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Practice Tips - I account, therefore I bill

15th Jul 2005
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It always interests me when people discuss problems with late payment of invoices, as happened recently on AccountingWEB. Of course this is a problem for any business. It is a particular problem for practicing accountants. But important as it is, late payment is only one small element of the issue of managing client payments in any business, and especially for accountants.

I break the problem into four stages:

1) getting the terms right;
2) getting the admin right;
3) getting the bills out;
4) getting the cash in.

Quite rightly, the issue of late payment is the last of these because it probably won't be a problem if the other three are handled properly.

Get the message across
IT sounds absurd, but the real problem for most accountants is getting the message across to the client that they expect to be paid. Time after time when accountants gather together you’ll hear it said "they think we're a charity who'll work for nothing" or "you know how it is, our bills are always at the bottom of the pile". And both comments are 100% right, but for one simple reason; the accountant allowed the client to think this behaviour acceptable. So the most important message is that this is not the case.

The client has to believe:
1) that the accountant charges fairly for what they do, and
2) has to be paid promptly for it.

This message has to be put out:
1) in the firm’s marketing literature, so the client arrives expecting to pay;
2) at the first meeting;
3) in the follow up to that meeting;
4) in the engagement letter;
5) whenever a new piece of work is accepted;
6) when a bill is sent out.

Believing in the message
This is no easy task. It means putting the uncomfortable fact that you will want to be paid in front of the client, often. This, of course, is why the issue is ducked. But to duck it is to undermine your own chance of having a successful business.

All businesses, whatever they are, need cash flow to survive, accountancy practices included. It’s just harder in the case of the smaller accountancy practice because:
1) the client presumes the partner does the work
2) the partner wants to be seen as the client’s friend and confidante
3) the partner raises the bill
4) the partner asks for payment.

This can’t hope to succeed if the partner does not believe in the message that payment is essential. Nor can it easily succeed unless as many systems as possible are introduced to support that self belief.

In the next installment I’ll consider the practicalities of getting the message in front of the client.

Richard Murphy
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. A collection of previous articles by Richard on practice management themes is available in Practice Management Zone


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