Lessons will be learnt etc...
A client side f up with the setup of a 3rd party add on, which they admit are 100% to blame, has resulted in the need to redo vat returns, accounts and tax returns over a 3 year period, I told the client we wouldn’t be able to provide a fixed fee as it was too hard to estimate the time it would take.
We come to the end of the work and it's taken 3 days which would be billed at £2,500 give or take, which is around 1.65x the annual fee, the client isn't finding this acceptable and has been quite blunt in his response. The person who received the email was a little upset by it.
I'm not sure if I should stick to the price, enter into some negotiations, which will likely have to be heavily discounted i.e. more then 50% probably 65%+ and dump the client in April.
I'm not very experienced at this my old boss would take someone to court over a pound and stick to his guns.
What do you do in these situations?
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Me personally? Much as you have suggested - discount it off to whatever can be mutually compromised and sack the client off.
You can go all Chamberlain waving your engagement letter and as much good as it will do you. You can sue for it at your time & expense - they will then be more or less forced into counter claiming.
A complaint to your institute will no doubt materialise, groundless or not that will be more time & stress to deal with.
As you say, lesson learned.
Thanks Roland, yes I shouldn't be but I'd be concerned about negative reviews, complaints etc. Dealing with this is already causing more unbillable work.
Just to follow up with a couple of further points. You have to make sure that if you choose to discount fees then you follow through sacking the client to show your employees that you value their efforts if the client does not.
The 2nd issue is are you sure it was necessary to go to this lengths to redo the accounts and tax returns?
Alternative approach. Point out to client that, whilst the bill is a four-figure sum, the work fixing an error on their side is netting them a five-figure sum.
Maybe the initial response was a gut reaction to getting a bill that, by your own admission, was significantly higher than their normal total bill. Pointing out how how much they are benefitting, whilst reminding them it was their error that caused the problem, might snap them out of it.
Depending on the exact content of their email, you might want to sack them off anyway as a matter of principle. Defusing their wrath first could head off the risk of dealing with a negative review. That's always a potential hassle, even when it is clearly unjustified.
Great point and I think so, it should result in a 5 figure refund.
5 figure refund? Client admits that it's all his fault and he's still not happy?
Get him in for a pot of tea and a reality check. Explain that you need him to value the work that you do for him. As he doesn't, you'll offer him a discount for the inconvenience of having to find a new accountant.
Been here got the tea shirt and learnt from it. You need to be careful not to get in a protracted discussions. I tend to send responses through the post not by email, otherwise you spend all day back and forth. Draft a detailed response, agree to maybe a 10% discount in full and settlement. You need to decide if you want to keep the client, if you don’t then you are in a stronger position. Be robust in your response, and definitely don’t let them push you around. I always enjoy jumping first, rather than them sacking my firm. You cannot please everyone! Good luck.
I've often found that by suggesting spreading the payments "if you are unable to afford this in one go" makes clients who pride themselves on how well they are doing pay up instantly!
Did you file the revised documents without getting the client to agree /pay the fee?? If you did you'll have a sticky time in Court and probably lose your entire claim.
I would negotiate with the client for a final settlement as soon as possible - what does he think is reasonable?
He has to take on board that it was his error, you re-worked three years worth of figures and charged him roughly half of his annual fee for each year. He is also getting a 5 figure refund.
I would then immediatly disengage once I was paid. The problem you have is that as we all know HMRC could push back on the refund which generates more work for you that no doubt the client will want for free as part of the service.
I would speak to them, and see how the call goes. They might have calmed it down a bit having chewed your staff member out.
I would stress the "yes its a big bill" but also explain why you have charged it, and its not come out of the blue, and the result they get and why you did the work. ie sell the value of what you did to his business and why it happened in the first place (ie him)
Be prepare to "discount for goodwill" but not by heaps. Maybe £2k+VAT down from the £2.5k
Id also mention they upset your team member and would welcome an apology. That to me would indicate if you carry on or not. Id put a red line in there for the future.
If your charges are reasonable / justifiable then I am not sure that I would be offering a discount (as this immediately looks as though you agree that your charges are too high!).
Bear in mind too, that when this is all sorted the client (rightly or wrongly) will very likely to look for another accountant - so no need to discount today in anticipation of income in the future.
Although you didn't agree a fixed fee, how did you communicate the charges - as there seems to be a mis-match in what your client was expecting.
Also (without sounding like a LinkedIn "expert") it seems that you didn't accurately communicate the benefit of your work to your client?
They should be thanking you for sorting their mess out and receiving a refund in excess of your charges!
The key is whether the type of work required circa 21 hours at circa £119 per hour, total £2,500,that all depends on what the work was, if mere data entry it possibly should have been done by a cheaper member of staff at say 21 hours@ £65, total £1,365
If you are a sole practitioner like I was, with virtually no staff (though I did have someone PT for a period) these sorts of things can be tricky, I always thought it seemed unfair to say charge your £150 per hour for the high spec stuff when it is mere debits and credits, in those circumstances I tended to class myself as a quick bookkeeper and charge about the £60 per hour mark for such work (albeit 4 years ago)
All depends what was involved.
The key is whether the type of work required circa 21 hours at circa £119 per hour, total £2,500,that all depends on what the work was, if mere data entry it possibly should have been done by a cheaper member of staff at say 21 hours@ £65, total £1,365
If you are a sole practitioner like I was, with virtually no staff (though I did have someone PT for a period) these sorts of things can be tricky, I always thought it seemed unfair to say charge your £150 per hour for the high spec stuff when it is mere debits and credits, in those circumstances I tended to class myself as a quick bookkeeper and charge about the £60 per hour mark for such work (albeit 4 years ago)
All depends what was involved.
In my opinion, the above is not relevant - the client is buying accuracy, peace of mind and a "5 figure refund" for £2.5k
At face vale, that looks like a great deal!
I am sure that the client could have found somebody less expensive (or more expensive), however they may not have been given the same level of service in terms of accuracy or time.
Perhaps, but what was he/she quoted and for what?
I have seen no sight of what the engagement letter quoted, have you?
. The fact there was a latent large refund existed whether accountant A did the work at say £2,500 or accountant B for less, the accountant did not create the latent refund merely facilitated its recovery.
So, the key is, what type of work, how was it quoted for, what level of staff was reasonably needed to execute the work what level of staff was actually used?
I'd agree with DJKL - it is, to an extent, relevant.
If i had to do a lot of labour intensive work myself, the client may be charged significantly more than the market rate for that work. If i asked my garage to clean my car and they charged me £150 because their 'most senior mechanic' did it I'd be pretty miffed.
I am open about the cost of us doing the donkey work for clients. I feel it is important to flag when the work you are carrying out is likely to lead to both sides being unhappy.
I'd also query (not sure if it has been covered) whether the third party add-on was recommended by the OP or whether the client found it on their own. I consider myself to have a bit of a duty of care if ive implemented a system. Equally if the client comes up with something ive never used before because it is great/cheap/etc i do warn them that if it all goes pear shaped the cost of fixing it might be high if it does go wrong (hence they may wish to consider using our preferred provider - but then youre back into a possible joint liability if they follow your advice and it still goes wrong)
I guess the lesson is to issue a quote (or a "work order") next time for this client.
Tell him you've rectified his error, saved him a five figure sum, and ask him to pay whatever amount he considers fair.
Not a bad approach IF this is a client that you've trusted previously and still want to retain. But that's a truly gigantic IF.
Otherwise you're moving into a realm where the client (not you) sets the price (including how much work is to be done as well as the rate for it) ... which feels 'unwise' if you'd be happy to see his rear end disappearing around the corner!
It's not a bad approach for a client you'd like to kick into touch either.
Those who stayed awake in Contract Law will recall that in D & C Builders versus Rees the Builders' acceptance of a reduced lump sum "in full and final settlement" did not preclude them from hauling Rees's *rse through the courts later on for the unpaid balance.
Rationale: Rees gave the builders no new consideration in exchange for the reduction. Therefore the agreement to a reduction was invalid . Rees was (partially) fulfilling his obligation to pay under the pre-existing contract, and could be sued for the remaining balance.
I suspect that I've forgotten more than I'll ever know (although the faintest of bells is tinkling in the distance).
So the solution (for all those DiY'ers, for whom the "in full and final consideration" phrase is trotted out parrot-like with a triumphant flourish) ... is that there needs to be a distinct Agreement to that reduction - preferably accompanied by a nice crisp new Fiver?
Not quite... even if there is a distinct agreement to the reduction there has to be some new consideration from both sides. So Slim's new consideration is easily identifiable: he'd be agreeing to accept a lower amount; but there'd be no new consideration from the client, who would simply be fulfilling an existing commitment (under the old agreement) to pay Slim.
Without fresh consideration from both parties the agreement would be invalid. (Which means you could go sue the client under the original agreement for the balance after you've banked whatever he's paid "in full and final settlement").
So if Slim's client had been unhappy with the standard of the work, for example, and Slim accepted a reduced fee in settlement of that complaint then you would have consideration on both sides: Slim's consideration by agreeing to accept a lower amount; and the Client's consideration by agreeing to drop his complaint that Slim did a poor job and called him a nitwit.
Presume just in England & Wales, we always had the ability to contract without consideration (The Unilateral Gratuitous Promise)
I didn't know that. In English law, a (unilateral) promise is worth nothing.
Edit: Before someone mentions estoppel, there are exceptions to that general rule. Promissory estoppel being one such exception.
Thanks all. Having slept on it I'm going to drop them once everything is tied up in a couple of months, going to offer a small discount and see what happens.
They aren't a client I want to act for and I don't want to 'reward' them for acting this way.
If you want to save yourself from any sort of dispute, step 1 .Reinforce to the client the amount of work involved and your cost/fee for completing it. Step 2, Invite them to pay what they think the job is worth and you in turn will decide if it is worth your while to continue to work for them. Step 3, sack them if they have under valued what you do.
At worst you have been paid a reasonable portion of the fee and not spent the next few months wasting time on a stressful dispute and a client that is not worth it. At best the client feels sufficient guilt to pay in full.
Step 2, Invite them to pay what they think the job is worth and you in turn will decide if it is worth your while to continue to work for them. Step 3, sack them if they have under valued what you do.
It's sounding like something off Three in a Bed ....
Not sure why you couldn't estimate the time involved? In these instances I always estimate the time then double it and say to the client it could be as much as £x but we will try and keep it below this. Do you want us to proceed? We always come in under the max quoted.
Not sure what you do now. I probably would negotiate a discount.
A lesson for the future!
I suppose this depends as others have said, on the level of work undertaken/required to fix the problem. Did you have to completely re-do the VAT returns/SA returns/accounts from scratch each year, or was it a question of amending some bookkeeping entries and then re-running the figures etc.?
Either way, the time costs incurred are what they are, and if you have an engagement letter that states this exercise would be invoiced on a time spent basis, then so be it.
If I am doing a piece of work that is difficult to fix a fee on, I will include in the engagement letter that this is the basis of the quote, and that the most suitable person will be doing the work, and the hourly rates for the work can range from £x to £y plus VAT. You then still have the scope to introduce some wriggle room to the eventual amount on the invoice.
Could you suggest they settle your fee once the refund is in hand? Or is this postponing the inevitable drudgery of pursuing them for payment after the fact?
