"AI is the answer… but I’ve forgotten the question" || PLUS App News, Fintech Acquisitions and AdvanceTrack

[00:00:00] AI is the answer, what was the question? I think that's the general theme that everyone thinks.

[00:00:04] 20% of firms had no plans to adopt AI, 30% were in the planning phase, so 50% of firms weren't doing anything.

[00:00:11] We go back 10 years, Xero and Quickbox had less than 100,000 subscribers, now it's in the millions.

[00:00:17] The talent shortage is going to compress that time step. Adoption will be greater when we see a real life example of a problem being solved.

[00:00:27] You realise actually there's so much more complexity than just solving the initial thing that customers were trying to do.

[00:00:33] Sage have just released their September 2024 resource, fair to say another successful year for Sage.

[00:00:39] They continue to develop their cloud products, key things that came out in November were shareable links for sales invoices,

[00:00:44] cooperation tax module, the ability to delete bank statements and bank reconciliation items, accounts prep by auto entry,

[00:00:53] I'm not sure that's what I'd call it but it's still a pretty cool feature that Sage has released.

[00:00:56] Data Molino have released billable expenses on a line item level.

[00:01:00] Fathom have launched a bulk update facility.

[00:01:04] New apps on the Xero App Store, Receipt to AI, Extraction Bookkeeping AI tool, Agrileco Verify,

[00:01:11] an end-to-end accounts payable system.

[00:01:13] Flexern allows employees to access a portion of their wages in advance, something that Employment Hero has been talking about doing for a while.

[00:01:19] AgDrive for those agricultural contractors trying to streamline their automation.

[00:01:23] Light Speed Restaurant K-Series, Mintsoft which is a 3PL provider system, Live Flow integration directly into Google Sheets and Excel.

[00:01:32] Australian air conditioning distributors which I think is possibly the most boring app name I've ever come across.

[00:01:37] Dext in a 500 million sale to Iris. How do we feel about these two entities combining in that way?

[00:01:45] We all know the playbook which is ramp the prices up ridiculously over a period of time and then eventually try and build it into your own performance.

[00:01:51] It essentially gets killed.

[00:01:52] I don't think this is going to happen with Dext because number one...

[00:01:56] Do you think we're going to see a bit more consolidation in this payment space?

[00:01:59] I think that the market's big enough to support a bunch of players but probably not as many as there are at the moment.

[00:02:05] The key in all of this is how do you encourage people to come into the profession and how do you make their role interesting enough that they hang around?

[00:02:15] Hello and welcome to today's Digitals in a Cruel World episode.

[00:02:19] We are nearing the end of the year and we have been enjoying the latest spate of app news that's been coming out.

[00:02:27] It seems like there's a lot going on in the industry with some of the biggest news coming from Iris and Dext this week.

[00:02:33] We're also going to be joined today by Jay Lyons from Nook who is the CEO and co-founder.

[00:02:40] He's going to talk to us about his exit to Modular which took place a couple of weeks ago.

[00:02:45] And for those of you who are not aware of what the big deal is about, we talked to Jo about how that fit between what is accounts payable automation technology and how it fits into Modular's strategy.

[00:02:59] As someone that has been really close to that payroll space and how they're looking to combine the efforts now, given that the consolidation seems to be happening across the fintech industry, we think this is a really great collaboration.

[00:03:12] And before we go any further, I'm going to hit it over to my co-host John Toon and Ryan Pearcy for those of you who have not already heard their dalsit tones this week alone.

[00:03:23] Hello, John. How are you? Are you still coping? Is man flu really a thing anymore? And why did you not get your vaccine?

[00:03:32] Well, firstly, indeed, there is no vaccine for man flu, which, you know, if you were a man, you'd realise that there's only a vaccine for normal bog standard flu.

[00:03:42] And as everyone knows, man flu is so much worse. So yes, I have been close to death.

[00:03:49] Sorry, sorry. It's worse because men don't understand how to be able to.

[00:03:57] Many things.

[00:03:58] That's true. That's true.

[00:03:59] And we have a low tolerance for pain, as you, as you, you know, as you're unaware.

[00:04:04] Hence why women give birth and men don't.

[00:04:07] Okay. I'm sorry for the weakness in you.

[00:04:10] But I will, you know, I am a gentle, sensitive soul.

[00:04:14] So, you know, as you, as you well know, I am indeed.

[00:04:18] So yes, I have been close to death for the last few days of not feeling great and even skipped the original date for recording for this.

[00:04:25] Because I was so unwell. But no, I'm definitely feeling a little bit better.

[00:04:28] I still got a bit of a lingering cough and, you know, not exactly fighting to it, but I'm almost there, which is good.

[00:04:36] What news kept your company in bed this week?

[00:04:39] What was the most exciting thing you read? Tell us.

[00:04:43] What news kept your company? The most exciting thing was probably about the Visma news, which I think, you know, is going to be coming up soon, which we'll cover.

[00:04:53] And yeah, that was kind of it, really.

[00:04:55] I'm all about the tech news. Nothing else floats my boat.

[00:04:59] Ryan, how about you? Anything new for your week? How are you doing?

[00:05:03] Well, I've completely recovered from man flu, which hit me three, four weeks ago.

[00:05:07] It's a lingering thing, man flu. It takes a while to really kind of get out your system.

[00:05:12] But what I can't believe is that John's big news or the thing that piqued his interest this week was not indeed the fact that you have announced that you are co-CEO.

[00:05:22] That was the thing that I thought was the most amazing news.

[00:05:26] And as you've had, I think, lots of love in from everyone.

[00:05:31] Congratulations on this. Is there anything that you'd want to read out?

[00:05:33] What was the best comment, sentiment that you received?

[00:05:37] I received so many lovely sentiments.

[00:05:41] But yes, there is one person in particular who I told you about just before we started recording.

[00:05:46] It was Rishi Ruparella who probably made me laugh, cry and just be like, so he feels so warm and cuddly as well.

[00:05:58] So he sent me a message.

[00:06:00] The public one on LinkedIn was much more just simple in a simple congrats.

[00:06:05] But the message that he sent directly to me was pretty sweet.

[00:06:11] Shall I read it out?

[00:06:13] Shall I read it out?

[00:06:14] Okay. He said, you're amazing and inspirational people.

[00:06:17] He said, thanks, Rishi, you're too kind.

[00:06:19] He said, I haven't actually finished Vivpool Quarters.

[00:06:22] I was texting you so many things.

[00:06:23] Your background, including the not speaking English initially, because when I was younger, I just did not speak English at all.

[00:06:30] He said, your gender, single parent, the fact that you're from the Midlands.

[00:06:35] These are things you have to come up against.

[00:06:38] Well done, you.

[00:06:39] I would buy it.

[00:06:40] That is amazing.

[00:06:42] So, yeah, that was my favorite one.

[00:06:44] And I mean, like there was loads of other things that, you know, but it's great because I think even though it feels like it was a formal announcement, those people who know me know that I've kind of been running the show for some time now.

[00:06:59] So it's good to just put it out there formally.

[00:07:03] Get recognition for it.

[00:07:05] Yeah.

[00:07:06] Now the real hard work begins.

[00:07:08] Now you really kind of feel the pressure, the challenge.

[00:07:15] Well, look, you've been co-CEO of the DigiTools in the Cool World podcast for three years.

[00:07:21] So there's been a lot of practice trying to wrangle us two into making any sense at any point.

[00:07:27] So surely you have the valid experience now for Bankable.

[00:07:33] Don't call me Shirley again.

[00:07:38] All right.

[00:07:40] Should we kick our tap news?

[00:07:41] Yeah.

[00:07:46] I have something on the week that has seen the acquisition of Dext to Iris.

[00:07:55] So HG backed software provider Dext in a 500 million sale to Iris.

[00:08:03] I think everyone caught it this week.

[00:08:05] I don't think I'm going to reveal anything new other than the fact that there's been obviously like commentary, feedback, speculation on like the fact that these two mammoths have kind of combined.

[00:08:20] And maybe, you know, like for Dext, this means that, you know, there's going to be a lot more in terms of changes at like a corporate level.

[00:08:28] And I can imagine that the fact that they made such big price changes over the course of last year.

[00:08:35] Do we think that this is going to be the only gambit that they play for the upcoming years in terms of being able to sustain the level of growth that they've seen in the past?

[00:08:48] Or how do we feel about these two entities combining in that way?

[00:08:54] Because in the past, when something like this has happened, it's never been received in the best light.

[00:09:01] Yeah.

[00:09:01] Well, I mean, I think, you know, it's fair to say, you know, that lots of accountants in our space have concerns whenever Iris make an acquisition,

[00:09:10] because Iris is the place where good products go to die typically.

[00:09:15] And, you know, we all know the playbook, which is by, you know, ramp the prices up ridiculously over a period of time,

[00:09:22] and then eventually try and build it into your own platform and squeeze it out, and it essentially gets killed.

[00:09:28] Now, I don't think this is going to happen with Dext, because number one, Dext, you know, is a much bigger beast than quite a lot of their historic acquisitions that they've made.

[00:09:40] And it's also no longer founder-led.

[00:09:43] You know, Michael Wood and the other co-founders, you know, exited well before this deal happened.

[00:09:49] And, you know, it's run by a sort of an exec board who have got commercial experience.

[00:09:54] And so this isn't a route out for an exit for people who've got a vested interest in the product.

[00:10:01] And, you know, Iris don't have to worry about having someone who's going to be in for a minimum six, 12 months,

[00:10:06] who then may well disappear and stop driving the product forward as well.

[00:10:11] And, you know, assuming that Dext can continue their good run of, like, product development and stuff,

[00:10:16] which we've seen over the last 12 months, I mean, I would say they've probably been the best large vendor in the market

[00:10:21] in terms of product development, innovation, you know, rates of releases, et cetera.

[00:10:27] You know, that should continue going really well.

[00:10:30] Plus, Iris have got a vested interest in this insofar as, you know,

[00:10:34] they don't have an MTD for it's a product, which Dext do.

[00:10:38] They don't really have an OCR product at all.

[00:10:41] Yes, they've got things that cash flow in, you know, in their suite of products,

[00:10:45] but nobody cares about cash flow.

[00:10:47] You know, that's been dead and buried for 10 years.

[00:10:48] So it's almost an irrelevant.

[00:10:52] So, you know, this should be a good opportunity for Iris to do stuff.

[00:10:56] Plus, you've got a great strategic opportunity because we know that Iris' focus has particularly been in the U.S. market.

[00:11:02] That's where they're interested in expanding.

[00:11:04] That's why HG partially sold out of Iris in the first place to the American LMP,

[00:11:10] to really improve their expansion over there.

[00:11:12] So I think Iris are going to put a rocket ship under Dext and increase their North American presence,

[00:11:17] which, to be perfectly honest, Dext have not really focused too much on.

[00:11:20] Yes, they've got a handful of people over there, but they haven't really invested.

[00:11:23] They haven't really put money behind that market.

[00:11:25] They haven't really put money behind the team and empowered them to go out and grow that.

[00:11:30] And I think there's a great opportunity for them to do so.

[00:11:33] I think the only other thing to say is, of course, you know, HG, yes, they've sold out of Dext,

[00:11:37] but HG do also partly own Iris.

[00:11:40] So this is just a flip from their point of view.

[00:11:42] I think you could say that there's a cynical element of that in terms of they will have option holders

[00:11:48] and minority shareholders in Dext who are still accumulating value.

[00:11:51] And this is a great way of capping that and crystallizing them and getting them out of that value.

[00:11:56] And also Dext have had to compensate by reinvesting in the top end in Iris

[00:12:01] to offset the cash cost of this to the other significant P investor fund from the States.

[00:12:08] So 500 million sounds like a lot from the outset, but it'd be really interesting to see the nitty gritty of this,

[00:12:14] to actually see what HG have had to reinvest back into Iris to compensate,

[00:12:17] because it definitely won't be a net 500 million.

[00:12:20] It's going to be much lower than that.

[00:12:23] Definitely. I know that there was a comment on LinkedIn as well by someone that had flagged what the profitability of Dext was last year,

[00:12:31] around 1.5 million, I think.

[00:12:33] And so if you're looking at a return on investment, you're going to have to do something.

[00:12:37] So either it's going to have to be that huge growth expansion that drives it up,

[00:12:41] or you're going to have to cut costs somewhere, or ramp prices.

[00:12:44] So we'll see what happens.

[00:12:47] But one thing I will state is I don't think we, at least us three, were that surprised that this occurred.

[00:12:52] Maybe not from Iris acquiring, but no, with what Dext had done with the increasing prices back in the last year,

[00:13:00] and then the push on the new releases, the really hard push over 2024, it was leading to the playbook up to sale.

[00:13:07] So we weren't massively surprised the sale occurred.

[00:13:10] I think there was a lot of like, wow, in the marketplace, but it was pushing that way.

[00:13:15] It's just about the right timing from their perspective.

[00:13:17] And OK, so Sage have also just released their September 2024 results.

[00:13:25] Just going off the press release, they've released this sort of summary overview of what's been going on.

[00:13:30] Fair to say another successful year for Sage.

[00:13:33] Perhaps not too surprising, given that they've been growing by around about 10% to 15% for the last few years anyway.

[00:13:41] And that is, again, reflected in their metrics today.

[00:13:44] So their recurring revenue up to 2.3 billion, sorry, just over.

[00:13:51] And that's up from 2.1 billion the year before, so an 11% change.

[00:13:56] Their operating margin and their EBITDA is up as well by about 16%.

[00:14:01] So very, very cash generative as a result.

[00:14:05] And as a consequence for anyone that's an investment in Sage, you'll be getting a bit of a windfall

[00:14:09] because their share price on dividend is all going up as well at the same time.

[00:14:15] Now, what I thought was really interesting, though, was that, yes, they've got this great overview in terms of the press release and stuff.

[00:14:21] But as always, the devil's in the detail when you dive into the annual report and stuff.

[00:14:26] And I was really surprised.

[00:14:28] In the director's report, they make this huge play about their EDI stuff that they're doing.

[00:14:33] And they also make a huge play about the sort of Sage foundation that they've got.

[00:14:37] And not one jot of that gets mentioned in the press release, which I think is really disappointing

[00:14:42] because there's some really interesting stuff that Sage are doing there.

[00:14:45] And it's well worth, you know, if you get the chance to sort of dig out those accounts and have a quick reader report.

[00:14:50] Yes, it's almost 270 pages, so don't read all 270 pages.

[00:14:54] But if you do find the DEI bits and the foundation bits, it's really interesting to see where, you know,

[00:14:59] what Sage are doing as an organization and where they're either making investments or making those charitable funds available

[00:15:06] and what they're doing with those.

[00:15:08] I thought that was surprising that they didn't make more of a play on that in the press release

[00:15:12] because I was a little bit disappointed.

[00:15:14] I haven't dug right into the detail of the numbers, to be fairly honest, in terms of where all that revenue is coming from.

[00:15:20] We know historically Intact has driven a lot of that revenue.

[00:15:22] The transition of the traditional on-prem products into the cloud has been a bit more challenging.

[00:15:29] hasn't grown as much revenue.

[00:15:31] I will do that at some point and see if there's any more data to be gleaned from these numbers.

[00:15:35] I think it's a classy thing to do, not to mention DEI or call it out as something

[00:15:41] because I actually think the problem is with most of these reports or the way that they're trying to mask something.

[00:15:51] And I think that seems insincere.

[00:15:53] It needs people like you to actually read the report and tell us what was in it.

[00:15:57] So was it a good read while you were in bed this week?

[00:16:03] It is a really good read.

[00:16:05] I mean, I don't have it in front of me, actually.

[00:16:07] I'm just trying to find it.

[00:16:08] But there's some really interesting stuff in terms of the breakdown of staff in terms of,

[00:16:15] obviously, the male-female splits, but also how they cover off people from different backgrounds,

[00:16:21] different races, religions, et cetera.

[00:16:23] What they're trying to do to encourage people to come into the industry.

[00:16:27] And obviously, being a tech business, that does tend to be male-dominated,

[00:16:30] tends to be white-dominated as well, historically.

[00:16:32] So what I found was it wasn't just about chucking out some numbers and saying,

[00:16:39] look how great we are as an organization.

[00:16:40] It was really talking about their strategy and how they're trying to encourage women into the organization,

[00:16:45] for example, how they're trying to encourage minorities, what they're trying to do to do that.

[00:16:48] And I think, if I'm being a little bit sort of critical, I think other large organizations only do this

[00:16:56] because they've got a statutory requirement to do it.

[00:17:00] Whereas I feel like Sera haven't, sorry, that was a slicker of a tongue.

[00:17:04] I feel like Sage haven't just paid lip service to the statutory requirements.

[00:17:09] They've actually got a little bit further to explain why this is important to them as an organization.

[00:17:12] I think the thing that I took from it is they seem to have gone mostly through their transition

[00:17:17] transition to the cloud.

[00:17:19] Now, Sage played loose on the word cloud, so I'm not sure exactly what that means.

[00:17:22] But the big thing they highlighted was that it was something like 80% to 90% transition to the cloud now,

[00:17:27] which I know they had to go through a lot of pain points.

[00:17:28] But they continue to develop their cloud products.

[00:17:31] So something that they'd, you know, they always do a summary of their releases for the month.

[00:17:36] And key things that came out in November were the shareable links for sales invoices now in the cloud product

[00:17:43] in the corporation tax module.

[00:17:45] Obviously, they're doing a whole thing with accounts and corporation tax through Sage.

[00:17:49] They've got double taxation relief built in now.

[00:17:52] They've got the ability to delete bank statements and bank reconciliation items inside their page.

[00:18:01] And they've also released accounts prep by auto entry, which I don't think is what I would term as accounts prep.

[00:18:07] But it's the ability to capture bank statements, receipts and invoices and bring them all together into a trial banter export.

[00:18:13] I'm assuming on a very, very micro level from what I can gather on this.

[00:18:18] But they're calling it accounts prep.

[00:18:20] I'm not sure that's what I'd call it.

[00:18:22] But it's still a pretty cool feature that Sage released.

[00:18:24] Talking of new release, there's something from Data Melino, who help you with the data capture of line items into QuickBooks and Xero,

[00:18:34] have released something that allows you to have billable expenses on a line item level.

[00:18:41] So for some reason, Xero's own hub doc doesn't cover this, but it looks like there's some interest in the future.

[00:18:50] Coming up next then, Fathom have launched a bulk update facility into their products.

[00:18:57] This is particularly aimed at anyone that's dealing with large multi-entity reporting, forecasting, etc., etc.,

[00:19:04] that you might expect to see.

[00:19:08] And that means that rather than having to update data individually on a client-by-client basis or a company-by-company basis,

[00:19:15] you can now do this en masse across a group of entities.

[00:19:18] And you can pull the data from Xero, QuickBooks Online, Sage, NYOB, all at the same time.

[00:19:24] And you can actually just choose also if you want to.

[00:19:26] You can choose which individual companies within the group would do that.

[00:19:29] So you don't have to do it.

[00:19:30] It's not an all or nothing.

[00:19:32] You've got the choices to do that, which is a great way.

[00:19:34] Of helping just to feed your data back into reports as you're building those up.

[00:19:39] Particularly if maybe you're partway through the bookkeeping process and you might have done, say, seven companies out of nine

[00:19:44] and you just want to check what the reporting is starting to look like.

[00:19:47] And then you can just carry on and finish off the updates and things like that.

[00:19:51] Alongside that, they've just made some other UI and UX changes and stuff just to make it a little bit easier to navigate around inside the products,

[00:19:58] particularly around the summary, the company summary page, and also the consolidations pages.

[00:20:04] So all of this is kind of leaning into everything to do with groups and stuff.

[00:20:08] And then the final update that they've released is just around permissions, again, linked to the group's functionality and things,

[00:20:13] just to, again, make that a little bit easier for you to manage who can see what within an entity or a group,

[00:20:19] which entities within a group someone should have access to if they need to have access to them as well.

[00:20:25] That's some nice little releases from Fathom there.

[00:20:27] I thought I'd bring this week's app news to a close with my roundup of the new apps that are on the Zero App Store that came out in November.

[00:20:36] And we've got some interesting ones here.

[00:20:39] We've got, once again, some new extraction bookkeeping style AI tools.

[00:20:46] You've got Receipt AI that has gone across pretty much all Zero licenses.

[00:20:50] And you've got Agrileco, which I'm probably not saying correctly, but Agrileco Verify,

[00:20:57] which is an end-to-end accounts payable system doing the same sort of thing that's directed directly at the UK market.

[00:21:06] One that I thought was really interesting is one called FlexEarn,

[00:21:09] which allows employees to access a portion of their wages in advance.

[00:21:12] This is something that Employment Hero has been talking about doing for a while.

[00:21:16] And I'm not entirely certain if FlexEarn is integrated into Zero Payroll to do this,

[00:21:21] or it's into another payroll platform, or it's looking at integrating between both platforms to do that.

[00:21:26] But I think that's a really interesting concept, something that a lot of payroll systems are trying to do.

[00:21:32] You've got some other apps that we've talked about many times that have also been either launched or relaunched on the App Store.

[00:21:39] You've got one called Ag Drive, which I think I talked about on the podcast a year or two ago,

[00:21:43] which is for those agricultural contractors trying to streamline their automation when working with farm businesses.

[00:21:52] You've got Lightspeed Restaurant K-Series, which is probably one of the worst names that I can think of for a recognizable name for an app.

[00:22:02] But it's basically an app that they acquired a while ago.

[00:22:06] I'm trying to remember now what that was called, which was a restaurant-based app that they've now rebranded under the Lightspeed Brand.

[00:22:12] And you've got Mintsoft, which we talked about as well, which is a 3PL provider system, which I thought was already on App Store.

[00:22:18] Maybe it fell off and has been brought back in.

[00:22:19] And then Live Flow, which is an integration directly into Google Sheets and Excel from Zero.

[00:22:25] And now we need to do a lot of live reporting.

[00:22:27] We've seen a few of those and I've got one just to finish, which is just for Australia, not for the UK.

[00:22:33] But it's called Australian Air Conditioning Distributors, which I think is possibly the most boring app name I've ever come across.

[00:22:41] So that's how I'm closing out App News today.

[00:22:48] Okay, well, I am delighted to say I'm joined again by Vipul from our fans track.

[00:22:52] And we're discussing more of the contents of the accounting talents research and just general research that they put out in the paper back in May.

[00:23:01] We're going to be talking about AI as a topic of choice, of course.

[00:23:04] So I guess the first thing that I want to ask you is, what can firms do?

[00:23:09] How can they integrate AI whilst making sure that they preserve this human element of the profession that's so important?

[00:23:15] I think talking about AI, I think certainly the last two years, and you'll know this, John, we've been on multiple events.

[00:23:26] And they always discuss AI.

[00:23:29] And I think AI is the answer.

[00:23:31] What was the question?

[00:23:32] I think that's kind of the general theme that everyone thinks.

[00:23:36] And look, AI is absolutely, and it's a very general term, I think, that's been applied to many, many things.

[00:23:44] I think if we discuss technology in general, it should be an enabler to help the profession deliver more in less time.

[00:23:55] But I think the key in all of this is, how do you encourage people to come into the profession?

[00:24:04] And how do you make their role interesting enough that they hang around and see this as a way that they can help their clients and help their business,

[00:24:18] whether they're an employee or an owner of a business?

[00:24:21] I think those are the key parts in that.

[00:24:24] And I don't know about you, John, but I found when managers and partners took me out to see clients,

[00:24:34] rather than just leaving me back in the office, the most interesting part of my life was actually seeing entrepreneurs

[00:24:41] and seeing what they did, whether they were making widgets or high-tech stuff.

[00:24:47] Yeah, it's the best bit, isn't it?

[00:24:49] The best bit about our job, right, is the variety and the types of clients that you can go and see,

[00:24:54] the types of people, their backgrounds, their circumstances, all of those things.

[00:24:57] It's what I really like.

[00:24:58] And I mean, I just want to touch on a couple of things that we pulled out from the report.

[00:25:01] And there was a comment in there that really struck me, which was that at the moment,

[00:25:06] truth and trust do not sit comfortably along AI.

[00:25:09] And I thought that was really fascinating because surely that's our jobs, right?

[00:25:12] As accountants, we should be the embodiment of truth and trust when we're delivering services to our clients.

[00:25:18] Yeah, no, absolutely.

[00:25:20] And I think that's probably, if there's a reason why we want to call it AI has not kind of taken over,

[00:25:29] it's because as an industry, we're conservative with a small C.

[00:25:35] So we're going to make sure before we let it loose with real client information,

[00:25:42] we want to tick all the compliance boxes that it's safe, it's secure,

[00:25:49] that data hasn't been compromised in any way, shape or form.

[00:25:54] If that's the case, guess what?

[00:25:56] We will then do it more.

[00:25:58] And you can see in terms of if we looked at the curve of adoption for cloud accounting.

[00:26:06] Yes.

[00:26:06] Yes.

[00:26:07] We go back only 10 years.

[00:26:09] Yeah.

[00:26:10] The likes of Xero and QuickBooks would have had less than 100,000 subscribers.

[00:26:15] Different times completely back then, wasn't it?

[00:26:17] And now you look at the numbers, it's in the millions.

[00:26:20] And I think it's going to be a little bit like that in this world.

[00:26:25] But I think the talent shortage is going to compress that time step as well,

[00:26:31] because they're going to say, actually, we've lost a load of people to the profession.

[00:26:36] We are not getting enough youngsters in because they'd rather go work for Apple or Google or something like that.

[00:26:43] I think the problem is, is that accountancy in general has a bit of a reputation around it of being fairly stuffy and boring.

[00:26:50] It tends to be long hours stuck in an office.

[00:26:53] And I think all of this good stuff where we're talking about being able to interact with different clients,

[00:26:58] being able to use your brain, really, if you like, and your emotional intelligence

[00:27:04] and engage with people in different levels to advise people,

[00:27:08] all of the stuff that you and I really enjoy about the work.

[00:27:12] We don't really promote that too much.

[00:27:14] I noticed in the analysis that you had, there was around about 20% of firms that had no plans to adopt AI

[00:27:21] or didn't really know what they were going to do.

[00:27:23] And then around about 30% of firms were in the planning phase.

[00:27:26] So around about 50% of firms really weren't doing anything, let's say.

[00:27:30] And that might be a little bit harsh on the ones in the planning stage.

[00:27:34] Have you seen really good successful examples of firms that are now starting to adopt, say,

[00:27:39] large language models or some of the other stuff in the periphery

[00:27:41] that's starting to make a difference in the way that they run their accounting practice?

[00:27:45] I think some people are using it, for example, you have a meeting.

[00:27:52] Yeah.

[00:27:53] You no longer have a scribe in the room.

[00:27:56] You don't need a scribe.

[00:27:57] There's technology there that will help you summarize a meeting, for example.

[00:28:02] So that's a big time saving because it will then give you, oh, these are your action points.

[00:28:08] And obviously you can go and edit it, but it certainly shortcuts that part.

[00:28:14] But I think the adoption will be greater when we see a real life example of a problem being solved.

[00:28:25] I think if we talk about it generally, it won't solve the problem.

[00:28:31] So to give you an example, obviously Xero and QuickBooks and the like were there.

[00:28:39] We did not offer bookkeeping services until the OCR solutions started being more reliable.

[00:28:49] But I think the key in all of this, that it solves a specific problem when that problem is seen to be.

[00:28:56] And look, it's not 100%, but it's enough that actually, look, I'm saving 60%, 70% of my time.

[00:29:03] Absolutely.

[00:29:04] Yeah.

[00:29:04] I guess it's all about turning the dial, isn't it?

[00:29:06] That's the impact of technology is that certainly in my experience has been that if you kind of don't have a problem to fix,

[00:29:15] and again, I think you alluded to this at the beginning is like we're kind of saying, oh, AI is the answer,

[00:29:19] but we still don't know what the problem is that we're trying to fix.

[00:29:21] Correct.

[00:29:22] What's the question we're asking of it?

[00:29:24] You know, we've got an answer, but we're not really sure what we're doing with this.

[00:29:27] And that is quite often the case.

[00:29:29] But then as soon as you do find that problem and then you can come up with the answer,

[00:29:33] that makes a massively tangible impact on organization.

[00:29:37] Well, Vipul, it's always great to talk to you.

[00:29:40] I'm going to throw it back out to our audience and sort of say to them, look,

[00:29:42] if you're using something really sexy in the AI world, we'd love to hear about it.

[00:29:46] You know, we'd love to hear about what you're implementing, what's making a real significant change to your business.

[00:29:52] Share your ideas because it's these cross pollination of ideas that helps us to push the profession forward.

[00:29:57] So let us know what you're doing and it'd be wonderful to hear from you.

[00:30:02] Thank you.

[00:30:07] I'm delighted to be joined by Joe Lyons from Nook, the co-founder who has recently exited his business to Modular.

[00:30:15] Joe, congratulations.

[00:30:17] Thanks for coming on the podcast.

[00:30:19] Tell us like more about where your head is since you've made the big decision to exit to Modular as a business.

[00:30:26] Yeah, thank you.

[00:30:27] Thank you, Indy.

[00:30:27] Great to be with you.

[00:30:28] And yeah, hey, Ryan.

[00:30:29] Also great to have you here as well, as you were saying.

[00:30:34] Ryan's right at B team.

[00:30:35] We don't acknowledge him on interviews, Joe.

[00:30:37] Just don't give him, don't panic.

[00:30:39] He will ask.

[00:30:40] I feel that's totally unfair.

[00:30:43] Yeah.

[00:30:43] Yeah.

[00:30:44] Amazing news.

[00:30:45] So yeah, as of 19th November, Nook was fully acquired by Modular.

[00:30:51] Yeah, huge decision for us as a team.

[00:30:55] And it was something that we'd been looking at for several months.

[00:30:58] We ran a competitive process and Modular were the best fit from a vision, people, technology perspective to take the product, customers and team into Modular.

[00:31:12] And they're going to give us a great platform to grow faster than we could as an independent business.

[00:31:19] And yeah, we obviously actually now we've paused our wait list and we're getting tons of demand thanks to the great PR that we've had around the acquisition.

[00:31:29] But we'll be launching Modular AP powered by Nook in early 2025.

[00:31:37] That's amazing.

[00:31:38] And were you, so you'll be staying on with Henry as well, your co-founder into Modular.

[00:31:44] How much autonomy will you have relative to then working within, I guess, the larger beast as Modular?

[00:31:52] Look, we're going to be here for the long run, but it's, of course, very different going from a four person organization to a 400 person organization.

[00:31:59] You know, and going from an unregulated business where we, you know, borrow the Visa currency card license to a regulated business.

[00:32:07] And so there are going to be some changes to processes, to systems and just the way that we get stuff done.

[00:32:14] But the senior team Modular have been really clear.

[00:32:18] They want us to continue to build for our customers, stay very close to them at speed.

[00:32:24] And what they're bringing in is obviously all of the experience of running a payments and financial technology company that's doing 100 billion in annualized transaction volumes.

[00:32:35] And all of those support, compliance, regulatory pieces that, you know, we just didn't have the money or capability to build.

[00:32:45] So, yeah.

[00:32:46] That's a huge firepower behind you then with their regulated business.

[00:32:51] So will that mean a complete transition away?

[00:32:54] And so you'll have, I guess, a period of rebuilding or reorchestrating some of that banking infrastructure as well.

[00:33:29] So, yeah.

[00:33:30] On top of that new banking infrastructure.

[00:33:33] Will you still have that same relationship with accountants?

[00:33:37] And, you know, how will that differ in any way from what Modular has or has as a foothold in the market too?

[00:33:46] Yeah, I think it's an interesting observation, right?

[00:33:48] So one of the reasons that Modular were the right partner to acquire Nook is that they have a similar vision for how to enable accountants and their advisors

[00:33:59] to manage accounts payable and payroll payments.

[00:34:03] If you look at their product today in the business payments world, of course, they do a lot of other stuff.

[00:34:09] You know, obviously, historically with the underlying infrastructure behind Revolut and other fintechs.

[00:34:13] But if you look at specifically what they do in business payments, they support thousands of customers on a great payroll and supplier payments tool.

[00:34:21] Although lots of volume going through, obviously, on payroll.

[00:34:24] And Nook, obviously, is almost a flip of that where we focus very much on that supplier payments or we call sort of the end-to-end accounts payable journey.

[00:34:32] So the hope here is and the plan is we bring those two elements together at great scale with really well thought out customer experiences and workflows.

[00:34:45] Something I guess from an accountant's perspective we're seeing is Modular is, you know, it's been a powerhouse for quite a while.

[00:34:52] It's traditional.

[00:34:53] It's tech is possibly a little bit older compared to, you know, what Nook does.

[00:34:58] How are you going to fuse those together?

[00:35:02] Obviously, you're focusing mostly on the AP side.

[00:35:04] They're going to continue on the payroll.

[00:35:07] But at some point, one tech engine has to overcome the other one, surely.

[00:35:12] So is there already a vision of how those two different pieces of tech will work together?

[00:35:20] Yes.

[00:35:20] And as you know, right, like what we've got written down and sketched out now is going to evolve as we get direct market feedback, you know, and start pitching it.

[00:35:30] But we see a world where there's a shared FinOps hub where an accountant, direct business, delicate business of an accountant can manage all of those financial workflows in a single place.

[00:35:45] And I think together today we do two of those very well.

[00:35:50] So payroll and supply payments or AP.

[00:35:53] But in the future, we want to start looking at more broadly cards, lending, treasury and so on.

[00:36:01] And so we, yeah, we definitely have some big decisions to make around how we bring those experiences together because, yeah, you don't want to be in this tool for XYZ and this tool for XYZ.

[00:36:14] That absolutely needs to be a harmonious experience.

[00:36:16] And a lot of the work now, a lot of the thinking that we're doing is in how we do that and over what timeframe, because to your point, customers need to have an uninterrupted service, whether they're a modular existing customer and they want to move over to Nook or indeed they're a Nook AP customer and they're very interested in taking advantage of what modular built.

[00:36:34] So, yeah, that's where a lot of thinkers go at the moment.

[00:36:38] And I think something that a lot of accountants and definitely clients have not realized is how much modular does.

[00:36:44] I was talking to one this week and they're like, oh, yeah, I'm going to use Sage, you know, Sage Payments.

[00:36:49] I'm like, you are aware that's powered by modular, right?

[00:36:52] Because they'd already said to me, oh, I don't want to use modular.

[00:36:55] So we're now going down the modular route because they've realized, OK, the whole thing is the same.

[00:36:58] So there's a bit there where modular is doing a lot more than a lot of people in the account world don't really know.

[00:37:08] But one thing that I wouldn't touch on is that when we started talking ages ago, Joe, I loved the vision that Nook had of connecting the two finance platforms together via a single tech platform.

[00:37:21] Is this something that modular kind of bought into or is this something that you now have to park because you've got so much more to do?

[00:37:30] That is a very good question. And thank you for picking up on that.

[00:37:35] It was that idea of being able to stitch together a customer is on Xero, QuickBooks or Sage or wherever together was very core to why we started the company in the first place.

[00:37:48] Of course, when you then take that idea to market, you realize actually there's so much more complexity than just solving the initial thing that customers were trying to do, which is I need to make supplier payments a bit easier.

[00:37:58] It's a bit of a disjointed experience. And so we still have some of that underlying code and written in the products and we could look to bring back that network.

[00:38:08] But I would say one thing that might happen sooner is the rollout of the invoicing.

[00:38:15] So the interesting thing with modular, they're in a lot more markets than we are.

[00:38:20] You know, just so everyone's aware who's listening, you know, before we were acquired, we only had regulatory approval to open up to UK double-sized entities.

[00:38:31] Okay. So, you know, we know where the UK is when it comes to invoicing compared to, you know, the likes of Italy and other markets.

[00:38:36] So I think we'll see e-invoicing probably pip us to actually being in the product itself.

[00:38:42] And if that does happen, then yeah, we'll bring back that functionality because instead of you passing around PDFs, it's going to be structured XML.

[00:38:49] And, you know, you'll be basically having a, probably a key based system where you could like the Xero network that I know you guys are familiar with.

[00:38:56] You could see something like that being built on top of that.

[00:38:59] So, but yeah, we've got it.

[00:39:02] We've got a full roadmap for 2025 before we get to that, I'm afraid.

[00:39:06] That is interesting as well, because when we spoke, I think we spoke a while back when we were talking more generally about this space and accounts payable automation.

[00:39:16] And with Modular's sort of various range of issuer processor, like you said treasury, other functions, does that put you more in the camp of also seeing the, given that you can see most of the different supplier payments that you could in essence be an issuer of cards as well?

[00:39:38] So, yeah, absolutely.

[00:39:40] So Modular has much more breadth of technology than actually we even knew of when we were having the due diligence conversations.

[00:39:50] And so now we've been in here for a couple of weeks and we're starting to get exposure to just how sophisticated some of the teams and technology that they have.

[00:39:59] So principal members of Visa, they do a lot of card issuance and run a few really, really interesting products.

[00:40:05] Some, for example, in the travel sector that frankly, we're not qualified to even understand yet.

[00:40:10] But again, it's one of the attractive points about the acquisition is that we could get access to some of those really intelligent people, intelligent technology,

[00:40:20] and think of how we can actually deploy that to our accountants, to our direct businesses who have been asking for more solutions in the card space that we've been able to offer with the likes of Visa Currency Cloud.

[00:40:33] Of course, we could have onboarded onto another partner, but that's more money, additional compliance, so on and so forth.

[00:40:39] So, yeah, it's, yeah, the 2025 roadmap is going to be very exciting.

[00:40:44] Card's going to be a part of it.

[00:40:46] I think Nook is super unique as well, because you were at some point, like, I remember when we first started speaking about that, what is the tech layer of what you bring?

[00:40:58] Then you've got the experience side of that as well.

[00:41:02] So the connection, the seat, like removing those friction points so that it's easier to make these payments.

[00:41:08] Then, I remember while we were speaking, you were talking about the BAS infrastructure.

[00:41:13] Back then, we started talking about the fact that, you know, why would you go through anyone that's an agency more than you go directly, say, to the regulated entity, like a railzer.

[00:41:24] And I think, am I right in thinking that Nook started somewhere there with railzer, and then there was the fiasco that happened with railzer, and then it moved to currency class.

[00:41:34] So it's so interesting that you've now moved to something where I feel like you've actually got something that's a scalable underlying proposition on the critical infrastructure.

[00:41:45] Yeah, I think it's, there's a couple of observations I have there.

[00:41:48] I mean, the story started, if you remember, with, we thought that, well, we really pitched the dream about open banking for bulk business payments.

[00:41:57] And I know that you, you both know that some of the challenges and pitfalls with that.

[00:42:02] So we actually built the solution initially on open banking.

[00:42:06] And then after some feedback and some, some, some tasks for customers, we realized that we needed to be on what was really sort of like BAS then.

[00:42:15] But now people are calling it embedded finance, but we all understand what there is accounts and payments provided to non-regulated businesses.

[00:42:21] And so we made the switch over to Rails Bank.

[00:42:24] And then there were some challenges with that business, which meant we started the onboarding process with Visa Currents Cloud initially to get access to FX.

[00:42:31] And then they, they gave us the GBP rail.

[00:42:34] And so we moved entirely onto them.

[00:42:36] And now, yeah, we've joined with a regulated entity.

[00:42:40] So, so yeah, we, we, we're not going to go have to go through the EMI process ourselves.

[00:42:47] So that's definitely a huge advantage.

[00:42:49] We can, yeah, we can just slot into, into, into modular's license.

[00:42:54] Exactly.

[00:42:55] I think that is so much better because you're in effect going with experts, that's it.

[00:43:02] We've not just done it the first time, but instead have track record.

[00:43:06] They are regulated.

[00:43:08] And so they, you know, it's something that they, they have obligations that they have to meet quarterly, annually, and they are checked on it.

[00:43:15] So it's, you know, a great synergy of fit, probably better than I think most have in the space.

[00:43:20] So I'm quite excited for you because I think that now you've got a lot more avenues open to you in general, where it comes to payments and cross-border and lending and treasury and cards.

[00:43:32] So yeah, it's really what I couldn't have, when I saw the news, I thought, yes, Nook, absolutely smashed it.

[00:43:41] Thank you.

[00:43:41] Thank you.

[00:43:41] Yeah, of course, you know, it's, it's hard letting go of, not letting go, but, you know, realizing that, you know, you're not going to be in total control.

[00:43:51] But that's quickly negated by all of the other benefits that we've discussed on the call today.

[00:43:58] So yeah, we're, we're all very, very excited about, about the future.

[00:44:02] And I think for customers, they're going to see us deliver product faster, deliver it in a way where I think if they were sort of teacher on the edge, okay, you know, Nook, early stage startup, you know, I need to get comfortable with being an EMD agent.

[00:44:14] What's he money, they can look at a modular pedigree, employee size, capitalization, licenses.

[00:44:23] And this is going to give more comfort to the larger accounting firms that might be, you know, less comfortable going with this early stage firm as someone sort of the more nimble, cloud, cloud-based or cloud-first firms, I should say, that have adopted us.

[00:44:37] So yeah, really, really excited about the future.

[00:44:39] Do you think we're going to see a bit more consolidation in this payment space?

[00:44:42] Do you think there's going to be other players out there that are going to now start to merge?

[00:44:46] Because, you know, you've had quite a lot of probably more dynamic players coming to the market trying to change things such as yourself.

[00:44:52] Do you think that now it's getting a bit crowded and you're going to see, yeah, some combinations?

[00:44:57] I think it's a good take.

[00:44:59] You know, everyone's aware of the amount of money, venture money that's like being plowed into this space.

[00:45:06] And that's created for accountants, you know, for customers, be they're a business or accountants, a plethora of options.

[00:45:13] And I think that the market's big enough to support, you know, a bunch of players, but probably not as many as there are at the moment.

[00:45:20] And so, yeah, I think it wouldn't surprise me if there was further consolidation.

[00:45:26] I think what's interesting is that if you go and speak to accountants and businesses, they are all calling for the same thing, which is that, you know, back to that vision of how do I actually manage all these different workflows?

[00:45:38] So I want a better business banking experience.

[00:45:42] I want a better payment experience.

[00:45:43] I want to understand how to maximize my free working capital with money market funds.

[00:45:49] And so, yeah, there's going to be, I wouldn't just limit that consolidation to the payments players.

[00:45:56] I think there's some other sort of adjacent players as well that we might see tucked into some of the either ERP solutions or indeed sort of large fintechs.

[00:46:06] And considering that you've now, I guess, sold Nook, does that mean that the next event, the drinks are on you, Joe?

[00:46:13] I can stretch to a couple of drinks for you, Ryan, I think.

[00:46:18] I'm a lightweight.

[00:46:19] It'd only be a couple.

[00:46:20] Oh, great.

[00:46:21] Fantastic.

[00:46:22] Yeah.

[00:46:22] Well, yeah, let's definitely do that.

[00:46:24] Yeah.

[00:46:24] I'm looking forward to it.

[00:46:25] I think we've really appreciated all the support from everyone in the community.

[00:46:30] This is why you do something like this is you want to build a product that serves customers well and they get delighted about.

[00:46:36] And so, yeah, I'm looking forward to seeing you both in person and celebrating with a drink.

[00:46:41] Thanks, Joe.

[00:46:44] Thanks for joining us on today's episode.

[00:46:46] If you've got any feedback, then leave us a comment, drop us an email or get in touch via LinkedIn.

[00:46:52] We're always open to hearing more from any of our listeners on how we can improve the format of the show.

[00:46:57] Also, other news articles that you'd like to hear more about.

[00:47:00] We're very keen to hear from you in terms of whether there's some things that we have not covered already in the last few episodes.

[00:47:07] Catch us on the next one.