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Are some accountants their own worst enemies? By Mark Lee
Imagine being in pain and going to your doctor for some help. Within moments of your arrival the doctor starts telling you, very enthusiastically, how similar your pain is to the previous patient, what is wrong with you and what medicine you need to take.
How would you feel if that happened? Would you trust the doctor? The doctor could well be right but you will probably be more likely to trust their advice if they spent a little time finding out more about your specific pain rather than just making assumptions and talking, talking, talking!
Giving advice
The same is true for accountants and tax advisers of course. When you meet with a prospective new client they need to feel that you are going to give them the right advice for their issues. They like the fact that you have experience but they want you to apply that experience to their specific issues rather than just making assumptions.
Getting advice
It works the other way round too. If you have a simple tax query you may be happy to obtain a second opinion via a tax advice helpline or the ‘Any Answers’ area of AccountingWeb.
If you or a client are troubled by a more complex, difficult or unusual issue you would probably prefer to know who it is who is providing the advice and something about their credibility before you rely on what they say. Going back to the analogy with your GP, you’d probably feel more comfortable if the tax expert took time to listen to your situation and asked salient questions before indicating how they might be able to help you. Instant diagnosis and prescriptions do not, in general, engender confidence and trust in professional advisers.
Common scenario
Imagine your client collects all their receipts and asks you as their accountant to produce accounts (if required), a tax return and then to advise how much tax is payable. Alternatively the client may collate the information onto a spreadsheet or into a simple accounts package and then ask you the same question.
What approach do you take to get to the answer?
Automatic
Most accountants’ go through everything and then come up with the answers. In most cases the accountant will have had to make a choice as to whether various expenses can be offset against the client’s income for tax purposes. Again, in most cases the answers will be obvious, especially after years of experience. Where there is room for doubt the accountant may make an informed guess or may just ask the client to clarify the nature of the expense and the reason they spent the money.
To some people that approach sounds fine. It’s certainly all too common. The accountant has used his experience, knowledge and skills to best effect and has avoided taking up much of the client’s time.
There are three problems with this approach though and they contribute to the widespread view that some accountants don’t help their clients save tax:
1. the accountant’s informed guesses will occasionally be wrong; and
2. the client has no way of knowing how much the tax bill has been reduced by virtue of the decisions made by the accountant.
3. the client will assume that the accountant hasn’t tried to reduce the tax bill. If the accountant had tried then surely they would have told the client how much they had reduced the tax bill.
Two step
An alternative approach would be for the accountant to reach an initial conclusion re the profits and tax and to communicate this to the client AND to make it clear that “we may be able to reduce the tax bill depending on how we treat a number of items.”
Accountants who follow this second approach can be sure their clients will perceive them as helping to save tax. Now the odd thing is that the final tax bill may not be any different to the tax calculated by an accountant following the first approach.
Many accountants go the automatic route because it’s faster and because their experience is such that they feel confident that they can make the right informed guesses. As this route is faster they can charge their clients less than if they ‘budget’ for a two-step approach. So at first glance this would seem to be the best approach all round.
But put yourself in the shoes of the client who wants to be confident that their accountant has saved them tax. If you go the automatic route, HOW WILL THE CLIENT KNOW WHAT YOU’VE DONE FOR THEM? You must tell clients what you’ve done and how much tax you’ve saved them. It’s too easy to forget and, as a consequence, to lose (or never get) the confidence of a client that you do help them to pay less tax.
It may take a little more time in the first year to dance the two-step but the client will be happier and will be more confident you’ve done your best for them.
What do your clients want?
Few clients would say that they want a beautifully presented set of accounts. Most smaller clients are far more interested in the help that their accountant can provide in reducing their tax bills.
When I’m networking with entrepreneurs and small business people I regularly hear two related complaints when they realise my focus is on helping accountants to be more successful in business:
“My accountant doesn’t save me any tax”
“My accountant seems to be working for the taxman”
And when I ask if they have told their accountants that this
is what they think, they invariably answer ‘no’. This make me think there may well be many accountants who mistakenly assume their clients are happy even though they are in reality telling their contacts that they are unimpressed.
I do also listen out for those people who tell me that their accountant has saved them a load of money, got them a mega tax refund or routinely saves them thousands of pounds of tax every year. Tax refunds speak for themselves of course (although I’ve yet to meet a client who realised that tax refunds also arise if they paid too much on account and that perhaps they could have paid less!)
Few clients will be aware of tax savings unless their accountant TELLS them about the savings that they have created. I am convinced that the clients who tell people about how great their accountant is at saving them money only do so because their accountant has HIGHLIGHTED the tax savings when communicating with them each year.
Conclusion
We all operate in a competitive marketplace and need our clients to be good advocates for us. We also want them to pay us willingly and promptly. They are far more likely to do these things if we give them good reason to do so. We have to stop expecting clients to work it all out for themselves so let me leave you with a key question:
Have you evolved a routine that ensures that your clients are able to articulate the value of your work and advice? Perhaps you’d like to share your tips in this regard by way of comments below as I’m sure we could all learn something from those who do this successfully.
Mark Lee FCA CTA (Fellow) is the founder of the Tax Advice Network and a past Chairman of the ICAEW’s Tax Faculty. He is also a frequent and popular speaker at conferences and writes a regular blog containing tips and advice for ambitious accountants. He can be contacted via www.TaxAdviceNetwork.co.uk, 0845 003 8780 or Mark.Lee@TaxAdviceNetwork.co.uk.
Number of comments: 7
AccountingWEB.co.uk 12-May-2008
Categories: Practice Features, Practice Management
Times read: 4782
by 5 user(s)
I dearly hope you don’t run into a career driven Revenue Officer who is quite happy to turn you into a building block of his next promotion, and costing you more than a penny or two into the bargain.
In your attitude to accounts preparation and dealing with HMRC you strike me as naïve, I strongly advise you to shop around for another accountant ASAP.
If you're moving people in the right direction. I never complained when I went go to my chiropractor and he manipulated my back. It all comes down to your motivation.
Building value before presenting the soultion is basic sales and marketing. Revealing the value is vital and too many accountants apply accounting thinking to marketing and miss this. If you don't do this you risk making the client feel your bill isn't good value which is a dis-service. Your job is to make clients "feel" good.
Getting a high price while you do as little work as possible is what running an accountancy business is about. We live in capitalist world and we're allowed to make profits - I am sure too many accountants let their so called professionalism over ride their commercialism. This is interesting because professionals get paid amatures don't and the more you get paid the better professional you are.
This is all 100% ethical and much better than just billing time.
Bob
www.moresoftware.biz
I'm sorry if you've misunderstood the message I hoped to convey. It's one I've been sharing in my talks 'Making more profits from your smaller clients' for 7 years - most recently yesterday afternoon.
I am not aware of anyone else drawing the conclusion you have - it's certainly not the impression I seek to give. I'm suggesting more of a pause and a part time report to the client instead of going straight for the end game without stopping en route.
Mark Lee
[EDIT: 'unimpressed' has removed the posting to which I was referring, presumably in the light of the clarification I have provided in this post]
Mark's approach is a bit like the plumber's cliched reaction to veiwing the task in hand. It can backfire though, I well remember one client's reaction when I advised him that after a valiant battle the R&D claim had been accepted by HMRC and a large tax saving had been acheived. The reaction was as if I had simply remembered to claim his personal allowance.
Client perception is a funny thing.
Agree with the analysis.
I had an accountant that did not want to save on tax for his clients. Was always on the offensive and lacked the decency to be transparent in his actions.
In the end I realised it is better that I do the books myself and since tax is on a self assessment basis verify it with the Inland Revenue officer.
In my conversion from an accountant (who coached) to a coach (who is also an accountant) let me share with you 2 crucial lessons wholly relevant to Mark’s article. (1) Listen listen listen and then listen again. Never ever switch off to anticipate the next question (yours or theirs). Get comfortable with silence if necessary. (2) The meaning of communication is the response it elicits.
Think about that one!
.....after reading Protect the term accountant in http://www.accountingweb.co.uk/cgi-bin/iadmin.cgi?&page=46&news_id=180832
I wonder Philip Turnbull actually carried out what he had to say in this thread. If he did what are the results? If he did, would it cause a scratch on the ICAEW's plans?
If he did not, that is why he is not responding to so many questions asked upon him!
