innovation insights: how trullion is trying to revolutionize rev. rec. and lease accounting.
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innovation insights
with donny shimamoto
center for accounting transformation
accounting, along with legal, pioneered technology that continues to grow and allows automation of mundane tasks. isaac heller, the co-founder and ceo of trullion, discusses with donny shimamoto how ai uses optical character recognition (ocr) and natural language procession (nlp) to read documents like pdfs and excel, and extracts relevant data, like lease dates, into databases, where they can be used for computations or searching.
more on trullion: trullion lands $15 million in series a | trullion: new a.i. startup targets rev rec, lease accounting
more on lease accounting: lease accounting hits hard | lease accounting is about to get very real
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heller and shimamoto discuss the origins of professional technology, sharing how accounting was the perfect breeding ground for database software. “when you think of oracle and sap and intuit going way back, these were really the pioneers of database software,” heller says. “it’s as simple as that, you know, the general ledger and the accounts payable and accounts receivable framework fits really, really well in a software model. so, there was kind of this jump out of the gate where we were able to do so much in accounting.”
more takeaways:
- because you’re starting with the source document (e.g. pdf, excel) and extracting the data from there to then put the data into the system, you can trace data back all the way to source document all within the same system (not just to the point where someone keyed the data into the system).
heller - the goal isn’t for the machines (ai) to do everything, it’s for it to instead complete 70-80% of the grunt work and allow the accountant or auditor to focus on the analytics and strategic work.
- small and regional firms can gain an advantage by partnering with accounting technology vendors that enable them to innovate and incorporate technology into their services more quickly than the larger firms.
about isaac heller
isaac heller is the co-founder and ceo of trullion, an ai-powered saas platform that automates financial workflows for cfos, accountants, and auditors. trullion unifies the unstructured and structured worlds of accounting by reading pdfs and excel and translating them into financial workflows, such as lease accounting and revenue recognition.
isaac has an extensive background in finance & software, including a 2014 ipo with sabre holdings. his experience with accounting regulatory changes has helped drive successful partnerships with financial leaders, from cfos to modern accounting firms.
originally hailing from texas, isaac holds a ba and mba from the university of texas. he lives between new york and israel and enjoys spending time with his wife and daughters. he can be reached at isaac@trullion.com.
transcript
(transcripts are made available as soon as possible. they are not fully edited for grammar or spelling.)
donny shimamoto 00:12
welcome, everyone to innovation insights. i’m your host, donny shimamoto. i’m the inspiration architect for the center for accounting transformation. during these episodes, we’ll visit with a variety of people who could share with us ideas, information technology and business practices that are accelerating innovation and transforming the accounting profession. today, i’m joined by isaac keller, co-founder and ceo of trullion, software built using artificial intelligence to help accountants with implementing the leasing standard changes. welcome, isaac. and since your company is a bit of a niche player, and a lot of people may not know about you guys, can you tell us a little bit more about your company and what your product does?
isaac keller 00:56
yeah, definitely. well, well, first of all, donny, it’s great to see you love what you guys are doing and really appreciate you having me and us on. the us is trullion. we’re an accounting software company. our goal is to make accounting easier, more accurate and more transparent. one of the things we do, as we mentioned, is help automate a workflow run the new lease accounting standard. what’s unique about trullion is we start with the source data. so, we can use ai to extract pdf and excel data, you know, really just like read a document. it’s pretty cool and do the accounting workflow. why that’s valuable is not just because it saves time, but also auditors and controllers can work together when you have the source data in one single workflow. so, we did this with leases, revenue recognition, and a lot of other cool areas of accounting.
donny shimamoto 01:54
oh cool. that’s… i know, i know you had mentioned before that you guys are going into rev rec. i didn’t see it on your website yet. but that’s exciting to see that that’s already coming in. and congratulations. i also saw that you guys had raised was it 15 million in your series a back in february? and that? i think that sounds like a lot, isn’t it for just kind of that starting out there?
isaac keller 02:18
yeah, well, let’s all be real, you know, that’s a lot of money for anyone, right? we’re very, very grateful. there’s definitely been a lot more capital coming into early-stage companies, and specifically software as a service, which is what we do. but at the at the same time, we got that, that financing, because we’ve demonstrated, you know, a really cool product market fit and an extremely happy customer base. so, the 15 million was led by alife, a very, very good venture capital firm that’s done a lot of companies like melio, which is very big in the accounting industry now, and lemonade, which is an insurance company. and it was co-led by third point, which is actually a hedge fund, very well-known hedge fund. but you’ll see a theme of a lot of institutional investors, hedge funds and private equity investing in earlier-stage companies, especially in areas like accounting. so, we’re very excited for that round.
donny shimamoto 03:24
you know, you say that, and that, that really, that is exciting. i you know, i know you don’t hear it in my voice. but i’m kind of thinking through that. and i think, i feel like one of the ways that in accounting, we’ve sort of been forgotten. and i think back to the first kind of dot com boom or bust, however you look at it, you know, there wasn’t a lot that was in our space. but now in this set, we’re seeing it not just you guys, but a bunch, like you mentioned other software, accounting software products that are really getting invested in, so it’s actually really cool, as i think about it, that this is finally turning around, say 20 years later, after the dot com bust that accounting is getting the attention in this area.
isaac keller 04:09
totally. well, donny, a lot of people forget, maybe even some accountants, that the accountants were the pioneers of, you know, business technology, what we call b2b technology, meaning when you think of oracle and sap and intuit going way back, these were really the pioneers of database software. it’s as simple as that, you know, the general ledger and the accounts payable and accounts receivable framework fits really, really well in a software model. so, there was kind of this jump out of the gate where we were able to do so much in accounting, then like you said, there’s been a lull and now coming back. that’s driven by a lot of things. we could talk about it, but i definitely think there’s this revival and excitement around. oh, hey, hittup, we’re actually tech forward. by the way, excel is a pretty cool piece of technology too. yeah. and there’s a lot of software, as well, coming out. so, it’s exciting for all of us.
donny shimamoto 05:10
you know, what you just said also makes me think, too, how you said, like database and all this stuff. and i don’t… i think as accountants, we often forget that there are these underlying technologies that are the standard it pieces of it. and what really has happened is that there’s been good developers, good teams, like your team, that’s putting this, what we call the user interface layer, but it’s really the screens and things that they interact with that is, in effect, making the technology useful or usable, and useful for them. and i feel, so your company, trullion, really does this with artificial intelligence. can you kind of help demystify, you know, because one thing that i want a lot of our listeners to hear is i think people think like, okay, artificial intelligence, machine learning, whatever it is, i have to go and learn about it. and then like excel, i have to use it as a tool as part of what i do. but it’s really where these things, like the database technologies you mentioned, they’re actually underlying the actual accounting application. so, can you share with us a little bit of how you guys take like ocr, and nlp and these other acronyms, and maybe tell us what the acronyms mean, and how they fit into what you guys, the software that you provide?
isaac keller 06:28
yeah, absolutely. so, let’s first let’s demystify a bit and connect some dots. i would, i would think of accounting technology in three waves. the first wave is the database era, right? where we had this new, you know, on prem database concept of the gl, ap ar, the second wave, i would call cloud-powered, right? when we could really get quickbooks, you know, on the cloud, and gusto and all these cool apps could come out, which would allow us to deploy technology a lot more quickly with our clients. the third wave is ai-powered. now, the cloud-based concept doesn’t change, we still have that as the database. but if you think about the accounting and audit world, the stuff that’s been happening outside of the database, right, that’s unstructured data and activity, that could be emails, that could be board meeting notes, that could be pdfs, that could be documents, all of these things are very, very valuable for accurate accounting, and accurate auditing. so, what trullion does is we use ai to read things like documents and excel and then connect them with the cloud database, which can help produce journal entries and disclosures. okay, so let’s now zoom in on the ai component. ai is a is a big cool catchphrase. but it starts with some pretty common fundamentals. one of them is ocr, which you mentioned. ocr is optical character recognition. ocr has been around a long time. it’s like basically converting an image. so, an invoice is actually an image, and ocr has to convert it into text or numbers so that we can interpret it. so that’s layer one in our stack, i would say layer two is what’s called nlp, right? so natural language processing, where you’re actually taking that text, which has been ocr, so converted from an edge to text. and then the nlp is saying, well, hey, based on what we’ve seen in thousands, or hundreds of thousands of other documents, this looks like a start date. this looks like an end date. this looks like a payment. this looks like an option. this looks like a clause. all of these things are all part of the ai package. and, you know, the more it learns, and the more it trains, the more accurate it can get. but i think one of the coolest things is just the fact that you have pdfs and invoices and stuff within a workflow, which means you can connect the source data into the workflow, which takes your audit trail from an audit log, which has “oh, donny logged in on this date and pushed a few buttons” to a real 360 audit trail where it’s like taking you like you’re in a parachute or like a time machine taking you back to the source pdf. so those are some a little a few aspects of ai.
donny shimamoto 09:38
i like that. so that and the other thing that you just mentioned that i think is super important, especially when we look in the audit areas, is this whole traceability. i talk about it as source traceability, and previously there would be a break in it because it would be the auditor or, even if we look at the finance side, it’s some type of accounting clerk or the comptroller, whoever that’s looking at this document, reading it, and then saying, okay, on some type of work paper on page 11 of the contract clause and whatever, it has this option. and instead, if i remember your system, i actually see the pdf, the image of the pdf, and it’s tagged. and i say, well show me where this is. and you bring up the pdf, and you show me that it’s right there. am i remembering that right?
isaac keller 10:23
yeah, totally. it’s like you go to the software store and you get a two-for-one with a little bit of dropbox and a little bit of workflow, but together, you know, in one, and, you know, it’s totally exciting. look, i think, i think the traceability is a big deal, right? especially as we get into more audited, and you know, audit rigor. and going back to your point about demystifying. let’s all remember that we have to live in a sampling world right now, you know? i know, that’s the common methodology. and i know it works great. but as new regulations come in, and as business models evolve in complexity, and as we have just general challenges around hiring, or retaining, or whatever it is, technology can actually, really, really help bridge the gap there. and i think, i think one thing that we forget about is, the profession can actually become stronger and move from sampling to full coverage, real time audit. so, when you say things like traceability, that’s, that’s the exciting part. it’s not about reducing, you know, work, it’s about expanding the coverage of the audit.
donny shimamoto 11:43
i think that’s so important. and i feel like we’ve had audit tools since maybe even the 90s, like these data analysis type tools, and maybe they weren’t as powerful. but i definitely agree with you. like, i’ve often asked myself, “well, why aren’t people going to more 100% testing?” and we’ve seen other tools that leverage artificial intelligence come in and start to look at that, but i think we’re you guys actually really break–i was going to say, break the mold–but where you guys are really different compared to those tools is that you’re actually going against the documents. so, whether it’s the lease documents, or the revenue recognition documents, right, that or contracts actually is really what that is, contracts, that you’re able to kind of pull this information out for us. how that that then makes me worried, like, how do i know the machine’s getting everything? you guys have a way to address that type of a concern?
isaac keller 12:40
yeah, definitely. well, let me let me break the secret, the machine’s not getting everything. and, and that’s not the goal. right. so, the goal, again, you know, you mentioned there’s been a lot of players that have come up, i do think there was this wave, let’s call it i don’t know, five to 10 years ago, where there was a genuine fear that ai could kind of conquer a lot of the tasks that are being done. and i actually think that some of the early players marketed that way. okay, the way that trullion thinks of the world–look, we’re a lot of former controllers and auditors ourselves–we believe that ai can unlock 70 to 80% of let’s say, the pdf, right? so, it can help you with 70, 80% of the things you need to do. the other 20 to 30% is still on you. it’s within a workflow. now, like you said that the pdf is in a container that’s right next to you. and it has these beautiful colored highlights that tell you, “hey, these are financial terms.” “hey, these are start dates,” right? that’s super accurate. but it’s not telling you “what’s the start date?” “what’s the end date?” it’s allowing you to select it. so, i think that’s the way to think about ai, is, you know, some people call it grunt work, right? there’s a lot of that going on. and if the ai can help you with that piece, put you in the strategic layer. that’s really the value proposition and that’s how trullion does it. it’s not 100%. it’s never going to be 100%. by the way, donny we still don’t have our autonomous driving, you know? people have been talking about that forever. i think it was supposed to be like 2020. but, you know, you still got to get behind the wheel of a tesla and stuff. so that’s kind of the way ai goes. it ends up being like a really cool car with some good features, lane assist, but it ain’t a robot taking over the world.
donny shimamoto 14:44
i think you hit on some really key things that it’s really important for people to realize, too, is that these are not things that are going to replace us. that was definitely a message i was trying to help combat for the last five years. and, well, and i always say if you’re truly operating at the accountant level, not at the accounting clerk level, that it’s not going to replace us because… what it does is it shifts, i always think of it as that as a pyramid, where today we spend 80% of our time doing that grunt work that you mentioned. and what we should do is flip that so that ai will take care of take care of the bulk of that and reduce it to the 20% that we have to manually review or go through the highlights and tag it, make sure it’s tagged correctly. and then we can spend the rest of the time doing the analysis and understanding what the implications of this are, right, and applying that judgment, which, again, for us as accountants, it’s this professional judgment that we employ of how should this truly be worked? or what is the correct interpretation or application of a standard to this? that’s really the power. and that’s probably why most of us became accountants rather than to sit there and manually go through page by page. and oh, there’s a date, let me highlight that. and let me put a tab on it. right? that’s, that’s really what you guys were replacing? and i don’t think any of us enjoyed that.
isaac keller 16:07
yeah, totally. and look, we, you know, we’re not we’re not coming here with a with a hubris to the market, right? we’re, we’re, we’re a group of technologists and product experts and accountants who love the industry and have been working and tinkering at this a long time. and we constantly hear demand and needs from our customers. so, we, we kind of build along with them. so, there’s a huge kind of, it’s gone from what you see as the early adopters to kind of the fast followers or, as wave of firms and controllers that are really hungry for this. and, you know, if you think about the broader industry, a good thing, i think, is always to take an analogy to a similar industry. let’s take legal profession, right, very services oriented. and ediscovery was a huge trend, you know, 10 years ago in legal discovery–ediscovery is basically ai where you can do massive documents search and look for critical data. so, think about going from binders and looking at precedents in cases to go into ediscovery. and it was scary at first. i don’t know if you’ve looked at law firms lately, but rates are going up. business is good. and a lot of the firms that are leading the pack are some of the early adopters of ediscovery technology. so, it’s really been a powerful engine for the industry. it to your point, it definitely impacted the paralegal work. but at the same time, there are paralegals that are experts in the ediscovery process now, right, and technology is a big part of their job. so, i see the same thing. i see this as a huge boost once it gets more adoption in our industry.
donny shimamoto 17:56
i didn’t… i hadn’t thought about that, either. so, this is where, in accounting, we’re not necessarily the pioneer of this. it really legal because i also think of like, was it kira systems, i think was the original one? we saw a lot of activity around. and that was one to where i looked at it and i said, “hmm, is this something that i want to help figure out on how we would apply it into accounting,” and i’m glad i never had time, because what you guys have done, i think is pretty amazing in bringing all that together in the context without people having to kind of customize and finagle that to get there. so, even the whole nlp around these contracts and stuff, it’s even more mature, because legal has, in a lot of ways, paved the way for us.
isaac keller 18:39
yeah, definitely. and look, i mean, kira is a really interesting point. so, kira is a technology company that used ai to do contract review. and it was founded by a lawyer and had a really, really strong legal dna and towards… they ended up… they were acquired recently. but as they matured, and they needed to grow, they expanded into the accounting industry. right? and so, you saw them popping up in the accounting industry. now, i don’t know exactly how it went. but i don’t think it was a homerun. and i think if you think about the accounting industry, it’s really, really specialized and has very, very, like mission critical needs that are important to the accounting industry. and, so, if you think back to the companies that have tried ai or different areas, they really do have to have a dna of the accounting industry and a healthy respect for the accounting industry. i think that’s kind of our mindset. that’s where we’ve had an advantage. we’re not deviating into legal we have a lot of lawyers that ask, you know, we do lease accounting. so, there’s a lot of real estate people that reach out, but we really try to focus on that dna because it’s, it’s hard. it takes a lifetime to get these things right. so, and by the way, i think as you think about vendors and you look for accounting tools, it’s very important to understand the dna of those companies. is it a workflow software that’s just trying to target accountants? is it a case management software from an industry that’s like, oh, accounting is a big industry? or is it people that are purpose built for what you’re doing in the accounting industry?
donny shimamoto 20:23
and what you said, i think the coolest thing is that we’re seeing people like you, who are really, accountant and it and, like you and me, i guess in the in the case that are really starting to bring this blend. and that’s, that’s truly i think, the difference in the products that we’re seeing now, because they are, as you said, purpose built not by a software developer, but by accountants and software developers collaborating together.
isaac keller 20:52
totally. and you nailed it, right? it’s accounting, plus technology. those are the two things now, you know, i hope everyone gets to watch this. but if you’re a small firm, regional firm watching this, i think those are the types of firms that have an advantage, right? and what i mean by that is, everyone agrees that we need more technology. right? and i think you’ve seen the big four, they’ve been trying for decades now. and they do a good job in some areas, but in other areas, they’re spending a lot of money in technology, but not necessarily productizing. that right? in the in the in the regional and midsize firms, they know that they don’t have the it budget and the it resources. so, they’re often looking to vendors to partner with. and i think that’s the perfect complement. because whereas an accounting firm, again, i understand some people can build internal tools, but to really build a full-scale platform that can do ai and automate and pass soc reports and all these things. it takes a special kind of dna and accounting firms are services oriented. they’re really, really good at building a brand and delivering good client services and technology companies like us, were really, really good at building and building fast. and so, like to your point of accounting and it coming together, i think that’s when you know, your bookkeepers and your regional accounting firms are going to have a huge advantage by partnering with these vendors
donny shimamoto 22:28
totally agree with you. i mean, that’s partly why we founded the center for accounting transformation was really to help highlight, hey, you guys–you small and midsize firms–you really have the potential to grab all these tools, and really make a difference. and it will get rid of all this grunt work. because i know in the beginning, everyone thought also, it’s like, it’s only going to be the large firms, all the small firms are going to disappear because they don’t have the infrastructure capabilities. but with more and more vendors like you guys coming on, it’s really empowering the smaller and midsize firms, as you said. i’m so glad you brought that up. because i often i feel like those are the practitioners that feel like they’re just getting lost or like, “i don’t know, no one’s helping me write and do all this stuff.” i’d love to kind of shift really quickly as we kind of get towards our time here. we’ve been talking about what’s here, which i love. there are tons of immediate applications with this ocr and nlp and ai, basically, that you guys are doing that the small and midsize firms can take advantage of today, because it’s all available today. what do you see really quickly, what do you kind of see in the future? where are we kind of going with this?
isaac keller 23:43
wow. so, it’s a big question. let’s, donny, like, we should open up a few doors. and we’ll see if we can, we’ll see if we can get through them. but i think, you know, first, we talked a little bit about eliminating the grunt work and bridging the gap. and i think that’s like table stakes. but i do want to mention that part of adopting these tools and innovating within ai is about getting to another level, which means real time audit and full coverage. and, so, i hope that we can be talking about that a lot. but you’re right. in the meantime, it’s like okay, let’s just maintain. the question is what do i think are kind of the applications to this?
donny shimamoto 24:26
where are we going to see the supply in the future?
isaac keller 24:31
we’re going to see it, again, you have new regulations coming in, everything from leases to revenue to cecil and financial services to esg. so, let’s park esg for a second. and then i think you’re going to need to see it applied to more complex business models, right? so as people move towards, you know, you hear the words “blockchain” and “bitcoin.” these things are real, right? so, as you move to a world where, i don’t know, your child can buy a virtual sword on roblox using aetherium, you’re going to have to use very, very powerful technology to bridge the gap and account for those things correctly. but i think esg is the perfect example. so, there will continue to be regulation. whereas some things are a little bit more defined, like lease accounting. esg is very, very, let’s call it widely defined, which means, to some extent, it’s still being defined. and i think that when you have sort of, like, let’s call it a multi-dimensional problem, where part of it is business operations, part of it is social good, right? you, you got e, s and g in different areas. that’s where ai and more sort of multifaceted tools are going to help bridge the gap. and these are very, very significant ways that are coming to the accounting industry very soon.
donny shimamoto 26:08
that makes a lot of sense to me, too. and i’ve been encouraging accountants to look beyond the financial and to start working with the non-financial data. i think that’s what you’re alluding to, there, is whether it’s the environmental impact, the social impact, or the way that we’re making the decisions, how are we doing these things? and are we going, again, beyond finance, and a lot of these have the contracts associated with them, right, the suppliers and everything. so we need to be able to quickly analyze that and identify whether or not somewhere in our supply chain, perhaps there’s a breakdown of addressing some of these concerns, because the clauses are not there, or they’re malformed or something. yes, definitely something interesting to think about.
isaac keller 26:53
it’s huge. and donny, i’ll give you another analogy. data privacy, right, so everyone has heard of gdpr, by now. and gdpr had a massive impact on businesses, especially consumer-oriented businesses. and, so, there is a whole industry and world around going through contracts and agreements and sort of endpoints of your personal data systems to ensure that you’re complying with gdpr. and, so, that’s a whole industry. that’s not just software-enabled, but it’s heavily services-enabled, i mean, how many law firms now have a data, a dpa officer? how many companies now are hiring dpa officers? so esg is going to be very similar in terms of a wave that’s going to have a big impact on the industry.
donny shimamoto 27:50
it’s always kind of frightening and exciting at the same time to kind of think about the future. man.
isaac keller 27:56
and, yeah, totally. well, i mean, look, i’m, to be to be frank, i’m a little bit worried, because–not worried in the sense that we’re not prepared, right? esg is the right thing to do. we all agree that corporate social good is meaningful and it’s, it’s the way we want to go. but to implement that on businesses might be tough. you know, i don’t know what the markets going to look like. i mean, if you think about lease accounting, for example, which was the last standard that we talked about, it was delayed twice, right? and we went into a covid environment, where there were all sorts of items about–also there were portions of revenue recognition that was delayed–and we went into an environment where covid hit. and all of a sudden, the rules that we thought were the rules of the standard, there was a bunch of concessions applied to it: “oh, you know, if you had if you had a rent, if you didn’t pay rent during march of 2020, that’s okay. you don’t need to recalculate or modify the asset,” even though that’s what the standard put down. and, so, you can already see there’s a tension between what actually happens on the ground versus what the standards are asking for. and if you think that, you know, we weren’t ready for lease accounting and revenue recognition, imagine what esg is going to look like. and so that’s my big concern. now the glimmer of hope is that, you know, hopefully you can use technology. there there’s going to be a “we’re all in this together” attitude where the cfos and controllers and auditors and rule makers make sure that we’re not being oppressive and you know, hurting the needs of the actual business. i don’t know, donny, what your sense is, but it definitely could be scary waters ahead if we’re not ready.
donny shimamoto 29:52
that is…you know, it’s funny, because i’m normally the optimist in kind of our profession, right and i don’t like the use of the scared like, like you mentioned before, everyone was saying ai is going to get rid of accountants and i don’t like those type of scare tactics. it’s, it’s part of why even like on this podcast, we’re trying to be like, “this is how it’s going to help you.” “this is how it’s going to make your life better,” you know? and then to come on… then to come to look at what you just described, the only hope i’m going to put into that is that there are people like you, me and the other accountant/techie people that are really looking at this and thinking about this and are really going to help guide our profession forward as we deal with this. we are just about out of time. so, isaac, i really want to thank you for sharing your time with us and giving us insights into the innovations that trullion is providing. and really just the kind of broader thinking. i like the way you just really opened it up. and like there’s all these different ways esg rev, rack leasing, other types of concerns that were really just going to enable this continuous audit, and ongoing, really, assurance flow. so, thank you, again, great look into the future.