Derek Kautz has always been fascinated by accounting systems. As a university accounting student, he taught classmates how to use Excel. And, instead of joining the accounting organization, he was a member of the university’s Association for the Management of Information and Operations group.
This affinity didn’t diminish once he began his accounting career. “I definitely have a conventional accounting background, but I’ve always leaned towards the IT side of things. That’s why I’ve been in the systems side of accounting with every role I’ve had, whether it be auditing, implementing, or managing them,” he said.
Derek followed a conventional career path for a just-out-of-school accountant, starting as a staff accountant first at Ernst & Young, then at Deloitte & Touche. But his career took an unexpected turn when an assignment uncovered an opportunity to do something he always wanted to do: build an accounting system.
The shift to product developer and entrepreneur came when Derek’s employer asked him to implement a new lease accounting system. The company had hired Derek as an enterprise support analyst a few months before the lease accounting IFRS 16 and ASC 842 compliance reporting requirements became effective in January 2019. As the liaison between the IT and finance departments, he was responsible for making sure that the finance team had the accounting systems they needed.
“When I started with the company, they said, ‘We have a quick job for you; it’s implementing a new lease accounting tool,’” he said.
It was anything but quick. Rushed to market to meet the new compliance deadline, the system had flaws. “It was a difficult experience,” Derek said. As a result, the system routinely delayed the finance department’s end-of-month closing.
“As I was implementing the system, I could see where they went wrong building it and started thinking about what I would have done differently,” he said.
Both frustrated and inspired, Derek talked with his father, finance executive and consultant Greg Kautz, about creating a better lease accounting system. It was, after all, something Derek had wanted to do his entire career. “I’ve always envisioned building a better accounting system. I didn’t know what or how, or in what area of accounting, but this has been my goal,” he said.
Intrigued by the idea and impressed by his son’s vision, the elder Kautz suggested they take on the challenge together. The finance professionals ran the numbers and assessed the market potential for Derek’s concept. Convinced they could make it work, they co-founded lease accounting software provider Black Owl Systems in Calgary in 2020 to execute Derek’s vision. He’s the firm’s CFO; Greg serves as CEO.
It’s a natural progression for the young CPA who has always been systems-driven. After his early staff accounting positions, he joined a technology company that served the drilling industry as a consultant before being named financial controller of a company that provided environmental management services.
Kautz was the accountant in the IT group in his next two roles. The first was as an enterprise resource planning financial analyst with an energy infrastructure business. Next, as the finance global enterprise support analyst at a large heavy equipment dealer, where he gained experience with lease accounting that helped inspire his entrepreneurship.
Kautz took that inspiration to a software developer his father had worked with before to build a prototype they could use to test the concept. Would others see the value? “We showed it to CPA firms and a few companies that have been struggling with lease accounting systems. They encouraged us to keep going,” he said.
Validation in hand, Kautz left his salaried position three months after meeting with the developer in October 2020. “This couldn’t be a side hustle. I needed to work on it full time to fully build it out, examine every angle, and make sure we covered everything,” he said.
While Derek focused on product development, Greg leveraged his CFO experience and network to spearhead fundraising for the startup. “I wouldn’t know where to start with raising funds. It’s probably been one of the most significant ways Greg has contributed,” he said.
Greg acknowledges that his four decades of finance industry experience allow him to identify what’s most important to the people he’s talking to about the product, whether it’s investors, accountants, or CFOs. “The most important thing I’ve seen in my past experience is the importance of listening. It’s watching the body language and seeing how the audience reacts,” Greg said.
Through the years, the elder Kautz has also stressed to Derek the importance of making decisions from data. It’s a lesson his son now applies to product development. “I’ve used this philosophy to ask: What data do we need to present in the system? How can we display it in a way that helps decision-makers make those decisions?” Derek said.
It carries over to his time management, too. “If I don’t need to read or respond to it, I don’t need to see it,” he said.
Founding a fintech firm wasn’t part of the plan when Derek was showing his university classmates the power of Excel, but he embraced the opportunity without looking back. “The best part of entrepreneurship is that it lets me take an idea and help it flourish,” he said.
This is part two of a three-part series. You can find part one here. The third part will post on March 30.