Xero Stretches Up, Trims Down | Be In The Loop

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

[00:00:21] Today I am joined by the wonderful Heather Smith who is coming to us not from Australia or New Zealand but instead from our very own blighty UK and in a beautiful part of the UK as well might I add which is the Cotswolds. And I'm also joined by Kendrick Hare who is coming to us live from the US of A and because this episode is a little bit different

[00:00:51] today we're going to focus on what has been a dramatic week of different news items all coming from the big blue machine that is Xero and we're really excited to kind of take you through some of the announcements that they were covering in XeroCon over the last week and we've seen a lot of reactions since then and on top of that Heather is the best placed person to talk about these types of updates

[00:01:15] because she is through and through a Xero expert and on top of that we know that Kendrick is going to bring a very different perspective because we've got the ecosystem evolving and changing and seeing Xero move more maybe upstream towards those scaling businesses and that is where there are different ecosystem partners and apps that exist out there.

[00:01:41] So first I'm going to throw to Heather. Heather how are you? Tell us how's it been since you've been doing a UK tour for the last couple of weeks? Thank you so much Indi Tatla for having me on the show. Hey Kendrick. Look, second time at XeroCon and again we hit record temperatures again so I'm bringing the heat wave. Yeah, thank you for that. We appreciate you.

[00:02:04] You are welcome and did have a fantastic time. Always wonderful catching up with the community at XeroCon and working in a different time zone has been exciting and Kendrick and I believe met about six years ago, didn't we Kendrick? Yeah, it's great, great times. It's wonderful to be with you Heather and it sounds like I need to hop a plane and get to Cotswolds as well. Better than where the US is at these days. Absolutely, absolutely.

[00:02:34] It is a really nice little corner of the world and I probably don't get to go enough. Heather, you were going to go and visit Bath. Did you manage to get down to Bath or are you? Possibly. Possibly. I'm in Bristol tomorrow. I'm in Bristol tomorrow, yes, for the event. It turns out I reckon it's Richard Sargent's birthday event. He suddenly organised an event thinking it was an accounting technology event but it's also his birthday.

[00:03:01] And I have birthday presents lined up for him, chocolate teddy bears, chocolate koalas, chocolate koalas. But he doesn't know yet. That's so cute. Oh, that's perfect. You won't find out yet because this episode, by the time it goes out, he'll have already munched on his koalas. And actually, it was really nice to see him. I managed to see him for a brief little stint in Bristol as well last weekend.

[00:03:26] Shame not to go down to the big event, the pirate event that happens every year. But it has just been a really busy old time because like you, Heather, I was also at zero. But before we kick off on that, actually, it would be remiss of me not to at least cover a little bit of what Fishbowl does and how the nuances and differences work in your jurisdiction, Heather, compared to what we have in the UK.

[00:03:52] So maybe you could take us back a few steps and regale us on how it works for you in Australia and New Zealand. And then, Kendrick, if you can fill in some gaps, that would be really helpful for everyone that's a listener on this show. I'm sure you'll have a lot of gaps to fill in there for me, Kendrick. But there's a gentleman called Simon Joop who has been sort of championing Fishbowl in Australia for quite some time.

[00:04:20] And Fishbowl's sort of sweet spot is businesses that need real traceability, food, pharmaceuticals, chemists, advanced manufacturing, not your retail or tradie style inventory. And Simon called this, because like I think perhaps people will be aware that Fishbowl had a legacy desktop solution

[00:04:46] and now also has a cloud-based solution or an online-based solution. And Simon calls this the Phoenix year. I don't know whether Kendrick calls it the Phoenix year. But this is the year of rebuilding as an AI-first cloud platform where they have an agent within it called Juno. That helps manage purchasing and inventory operations instead of sort of users just running static reports.

[00:05:13] So it's sort of getting that AI powered on their online solution. If we look across Australia and New Zealand, most of the clients are sitting in Australia. But I know that I've also – I go to a lot of events in Singapore and I also frequently see Simon up there. So when I say Singapore, that kind of is the centre of Asia. So it's sort of pushing out into the APAC region.

[00:05:38] And what's exciting for me is they're focusing on strengthening their accounting and bookkeeping partnership channels sort of to – rather than go direct to client, also looking at that route as well. But I'm sure, Kendrick, you've got a few things to add in there. You know, Heather, I'm going to start off by saying you nailed it. So that's fantastic. I can't say as much for Simon being the phoenix here. That must be an Aussie-specific term for him.

[00:06:07] But sufficient to say, you're spot on. And I think part of this is that we spent so long focusing on our legacy solution in the APAC region that a lot of people don't know that since 21 we've had a cloud product as well. And, you know, a little bit of miss on our part is that we weren't doing a better job pushing that globally. You know, it comes up, I think, all too often that from the U.S. lens, we tend to think about things as far as the U.S. and fail on the rest of it.

[00:06:35] And I think that's maybe behavioral across a lot of companies in some way. But, yeah, to the point of where we're headed, it's exciting to see. And, Heather, you mentioned Juno as an agentic solution to really help out. What we've been able to see here in the U.S. side is deploying that as really transforming the way that businesses work. And I know that may sound a bit cliche, but how exciting is it when we go into a manufacturer? I was with one yesterday.

[00:07:05] I had a chance to do a customer visit, and they produce chemicals, their life science reagents that are used in blood work. And instead of going in and, you know, looking at orders in a traditional sense, they're literally just talking to Juno to ask questions about what's short and what are the next things I need to buy. And, you know, how amazing is it?

[00:07:28] And the funnest part to me, I shouldn't say this, but I will, that the operator that was doing this, and we got to kind of witness firsthand, was in his late 50s. And it felt like watching a teenager navigate through technology because it was just so simple and straightforward and natural for him. So that's the thing I think I love most about it. Now, we might not adopt Simon's phrase that it's kind of the Phoenix year, but so far that's localized to Maluluba.

[00:07:57] Good things coming, though. Fantastic. I think that's fantastic. I love that, and I think that's exciting for anyone that's, like, looking in particular at different forms of how technology can be better, a better enabler for their customers in efficiencies and performance across the board. Especially, like you said, some of the businesses that tend to work with you have, they are at that scaling level.

[00:08:25] So I think that's where, you know, there is that need for something that specializes on certain types of, you know, industries or sectors that aren't covered by the generic types of software. So you do need nuance and you do need to niche down. And I'd love to return to that in a moment when we start talking about, more about last week's big news and the several different announcements that were made around Xero.

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[00:09:49] But he commented that in previous years, Xerocons have had no announcements. And this year, there were a lot of announcements and a lot of exciting announcements. And it's worth highlighting that Dear Jolly, who's the Chief Product and Technology Officer at Xero, has been at the company just over three years. So I imagine that's kind of the time you need to sort of steadily move towards building into solid announcements if you're in that position. And I spoke to Dear.

[00:10:17] I was very grateful to have the opportunity to speak with Dear. And she told me that one of the things that she's most proud of is Xero's voice of the customer process, where they take customer feedback from every channel, the NPS scores, the Xero product ideas, the Xero con laundromat. That wasn't teaching you how to money launder. That was about taking ideas and listening to them. They rank it.

[00:10:44] Every quarter, they identify a top 10. And it's from that top 10 that they create, that they work on ideas to ensure they're delivering what the customer needs most. So I thought it was good putting that framework in at the start. But before we jump into that, the next big announcement in terms of releases was they announced they hit 5 million customers. Okay? 5 million. So that's really significant.

[00:11:13] For me, I've just released Xero for Dummies, the sixth edition. So that's all potential readers for me. So I was happy about that. And touching on some of the announcements, there is the Xero Partner Hub. So that is a new central workspace that brings together book health, compliance, tax preparation and practice workflows.

[00:11:37] So you can identify issues early and prepare the clients for month end more efficiently. But we will talk about that later. Smart document capture using AI context recognition. Rather than OCR, she called that out on stage.

[00:11:54] It is not using OCR that we've been using for the last decade to understand documents, extract the data more accurately and learn from the business's transaction history. And auto bank reconciliation was announced from the stage. We have had it since November 25, but I think it's rolling out and some people are using it. It's beta testing. Some people have it on. Some people have it off.

[00:12:21] Using AI to automatically match bank transactions and with increasing accuracy over time, learning from both global patterns and each organization's own reconciliation behavior. And I did talk to her about that. It's not a sort of an instant learning process. It is a periodical learning process. So that's interesting. And they got all the Xero words out.

[00:12:48] Xero Force, Xero Force, an AI platform that lets accountants create custom AI agents using natural language to automate repetitive tasks, answer client questions, streamline practices, workflows. There will be a library available of them and you will be able to create them and share them. So that I thought was interesting with those Xero Force agents. And then Xero Ultra.

[00:13:17] Now, I'd refer to this as light ERP, light ERP, not like ERP, light ERP. So there's new Xero plan designed for larger, more complex businesses, offering higher transaction capacity, multi-entity reporting. I think that's leveraging the SIFT relationship and advanced features without needing to move to the ERP system.

[00:13:39] So it is not ERP, but it's kind of filling up that gap between the top of Xero, the bottom of ERP and possibly delaying that move to ERP maybe permanently, maybe a few years. Yeah, I was going to build on this point and say it was someone else used this word, not me, but it was like a stretcher. You know, they're stretching the top end of that.

[00:14:09] And I've got some more to add on Xero Ultra, but it'd be good to get your immediate reaction, Kendrick. Yeah, I think it's interesting to see where Xero is headed. And in fact, I'm curious to know Heather's take as well. But what I see in all of this is that they're really pushing into the mid-market. Obviously in the U.S. space, I know this is a Xero podcast, but we hear a lot on Intuit. And it seems like Xero is right down that same path as well.

[00:14:35] Curious to see with some of the agentic tools and things like that, how far down the road they go. But obviously standing up jacks and some of these other things that have come along puts them in a prime spot. Heather, from your position, how do you feel like that's going to land in the market, especially the APEC side?

[00:14:51] So Angard Soyn, who is the Chief Strategy Officer in Heads Up Australia for MD of Xero, he has come and done roadshows and kind of put up on the matrix, the matrix, that we are not, they're not necessarily focused on that micro worker, that gig worker, that freelance, that really small, small business. And they are really looking to push into that space.

[00:15:20] And likewise, they are really looking to push upwards into that space. It has, there's money in them, their hills. Yeah. There's money out there to be had out of it. It's an expensive package. And, but to move into ERP land is a really expensive jump. So that's where the money is to be had, not with the gig workers. It is to be had in that space.

[00:15:49] And likewise, I sit in, I go to the ERP conferences and they're looking to push down and they're like going, well, we're interested in the small business GLs as well. Oh, look, Lee will like my. I agree though.

[00:16:06] The promoter in me came away from zero con genuinely surprised by how much the product team seems to have unblocked because it did feel like for a while there, we were just talking about more reporting or different tweaks here and there.

[00:16:21] And then we saw AI come out and we saw what was like on a global stage, people racing to get to the number one spot between Anthropic and OpenAI and X and all of the other players. And we've seen a similar one then, a microcosm of that in the accounting tech space where it feels like the same thing is happening, where it's just releasing as quickly as possible.

[00:16:47] And in some cases prematurely, which is what we would say was the case with Jack's. It was definitely released prematurely because it couldn't really do anything interesting back then. And it was sort of, as a result, it was rejected a little bit. But, you know, I'll go back to Ultra and we'll touch about some of the agentic pieces later, I'm sure. But Ultra is, you know, a good example of that sort of product, at least, as you said, like this is zero going after the business, businesses that have outgrown.

[00:17:17] The basic cloud accounting, but don't want yet to move on to the full ERP. We know it's costly. We know it requires, therefore, a lot of different migration expertise. There's a lot of things around, you know, governance that are better in that type of ERP software. And to some extent, Ultra would give some of that. Like you said, it's a sift, but maybe advanced.

[00:17:42] So better support, more control without having to rip out a system that everyone has gotten used to. I think for, even though this is, the launch story is primarily like Australia led because it's not, you know, quite yet for the UK. The message, as you said, is zero doesn't want clients that are growing clients, actually.

[00:18:09] They don't want growing clients to drift out of the ecosystem the moment things get more complicated and they lose out. So it's actually probably I see this as a bigger threat for some of the UK businesses who sit just above that, maybe like an accounts IQ sort of space where they are doing some more of that. And maybe that's an innovation area for them to then think of what else they want to introduce to their system.

[00:18:37] But it's a smart move because, as we said, the mid-market is where the fees are and that's where they can afford to make a bit more money in the group reporting, in the cash flow planning, in the permissions and the controls and the board pass, etc. And they can, you know, the accountant can charge a bit more as well to stay relevant to those clients that are also stretching up to that next layer. Because that's often also a sort of point where everything gets reviewed, not just the system, but the service.

[00:19:06] So Ultra is a product that I see the benefit of for the accountant. I can also see for the ecosystem in general, maybe a little bit of an uncomfortable bleeding into areas that perhaps we didn't really see coming as soon as we have. So, but yeah, if you're asking a more complex business to stay on the platform, then the trust layer really has to hold up.

[00:19:35] And we haven't really seen that yet. We don't see that at the moment. So, Heather, you'll probably give us a stronger view on that because I think Ultra for us is a roadmap signal, but not quite actually something that we can do anything with yet. So overnight we got emails about it. And it was hitting, I think, $500 a month subscription. So that's like £250 a month.

[00:20:02] And so it's out there in the big wild world. So people are talking about it in Australia. And I should also mention it hasn't been clearly defined yet, but you may be aware that there are transactional limits within Xero. And their view is they will be raised with this Ultra solution. And sometimes just being able to raise a transactional limit will keep people on for an extra year.

[00:20:29] And like I've got someone who's moving off Xero to an ERP solution and their subs are like hitting $1,000 a month, which is £500 a month. So it's a big loss for them. And if they can keep them for longer, it's a revenue gain, which makes sense. That all makes sense. I have a question. And maybe, Kendrick, you can jump in on this.

[00:20:53] So where does Xero genuinely stop being enough for a growing client? And has Ultra moved that line, do you think? I'd say in the U.S. market, not yet because it's not there. But the concept is interesting. And back to your earlier point, Indy, around Jack's being a little premature. There's this whole path that I think Xero is laying out to change where they're interacting with business.

[00:21:22] Obviously, part of it is what type of ICP they're focusing on as they go upstream mid-tier. But almost flipping the script on how businesses are interacting in general and where they sit. They've got this idea around the Microsoft integration that they just did. And while that may be more of a show than actual capability right now, when you step back and look at the announcement that Sook Inter made, there's more to it, in my opinion.

[00:21:52] Because when we think through how our business is operating, they're jumping between tabs. Yes, everything's gone to the cloud. And yes, it's all accessible wherever we go. But now it's about clicks and windows and bandwidth and all of those types of things to be considered. And seconds matter in the world we're in. And so I don't see it as maybe disappointing so much as the springboard for where it could head. So at launch, the Jack's element was disappointing.

[00:22:20] Well, now when we think about how Jack's works within Copilot, yeah, there's some things. You can ask questions and get surface insights. And maybe that's lackluster. But let's fast forward and wave the wand 24, 36 months down the road. And I think that they're in an interesting position. Obviously, from the U.S. space, Xero has some catching up to do. But it's almost like AI level set so many things.

[00:22:47] And to your point, pushing it out early may not be the right. Sometimes we use the phrase the best bad idea. Maybe it's not a great idea, but it's opening doors. And so as I look at that as maybe a pattern on what's happening, super useful, maybe. But what could be in it, the promise that's there, I think is really compelling.

[00:23:11] So doubling down on that a little more, live data in Xero flowing through into Word and Excel and PowerPoint. And every board update that happens, just coming along and nobody copying the wrong revenue numbers or grabbing the wrong charts or things like that. If they can really pull through and deliver on a really solid model between Xero and Microsoft, I think that's a game changer for them.

[00:23:40] And I think, you know, it will disrupt incumbents across the globe. The question then becomes, how reliable is it? You know, is the accounting intelligence there or are we dealing with another incorrect CSV file that just got uploaded and propagated across the entire organization? Which I'm sure, Heather, you love when bad data gets put in and then you got to go sift through. Where did it go sideways? Yeah, absolutely.

[00:24:04] And I think to add to the context here that people may not realize that in Australia, a medium-sized business is a small business in the UK and is a teeny tiny business in the US. Okay, so we do things, even though our crocodiles are bigger, our businesses are much smaller. So it makes sense to start with Ultra in Australia. Oh, wow. That's really, that's quite interesting.

[00:24:34] And actually, I'm going to build on one point from Kendrick. So the Microsoft integration from the surf, from what you said is, it will be really interesting once it's across everything. But if I'm not mistaken, right now, it is just co-pilot. So it's, the theory is, again, everything. But the Microsoft integration is not yet in the actual Word, the Excel, the PowerPoint. It will be, hopefully. But again. In theory, right? It's a springboard, right?

[00:25:04] Another, it's another one that's like a, you know, there's something there. There's a roadmap for where it can go. But it's like, okay, let's pause and see. I just think it was an interesting choice to go with Microsoft. I guess like it is good because, you know, accountants love Excel, UK, you know, we're still very attached to that.

[00:25:28] But, yeah, it's just, it's just this race, this constant race of, you know, it started as announcement of an announcement with OpenAI being the underpinning AI of choice. Then it was anthropic. Then we, now there's a Microsoft in there. I just, you know, I am wondering when we're going to hear the X, you know, there's like Elon Musk is somehow linked to zero.

[00:25:56] Is that just, you know, the next one, right? Okay. So let me jump over and start talking about the zero partner hub. So Akankshar Dhawan, who is the SVP of products at Xero, has released a blog post on the Xero partner hub.

[00:26:16] That's a central place that brings together the key workflows that the accountant performs, starting with book health, okay, concept of book health, compliance and compliance. So, and the goal is to help firms identify issues early and then complete the work more efficiently. The goal, the vision is to have 50 health checks within the book health area, but it's going to roll out with initially two.

[00:26:44] And that is going to be around month end readiness. So looking at unreconciled items, duplicate transactions, missing documentation. And the other one was around GST readiness. This is going to be launched in the UK first and then followed by that Australia. And then the US, you are last, US. You have to love something.

[00:27:14] I know, right? It gives us a chance to see with the rest of the world. So often we're just out in front, right? Yeah, that is true. I mean, it's really interesting, this one, because obviously it couldn't launch in the US. Yes, you have probably different state to state processes anyway with how the close is run. But it is really good to see something that can be a marker within the software that says,

[00:27:42] okay, these are the steps remaining or something that gives you a next step within Xero itself. Certainly, I saw that as something that, like you said, Heather, in some of the updates that you've covered here. People used to go from one browser to the other to then go and check this out in different type of like analytics product, for instance.

[00:28:08] And then they'd say, okay, well, what's left or what's the next step or what's the health, for instance, of that particular record or, you know, the workflow or whatever it is that you're trying to perform on that client. So now Xero is sort of saying, well, you don't need to go anywhere else. Why do you need to go to another browser or anything else? Just do it in Xero.

[00:28:31] It was described to me, because I did specifically ask this, is this kind of replacing Expert or Xenon or I think it has a new name now, but Dex Precision. And they said that, no, it's not like, it's not going to be like that. It's going to be associated with the workflows. It's going to be things like it will go out and collect documentation and say there's no documentation here and it'll go out and collect that documentation. So it will be interesting.

[00:28:58] I hear what you're saying and that's what I thought too, but it will be interesting to see how it evolves. Hmm. Okay. Well, that's a watcher space one because we all, I say we all, that's so royal we, isn't it? It's like we all in the industry. Most people that I spoke to had heard probably the similar version, which was, you know, there was an elephant in the room of who was not in the room.

[00:29:24] And they are, I should really find a better way of describing them. There was a tiger missing from the room. And I, I think we were aware hearing that sort of release was that showing boundary encroachment into some other specific application and they picked up on that soon. But, um, as you said, the devil is in the detail.

[00:29:49] So once we actually have something, um, that we can play with, then we can figure out whether there's a, you know, whether it does actually make some of the other softwares less, um, attractive or needed. So I've got something, um, as well that was, uh, linked and it was to your point around capturing and the fact that they're trying to do more in the capture area.

[00:30:15] Um, paperless has been, uh, certified for Xero and it's, you know, showing that Xero is clearly trying to build more native capture. So the smart document capture that we were speaking about is coming to that core product and Jax is being pushed as the intelligence layer for it. Um, so if you're an app partner, the whole thing that we heard was optical character recognition is not enough anymore.

[00:30:43] And I don't, I think that's not Xero's words. That was clearly just, they were continualistically saying it is not optical character recognition. So for me, I read that as we don't just read the invoices because that's not good enough anymore. And paperless is making the, the argument, the better argument, the invoice processing is not just capture.

[00:31:06] It is the intake, the approvals, the routing, purchase order matching, the coding element, the audit trail, and then getting the right thing into Xero without the finance team having to do some of the stitching of the workflow together by hand. So, um, that is where certain partners, you've still got that as the baseline case. And actually what we've given, given what we've seen with the AI classification, that control layer becomes even more valuable.

[00:31:35] Um, but I had a few moments this week that I wanted to check on in on this. I wanted to check in on that, what we heard at XeroCon. How real is that? What boots on the ground, show me something. Um, is it inferring the right information? Does it, what is happening?

[00:31:56] And this is slightly different, but, you know, some of the things around the bank rec is still inferring the wrong VAT treatment on something that an accountant has already previously classified differently. So if you've already zero rated something and that's your history with that client record, then why isn't it automatically doing that based on your history? Not on some generative AI, which I think has to be at play here.

[00:32:24] Um, because the approval workflow then becomes more of a burden because it's actually making you go in and say, okay, well, that's not how I would have classified that. And the history shows that. So my thing is still, that makes every single element of this maybe questionable until we see how not just the capture element works. And yes, it's not optical character recognition.

[00:32:51] You're saying that it's the actual processing and the workflow and everything that goes with it. But if I can't see that yet on some of the bank rec stuff and it's, and then roll that forward, we'll still have some of that that needs to be refined. And the one thing I know about having worked with the accountants for the last few years, they do not like to be the guinea pig.

[00:33:15] So, um, there will be apps that maybe need to, um, supplement in the meantime, because, you know, there's no way that you can, you can help train a software and rely on it if it's not pulling in your historical patterns.

[00:33:30] So I, I think I saw this as a, the partner market is not dead in any way, is not being, um, replaced, but the bar is moving in terms of how you are utilizing the data capture elements and putting those into a workflow control system.

[00:33:50] Um, um, and zero, if zero is looking to capture the document natively, then I guess what extra control does an app, uh, need to provide before a firm keeps paying for that additional app? Um, maybe that's the thing that the challenge that will exist, but only as and when we see, um, some of this in the wild actually being used at scale in anger.

[00:34:16] And we see that, okay, there's accuracy and we can see what happens, um, you know, and it's how auditable it is. Um, and how much more time it adds to the accountant's actual day job. Does it add, does it take the time away like it promises or am I having to go into the record and then see, okay, has it followed the same pattern of things that I would do with this client? Not just someone else.

[00:34:42] So interesting thing, India, about, about how that, that bar moving and where, you know, OEMs are, jumping in and third parties compliment it, uh, and data cleanliness is always the most important thing at the end of the day, right? Sometimes we overlook that element and how important it is to really deliver on, uh, what is right. Yeah. I think it's easy to say and easy, easy to hear that. Okay.

[00:35:07] Well now zero is trying to do more data, native data capture and it's a native data capture plus processing. But processing means that you are using somebody's rules here and that intelligence layer when we were at zero con was positioned as something that was based on historical behavior.

[00:35:29] And almost like that, that was part of the harness of not just having something that's a generative intelligence on top of what you're doing based on everyone else's, um, data and historical processing. But this is about you. I think there's still space for a lot of different players in the ecosystem to continue in their capturing and processing of what they're doing, but how long that will continue to happen for, I don't know. So. Yeah.

[00:35:59] Yes. I think, I think you hit the nail on the head there. Um, how long, but I think that they will be faster at building out, uh, new feature functionalities that are required at to, to, to bring that, that, uh, information into the solution. And, um, in terms of the sort of the reconciliations and the, the, the data sometime is not exactly correct.

[00:36:23] It seemed to me, my understanding was they look at it, it looks at it and repairs or resets after 30 days. So if five things come in incorrect and you change them all that day and then the next day, it still won't have updated. It takes a while for that to happen. Um, which didn't make sense in my head, but technically that's what I understand it to be.

[00:36:46] And I, you know, I'm not a, I'm a, I'm just, I'm just, I'm just a technology writer, not a technologist. Okay. That's helpful. It kind of pulls at the long game though, doesn't it? Uh, you know, when, when we think about where zero is going, uh, they're continually trying to reach out and do more. You know, we talked about ultra a few minutes ago and the, the bank feeds expansion through the API that they're, they're pulling through, uh, you know, they're trying to get more and more data natively.

[00:37:16] And so it, it, it changes that bar. You talked about any on, on, uh, third parties and it really expands where they want to hit. Uh, and, and, you know, maybe you could argue that it's just a plumbing fix, um, for API expansion. But I think there's more to that when you consider how and where JAX is at and, uh, you know, the things that traditionally, uh, end users or accountants have to deal with in CSV uploads and missing data and all of that mess, the, the, the reconciliation problem that comes.

[00:37:43] And we all know, um, you know, the, the practical benefit behind that is, uh, you know, fewer garbage or, or I guess, as you'd say in the UK and Australia, rubbish imports, uh, are, are really ideal if we can get that worked out. Uh, and I think zero spent a lot of years relying on third party apps and they're getting hit by people who aren't happy. Right. Because at the end of the day, those users or those accountants are saying, this is a problem that we need to solve for.

[00:38:10] And if I'm reliant on a third party to deliver that, um, you know, it's fine when the ledger's up to date. Um, but when I can't get what I need or when misinformation's coming through, well, that shows bad on zero. So, you know, for them to be able to, to take that data and then move it forward to automation with everything that's happening in, in AI, I think it's, it's behoovement of them to, to really figure out how do they capture more and do more.

[00:38:35] Maybe it's a play for the mid market, but at the same time, even for small business and Heather, to your point, the mid market means a lot of different things when we look at various markets. Um, so if we extrapolate that out to, it's a play in getting better data in. So a zero takes more control over that capture layer. Uh, I think they open a lot of doors and, and, you know, while there's going to be impact to third parties, you know, they're still giving an opportunity. You just have to play by their rules.

[00:39:01] They, they ultimately, in order to, to win and, and continue to keep market share, they've got to have cleaner data sources. And, uh, you know, maybe Jax isn't there yet, but, uh, it's a really good path for them for accountants. Uh, if it's great, if it'll kill the CSV mess that that's going on. And so that rubbish data doesn't end. And, you know, so the, you know, the big question in my mind of zero starts ranking data sources by trust.

[00:39:26] If, if you have to be a valid partner or there's some governance body, how transparent does that trust model need to be for firms and clients if they can really lean into that? Yeah. How transparent is it at the moment? But that's a very good point. And if we had to understand that right now, it's probably not understood, um, as a, because there's no benchmark for it. We just, we don't see that.

[00:39:52] Um, I think any government as well, at some point will want to know the underlying, um, to know that there's a degree of accuracy. And I think this is something that, uh, Lucy Cohen has spoken about at length as well. She's written about this in the UK. So she has really, you know, she's questioning, I guess, what reliance government systems will have on software produced outputs.

[00:40:17] And especially given that those softwares are not audited in any way or held to any standard beyond just having something that says, yeah, you can submit it through the link. It's not actually held to account in its own way. So I think there will be a reckoning at some point of maybe some intervention that will say, how much should we rely upon these softwares?

[00:40:40] You can't blame the small businesses if, if the software is, um, making it possible for them to fill in the boxes in the wrong way. And, you know, there's AI underpinning and that AI has historically also been trained incorrectly, then who is really at fault here? So I think there will be a need for a trust score at some point with some of the data sources that are being ingested.

[00:41:04] I did find your comment, Kendrick, interesting about how, uh, in terms of the, um, uh, verifying or rating the data coming in and how over the last decade, the actual data coming in from banks, I thought the banks have all the information. They should just be pumping that all in on the bank feeds. And I found that they've actually pulled back. They've pulled back on the information that's come through on the bank feeds.

[00:41:30] And, um, I think that's because people like me were no longer visiting the bank on a daily basis. And so they were losing eyeballs. Um, and interestingly in Australia, one of the banks stopped the feed altogether and stopped me being able to access CSV altogether.

[00:41:49] And I complained to our, um, uh, consumer commission organization and the bank contacted me and they said, we will give you $500 if you stop complaining about us. Is that a liability play? They're concerned about information or just, uh, they don't want to maintain it. That I think they don't want to give it to us so that we go into their site all the time.

[00:42:18] I mean, it plays out right there. They're interested in that traffic, just the way that everybody else. Banks are a business too. And I think sometimes that gets overlooked. Hey, indeed. Banks are a business. Banks are a business. And there's several of them at the moment that are definitely trying to, um, maybe there's some defensive play at hand as well. Cause I think there's some banks that are thinking, okay, we'll go into the accounting, um, side of things.

[00:42:48] And then we've got some accounting systems. We really hope for going into the banking side of things. Um, or I'm not sure if we hope we recognize they may. Um, I, there was one other thing that's a quick one. It's SIFT product, new product tables. It wasn't the flashiest of their stories that came up, but again, it was just a nice sort of fit into the wider direction.

[00:43:11] Um, there were some things around, okay, what, you know, you could see and, and how that might, you know, push, I guess, further into other people's territory. Um, but things like the product sales purchases, inventory on hand and drill downs and multi-period views, all sorts of things around moving the reporting, um, closer to the operation. So not just like, Hey, what was the revenue last month, but more like what sold? What did it cost? What stock is sitting out there? How old is it?

[00:43:40] How long before it runs out? Those sorts of things that are more like in tune, in tune with the client and giving that client visibility. So, um, there was some things I thought that were interesting about that because it's not just SIFT saying it's getting a little bit better, but I think it's zero again. Once again, showing it's moving further up the value chain, um, and also starting to overlap with some of the other softwares that perhaps have been building out those features and functions as well that we know about.

[00:44:09] So again, that ecosystem dynamic is shifting again and, um, zero is kind of saying, okay, we're not just the ledger partner that sits on top, but it's, it's sort of reinforcing that, um, you, you know, they are seeing an opportunity for themselves to provide more intuitive data to the client. And I don't see that as a bit of, of stepping necessarily on just the accountant's toes, because this is really good for, um, strong advisory.

[00:44:38] And I've always thought that I would just be the sort of thing that your accountant should come to you and be the one that has, uh, objectivity to look at those, that data and have a meaningful conversation around the tax impact by product level or supplier concentration risks or product margins. Or things that then might be very helpful, but you just would not consider when you're actually in the business of the doing.

[00:45:02] Um, but I guess the catch is the same as what we've said that, um, it's only as good as the underlying data, whether that's the product or the inventory data or something that, you know, fishbowl, you know a lot about. If clients haven't tracked those items properly, they haven't, they haven't coded the purchases consistently or maintain stock records and the tables will look clever, but they'll only tell half the truth.

[00:45:29] And that's some of the case when you look at other parts of, I don't know if you look at certain features within Xero that are just not heavily used, like the assets register or something. You just haven't populated it in the right way. It becomes a little bit redundant. So, um, but there is an opportunity for some, um, prettier reporting, some operational discipline that could be part of a conversation from the accountant to their client.

[00:45:56] And that SIFT can help bridge that gap in giving, um, the accountant a strong way to show the client what their product data is saying and making them a little bit closer together and, and aligned with their own client. So what do we think about that in terms of, you know, are the firms ready to advise on product performance and stuff like stock behavior?

[00:46:16] Um, or, um, or with this just start as like a, okay, let's first understand how messy the client inventory data really is in Xero. If nothing else, it's a good enabler for a conversation, right? I think so. It just opens the door. I've always said that the three niche areas to make money in, uh, payroll, e-commerce and inventory.

[00:46:44] And that's inventory and, and giving you those, uh, that, that, that inventory advisory people who are doing anything with inventory and disagree with me, Kendrick, if, if I'm wrong, there's money. There's money in them. They have money. They can make money if they're doing it smartly and they can make better decisions with better data. You're spot on.

[00:47:04] And from an advisory standpoint, if you're dealing with people who have that inventory, as you can show them how to better utilize their cashflow into inventory, it's better opportunity from the advisory standpoint. We see so many folks that want to avoid inventory manufacturing and there's a goldmine of opportunity there. Um, you just gotta be able to get your arms around it. So to your point, indeed, maybe the tool, uh, isn't exactly what it needs to be, but it still opens the door and, and Heather, keep me straight here.

[00:47:34] Accountants sometimes need help opening that door because they can be a little hesitant to jump into things like inventory management. Well, I actually think it's a great area. And, and, and again, I think we have a nuance different, but I think this is a great area for bookkeepers. I think bookkeepers understand numbers. They understand clean data. Um, and if they want to increase their rates because they're all about the other level of data, jump in there and, and, and work with, um, an advisory team and get that information out.

[00:48:04] And, and, and you got to start with one and then another and then another, and it will be an easy, I think a good area to niche and niche and have delicious big projects. Mm. Great call. I love that. Right. We are in the home stretch now and we're going to cover the juiciest items. And we've waited until the last 10 minutes to cover all of them because we were a complete broad sheet the whole way through up until now.

[00:48:32] We've switched to our tabloid mindset for a moment because tumorous, we obviously want to talk about some of the other things that you've all been reading about and that we've seen as well. So Heather, you probably can kick us off, I think on this one. So Savvy Gill, um, the CEO of Dex wrote a piece on LinkedIn about not going to Xerocon and not sponsoring Xerocon. So interestingly, I was with Savvy on the beautiful coastal destination of Noosa, which is just near Mooloolaba where Fishbowl is based in Australia.

[00:49:01] And I was there last month with him for a thought leadership event. And part of that process was giving Dex feedback. And my piece of feedback to Savvy was post more frequently on LinkedIn. So there you go. He followed your advice, haven't you? He followed you. He fired you and he said, fine. Okay, let's like release the post. Trust me, Savvy.

[00:49:27] Stay on TV before Xerocon and have every single person in the industry talking about how Dex said, we're not coming to your party. Zero. Zero. And, you know, I'm going to blame it on the API charges and fees. Given that Dex, you know, when Savvy first came, he had so many, like he had so much visceral energy to deal with from the Dex community because there were so many price changes and fluctuations.

[00:49:56] And he did a really good job of saying, okay, we're going to do this one last time and then we're done. And actually, yeah, it has meant for him that even though Zero did this pricing thing, they didn't go back to their customers and say, well, Zero have done this and now we need to do something with you. So he's actually been quite, I would say, there's a deep shine to the approach that he's taken.

[00:50:21] You know, he's come out, stated it, not try to let anyone else own the narrative and just say, okay, we're not going because we're not okay with this. Yeah. And to your point, interestingly, he's coming up to four years at Dex. Okay. So, and I think that's sort of enough time to deal with the visceral element of that pricing history. That was all over the place for quite some time.

[00:50:46] And I kind of feel the last two years he's stabilised it, but people can disagree with me on that. And he also, I find he's a real gentleman. I find he's a real gentleman in the industry. And as in his leadership role, Dex doesn't give off the vibes of ruthless vendor finance vibes, which is a vibe that some organisations do give off. That is my ruthless vendor financial vibe.

[00:51:15] Gosh, it's like, it's talking about, it's like a blast from the past. I feel like I had a lot of that for the last few years, but this year I've been free as a bird, just enjoying the community. So, yeah, I can appreciate the difference being on the outside of it and looking in a little bit differently at how other people are approaching the choppy waters.

[00:51:37] And we've seen even more of those choppy waters, which I think, Kendrick, you've probably got something going on as well, because it didn't end with the Dex story. So, yeah, tell us a bit more. The tabloid line keeps going, right? Right, I can do. Heather, as you bring up the word ruthless, I can't help but think about the article that was posted in Forbes.

[00:52:01] Daniel Van Boom wrote about where zero is going with low performers, as they call them. And, you know, really interesting to see zeros push and kind of shift in my mind on how they approach their employee base and what's kind of going on. And now, you know, the word garbage we were talking about earlier, that may have a reminiscent feel for some of what's happening here. But in the U.S. market, it seems like it's become so common what gets labeled as the performance culture.

[00:52:31] It's really just a way to introduce a pip and shove things out. And I think that, you know, the U.K. and Australia, New Zealand have, I'll say, better rights and laws for employees than what we experience here in the U.S. And so interesting to see how zeros kind of adopted that Silicon Valley type approach with those low performers. And, you know, there's a lot of heavy hit there.

[00:52:58] So, you know, what they've effectively rolled out is anybody who is not meeting the mark is put on a 30-day pip and given the opportunity to just walk away with an ultimatum and or a severance package kind of put into that. So, you know, very different than I think what we've experienced or seen.

[00:53:23] And obviously, as AI changes things, there are a lot of companies that are jumping on board with what AI is doing to the workforce and how it's adjusting it. You know, we all know that software stock in general, and particularly zero stock, is taking a beating as the market's been worried about the SaaS disruption turning into AI. And, I mean, Sikindra's own package is underwater from where things were at.

[00:53:48] So they're really trying to push a bit of a two-step and, you know, change the way that leadership incentives are happening. And at the same time, while maintaining the optics, get people out that they don't feel are really contributing like they need to. I think that there's more than the bottom line on this one because it's not just about dollars and cents, but kind of the whole community and the feel around Xero.

[00:54:14] It's nothing new to see somebody like Intuit or Adobe or one of those companies doing this because it's been the model for decades now. But it was surprising to see it out of Xero. Heather, what do you think about that shift on the community side? I'm chomping at the bit to jump in here. Okay, chomping at the bit. Okay, I've done some research on this. People of workers' age, people of workers' age, in the U.S., there's 212 million.

[00:54:44] There's 43 million in the U.K. So 212 in the U.S., 43 million in the U.K. There's only 21 million between Australia and New Zealand together. If you fire our good people, there are not other good people to find. Stop firing the Australian and New Zealand zero good people. Okay? But that's the thing.

[00:55:12] This is why I wonder, and you hit the nail on the head a little there, Kendrick, is we're used to the sharp elbows and hearing that from Intuit or something that's like, I don't know, over there in America is like, okay, yeah, like the edgy, the edginess to it. I think it's because when you have something that hailed out of Australia and New Zealand and then has come to the U.K. And has grown and there's been a real community about it.

[00:55:40] And it's actually just, you know, the stories where it pertains to its people have always just been good stories, enablers for a diverse culture, enablers for, you know, like whether it's female empowerment. This is the first time we're seeing and hearing something that sounds a little bit more edgy than what we've heard in the last however many years that zero has been around.

[00:56:05] And I think, I don't know whether that's just giving Sukinda in particular a bad rap, but actually because culturally it's much more accepted to then say, well, okay, AI has come in and we've seen it happen so many times this year. The, you know, Jack Dorsey and others who have turned around and said, right, we're cutting the workforce by 50%. And we're doing that because we just want the high performers. And they have said that openly about it's nothing to do with the people.

[00:56:34] We just want the high performers. AI has changed the way that we work. So that's what we're doing. We've seen it with GoCardless and Molly because there was not, you know, a merger. And therefore, like, again, it's just natural that we want to cut some of the, the, I guess, surplus rolls out because they've synergized. And then we saw it recently again with Intuit who announced it. And they said that, again, it was just cutting out a load of people that they had gone on a big recruitment drive for,

[00:57:03] to build AI in. So they had announced that they were making the cuts. I think it was maybe like six weeks back. So it wasn't too long ago that we heard it from them. I think it's just because it's come in one go at the same time as knowing that the share price has taken hammering. And Sukinda sold off her stock, which was my also final story on that, which was she's decided to sell off the stock because she needs to pay the taxes on them.

[00:57:33] And obviously that's because the share price, the strike price when she was given the options were very different to what they are now. So I think they were 178. And then now they're more like 77. And I think there was a 3% dip when she announced that she actually sold the shares off. So everything is underwater.

[00:57:53] I personally think that this announcement that was made around the people and her selling the stock and all of the announcements that we've heard on the pod today around the product, how it's evolved, how it's strengthening the moves that they're making within the different jurisdictions they operate within.

[00:58:14] I think that Xero are hunting for more investors, for better investors that can support their vision for them going broader. And right now, maybe that's something that as a CEO, she's been there for, again, just over three years. This is the sort of thing that you want to lock your CEO in for the next however many years if you are truly invested in that vision.

[00:58:44] And I think if this was another US CEO, would we question it? I'm not entirely sure. We didn't really question the Intuit CEO hard enough. But I do think that Sukindra is getting a lot more flat than we've given to most who have helmed the big software companies who have exited prematurely or maybe not done a great job of the share price.

[00:59:08] So I'm trying to remain really promoter and pro on this because I kind of see this as like a strategic move that says, OK, we've got to cut a load of the – we've got to trim what we have. We need to be ready for the next part of the path.

[00:59:23] If the shares are underwater, so she's not very well incentivized, which is a risk to zero, especially if they're trying to raise more money so that they can be ready to take on and go bigger in the US, which is what I actually think they're trying to do. I definitely think she's taking a lot more heat on this if I'm being candid. If we look at what Sassan goes through over at Intuit or even rewind, go back to Brad Smith.

[00:59:49] Rewind 10 years ago, if one of them would have done this, yeah, it's just the path that they're in. It's a cultural shift and I think a new chapter for zero. And that's the part that I think is more compelling. Everybody takes the most heat when they're blazing the trail, right? And so she's got a fair bit of that. And whether it be a cultural shift or she's just trying to right the ship and adjusting what the employee layout looks like, time will tell.

[01:00:19] But certainly interesting to see the position she's in and by extension what it's doing in the market for zero. And there's a ripple effect that goes throughout the entire community. Heather, to your earlier point about what it does to employees and across the map, I think you drop that stone in the water and we don't give appreciation for how far it can reach. Oh, Kendrick, I love your analogies.

[01:00:45] The person who takes the heat that blazes the trail, causes that blazing trail. Look, and with Sasan and Brad, they are in the U.S. with U.S. employees and a big, because that's what I'm trying to pull out. The U.S. market workforce is so much larger than it is in Australia and New Zealand.

[01:01:11] And U.K. is a bit bigger, but if you fire someone, you turn around, where's the replacement? In the U.S., I think there's five people to replace, but not necessarily in Australia and New Zealand. So I think this is... Yeah. And also, to your point, she is very public, which is great. And she walked that floor of Zero Con and came up to everyone and said, what did you think? What did you think? And that was great.

[01:01:41] I'm not saying that Brad or Sassoon did not do that, but I'm just saying that she does do that. And in stilettos, which I'm always impressed by. I know that's shallow, but for me, I apologize. Yeah, I couldn't last five minutes and she's going all day. Well, I mean, I think it was a very... Overall, it was a very different event. We can all say it was a very different event. It was a different tone to it from the previous Zero Cons.

[01:02:08] And maybe that's actually what's needed in some ways because it did feel much more intimate. There was a concentration of updates that had come in one big ground swell of news. And I think what we need to do now is wait, see and see how it stabilizes. There's still reactions. There's still a lot of reactions that we're getting into the loop as well. We've had quite a few that we went out scouring for on the day.

[01:02:38] And we're going to continue publishing those reactions as and when we continue to see the product evolve in beta or however the releases are coming thick and fast. So this was hopefully a useful episode to hear all about the latest updates on Zero. And thank you both to Heather and to Kendrick for covering it from all angles. Hopefully you got the 360 as well. We gave you the global approach on this one.

[01:03:04] And this episode might never even happen again because we're in three different time zones most of the time. And I think that this was the one episode that we needed to have these three people on. I think Kendrick invited us to Utah, didn't you, Kendrick? Absolutely. I'm still waiting for that. Are you coming for Denver to Zero Con? I'm not, but I'll come and visit you in Utah sometime. Yeah, I agree. The door's always open. Can't wait.

[01:03:32] Yeah, Utah, Pickleball. Yeah, you've got the bat ready. So we're all good. So it was definitely, you know, a good Zero Con this year. If you missed it, then hopefully this episode has caught you all up. And if you're not already following Heather Smith or Kendrick Herrera on LinkedIn, please do so. We're going to post these videos and give us your feedback and keep in touch with us on this because there's a lot of moving pins right now in the industry.

[01:04:01] So we will catch you on the next one. Thank you so much. Thank you so much. Thank you so much.