job one to two years now, whereas before they stayed a very long time.

And that turnover has a really significant impact because, you know, somebody’s learned everything and all the processes and all their systems and how to do it. And then they leave and that knowledge goes away. And then they got to get somebody in who’s new and they have to like learn all over again. And when we’ve modeled it, we found that people don’t really reach maximum productivity in any of these areas until they’ve been at a company for at least a year.

Anthony Codispoti (32:31.977)
Okay.

David Schnitt (32:32.847)
So you’ve all these things together have made it very difficult for companies to handle back office functions and accounting functions in particular in the U S. So those things have really driven, you know, our business as of late. but the other thing that’s also happening, which is really interesting is all of the technology. And if you think about AI and machine learning and things like that,

Companies are really at a loss to how do you deal with that? Is it usable? Is it not? How do we make it work? When we’ve gone into companies, we found that almost every single time when they’ve implemented some technology, they’ve had a negative ROI. And it’s almost every size company. So recently we were working with a billion dollar retailer.

Anthony Codispoti (33:22.893)
Really?

David Schnitt (33:32.517)
And they implemented a lot of technology. They re-engineered their processes for best practices. And yet their productivity went down by 50 % versus somebody doing the same thing manually. So, you know, it’s very difficult to leverage technology appropriately and get the benefits of that technology when it comes to back office functions. And it doesn’t matter if you’re a little company, you’re a larger company.

they all struggle with the same thing. And one of the things we say is, you know what? We’ve already figured this stuff out. We have all the processes, pre-designed. have all the best practices. We do all these things in a way for each industry. have basically process maps for every industry. And we’ve already layered on the technology that we’ve built that’s proprietary. So we’ve made sure it really makes us efficient and we’ve got the scale to be really efficient.

And so there’s no way anybody can compete with us in terms of efficiency, quality, cost, and so on. so typically, you know, a client will come in and we’ll save them about 50 % on average. And it’s, it ranges anywhere from 30 % to some clients over 80 % savings. But at the same time, we’re doing a higher quality job. We’re doing things faster. and you know, that’s, that’s the benefit.

Anthony Codispoti (34:51.448)
Wow.

David Schnitt (35:00.956)
that you were selling to that client.

Anthony Codispoti (35:02.968)
So this is important, David, because this, I don’t think I fully was wrapping my head around what it is that you guys do. I was thinking, okay, you’re finding probably providing some training to the folks that, know, are, being placed to help with these companies, but it goes way beyond just, recruiting, retaining, training folks. It’s also, you guys have this software, you have these processes that you can put in place that allow for.

David Schnitt (35:23.325)
Thank

Anthony Codispoti (35:33.346)
the people the staff augmentation that’s taking place to be so much more effective at what they’re doing because they’re not just I Don’t know. They’re not just sort of following the client and what the client thinks that they need done They’re they’re kind of going in there with With a game plan that that you guys have used and refined over the years. Is that a more accurate way to think about it?

David Schnitt (35:57.277)
For the outsourcing piece of our business, yes, that’s exactly what we do. For the staff augmentation piece, we’re really providing talent to those clients and then they’re supervising those folks directly. those technologies and those processes in that case, we don’t implement for those clients, but we’ve had plenty of clients who’ve started out doing staff augmentation and then they’ve said, hey, you know what, can you help us with this or help us with that? So, you know, that’s ended up.

you know going that way as well. really just depends on what the client wants and what their needs are.

Anthony Codispoti (36:32.47)
Is it possible to paint a clear picture on what the elevated service is, where they get the processes, where they get the technology, kind of help the layman sort of appreciate more what it is that you guys are delivering?

David Schnitt (36:48.007)
Sure. I mean, I’ll give an example of let’s say the accounts payable process, right? Every company pays bills. Right? So that is actually one of the most complex, if not the most complex process in the back office. Why? Because every bill that comes in, it has to be coded. Somebody has to approve it or it has to be matched to a purchase order and a receipt.

in their accounting system and inevitably when it doesn’t match, there’s a lot of exceptions. About 30 % of all the invoices that come in don’t match the PO and the receipt and those exceptions have to be dealt with one way or the other. And so because of that, there’s a huge amount of complexity and cost associated with managing accounts payable for companies. The larger they are, generally speaking,

the more invoices they have and the more complex it is. And so what we do when we come in is we look at their existing process, we assess it, we do a gap analysis between what they’re doing and our best practice processes, which are enabled by technology that we have. And we tell the client, okay, you’re doing this. We typically do this. Here are the things that we think.

you should start doing to improve your processes in terms of efficiency, management controls, internal controls, know, saving people time and so on. And we talked to clients about that. That’s a free assessment that we do. And then once they say yes, then we implement them in our environment. And we’re able to, as I said, take a

a best practice way of doing things and using our technology, which is layered on top of that. And our teams, which are offshore, which obviously there’s some labor arbitrage that’s there, but actually most of the savings company get and most of the benefits they get are really coming because there’s a better process and there’s better technology. And they didn’t have to spend their time sort of figuring all this stuff out because we’ve already figured it out for them. And we’ve got it working at scale.

David Schnitt (39:13.949)
so that’s essentially a good example of, you know, a process that frankly, you know, my feeling is nobody should try and do this themselves. Why bother? It doesn’t make a lot of sense to reinvent the wheel and figure all this stuff out when somebody’s already figured it out and they’re doing it at a fraction of the cost. that, you know, that a company, you know, is typically spending on it. And like I said,

Most companies save 50 % on average and some have saved a lot more. So why do it? It just doesn’t make a lot of sense.

Anthony Codispoti (39:44.76)
That’s insane.

Anthony Codispoti (39:49.474)
hire the experts who have already figured it out, they’ve got the software, they’ve got the processes. You’ve done it for years for, I don’t know, dozens or hundreds of clients perhaps? Okay.

David Schnitt (39:59.879)
Yeah, hundreds. You know, it’s sort of like, would you build your own phone system in house? No. Would you build your own zoom technology to have webinars and meetings? No. You know, why is this any different? It’s really no different.

Anthony Codispoti (40:17.802)
That’s a great comparison.

Now, when companies engage with you to do that, do they have to replace their tech stack with yours or can you layer on top of what they’re already using and integrate?

David Schnitt (40:32.411)
Yeah, we’re completely system agnostic. So our technology and our process layers on top of whatever they already have. So we’ve got clients that are on SAP and Oracle to QuickBooks and everything in between. So it doesn’t really matter what they have. We’ve designed it to work seamlessly with them.

Anthony Codispoti (40:52.962)
How do you find and train your team members?

David Schnitt (40:56.581)
So that’s really important in what we do. So part of what we do that makes us successful is we have very deep documentation on our processes and they’re driven by what we call business rules. So if you think about somebody performing one of these activities in their mind, they are executing a set of business rules. So they’re saying,

And to use an AP example again, which is a very common example. it’s this vendor. So I need to code an invoice this way, or I need to make sure that this person approves it. Or I need to format the invoice number in a certain way in the system. So when the vendor gets it, they can apply the cash properly and I won’t have a problem. They won’t cut me off because they goofed up something on there. So there are all of these rules that people have.

When we start with a client and we put a rule book together, it’s often in excess of a thousand pages. We go very deep into those rules because a lot of them are automated within our technology. And so we have to know exactly all of those specific rules. Now, a lot of them are common across clients, but a lot of them are specific to clients. So for example, every client codes their invoices in a different way. And so.

We have to make sure that we are accommodating all of our clients specific needs. Usually in the U S if I go and I meet somebody who’s doing that, they, basically have a bunch of stickies on their monitor and that’s their rules and the rest of it’s kind of in their head. Right? So we go way, way, way deeper in terms of codifying these things because a we’re automating a lot of it and B we want to make sure that we’re doing it right. And so.

When we do that, then that leads into making sure we’ve got people. So we’re recruiting people who can follow those processes to the letter and not waiver. We don’t want people taking shortcuts or saying, I can do it this way. I can do it that way. There are folks that need to follow the process and make sure that our quality is about as perfect as it can possibly be. So recruiting is a very, very important part of what we do.

David Schnitt (43:23.453)
And fortunately, because we are offshore, because we have offices in Chennai, India and Manila in the Philippines, we’re able to find some absolutely fantastic talent that’s there. You just can’t find a lot of good people to do that kind of stuff in the US anymore. They don’t exist. And so that really gives us a leg up versus, you know, anybody trying to do it internally.

Anthony Codispoti (43:49.57)
You know, for my own businesses in the past, been big on developing SOP standard operating procedures. you know, I’ve often coached my team. Hey, if you get to a point in that SOP and you’ve got a question, that’s great. Ask the question, but it’s a sign that, you know, that SOP is not complete, you know, and it can be refined. And so once you get the answer to that question, add onto the SOP, some people take to that process very naturally. They’re very appreciative of it. They like having sort of this.

David Schnitt (44:08.55)
Exactly.

Anthony Codispoti (44:19.086)
there’s rule-based structure in place. But there were some folks that, man, it was like, I don’t know, pulling teeth to try to get them to adhere to that process of using our processes. I’m wondering how you deal with that. It sounds like at least part of it is because some of these SOPs are encoded in the software. So the software is doing it. You’re not relying on a person, but certainly there are times when you’ve got to make sure that the person’s doing their step the way they’re supposed to.

David Schnitt (44:49.393)
Yeah, exactly. That’s definitely part of it. But I would say also the fact that we’re most of our folks are overseas. Those folks in those countries tend to prefer to follow an SOP versus winging it. And, you know, I would say generally speaking, a lot of us as Americans, you know, and I’m a good example, right? I never read an instruction manual.

Right. I just go and I do something and I just figure it out and I wing it. Right. And a lot of people are like that here. Right. And we don’t want that structure. We don’t like that. But overseas people love that structure. They want that structure. It’s a cultural thing. Exactly. And so because of that we’re able to execute at a much higher level of quality. You we have we have ninety nine point nine seven percent quality in what we do.

Anthony Codispoti (45:32.396)
It’s a cultural difference.

David Schnitt (45:45.789)
And if you take an AP department as an example in the US it’s about 98 % so you’ve got 2 % errors Well 2 % errors doesn’t sound like a lot But if you get the amount wrong on a check that’s going to a vendor that could cost you a lot of money right and So those errors add up and they become big problems potentially for companies and so having that kind of quality

you know, for our clients really helps them, you know, get better control on what’s going on and just an overall better.

Anthony Codispoti (46:22.38)
You mentioned your quality is 99.97%. How is that measured? What does that actually mean?

David Schnitt (46:29.585)
That’s the number of errors divided by the number of transactions processed. So if you look at it another way, which is in terms of all of the opportunities for error. So let’s say to use an accounts payable example again, if you’ve got an invoice, there’s a lot of fields that need to get into an accounting system. There’s a lot of characters associated with that. Every character is an opportunity for an error.

Anthony Codispoti (46:33.559)
Okay.

David Schnitt (46:58.589)
So if you divided it by the total number of characters where you could make an error, either somebody entering or processing something and following a rule, we’re probably more like Six Sigma quality, which is, know, kind of Nirvana for a manufacturing environment. And we do try and manage our, our business like we’re a manufacturer. We’re very focused on quality controls, metrics.

things like that, when we go into a client and we ask them for some of the metrics, invariably they don’t have it. And in fact, often they don’t even know their volume of things that they’re processing. So we’re able to really give them some metrics that they just didn’t have before and help them really understand what’s going on with their processes.

Anthony Codispoti (47:53.996)
I’m looking at your website here, which the name is exactly what it should be, IQBackOffice.com. And I’m seeing a stat on here that’s almost unbelievable. $6 billion in duplicate transactions.

David Schnitt (48:01.405)
you

David Schnitt (48:11.131)
That’s old actually. It’s gone up to 13 billion. We haven’t had a chance to update it on the site. But yeah, I mean, one of the interesting things is there is a huge amount of duplication of transactions that occur with back office processes. it used to be, again, to use an AP example, because everybody’s familiar with that. It used to be in the old days that

Anthony Codispoti (48:14.35)
Ha

David Schnitt (48:38.301)
You know, if I was going to send you a bill, I’d print it. I’d stick it in an envelope, slap on a stamp and send it. Right. And so when that happened, you know, I was very judicious to make sure that I didn’t send that same bill, you know, too often. Right. Well, fast forward to today, the amount of mail we get has dwindled. Most things come in via email or some sort of electronic file. And what we find is the number of duplicate transactions.

companies are sending to one another has skyrocketed. And it’s not uncommon. find either 15 % or sometimes even 20 % of all transactions are duplicated. Because my cost of sending you the same thing multiple times is effectively zero, right? It comes out of my system. So I don’t care, right? But you care because you have to look at each one and figure out.

Anthony Codispoti (49:28.715)
Mm-hmm.

David Schnitt (49:36.761)
Is this a new thing? Is it a duplicate thing? If it’s a duplicate thing, you have to cancel it. Right. so all of that noise has really created a lot more opportunity for companies to pay things twice, to make errors, things like that. So we’ve invested a lot of money in controls to make sure that we catch those things at the source. And these days with our software, most things come in.

It’s read by a computer, read by an algorithm. The algorithm looks at it and if it sees it’s a duplicate, cancels it and it goes no further in the process and we don’t even have to touch it in most cases. So that’s just some of the things that we try to do to make us efficient and to make sure that we’re not processing the same thing multiple times for our clients.

Anthony Codispoti (50:27.636)
What you’re describing David sounds pretty incredible as I’m sort of thinking through the logistics of how the interaction between clients here in the States and you the your overseas team might work. One thing that I don’t know concerns me a little bit is the time difference. Like how do you account for that? Are they working, you know, when I’m sleeping or how does that work out?

David Schnitt (50:53.095)
So it depends on what the client needs and what they want. For the most part, a lot of our folks will work US hours. But there’s also a lot that we have either on multiple shifts or they work during daytime hours offshore. So there is some value in, I come to work in the morning and all the stuff got processed the night before, right? That’s sort of one advantage.

Anthony Codispoti (51:01.069)
Hmm.

David Schnitt (51:20.017)
But there’s also an advantage to have people doing stuff real time and dealing with issues. Certainly when we take phone calls or answer emails from our clients, vendors and customers and other parties, we’re going to work US hours. But again, it really just depends on the client’s needs. We’re a 24 by 7 shop for the most part. So things are getting processed all the time.

Anthony Codispoti (51:44.202)
Okay, so you’ve got flexibility, you can meet the client where they need to be, whether they need somebody that’s working their hours, so they have that sort of real time dialogue back and forth, or somebody who’s like, Hey, I don’t need that. I would love to wake up in the morning and have you know, what I sent in the night before just be, you know, sitting there ready and waiting for

David Schnitt (52:02.161)
Yeah, that’s right. And in our staff augmentation division, usually the folks there will work for the client during US hours, whether they’re East Coast, West Coast, whatever, it’s totally up to the client as to what hours they want them to

Anthony Codispoti (52:16.948)
And on the outsourcing side, the internet connection is good so we can have a quality Zoom call or upload large files back and forth. There’s no issue with the tech stack there.

David Schnitt (52:28.271)
No, in fact, you know, especially these days, everything’s in the cloud. so our folks will access our clients, you know, software directly. We use, you know, Google Drive for a lot of things. All of our phone system and all of our video calls are on a cloud-based system. So really everything’s in the cloud and everything’s secure.

All of the data that our clients have is domestic. So none of it is like going overseas, so to speak. It’s all remains here and people are just accessing it remotely. yeah, bandwidth is fine.

Anthony Codispoti (53:07.502)
So secure folders, everything’s locked down, clients don’t need to worry about what’s going on with their data.

David Schnitt (53:15.377)
Yeah, yeah. Everything’s, know, locked down, secure VPNs if they need it. So, you know, we have a lot of large public companies as clients. So you can imagine the security that they have that we have to meet and we have to support. You know, we do that every day.

Anthony Codispoti (53:35.085)
So as I think about growth for a company like yours, David, I imagine, of course, you’re trying to find new customers that are a good fit for the services that you offer. Do you also think about trying to expand the types of services that you can provide? Or do you feel like you’ve got a pretty good suite of things to provide to clients as it is now?

David Schnitt (53:58.295)
I think there’s really two things. So we are trying to grow in multiple ways. So one is if you look at, the outsourcing business in and of itself, still today, you know, the vast majority of companies do these things internally. So that opportunity for us is still enormous and most companies are still reinventing the wheel, trying to figure that stuff out themselves and spending too much time and money doing it. So that, that opportunity is still there.

At the same time, there are other areas that we’ve expanded into. So for some clients, we manage all the orders from their customers. We’ve set up HR call centers for clients. We have gone into other industries where we do a lot of work within those industries, very specialized processes that we’ve set up for them. One of our clients, we were doing some billing work for, and they came to us and said,

You know, we have all these people sitting here in our office and you guys have done such a really good job on the billing side with all the process thought and the process re-engineering and the quality and the controls that you’ve put in place. We’d like you to do the same thing with this other process. And so we took that on for that client and we’ve been doing it now for years. We’ve got about 50 people sitting in our menial office, handling that process for that client.

And it’s worked out really well. So we’ve opportunistically looked at expanding into other non accounting and finance areas, typically, which are back office related areas. But then in terms of our staff augmentation division, you know, that’s really grown very quickly. That’s actually one of the fastest growing parts of our business right now. And clients are asking our folks to do everything from, you know, our core accounting related stuff to.

You know, admins and marketing people and IT developers and call center people and you name it. So we’ve been expanding into all sorts of areas that clients are trying to find some good talent.

Anthony Codispoti (56:13.238)
And so like the one client that you mentioned that first came to you with something that was kind of outside the accounting and finance realm. Once you guys took that on and whatever that function, that service was that you were helping them to build a new outsource process for, did you then say, hey, we now know how to do X, let’s put that into our quiver and go out and mass market that to all of our existing customers.

David Schnitt (56:40.425)
in general, yes, we do that in that particular case. It was actually a very specialized thing for them and for their industry. they have a very unique solution, in their industry. And so we built a specific process for them, but in general, yes. if you take order management, which means taking in orders from customers and processing them, you know, that is something that.

We had one client ask us to start to do, and then we started letting our other clients know about it because that’s another area that’s kind of untapped that a lot of clients are struggling to find good people to do that work as well. yeah, it’s also complex and there’s a lot of opportunity for improvement.

Anthony Codispoti (57:26.626)
What have you found has been the most effective way to get in front of your target clients and be able to explain to them what it is that you’re doing and why it’s better than the way that they’re doing now?

David Schnitt (57:36.925)
So we have a number of different avenues that we use to try and find new clients. Our biggest source of new clients is actually referral. So as I mentioned earlier, a CFO at a client will leave, they’ll go to another company and invariably we’re one of the first phone calls they make because they’ll go in and they’ll say, you know what? This is all a mess, right? You know, everything was working well with you guys. Everything was stable. I need help to get this all cleaned up.

And, you know, to get it operating as optimally as possible. And I’d like to save some money too, by the way. So that’s the biggest source of our new business. But we also have clients that we meet at trade shows, web ads, you know, different things like that. So we actually have some new marketing initiatives we’re undertaking right now. But, you know, for the most part, you know, you don’t know who

is interested in our kinds of services. So marketing is a little bit difficult. So traditionally word of mouth and things like that have been the way that we’ve grown the business over time. We’re trying to get away from that so we can grow even faster.

Anthony Codispoti (58:51.974)
I mean, it says a lot about the quality of your work if the majority of your business, new business at this point is coming from referrals. But I also, hear what you’re saying about the marketing is a little bit difficult because so many different types of businesses are your potential clients. In fact, people who don’t understand marketing or haven’t been through it before, sometimes that specificity really helps. You know what

you know exactly what trade show you should be in. You know what trade journal you should be advertising in. You know who you should be targeting with your advertising. But the services that you provide are helpful and useful for just about everybody. So you’re kind of taking a shotgun to a wall.

David Schnitt (59:31.515)
Yeah, that’s right. Yeah, exactly. And you know, I went to business school and when I learned in business school was if you’re doing marketing, you want to take a rifle and shoot at something and hit it, right? You don’t want to take a shotgun and hope you hit something, right? So it makes it difficult for us. And as well, you know, there still are plenty of companies that don’t want to outsource. They feel like they have to keep that internally for various reasons. And that’s fine. So.

they can use our staff augmentation division because as I said, increasingly they’re under tremendous pressure because they just can’t find the talent to do that work. So whichever way they wanna do it, we’re fine to support them and help them achieve their goals.

Anthony Codispoti (01:00:17.998)
We’re not quite at the end of the interview, but I did promise folks if they stayed towards the end that they would be able to find out about the free process benchmarking that you offer. Can you explain first what that is and then how folks can take advantage of

David Schnitt (01:00:33.767)
Sure. So as I mentioned earlier, when we start working with a client, we try to get an understanding of their existing processes. So as part of our solution, and this is true of any client, we will come in and we will look at one or more processes that you have and give you a free assessment. And so what we do is we try and put some metrics around it. What’s the volume?

What’s the cost? How long does it take? Timeliness. What’s the quality of it? What’s the impact on other areas of the business? And so to use an accounts payable example, again, we can come in and we can look and we’ll say, okay, you your cost per invoice is X. You’re spending, you know, two X or three times what you should be spending. And by the way, here are all the issues that we’re seeing.

You know, things aren’t getting approved properly. Things are taking too long. Vendors are mad at you. You know, all of the other things that we see that are potential problems. So we do that. Obviously that helps us with a client because they’ll look and say, okay, well, maybe we should use IQ to do this stuff. That’s possible, but that’s really the first part of our process. And we’re happy to do that. It only takes a few hours.

of our clients time to give us the information that we need. And we can do an assessment pretty quickly.

Anthony Codispoti (01:02:10.134)
And so how would somebody raise their hand and say, yes, please.

David Schnitt (01:02:14.865)
They can just go to our website IQBackoffice.com and there is a form that generally pops up or you can do contact us and just let us know and we’ll get in touch with you right away and see if we can put an assessment together for you.

Anthony Codispoti (01:02:32.174)
So I’ve just got one more question for you, David, but before I ask it, I want to do two things. Actually, one of those things you just did, let people know the best way to get in touch with you. Is that how you would prefer people to reach out?

David Schnitt (01:02:43.803)
Yeah, going to our website is the best thing. We’ve got forms you can fill out. We’ve got a contact us page. So all of those are great ways to get in touch with us.

Anthony Codispoti (01:02:54.294)
Okay. Also for those listening, if you enjoy today’s content, please hit the like, share, subscribe button and your favorite podcast app. And David, last question I have for you today. I’d like to hear about maybe a particular challenge that you’ve gone through. Personal, professional combination of the two, what you learned coming through the other side of something.

David Schnitt (01:03:15.645)
So I alluded to this at the beginning, which was that when we started the business, was difficult. We were pushing a rock uphill. But at the time, back in 2002, the idea of outsourcing, the idea of having work done overseas was still a very foreign, no pun intended, concept for companies. And so it was really hard to get new clients at the beginning. And we did grow fairly quickly.

But we still had a lot of struggles. would say, you know, probably 80 or 90 % of the companies we talked to, you know, just the whole idea was very foreign to them. They didn’t know what to make of it. They didn’t think it applied to them. and so that was really difficult at the beginning. And there are many times when I said, you know what, I’m not sure this is working, you know, should I continue with this? But, I persevered and.

I think for any entrepreneur, if you think you’ve got a great idea and you think it’s something that adds a lot of value as we think what we do does, persevering is very important, not just giving up. And a lot of people talk about entrepreneurs pivoting, which is fine. That’s changing your solution to better fit the market. But from the get-go, our solution was a really good one for the market.

But there was a lot of education that needed to be done. And that took time and it took effort. you know, as I said, eventually we persevered and did well. But it was a struggle at the beginning. Absolutely. For years.

Anthony Codispoti (01:04:57.548)
Yeah. And I have to imagine David, that would be even more difficult for someone like you who had just come from such a successful venture that grew so quickly and reached just incredible heights, know, super successful IPO, not as good as it gets. And now you start this new idea and you’re all excited about it. You’ve connected the dots. You see that there’s, there’s a need for this, but clients keep telling you over and over again. I don’t get it. for me. And so.

I mean, it’s one thing to kind of look in the rear view mirror now and be like, yeah, like it’s good that we persevered. I’m glad we stuck with it. Like clearly people are more informed about it now and the rocks rolling down the hill. But in that moment, you know, when you’re knocking on all these doors and they keep getting shut, you know, what is it inside of you that drives you to keep moving forward?

David Schnitt (01:05:50.961)
Well, what drove me was the fact that I knew the numbers. I knew that we can do these things better and we can do it at a lower cost and we have very happy clients. So that told me that, you know, the market is there and the opportunity is there. And as long as we have a lot of clients who are very happy with our services and we’ve got some clients that have been with us for over 15 years. So.

those clients keep telling me, hey, you guys are doing a great job. We’re very happy with you. And so we’ve got one client like that. know there are hundreds of thousands of other ones that are out there that can also benefit from it. And so that’s what kept me going.

Anthony Codispoti (01:06:37.486)
All right. David, I want to be the first to thank you for sharing both your time and your story with us today. I’m grateful for.

David Schnitt (01:06:45.553)
Thank you, I appreciate the time. Thank you very much.

Anthony Codispoti (01:06:48.322)
Folks, that’s a wrap on another episode of the Inspired Stories podcast. Thanks for learning with us today.