Coping with nightmare business clients in the recession

Coping with nightmare business clients in the...

Didn't find your answer?

The other day I was thinking back to when I was a partner in a West End firm, We had good clients, not so good clients and a few nightmare clients. The nightmare clients tended to have a lot in common - they were usually small to medium sized (often a small group or collection of connected companies) and generally had an internal accountant/bookkeeper that was not up to the task. When it came to dealing with the year end accounts, there were usually reconciliations required, things in the wrong company, and a vast number of adjustments needed to get any semblance of sensible figures, The client usually was slow at providing information, resulting in a stop start approach to our work. The time required to prepare the accounts was well beyond what it should have been for a business of that size and of course that comes at a cost. Sometimes the business owner was unappreciative of the work carried out and guess what.... there was a fee recovery problem!! On top of that the client was often slow in paying.

OK there are ways of dealing with clients and trying to smooth the relationship, but if this type of client cannot cope with basic accounting in good times how are they MANAGING the business in difficult times? Some business owners place little value on accountants and financial information and they will suffer through poor financial management and a lack of credibility with funders -the accountants will in due course have even bigger problems with the client (that's assuming the client continues in business).

I would be interested in people's views on their responsibility to this type of client in the current environment. Often the engagement letter will be restricted to year end accounts and taxation. However some accountants market themselves as "business advisors" and many SME owners rightly or wrongly see their accountants as the fountain of all financial knowledge. There may be no legal responsibility, but is there a moral responsibility to guide the client in the right direction? Alternatively you may even feel that there is a risk of being construed as a shadow director - so want to stick strictly to the terms of the engagement. Commercially, giving the client a steer in the right direction may be seen by some clients as proactive and lead to recommendations, whilst others may see it as interference.

An insolvency practitioner I know estimates that 80% of SME insolvencies are caused by poor financial management and in most cases this is caused by a skills gap in the finance function.

So what approach do you take to these clients in these" interesting times"? - your thoughts would be appreciated.

Regards

David Lewis
http://www.camroseconsulting.co.uk/small%20businesses.html

Replies (12)

Please login or register to join the discussion.

avatar
By phopwood
05th Mar 2009 16:51

Really helping clients
Now you are being silly! Accountants (wait for the sweeping universal applicator) can't even get their fellow partners involved, let alone outsiders. Either fear that you will screw up or fear that they won't remain the omnipotent super accountant.

My concern is whether accountants are properly trained to help. That may sound odd, but let me explain. I used to think I was a business advisor, until I learned how to be a business advisor, when I realise how much I didn't know (if you understand me).

One of the many interesting developments that comes with creeping old age is that you realise how little you don't know. But when you are younger, or indeed just ignorant or even arrogant, you just won't know that.

Thanks (0)
avatar
By David_Lewis
05th Mar 2009 13:54

Idealistic?
Yes I am a freelancer and yes I was inferring that in some situations SMEs could benefit from freelance support. For your information the firm I was talking about was medium sized, operated as a general practice and had many SME clients.

I wouldn't expect most practitioners to significantly change their way of working, although the nature of advice may change, especially as sympathy only goes so far.

Whilst I am under no illusion that many SMEs will just slash costs and wouldn't contemplate extra overhead, some will look at the alternatives and it would be nice to think that the options might be pointed out to them.

As regards the planet I'm on. It is one where I would hope that practitioners identify where their clients need extra help and steer them in the right direction including, if appropriate, introducing them to a fellow (complimentary) professional.......although perhaps I am being idealistic.

Thanks (0)
avatar
By rhangus.
04th Mar 2009 19:35

What planet are you on David Lewis?
You seem to think we all work in the same large accountancy practice that you idealise about.
The current climate has absolutely nothing to do with the way I provide my services other than a little sympathy and even a bit of empathy from time to time.

Now reading some of the comments I see that you have been a freelance adviser/consultant perhaps?

You need to find out what each client wants and is prepared to pay for. If he values your opinion and has a lot of respect for you it may be a worthwhile exercise setting up some basic consultancy work every 3 months say for a few hours. He must though, appreciate the preparation time and the work beyond an initial consultation and be willing to pay for some sound advice.
Nightnmare clients, for me anyway, are for getting paid appropriately and moving on and knowing that you do not need them. What's the better feeling, hitting a lovely 3 iron straight at the flag or being paid and saying cheerio to that big time waster? Does anyone have a coin?

Thanks (0)
avatar
By David_Lewis
02nd Mar 2009 20:16

Message for Doug
The nightmare client is an extreme example of clients that need help with their financial management - although clearly it does raise other issues for practitioners,

I have previously posted similar messages and have not received any response from practitioners and thought I would post the extreme example of a nightmare client to attract attention and trigger discussion.

I am happy to post under another thread and look forward to hearing your views. Incidentally, I have spent 25 years in practice and approx 5 years providing freelance support to businesses and so have seen things from within and outside the profession.

Thanks (0)
DougScott
By Dougscott
02nd Mar 2009 20:00

Ask the right question.
If you asked the right question then you may get the answers you obviously want! I would repost asking what you really want which seems to be something along the lines of "How far should accountants go to help clients and add value to their clients business" which is a completely different question to what do we do with problematic/difficult clients.

Please repost and I will give you my view of what I think after 30 years in practise and others will no doubt too!.

Thanks (0)
avatar
By David_Lewis
01st Mar 2009 21:15

Is there another practice view?
So far the practice view seems to go as far as saying "lets kick out the difficult clients".

AR who is not in practice sees the recession as an opportunity for practioners to help clients generally and generate fees, do practitioners agree? and if so how far do you go in providing help?

i agree that there are interim/turnaround opportunities, but if there is a need for this what are practioners doing? is it something they can and do help with? or do they feel that they don't have the time or (possibly) skills)?

The thoughts of practitioners would be appreciated, I do believe that many SMEs are not getting all they need from their accountants. If any practitioners feel that they would like to do more to help their clients but would rather reply off line then please e-mail me.

David Lewis
[email protected]

.

Thanks (0)
avatar
By AnonymousUser
01st Mar 2009 11:30

opportunity ?

surely you "know your clients" and therefore those which in HARDtimes still fail to provide you with a full fat + of course [near] complete file to tick and bash and produce accounts

these are the opportunities to provide turnaround or interim or add value or mitigate loss[ insolvent trading PG implications etc] - well before you get to year end

even some of the better clients may now require this - especially if they have rejigged finance personnel

hold a series of breakfast seminars and see what they need ?
more frequent contact could generate not only more fees but also a more efficient client

..... and i am not in practice, but in the client side dealing with my CA's from a SME pperspective

Thanks (0)
avatar
By David_Lewis
01st Mar 2009 07:54

What about the better clients??
OK it seems clear the best thing from practitioners point of view is to kick lousy clients out. (Do you do so pointing out the risks of poor financial management?).

As mentioned previously, I chose to describe an extreme situation to trigger discussion- I do feel that an expectation gap (as regards financial management help) can exist with other better clients and the following questions will still apply.

WHAT DEGREE OF RESPONSIBILITY (moral) DO YOU HAVE TO HELP CLIENTS ACHIEVE SOUND FINANCIAL MANAGEMENT? HOW MUCH HELP DO YOU OFFER/GIVE? IF YOU DON'T OFFER HELP (or they don't accept) THEN WHAT NEXT?

David Lewis
http://www.camroseconsulting.co.uk/accountancy%20firms.html

Thanks (0)
avatar
By AnonymousUser
28th Feb 2009 11:35

I work with grown ups only ...
that is what I tell every new client now. By grown up, I mean that they respect their responsibilities in business and that they respect our relationship. If it turns out that they cannot stick to this I sack them. This has not come easily to me and has taken a number of years but it is the correct approach. Some people were put on this earth to be employees and not in business .... that's just the way it is!

Thanks (0)
avatar
By phopwood
27th Feb 2009 17:55

'C' clients
I would say "choose your friends". Have a client selection process. If they don't make the grade, have the courage to walk away. You won't make money from these clients anyway and your staff hate them. Let them screw up your competitors.
David Maister says "doing almost unbearable work for only just bearable clients for money is called something". Are you in that business?

Thanks (0)
avatar
By David_Lewis
27th Feb 2009 17:36

I agree - but...
I mostly agree with Doug, most clients won't see the error of their ways and should be kicked out (although easier said than done if there is a partnership with a culture that size (of fee income) matters).

However these are often serious businesses employing several people and with creditors. They have very poor financial management in a difficult climate and some may fail as a result. If you are their trusted accountant and "business advisor", WHAT DEGREE OF RESPONSIBILITY (moral) DO YOU HAVE? HOW MUCH HELP DO YOU OFFER/GIVE? IF YOU DON'T OFFER HELP (or they don't accept) THEN WHAT NEXT?

I chose to describe an extreme situation to trigger discussion, however the expectation gap exists with other clients and the questions in caps will still apply.

I believe that the failure in many SMEs' finance functions could be prevented by better management of the expectation gap. Whilst practitioners may or may not feel they should be helping their clients with financial management (nb: some won't have the time or skills), I do feel that as professionals accountants should at least be very clear to their clients about the limitations of their services and when they need to get extra help.

Whilst these posts are not without self interest, I fear that many practitioners will disregard these very real issues and both they and their clients will suffer in due course.

David Lewis
http://www.camroseconsulting.co.uk/accountancy%20firms.html

Thanks (0)
DougScott
By Dougscott
27th Feb 2009 12:11

Same as in good times
My approach would be the same as in good times - get rid of them!

In bad times I'd be keener than ever to get rid of them as they are likely to be your insolvency cases and result in big bad debts (unless you get everything paid up front of course!). In fact maybe if they don't pay up front you should now insist they pay by regular standing order or find another accountant.....

Thanks (0)