Share this content
28

Should you inform the incoming accountant?

Should you inform the incoming accountant?

Didn't find your answer?

When you receive your ex clients courtesy letter from their new accountant requesting professional clearance they usually ask for any other information relevant to accepting the engagement. We do the same. Do you think it is correct to advise them that the client is a slow payer. Last year the client took 15 weeks to pay our annual invoice. This year we asked for a deposit on receipt of records with the balance paid to be on completion. So he left us saying he felt insulted. The incoming accountant is a neighbour and well known to us. Should we tell or just keep quiet? What's the professional thing to do?

Replies (28)

Please login or register to join the discussion.

avatar
By memyself-eye
16th Aug 2013 12:13

keep quiet

It's up to the new guy to enforce his own payment terms - he might be happy waiting 15 weeks if the account is a good one - it's not as though you are passing on a bad debt.

Thanks (0)
avatar
By Jekyll and Hyde
16th Aug 2013 12:27

isn't slow payment a commercial reason....
... Not a Professional reason.

Afterall, some business models work well simply because they pay slowly and collect quickly and hence generate working capital to finance the business.

Thanks (0)
avatar
By BKD
16th Aug 2013 12:52

Has the client ...

... given you full authority to talk to the new agent? If he has, then to put your mind at ease, just pick up the phone and speak to the new agent about your concerns.

Our 'clearance' letters include a request for all information that could be relevant to our decision whether or not to accept appointment, it is not restricted to 'professional' reasons. I would welcome the advice of a previous agent advising me - off the record or otherwise - that a potential client is a debt risk (though at the same time taking any such advice with a large pinch of salt).

Thanks (0)
Replying to thevaliant:
avatar
By B Roberts
16th Aug 2013 15:06

?

BKD wrote:

I would welcome the advice of a previous agent advising me - off the record or otherwise - that a potential client is a debt risk (though at the same time taking any such advice with a large pinch of salt).

A slow payer and a potential bad debt are not necessarily the same.

Also, why would you welcome advice that you would take "with a large pinch of salt" ?

Thanks (1)
Replying to Mr_awol:
Quack
By Constantly Confused
16th Aug 2013 16:57

B Roberts

B Roberts wrote:

BKD wrote:

I would welcome the advice of a previous agent advising me - off the record or otherwise - that a potential client is a debt risk (though at the same time taking any such advice with a large pinch of salt).

A slow payer and a potential bad debt are not necessarily the same.

Also, why would you welcome advice that you would take "with a large pinch of salt" ?

Surely it is better to hear something that you can then choose to accept or disregard, rather than never hearing about it at all? 

Thanks (1)
Teignmouth
By Paul Scholes
16th Aug 2013 13:56

Agree with BKD

The request doesn't say any other "professional" reason why I should not accept appointment.

My mentor, way back, used to parcel up his files and send them to the new accountant!  Those were in the days of trust and natural professionalism, ie the sort of attributes that didn't need to be regulated.

I've always passed on anything that I would want to know when accepting a new client, including emails & notes about problems in the books, fees or relationship as a whole.

And if it causes the client grief, so be it.

Thanks (0)
avatar
By Jekyll and Hyde
16th Aug 2013 14:55

in the past when incoming accounts asked for clearance...
... I always stated there were no professional reason why they should not act.

It was up to them to form a commercial reason whether they wanted to act for this client. The mere fact they were leaving would highlight a commercial reason of some sort. Afterall the incoming accountant can do credit checks on their potential new customer.

Ask yourself a question. Do you feel that you have a good reputation in your area? If so that reputation will already have been formed amonst other accountants in you area. The mere fact you ex client has left you will either say something about that client OR indeed yourself. I'm guessing the former in which case the incoming accountant has the chance to do research on their competitors to establish the good and poor practices.

hence my.point why would i want to give my competitors any useful commercial information?

Thanks (0)
avatar
By BKD
16th Aug 2013 15:07

Key words

"in the past"

We no longer give (or ask for) reasons - professional or otherwise - why one should not act. We simply ask for any information of which we should be aware in deciding to act or not. Divulging information about payment history is, I suggest, down to nothing more than the conscience of the outgoing agent.

As a professional practice, we would never consider withholding information about a client's payment history simply because to divulge it might provide competitors with "useful commercial" information. Treat others as you would have them treat you. Having said that, we rarely tell a new agent that we have had problems with payment - but will certainly let them know if there are long-outstanding fees.

Thanks (1)
avatar
By Jekyll and Hyde
16th Aug 2013 17:31

Change of wording, same implications!

Although I accept that your wording is more pleasant, it is the same. The simple facts are that I am governed by the ACCA's 2013 rule book, when it comes to professional appointments. I therefore refer you to section 210 of the rulebook. It is the incoming accountants responsibility to ensure they undertake adequate procedures to safeguard them with that appointment. It is not the outgoing accountants responsibility. My understanding is it is the responsibility of the outgoing accountant is to report to the incoming accounts any professional reasons (or other) for not accepting the appointment. Clearly the OP tried to change the payment terms of the customer and the customer has gone elsewhere. The question was should the op include this within the professional clearance letter and my answer is still no. There is no bad debt and no fees owing. Therefore if the OP is going to highlight one aspect, that relates to them only, they perhaps have a duty to provide full information to the incoming accountant on all aspects of the clients financial affairs. Again as an unprofessional accountant I always undertook a complete review of any client I took on, to the extent if they did not provide me with information that I wanted to see or did not answer my questions I would turn them away. As an unprofessional accountant I didn't have many clients leave me and I didn't have many slow paying clients. That is perhaps because I communicated with the clients and provided high quality work for those clients. So I am very sorry for stating "in the past", because it was a long time ago that I lost a client to another in coming accountant. As for my views on competitors? I've seen a lot of professional practices treat clients in very unprofessional ways, and then those professional practices wonder why clients come to unprofessional practices like mine and get a far better service and pay a lot quicker! Again to answer the OP question a credit check and review of the creditor days on the accounts is a good way for the incoming accountant to check the payment terms of the client, but if you decide to put it took 15 weeks to pay me, do make sure that you also put down the average creditor days, so the incoming accountant can decide whether this is part of a reason not to act or just a disgruntle supplier. After all no mention of bad debt just a slow paying, complete paying client.

 

 

 

Thanks (0)
avatar
By Jekyll and Hyde
16th Aug 2013 17:54

or to put my point in another way
Whilst deciding to continue to act for the client this year, as part of their annual assessment, did the op consider terminating their engagement with the client on the basis that he paid his bill after 15 weeks? Or did they simply try and change their commercial payment terms to seek earlier payment.

If they considered terrminating the engagement with the client, or indeed actually terminated the engagement, then i feel that they may well have a reason why the incoming accountant should consider declining appointment.

If they were happy to continue with the appointment, but on different commercial terms, then i do not feel that this is necessary to inform the incoming accountant. Aftefall the incoming accountant, if professional will have highlighted to the client the terms of business as part of their introduction meeting with that client.

Thanks (0)
avatar
By Old Greying Accountant
16th Aug 2013 17:57

I ask this ...

"Please also confirm, or advise otherwise, that there is no history of dispute as regards your fees and that all such fees have been paid reasonably within your credit limits over the period during which you have acted."

The client has gone, can't be doing with this small minded "competitive" edge" malarcky - pass the paperwork over as quickly and painlessly as possible. There are enough clients out there for everyone, if you don't get your share it is down to you.

Any sensible accountant will get at least 50% up front for a new client so you will work out if they are a bad risk before you have lost any money. 

Thanks (0)
By ShirleyM
16th Aug 2013 18:36

Has anyone ever had a previous accountant give ....

... a professional reason for you not to accept the appointment?

I always ask if there is one, but have never been given one.

Thanks (0)
avatar
By BKD
16th Aug 2013 19:14

J&H

It's not just about complying with the rules and regulations of one's regulatory body. It's about professional courtesy to other professionals. Unless I suspect that another accountant has been particularly underhand in winning clients from us (such occurences are rare and tend to happen with unregulated accountants) most clients that choose to leave us go with our blessing. There are plenty more where they came from, often from the same firms to which our lost clients have gone. We tend to find that we all exchange information freely, which seems to suit everyone involved. Perhaps it's different in other parts of the country and/or with certain practices?

I don't know much about the ACCA regs, but as far as I'm concerned, the CIOT wording (my emphasis) - "When the client’s permission has been received, he should disclose to the prospective new adviser, either orally or in writing, all information which, in his opinion and based on his knowledge of the client and his affairs, may be needed to enable that adviser to decide whether or not to accept the appointment" pretty much covers my points. In particular, the request is for relevant information, not reasons. There is an important distinction - as you point out, it is not the outgoing agent's responsibility to make up the new agent's mind for him (which is what the outdated request for reasons would imply). But you still have to provide whatever information you think is needed by the new agent. If you don't think late payment of fees is an issue, that is your call. As indicated above, simply put yourself on the other side and ask yourself what information you would like about the prospective client.

Thanks (0)
avatar
By Jekyll and Hyde
16th Aug 2013 19:23

i am simply answering the op question
I do not feel that this item is one that is designed for such a letter.

I have come acrross too many clients that have been handles by too many professional accountants. I have also seen too many employees bullied by those so called professional accountany firms.

The question was should they disclose that the client is a slow payer? And my view is no. So, for me as a person, I have always given 100% to what I do. I have undertaken greater due diliegence than most. I have decided to decline appointments more than most. I am simply stating again, it is not my resposibilty or indeed my duty of care to the client, to tell an incoming axcountant about the clients commercial payment terms. They should exsrcise the same due diligebce as me. If they did perhaps the rouge clients (and their accountants) would have nowhere to hide.

The problem i have is that it would appear to some reading this thread that i may not be as professional as others. Perhaps the incoming accountants shouls exercise more due diligence before accepting appointment. In this case they are neighbours so should have a good idea if the op is rouge, unprofessional or professional. As for being in a professiknal community. What restrictive covenents do these so called professional practices now a days impose on their hard working staff.

Oh and i have seen far more underhanded and unprodessiknal practices coming from longstanding traditional practices than from unregulated practices. One example is buying a practice, doubling client fees without advicing them and then sueing for the increased unsolicited fees. I don't see that as being very professional. But i am now going off piste here.

My point is that slow paying is a commercial issue and not one dor such a letter. As for professional courtesy, i feel that should also be extended to the outgoing client not to try and create a negative relationship with the incoming axcountant before they had formed their own bond. Is that fair if the only reason to give the incoming accountant doubt is that the client pays after 15 weeks and we tried to agree better terms but the client has now gone else where.

I accept that a lot of accountants don't share my views but then i would not tKe on a client if i was not aware of the commercial risks. I also have the view of not overcharging, only billing for work that has been agreed, comlplete communication with client and doing the right job for that client. There are a lot of regulated and unregulated practices in every part of the country that puts their clients care last on their priority list and then wonders why clients leave and are slow payers.

Thanks (0)
Replying to andy.partridge:
avatar
By BKD
16th Aug 2013 20:59

Agreed

Jekyll and Hyde wrote:
I do not feel that this item is one that is designed for such a letter.

Which is why I suggested picking up the phone (and emphasising the orally part of CIOT's guidance). In my view, this particular issue boils down to the relationship that you have with the new agent and/or client. But those rules have no regard to keeping the ex-client happy or affecting his relationship with the new agent. The guidance is clear - and at risk of repeating myself you provide what information that you think is relevant to the new agent's decision. If you don't think the client's payment history is relevant, that is your call. But it will depend on the actual circumstances, and I therefore don't think it is possible to advise another accountant what they should do without full knowledge of the facts.

Thanks (0)
avatar
By Jekyll and Hyde
16th Aug 2013 20:37

in fear of keeping this argument alive for too much longer
And i am not entirely in complete disagreement and certainly do not wish to make tgis too much of a tit[***] for tat bdtween us.

If the op is going to give full accurae information for me to rely on i would also want details of their credit terms, stats on their complete clientbase debtor days average and by how much this 15 weeks falls outside their acceptance parameters. Because simply saying the client pays after 15 weeks to the op doesn't give me enough information to determine whether there was an issue for me to act for this client or whether it was simply poor credit control systems of the op, which resulted in every client paying beyond the op's credit terms.

However i do agree with you in that if the op and his neighbour had a very good working/professional relationship then my view is that IF the op considered their were any financial information which could put the client' ability to meet the incoming accountants terms then perhaps a quick chat on the non formal concerns to the incoming accountant would be pleasently received.

On a final note, it is carnival night here in Dawlishand it has now got near us so i will sadly have to leave it for tonight.

This thing i like about aweb, is that were are a community with different views and opinions on a wide range of subjects and from my point the vast majority of people i havecome accross try and do the best job they can. Hopeflly i can resist the urge to check aweb and enjoy the carnival with my family.

Thanks (0)
avatar
By ver1tate
16th Aug 2013 20:51

jekyll and hyde

The simple facts are that I am governed by the ACCA's 2013 rule book, when it comes to professional appointments. I therefore refer you to section 210 of the rulebook.

It is indeed a pleasure to meet one who does obey the rule book

Thanks (0)
avatar
By morgani
16th Aug 2013 21:14

I don't think payment history is relevant and the incoming accountant can do their own research.

I have given an informal reason once. We asked a client to find a new accountant as they expected us to lie on a mortgage application for them. When we refused they said we had acted unprofessionally. The client also fell out with the bookkeeper for the same reason. The bookkeeping was a little complex with lots of re-charged expenses, net offs etc that they wouldn't cope with. The incoming accountant was someone I knew well so simply picked the phone up and had a chat. They decided not to take it on and I have issued disengagement so believe they currently have no accountant.

Thanks (0)
avatar
By ver1tate
17th Aug 2013 00:29

payment history

Most letters I receive or send state 'any reason professional or otherwise.' I feel if you did not inform an incoming accountant of slow payment and let him or her make a decision based on their ability to handle this, then that would be unprofessional. It may be a fledgling self employed accountant who was unable to cope with delayed payment.

Thanks (0)
avatar
By Jekyll and Hyde
17th Aug 2013 08:05

i've never receives a letter that stated....
... Client paid their invoices within 30 days. Surely if stating the payment terms of the client to an incoming accountant is professional when it is merely slow paying, it must surely be professional to state the payment terms of clents no matter the length of time a client paid the outgoing accountant.

So unless the op informs all incoming accountants of the payment terms every time, including informing the incoming accountant.when the client is an extremely good payer, i do not how payment terms can form an in that letter. Afterall i would find it vey useful as an incoming accountant that a potential client paid on return of invoice, but have never received such vital handover information.

Having said that i have never received such vital transfer information like details of full systems internal controls and details of key personel, timings of when the accounts were delivered to the accountants, the standard of the records kept. Allvital information that could assist me in assessing whethwr i should take on a prospect client. Once again i always thought me undertaking this research on the prospective client and accepted a lack of supply was the professional thing to do. Just like not stating the client pays within 30 days.

I know for future to ask for, and expect all this information, to be readily given upon request because afterall it is now the professional thing to do. Ie. Provide All information necessary to make a decision to appoint or not. Am i reading this correctly?

Or is it professionap only to writw to the incoming accountant when it is potentally of negative impact. Surely it must be ALL or nothing. So my thoughts on the op's question, if you are going to discuss payment terms of an outgoing client in such a letter, then it should be part of every letter to incoming accountants as standard. At this point consider what other information would also be relevant to the incoming accountants engagement and supply all necessary supporting information. Oh, as this could take a couple of hours to dictate, please do not sent the ex-client an unsolicited invoice for the time spent doing this as it does cause us incoming accountants problems when we tell the client not to.pay it.

And if anyone is thinking that i do not supply tb, detailed breakdown and schedules of balance.sheet items and key p & l items, last years accounts etc they would be mistaken. I just haven't charged the client like other professional practices do.

Thanks (0)
Replying to PhilGP:
avatar
By BKD
17th Aug 2013 09:40

Negative

Jekyll and Hyde wrote:
. Or is it professionap only to writw to the incoming accountant when it is potentally of negative impact.

Yes. Because that is the nature of the request - there is still an element of the old letters where one asked for reasons why appointment should not be accepted, one did not ask if there were reasons why one should accept appointment. The difference is that the onus is now on the incoming, not the outgoing, agent to decide whether the information is sufficient reason.

In the absence of information to the contrary, the presumption is that there is nothing untoward. The whole point of the letter is to bring to the attention of the new agent specific factors that might affect his decision, again the presumption that if everything is 'normal' he would accept appointment. Being told that a client always paid his fees on time, and had sparkling records wouldn't make me any more willing to accept. But being told that he is habitually late in paying, records are a mess etc may well make me think twice.

Having said that, if the client is an A++ client, nothing wrong in picking up the phone and telling the new agent - I just wouldn't include it in a letter.

Thanks (0)
avatar
By Jekyll and Hyde
17th Aug 2013 08:53

if we are helping the fledging accountant...
...... Then pethaps the other vital information is equally needed. Client brings records in december, and constantly has missing information. Client talks to a lot of people down the pub about advice. Client accounts take the junuor x hours, manager y hours and the patner z hours to complete each year. We are not sure by how much you have under quotes on our fees, but wanted to inform you on these vital information to ensure that you had the capability and struture to adequately perform the job without causing any unnessary strain on your fledging resourses.

Might sound harsh here, but i have never seen any such vital information that would actually genuine aid a decision whether i would want to act client or not. For me this information is far more useful information to persuade or otherwise in accepting an appointment with the quote i had given client. So again back to op, are they intending to supply all such necessary OTHER information that would truely aid the incoming accountant or are they going to just limit it to payment of fees took 15 weeks.

By the way does Rolls Royce still apy their suppliers on 100 days? I also now too many small construction businesses that as standard pay their subcobtractors on 90 days. Just one aspect of their business model.

I would genuine appreciate if were got to a position in this country where accountants working and other papers were all transferred with the client. Therefore giving the incoming accountant the complete history of that client or a position where the

Thanks (0)
avatar
By Jekyll and Hyde
17th Aug 2013 09:04

sorry bad use if phone this morning
Incoming accountant had the right to inspect the client files of the outgoing accountant. Such rights would enable the incoming accountant make a complete decision on the cclient and if necessary on the actual.competence of the outgoing accountant. But we are not at that point.

I hear a lot about the professional thing! Highlighting that any other view MUST be unprofessional. I just don't agree. Dosn't make me less professional or my views less professional! There are a lot of things that iconsider arr right and wrong, not professional or unprofessional. And ver1tate thhere are far more ICAEW and CIOT membets that flaut the law than ACCA members but you seem to only have a grudge with ACCA. Just look at recent newd srction on aweb. It is all sectors.of our professional practices that do it wrong!

Thanks (0)
avatar
By arcon5
17th Aug 2013 09:07

Isn't his payment history with you confidential? Surely his accounting affairs and independent to his contract for services with you? The fact of the matter is he engaged in your services, you've been paid in full and now he is moving on - you will just look bitter

Thanks (1)
avatar
By Jekyll and Hyde
17th Aug 2013 09:24

arcon5
Reading some posts, thats an unprofessional way of looking at it. But i agree with you.

Thanks (0)
avatar
By Jekyll and Hyde
17th Aug 2013 11:23

perhaps i could tip my argunent on its head.
What do others think are vital information that must be past to incoming accountants as a matter of rule:

1) Payment terms actual correspondance received/sent in connection to late payments. In fact my credit terms were always 14 days from date of invoice so guessing most clienst would fail to meet my credit terms, however there were no clients that i would not have acted for the following year! Like i said previously the op was still happy to act abide different payment terms. They did not disengage with the client. I indeed agreed with a couple of very good clients to pay 3 years in a row over 4 months. The second year i actually recomended doing so before starting thw job. This created very good goodwill with the clients and ensurd that i kept a couple.of very good long term clients. I could imagine in their hour of need how insulted they would have been had i demanded 50% up front and 50% on completion. I suspose the difference is that i was happy to communicate and look at those clients in a different mannorism.

2) When the records were deliveted and when they were started and finalised.

3) what records made up the client book keeping and hiw king it took to do the job.

4) what risk bracket the client was in. Ie HMRC view of high, medium or low.

On the assumption you only report anything that is abnormal, anything normal is expected and not needed. Then i do not consider that a slow payer is abnormal and necessary a bad thing. Whilst typing i have just recalled a situation where i agreed a 6 month payment delay. Client pub, not performing too well. I usually got his books end of April and he usually paid after about 60 days. In may when i phoned and asked where his records were his reactions were that as he wont be able to pay until nivember he wasnt giing to give me accounts until them. My response wad thanks so i have a fee days in may not doing anything, but will now be oversyretched in novembrr. I told him not to be silly and let me do the accountd in may and he can pay me in november. I kept av very good long term client because.i chose to.extend my payment terms. All because i spoke with him and knew he wasn't a bad debt risk, i just understood his short term issues. The following year he spoke to me in march and tols me he would pay my bills on return of invoice because i had been very very fair fair with him.

My points are just telling an incoming accountant on aspect can axtually be more misleading than not mentioning it at all. So i will bow down and admit that providing the incoming accountant with a lot more information would be beneficial.to.them, but then this needs to be more than just limiting it to late payment of fees. Perhaps a list of useful information should be decided and put into all letters to incoming accountants. I have highlightes some in previoua posts, and hoping tgat we will receive such information from now on.

Perhaps my problem is i just do not necedsary see a bad thing in a slowpaying client. Again i'm guessing it is because i talk to the incoming client and adk lotd of questions and form my own opinion on the risk category of that client and then decided whether that client fits my client profile. That includes reviewing and considering what accountant that ckient is coming from and the reasons they say they are leaving those accountants. If i share the same or similar views to the client in those accountants there will be some credability in what cluent is saying. If i do nit share those views on that accountant then there is a good chanc i will form a negative view of that client and therefore i would consider risk adverse ways of engaging in that client. Therefore if this client came to me and gave the reason that the op insulted them on the payment terms and that is the only reason they are leaving, i would consider stating my terms to this client. If this client stated other reasons, op did not give advic, always slow at doing work, talked down to client or just a dam professional practice, i would compare this with my knowledge of thosr accountants and probably come up with the conclusion that the client was in.someway not giving me the whole truth. I would then consider whether i wanted to act for this cliebt or not. Simply being told client consistenly and completely paid late to the old accountant would not altrr my my engagement decision one bit.

Therefore concluding that if it is not going to impact my decision one bit i do not need such information, however as it appears to be necessary or even helpful to some other accountants in making their decision pehaps a list of all other information would also be helpful.

Oh again, i rcall my first client i took on and i tried to enforce my 14 days terms. They left sharply afterwards and i learned a valuable lessions abour mutual business respect. I thinking now i should have informed the incoming accountantd that client had failef to meet my payment terms and as such this might present the incoming accountant with undue risk to them as well.

Bkd - i actually like and respect your approach as a whole. There are indeed acountants that i respect and some that i simply so not. If a client came from one that i respected then the chances are i would not be taking on that client, unless it is because the ckient has a genuine reason and can demostrate that to me. One example is a larger very good local firm of accountants that i respect. If it is fee related, then chances are i can compete. If it is performance related then i think the clienr may be high risk. If it is personality related, it will depend on the partnet and manager involved.

Thanks (0)
avatar
By Jekyll and Hyde
17th Aug 2013 11:32

sorry for constant typing errors
I am always typing on phone. It is very difficult review my typing before sending and i clearly type too quickly for my fingers and keypad. Just reading back on some of my posts and the typos are plentiful. Sorry

Thanks (0)
avatar
By memyself-eye
17th Aug 2013 21:09

how did this get

so tortuous?              Jesus H Christ.....

Thanks (0)
Share this content