“Mr Client: you're fired”. Jennifer Adams considers when and how to disengage with a client.
There are two weeks in an accountants' life that are satisfying - the first week of an annual holiday and the first week of February. The February week because not only is there the satisfaction of having fulfilled a miracle in submitting all your clients' tax returns on time, but also that the time has come to look through your client list to decide whether you really want to keep the more painful or problem clients.
Who should go and who should stay?
The word "painful" is the key. A broad rule of thumb could be your reaction when the client's name appears as a caller on your mobile. Should that reaction be disparaging then that client needs to be placed on the "possible to go" list.
At the end of the project you should have a list of those clients whom you wouldn't mind if you never saw again. However, emotions can sometimes get the better of us and you could decide to "sack" them all.
MTD will bring another layer to the project. You will need to think about which clients you can envisage seeing yourself directing through the pain that will be MTD, and those you cannot. A considered approach is therefore necessary.
When you may be required to disengage
- Withheld information.
Not providing information may be just poor record keeping, but if you feel that the client is deliberately withholding information then that may be the time to sever the relationship.
- Conflicts of interest
This situation will be met when you act for two clients who are getting divorced from each other. Both you and your clients may feel that you will be able to cope, but as anyone who has dealt with such a situation will tell you it is fraught with difficulties. It might be better to sever ties with one so as not to lose both. The sale of a business or dissolution of a partnership may also pose similar conflicts.
When disengagement may be advisable
- Bad clients.
Such clients are generally pretty easy to identify. It typically only takes a few interactions with the ‘wrong type of client’ to realise that you want nothing to do with them. If you are just starting out or have only been going for a relatively short period you may not want to lose any clients.
However, a client who is constantly ringing, or complains about the invoice when it has been fairly calculated, or is constantly difficult to deal with, or fails to provide information on a timely basis, or is abusive to you or more importantly, your staff, then they need to go on ‘the list’.
These clients may consume so much of your time and attention that there is a danger of them affecting your service to others. You need to evaluate the effects of such clients on your business as a whole, the happiness of your staff and yourself personally.
- End of a life cycle
The ‘end’ could come from either side. As your firm grows your client base will evolve with it, and growth could be enough for you to find that a particular type of client no longer fits in. Fee pressures may make servicing a particular client or type of client no longer viable. Holding on to such clients may be holding your firm back. However hard it may be to let them go, you may need to in order to fulfil your vision for your firm.
The opposite may also be true. A client may evolve so that you cannot service them fully, or has moved to a different business line of which you do not have expertise.
- Making Tax Digital (MTD)
Much has been said on AccountingWEB about particular clients not being able to cope with the new enforced use of accounting software, accountants being required to spend (possibly unpaid) time as teachers, how MTD will affect workload etc.
Whatever your thoughts, there will be a road to travel. Each client will need to be evaluated in order to decide whether your firm will have the time or inclination to take them along that road.
The decision will then need to be made to disengage with those clients who may not be able to keep up or fit in with your work plans. In addition, you cannot assume that all clients will stay. Many will hear the words 'free software' and go anyway. A breakdown of potential headings to help in your decision can be found in this blog.
A disengagement letter is vital in order to cover yourself from any future problems. The use of such letters can help minimise continuing liability to ex-clients, and will stand you in good stead with professional indemnity insurers and the courts should such a process result.
The letter needs to be written professionally and be non confrontational. Frigyes Karinthy's idea that all living things and everything else in the world are six or fewer steps away from each other needs to be considered - you don’t know whether or when you might meet the client again or in what circumstances.
Do not disengage by email. A phone call is your choice but a formal, firm letter is needed setting out the boundaries of your responsibilities and to advise the client of the work that has been completed as at the date of termination. It gives a clear 'cut off' point and confirms to the ex-client that you are taking no further responsibility for their affairs as from that date. Keep it simple – don’t go into screeds as to the reasons for your decision.
Checklist of points to include:
- Set a clear ‘cut off’ date.
- Summarise matters that have been dealt with and what further work, if any, your firm will undertake.
- List any outstanding matters that either the ex-client or the new advisers will need to attend to details of any impending deadlines.
- Detail any fees due to or from the client.
- Confirm your willingness or otherwise to assist any new advisers in the hand over and resolving outstanding issues with HMRC etc.
- Confirm that you will advise HMRC that you are no longer acting, and that until further notice all correspondence should be sent to the taxpayer in the event a new adviser is not appointed.
- Confirm your firms' policy of retention of records and confidentiality thereof.
As an aside point – take the opportunity to review your Letter of Engagement, ensuring that a paragraph included stating terms of notice.
Whether you ask the client to sign and return the letter is your choice. However, in the circumstances you are unlikely to receive the copy back and not having it returned would probably have no bearing should any court proceedings ensue.
Is 'clearing' a good thing?
The first time is the hardest. Once done, it's never forgotten and will probably be repeated several times in the future. AccountingWEB member Paul Scholes' comment may be one to remember: “Keep it business-like and to the point and restrict the F word to maybe only 1 or 2 instances.”