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Client not paying

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Our ex-client limited  Limited company is refusing to pay our invoice of £3200 as the new accountant has mentioned there were errors in the accounts.

The new accountant has sent a list to the client which has been forwarded to us by this ex-client.  Errors mainly involve the director loan account where we believed they were personal expenditure at the time due to lack of information and secondly there were some items that questionably should be under revenue expenditure and not capital.  Unfortunately the client wasn't really helpful at the time and information was provided at the last minute.   Client has signed the accounts and the luckily the letter explaining some of the figures in the accounts.

Could we have done a better job ? Most definitely if the infromation was sent when we had requested it three months earlier instead of a week before the accounts filing deadline and the client was more helpful. Certainly we would have recitified the "errors" if we had continued the engagement.  The problem is the client is unwilling to negotiate and refusing to pay anything.  I am im fine if the client wants to deduct the amount for any rectifications in the accounts. 

 I am now seriously thinking of taking the matter to court but now it is not clear cut even though we have done the work and acted reasonably in this very difficult engagement plus we have a lot of other evidence.  We never even charged for all out time and want to get paid. This client is also being rather obnoxious.

It is a lesson learnt but I don't think as an accountant would be helping the client to pinpoint faults if it was the other way round.  I would just be concentrating on getting the balance sheet correct.

 

 

 

 

 

 

Replies (39)

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By Paul Crowley
19th Oct 2021 16:04

Same set of records and information
3 accountants would give 3 different results
Has client made any loss?
No because it is all in time to be amended.

Would client have made a loss if you delayed submission?
Yes late filing fees

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Replying to Paul Crowley:
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By taxwizard
19th Oct 2021 16:08

Yes three results and three different prices. I think the other accountant is charging much less than ourselves which has irritated the client too. Client was making a loss so the errors would have just increased the loss.

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Replying to taxwizard:
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By Paul Crowley
19th Oct 2021 16:12

There are aways people who will undercut

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By ireallyshouldknowthisbut
19th Oct 2021 16:20

Someone filed before you got paid? Ouch.

Given the rubbish self inflicted position you are starting from, unless you really want the hassle of smalls claims court, I would take this as a very expensive lesson, and settle.

And beef up your systems so this cant happen again.

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Replying to ireallyshouldknowthisbut:
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By taxwizard
19th Oct 2021 16:42

Its the first time in 10 years it has happened where we have not been paid. There is so much more to this why this situation has occurred. Systems are fine.

We will take this to small claims court as there is a lot of money at stake. We have done the work and have the evidence I don't know if it is worth the client going down the legal route as they have to pay something plus they will have interest and court fee to pay as well. I suspect the court will just allow the deduction for any remedial work if they counter claim for breach of contract

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Replying to taxwizard:
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By memyself-eye
19th Oct 2021 18:05

Sue and be damned!
No if's but's or maybe's
You are owed the money - DO NOT let it rest.

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Replying to taxwizard:
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By SXGuy
19th Oct 2021 18:08

I do agree however that your fine system isn't that fine if your filing accounts before being paid

You may not have had a problem before, but it was a problem waiting to happen none the less.

Put it this way if it were me, I'd have explained that unless payment was received prior to filing deadline, client should expect a penalty.

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Replying to ireallyshouldknowthisbut:
By jon_griffey
19th Oct 2021 17:24

ireallyshouldknowthisbut wrote:

Someone filed before you got paid? Ouch.

Given the rubbish self inflicted position you are starting from, unless you really want the hassle of smalls claims court, I would take this as a very expensive lesson, and settle.

And beef up your systems so this cant happen again.

I would have thought £3,200 is a bit too much to just take on the chin without a fight. It is easy enough to put in a claim. Hopefully the letter of engagement will help.

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Replying to jon_griffey:
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By memyself-eye
19th Oct 2021 18:11

Never had a letter of engagement - waste of time.
The small claims court is not a hassle, it's easy peasy - use it. Show the recalcitrant you mean business.
I once sued the national airline of the worlds second? maybe third, biggest country using the SCC. Sure, they hired a national firm of solicitors to refute the claim.
They lost.

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Replying to memyself-eye:
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By Calculatorboy
19th Oct 2021 21:53

No letter of engagement? That is a disaster waiting to happen one day.

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Replying to Calculatorboy:
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By Roland195
20th Oct 2021 10:17

Is it though? I question the value of them myself in the real world too, albeit I still prepare them.

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Replying to Roland195:
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By Leywood
20th Oct 2021 10:27

I doubt most folk read them. As with most T&Cs. Until something is pointed out from our end that is.

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Replying to Roland195:
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By Calculatorboy
20th Oct 2021 22:12

It's obviously important that you restrict what you advise on unless agreed in writing otherwise you are wide open.

.so you engage painarse client with property disposal and he claims you didnt advise him of time limits ,

Or that he wasn't complying with cis, vat ... etc etc

And so on...believe me its a can of worms

Besides don't you want to restrict your overall liability?

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ALISK
By atleastisoundknowledgable...
19th Oct 2021 17:55

Put in a claim (MoneyClaim.gov.uk). Chances are the client will pay up when they receive the summons.

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By Matrix
19th Oct 2021 18:54

I would put it down to experience. There have been some recent posts on small claims if you do a search.

That debt is a lot of money to me, maybe less to you if you mainly do tax, maybe concentrate on that but get paid upfront etc!

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Replying to Matrix:
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By taxwizard
19th Oct 2021 20:10

Actually this client came out suddenly from an good acquaintance of mine who vouched for their integrity. We didn't quote on a fixed price basis as there was no book-keeping done and we need to do this from them and that this engagement doesn't seem straight forward. We charged on an hourly rate as we had no idea how much this engagement would cost. Glad we did as it was the most challenging engagement we have come across . The fair amount for the Accounts and Tax Return should have been 5K but we limited to 3.2K.

Yes will take this to the small claims court. Its annoying their accountants have got involved as well which sure they will use as witness and evidence in court.

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Replying to taxwizard:
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By Matrix
19th Oct 2021 21:13

Did they pay for the bookkeeping? Those fees sound high, do you do bookkeeping at tax charge out rates if that is your expertise?

I would weigh up the time and energy on this one.

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Replying to Matrix:
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By taxwizard
20th Oct 2021 11:30

We just included the accounts, tax return and corporation tax in one hourly rate. The book-keeping took hours as the client was not able to answer a lot of our questions or provide documentation

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Replying to taxwizard:
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By bernard michael
20th Oct 2021 09:44

taxwizard wrote:

Actually this client came out suddenly from an good acquaintance of mine who vouched for their integrity. We didn't quote on a fixed price basis as there was no book-keeping done and we need to do this from them and that this engagement doesn't seem straight forward. We charged on an hourly rate as we had no idea how much this engagement would cost. Glad we did as it was the most challenging engagement we have come across . The fair amount for the Accounts and Tax Return should have been 5K but we limited to 3.2K.

Yes will take this to the small claims court. Its annoying their accountants have got involved as well which sure they will use as witness and evidence in court.


If he's got any sense I doubt the new accountant will want to get involved without payments upfront and the "client" may find himself disengaged with the ability to find another patsy difficult
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Replying to taxwizard:
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By Leywood
20th Oct 2021 10:31

Some Accountants like to show how good they are by having a pop at the previous incumbents work. But would they stand up in court? I somehow doubt it. You dont say, or maybe Ive missed it, are they covered by a prof body? I somehow doubt that too.

Its worth a shot across their bows if nothing else, especially for that amount.

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Replying to Leywood:
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By taxwizard
20th Oct 2021 11:32

Yes agreed its annoying another accountant is trying to get into the clients good books by undermining another accountant. They are AAT qualified.

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By I'msorryIhaven'taclue
20th Oct 2021 13:46

They seem to come in two licensed flavours: accountant and bookkeeper.
https://www.aat.org.uk/membership/standards-requirements/licensing

Get busy - this might be the Achilles Heel. You say "they" are AAT qualified... is there more than one principal (or shadow-principal?) and is that in accordance with their accountant licence? Registered with Information Commissioner? Is there an AAT register of members that will tell you the licence-level?

Get weaving! For £3k I'd be (figuratively, of course) hanging someone or other out of a window by their ankles by now!

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By Leywood
20th Oct 2021 15:00

'Qualified' or 'licensed'. Qualified could just mean they have passed their exams, have no actual experience but have set themselves up without the express permission of their prof body, so could well be acting beyond their remit anyway. Worth a quick check.

Did they ask for clearance?

Wondering if a quiet word is in order. Depends on how that was handled in the first instance.

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Replying to Leywood:
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By taxwizard
20th Oct 2021 15:41

I used the wrong terminology they have a license. To be fair they seem very knowledgeable compared to some AAT accountants I have come across in the past

They did ask for clearance but they seem to enjoy pinpointing minor errors which they have done previously as well Really does wind me up as they seem to be goading the ignorant client.

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By Calculatorboy
19th Oct 2021 21:50

Always do a letter of rep for client to sign ( even with soles & p/ships) specifically listing all such transactions with no documentation and client signs it to confirm treatment

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Replying to Calculatorboy:
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By taxwizard
20th Oct 2021 11:34

Luckily, I did that for this client as I don't provide a letter of rep for all clients and don't think many accountants do anyway. Though, I didn't list all the transactions with no documentation

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By I'msorryIhaven'taclue
20th Oct 2021 09:41

taxwizard wrote:

Errors mainly involve the director loan account where we believed they were personal expenditure at the time due to lack of information...

I'd have posted such amounts to the DLA in the Revenue's favour. I guess most of us here would, given a tight deadline or an unreliable client who doesn't keep proper records. Arguably fine to err on the side of caution.

taxwizard wrote:

...and secondly there were some items that questionably should be under revenue expenditure and not capital.

So you've capitalised some expenditure that could have been expensed. But what actual loss did the client suffer as a result? If little or nothing, then that's the ceiling on the client's claim against you.

In your shoes, I'd quantify the corp tax charge on the contentious DLA posts, ditto on any capital allowance versus revenue expense shortfalls, and offer to deduct the full amount of those CT sufferances from your £3.2k bill. That's demonstrably more than reasonable, and should ensure that any eventual court will find in your favour.

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Replying to I'msorryIhaven'taclue:
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By taxwizard
20th Oct 2021 11:38

I think out of 150K around 20K should not have been capitalised. Client was making large losses anyway. This would have just increased the loss (and not sure the client wanted to show a large loss in the first place)

There was absolutely no time to distinguish between revenue and capital and basically parked everything into capital

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Replying to taxwizard:
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By I'msorryIhaven'taclue
20th Oct 2021 13:35

Ahha, bigger numbers than I'd anticipated. How about suggesting your ex-client expenses out in the following year's accounts anything in FAs that turns out to be of shorter-life than you had anticipated?

After all, you've been forced into making a value call because your ex-client failed to maintain proper books and records (that fact would go in bold type on any letter from me, as it's so loaded). And if your ex-client now disagrees with your allocation he is free to adjust this year by reallocating from FAs to P&L anything that's been substantially consumed within 12 months.

If I were you I'd be combing through anything DLA-related within the accounts you prepared; bringing into question anything the slightest bit contentious, as a shot across the bows.

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Replying to I'msorryIhaven'taclue:
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By taxwizard
20th Oct 2021 15:50

Its not a huge job to sort it out and the client is using this just to undermine my case against him in terms of fees owed. I don't mind paying his new accountant for making these adjustments even though the client left everything to the last minute and it became a rush job to meet the deadline.

I have been through the accounts again - there are several transactions in DLA and Fixed Assets that should have gone into P&L but its immaterial in the context.

I think its a more of a ego battle as client wants to prove that I am a poor accountant and that he has been overcharged.

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By OldParkAcct
20th Oct 2021 13:33

Given the client was making large losses, then any legal judgment could prove pointless if the company doesn’t have the funds to pay and is dissolved.
The fact that the new accountant is looking at the capitalised assets perhaps indicates they are looking at what would be needed to pay in event on a liquidation.

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By CJS88
20th Oct 2021 15:42

Go to small claims court (MoneyClaim.gov.uk)
Go directly to court
Do not pass Go
Hope to collect £3,200 + costs

Time is of the essence if they are burning money.

You did the best you could with the information supplied at the time and the client approved the accounts.

Stick to you guns.

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Replying to CJS88:
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By taxwizard
20th Oct 2021 15:57

Thank you everyone for your support.

We have everything backed up and we did our best in the circumstances and the client was happy at the time. It was the most difficult engagement due to the client lack of knowledge, incomplete records and information since I have been in practice. I can't tell you how bad it was Definitely a lesson learnt

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By Leywood
20th Oct 2021 22:23

Let us know how you get on idc.

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By taxwizard
21st Oct 2021 10:09

Yes will do

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Replying to CJS88:
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By Hazel Accounts
21st Oct 2021 12:42

CJS88 wrote:

Go to small claims court (MoneyClaim.gov.uk)
Go directly to court
Do not pass Go
Hope to collect £3,200 + costs

Time is of the essence if they are burning money.

You did the best you could with the information supplied at the time and the client approved the accounts.

Stick to you guns.

A small amendment to the above - I believe it is good practice (and the court will like to see this) if you send a pre-action letter setting out the case and what you want ie your fees with maybe a small deduction for any loss caused to the client. You would need to present this to the court anyway so it's not extra work. You can set out a reasonable time for a response and payment before you file with court and you could also add you will charge interest on the debt from then going forwards if they don't settle (I think there's an official set rate but it's been a while since I've done anything with money claims). Good luck - I'm sure you deserve something for at least the book-keeping! (New accountant won't be re-doing all that)

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Replying to Hazel Accounts:
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By taxwizard
21st Oct 2021 13:17

I or a solicitor (cost around £15) would send out the letter before action as this is required as part of the legal protocols but normally you wouldn't set out the case. Though its a good idea to put the case and offer of deduction for any remedial work.

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By Calculatorboy
20th Oct 2021 22:19

Whatever the technicalities if you can demonstrate no loss to client and have been helpful to new accountant... you are in strong position...best of luck in court

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Replying to Calculatorboy:
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By taxwizard
21st Oct 2021 10:09

He may counter sue claiming breach of contract or negligence though you are right they will have to demonstrate some loss

Possibly even go to my accountancy body. I am sure they are intent on revenge.

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