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Self assessment: Getting your clients organised

5th Sep 2005
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For the practicing accountant the deadlines of self assessment are a nightmare; the very thought of January is enough to get you depressed about any New Year. For most accountants at least 25% of all tax returns will not only go in during that one month; many will also be started and finished in the same period. And there's no fun whatsoever in that. Worse still, every practicing accountant is exposed to substantial risk as a result. Anyone who has to work quickly and under pressure is more likely to make a mistake than a person with more time for reflection, and as importantly, checking what they have done.

So what can be done to cure this nightmare? Richard Murphy has a few practical suggestions.

Say what will happen at the start of the year
In my opinion every client of a firm has to get a letter (and if need be a new engagement letter) telling them what information is needed to prepare their accounts and their tax return as soon as possible after 6 April each year. That means, in my opinion on 6 April unless it falls on a Saturday or Sunday. The reasons are simple:
1. this sets out your terms for doing the work and should put you in control of the process;
2. it lets you say if the client has failed to meet your terms, so justifying an increased fee;
3. it lets you get rid of the clients who fail to meet your needs during the course of the year;
4. it minimises your risk if anything goes wrong.

The letter should cover:
1. what you want;
2. when you want it;
3. how you expect the client to react to your requests for information;
4. what will happen if they don't do these things, including when they will become liable for penalties for late submission and what additional fees they will pay if they are late;
5. all the usual engagement terms if you re-issue your engagement letter each year (as seems wise given the frequent changes in taxation law and systems).

Make them pay
There are up to four ways in which clients can pay for being laggards:

1. Make clear that if they supply their information to you after a certain date (I've always used 31st October) then they are liable for any tax penalties that arise from late submission of the tax return whatever happens. I recall that when self assessment came in my firm lost about 5 clients for insisting on adding this clause to client engagement letters, but they were all people who had always been late with everything anyway so they fell into the group of clients I call dross (see more below) and so we were quite happy to lose them. I would stress that this provision gives you no reason to be slack, and the number of times I have had to rely on it is tiny, but it's still worth making the point.
2. Make clients who submit their information between 1 November and 15 December pay an additional 10% fee. Show it as such on the fee note. It's a premium to cover your additional staff and admin costs in this period when pressure is rising. Few will argue. They have, after all, had seven months to get the information in to you by the time the additional fee begins to be incurred.
3. Make clients who submit their information between 16 December and 15 January pay an additional 20% fee. They are imposing more stress on the system.
4. Make clear to clients who submit information after 15 January that you will charge an additional 30% fee if they want the return in by the end of the month or 20% and they will be liable for the penalty if they want it in during February.

This might seem tough, but January is hell, so you might as well make profit from those who make it so. Most will accept this as the price of their own tardiness. The loss of the few who argue will be more than made up by the additional fees from the rest. It's worth the effort.

Chase them
There's no excuse for not reminding clients of deadlines, especially in the days of email (and if 95% of your clients have not got email now what business are they in and what chance have you got of making any money out of them?).

I don't chase until late June. Then I do a gentle reminder to say that it would really help me to have information in if they want me to check the second instalment on account for the year. I tend to stress there may be a cash flow advantage in doing this.

Another reminder can be sent in late July. I've usually done this for work chasing purposes because the summer months tend, despite the prevalence of holidays, to be short on workflow. The end September deadline can be used as an excuse at this time.

The beginning of September is the time for the next chaser. This is used to remind of the end of October deadline and the increased fees for information received after that date.

My final reminder is at the beginning of November. This says the extra fee regime is in operation. And it also says this is the last reminder they'll get ' because it's heads down to get the job done from here on in. Which is true.

Mean what you say
If you say you'll bill more, do. If you say they'll pay the penalties, make sure they do. If they argue, see the next section.

Get rid of the laggards
The laggards will almost certainly fall into several of the following groups:

1. they've sent their records in during January for the last 8 years;
2. they have bad books and records;
3. they're never grateful;
4. they always pay late.

However nice these people might be they fall into that category of clients that I call dross. And there's only one thing to do with them: sack them. Indeed, if you can do so with an easy conscience, do so now during September when they've still got time to go elsewhere and that way you've got some capacity to take on some more interesting work during the heat of the season which might otherwise not be possible.

Is this too tough?
A lot of people seem to think I'm tough on clients. They're right. Clients might provide my income, but they are not my source of friendships. I have a strictly commercial (even if professional) relationship with them and these things work best when conducted within clear frameworks. If those are not applied clients are like children; they will test your limits to the extreme to see what they can get away with, almost for the fun of doing so. I'm not willing to tolerate that. This is why I treat clients as I do. For those who accept these rules of engagement (for that is what they are) this works well. For the rest, there's always someone else who seems to be willing to take on bad work. They're welcome to it.

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. Richard's previous articles on practice management themes are available in Practice Tips - The Richard Murphy collection

Replies (8)

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By Neville Ford
13th Sep 2005 14:11

Confused by all the trauma.
I'm a little confused why the SA deadline is such a trauma.

I could understand it if you have to prepare trading accounts and a tax return - due to the time required for accounts production & queries, delay in client signature, return preparation & queries, delay in client signature, filing. However if the accounts are prepared as soon as possible after the year-end the latest set of accounts that will be included in a 2005 Return ended 5 April 2005 (accept proviso re: new businesses). If you are still trying to chase books for 5 April year-ends in January the clients deserves everything they get, so why are you worried.

Preparing the tax returns for the majority of small clients is usually straight forwards, if you get the information, which I accept is the crux of the matter.

We usually write to clients in May/June outlining what information we require, when it is required and the consequences for late submission. After August we chase quite hard with regular reminders. We charge a 50% surcharge for December completion and 100% surcharge for January completion.

Not many take us up on the option! Consequently we do not generally have a problem in January. A couple of years ago I went to Australia for three weeks over Xmas & New Year and we are planning the same next year. BUT, I am a sole practitioner, so I have the luxury of having only myself to please, I do not have to feed a large overhead generating machine.

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By AnonymousUser
09th Sep 2005 19:48

eliminate the pile up of work
I agree withwhat's been said. This year, I have started chasing clients much earlier.

There is an additional aproach that I am also trying.

It seems to me that the workload problem partly arises because one has to move from a turnround of say 30+ days going into the final part of the tax return season, to a turnround by 31 Jan of say, 7 days. This means an extra workload simply to eat into this outstanding pile of "work in/not yet started".

My aim for the 3 month period Sept-Nov is to reduce this in-tray to as near zero as I can. In this way, I spread some of the workload from Dec-Jan to Sep-Nov. In other words, some small amount of regular extra working earlier on should result in less work in Dec-Jan.

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By markgosling
07th Sep 2005 12:02

Not sure about 20% surcharge for filling in February
I agree with most of what you say, and have been considering the idea of surcharge for a couple of years.

I certainly agree that a client must be made responsible for paying any late filing penalties, if he is late in providing information. However I do not see how you can justify a surcharge if you leave their work until February, when the January rush is over.

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By AnonymousUser
07th Sep 2005 12:09

A sensible regime and it (mostly) works
I use a similar approach to Richard, but I only send targeted reminders at the times he mentions and I apply additional fees of 20% for information received after 30 November and 40% if received after 31 December. Previously I didn't separately disclose the additional charges. Last year they were itemised as a separate line on my invoices.

In most cases the additional charges were not great - the highest amount being about £150 and most significantly less. However, it seems to have had an impact.

This year, with only one exception, everyone who had a "surcharge" line on their invoice has already sent me their tax return information for 2004-05 whereas in previous years it tended to arrive in late December and January. I'm not convinced that these clients will do so in future years, but it has had the desired effect for this year at least.

Incidentally, one client for whom I usually submitted a return in January has already submitted the 2004-05 return. She commented that she was glad I had surcharged her last year. She sorted her papers out much earlier this year, it was much easier when everything was fresh in her mind and it hasn't been hanging over her ruining her free time.

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By AnonymousUser
07th Sep 2005 16:52

Try a different approach this year
There is no need to get depressed thinking about Janurary. Despite all the efforts made every year, undoubtedly there are clients every year who will send their books and records at the last minute. Charging premium rates may still not release the pressure on smaller practices.

An alternative approach to all this can be outsourcing work to someone like us at Techno Beavers, as we can give you that extra help when you need it most. Try us and this January you may be able to enjoy your new year in a more relaxed manner.

Hammad Farooqi
Techno Beavers Limited
email: [email protected]

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Dennis Howlett
By dahowlett
07th Sep 2005 17:50

Sack 'em.
I'm 100% with Richard on this.

I don't understand why there should be a debate about this. Surely what all practitioners want are high quality clients. This is a two way relationship. Sending stuff in right at the end is a sure sign there is no relationship because if they don't care enough about your need to plan then they don't care about their relationship with you. In my mind, I'd also be asking whether the client cares about themselves. If they don't, then any resultant inquiry from HMRC will be a time and cost nightmare.

I'd sack the client in the nicest possible way and hand them over to TechnoBeavers. Who knows, you could maybe offload a bunch of dross at a price (say 90% recurring fees - excellent deal!) and have funds left over to hire in top people who give top advice to top clients. A good use of resource I say.

You'll improve your reputation as a practitioner that cares about clients and who wants the best for them - and you.

My motto: "We're servants, not slaves - treat us as such or find another slave."

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By AnonymousUser
07th Sep 2005 20:25

Sack 'em - ??
In reality there are not many brave souls out there who would sack their clients for sending books late.

By the way Techno Bavers is not an accountancy practice and as such does not deal with clients directly.

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By User deleted
08th Sep 2005 17:27

Blue Chip On The Shoulder?
Really no fuss about this. In late then its unlikely to be filed on time if information is incomplete. Then its a premuim charge out rate at that time of the year as well.

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