Xero's C-Suite Churn, FreeAgent x Joiin and Vibe Coding the Ledger || In The Loop

[00:00:00] Hello and welcome to another episode of the Digi-Tools In Accrual World podcast brought to you by The Loop. I'm delighted to say that I'm joined by Ian Gregory from Advancetrack and Billy McLaughlin Superstore in the AI world. Before I come to both of you guys, super exciting to have you on, of course. And we've got a whole bunch of stuff to cover. We've got some updates from Xero. Obviously, we're going to have a deep dive into a whole bunch of AI topics and ideas. And then a bit of a wrap up on like, where's the tech system going to go? What's HMRC going to be doing about it?

[00:00:30] But Ian, as I said, you're from Advanced Rack, one of our sponsors, and you're going to be supporting us at our Disruptor Awards in the not too distant future as well. But what are you looking forward to discussing? What's the topic of choice for you today? So I'm the CTO for Advanced Rack, so I spend most of my life thinking about where the industry is going, what impact AI is going to have.

[00:00:54] So that's always been entrusted me to find out what's going on in the wider industries, particularly the AI space, and just how people are beginning to use these sort of tools and how it's changing strategy across the industry and with the vendor base. Yeah. And it's good to see that Indy's let you out. You look like you've been locked in the bunker for a long time, but she's finally let you out to see some daylight. Yeah, they keep me down here. They keep me chained to the computer developing software and things.

[00:01:23] And occasionally I get to go out to India and see the guys who are doing all the actual work and doing the offshoring and outsourcing that we provide to our customers. You're a lucky devil. Lucky devil. And Billy, I mean, I know you'll be all over the AI debate, but what else is pizza interested? Yeah. So I think it's great to see the kind of shift in the apps that are now appearing in the Xero app store. So looking at things, sort of AI agents as opposed to the software.

[00:01:52] So I think I'm really excited to see how that's going to go in the future and see if other apps are already being used in a traditional sense of helping accountants, whether they start adopting this aspect of let's launch an agent and see if people want to integrate that with their Xero. So, yeah, it's an exciting time. Well, let's pile into the app news and we'll find out what's going on.

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[00:03:14] So give them a look up when you get a chance. We have had the July releases on the Xero App Store. So every month Xero certifies a new batch of apps and the July ones have just dropped, which is great. I'm not going to cover all of them because they are across sort of like the global ecosystem of the apps that are available. So just some of the UK ones to be aware of. And we've seen AutoCapture now on the App Store, which is an AI receipt capture tool.

[00:03:42] Garfield, this one is super interesting if you're not aware of it. It is the UK's first SRA regulated AI law firm. So this can read your Xero data and then spot any overdue invoices. It will then draft and send everything from like kind of like the reminders and things like that. But then it takes it one step further and can draft court documents for small claims for payments that are overdue. So that's great up to £10,000.

[00:04:12] The third app that's worth bringing your attention is very niche. This one is called Clear Course Health. And this is a clinical management software. So it's particularly around medical professionals, very niche. But if you're in that niche, it will be really, really helpful because it sort of has that two way sync between patient records and invoices and Xero.

[00:04:31] And we've seen a remittance app launch, which is called RemitClear, which will link your remittance advices to your invoices in Xero and mark them as paired. Paperless, which is a accounts payable automation. And then I've saved the best to last AutoHive, which is a no-code AI agent that works inside Xero.

[00:04:54] So this creates invoices, bills, searches, contracts, pulls reports, that type of stuff. If I'm honest, I feel like it does all the things that Jax is supposed to do, but probably falls short. So it's good to see that on the app ecosystem. What I would say is kind of that's like a summary of what's launched. A lot of them are admin heavy, which is great. I think that's where accountants and bookkeepers need the support right now.

[00:05:19] But what I really love is, naturally, that an AI agent is now appearing in the app store. So I feel like very often when you're in practice and you're looking for a tool, we're looking for things that are like, I don't know, software that can do dashboards, for example. But now I'm wondering if this is the start of a shift where instead of looking for a tool or a software, we actually end up looking for a worker.

[00:05:48] So is this going to be like a new era of an app store where instead of looking for a software, we're looking for an AI agent? So instead of kind of, I guess you almost choose a task and then the most qualified agent will come to surface on that task as opposed to picking a tool. And then that fits with the narrative of like people don't need more apps. People are tightening up tech stacks. What they actually need is more resource. So, yeah, I don't know what your thoughts are on that. It's quite a heavy start for me to take it on to the future.

[00:06:16] But I feel like it could be the start of something new. I think that kind of concept is really interesting, Billy. And having been at Xerocom the other week as well, I think it kind of reflects the direction of travel that I feel like they're trying to go in as well. I mean, the one thing maybe I do slightly disagree with is maybe like I'm not sure that thinking about having workers reduces the load necessarily in terms of the number of apps.

[00:06:42] Because I think if you think about the roles, you talked about Garfield, like your kind of credit controller to like legal thing. Well, that's one role. But what about the purchase ledger clerk, you know, which is basically now Dex or Memo or whatever, right? What about the treasury manager? What about all these things? These are roles that are maybe not familiar to small businesses, but they're definitely familiar to larger businesses. And so, you know, they would normally have been done by one person rather than done by multiple.

[00:07:11] But maybe that is the way. Maybe these kind of like tasks or workflows can be broken down. I've never had a problem with having like multitude of things connected to my zero and having to log into different things. Yes, it's a bit of a pain, but actually I'd rather have really good stuff in my products rather than having like average stuff in one kind of place. Yeah, I guess. I mean, the problem is that we end up adopting tools that have features that are released that we kind of bend our workflow to, I guess. Because we're like, oh, that tool does that.

[00:07:41] This is how we work. Let's try and merge the two. But if it's an AI agent, we kind of teach that how we work and hopefully that will save that time. But it'd be interesting to see how these things are priced as well. That's not something I'm aware of. Yeah, I think it's an interesting angle in terms of I think it's going to be an interesting thing going forward as to whether we adapt to the workflows of things like Xero or whether it adapts to us. And there's an argument that says that actually best practice should be followed.

[00:08:11] But then who defines what best practice is? And is that the same for every accounting practice? So I think there's going to be some really interesting things and certainly working for a firm that provides resources. For us, it's something to think through because why shouldn't that resource be a human being? And to some extent, we already do that. And there are some interesting challenges in providing that and actually getting people to follow workflows.

[00:08:37] But I think it will be the same issue if it's an agentic workflow as it would be if it's a human one. So very curious to see how that pans out. And as Billy said, that pricing challenge presents an interesting dichotomy in many respects, right? Because we look at apps at the moment. We say, oh, it's going to cost us X pounds a month or whatever. Or maybe it might be moving to a volume pricing, which we're starting to see, or a transaction pricing that we're starting to see with AI.

[00:09:06] It's almost like that labor arbitrage conversation, which kind of affects what you're talking about, Ian. But it also goes back to what you're saying, Billy, in terms of like, how do I then validate what I'm paying for? And kind of figure out, am I getting value for money? Like, is it worth me paying a salary or should I buy this instead and get someone to do that role? Yeah. Yeah, I think there's going to be a huge shift in the pricing structure. But that's one for the software vendors to figure out.

[00:09:40] So coming on to our next item, this is an awkward follow-up. So we've just seen Xero make a huge amount of noise about product momentum, particularly at XeroCon. 600 UK releases, so Jax, ZeroForce, Microsoft Payments, Ultra, Bank Feeds. In fact, the whole financial operating system pitch. And now we've just learned that the CTO is leaving after a mere 16 months.

[00:10:06] So Rick Carragher came from Amazon, and perhaps that fit the version of Xero that needed big tech engineering scale with infrastructure, delivery cadence, API implementation, and global teams. And to be honest, he's had a few rough months with a five-day outage in Australia at the height of the tax season in May. So that would be a bit like going down at the end of January in the UK. So you can imagine there was a little bit of commentary on that over down under.

[00:10:36] The incoming appointment, which is coming at the same time, is not a direct CTO replacement. But it's actually an interesting clue about the future of where Xero is going. So Madhuri Doulipava is joining a SVP of Engineering Payments and AI Transformation. And she's coming from BlackRock, the big financial services company, with Salesforce and PayPal in the background. And that's a very different CV.

[00:11:04] So what BlackRock means, it's about financial infrastructure. And the system she was responsible for, Aladdin, is the platform that they use to analyze risk, manage portfolios, manage trading, and regulatory compliance. It's a major platform in the investment industry. And it's estimated that 7% to 8% of the global financial system runs through it. So she's a serious player. And I suspect on the back of that, Xero have got really big plans.

[00:11:30] So I think the question is not why has the CTO left, but what is it that this is showing about where Xero has been and where it wants to go? And when I saw the story, I was having a think about it. And I appreciate your views on this. But the payments industry seems to be anticipating major shifts, quite similar to the rise of PayPal at the beginning of the dot-com boom or the launch of credit cards in the 70s.

[00:11:58] So at the moment, let's say you want your agentic AI, so Claude Copilot, to buy you a train ticket. The payment mechanism is really clunky. You end up having to get your credit card out and start entering details.

[00:12:10] And what's interesting, a couple of months back, is that the big payment providers like MasterCard and Visa, along with people like Shopify and PayPal, launched a foundation to develop a new payment approach, which they call X402, which basically solves that by getting rid of the human in the payment mechanism. So that's a massive technical change. But one of the things that's quite interesting from an accounting perspective is they're looking at the data around the payment.

[00:12:38] And an element of that is how you provide receipts. So when we're looking at payment futures, it's not just about payment. It's also about the future of receipts and therefore the future of bookkeeping. So if you look at that picture, it's interesting that Xero are clearly trying to fit into that.

[00:12:58] And if you add that to the announcement of the purchase of Melio last year and some of the features they announced at XeroCon, so the ability to get jacks to reschedule payments and also to spot payment fraud, we get a clue that Xero seems to be wanting to use their 20 years of data to be the intelligence supporting AI-driven payments and hence avoid it becoming a victim of the saspocalypse. And I think that needs the sort of engineering leadership that the new joiners are clearly going to bring.

[00:13:28] So what do you think about that, John? And I think, well, I think it's interesting. And maybe before I properly comment on it, I might bring in some of the other news that we've got from Xero because there's been some of the changes. Because I think this all kind of wraps up in the same kind of place. So at the same time as losing one person, Xero also lost their chief people off, which had only been in the role for 15 months. So similar kind of time frame.

[00:13:59] And have been brought in under Sukinda's CEO kind of role to kind of help bolster performance at Xero. And we've also seen some very striking news from Xero about this kind of 30-day notice that some people have been given in terms of performance and things. So that has happened.

[00:14:23] And then also, at the same time, they've also then appointed someone as chief business officer, a guy called Maninda Sawney, who's come from Adobe. So another big player in the sort of technology space and stuff. So I think it's hard to read in some ways. There's obviously some churn, if you like, at the C-suite level. And you could read into that that that's a negative.

[00:14:50] Obviously, there has been negative headlines around share price and a whole bunch of other stuff. I was a little bit underwhelmed by the C-suite at Xero, if I'm perfectly honest, in terms of their presentations and what came out of there. At the same time, though, Ian, as you say, we kind of know that Xero want to kind of pivot into some kind of banking funding thing. It's been trailed for a while. It will allow them to compete with QuickBooks and some of the other players in the marketplace.

[00:15:20] And bringing in someone in a chief business officer role, I think, is going to allow them to be a bit more pragmatic about their strategy delivery and where they go. Because, again, I think Xero strategy has not always been clear in terms of what markets are they really trying to press into? How are they going to achieve that and go from there? But, yeah, I don't know. What else do you think, Billy? Because, I mean, it's very mixed for me. And this is why I'm just a little bit unsure. Yeah.

[00:15:50] So, John, I think I've got two takes on this. One is kind of from what Ian was saying around the payments aspect. So there is a new AI tool that's just received $30 million in funding called Natural, which is to make payments. So agents are going to have the access to access bank accounts, things like that. And I'm wondering if the way Xero is going, are they going to potentially buy it, no doubt, in the future, but create something similar?

[00:16:12] But then with this huge shift in sort of the top dogs at Xero, I think one of the concerns I would have as a practitioner is everything that I've been promised on a roadmap. Are those things still going to apply? Are we going to have to get sort of those commitments again? And then it's one of those things where quite often someone can leave a business and it's very easy for anything that's been promised to leave with them. And the blame goes with them as well. So in the future, you say, oh, you promised X, Y, and Z features.

[00:16:41] They go, no, no, no, I didn't promise that. So and so did and they left the business six months ago. So I think that would be my main concern right now is kind of getting Xero to be promised that roadmap of what's coming. Yeah. And I mean, I think when India and I and Ryan were at XeroCon, we had the interior case, the UKMD.

[00:17:00] I mean, we kind of pushed her a little bit on this as well, because I think Xero have kind of been making noises about promising to realign with the backlog of issues and feature requests that have been asked for. And certainly there are specific ones where they've really kind of like made a big play about it. You know, the small business payments challenge in particular and being able to do some of the stuff around recovering money, but also payments and then payment monitoring.

[00:17:29] You know, they've done a big push on that. And also India and I were at the Xero developer like hackathon that happened the weekend before XeroCon. And, you know, the product team there were talking quite a lot about how they want to kind of work through the backlog. And I guess in this world where you've got your agentic coding and stuff like that to help with this, we should see an acceleration of this. I know that Xero said they launched like 600 new features and products, right? But I think there's a whole bunch of stuff in the backlog.

[00:17:58] And I don't think some of it is actually technically difficult to kind of build into the product and to launch. So maybe we'll see an acceleration of that or maybe they'll have a focus group on kind of trying to achieve some of those things. So let's move on from Xero. They've consumed a lot of the sessions so far. So I think we could move on to maybe Free Agent now and give one of the other tools a bit of airtime. And it's around Free Agent's connection to Join.

[00:18:23] So we've seen Free Agent make quite big moves over the last, I don't know, 24 months really with a lot of the vendors. And it's really good to see. So this is a new one. To backtrack slightly for those of you that don't know, Join is a consolidation tool that produces reports. And I believe it's not just finances as well. I think it can kind of look at operational data as well. So, you know, a full picture for the business, which is great.

[00:18:46] But previously, if you wanted to pull reports from multiple companies, you would need to export them all separately, pop them into a spreadsheet, tidy it up, do loads of copy and pasting, reformatting, you know the drill. And then next month, do the same thing again. Well, now that Free Agent and Join actually integrate directly, you don't have to do that.

[00:19:08] So it can be quite common that groups also have different ledgers. So whether that's through consolidation or maybe different finance teams want to use different tools or maybe they need different features within the tools, you might have a group of companies that are using the whole array of suite of general ledgers and that can cause issues as well.

[00:19:31] So now with this integration, it means that if you've got a group of companies and three of them are on Xero and two are on QuickBooks and one's on Free Agent, no problem. You can use Join to connect all of them and updates every 24 hours. So that's going to be a massive help. I think I popped on the site when I saw this announcement, I think they have a 14 day free trial as well, which is always handy so you can see if it actually works with your clients. If consolidation is obviously a big challenge for you, this is definitely worth checking out.

[00:20:00] John, I guess from when you was in practice, I would be interested to know that like, is this just Join catching up? But is this something that was already solved or is this something that is actually going to be quite useful for the businesses that have made those consolidations? I think maybe there's an element of Free Agent and Join catching up. I mean, this is just kind of the natural progression of the broad ecosystem, isn't it? Right.

[00:20:25] You know, you build for one product and then you move on to the next and the next and the next in terms of the GLs from an ecosystem point of view. You know, we also know that Free Agent have been very strategic about the way that they approach their own ecosystem and you're building really high quality integrations with the partners that they choose. For me, this is massive, you know, because for a product like Join, which you, as you say, Billy, allows you to do consolidation.

[00:20:53] You know, one of the big challenges that sometimes you are facing practice was you've got a multi-entity organization who isn't just on one GL for whatever reason. It might be a geographic reason. It might be a scale issue. It might be something else. And bringing that data together cohesively was always a bit of a pain and it usually ended up being an Excel.

[00:21:13] So having it in an app like this, you know, it's not the be all and end all, but it does help to save some of the pain and the challenges around reporting and management and stuff, which I think is kind of there. And I think it's also an interesting kind of juxtaposition at the same point, because, you know, we see other products trying to move up market to kind of do this kind of like, I don't know, small scale ERP type solution. And we've also got AI players coming into the market like Rillit and others.

[00:21:40] And so everyone's kind of trying to find their space in this marketplace and figure out how do they reposition themselves to go up market a little bit further. So you're broadly good all around for me, I think. Talking of ERP vendors going up market, there's Acumatica, which is an ERP vendor, and they've just bought a company called Vertrax. Vertrax is a specialist software business that looks at fuel and energy distribution.

[00:22:08] So when we look at the bigger picture around the so-called Taspocalypse, you know, this looks like a much more interesting play than just an acquisition of a partner. Because suddenly it changes Acumatica from being a general purpose ERP into more of a specialism around fuel and energy distribution. And that's not a neat little vertical. It's messy. It's regulated. It's very operationally specific.

[00:22:35] And suddenly it's much more strategically relevant in the world. So we're all familiar, obviously, with the blockage of the straight-to-four moves. And it's blockage for so many months means that energy suppliers are likely to be more restrictive for the next year or two. And everybody needs energy. So suddenly supply is a big deal. And if you go beyond that, you know, we've got wider trends like AI, which is swallowing power. Data centers need electricity and the means to generate it.

[00:23:03] And this is having a massive impact on other markets for the same fuel. So software that understands fuel and energy movements is not niche in the way that it might have looked five years ago. It's actually infrastructure software. So that's a much better read on the deal. Acumatica is not just buying customers. It's buying with nuanced delivery routes, tank monitoring, pricing adjustments, compliance, field operations, and most importantly, margin control.

[00:23:31] The sort of operational detail a generic GL does not understand. And a generic AI agent will not magically invent. And, of course, in the UK, you know, we've got questions politically around, you know, future generation of oil in the North Sea and gas in the North Sea, domestic production, imports. So for the UK, it's also potentially an interesting market to look at this.

[00:23:57] And it's an interesting strategy to try and become more relevant when the SaaS companies around you are losing share price like there's no tomorrow. Yeah, I think when a partner that software kind of is in the same vertical and the expertise in that app or that software or that service becomes crucial to your growth, then I think buying it just makes sense.

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[00:25:19] That's www.sweetfiles.com forward slash digital. Okay, moving on. We're going to get into the nitty gritty of accounting right now and dive deep into something very niche for a moment. So there's a product out there called Crunchify, US-based products predominantly, but now just launching here in the UK to help accounting firms with their FRS 102 lease accounting requirements. So why is this important? Well, it's important for a number of reasons.

[00:25:48] Obviously, the FRS 102 changes that came in brought two major IFRS-related changes into our accounting requirements. One was around revenue recognition, a change that affects some businesses but not others. But then the lease accounting one is probably the most significant one because that will pretty much affect almost every business that has any kind of operating lease as it was then, which has now become something that you have to bring onto the balance sheet.

[00:26:14] And the reason why this is challenging is like it's quite a technical area of accounting. There are some implicit challenges in like working out the value of the lease, the interest rates related to that lease and how to then do that. And then broadly, you've got to do kind of a fixed market discounted cash flow calculation to get to an asset value and a lease value, bring that into your accounting. There's all sorts of transitional adjustments. And unfortunately, the only entities that are exempt from this are FRS 105 micro quantities.

[00:26:41] So even if you're doing small company accounts with one or two, one, hey, you've got to do this. And if we're perfectly honest, accountants are not always good at getting this technical stuff right. And if you've got a business that's maybe got, I don't know, 10 or 15 like cars on a lease, for example, these will be caught by that. And that's quite a lot of calculations to do, quite a lot of stuff to keep together. Having done this in the past for businesses that do IFRS where they've got properties and other bits and pieces as well, you can end up with big messy spreadsheets, which you kind of got to keep on top of.

[00:27:11] So we've got this product here, which helps with the calculations that helps with doing basically keeping your asset register and your lease register together, doing all of the journal calculations and everything else that's required for this. Worth saying the Crunchifier, not the first player in this market. There are a number of others more kind of in the audit space, I would say, that kind of move around in there. For example, Datasnip, I have a lease accounting module and there's a product called Audit Lease as well, which does this and a few others in that space.

[00:27:40] So it's worth having a look around. Unfortunately, I would say broadly, none of these products are cheap because they do kind of come from this top end of the market coming down. Equally, maybe some of the GLs could be looking at this and building it the other way around because we've known that these changes were coming. We've known that these changes have been coming for about three years for small business to carry.

[00:27:59] And so maybe this is one of the areas when we're talking about where the GLs could move to is actually they could be a little bit more proactive around some of the challenging concepts that sit in our space. And your lease accounting isn't just one of them. You obviously see so many. I see many mistakes around things like share incentive payments and all sorts of other things where people just fundamentally get these things wrong all the time. So things you're talking about software and things that you don't like.

[00:28:26] So a lot of people now are talking about vibe coding their way into software. And we've talked a lot about general ledger and there's been a report just written around someone that vibe coded their way out of a general ledger. So I love that someone's written this. Yes, I have a really big problem with it, but I also agree with it at the same time, which is quite conflicting. But we've already spoke a little bit about Xero's share price reducing.

[00:28:52] And to me, that is a signal from the market that there will be businesses that are now vibe coding their way out of software. And that's why share prices are falling. But there's an article on accounting where we've got someone who actually did it. And I was actually having a conversation with Dex recently. Dave had a few people saying to them, like, well, why could we not build something ourselves that would read receipts? And I think it's about understanding what features are actually in your product, because if you think you could build it, you probably are not using it to the breadth of its capabilities.

[00:29:24] So in this one in particular, I think the guy was called Steven. So he didn't like the prices that were rising specifically with Xero. He said that it felt like it didn't reflect the improvements in the software, which is probably one of the first things I would disagree with. Because in Xero's defense, I would say it's almost insulting to not appreciate how much resource goes on behind the scenes to maintain it. It's a little bit like your IT provider. Like nobody ever really knows what they're doing until something goes down and they are the devil and everybody slags them off for three days.

[00:29:54] But nobody talks about the other 362 days where it's running really, really well. And I think it does kind of give me that. And also, I feel like everything is going up in price. It's like my butter is now £6, but I'm not going out to go and I'm not going to stand in my garden. I don't even know what the technical term is, but I'm not going to make my own butter now because it's gone up in price. I think there has to be this element of like, it's a distraction. I can see John. John's lost it.

[00:30:22] John's lost it thinking about me making butter. The thoughts of a cow in the garden, Billy. Oh gosh, there's so many talents I have, you see. I'm going to bring some to the next event. I'm going to bring some home in. Billy's butter, that's going to be the new thing. But I do think there is this like huge thing now with VibeCoding where it's become a distraction. And instead of us focusing on what we're good at, what we enjoy doing, what we set out to do in our industry,

[00:30:49] we are thinking, oh, we can have a dabble at that, which is great. And in this story in particular, the guy said he built it on a Saturday and it saved him £790 a year. And I would argue that actually a Saturday to me and my family is worth more than that £790 I would save because it's not just that one amount. It's then the upkeep you've got throughout the year. What happens when VAT rates change? What happens when there's the banks disconnect and things? There's the upkeep aspect as well.

[00:31:18] And I think that kind of is kind of missed a little bit. I would say, referencing back to the article, he does kind of dispel some of the myths. So he does talk about it. And he does kind of say to build a regulated audit ready MTD compliant software, you can't do all of that. So if you've got a really, really small requirement, it's just a few features, then maybe you could.

[00:31:44] And then the other thing I just want to point out, like nobody seems to talk about when they talk about vibe coding products. There is still a subscription cost to pay. Like if you're, I've built my own things on Lovable and it's great, but I still have to pay for my Lovable subscription. So at what point are we just, I don't know, I feel like we're kind of chasing our tail a little bit in this sense. So I do agree. If you are looking at cutting down on your subscriptions and you've got some tools, I always visual almost like a Venn diagram of like, right, okay, what products have we got?

[00:32:14] And how do they overlap? And then, you know, if there's any that falls specifically in that overlap, then those are the tools that we can kind of think about removing from our tech stack. And I do love how accessible it is now to build these tools. And we have to think about the fact that our clients might now be building those pretty dashboards that we said took us three days to produce and we charge X amount for. But I think we would be naive to think we could replace a general ledger tool by VibeCode.

[00:32:40] And I think it's kind of like the admin, as I say, like I built stuff myself around like when I'm speaking, have I sent the headshots by us? Like those type of things. The admin, brilliant. But the really big tools, I would probably say stay away from. I don't know, Ian, John, have you built anything or do you agree with anything you've said or disagree? Have I gone on too much of a rampage? No, no, I think you're absolutely right. I think part of my job is writing software anyway.

[00:33:08] So at Advanced Track, we have various proprietary systems and part of my role is to manage them. And a lot of the coding I do myself. So I, you know, I've got Claude working away writing code all the time and it's really good at it. However, I think what, as you said, what people don't realize is just how much work and cost it keeps to keep these things running. And I think, you know, a really nice analogy is the open source movement.

[00:33:35] So, you know, beginning of a dot-com boom and even through till today, you know, there is a lot of free software out there. So, you know, one of the big ones would be WordPress. You know, you can download a copy of WordPress and install it on your server. But people still pay a lot of money for somebody external to support it because actually it's a lot of work. And then you've got all the hosting costs and those sort of things. So I think with vibe coding, people will dabble. Somebody will get burnt and it'll go down the same road as open source.

[00:34:05] There'll be a niche for it. But anything actually mission critical, you're just not going to want to run on it. Yeah, I'd agree with you as well. And Billy, I totally agree with you. I mean, butter is unbelievably expensive nowadays. I think just the concept of replacing a GL, vibe coding your own GL over a weekend and replacing it is just absolutely nuts.

[00:34:31] When you can spend that time and effort and resource on fixing a problem that exists. Like, you know, the GLs in the market are not broken. They work exceptionally well. They're unbelievably secure. Yes, there are challenges with downtime occasionally. Yes, there are challenges with integrations and other stuff. But when you think about what an accounting practice does and what a small business does, like there are a bunch of things which are broken. And quite often they're in very niche areas and stuff that need to be addressed and fixed.

[00:35:00] Having vibe coded some stuff myself and actually got a product that we're about to use internally, which has been vibe coded, I'm still relying on external expertise from a software point of view to validate that product before we let it loose on people. Because we've got to make sure it's secure. We've got to make sure it is kept up to date from a legislation point of view and a regulatory point of view. This is something that's going to hold information and data that's going to be controlled in a very specific way.

[00:35:30] And it's going to be subject to regulatory scrutiny. And I don't want to put that risk on myself and on the products or tools that I'm using. So, you know, I'm spreading my risk in a sensible way by getting technical experts in to support me and go, yes, John, what you've built is either like 99% there and the 1% we can fix. Or actually, John, you're 50% there and we're going to have to close the gap and it's going to cost you X. So, yeah, that's where I think people should be doing. You know, it's the age old thing, right?

[00:35:59] Just because you can doesn't mean that you should, right? I think that's the thing. Yeah, I agree. So that brings us on to an entirely different topic, which is about tax. So there's a recent article in accounting where by a journalist called Philip Fisher,

[00:36:24] who reviewed an academic blueprint by the Social Prosperity Network, which is a foundation at UCL. We're looking at tax simplification for the UK. And it's fair to say that the accounting work community didn't exactly roll out the red carpet for this. So the scope of this paper was massive. They were talking about collapsing income tax, having national insurance contributions for both the employed and self-employed,

[00:36:54] capital gains tax, dividends, inheritance tax, single national contribution system based on total personal income. And they threw in a 1% levy on property just to make it more complex, taxing state benefits, scrapping tax free allowances and aligning with the calendar year for financial years. That one will go down well. It's easy to see why the comment section lit up on this.

[00:37:20] The consensus was simplification is great, but this just feels like fan fiction aimed at Westminster. So I think practitioners, you know, not defending the status quo. We know the UK tax codes are nightmare because they have to manage it every day. But I think there's a massive gulf between what is an elegant academic model and the messy reality of actual people and organizational politics.

[00:37:47] So, you know, if you think about pensioners, benefit claimants, people who are property rich, cash poor, households facing higher travel duties, above the median income being sold fairness while the economy is flat. And then think about the practicalities of actually implementing a 1% property levy. I mean, that in itself is an enormous project or moving to a calendar year for the financial year.

[00:38:13] So I think, you know, I used to be an academic for a while and the word says it all. And I think this is one of the cases where it's just, you know, blue sky thinking that it's not really pragmatic. And I think it does, however, ask questions of actually all of these things.

[00:38:40] It raised income a bit, but it didn't actually solve the problem of growth, which is a key issue here. And I think there's another really big question, which should we be looking to simplify the tax code with a view to then applying more automation? And I think there's a massively nuanced argument. Accountants, for one, benefit from a complex tax code. If it was really simple, people wouldn't need us. So I think there's a lot there.

[00:39:09] And just picking up on Billy's article on Vibe Coding, you know, part of the challenge with automation in this sort of space is how do you make sure that the tools that we're using are actually good? And I know that Lucy Cohen at Mazoom has been blogging quite a lot recently about some of the challenges around the quality of the input coming out of some of these tools and trying to sort out the messes of them. So, I mean, it's an interesting set of arguments.

[00:39:37] You're both accountants known to the humble IT guy. So what do you think? I think the input is always under-talked about, to be honest. I think the input is also just as important as the output. So, yeah, I think when you talk about things like simplifying tax codes and stuff like that to try and help the automation, yes. Going back to the article itself, the thing that just jumps out at me is this, like, no tax-free allowance is, like, the government would not survive that as a headline.

[00:40:06] The government just would. They wouldn't. Like, they would get, like, burnt at the stake for, like, $1,000. You know, putting pensioners through tax and all sorts of, I actually really liked what you said about it being like Westminster fan fiction. I feel like that is actually quite an accurate description of it. I probably would have been one of those noisy commenters in the past who would have said, oh, what do academics know about, you know, the real world? Having, having made it the benefit of having worked closely with academics in the last couple of years and various things, I think it's good.

[00:40:36] And maybe sometimes, as you've said, you have this kind of blue sky thinking almost, or this kind of, what if we did this? We'll challenge the status quo a little bit. How about this is a different concept? Clearly, there are practical issues. You know, Billy's alluded to some of them. I think removing the first allowance is political suicide. But aligning the tax code or the tax year with the calendar year, many older countries already do this, right? So that is not impractical.

[00:41:00] And there is that famous history of when we did move the tax year previously in the country and we had two days of rioting. You've got to go back about 400 to 500 years for that. But, you know, that is part of our tax history in the UK. Some of these things potentially are there. One thing I would say, because you touched on it, Ian, was that I actually think that in many respects, accountants and bookkeepers and the broad industry has been calling for tax simplification generally for a long time.

[00:41:29] Not because we think we're going to lose our jobs or that it's going to be a challenge, but actually because quite often in our roles, we're actually fixing mistakes that people have made going off on their own, trying to interpret the tax themselves and then having to deal with it. And in some respects, it's not always that easy to charge money to fix problems that people have created out of their own misinterpretation of the rules. And so if things were a little bit simpler broadly, it would be nicer for everyone because our advice could be much more crystal clear.

[00:41:58] We wouldn't be operating in the gray quite so much as we do sometimes. But also there are, I think there are huge benefits to simplification. And I go back to something we've talked about previously, but if you look at what Brazil has been doing over the last few years with VAT simplification linked to e-invoicing over there, which is now extended into effectively an extension of the way that benefits work for the low-income people over there.

[00:42:22] Such that rather than having, like we've got here in the UK, we have like zero rating on children's clothes, which we actually know benefits wealthier people more than it benefits poorer people. Over there, if you're on the low-income register from next year, when you buy children's clothes, you will effectively benefit from a zero rating on that in a way that your wealthier people will not have access to. So that's a much more fair distribution of the benefit system and the way that tax correlates and interacts with other things within society.

[00:42:52] So there are massive benefits, I think. Yeah, that's interesting to see. I'm going to pile on then the last little bit of thing because talking about taxation, HMRC are also in the middle of their own transformation journey. They set out a roadmap in 2025, which sets out five years worth of change that they wanted to build in. This is not dissimilar to what we've seen in other countries. The IRS have a really big roadmap as well to modernize.

[00:43:21] And this is required. We need to know what HMRC plans to do so that as advisors in the system, we can understand what's going to be happening, how we're going to change our interaction with them and where they're going to end up at. So the five-year-old plan set out three priorities. One was improving day-to-day performance and taxpayer experience. I think probably most accounts would say it's hard to see a change there yet. Second one was around closing the tax gap.

[00:43:45] Ironically, the performance indicators are that the tax gap has increased, not come down for this year or for, sorry, last tax year, 25, 26. So again, not doing too well on that. And then reforming and modernizing tax and customs administration. And I guess you could argue that there has been progress on that. Whether you like it or not, MTD is having an impact. And other things are starting to change there. Albeit it does feel like we're waiting to retreat or sometimes.

[00:44:09] But I guess key things in terms of the core updates was that broad digital engagement with HMRC had ticked up a couple of percentage points from 76% to 78%. That's a positive. That's something to be applauded. The one big one that I know India and I have been talking to Kuhn about very recently is this kind of transition of moving everything across to the gov.uk. One login. They want to do that by 2030. That's a very ambitious project.

[00:44:37] There's a whole bunch of stuff that needs to happen to make that work. But there is some bigger benefit and my personal frustrations with some of the admin overload that you get when you're running small businesses and your self-assessment and all these other things. Maybe that will go away. One final thing just to touch on in here and then I will open it up for comments is, as I said, the tax gap was estimated to have risen from 5.3% to 6.4%. So that's disappointing to hear.

[00:45:01] There has been a mass rollout of Microsoft Copilot, Billy, which I'm sure you're very excited to hear about, to 28,000 HMRC caseworkers. Again, there's maybe a question mark about whether that improves the service or whether it dumbs it down a little bit. And they've added, they talked about this mandatory tax advisor registration from May this year. And again, it's seen whether that improves quality and output and maybe, again, maybe helps to close some of the tax gap that we've been talking about.

[00:45:30] So there's a bunch of stuff happening at HMRC. It's not surprising. It's an enormous organization. I'm sure we would like to see an acceleration across all fields. And I actually do think that broadly they are starting to listen a little bit better. It's just that they don't make it easy for us to communicate with them in all times, unless you just happen to be bump into the right person at the right event or happen to be on the inner circle of something that's happening. And then you might get wind of it.

[00:45:55] And I think that is one of the disservices to the broad accounting market is that I don't think there is a broadcast signal that we can tap into to provide really great feedback and to feedback on where we think things should improve. Yeah, I mean, obviously for me, I'm really excited about the co-pilot. But I think you make a really good point around the dumbing down. If the co-pilot is being launched and released with adequate training, then that's positive.

[00:46:23] But if it's just, hey, go, here's some AI, go use it. I'm excited already for the memes that we're going to see of the letters and the incorrect communication and stuff like that. So, yeah, we'll see. I mean, even like the chatbots online and stuff, we've seen it where you can ask it for a Kirchrest P. It'll give you it. So let's see, including butter. So, yeah, let's see where it takes us.

[00:46:54] Well, there you have it. There's another episode of the DigiTools and Accrual podcast brought to you by The League. I was delighted to be joined by Billy and Ian. Great chat, really good conversation, some interesting updates and things and some interesting challenges to take away for our firms and businesses as we go forward as well. You can, of course, find us on all of the podcast platforms. You can find us on YouTube. We'd love to hear from you the interaction, the comments, the sharing of our posts and bits and pieces. And we'd love to be challenged about our thinking as well and just to figure out, have we got this right? Are we getting the messaging right?

[00:47:23] Are we completely off and what should we be thinking? Because as Ian said, and Billy, I know you do this as well. We're all interested in the direction of travel of where this industry is taking us. And for me, this is one of the most fascinating and interesting times to be in this industry. You'll be able to catch us on the next one. And as I said, thank you again to Billy and Ian for being superstars as usual. Thank you, John. Been a pleasure. Thank you.