Bad clients: Sack, sell or simply disengage

 

Many practitioners who took part in our self assessment survey in February appeared to struggle with a situation: How to deal with troublesome clients.

While some accountants are more gung-ho, opting for the ‘sack ‘em’ approach, others are a tad more lenient, applying late fees and incentives for those who are on time with their files and receipts.

Steve Pipe threw a new idea into the mix...

Continued...

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Comments

I wouldn't sell bad clients

Accountsetc | | Permalink

I agreed to buy a block of fees from an accountant who said she was selling them because of her workload.

It turns out that it was her bad clients she wanted rid of. Its dishonest and unhelpful and disruptive to my practice not to mention the clients themselves. 

The only time I would sell bad clients is to a new practice - someone who needed a base to start with and can then move them on themselves. But you couldn't the going rate for a decent block of fees. And you're totally upfront and honest about what kind of clients they are.

 

 

Kent accountant's picture

More like backtrack    3 thanks

Kent accountant | | Permalink

'Pipe responded to clarify his viewpoint: “Surely just about every accountant sells clients when they retire, so selling clients is a well-established fact of life,” he said.'

Selling clients when you retire is completely different.

Lets face it  - Steve ballsed up with his blog post and he knows it.

DMGbus's picture

Bad = no value

DMGbus | | Permalink

Really "bad" clients must surely have little or no value, unless some mug can be found to pay for them.

More realistically there will be clients who are not "bad" but rather "difficult" to provide a good / rewarding service to.

This difficulty can arise from various factors such as:

  • Geographical distance between accountant and client
  • Client not able to use eMail and internet
  • Client should not be in business as incapable of managing obligations and finances
  • "High maintenance" client requiring lots and lots of guidance and maybe unwilling or unable to pay fees for the level of service
  • Particular trade expertise - client might be a CIS subcontractor and I see from Aweb some members avoid dealing with such clients
  • Particular software - some clients might have a sofware product that an advisor is unfamiliar with and an advisor might be reluctant to learn how to use such software product
  • Particular requirements - some advisors are better set up to deal with particular requirements - for example I decline to get involved with payrolls that are weekly or require me to initiate BACS payments, whereas some advisors have the scale and expertise to successfully deal with such requirements

In summary I see that there is a market for off-loading clients to new advisors as some advisors will inevitably have the expertise / patience to take on "difficult" clients, or new start up practices might have a greater desperation to "take on anything" than an established practice (which might be more likely to be seeking to offload less profitable / more difficult clients).

I personally see the opportunity to set up amicable arrangements with other local practices to exchange clients where client needs can be better supplied by the alternative advisor.   In my case I don't like book-keeping, so I know of bookeepers to pass work onto, they in return will pass annual accounts work to me.  All very informal and amicable, no money changes hands. 

carnmores's picture

caveat emptor

carnmores | | Permalink

some people have much better inter personal skills than others and can deal with clients others cannot .  I think its time I started a ' bad client' practice :-0 

Maybe the government can take them on...

James26 | | Permalink

... oh that only happens with bad banks doesn't it?

We sell blocks of fees for lots of accountants

N.Draper | | Permalink

Accountancy is far more about relationships than figures on paper.  If there is not a good match with the accountant and the client then the client can be difficult - often on purpose.  Moving clients to another accountant at a cost to the aquirer can help both parties.  The price will be reduced.  A buyer will not part with money if they do not think they are going to get some value to their practice.  We sold a tranche of fees for a three partner firm who did not want them any more and the buyer was a national firm.  Never assume someone out there will not be interested in your fees. 

respect!

kenatnam | | Permalink

Why would you do something dishonest and underhanded to another person? Fair enough if you advertise them as "bad clients", but if you do not then you are not respecting the person you are selling them to. Of course if you expect everyone else to be dishonest with you then that is the unfortunate life you have..... 

nigel's picture

Have you ever actually bought clients?

nigel | | Permalink

If so, you would know that the normal terms - at least when we have done it - is to pay the vendor as and when you get paid. After all, you may try to "sell" them, but you can't make them sign up to the new firm.

Alternatively you might pay them a very reduced rate - say 10-15% of GRF to cover the non-payers and those that don't transfer. Both parties would normally prefer 50-100% plus of GRF, paid on a results basis. That suits both parties. 

No-one in theri right mind is going to pay a significant amount just for a client list. So non-payers might be time wasters for you, but they shouldn't cost you money.

Ermintrude's picture

3 crosses    1 thanks

Ermintrude | | Permalink

Bad clients get crosses in all of the following 3 boxes:-

1. Bad attitude

2. Bad records

3. Bad payers

I can deal with up to 2 of the above, but when its 3, sack 'em.

And when its 3, flippin' well enjoy doing it!  Most excellent therapy!  Don't sell them - that's unkind to your successor.

You can include reference to the 3 matters to the poor hapless chap/ess who subsequently takes them on.

I am now much more alert to new clients who may be poor - either becuase of them slagging off their previous accountants (rarely is this justified.  In fact the bad accountants seem to manage to avoid disclosing this to their clients), or hints in the letter of professional release. 

 

sdphilpott's picture

Selling off bad clients

sdphilpott | | Permalink

If a client is a bad fit with your practice (e.g. too small or too fee conscious or just doesn't get on with you) then I see nothing wrong in having someone to pass them on to and if you get a bit of commission out of that I don't see anything wrong with it. If however they are horrid people to deal with or bad payers I think it's more ethical to effectively sack them rather than give someone else a headache - in any event if you passed on such a bad client you'd probably only get away with it once and then the relationship with who you passed them onto would be damaged.

vowlesj's picture

its all about the how!

vowlesj | | Permalink

I think it really is all about how you do it - dealing with the potential new accountant, dealing with the soon to be ex-client and at all times remembering to be ethical in how you do things.

I have both bought and sold.  Both worked well because of how we treated the client and the level of goodwill between the two accountants.

To accountsetc sorry your purchase didn't work out well - but the reason was the old client was not ethical and honest! in other words it wasn't the sale, ie what you did.  It was how the seller did it by keeping info from you that caused a problem.

And to Kent accountant - sorry but I think you are wrong.  As Steve Pipe said nearly every accountant will sell their clients as a block of fees when they retire, so why is selling a block of fees without retiring any different, apart from the reason to sell?

Kent accountant's picture

@vowlesj

Kent accountant | | Permalink

I agree lots of accountants will sell fees.

I was however referring to Steve's original blog post which is clearly aimed at selling bad clients rather than just sacking them.

His follow up posts were a backtrack