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What are the risks?

I met a new potential client yesterday who has a one man band limited company. The current accountant does everything, according to the potential client.

He had no accounts, no company documents, no cert of incorporation, no register, no articles, etc, even though his home is the registered office, and he assumes they are all with the accountant. He had never heard of dividend vouchers or Directors Loan account. He doesn't know whether he gets Directors remuneration. He just gets a call from the accountant saying he needs to spend some money!!!!!!

This is so different to our way of doing things so I explained that if he liked the current accountants way of doing things then he wouldn't be very happy with us, but he is keen to find an accountant more local to his home.

I haven't quoted yet because I haven't enough information, but I do wonder if I am wasting my time and the clients money, by insisting everything is done correctly. I meet clients like this quite often and the lack of proper records, documentation, etc. never seems to cause a problem, and some clients think we are being pedantic by insisting on them, so is it worth bothering about for the really small companies?

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10th Mar 2012 10:15

Quick answer---from a commercial angle such clients are trouble---from a law point of view--illegal--save yourself some heartache---not worth the potential time lost and potential PII implications--man in the pub strikes again

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10th Mar 2012 11:08

I like the way you do business

Everything you have written on Aweb shows that you like to do things properly. I am of a similar persuasion. I have recently turned down several prospects because I knew they weren't the fine upstanding people I prefer to work for.

There will be some accountants who will take a different view and cut a few corners, but I have found it is difficult to be someone else apart from yourself. You may think you will compromise initially with this client, but it won't be very long before you wish you never did.

I doubt this client will thank you for not insisting on things being done properly, but he will be the first to blame you when something pops out of the woodwork that is not your fault.

I think I know what you will decide to do!!

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10th Mar 2012 12:33

My way or the highway

I like things done properly.  If clients want to cut corners and run risks with HMRC they can find another accountant.

I will not risk being struck off because of someone else's approach.

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By Flash Gordon
10th Mar 2012 14:26

Ditto to what the others have said!

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10th Mar 2012 15:39

Thanks Guys ... and Gals

I question my procedures at times and often wonder if I am going OTT for no good reason, but you have all reassured me it's worth the effort.

As said above, if clients don't like our ways they can always go to another accountant.

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10th Mar 2012 15:53

Cutting orders

Would anyone who cuts corners dare to admit it here? Unlikely. They would be attacked by the highly upright.

With me it depends on what information is missing. I would take on a client who is not perfect with his record keeping. I try and find work arounds.  Fees would increase by 25% to 50%.

They have been  few occassions I have not taken on a client where it would turn out to be just too much work and may be the risks are just too high. 

 

 

 

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Is the client really the problem here?

Surely if the client has never been told of the correct way to do things and the current accountant tells them not to worry about anthing, they'll take care of it all, how is the client the criminal some of you seem to think he is?

I've taken lots of clients on like this and all you do is explain that they seem to have been badly advised in the past, explain what you need, how it will work with you and let them decide.  In my experience most are annoyed and are keen to do things properly and turn out fine, others don't.

I give them a range of possible fees which are subject to what I find out from contacting the previous accountant to get chapter & verse and if things have been done incorrectly in the past then get the previous accountant to put it right.

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11th Mar 2012 05:38

I am with Paul's approach. I have taken on a number of clients like this and find that when I explain how THEY could be affected by not towing the line with proper records etc they are extremely keen to get it right. OK sometimes I have done a first year at a loss or even gone back over earlier years when there are glaring errors because that make me more comfortable but it has been worth it in the end. If I can get a reasonable tax refund for earlier years I charge, if not I don't but in almost 29 years of practice I have done two free jobs under these circumstances. The clients generally appreciate the effort and the interest and it inevitably means they co-operate with us in the future and introduce other clients.

If, after explaining the pros and cons they are not willing to tow the line then I would not touch them, however as a previous poster said, I am fairly convinced your gut instinct will guide you in the right direction because of previous comments you have made. You do seem willing to consider taking this client on so why not explain your problem to them? You don't have to criticise the previous accountant. I usually say something like I am just too pedantic and simply cannot work that way myself. I prefer to see my clients at least once a year and feel that they are fully involved in all aspects of their business or at least fully understand everything about the work we have done. Like you I need the loose ends tied up but I usually find the client is relieved to find that is an option.

Just to make my point. I took on a client who has had 9 previous accountants locally in 20 years of business. It would appear that they after an initial meeting they have never met with any of these accountants again, just handed in their books to reception and received a set of accounts to sign in the post! That horrifies me and I really feel that these practitioners let the whole profession down. I know a number of these firms - all larger firms of accountants - from past dealings and they just don't want small business clients. Fair does but they should tell the clients that at the outset not charge extortionate rates for work they hand out to a junior and obviously do not check. I have found enormous errors from some of these people in the past - some of them really basic ones.  

This client only had old Accounts from 2005. The previous accountant would not co-operate as there was an outstanding bill but the fees were extortionate for the size of job so I took the risk based on instinct. I did Accounts from 2005 to date, (largely for my own benefit) advising the client at the outset that I would only charge for years in date. However I got a decent refund and billed as advised. The cheque arrived the next day for the amount billed PLUS a similar amount for the years I had not charged ! A letter came with it saying how much they appreciated the efforts I had gone to, the time I had spent helping them to understand "that" side of the business and included a promise to take on board all suggested improvements to their record keeping. They explained that no other Accountant had ever spent the time with them that they needed and they thought that was just the way it worked. We have now had their next year in and they have implemented all of the suggested changes!  It will be a really easy job from now on and I anticipate very co-operative clients.  

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11th Mar 2012 06:43

 I think the circumstances

 I think the circumstances posed by SM are slightly different to the views expressed by PS and BC.

Yes,a  client who is ignorant of the requirements and why is different from the client who requires a minimal service.Do they merely wish to disguise their frauds using the good reputation of an accountant?An accountant who does not see paperwork is the perfect vehicle.

A client who wiill accept change can be charged for the additional work in bringing their affairs up to an acceptable standard.

A client who does not produce purchase invoices for inspection should put the accountant on notice and the question should be asked --Why not?Is there something to hide?Would the client wish to ensure items of expenditure are correctly treated?

I know there are debates of minimal versus full accountancy services elsewhere on this site.I am not entering this debate except to say the accountant needs to decide where in the marketplace they wish to be.

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11th Mar 2012 10:18

Thanks again everyone

My gut feeling about this potential client wasn't a bad one, but then I am not brilliant at sussing out the genuine ones from the liars. He seemed willing, in fact quite keen, to do things properly, and he seemed genuinely surprised that they were not. He 'thinks' he had a copy of his accounts, but couldn't find them. This is the part that rings a warning bell for me. Is he naive and badly advised, or just not interested? I have asked him to bring in his accounts, and some other records. If he actually comes back with them I will have a much better idea of his commitment, and the work involved.

This particular potential client has taken us off topic a little. My main reason for posting was that I see so many accountants just doing the bare minimum, if that, so I wondered if I was going OTT for these very small clients, ie. being too pedantic and doing work that isn't really necessary for such small enterprises.

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11th Mar 2012 12:05

Could we re-write this script to determine whether new clients qualify for the minimal accountancy service?http://www.youtube.com/watch?v=dSINO6MKtco

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By Tosie
11th Mar 2012 15:37

maybe the accountant does do everything

I have several clients who can hardly read and have no interest in paperwork other than how much tax to pay.They run successful businesses I do all the paperwork on dividends and directors loan accounts. I don't cut corners and all dividends are based on management accounts. I suspect that when I move on they would say to the new accountant exactly what your prospective client has said so maybe it is the new clients view rather than reality.

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Interesting

Hi ShirleyM

I've often wondered about the quality and quantity of the work I do. Having only relatively recently gone back into practice, I spent a huge amount of time, effort, research and studying to ensure that my quality standards were of a sufficient level.

After only a few months in practice I was approached by a much larger local practice to ask if I would be interested in 'managing' the 'accountancy' side of their practice on a part-time basis - they do a lot of tax advice, payroll and consultancy work which the other directors spent most of their time on.

I jumped at the opportunity, thinking I would learn a great deal about processes, acceptable standards etc.

How wrong I was, my standards were higher and I was quite shocked at the lack of processes and procedures in place.

Back to the question, no doesn't sound like you're being OTT, and hopefully you now have a new client ready to learn the right way to do things.

 

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Sleeping at night
I am sure that by doing things right you sleep at night, and your (proper) clients too.

Captain

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12th Mar 2012 09:56

Pedantic?

Shirley, you stay as pedantic as you have always been!

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12th Mar 2012 10:25

use common sense

i have seen some shocking work by some practice accountants ... but then i've seen some that seems OTT in terms of the materiality of the item (accounting for the stationary as stock for a smallco, anyone?)

 

our approach generally, for example, is to charge anything unreceipted or dodgy to the DLA - and communicate that to the client.  

 

its a case of balancing the commercial with the professional.  we all have our own "level".

 

regards a client who hasn't got a clue ... it's more frequent that i expected when i started in June 2010.  the general level of financial / accounts / tax understanding is quite low, save for the odd exception.  at least the client was honest enough to admit he hadn't got a scooby do!

 

as was said above, the standard in some larger (not all) firms is poor - i trained with a Big 4 (was Big 6!) & the small biz team i was in was a real ragbag ... the partner was a cowboy and basically told us to do the minimum possible so that he could sign the accounts ... and NO MORE!  so, we did ... LOL

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By Jimess
12th Mar 2012 10:25

Definitely not OTT

A former client of mine went elsewhere because he thought that his new accountants online methods, accepting information online, not asking for records etc was showing more trust in his record keeping and much cheaper - about £600 plus VAT for company accounts, corporation tax, VAT returns, Payroll and personal tax returns. I could not even meet that figure for the accounts prep (client never wanted to attempt to balance banks, extract debtors/creditors etc) without far more substantial input from the client which he was not willing to do. Six months down the line I met him in the High Street and he was bemoaning the fact the he did not know where he was with his online accounts system, he had never met his new accountant face to face to discuss how his business worked and he was not even certain whether VAT returns had been filed or not as he never had any communications from the new accountant on the matter.  I am not saying that all online accountants are like that, but my former clients experience with online accounting has not been positive and perhaps that is because the new accountant has not considered whether his one size fits all accounting system would actually suit the client's business.  Much of what we do is helping clients keep on the right side of the tax and accounting laws.  In my view you cannot do that by cuttting corners.  Stick to your guns Shirley - the right way is the only way in my view. Ok we may lose a bit of the more routine work to the production line guys, but there are clients out there who want a lot more hand holding and proactive advice and are willing to pay for it.    

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12th Mar 2012 18:48

Welcome Book

@Shirley - I agree with you but what we think isn't important; you need to "sell" prospects/clients on your ideas so consider putting together a Welcome Book and use it to filter prospects.

Include all the usual stuff but include more opinionated content, like your thoughts on doing things right and your pricing policy. Just make sure to include lots of reasons why from the client's perspective.

If the client doesn't read the book, or agree with you, then do not even meet with them let alone consider working for them.

Bob Harper

Crunchers Accounting Franchise

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12th Mar 2012 21:12

Bob H has a good point.  The

Bob H has a good point.  The issue a pedant will have is that a client's work will take twice as long as that taken by a corner cutter.  Unless profits at 50% of the cost cutter are accepted and no premium is charged by the pedant than there will be an issue.  Thorough accountants need to sell the benefit of their product; if the client thinks that it is a commodity they will choose on price.  Personally I never try to be the cheapest and whilst I might not be able to see everybody as often as they may want I do rely on email to answer questions and give advice.  I also try to spot troublesome clients early on and steer clear ~ I would not touch anything with significant bookkeeping or a large cash turnover. 

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