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Clearance letter sent prior to instruction

Clearance request received but client denies instructing the firm, what action should I take?

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This is a new one on me. Out of the blue I received a clearance request for a client. So I contact the client for approval to communicate with this firm, and he says he hasn't instructed them, although he had been shopping around. Should I leave it to the client to deal with this or should I contact the other firm to ask for an explanation? And if I find that the firm has acted in error, should I take the matter further?

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By ireallyshouldknowthisbut
29th Mar 2018 10:44

You just respond saying you have not have authority to release the data.

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By johngroganjga
29th Mar 2018 10:55

I agree with the above, with the proviso that you should say you have no authority to respond to the clearance request, which is what you say the letter is. You don't say that the letter also contains a request for information about the client, as the above response is assuming, but if it does you may also want to confirm that you have no authority to provide information either, but that is probably implicit in your first response and may be so obvious that it does not need saying. The rest is between your client and the other accountant.

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By andy.partridge
29th Mar 2018 11:07

What they said.

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Oaklea
By Chris.Mann
29th Mar 2018 12:13

And, at least you know where you stand with your client?
From the sounds of it, possibly soon to be (ex) client?
The old adage; you never know what's around the corner.

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Red Leader
By Red Leader
29th Mar 2018 12:25

I wouldn't bother responding, not worth the time. Frank discussion required with the client, though.

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Replying to Red Leader:
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By MissAccounting
29th Mar 2018 13:00

Depends on the governing body potentially.

Chances are though theyve had this client sitting as a prospect and another client has said they want to proceed and theyve processed the wrong one? A quick letter back to them should sort it.

The other alternate is that the client was too scared to tell you over the phone and you'll receive an email from the yellow belly over the weekend!

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Replying to MissAccounting:
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By PracticePartner
29th Mar 2018 17:23

MissAccounting wrote:

Chances are though theyve had this client sitting as a prospect and another client has said they want to proceed and theyve processed the wrong one? A quick letter back to them should sort it.


If that were the case it is hardly a trivial matter. The client faces the embarassment of being confronted by their current accountant, and the new accountant faces the wrath of their prospect who if they have any sense will cross them off their list.
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By PracticePartner
29th Mar 2018 12:52

Thanks for your replies. I was wondering whether to report the new accountant, they shouldn't have sent their letter until they had an EL signed by their new client. Who, you will not be surprised to hear, owes us money!

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Replying to PracticePartner:
By Ruddles
29th Mar 2018 13:08

Is that the correct order of things? Generally, we don't issue an engagement letter until we're satisfied that we should. What happens if you have the EL signed and the previous accountant then responds to your 'clearance' letter with information that makes you change your mind about taking the client on?

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Replying to Ruddles:
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By PracticePartner
29th Mar 2018 16:49

Good point. However it is usual practice to include the clearance etiquette and request for handover information in the same letter. But the handover information shoudn't really be requested until the client enters into a contract with the new accountant. Has everyone been doing it wrong (using their institute's templates) all this time?

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Replying to PracticePartner:
Oaklea
By Chris.Mann
29th Mar 2018 14:08

"Who, you will not be surprised to hear, owes us money"

I'm sorry to say that, in this day and age, there's only you (or your firm) to blame.
As regards reporting the "new accountant", I think that's another inefficient waste of time.

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Replying to Chris.Mann:
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By PracticePartner
29th Mar 2018 16:41

"I'm sorry to say that, in this day and age, there's only you (or your firm) to blame."
What do you mean exactly? Not everyone pays in advance and with respect, you are not aware of the circumstances.

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Replying to PracticePartner:
Stepurhan
By stepurhan
29th Mar 2018 17:18

What other way were we supposed to interpret your mention of the client owing money? You were the one that brought it up in the context of a client who is "shopping around".

If you are going to share something like that, people are going to comment on it. If it's not as simple as your statement made it sound, perhaps you should not have mentioned it in the first place.

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Replying to stepurhan:
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By PracticePartner
29th Mar 2018 17:30

It is not directly relevant to the original question, but the debt might explain why they are shopping, in order to get work done that we won't do until outstanding fees are paid.

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Replying to stepurhan:
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By Mr_awol
29th Mar 2018 17:36

stepurhan wrote:

What other way were we supposed to interpret your mention of the client owing money? You were the one that brought it up in the context of a client who is "shopping around".

If you are going to share something like that, people are going to comment on it. If it's not as simple as your statement made it sound, perhaps you should not have mentioned it in the first place.

I'm not sure it's relevant for people to comment on it. I read it that the OP only found out that his client was 'shopping around' when he got the clearance letter.

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Replying to PracticePartner:
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By Mr_awol
29th Mar 2018 17:34

PracticePartner wrote:

"I'm sorry to say that, in this day and age, there's only you (or your firm) to blame."
What do you mean exactly? Not everyone pays in advance and with respect, you are not aware of the circumstances.

In another post Chris suggests that timesheets and hourly rates "seem something of the past". I suspect he feels that 'modern' accountants 'should' adopt monthly pricing rather than charging for their time and therefore there's no reason for bad debts.

In practice I disagree, but it could depend on size of business (both in terms of accountant and client). We strongly encourage DD in some sectors with smaller clients but would never insist across the board and certainly wouldn't move to a subscription based billing model. The larger clients would just move on.

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Replying to Mr_awol:
Oaklea
By Chris.Mann
30th Mar 2018 08:32

"I suspect he feels that 'modern' accountants 'should' adopt monthly pricing rather than charging for their time and therefore there's no reason for bad debts".

With respect, when I need your interpretation of my views, I will ask for it.

No matter how accountancy practices are (fee) funded, in the modern age and, with ever increasing compliance responsibilities, the last thing we need to do, surely, is act as bankers to client's? If you know your client and, service them well, there is no place for overdue fees, given the various options available.

I imagine it would be wholly impractical (it certainly is in my practice) to fund fees purely via monthly payment. However, where the signs are that the client may be "reluctant" to make payment on time, there are a variety of methods of persuading them otherwise. The most obvious being not submitting documents, until the fees have been settled.

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Replying to Chris.Mann:
Hallerud at Easter
By DJKL
30th Mar 2018 09:34

I run the odd debt, some quite old, often for very sound business reasons.

When you act for one entity which is very cash strapped (often property projects take years to generate any cash) and has not settled any fees in the seven years I have acted,but I also act for another related entity which is a great client, in fact which is my largest single source of income, letting debts run can make perfect business sense.

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Replying to PracticePartner:
Oaklea
By Chris.Mann
29th Mar 2018 17:35

Calm down dear, it’s only a web forum.

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Replying to Chris.Mann:
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By PracticePartner
29th Mar 2018 17:44

Isn't "dear" a proscribed term in this day and age? None taken though!

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Replying to PracticePartner:
Oaklea
By Chris.Mann
30th Mar 2018 08:35

No, it's regarded with deep affection. Or, it's expensive.

You decide which fits best!

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Replying to fawltybasil2575:
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By Mr_awol
29th Mar 2018 17:55

Textbook

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By KateR
06th Apr 2018 10:12

I had an even better one a while ago - a clearance letter for someone I had never acted for from an accountant I did not know. I just binned the request.

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By pauljohnston
07th Apr 2018 11:25

Amazon always expects payment upfront so we as accountants should consider the same.

It is interesting to note that the only problems we have with clients paying are those that pay after we have completed the work. Never from those who pay upfront. I meant the whole fee up front.

The monthly model is comming and for some accountants this will be the way forward. Others it will be a hybrid of some monthly some at the end and some at the beginning.

If all your clients pay after you have done the work, I suggest asking some if you gave a discount of say 5% whether they would pay up front. You may be suprised at the response- I was.

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By Marion Hayes
08th Apr 2018 15:14

Amazon don't take payment upfront!!
They take payment details but don't action them until the goods are physically dispatched. At that point you can no longer cancel and they take payment

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