I took on a client about 8 months ago. In the clearance letter I requested some information.
The previous accountant provided a detailed information in response to the clearance letter. However some key information is missing. This includes:
- Debtors of £75K no break down of debtors
- No bank rec or explanation of the difference between bank balance on bank statement and bank balance on the balance sheet.
I requested information on the above and response was "we have given you all the information, This is no longer a live client- best of luck"
The client is not able to respond to above queries. The previous bookeeping is in a mess.
I would appreciate any comments/views on handling this.
Replies (18)
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Hmmm
If I had to guess, I'd say that the previous accountant did the best they could with a client who couldn't (or wouldn't) get their act together. Perhaps they could at best only get a verbal estimate of debtors, and a verbal (though incorrect) statement of the bank balance.
This could be because the client was not only in a mess but was also unwilling to pay for the necessary remedial and thorough bookkeeping work to be carried out. Faced with a choice between (i) just getting the accounts done and getting paid on one hand, and (ii) late accounts, hacked off client, work dragging on, fines, payment doubtful, on the other, the accountant chose option (i).
I've seen this happen several times. It's not pretty, and maybe it's not right, but it's a commercial decision that some accountants feel forced into.
On the other hand, it's possible your client is lovely and helpful and has simply been hard done by, and the accountant is in fact rubbish.
You'll probably find out the truth in due course.
WS.
WS is most likely quite right
The fact that the previous accountant has sent you really quite a friendly letter should be ringing warning bells with you about this client.
Why not give the old accountant a ring, thank him for his letter and discretely ask him if this client is/was a PITA.
Forewarned is forearmed!
Attitude problem
Perhaps WS is correct in both assumptions. A lovely client, or a rubbish accountant. I have encountered both, though mainly the latter. I did in fact obtain my first two clients who came to me seeking help after their previous accountants had got them minimal CIS tax refunds, at the cost of extortionate fees. I sorted out their affairs, got refunds of thousands of pounds tax, and they have been the best advertising I have yet had.
But I always take up references from previous accountants, and whether good or bad, give potential clients a comprehensive of the documentation I require from them, require that they sign the P.O.C.A., and give them an equally comprehensive list of my proposed fees for the services as discussed, stating that services outwith will be charged as appropriate.
H.W. Dunlop. A.C.I.S., F.F.A., F.I.A.B. Chartered Secretary & Accountant.
Friendly warning
I agree that you're probably taking on a PITA client and the outgoing accountant is giving you the heads up without putting it into too many words. I took on a client from another accountant who they'd complained about and came upon a letter in some correspondence from the accountant before him that revealed that there had also been an unpleasant ending there (hadn't told outgoing accountant they were changing, had made complaints about accountants' incompetence etc). Remarkably I've just sacked the client for telling me how to run my business amongst other things and will be giving the new mug a friendly heads up so they know what to expect :)
Tax returns
I have some 2 minutes ago received a reminder from HMR & C to file my 2011-2012 tax return.
At least one department is not closed for essential maintenance!
How about..........
I just wonder how others would handle this if there are no further details on:
£75k debtors
Too large to just accept. Confirm that client is willing to pay you to verify and produce your own list of last year's debtors. And get it from the client in writing too!
If not, run away.............. very fast.
Small difference in the bank balance - balance sheet and the bank statement. This is not hugely material so should be okay to deal with,
Write these off - life is too short.
I am also sure that they are accountants who would not ditch this client ( I am one of them).
It can be very hard to refuse to take on a client but sometimes (and I am NOT saying this is one of those times) certain clients can be so much trouble for so little return that if you factor in all your time spent, you will be making a loss. And that is just plain silly.
dealing with debtors
Assuming that there is no obvious error in the PY, why not just reverse last year's 75k and then make sure the c/fwd debtors are correct?
Have you got a detailed ledger for your closing balance this year? If so, why cant client provide something for even some of the balance for last year?
I would also second the advice to call the previous agent - some things you wouldnt want to put in writing.....
reversing debtors
If it is a limited company - it could be an overdrawn directors loan account - there is another can of worms! Reversing it out to sales would then be disastrous. If you really don't know what it is I would be very wary of making a reversal in a hurry.
Debtors
The debtors last year (assuming all trade) can be proved by matching this years receipts with sales invoices issued this year. But in any event just include the correct debtors at the end of your first year you are dealing with and between these two years the result as a whole will be correct.
Bank reconciliation
Similarly if you have all the information relating to the bank account (cheque stubs,paying in books, all bank statements etc etc ) you may be able to prove the opening bank balance by exception.
These situations are often a nuisance, but will be a good test of your skills!
Contact the outgoing accountant
Debtors
The debtors last year (assuming all trade) can be proved by matching this years receipts with sales invoices issued this year. But in any event just include the correct debtors at the end of your first year you are dealing with and between these two years the result as a whole will be correct.
Bank reconciliation
Similarly if you have all the information relating to the bank account (cheque stubs,paying in books, all bank statements etc etc ) you may be able to prove the opening bank balance by exception.
These situations are often a nuisance, but will be a good test of your skills!
This is good advice if you are happy with what you have gleaned from the client after (presumably) seeing his records and ascertaining his ability and willingness to pay for your services ... but the telephone is your friend, call the previous accountant. A ten minute call may save you hours and £££'s of frustration.
.
Call me a sceptic but I would hazard a guess that these are drawings from the bank which may not be for a business purpose.
The key to a quiet life is...
Good Book-Keeping. When we took on a client (about 4 years ago), we got rubbish from the previous accounantant. She dumped everything in Suspense. We shopped her to her institute - and surprise, nothing happened. But correspondence with her Institute went on for the next three years.
Proactively, we wrote up our new client's records into a SIMPLE book-keeping package, and have been doing so ever since.
We discovered that the previous accountant's work was "scant" and did not reconcile to the books that we had written up. No matter, we moved forward, and our "new" client is delighted at our service, and her Accounts, Tax Returns, etc are filed expediently.
As readers of this column are (possibly) aware, it's as easy as ABC.
Let's be practical about this
Sorry but "the client is not able to respond to above queries" is a daft comment.
As I say in "Bookkeeping Home Truths" (iBook store and Amazon Kindle), the first job when faced with a mess is to get out the supplier statements and other evidence and make up your own list. Get the client to do this - less than half a day I suggest for a low-level employee.
You should also educate them (as they seem to be ignorant) about the effect over or under-valuation of Debtors has on the Balance Sheet - does this matter to them? Are they trying to impress their Bank?
Then explain the effect on tax bills. With small businesses who do not carry our detailed stock valuations etc I explain that it is swings and roundabouts. The tax you save this year by under-valuing stock and debtors will bite you on the [***] in next year's tax bill.
Surely the other point is Gross Margins. Are the latest accounts an aberration or do the results chime in with previous years? (subject to the client's assessment of the business's performance)