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Practice Tip - Two weeks to a new tax year

23rd Mar 2005
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There are less than two weeks left before the new tax year. But this is not a column on tax. This is a column on practice management, but in most firms the two issues are inextricably linked. I happen to think that is even more the case now we have practice assurance in place for many more firms.

The new tax year is a perfect opportunity to do three things:

1. to cull clients
2. to tell clients what you expect of them in the coming tax season;
3. to remind them of your terms of engagement.

Since I've said lots about culling clients of late I'll say no more now. But, unless you're a most unusual practice you will still have plenty of clients left after a cull. Based on experience there are only two ways in which the relationships you have with the clients you want can work:

1. they are in charge of the relationship, or;
2. you are in charge of the relationship.

Before I am accused, yet again, of stating the obvious let me acknowledge that I am, but as is so often the case what might be obvious is not readily apparent to many people. In this case, it seems based on my experience that many people are simply not aware that they have the opportunity to be in charge of the relationships they have with their clients. These all too often comments suggest the existence of practices where the client has the upper hand:

1. I can never go on holiday, someone always needs me;
2. the client send me the books and records on 27 January but we still got the tax return in on time.

Frankly, in both cases the accountant can have little self respect, and this is not good for their own sense of self worth, their mental and physical health, or for their long term prospects of being able to handle the stresses of this job.

So, what can be done about this? There are two things. The first is to send out letters asking for information to prepare tax returns that make clear that:

1. if the information is not received by a deadline (which should never be later than 31 October in my opinion) then no liability is accepted for late submission of tax returns and all that follows on from it;
2. that a premium rate will be charged for work undertaken on all books and records received after that deadline. I suggest the premium be at least 25%. A further uplift to a 50% excess fee should be charged for work received in January. In both cases the excess would, I think reasonably, be dependent upon you having finished the work in time for the tax return to be submitted ' but remember to make sure to say that if the client then fails to do their bit on time that's not your fault.

This is straightforward commercial practice. It limits your risk and says if the client wants to pass their risk and stress onto you, they are going to pay for it. That's not unprofessional. In fact, it's exactly the opposite, and that's especially the case if you make some effort to point out all the advantages of getting tax returns prepared and submitted quickly.

The second thing to do is send out new engagement letters that reinforce this point and to let you cull clients who do not play the game your way more easily. There will never be a better time to do it than the start of the year. But make sure you include a clause that says this:

'We would ask you to agree these terms by signing and returning the enclosed duplicate copy of this letter. If however you do not do this but do nonetheless ask us to continue supplying you with services at any time more than thirty days after this letter has been issued to you the terms included in this letter shall be assumed to apply to all services supplied after that date.'

That way you get around the inevitable problem that some clients just will not sign such letters.

And if you do both these things, and stick to them, you will begin to be in charge of your client relationships, which is a great feeling.

Richard Murphy
[email protected]
AccountingWEB contributing editor Richard Murphy is a sole practitioner chartered accountant but was previously senior partner of a firm for 11 years. He has also been chairman, chief executive or finance director of 10 SMEs. In addition to accounting, writing and lecturing Richard develops and markets software tools and guides to help accountants in practice systematise their operations.


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