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worst type of clients but stuck with

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Hi. Steady conclusion over the years that limited companies of turnover between say £50k-£150k pa requiring VAT, accounts, CT, payroll & autoenrolment (ie the full monty) are the worst type of clients, not just in terms of time and resources demand but also the least profitable as there is an awfully large volume of transactions and they are not willing to fork out to the accountant more than £1k-£1.5k per annum (sometimes because they simply cannot afford as they are basically making a living). Not sure how other firms handle this but yours truly is a small firm in terms of fees but with proper overheads and salaries and obviously we dont want to work for £10 or £20 per hour per annum on average (n matter how efficient you try to be) or ending up subsidising them from profitable clients. Seems that we have two options there: either get rid of them or keep them for cash flow until we dont need them. The problem is being a small firm we are trapped in a vicious circle as we would normally be the destination of those clients. Thanks.

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By SouthCoastAcc
14th Nov 2019 12:11

It's the "small" sole trader clients for me, always asking questions, records aren't well kept etc. I am in the process of bumping these fees up, if I lose a few or all I'm not that concerned to be honest. BTL landlords can be similar but it depends on the person.

I sort of agree with you the companies wanting the full monty but earning little, but I am strict with these fees and charge between £1k and £2.5k, I also find they ask fewer questions.

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By JDBENJAMIN
14th Nov 2019 12:17

I presume these fees are covering the direct costs but not their proportion of overheads. Only you can decide how long it is worthwhile doing that for, but my view is that you should charge more whatever happens. I work from home and always set my fees to recover £50 per hour minimum. I find such customers can be profitable if you grasp the nettle and insist on realistic fees. Some will walk, but most will remain. I tend to charge between £700 and £1500 for such clients, depending on complexity, and can make good money out of them, but being a home based sole practitioner I have minimal overheads.

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Replying to JDBENJAMIN:
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By darkmatter
14th Nov 2019 17:43

and you've probably got time for a social life ;) more power to you

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Locutus of Borg
By Locutus
14th Nov 2019 12:17

Your first step could be to simply get rid of the worst 10% or 20% of clients.

Then put your fees up a bit for the remaining 80% to 90% of clients.

Some of those 80% or 90% will be so fee resistant that they leave.

Depending upon how much you increase fees and how fee resistant your remaining clients are, there is a good chance your overall fee will be much the same as it is now, or even a little higher.

This will also free up more time for you to do more profitable things.

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By Red Leader
14th Nov 2019 12:27

I tend to do less of this work nowadays. However when I did, I used to introduce the client to a freelance bookkeeper to do the routine monthly work such as VAT returns, basic record-keeping. This leaves you to do the higher margin work.

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Replying to Red Leader:
A Putey FACA
By Arthur Putey
14th Nov 2019 16:57

Oddly perhaps, the biggest pains are the small companies who do have an independent bookkeepeer. The client expects the bookkeeper to deal with accounts but we invariably find they are not doing it properly, but it is not for us to retrain them. Twice recently we have had cases where a client has registered for VAT and Xero or whatever hasn't been set up properly. I suspect it is a consequence of cloud accounting, meaning there is less of a handoff between them and us. Thats not to say our experience is typical and there aren't lots of brilliant bookkeepers out there. Ironically though our usual approach to the OP's type of client is to automate them, which negates the need for a separate bookkeeper and makes them quite profitable.

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Replying to Arthur Putey:
By Red Leader
14th Nov 2019 17:14

Understood. The key is to know of decent b/ks that you can introduce to the client. Admittedly, they can be as rare as rocking horse s h 1 t, but one tries.

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By peterdell
14th Nov 2019 14:22

I agree entirely.

Try billing separately for VAT Returns use MTD as the excuse. This way you can up the fees on those clients.

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Replying to peterdell:
A Putey FACA
By Arthur Putey
14th Nov 2019 17:00

VAT MTD doesn't involve any more work, but I agree it can used for leverage. I was also shocked to discover how much extra work RTI and pension auto enrolrolment added to the payroll process, so we reviewed fees.

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Replying to Arthur Putey:
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By peterdell
15th Nov 2019 01:13

Of course it involves more work, because now you are forced to do the accounting reconciliations every quarter, rather than every year.

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Replying to peterdell:
By Charlie Carne
15th Nov 2019 13:35

Peter Dell - Are you suggesting that, prior to MTD, you didn't bother to check if the VAT was correct until the end of the year? If not, then what additional work is being done each quarter (once you've done the initial work of registering them for MTD and, perhaps, migrating their bookkeeping to MTD-compatible software)?

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Replying to charliecarne:
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By peterdell
15th Nov 2019 15:14

I forgot its the "look how good I am brigade on AWEB" there is definitely a type of person on AWEB they has some kind of social anxiety deficit that makes them crave approval from total strangers! LOOK HOW GOOD I AM.

Prior to MTD you could prepare the VAT Returns from sales and purchase invoices and rec it up the year end. If you saying no we all did that already you are one of those companies that grossly over charge their clients.

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By darkmatter
14th Nov 2019 17:40

if youre in a city its easier to flog a batch of clients , seems to be 1 x grf / at present ? I really sympathise , to me that sort of compliance work is not worth the effort

alternatively try and get them up to speed on doing their own compliance work -

1. payroll (never had a client who couldn't deal with moneysoft payroll after an hour of set up , with remote support). I no longer operate payrolls and saved huge overheads.

2. vat - well xls + bridging software is a dogs dinner if clients are not reasonably excel proficient), so hook up with cloud accounting supplier so you can give good backup

3. at the end of the year .. just sigh and tell them they've messed up and its going to cost a lot to sort it out

my experience is the more you do for clients the more they expect you to do , if they walk, youre better off without them

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Jennifer Adams
By Jennifer Adams
17th Nov 2019 10:15

Arthur is 100% correct. I'm fed up with hearing 'you dont have to do much... it all balances... Sage says so' such that I made it a rule that I do everything. I have a brilliant bookkeeper.

Client's bookkeepers always get it wrong and up to recently I spent hours teaching them but no more. I do everything or not at all. Clients think they can save money by doing it themselves and that they need to see how they are doing in ' real time' but with bank streaming that can be sorted (unless the client chooses any bank except Lloyds or Co op then the client has to be included).

If any client wants to be taught in bookkeeping there are always courses and other accountants.

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