Firm Models, Big Budgets and Nobody checking || In The Loop

[00:00:00] Hello and welcome to another episode of Digi-Tools In Accrual World, brought to you by The Loop. We cover all the things that are wise and wonderful in our accounting tech world to help you cut through the noise of the busy app marketplace and more recently AI marketplace and figure out whether there is a technology that is a good fit for your practice or for your firm.

[00:00:21] And today we're focusing on a handful of recent news items, mainly AI-centric, and we are covering across the board things that are happening at a government-wide level, UK strategy, as well as some tech updates which you might be interested in with Mimo, with Katana and with FreeAgent.

[00:00:40] So my favourite piece this week is definitely seeing more being done by Sage on the embedded accounting world and hearing some perspectives on that from both Ariana and John, who are joining me on this episode, and I'll throw it over to them to tell you a little bit of what they enjoyed on today's podcast. Thanks, Indi. I really enjoyed talking about AI and the strategy that accounting firms have, whether they have one or not, and how they're planning to go about spending a hell of a lot of money.

[00:01:10] Also looking at employment in the UK and what that means in terms of geographical locations, what that means for professional services, and the indications of what's available, how are we working, and how does employment fit into that. And also some product updates, as you've mentioned. So really enjoyable chat today. And I mean, I'm still a product guy at heart, so I really like the Mimo stuff and some of the bits and pieces that we talked about, because it's just sort of cool to see what people are building and launching out of the market.

[00:01:40] And of course, I love to spar in with Ariana over the various things that we talked about, because she's always a good challenge for me. It's quite an intellectual, stimulating debate, as always. I've got you off a few times, John. It was just like, it was like an ongoing sort of like, oh, I've got another perspective. I thought, not today, you haven't. We need to set up our own very special podcast for you in the Johnalogues, which hopefully is coming one day. Shall we crack on with the app news and let's let people hear what this episode is all about?

[00:02:10] We're welcoming Fishbowl to our podcast. Fishbowl is inventory and manufacturing software for businesses that have outgrown spreadsheets and bolted on add-ons, but aren't ready for full ERP. They've got over 25 years building this product in the US and 15 years in Australia. And now they're showing up properly in the UK, both desktop and cloud working alongside QuickBooks and Xero.

[00:02:32] What stands out is their manufacturing depth. There's multi-stage build of materials with sub-assemblies, mid-build component swaps without having to cancel the work order and reissue it, and capacity and production planning. True landed cost reconciliation and all four costing methods, VIFO, LIFO, standard and average, which is rarer in this category than you'd think.

[00:02:53] The other thing worth knowing, when you're quoted, the price includes the product. So barcoding AI insights, the reporting modules is all in. They're not on a list of extras. And when you call support, you get a lovely Fishbowl employee. So the accountability always stays in-house. It's worth a look if your inventory tool wasn't built for the operations you're actually running right now.

[00:03:16] So I've got an update from Digits over in the US. They just partnered up with one of the largest firms in the US, as it happens. Probably a firm name that's maybe not that familiar to most of our listeners over here in the UK and Europe, but in the US, it'll be a name that's very much recognized. It's called CLA, Clifton, Larson, Allen. They are in the top 15 firms, have been for a while now. And of course, that's all come about through various activity in terms of consolidation and bits and pieces that's going on over there.

[00:03:43] But yeah, this partnership with Digits seems really interesting insofar as it doesn't appear to be just CLA buying Digits and using it in the practice. There's talk about using some of CLA's own proprietary AI and information, and it doesn't really disclose what that is, to train Digits on the client base and workflows. It's not massively clear if this is an extension of Digits into CLA or if this is kind of like the meeting of like a CLA product or development with Digits.

[00:04:11] But effectively, what they're promising, of course, with everything AI related is like they're going to super automate everything. They're going to make it a lot easier to categorize transactions, to do the review work and just to broadly kind of like mine some client information so they can do more advisory type work and make that whole judgment and transaction processing a little bit easier. There's a bunch of quotes on there, which I'm not going to read out and stuff. And there's also some trademark stuff. So the lawyers have got very excitable about this and what they've been doing all of this.

[00:04:37] But I guess, you know, this is probably just like the start of maybe what we would expect to see. You know, maybe this is the next era of what we saw with the cloud transition where people were jumping into Xero and QuickBooks and FreeAgent and all these other products a while back. Maybe now it's the rise of the AI powered kind of GLs and there's more than one out there in the Optus Digits. Maybe this is going to be this sort of a stepping point, if you like, or the stepping stone for people to start to move and across.

[00:05:04] And I know from talks with some accountants here in the UK that some people are starting to ask those questions. Like, should I stick with Xero, for example, and move to Xero? I don't think it's a kind of a clear cut choice at the moment, but I know, Arione, you've seen some of those conversations as well. So what are your thoughts on this? Yeah, I mean, with everyone now having AI at their fingertips, I mean, even the smaller firms are saying, I can now do things myself, right? Let alone some of these larger practices that you expect them to be on top of this and all over it, to be honest.

[00:05:35] But as you say, the decision right now for those that I think are more into kind of this side of things with AI and everything is looking at, well, what does my future look like for my workflows and efficiency as well? I think we're in a little bit of kind of like a muddy situation right now.

[00:05:55] It's not so clear because you have to consider one, right now we have systems and processes in place, which may not be the most efficient in the world because of the limitations we have. But there is a way of working that everyone is used to. But now we've got the ability to make changes and do things ourselves.

[00:06:15] One, do we have the experience and the knowledge and, you know, being able to change, changing our team's mindsets, retraining them? Will we even get it right? You know, but if we don't, what does that mean for the future of our firms?

[00:06:32] Does this, I mean, does this tie into why we're seeing companies that are choosing one partner over another to maybe use some of their proprietary workflows, their data and help them figure out how they can be their own, I guess, front end for the client? So we've got like companies like Summary who are coming into the market looking to do just this. We've got companies like Artipact who have proposed the same, more in the US than here.

[00:07:00] And then we've seen other ones, right, like Briefcase and Mimo who have also been more involved with how to enrich the firm with, I guess, different technology and AI-assisted processes are based on their data.

[00:07:16] Is it that, you know, you're kind of looking and thinking, is this the time for maybe not like a really large firm, but a decent mid-sized outfit to then have their own CTO and start looking at whether they can, they need to have a partnering approach with some of the other technology companies that are looking to do just this so that they can also survive, I guess.

[00:07:41] I would say so. I think that's where, again, some of the more mid to larger firms are dabbling with that. Smaller firms, I think it'd be a long time before they see this, unless with companies like Briefcase that you've mentioned, it's testing the waters and trying it out and seeing. But I'm not sure that the smaller firms fully understand what that means for them. There's also that fear of if it's training on my data, what does that mean for data security?

[00:08:08] And there's so many questions that I think many will have and don't necessarily understand how it will affect them. Maybe one other question, Ariona, because I mean, going back to your point, Indi, I think one of the reasons we see a lot of this in the US is because actually in the US, I think actually the market's a little less mature than it is here in the UK. There's a lot more manual processes, particularly around taxation.

[00:08:30] You know, the kind of what they would call your cash work, your sort of like client advisory services type stuff, which is really bookkeeping and outsourcing. You know, that again is much more mature here in the UK than it is over there. And so it's a big rapidly expanding opportunity for a lot of firms over there. But I think maybe the pointy question here is, you know, Ariona, you talked about kind of changing processes and systems. And you mentioned a few products that are kind of looking at that systemization, you know, and automation of systems and processes.

[00:09:00] But this is almost like, yeah, we're almost talking about a drastic step here. And you famously went through that with your firm in terms of ripping everything out and starting again. Do you feel like you're at a position where you could sort of say, right, OK, QuickBooks be damned, you've gone and digits is next or something else is next? Or are you actually looking at it more along those lines of that iterative approach that you kind of talked about? I'd rather just nibble away at processes. Do you know what? I think it's really it's a great question. I am a bit crazy in that I do like to just go and do big projects in one go.

[00:09:30] So, however, having been through it, it's not so easy. But most recently in the last six months, I have changed three or four of our biggest software within our business because there's always something better. And I don't I don't I have that fear of like I want to make sure that we are using the best tools to be able to provide our clients with the best service because our clients expectations are changing.

[00:09:53] So I'm always keeping up to date with that in terms of a big change, I get rid of QuickBooks completely right now. I don't see that happening, but I don't know. I'm also in that in that phase of looking at what's happening. What can we do with AI? What are other people doing? We've made some changes that we've added briefcase, for example, and we're seeing huge changes with that within the firm in what we can do.

[00:10:21] But I'm sure there will be others that will come along and make those changes even bigger for us. What will happen with our GL and whether that changes? I just see that that will be a huge project. But I never say never. And on that note, actually, there was a SAGE roundtable talking about GLs, a different GL for a moment. And they held that on embedded accounting covering Lucy Cohen's, let's call it Lucy Cohen's Canary.

[00:10:48] So the gist is embedded accounting only works if the profession gets a proper review and correction layer before automated bookkeeping becomes automated tax filing. I was due to be at that SAGE roundtable on embedded accounting. I'm still kicking myself that I missed it because of a twice delayed sports day, thanks to our heat wave over here.

[00:11:08] But it does feel like the credit is due there because SAGE brought together a number of people in Zoom to talk about what that embedded accounting needs to look like in that AI era. I think the conversation has been drifting for a while.

[00:11:24] As anyone that's read Lucy's articles, it's been drifting into fairly dangerous territory where you've got different banks, different accounting softwares looking at the bookkeeping and tax filing as something they can either tuck inside another application or go directly to business and have a nifty interface, a few prompts, and something that allow them to file directly and say, okay, the job is done. And this is where Lucy's work has been pretty important.

[00:11:52] And I know she's gone into depth on other areas around like the whole, whether it's, you know, I think she's sort of a one woman at the moment crusade to try and make the profession look at this as a public interest argument and not just a commercial objection. If you turn the messy judgment into automated guesses at scale, the tax base is going to continue getting more and more polluted. And we will be gutting this out for possibly years to come.

[00:12:19] And it's only going to impact our economy even more so. So before AI, banking, bank app bookkeeping could already be criticized as data entry that was wearing an accounting face mask. And probabilistic AI now within it becomes even harder to spot where those errors might be because it looks fairly clean and it will repeat and it sounds super confident as we know AI does.

[00:12:44] And I think that's where the discussions or move towards is how MTD recognized software doesn't mean that it is compliant with the MTD agenda. It doesn't mean the tax treatment has been reviewed.

[00:13:00] I don't think that, you know, we're going to have something of a gentle place to start in experimenting with MTD going digital, AI, you know, being imbued in these applications and accountants being the signatory for all of this or maybe holding the baby on it because they're going to be the ones that people go back to in a panic.

[00:13:23] And we were just talking about that before, you know, when I was younger, I had my mom and dad had a shop and they were told to argue something. It went horribly wrong for them and they ended up holding a much bigger bill that they were panicked about for like months. It, you know, impacted our childhood. And this is my worry with some of this is that the accountants in this space are going to be the ones that are left holding the baby.

[00:13:47] I do think that accountants as a result need to have more protection themselves or at least businesses need to be able to recognize that these are protected accountants because they're attached to a body. And therefore, it's more, you know, in their interest to go to an accountant before they use these technologies. And then they can't be surprised later on when the software has struggled or not performed something.

[00:14:12] So I think the absence of the protected status for accountants makes this really messy because the bank or the fintech or some vibe coded accounting tool is not going to hold the liability on this, even if HMRC have said it's recognized. So your thoughts on it would be really great. Both of yours, actually, because you're both, you know, affected by this. Yeah, so that's an it's been a long, long argument, right? Trying to get our status protected.

[00:14:41] And I think there's one misconception because you'll see on LinkedIn and everywhere people arguing about, well, there are people that are regulated and they're really bad and there are those that aren't and they're really good. And it's nothing to do with the quality of the of the accountant or firm, in my opinion. It's if something goes wrong, you have someone to go to. Right. They can be held reliable, accountable, you know, so that needs to happen. But I don't think it's ever going to happen.

[00:15:09] But the worry here is that so many business owners, because it says, you know, it's HMRC recognized, as you said, then I'm doing everything correctly. It's not being reviewed. And if accountants aren't reviewing it or those that are reviewing it, what does that look like in charges? Because when you come back to the client and say, no, I've reviewed it, but it doesn't. That's not correct. And then the client will push back and say, no, that can't be because the software says it is. So why are you doing this to me? I don't even you've wasted my time. I don't want to pay you.

[00:15:37] The conversation would just it would. Yeah, I don't see how this can be good. It's super worrying. I don't know. I don't know why you're out of this. Well, fair play to Sage for asking the question before charging ahead, because they have always been quite clear about including a list of accountants that you can use and go to that they recommend. I think for me, the answer has to include something in this latest wave of, OK, this is MTD recognized and therefore filed for that software.

[00:16:05] It's the same as, I guess, you know, echo chamber of what Lucy is saying, which is we need to include something that has review, agent review or some sort of visible audit trail, some sort of source to treatment evidence and a clear line that exists between the bookkeeping assistance and the tax filing confidence level. And I think her post, her content has raised the level of debate. So I think the software vendors also need to meet that at the point that we are now.

[00:16:34] And there's only a certain number of software vendors who are actually exploring those conversations to say, is this good enough? I haven't seen lots of software vendors who use AI coming out to say, actually, yeah, this should have some level of review in it. Once they are MTD recognized, then they say, yeah, tick in the box, we're done.

[00:16:55] But even they know that that's still not the way that, you know, if there's some level of generative AI within it, they must know that the models can hallucinate. So this needs to be reviewed because if it goes wrong at scale, it will cost our economy a lot of money. I saw something. Sorry to interrupt. I was watching TV and there was an advert from QuickBooks actually talking about their new AI agents and stuff and showing how.

[00:17:22] And in the past, this has been very dangerous in adverts, but they changed it up saying that AI agent will be able to do this and this and this. But at the end, it did say and with a quick agent, your accountant review working together, then you know that your taxes will be accurate. That's the first time that they've added that. And I thought that was amazing. If all of them could do that, just to highlight, because they've said all the, yeah, it's great.

[00:17:44] We can do so many great things. But they did add that caveat that with an accountant review, you know exactly what you're doing. Your figures are correct and, you know, you've got peace of mind. OK, so I'm going to go into a piece from the accounting web talking about AI and accounting and the workflows that UK firms are automating right now. The data draws on the accounting web and SAGE joint report.

[00:18:07] But I think the headline number to take note of is that almost half of UK firms are planning to invest up to £100,000 in AI this year. And when you look at where they're planning for that money to actually go, the top use is automating repetitive tasks like data entry at 44% of them.

[00:18:25] Then document processing and transcription, which, although it's genuinely good news, there are, you know, those are real hours which are coming off real jobs and firms are seeing the returns today rather than waiting for the next generation of technology. It's a shift from where we were, you know, two years ago, but where it was all still theoretical. But one thing I'd say is a lot of the use cases which they're planning to use the money for, they're for things, technology that we've already had for at least 10 years.

[00:18:53] It's already been in the market. So it's interesting to see that the money is going into that when we already have the tools. But at least it's positive that things are changing if those that weren't using them before, they may be using them now. But something I think we should take note of is that everything at the top of that list is the input side work and everything that requires judgment, things like fraud detection or forecasting or scenario analysis is sitting near the bottom at around 25%.

[00:19:23] So as a profession, we're automating cost, but not yet automating our way into value, which seems more of a kind of defensive question, not a strategic one. And something else that we should be noticing is 21% of those firms said none of the listed use cases above. So whilst half the market is budgeting six figures, a fifth of that is doing something either very different or it will be a lot kind of smaller things.

[00:19:52] But I think the piece also goes into talking about the limitations of AI. The AI doesn't reliably know current UK tax rules and it will only be as good as the data that you feed it. And critically, it has no judgment and no accountability. And the ICAEW are now flagging over-reliance as the next big threat to the profession's reputation. So there are so many things to think about here. Everyone's running into this with trying to throw money at it.

[00:20:22] But realistically, does everybody have a plan of what they want the outcome to be? I think that's a lot of what I'm seeing. How are you going to go into something with no real plan? It's not just a case of throwing money at it. What is the goal? Is it that you want to save time, create capacity, have a better service for your clients, get rid of team members? Because we know that a lot of them are considering that, right? But what is the actual real end goal? Where do we sit also with the ethics on this?

[00:20:50] If people are doing this to get rid of people, ethically, it just doesn't sit right, right? You're training your staff. You're using your staff currently to train the model so they can get rid of themselves. So there's so many things to think about here. So that's the bit that we have to be mindful that everyone's a business. But there is that element of civic duty in some way when you are building a business.

[00:21:17] And I asked AI, like, how long before we're completely replaced? And then you know everything about me. You've seen everything about what I do and what I'm working on. How long before I'm replaced? Like my job or whatever my job is. And it said, yeah, you could pretty much like be replaced tomorrow on some elements of what you're doing, like the podcast, etc. Another two to five years on other fronts because they're slightly more nuanced and complex.

[00:21:43] And there's only a handful of people that I think have done this as well, where they repurposed their team who've been in a function. And then I said, okay, well, you guys, you know, they've automated, they've got like now an agent that runs that and then they've repurposed them elsewhere within the same business because those team members have a lot of depth and knowledge. And so they are doing the same thing, which is move them downstream because they've automated that. So what else can they do?

[00:22:09] So I think that's something that even if you're looking at it and like maybe AI is being used as an excuse for why to look at cost centers. But if you've got good team members, then arguably they'd be the same as you or I replacing ourselves. We would find a new thing to do. I mean, I haven't seen the survey. I haven't seen the detail, but I do agree with you, Ariana, on the face of it.

[00:22:35] It sounds like people are automating things that already exist or trying to sort of just basically switch into a newer technology. And that might be valid, but that headline of people looking to invest 100,000 over the next year, I'm like, where does that number come from? You run the numbers and that's about 100 staff with a clawed max subscription every month. It's not realistic. Like there's no way that firms on average are going to spend 100,000 pounds on AI.

[00:23:02] No, it's either going to be, it's going to be much lower in my, in my broad opinion. And I think, I think that that 20% figure that you mentioned of people doing other, that's probably where the smart money lies because you have the reality is you're using, using generative AI to automate invoice processing or automate some of this stuff. It's, it's almost pointless, right? It's almost, it's pointless reinventing the wheel and ripping out that system that already exists and replacing it with something else, unless it's going to add some value.

[00:23:31] And, and as you pointed out, it's only kind of changing your cost model. Now that might be defensive because you're all of the talk recently is about, you know, we're in this kind of golden age at the moment where accounting margins are quite good. And then they're going to be squeezed over the next few years, as we start to see price, you know, pressure. It's still to be really seen if that's definitely coming down the track here in the UK.

[00:23:53] It's starting a little bit in the US, but, but I do fundamentally agree with you in terms of like, you know, what's the strategic choices being made here and do firms have strategic, you know, a strategic plan for what they want to use. You know, not just AI, but technology for, I, I am broadly of the opinion when I speak to many, many firms that they don't have a very clear technology strategy. And if they do, it's kind of like, well, we want to make sure our cyber security is all right and we're going to keep our data secure, but it's not really a strategy.

[00:24:21] That's kind of just that's ambition or, or a, or a baseline need or want really. Should we move on to some more AI chat? And hopefully we'll get over this hump fairly soon, but like, let's see where we get to. So we have a new prime minister. I mean, they come along like London buses nowadays in the UK. So, you know, we'll probably have a new one in two or three months or something like that, but we'll see. I mean, I should say that I'm a big fan of Andy Burnham and I do kind of know him.

[00:24:44] So, you know, we'll see if a northerner can pull off what a bunch of southerners have failed to do so far in the last 20 odd years. Not with established. You're not really north. Well, you know, we have a devolved set of governments now. So the border stops at Hadrian's Wall for all intents and purposes. So, you know, the Scots wanted to have their own crazy taxation. So that's what they've got.

[00:25:06] So we have a brand new AI task force that's been launched by Andy Burnham when he jumped into number 10 recently, headed up by Lord Valence. He does have some very technical scientific background as well. And so it's quite interesting that he's been appointed to this. But I guess broadly, I guess the intention here is to talk about some of the strategic stuff that we've just been talking about. Right.

[00:25:30] In terms of, you know, we are currently in a position where actually in the UK, we've got quite a lot of good quality technical knowledge, but also great university backgrounds and research going on into AI. But the problem is, like, we don't actually control any of the models. Right. You know, the models either sit in the US or they sit in China. And so this is an issue that's going to affect the UK probably going forward into the future.

[00:25:56] The EU are also very concerned about this, as are some of the other big countries around the world. You know, you're looking at how do they kind of gain back some of the ground that's been lost to these frontier models and what do they need to do? And would that be, you know, maybe partnership? And we're starting to see a little bit of that where people are spinning up, you know, servers and space where some of these models can be hosted and used more broadly. Or is this maybe going to be moving into the development of a model, which I think would be quite challenging given that there's sort of the ground that's been lost.

[00:26:24] But effectively, you know, the task force has also been focused in on, like, how can AI be utilized in the broader economy? So how can we use it to transform public services? How can it be helped to unlock growth and prosperity? And, you know, they kind of reflect back on the vaccines task force that was created a little while ago, which contributed to our success in terms of, you know, getting through COVID.

[00:26:51] Your success moderated by all the other horrible things that happened. But, you know, we were leading the world in terms of, like, vaccine research and our ability to do stuff. And so there are clear, you know, societal benefits here. What's going to be done is it's got to be delivered in an effective way. And the challenge, of course, is that government is not always a good model of, you know, delivery, if you like, of success. But maybe things are going to change. I mean, it's I think it's good to see this. It's good to see this has been prioritized.

[00:27:20] I will say at the same time, like a whole bunch of money has been taken out of other science research aside from this. It's not AR related. I mean, John Rookbanks just down the road from me. I saw that it's funding removed, which is like absolutely shocking when you think about your broad research into what's going on in the universe. So, you know, this is this is a continuous challenge, of course, whether you're in government or business is like where do you allocate your resources? But I do think that science is something that sets the UK apart from the rest of the world. And we punch way above our weight.

[00:27:49] And so investment in anything like this is warranted. But more investment should be piled in because it gives us a strategic differential and it gives us a great opportunity going forward into the future. With those that have had funding removed, do you not think that by going further into AI, it's something that will benefit all sectors in the longer run anyway? So it's something to be taken away short term to be able to give them so much more slightly later?

[00:28:18] Yeah, I mean, of course, I mean, that is that is an entirely legitimate argument. And I mean, you could also argue, you know, general banks been around since like just after the Second World War. Right. I mean, it's not exactly a modern facility, but it has been modernized. It has and it is now linked into your broad network. I mean, we don't have to talk specifically about that.

[00:28:36] But I think the challenge is it's like for some for some areas of science, you particularly if it's research based, if you pause the funding, we know that you can get very far behind very quickly. And then if you switch on the funding again, it's a little bit like having a house with a leaky roof and you just sort of put a bucket under it. Well, that's that's great as a short stop gap. But until you get to the point where you're willing to spend the money to fix the roof, you know, it doesn't get any better. And the longer you leave it, it tends to get more and more expensive. It's kind of that same principle.

[00:29:05] So, you know, yes, we might save a few million pounds by not by not investing in certain areas. And they may not they may not warrant it as well. I'm not I'm not trying to justify the changes or not. The problem is, is if you then choose to switch it back on, then it's probably going to cost you twice as much or more. Do you think that we are in the UK being like a dog chasing the next car? Right. So we're just kind of that's what this is what I hear when you're saying we have this AI task force.

[00:29:34] Let's bloody well hope they deliver something because otherwise we're just we're already quite far behind our race. We do have deep mind here in the UK. Technically, we do. We are producing some of the best AI brains at the forefront of it, but we're just not leveraging gear. And we also don't have like a lot of money in the pot. So this next one is about some money in the pot, which is the millionaire story on them asking to pay more tax, which hopefully would then bolster the coffers.

[00:30:03] What's the best way of saying that, John? I always feel like the turns of phrase. You're better at that. Money in the coffers. I boast the coffers. Something like that. In the coffers. Something. I think it's like a post the Gary Stevenson documentary. We saw Dan Needle talk about it and say it was a populist clap trap. But we've now got more than 120 millionaires saying tax us more, which sounds very noble. They obviously we've seen that they can obviously do that if they really wanted to do that.

[00:30:32] It's a great LinkedIn post, but they're calling for 2% annual tax on wealth above 10 million. Plus capital gains tax reform. So wealth is taxed more like work. And the moral argument is easy to understand. Of course, if the UK earned taxes and income heavily while accumulated capital often gets a softer ride, then we're trying at the moment to explain fairness to someone on PAYE. And they're not really.

[00:31:00] It's a difficult point to make because you can't really, you know, you're trying to tax someone that's assets are sort of fairly illiquid. And where are they going to get the money to pay that every year? And this is where I want us to kick the tires on it, because saying the wealth tax is one thing, but valuing these sorts of companies, private companies, property portfolios, and all of these things like farms, family businesses, overseas holdings, and our work every year is like, where are we going to find the resources to do that and make that fair?

[00:31:28] And then you get things like, like I said, the liquidity questions. What happens when someone has a large paper wealth, but not the position to create or have access to much of the cash? Do they sell the assets? Do they defer? Do they borrow? And then overall, I think it's more just like the whole story is fairly virtue signaling. So I don't really need to go into all of that. We've all heard about it. But there is a proper tax policy version of this.

[00:31:53] So the practical route is not a grand new wealth tax, but a CGT alignment. So maybe fewer reliefs, tighter inheritance tax rules, non-domiciled reform, or taxing investment income more consistently. So what I'd like to try and understand is in principle, if we had to do this, and not pretend that it's like taxing or getting millionaires to pay more tax,

[00:32:19] but practically if this sort of wealth tax came in or if there was like an abolition of the stamp duty and we had suddenly a property tax that needed to be applied every year, are we well set up for that to handle it? And can we actually, you know, what will it mean for these clients, private clients that are high net worth? And, you know, if this happened on the morning, what would we do straight after that? Because there's quite a lot that is required.

[00:32:48] And it's just, it feels like there's a lot of noise out there. So especially on my LinkedIn feed, which is why I'm bringing it up, just to find out what you guys would do. Personally, from my point of view, I'm not a big fan of wealth taxes. For all of the reasons you set out, you're massively burdensome to a minister. You're many people with wealth. You might have paper wealth, but necessarily like say liquid assets to pay a tax. So then how does that come about? Do they defer tax until they sell those assets?

[00:33:15] And does that mean that actually the government's just carrying a huge amount of debt for, you know, however long it takes to kind of crystallize that? You know, these things always sound great because everyone turns around and says, oh, look, that guy's worth, you know, 20 million or 100 million or whatever. Well, great. So what? But also if the stock market crashes, they're worth probably nothing the next day. And so what happens in that instance also where your wealth is tied into markets,

[00:33:43] which do fluctuate because if they pay a wealth tax one year, do they get a refund the next year because the market has shifted up or down? Like there are so many things with wealth taxes that are just ridiculous. And there are so many other better ways to address taxation in the UK. Dan Neal is a great proponent of this. There are other people also talking about this all the time. The reality is, is that, you know, and we've got the same problem at the moment with Andy Burnham who we just talked about, is that, you know, the government locked themselves into his positions of saying, well,

[00:34:13] we're not going to change VAT. We're not going to change income tax. We're not going to change X, Y, and Z. And so all of a sudden you've got the handcuffs on when you want to shift. You want to address your wealth better or you want to tax millionaires more, put 1% on income tax. That affects everyone, but proportionally it affects the wealthy way more than it affects the lower earners. And it's way more efficient than fiscal drag, which is what we've got at the moment, which actually penalises lower income earners. The other thing is I worry with all these discussions,

[00:34:42] we are tending towards an economy or a country which is penalising those that want to take risk. You know, you go out, you set up a business, you don't know whether it's going to work, whether it's not. You work day and night, nonstop trying to make it work. You create jobs. The government comes along and says, oh, if you want to create jobs, I'm also going to penalise you by adding a 15% tax on top of that. So just to make it a little bit more difficult for you.

[00:35:11] And then once you've made it, after all of that, if you happen to have made it, you're penalised to have made it. And a lot of these with business owners that I work with, those that have managed to make a lot of money and they are putting that money into property, for example, because they want to, at some point, stop running 100 miles an hour, you know, but they want to make sure that later on in their life, they're able to relax a little bit. So they put that money in property.

[00:35:40] So they still have not actually had the benefits of all the work that they have done because it's gone straight into property. And they may not actually be earning much from it anyway, because they're hoping for capital appreciation and whatever income for them as a pension. And you're being told, by the way, if you do that as well, if you do well, we will penalise you again. So where is this going to go? Like we had, I think, was it after Brexit or which one was it?

[00:36:05] The 10,000 UK millionaires left the UK after a change of law. If we keep doing that and we drive away all of those that are entrepreneurial and have that spirit to, you know, give things a go and try and make a success, what are we going to end up with here? It just doesn't make sense for me. Sorry, Ariana. I say I'm less concerned about millionaires moving because they're always fairly transient, right? They've got the means and the capability to do pretty much whatever they want.

[00:36:34] They can live here in the UK, they can live in the US or wherever they wish to do that. I actually think we should encourage mobility, you know, whether it's at the top end of the income scales and the asset scales or at the bottom end. But I do also agree, but I do agree with you in terms of, you know, that the reason why as a business owner and the structures that we have at the moment, you incentivise taking a risk or are trying to incentivise taking a risk. I mean, you could argue whether or not we get the balance right.

[00:37:01] But that's why as a self-employed person, you pay less income tax than an unemployed person because there's more risk in that technically. I guess the question, the reality is, is like, is there really risk in some of those roles? You know, you could look at some of the stuff around IR35 where basically someone was in employment and spilled out of that. Are they really taking a risk? Are they really running a business where there is their own genuine capital at risk? Yes, their reputation and other things are potentially at risk

[00:37:31] if they screw up and they'll have insurance to cover themselves. But there are arguments about, you know, where does that line lie? And I think perhaps at the moment we haven't really got that quite right. Next up, we've got Intuit QuickBooks Small Business Index, which has just published its UK employment figures. So the UK small businesses employed over 4.1 million people in June 2026, which is a 0.03% increase, I believe, from the previous month.

[00:38:00] The small business employment increased by 1,400 jobs, whereas professional services added 6,100 jobs in June. So vacancies went up 4.12%, so it's over 4,000 new positions, taking us to 104,500 unfilled roles across the UK small business economy. So hiring intent is running well ahead of actual hiring. So firms want people, but they're not able to get them at the moment.

[00:38:29] And the regional picture is wildly uneven. So the east of England was up 9,400, whereas the northwest was down 5,300, and Scotland as well, down nearly 4,000. So it doesn't seem like there's a national labour market anymore. There are about 12 of them. And the experience of hiring right now seems to depend almost entirely on your postcode. So my question is, is our sector hiring out of confidence or hiring out of capacity pressure?

[00:38:57] Because they're very different stories. What do you guys think? I mean, from a northwest point of view, I mean, we know that Manchester in particular has been a huge kind of like magnet for professional services and the growth there. And actually, I think when there were some stats recently, weren't there about Manchester being the fastest growing city in the UK? And when you kind of dug into that, it was all pretty much driven by professional services. And it is a big magnet. You know, it's probably one of the few regional cities that has all of the big players there and stuff like that.

[00:39:26] And so they do recruit a lot of people. I mean, my personal view... But you're saying it's down, Ariona. You're saying it's down, weren't you? But isn't it the gap? What are we saying? That there's... Disparity between north and south. I mean, I think it's difficult to say because when we've been having discussions in the podcast today about like, where are people's strategy and what are people doing? I mean, I just think a lot of firms are not being run strategically.

[00:39:56] And so they're kind of lurching from one thing to another. And so, you know, they suddenly look and say, oh, we need like two new people tomorrow. And then they get the two new people, but they don't maybe go through a really good recruitment process. And then they have to like spin up that process again at some point in the future. Or they're not really planning for where you want to go in terms of growth. And there's always a bit of a chicken and egg thing here, isn't there? In terms of like, do you recruit for anticipated growth or do you wait for the growth to arrive and then, you know, recruit after the fact? There's always a challenge.

[00:40:26] But I think this is the issue. And I think one of the confusions for many, many small practices in particular is like, you know, they're sitting looking at this going, well, should I recruit someone with all of the costs associated with it that we just talked about? Or should I sit and wait for the technology provided to make that job magically disappear and make it easy for me? And no one has an answer, right? I think that's a challenge. But I think here we're seeing that we're actually, the vacancies are much higher than the people that are available,

[00:40:54] which is really interesting also because, you know, we're talking about things like technology and AI getting rid of our jobs and things like that. But, you know, we're hiring more. We were one of the highest sectors to hire people. So I think that goes to the fact of like we need, we're just going to be able to, our productivity is just going to go through the roof, right? We're going to be able to do so much more. But we need people to run those technologies and that AI to then give us even more opportunity to help our clients.

[00:41:23] It would be interesting to know, conversely, whether in business, the teams, the finance teams are contracting. Because that would be a good measure to know whether that actually you're just moving more from what was going into private industry and a finance team. And now is going into something that can be an outsourced finance function for companies to operate more streamlined. And I think that would be quite like to compare side by side.

[00:41:51] We've seen that with a lot of clients that have come to us recently where they had internal teams and you see how they were working. It was super inefficient. It didn't make sense. And they were able to basically get rid of the whole finance team and give us all of that work for much less than they were spending with the team in-house. Because of the experience and the knowledge of all the tech and everything else that we've had experience with. And also whether that threshold has changed.

[00:42:19] So I remember, you know, one of my first companies I worked for, the threshold for how long you kept with the accountant and the accounting firm who ran all of those functions was up to a certain threshold. And then you would then, okay, you need to hire all the team and build it out yourself. I wonder if that threshold has increased now as well with all this automation. So that actually we, accounting firms can hire a much larger threshold than perhaps 10 years ago or even two years ago.

[00:42:49] So that would be interesting to also check in on. I guess that recruitment pressure goes both ways, right? Because if you're in a finance team looking to bolster that finance team and not able to find the staff, maybe it's easier to go to an account of bookkeeper and outsource that pain to someone else. Okay, I've got a quick update from Mimo. They've just launched that review. Probably not a new product per se in the market because good old Savier Analytics, which became Dext Precision. And I think Briefcase do something similar as well.

[00:43:17] But effectively what they've launched here is the ability through the VAT return figures and to do validation checks on them before you submit them. And this is all part of Mimo's broader kind of like workflow piece at the moment where they're looking at month-end flow that happens for every organization and trying to automate as much as possible. I'll make that as seamless and easy as possible in terms of how you manage it.

[00:43:38] So what Mimo has done in terms of what the product is capable of doing is it reviews every transaction, every invoice rather, but it looks at every line item on the invoice as well. So it's not just looking at kind of like the invoice totals. It's actually looking at the detail. It goes through that. It looks at historical coding as well. So it goes back 18 months to look at how you've dealt with this yourself in the bookkeeping. So it's taking a bit of a lean or a steer from you as the accountants or bookkeeper in terms of what you've been doing in there.

[00:44:05] And then they also validate against HMRC rules and effectively then flag transactions where they think there may be an issue for you to manual review. As I said, it's kind of like got the sort of a trifecta of checks that you could possibly put into here in terms of like what's there. And then essentially on a kind of, as you go through it, looking at the screenshots, it's essentially sort of says, right, okay, looking at that last month or last quarter's transactions. Here's kind of like the highlights, if you like, in terms of something that we think is a little bit unusual.

[00:44:36] And they kind of flag it up in a way that you can kind of review the transaction detail. You can also then link back into zero because it's currently connected to zero and nothing else at the moment. And then you can obviously either go and correct that or validate it against the invoice document if you've got it. What I do quite like about it is they do have a sign-off audit trail on there. So, you know, if you do go in and say, no, this is right, happy with it, it'll say, don't do it, so it's good. Or if you go in and change it, it'll obviously track that and tweak it as well.

[00:45:01] I mean, like I say, not particularly new in the market, but this is just a neat addition to what they've got and the functionality. So, you know, great little addition to the broad product that they're building up. That's quite nifty. And I've got another little nifty update. So Katana MCP is live. So Katana is the first inventory platform for clients that can run from Claude or ChatGPT. And so if you've got some AI curious clients, this one is pretty interesting. Amazon FBM is also now native to Katana.

[00:45:29] So the headliner this month is that if any of your clients sell on Amazon and ship some of their orders to themselves, then Amazon FBM now connects to Katana natively alongside the existing FBA integration. So your clients get something like the order lands in Katana automatically, ready to pick and pack and ship. The stock stays in sync so they don't oversell. And then the tracking and delivery status post back to Amazon on their own.

[00:45:55] So the one product can carry both its FBA and FBM Amazon SKUs and there's nothing to duplicate. It's quite a nifty little one if you've got clients that are curious about how they can better manage their stock using something that is AI, automated, assisted in some way. That sounds like it would be super helpful. I've got one last story, which is our product. Free Agent has just enabled MTD for income tax quarterly updates from their mobile app.

[00:46:23] So sole traders, landlords and anyone with property income who's inside MTD can now file straight to HMRC from their phone, which I think is the right call because the cohort currently being pulled into MTD at the moment is mobile first. And thresholds which drop in 2027 to 30,000 and 20,000 in 2028 are also progressively less finance savvy and more mobile phone only. So building that now, I think, is a smart move.

[00:46:50] And the in-app view of every submission deadline and its status is probably arguably more valuable than the filing itself. But there's hesitation and that's in the workflow for me. So there's three steps. You open the app, Free Agent auto-populates your income and running costs. You check the numbers and you hit send. But step two carries all the risk. It auto-populates if your records are up to date. And the app doesn't necessarily know what's missing.

[00:47:15] So nobody is meaningfully reviewing a profit and loss on a phone screen at a bus stop. So we've removed friction from a decision where friction was doing a job, right? Friction is what made someone stop and ring their accountant previously. But now Free Agent have also built approval controls and bulk submission for firms, which is genuinely important as part of this announcement. It's actually buried somewhere like three paragraphs down. But the question for practices is, have they actually switched those controls on?

[00:47:45] Yeah, I mean, that's an interesting one, right? I mean, I really like the idea of being able to kind of do this on the fly and the mobile side of it appeals. I also think broadly, you know, whenever I'm looking at a GL product, I'm sometimes a little bit disappointed, a bit frustrated when the mobile app doesn't kind of allow you to do some of the things that you can do in the browser. So seeing more of that capability is always pleasing. But I do agree with you, Eriona, that this does carry a bit of a risk, particularly if someone hasn't kept the bookkeeping up to date.

[00:48:14] But then we kind of have that risk already, don't we? We've had that with VAT returns. You know, like I know, well, I tell you now I'm chasing Indy for some invoices so I can get our back return done for this quarter. And, you know, at some point it'll get to a point where I just have to push the button because, you know, I can only wait for so long, right? Because the deadlines keep coming around. And so that's sometimes the pragmatic choices you've got to make when you run a business or when you're advising a business as well. But yeah, I do agree with you.

[00:48:41] So if the person running their business is a bit hopeless at the bookkeeping and then they're starting to file any old random crap to HRC, that carries a multitude of risks, right? I mean, I guess a free agent could potentially, and I haven't seen the app, but potentially could put some flags in there saying, hey, you know what? You haven't reconciled the bank for like two months or something. So maybe you need to do that. Or you haven't done X, Y and Z. So before you do this, maybe you just want to kind of get things in order. Okay, perfect.

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