Episode 8: Big Questions for Accounting - with Jim Norrington of TC Group

In this episode Croydon based Jim Norrington of TC Group discusses big questions on accounting, coronavirus and making the world a better place.

If you enjoyed this, why not leave a review?   

If you're an accountant, and you enjoyed it, why not come on the show? 

Transcript

Kirsten Gibbs: [00:00:00] Welcome to the pioneer accountants podcast. Where pioneering accountants answer big questions about accounting, and I introduce them to people they should know. I'm Kirsten Gibbs and I help accountants to build an autonomous practice they can step up with or away from whenever they want without killing themselves or their business in the process.

Today, I'm talking to Jim, Norrington a partner at TC Group. Jim runs the Croydon office of TC Group, which is the fastest growing accountancy firm in the UK with 13 offices currently. Jim's role is to add value to his client's businesses by helping them to plan, monitor, and manage their business performance so they can meet their personal and business ambitions married with two boys, age three and four.

He's trying to juggle the demands of growing a business with the responsibilities of parenting and it's coming at great cost to his golf handicap. I'm very sorry to hear that, Jim. Hi. 

Jim Norrington: [00:01:05] Hi Kirsten Yeah, it has come at a cost to my golf handicap, but working from home during the current pandemic has meant I can break every now and then for a bit of chipping in the back garden 

Kirsten Gibbs: [00:01:17] There's a silver lining to every cloud. 

Jim Norrington: [00:01:20] yeah well if I get let out on the golf course again, we'll see if that's come to any fruition for me. 

Kirsten Gibbs: [00:01:25] Okay. Brilliant. Brilliant. Thank you. So, Right. Lovely to have you here. I'm going to dive straight in with the first big question, which is what is accounting for?

Jim Norrington: [00:01:37] What is accounting for, It's for whatever the client wants it to be for Kirsten. If, when I started in accountancy, it was all about compliance? as you, as you probably know, very well, and a lot of people know, in the accounting industry, it's a technical area. There's not only the accountancy compliance the tax compliance as well.

Its 2020 now. So a lot of that is done by technology and AI

Kirsten Gibbs: [00:02:04] Right.

Jim Norrington: [00:02:06] So, yeah, that that's made that side of the business a lot easier for us to cope with. So now I would say accountancy is for whatever the client needs us to do. And for the most part, that is the interpretation of their data and using that to provide insight for them.

Kirsten Gibbs: [00:02:22] Okay. So is that what it should be for? 

Jim Norrington: [00:02:27] At the moment. Yes. I think that is what accountancy should be for, but accountancy is a business and like all businesses, we've got to adapt and we've got to evolve and we've got to keep up with the change in demand and what it is that people want. 

Kirsten Gibbs: [00:02:43] Right. Okay. So next big question then, Can accounting help to solve some of the big problems that we face today? Things like inequality, climate crisis - can accounting help has come out of coronavirus in good shape? 

Jim Norrington: [00:03:00] Yeah, some huge issues there. Yeah. So yeah, really interesting ones to discuss and how accountancy can play a bit of a part in some of these.

So my take - can I break that down and, lets take inequality and climate crisis. there must be a level of quantifiable data somewhere on the impact of inequality and the impacts of climate crisis. It might not be immediately available, but an accountant should be able to somehow gather that.

And once they have that information, they can interpret it. Probably compare it to history, and other sources that are available, not just numbers that are available and make some form of conclusion on, on both of those topisc. 

If we take coronavirus, We don't really have anything to benchmark that against there's no, there's been no pandemics in our lifetime.

So all accountants can do is estimate what might happen in future as a result of coronavirus. 

Kirsten Gibbs: [00:04:03] Yeah. 

If I, if I, if I elaborate on that, a very simple, scenario, if you're like, it might take an accountant to understand somebody's business and demonstrate to them how, as a result of coronavirus, one of their big customers might go bust.

Jim Norrington: [00:04:23] And in doing so that would have a serious knock on effect on the rest of their business. A customer going bust is just one of several scenarios that could happen as a result of not just coronavirus - any business. You could have a loss of key staff, potential litigation, rising demand for your product, or increasing costs.

And all of those can have a significant impact on any business. So yeah, we need to forecast all of those scenarios for our clients to allow our business owners to make better decisions now. As opposed to making a quick decision at the point of crisis happens. 

Kirsten Gibbs: [00:05:00] Yes. yes. Okay. So one things I remember learning at business school, was Shell and scenario planning, way back in the seventies.

They quite famously did some scenario planning about the business. And one of the scenarios they investigated was what would happen if the price of oil plummeted. And of course, as they were doing this, everybody said, don't be stupid. That's never going to happen. It's a finite resource. It gets harder to get out of the ground.

You know, it's only ever going to go up in price. What's the point of looking at that scenario? Well, you know, they did. And what I thought was really interesting was it wasn't so much that they did. And therefore, when it did plummet in the seventies, they were prepared. It was that as a result of looking at that risk, they identified all sorts of opportunities to improve the business that would make the business better anyway. 

So even if the price of all had not dropped Shell would have been operating better than they were before. So I think that whole idea of. Just not just looking at risks because bad things might happen is it forces you to look at your business and how it's working and make improvements now rather than too late.

Jim Norrington: [00:06:26] Yeah, that's, we've talked about risk there and it's really important that for every, for nearly every risk, it's important not to lose sight of the opportunities that come out of the back of that. And if we can identify those opportunities now, all of our clients are only going to be well-placed in future, especially if they act now to mitigate the effects that come as a result of those risks. 

Kirsten Gibbs: [00:06:51] Yeah. I mean, the other thing it reminds me of is, I work with sometimes with franchisors who want to create a franchise out of their business. And one of the things you have to do when you take on a franchisee is train them to run the element of the business that you want them to run.

And when we do that for retail, for example, the way we train people is actually the way you learn to drive a car or fly a plane, which is kind of in a simulator. And the whole point of that is you identify scenarios that are likely, and then you train people, you give them practice in those scenarios happening so that, so that when it happens for real, they've actually kind of done it before.

It's really comfortable. So the more you can do that with a business, the better I would say, but also what you've just said makes me think, yeah, there's an even more valuable aspect to what you're talking about. Scenario planning and all the rest of it, which is that you're constantly reminding business owners that a business is not a simple machine. It's not just a thing where you crank the handle and money comes out. 

It's a complex system operating inside other complex systems. You have to keep watching what's happening around you and inside your business and you've got to keep adapting to all of that. And that to me, seems like an incredibly valuable role for an accountant to be playing.

Jim Norrington: [00:08:24] Yeah, I think so. We're accountants and we, we love systems, but you can't take your eye off the ball. They change. They've got to change and sometimes, it takes something to go slightly wrong in that system for that system to come out better as a result of the improvements that you need to make to correct it.

Kirsten Gibbs: [00:08:42] Yeah. 

Jim Norrington: [00:08:44] I think based on what we've talked about up until now, it shows that, as accountants, we are no longer giving history lessons. What we're now doing is helping our clients to focus on possible futures. I go back to some of the topics we've just debated or mentioned. If you interpret data on climate change and inequality, you're in a better place to scenario plan, how decisions today might impact climate change and inequality tomorrow.

Kirsten Gibbs: [00:09:11] Yep. So that's how accounting can help individual businesses deal with the really big issues that they might, they may feel powerless to deal with. It's. Brilliant. Thank you. So kind of in conclusion then, do we think accounting can help make the world a better place? 

Jim Norrington: [00:09:34] I would be doing my profession a disservice if I said no 

Yeah, accountancy and, and the interpretation of data can give people information. They need to have informed decisions on really big issues. So decisions could be made for the greater good. but ultimately you'll never be able to please everybody, because given any scenario planning, different people involved are gonna have different ideas on what a good outcome is and what makes the world a better place.

Kirsten Gibbs: [00:10:02] Yeah. But I think the valuable thing is to, to make all of this thinking and this belief to make those things explicit and transparent. So if you can make those ideas explicit and the motivations behind them explicit, that can only be helpful. And often that means basically the way you do that is to hold a degree of skepticism about what people say versus what they do.

And again, I think accountants are particularly well placed to help with that because accounting is historically based in fact, and rationality, and that makes accountants sood candidates to be a kind of professional skeptic for a business owner. 

Jim Norrington: [00:10:46] Yeah. That that's very true. and what we mustn't lose sight of is that the future is not fact. Whilst its based on logical scenarios of what could happen, a really balanced accountant will need to apply a level of emotional intelligence in addition to some sort of rational intelligence, because people's motivations for various outcomes differs from person to person. 

Kirsten Gibbs: [00:11:08] Oh, that's interesting. Give me an example. 

Jim Norrington: [00:11:11] Yeah. Okay. So, if we go into cold, hard emotion that could compromise somebody's ability to make a decision based purely on facts, off the top of my head, you could have a scenario where.

A business might believe that a push towards new technology is the way forward. And they can measure that because it has a quantifiable costs, so they can forecast what their outgoings are going to be in future. And they can understand whether or not that is likely to make the business more profitable.

But in doing that and implementing new technology, but you'd expect that technology is likely to replace some staff, especially in, in manual work. So for a business owner, there's an emotional decision to be made there because they will need he, or she will need to weigh up the potential financial benefit against the emotional benefit of laying off staff. 

Kirsten Gibbs: [00:12:06] Yep. Ah, okay. 

Jim Norrington: [00:12:09] Yeah. Actually, now I've given that example, I can actually relate to a business that I am working with. A business I work with has picked up a new contract to provide consultancy within the gambling sector. 

Kirsten Gibbs: [00:12:25] Right, 

Jim Norrington: [00:12:26] So, on the face of it, it's more income for the business, which is great news. But my client, the director is torn and he's weighing up between an emotional issue, which is is it right for them to be giving consultancy is clearly of value, to the gambling sector, which is ultimately there to promote gambling addiction.

So yeah, my, my client wonders if it's the right path for them to take, because it could in the long term have a negative effect on their reputation. 

Kirsten Gibbs: [00:12:59] Yeah. Okay. So what we're saying really is that accounting doesn't in itself make the world a better place, but it can certainly help people decide for themselves how they might go about doing that. Yeah. 

Jim Norrington: [00:13:14] Yeah. I think, I think that's fair to say. I think facts in the past scenarios in the future, and ultimately it's only ever going to be down to human beings to debate amongst themselves what the best outcome is. 

Kirsten Gibbs: [00:13:25] Okay. So. What do you think business owners should be asking from their accountants?

Jim Norrington: [00:13:36] Good question. Kirsten. I think, I think before business owners ask their accountant that question, they should be telling their accountants what they want to achieve and where they want to be. For some people that's going to be earning a nice income, working reasonable hours in a week and seeing their family. And for some people that's going to be working their socks off for five years. And in five years time, hopefully sitting on a beach with a cocktail in their hand, having very successful business. I think what it really means is in the world we live in today where it's so important to focus on the future, it means there's no real value in

quizzing your accountant to find a five pound reconciliation difference somewhere, or even quizzing your accountant to make sure that every possible estimate has been considered and accounted for, because ultimately you might save 50 pounds on your tax bill. Instead, clients should be asking their accountant to help them identify risks, and alongside, those risks, identify the opportunities that are available to them so they can forecast scenarios and ultimately future proof their business. 

Kirsten Gibbs: [00:14:44] Yeah. I wholeheartedly agree with that. That's a brilliant, brilliant conclusion. Thanks ever so much, Jim. That's really kind of you.

Jim Norrington: [00:14:53] Thank you.

Kirsten Gibbs: [00:14:55] It's been really interesting to have you on this podcast. 

Thank you for listening to the pioneer accountants podcast. Where pioneering accountants answer big questions about accounting with me, Kirsten Gibbs. If you're a pioneering accountant and you'd like to be part of this podcast, just head over to my website, www.gibbsandpartners.com and send me a message. I look forward to hearing from you.