Tackling Tax Technology and Talent
Jasen Stine: Welcome to Account
Trends everybody. I'm Jason
Stein with Intuit Accountants.
My co-host, david Bergstein, and
I are excited to be with you
every couple of weeks to share
the latest news, interesting
perspectives and hottest trends
in the tax accounting world.
We'll have special guests on the
show to help break these trends
down and give you food for
thought as you find new ways to
deliver for your clients And,
most importantly, we plan on
having some fun while doing that
. Welcome, welcome back to
Account Trends everybody. Jason
Stein, your host here along with
me, as always. Mr David
Bergstein, how are you today,
sir?
David Bergstein: I'm doing
wonderful today. I want to know
what's happening with you. I
know you're going to tell me a
little bit about your baby
chicks, your big chicks and
what's happening with your
renovations, now that you've
been there a while.
Jasen Stine: Yeah, the chicks.
So we've got the older flock of
four out in their coop now and
they're doing great, and we've
got the little still in their
little playpen and they're
peeping away. They're smaller
breed birds. They're going to
take longer to get older, but
the renovation is probably more
exciting, which seems like it's
just never ending. We've got one
more big project coming up
after this next one, but, by the
fact, just today we actually
worked with our contractor and
they built a custom door for us
that's being installed right now
. I'm very excited to see it,
and so you may have seen this in
videos or whatever before,
where you've got a secret room
in somebody's house, and so my
wife's office sits at the front
of the house and it's just off
the kitchen, and so it plays
nicely to have a secret door on
it that has cabinets that match
the existing cabinets in our
kitchen, so it's going to look
like it's just another one of
the cabinets until you go open
that door, and then it's a whole
room in there. So I'm excited
to see that.
David Bergstein: Well, I guess
it's not going to be a secret
door anymore, because everybody
just told everybody. So, that
kills that part of it. But for
those who just joining us for
the first time. Jason moved out
west from Texas into the country
and he's been renovating
everything. And how many months
you've been there now? About six
months now. Yeah, pretty soon
you'll be paying taxes. You have
to pay a tax in that state.
Jasen Stine: No state income tax
in the state of Washington And
no sales tax in the state of
Oregon. So when we want to avoid
paying sale tax, we just pop
down in Portland.
David Bergstein: That sounds
pretty interesting. You move
from a non-tax state, texas, to
Washington, now getting rid of
the local tax, not paying sales
tax. We're coming after you next
year.
Jasen Stine: Hey, tax avoidance,
not tax evasion. I'm good.
David Bergstein: That's true,
that's good tax advisory stuff.
But today we're going to skip
from tax advisory and we're
going to go back to account
trends. I think I have a
privilege of introducing today
someone I've known a
tremendously long time, randy
Johnston. If I say his name
correctly, chairhold, k2
Enterprises, hutchinson,
candison. He's a nationally
recognized educator, consultant
and writer. He's got a lot of
years of experience. Randy, tell
us a little bit more about what
you do and who you are. The
people that don't know from
accounting software world,
totally Papeless and MGI and
everything else.
Jasen Stine: Welcome to the show
, Randy.
Randy Johnston: Well. Thanks,
dave and Jason. It's so good to
be with you. You are right, i've
been around. I actually knew
Dave when he was well, let's
just say much younger. We've
known each other a long time.
You are correct. We produced
continuing professional
education in the US and Canada
to the tune of about 100,000
CPAs annually over about 1,600
events. With our K2 business. We
usually are trying to teach how
you use technology in the
practice of accounting. That
could be public practice or it
can be industry accounts. About
40 years ago this year, i
founded my NMGI business, which
supports CPAs 24x7 from Boston
to Honolulu, and have had the
privilege of help to start many
other businesses and help them
grow. I've been very happy about
that. Through the years I've
gotten the privilege of meeting
a lot of super smart people
related to technology and
related to accounting and help
them where I can.
Jasen Stine: I can relate to
that, Randy.
David Bergstein: It's a pleasure
to have you on the show. I'll
hit you with a question then
I'll let Jason answer most of
the questions, because he's got
the inquisitive mind. But are
you also don't K2 give out
technology awards every year?
Randy Johnston: We have for
20-plus years. Dave, that's
exactly right. We pick different
categories over time, but we do
have many of them that have
been around since inception.
What happens is our attendees
and our instructors vote for
products that they believe are
best of class in those various
categories. Over time, year
after year, we have awarded
those, typically in the fall.
David Bergstein: And typically
trends that are going on and new
innovation ideas that are out
there.
Randy Johnston: Yes, we will add
things. So, for example, we
added cloud before it was very
popular. As an example, we added
client accounting services
products before they were
popular, and through the years,
we've tried to pick things that
are new and innovative. I'm
certain there'll be some
artificial intelligence ads this
year, assuming that the vendors
get their products delivered
that have AI incorporated, so
that would be an example of
something I'm sure we'll add.
David Bergstein: It'll be
interesting what we say, and I'm
going to ask the last question
and give it over to Jason What
do you see as the future of
accounting?
Randy Johnston: Well, that's a
pretty broad question. I think
accounting will survive off into
the eons. I mean, i really say
it like that, because you really
have to keep track of where
you're at, is the way I would
call it. Not only do you have
the regulatory compliance that
you've got, but you just want to
be able to talk profitability
and so forth. I do have to
disclose I'm on several boards
of directors, so we have fiscal
responsibilities as boards in
many cases, but the accounting
profession, i think, will evolve
more towards advisory position,
in other words, helping
individuals and businesses
achieve the goals that they want
to have. To me, accounting is a
scorecard, and it's a very old
scorecard if you go back to the
origins And realistically,
there's more than just money
that should be accounted for.
But obviously that's what, as
accountants, most of the time,
we're put in charge of. But,
david, we've known each other a
long time. We've talked about
dashboards, for example in prior
years, and key performance
indicators, and there's many
KPIs and dashboards that go well
beyond just the monetary piece.
Jasen Stine: Yeah, well, said,
Randy, because you're exactly
right. It's almost like you've
been listening to our show and
you're repeating. I mean, David,
keep hearing and saying you're
dead on right And that's why we
spend so much time and have been
gearing up for for so long. And
you know, it's this profession.
You know, people always kind of
said well, I'm a numbers person
, maybe I should be an
accountant, right, And that's
just such a tiny part of it. And
it's because of the advancement
in technology and the trends in
that space it's accelerating
and turning into what we've
always known it would be
eventually. But we're seeing
that title shift now And people
are really leaning into it in
big ways. And so, while we're on
the subject of technology, or
the fact that I conveniently
brought it up, one of the things
that I wanted to dig in with
you because of your vast
experience in this, in that
space, is, you know, talk. Can
you talk more about tax
automation and how, why firms
should be working to implement
that?
Randy Johnston: Yeah, tax
automation is a big deal, you
know. Let's run minor numbers.
Small firms still still tend to
get almost 80% of their revenue
from tax, major firms about 40%,
and those numbers shift a
little bit. But the fact of the
matter is that hours upon hours
are used generating tax work and
whether that's tax forms
actually doing income tax, or
whether it's sales tax
compliance or other tax pieces,
there's a lot of manual work
that goes with that. So on the
front end in fact the way Jason
and I like to talk about is that
in the end process. So I like
to go everywhere from engagement
letters and PBC document
gathering all the way to
ingestion, if it's personal tax,
through a 1040 work paper
product imported automatically
into you know, a tax software.
So if you think about all the
gathering process, try to
automate as much of that as we
can And then from there being
able to pull trial balances, get
the adjusting entries done if
it's tax, income tax and then
push it out as deliverables on
the back end as an electronic
deliverable through a portal
where you can receive payment
and complete electronic filing
8879 if it's personal, and so
forth. So I like to look at
every step of that process and
figure out what we can take out
of human labor in that
methodology. So we expect more
interfaces from accounting
software into tax software. In
other words, the trial balance
is flowing in. On the business
side, we expect personal
transactions to flow in from our
bank accounts and bank feeds
And I think that will improve
over time. But there's just too
bloody much paperwork flowing
around right And it is way too
oppressive for the individuals
and the businesses and the
preparers.
Jasen Stine: Yeah, yeah, i love
that perspective. I think that's
something that firms are really
having a hard time with. I
don't think that's whatever they
all say, because there's just
so much work and so little
people. Right, and we know right
, there's a major staffing
crisis in our profession, and I
always like to say that you
should look at technology as a
tool that you hire to do a set
of tasks as part of your talent
and technology strategy. And so
how do we think about because
you've got a lot of experience
in the staffing space as well
how would you recommend they
think about the? how does this
impact the staffing?
Randy Johnston: Yeah, and the
vision on this for me probably
goes back 10, 20 years or more
that I thought technology would
reduce the burden, reducing the
amount of labor required, and
that's happened a little bit,
but there has not been enough
new talent into the accounting
profession to really cover, in
some cases, the extra work
required in audit or the extra
volume of work that's happening
in tax. So unfortunately the
automation just hadn't kept up
fast enough. So what happened?
Staff shortages, outsourcing
took a big increase during this
past few years. It had been
popular, but it's really really
taken off in the last two years
in specific. And I'm also
concerned about that for the
long term, because part of the
reason for the outsourcing is to
get the labor, but part of it
is to try to reduce the costs,
and the fact of the matter is
the outsource costs are going up
also. So yes, other countries
Philippines, India, south
America wherever people have
pushed the work, the wages are
still below US wages, but their
gaps are closing fairly quick.
And then the second part is
really trying to have the
expertise, because you've got to
think about outsourced
personnel as a new staff hire
And so you've got to have your
existing staff do higher value
work, and I know something
that's near and dear to my heart
probably near and dear to your
heart too is with advisory work.
I want my professionals to use
their skills in higher value
work, which I consider advisory
work to be. So tax advisory
would be one example. Other
advisory services, of which I
numbered nearly 80 different
advisory services that CPAs
could be providing. But if
you're just working, working,
working and you're not really
doing high value work, you're
going to be just kind of
churning forever. So I would
want the doggone automation to
do much more for us. Ai is going
to give us a little help there,
but I still don't see that
panacea that I expected 10 years
ago, where a lot of the mundane
stuff would go away.
Jasen Stine: Yeah, i think we
have great visions in this area,
but the practical application
of getting there and the
limitations, yeah, i would have
liked to have been seeing it
slow or faster, but I think it's
interesting too. We say that,
tongue firmly planted in cheek,
that the pandemic accelerated a
lot of the stuff in it. It's
twofold, and that's why I say
staffing and tech go together,
because your staff has to be
able to leverage the technology
properly in order to take
advantage of it. And then, as
you continue to use it and
invest in technology, it gets
better over time. If you don't
invest in it and it's not
getting used, then it ends up
going away.
Randy Johnston: Yeah, and my
favorite saying from 2016,. I
use frequently if you say it
real fast, it sounds easy. So it
sounds like all this technology
or outsourcing or whatever
should fix these things. But we
need a revolutionary change, not
an evolutionary change, and
unfortunately we've just been
making small little steps
instead of major breakthroughs.
And I have been more hopeful
that robotic process automation
would do it, or optical
character recognition would have
helped us, or feeds from
multiple platforms would have
helped us. So many of these were
good technological attempts,
but they're not easy, and so
much of the time we expect
things to be easy You think
about the big red easy button,
and there's just not one or tax
automation that I'm aware of.
David Bergstein: I think you're
all gonna be surprised. I think
you're all gonna be surprised
over the next two years with
automation taking over the tax
processing. Just my own
experience, even this past year
and I've been doing this same
client for a long time He's a
day trader. He has like probably
3,000 transactions from the
brokerage. The amount of time
that I save by just pressing the
button into the tax software
has made a tremendous time saver
. So it's all these little
things. Even when e-filing first
came out, nobody wanted to
e-file a tax return. All the
accountants were against it. So
I think I agree with everything
you're saying, randy, but I
think we're gonna start to see a
breakthrough with what's
happened this past year with AI.
Everybody is predicting and now
all of a sudden, as I follow
the internet, i'm seeing all
sorts of software packages start
to announce We're changing our
AI, we're gonna make it easier.
It does take time, but I think
it's gonna hit all of a sudden
as we move forward And you're
gonna be teaching thousands of
accountants, whether they're in
public or private, the tricks of
what new tools to use.
Randy Johnston: Yeah, i
appreciate that. In fact I was
smiling while you were saying it
, david, because obviously you
go back to RIA. That's probably
when we first met And I just
think about the difference in
the tax products. But even in
the column that I wrote for the
CPA Practice Advisor this week,
i suggested that we
underestimate how much value our
tools are providing for us,
because your 20-minute comment
to me last week probably was the
trigger for that. Because the
fact of the matter is, you can
create a pretty bloody complex
return in a relatively few
minutes. In fact, i talked to a
practitioner out of Wisconsin on
Monday and he had made the same
comment. He had done a very
complex corporate return in less
than 20 minutes, wow. And he
said you know, things just work
the way they were supposed to.
And I chuckled it when he said
it and I said well, you've been
around long enough. Just think
about if you had to prepare that
bloody thing manually.
Jasen Stine: Yeah, on paper
right.
Randy Johnston: On paper ick.
David Bergstein: And this way
you got to justify to your
client. now That's where the
advisory service comes in. Chris
, you're not charging for time
to go to Ron Baker's
subscription model. You change
what you do and how you do it,
and the tax return is only
deliverable. But, like you said,
you're looking at accounting or
tax information. It's not one
advisory, it's 80 plus types of
services. you can rent it to
them.
Randy Johnston: Yeah, yeah. So
the bottom line, david, as
you're thinking about that,
notice that if you're doing
sales tax compliance and you've
got a business that is selling
on the internet and we have
deliverable, you know point of
sale if you will sales tax to
collect, and that's a bugger to
complete too. So you know all
sorts of businesses have to do
that And many CPA firms have not
figured out how to take that
Very profitable recurring
revenue business on board.
They're still messing around
with other services that are far
lower value.
David Bergstein: Yeah, people
forget about the term salt
S-A-L-T. State and local tax
advisory services is a
tremendous way to gain clients,
especially small to medium. If
the internet says you can sell
anywhere, look at state and
local taxes, don't look at
federal taxes, don't look at
income taxes, don't look at all
those other taxes.
Randy Johnston: Yeah, that's
about as sticky as payroll,
right, you've got state and
local taxes and you got payroll.
Yeah, when you're in the
banking industry, the rule of
thumb is you gotta have three
services to make a client sticky
. Well, i've taught that to CPA
firms for 40 years, david, and
you've heard me talk like that.
You gotta have three, four, five
services, and they need to be
high value. It's gotta be ones
that business owners want, not
ones they must have, the must
have, ones they begrudgingly pay
you to do, but the ones they
want, they gladly pay you to do
them.
Jasen Stine: Right, right, i
wanted to unpack. I wanna come
back to this conversation, but I
wanted to unpack the technology
stuff that you were saying a
minute ago about the automation,
and you made a comment that
resonated with me around how
people are not taking full
advantage of the capabilities of
the technology that they hire
And I mean, of course, i did too
. We see that all the time. I
mean half of our users of our
professional tax products only
use half of the features and
functionality that we offer, and
it's astounding to us. We
cannot understand what's going
on there, and so what I observe
is that people have, firms have
their processes that they have
set up right. Some of these
processes were established for
these technology solutions were
ever even invented, right. I
know there's firms still passing
around a paper folder with a
sticky note on it as their
process in the office, and so
it's interesting, because what
people do is they hire the
technology and then they try to
force fit it into their same
process, and what they don't do
and it's at their deficit is
understand that technology is
designed to solve a set of tasks
, not just one, and so what
people do is, when you're trying
to force fit it, then you're
frustrated because it's not
doing the task that you wanted
it to do, and you may have been
promised that it would. There's
these work around solutions.
Yeah, it'll do that, but you got
to do this and that. And so
then people are like, well, why
did I? this is creating more
work, and why did I even hire
the technology. And then they're
frustrated with it. And then
that's the end, and you've never
gotten to see the advantages of
it. And then I think that's
especially true for cloud,
because when we think about our
cloud products, we can automate
things and make connections both
within our solution set but
also outside, like with
financial institutions, where we
can pull that data in way more
effectively and easily than you
can on a desktop. Are you seeing
the same kind of behavior? What
would you add to that?
Randy Johnston: Yeah, that's
interesting that it's a change
management problem And, as you
were describing it, i was
thinking of a current
well-educated, thoughtful tax
practitioner partner who still
copies all of his own work on a
copy machine, so he has the
backup information so he can
return the originals to the
client And that firm has all the
automation that would be needed
. And I've talked to him
directly and said tell me why
you're doing it this way. And he
said well, while I'm running
the copier I can think about how
it's gonna go in the tax return
And his clients love him dearly
, but his profitability compared
to everybody else in his firm
is lower. So you know, it's just
one of those like so when
you're going to change, and he
said I never will. And he said
I'm a partner so nobody can make
me, and you know, so you've got
some of that going on. I don't
want to make that sound like
it's a lot, but really, jason,
it is super difficult for people
to adopt change. They have to
really have an attitude that
they're looking for a better way
to do it. That's why for 30
plus years, we've taught people
about workflow processes and how
to optimize processes and why
we ask people to revisit their
processes twice a year, that we
ask them to consider any new
shortcut process that somebody
has discovered and incorporated
into their general processes and
teach it to the whole team. You
know it takes some effort to
get that done, but it pays
magnificently. And you know
there are, frankly,
unfortunately very few workflow
process tools that do a great
job at helping us with that part
. There's only well less than a
dozen workflow tools in the
profession And many of them are
designs that are 20 plus years
old, so there's not too many
modern workflow processes that
are out there. So when something
is new and you really to your
point, you've got a lot of
capabilities in the intuit
platforms that people are just
clueless about. And it was
really fascinating, frankly.
Just yesterday I was in Lassert
using features and it was clear
that the practitioners that were
watching didn't know what we
were doing, and it's like don't
you live in this product most of
the time And don't you? don't
you look for an easier way to do
things? And you know, my belief
is that people do it the
easiest way. They know how, but
they don't know what they don't
know and they don't always
discover the easiest way.
Jasen Stine: Well, I love that.
I love that because I talk about
this a lot too. Intentionality,
right, People are kind of
typically prone to follow the
path of least resistance when it
comes to accomplishing a task.
Right, And I'm the same way I'm
not saying, you know, I'm better
at that I think where firms can
be intentional and strategic
about how they're approaching
something that lets you then get
off the hamster wheel, right?
Because that's the problem We're
stuck in this hamster wheel. We
can't pause to get off, to look
at the firm as a whole and work
on the business instead of just
constantly working in the
business. And that's what this
all ties together with being
intentional about what you're
going to do, how you're going to
accomplish the work and how
technology plays a role in that,
And that all works together.
And then, of course, you know
how the whole firm works
together using those tools.
David Bergstein: You're reading
too many books, jason. You're
probably reading the intentional
accountant, the emith for
accountants, because that's what
you just quoted, but kind of
interesting. I just read the
current issue of accounting
today and I was talking about
the best technology firms and
both you and Randy hit it.
People don't know what they
don't know, but part of the
reason they picked some of these
firms is the best technology
firm because they had the most
hours of training per person,
where they're teaching the
people in the firm how to use
the tools that they have.
Because people get the tool,
they use it and they don't
realize that there are
enhancements to it. So training
on a constant basis is what's
going to make someone better
with using technology, as they
understand the tool does more.
Randy Johnston: David, that's
actually part of the reason I've
enjoyed my K2 business for so
long, because what do we get to
do? We teach people the best
tricks that we know in any given
year and there's always new
tricks. So that's been a real
delight And, frankly, yeah, i
probably have been reading too
many books lately. But, like you
, i've had the privilege through
the years of working with
Michael Gerber, when he was
brand new and trying to figure
out what this e-myth thing was
going to be right. Or we go to
Daniel Burris, the futurist,
when he was considering leaving
his high school teaching job and
I talked to him about why you
should perhaps do a consulting
practice and speak about your
ideas, which have been adopted
by many firms, in fact, covered
in a recent book as well. So
these things really have to be
intentionally discovered and
taught and it takes time and it
takes some space And in fact,
the word that I've used around
that, friends, is margin. You
got to have enough time to stop
and think. So many people are on
that hamster wheel spin, spin,
spin instead of slowing down. We
used to say slow down and smell
the roses, but it's slow down
and think a little bit and you
might be able to discover much
easier ways to do things and
much smarter ways to do things.
Jasen Stine: Yeah, I always use
the forest through the trees
analogy, right. Just like you
said, you got to stop and look
at the whole forest because you
may be cutting down the trees in
the wrong place or there might
be a better, more effective way
or have a way to have a bigger
impact. And I think the bigger
impact part is the place where
we really have the most
opportunity. Right, I've heard
some say it's being squandered
in our profession, and that
brings us back to the advisory
conversation. Right, It?
Randy Johnston: does, because,
in effect, if you do tax
advisory right, you can avoid a
lot of those taxes properly. And
the fact of the matter is a lot
of people are just sending the
money on, and I know that even
my own practitioners have been
conservative through the years
And that probably comes from
their days of working for the
IRS, right. So they were pretty
conscientious and, i'll just say
, cautious about what they might
recommend and they didn't
really apply a lot of the common
tax strategies that are out
there And unfortunately, many
business owners are not able to
take advantage or are not taking
advantage of it, and many
individuals aren't either, and
it's a sad thing because you
know personally, i've been
working with a lot of people who
don't mind paying taxes so much
. But I really would like
everybody to be able to pay
their fair share. But I also,
along the way, don't want to be
gouged, and I think you can take
all sorts of different words
around that, but the fact of the
matter is it's going to cost us
something to run this country,
so I don't mind paying for what
it takes to help run it.
Jasen Stine: Yeah, I always say
it's better to make money and
pay taxes and lose money and get
deductions. But there are
deductions that are designed
around propelling parts of the
economy or getting certain
behaviors with business owners
so that they can be more
effective at both contributing
to the economy at large but also
for themselves, And that's why
those tax breaks and those
strategies are fair.
Randy Johnston: Yeah, my K2
partner, will Fleener, always
said hey, i love paying taxes
because that means I made money,
but again, we don't want to
send any more than we have to.
So exactly, And I've said that
on licensing for years too.
Jason, i absolutely don't want
people to violate license
agreements. You always should
follow the license agreement. In
most states that would be an
ethics violation and put your
CPA license at risk. But there's
so many people that overpay
licenses, so what I've usually
said is I don't want to send a
dollar more to Redmond or to
Houston or Austin or Boston or
Mountain View. Then I have to,
but I will pay every dollar
because I believe that the
companies that have created
those products have earned those
dollars.
Jasen Stine: Right If you're
getting the value out of the
product that you are buying.
Right.
Randy Johnston: Yeah, and I just
think about the new Microsoft
Copilot 365 and the AI features,
more of which were expanded
here as of late. There's so many
capabilities that are just
going to be normally added to
your subscription in that world,
and if you don't take the time
to learn how to do it, how to
take advantage of those things,
you're going to do things the
old way, and I can tell you that
my use of AI. To David's
earlier point, i'm doing work
now, now, in less than 20% of
the time that it took me to do
that work a year ago at this
time Well, five times faster. I
thought it was pretty bloody
quick before.
David Bergstein: That's why it's
good to attend one of your when
you do your education training
across the country, because,
even though you call it
Microsoft Update, it's new
features from last year to this
year And if they don't go they
don't know what they can use, in
a way, new capabilities.
Randy Johnston: Yeah, yeah, and
in fact that has been kind of
our hallmark is we want you to
learn new things today that you
can use tomorrow, and it is that
type of framework that we've
worked on for 40 years And,
frankly, the amount of knowledge
that you have to know has
expanded so much that it you
know. I think I know a smaller
percentage of the whole than I
used to, but I still know a lot
more than I used to.
Jasen Stine: And that's a
perfect segue to round us out.
So, randy, if people want to
take advantage of your training
programs or just continue
learning from you and get
connected with you, where would
you send them?
Randy Johnston: Well, i would
start you with our K2 side,
k2ecom. You'll find the schedule
of events. You'll also find
that a wide variety of courses
can be chosen from there, but we
do publish a very broad
schedule across pretty much any
technology that you want to
learn about. If you don't see
what you're interested in, i'd
actually have your listeners
just contact me because I'll say
, yeah, we've got a course like
that and we can do that, and we
can produce those in-house, we
can produce those online or
we'll do that at face-to-face
events around the country.
Jasen Stine: Awesome. Well,
Randy, we really appreciate you
coming on the show bringing your
expertise and insights, So
thanks for being here.
Randy Johnston: Pleased to spend
time with you and your
listeners, and I look forward to
talking with you again very
soon.
Jasen Stine: Absolutely And as
always, david, good to see you
and talk with you, and thanks
everybody for listening. Until
next time. Thanks for listening.
If you enjoyed this episode,
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Trends is produced and edited by
Luke Johnston. Be right into it
, 2023.