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Chances of recovering fees from client

Client decides to leave suddenly

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I have had this particularly client for five years - Sole Director of Limited Company.  Really good relationship - no issues.   I knew him quite well since we have mutual friends.  I actually wasn't charging him much and not put the price up for five years

When the Pandemic hit - he lost his only contract. Immediately I said to him he can delay payment if that helps.  In the meantime I had been submitting his monthly Furlough Claim which I did not charge for.

Back in November I inquired when I shall be expected to receive payment. I thought he could pay from his Furlough money - at least pay something.  Unfortunately, he ignore my emails.  Beginning in December I sent a slightly stronger email refusing to carry out any further work including submitting the company accounts which was due shortly

Out of the blue, I received a professional clearance letter from his new accountants.  I was gobsmacked as I thought at least have the courtesy to inform me before moving.  I am not sure how he will be able to afford these accountants as they are not small.

I have a very old engagement letter which I did update a few years ago but this client has the old engagement letter which doesn't allow me to charge on a per hour basis.  Only mentions monthly basis which covers the company accounts etc so not sure if I can still charge for the Furlough work ? The work I have carried out since March has only been payroll and Furlough submissions. The old Engagement letter does say that the director will be personally liable for outstanding accountancy fees. 

I would have to adjust the outstanding amounts payable as his new accountant will file the company accounts etc but want to charge him for payroll and Furlough submissions.

The director is planning to close his company and relocate overseas.  Looks like my chances to get any of the money due looks remote unless making the director personally liable for the debts clause holds ?

 

 

 

 

Replies (23)

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By williams lester accountants
29th Dec 2020 12:30

Not worth the effort, learn a lesson from this (always get fees before work!) and move on.

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By I'msorryIhaven'taclue
29th Dec 2020 12:33

It sounds like a write-off. You've more or less arrived at that conclusion by yourself.

Invoice him for the furlough / payroll work, and mention the unpaid fees to his new accountants, so that:
(i) they, the new accountants, are made aware that they've bagged themselves a Roger-the-Dodger client; and
(ii) in the event that the new accountants want anything more than the barest of handover information you will be able to apply some leverage by bringing up the matter of settling outstanding fees before you undertake any further work.

I would raise credit-notes (for the accounts prep element) against your regular monthly invoices. That way you avoid raising what might otherwise look to be a parting-shot invoice as the client exits.

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Replying to I'msorryIhaven'taclue:
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By sanjay100
29th Dec 2020 15:52

I will mention the outstanding fees on the clearance letter.

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By Matrix
29th Dec 2020 12:45

Has the client already paid you for the accounts or not? Sorry it wasn’t clear.

I expect the payroll and furlough, while valuable to the client, are low fees and also take minutes for a one man band. However I don’t see why you need a term in an engagement letter to charge for work you have done so just raise a bill. Whether the client will pay or not is another matter. Although you probably have some leverage with handover info.

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By sanjay100
29th Dec 2020 15:28

No the client hasn't paid for the accounts. Don't have much leverage over the handover as under ACCA which I have spoken to them about another client and basically they said you have to provide everything as accounting records belong to the client. The client affairs are very simple as its an IT Contractor.

Yes it will be difficult to get the money from the company but I am not sure if I have any case at all with the clause making the director personally liable.

I think I can justify £50 per month for Furlough and Payroll.

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By Matrix
29th Dec 2020 15:37

I still don’t understand, is their account in credit or not? If their monthly fee has been in excess of the work carried out then what is the problem in taking the £50 out of this?

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By sanjay100
29th Dec 2020 15:51

Sorry, yes he is in credit. Engagement letter mentions no refunds either so technically I am still owed for payroll and Furlough. In the end, he will end up paying twice for the accounts.

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By Matrix
29th Dec 2020 16:08

But your question is about recovering a debt? Just move on. You say he is closing the company anyway so spend time on clients who appreciate you and who will be able to continue into 2021 thanks to the help you gave them with furlough claims.

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By Mr_awol
30th Dec 2020 00:40

sanjay100 wrote:

Sorry, yes he is in credit. Engagement letter mentions no refunds either so technically I am still owed for payroll and Furlough. In the end, he will end up paying twice for the accounts.

So he’s in credit, you want him to continue to pay up front despite knowing he has no income, you have a no refunds clause in your LofE (which can only be described as underhand at best) and now you’re moaning that he won’t pay for a service you had no intention of charging for?

You’re ACCA you say - do they not teach ethics or did you just skip that part?

I hope he doesn’t give you another penny

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By sanjay100
30th Dec 2020 14:54

I think you are jumping the gun and harsh claiming on ethics. The engagement letter says no refunds so I should be filing the accounts etc. On top I have filed the payroll and applied for Furlough each month plus some other advice. Technically he owes me money !

Yes, I probably will not pursue the outstanding amount as will be a waste of time. and have better clients to serve. The client conduct in this matter has been wholly unsatisfactory. It is just basic manners you inform the other person if you are leaving.

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By Mr_awol
30th Dec 2020 15:51

Let’s compare your position to a car mechanic.

I get my car serviced by him each year and it costs (say) £600. He offers to let me pay £50
A month instead (maybe even insists it) so that by the time my service is due I’ve paid up front. He also offers to check the tyres and oil levels etc for free, to all his customers.

I miss a few payments because I’m skint with no income. I then find someone who will service my motor for £400 and whilst I like the old guy, I’m skint remember. I have already made 8 payments towards my next service so when I get that back I can put it aside and it will cover my next service.

I tell the garage and he tells me there’s a ‘no refunds’ policy and I can either give him another £200 and get the service done or he’ll keep the £400 anyway. Oh and if I complain he will bill me pretty much £400 for checking the tyres and levels once a month, which was always a free perk of going there.

1) should the garage be on rogue traders?
2) are you doing anything different, really?

Ps if the garage billed me for a wiper blade, key battery, or anything else they’d have normally charged for at the end with the service but which they didn’t tell me was ‘free’ that would be fine

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Replying to Mr_awol:
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By sanjay100
31st Dec 2020 13:33

Yeah Right - all companies are rogue for not giving a refund. Just like Travel companies and Airlines.

If I had told him to go then would have refunded him. In this instance it was his choice to suddenly move. I would be more than happy to have done his accounts then he could moved. Anyway, I am not going to request for the additional amounts.

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By I'msorryIhaven'taclue
30th Dec 2020 12:20

sanjay100 wrote:

Engagement letter mentions no refunds either so technically I am still owed for payroll and Furlough


A contract which is silent about the matter of refunds won't help you much. Basic contract law still applies, and I think you'll find that (dissensions aside - that is to say you have each performed your side of the contract satisfactorily) you'll be entitled to payment per se for so much as you have done (and no more). That's automatically implied.

If your contract (ie your L of E) had contained an express term stating no refunds then your position might have been different. But it didn't. So hard cheese, Old Boy. Better not spend your client's over-payment just yet!

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Replying to I'msorryIhaven'taclue:
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By Mr_awol
30th Dec 2020 15:52

I don’t think he is saying the LofE “mentions no(thing about) refunds”. I think he is saying it mentions (states) “no refunds”

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By I'msorryIhaven'taclue
30th Dec 2020 16:37

Ahha, got it -the penny's dropped!

Well B2B that might well be an unfair term under the Unfair Contract Terms Act 1977. It's a question of what a court might regard as unreasonable, and no refunds doesn't sound particularly reasonable. Maybe, maybe not. So far as additional payment - double payment, if you will - which was the OPs original issue, then I doubt he'd be paid a second time by order of any court.

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By Paul Crowley
29th Dec 2020 13:07

All you can do is charge and see what happens
No handover details before cleared funds

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By lesley.barnes
29th Dec 2020 15:25

You've said that your client hasn't contacted you re the new accountants and is ignoring your emails. If your client hasn't given you permission you shouldn't discuss or send any information to the new accountant until the client gives you clearance. That might concentrate his mind and give you a way to discuss any payment he owes you. Could he have moved to the new accountants because he is liquidating his company and they can do this?

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Replying to lesley.barnes:
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By sanjay100
29th Dec 2020 15:42

I will not be responding to the new accountant as I have only received the clearance letter and no signed authority from the client. Neither he was copied on the email sent by his new accountants

I had mentioned to the client around a month ago that once the accounts and corporation tax returns are filed we could close the company. What I don't understand at this stage why go to new accountants who will probably charge him double and will want money upfront. Whereas I would have been willing to work something out and now potentially he could end up having to paying two sets of accountants since I wouldn't have charged him for Furlough.

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By I'msorryIhaven'taclue
30th Dec 2020 15:43

Well something prompted him. Perhaps he got round to reading your L of E :)

Come to that, better read it yourself to make sure a watertight IR35-proof contract wasn't your remit; or, if it was, that one was in place. (You mentioned in your OP that there was but one solitary customer). Otherwise there's a potential PII claim to cloud your horizon.

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By bernard michael
30th Dec 2020 09:28

What is the outstanding debt based on invoices issued ??

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By Mr_awol
30th Dec 2020 09:33

bernard michael wrote:

What is the outstanding debt based on invoices issued ??

A refund by the sounds of it

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By fawltybasil2575
31st Dec 2020 14:31

@ sandjay100 (OP).

Just a small point, re the client’s proposed appointment of a new accountant. Your 15.42 post on 29 December 2020 included:-

“I will NOT BE RESPONDING (my emphasis) to the new accountant as I have only received the clearance letter and no signed authority from the client”.

You may perhaps have meant that you were to contact the proposed new accountant, to advise that you had received no authority to provide information to them: this I believe is entirely the correct approach. Taken LITERALLY, however, you are NOT proposing to respond to the prospective new accountant’s letter at all: if such be the case, may I advise that:

(i) Many accountants are unaware of the requirement for an incumbent accountant’s obligation to obtain formal authority, from the client, to provide information, and

(ii) The prospective new accountant may have been informed (incorrectly) by the client that they (the client) has already authorised you to provide information.

Consequently, IMHO the ethical, and indeed standard courtesy, approach is to:-

(a) Write to the prospective new accountant to advise that you have not received authority to provide a substantive response to their letter, but that you have on that day written to the client, enclosing a draft authority letter for them to sign and return to you: and that you will thus respond substantively to the prospective new accountant’s original letter when you have received that signed authority,

(b) In line with (a) above, write to the client enclosing (i) a copy of the letter from xyz accountants, and (ii) a draft letter for them to sign and return (such draft letter confirming that they “authorise you to respond substantively to the letter from xyz accountants of xx/xx/xxxx)”.

The above approach will hopefully enable you to “move on”, in the interests of ALL three parties, as soon as possible.

Basil.
PS. If of course the client disregards your letter [per (b) above] then you should [after (say) 4 weeks] notify the prospective new accountant to that effect.

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Replying to fawltybasil2575:
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By bernard michael
01st Jan 2021 08:53

fawltybasil2575 wrote:

@ sandjay100 (OP).

Just a small point, re the client’s proposed appointment of a new accountant. Your 15.42 post on 29 December 2020 included:-

“I will NOT BE RESPONDING (my emphasis) to the new accountant as I have only received the clearance letter and no signed authority from the client”.

You may perhaps have meant that you were to contact the proposed new accountant, to advise that you had received no authority to provide information to them: this I believe is entirely the correct approach. Taken LITERALLY, however, you are NOT proposing to respond to the prospective new accountant’s letter at all: if such be the case, may I advise that:

(i) Many accountants are unaware of the requirement for an incumbent accountant’s obligation to obtain formal authority, from the client, to provide information, and

(ii) The prospective new accountant may have been informed (incorrectly) by the client that they (the client) has already authorised you to provide information.

Consequently, IMHO the ethical, and indeed standard courtesy, approach is to:-

(a) Write to the prospective new accountant to advise that you have not received authority to provide a substantive response to their letter, but that you have on that day written to the client, enclosing a draft authority letter for them to sign and return to you: and that you will thus respond substantively to the prospective new accountant’s original letter when you have received that signed authority,

(b) In line with (a) above, write to the client enclosing (i) a copy of the letter from xyz accountants, and (ii) a draft letter for them to sign and return (such draft letter confirming that they “authorise you to respond substantively to the letter from xyz accountants of xx/xx/xxxx)”.

The above approach will hopefully enable you to “move on”, in the interests of ALL three parties, as soon as possible.

Basil.
PS. If of course the client disregards your letter [per (b) above] then you should [after (say) 4 weeks] notify the prospective new accountant to that effect.

Basil
You missed out - Send also a copy statement detailing any outstanding invoices

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