Turn Bad Clients to Good, or Fire Them

Source: Accounting Office Management & Administration Report

Bad clients drain resources, create discomfort, reduce cash flow, and distract the firm from its goals.

The principal remedy is to reject them before they become clients. Set up criteria for client acceptance. Ask these questions:

• What are the client’s short- and long-term goals? What are its strategies for reaching them? Are there any implicit problems with these? Can your firm help the client achieve its goals?
• Is it in an industry you already serve? Can it successfully compete? Are there significant trends in the industry such as consolidation, technological change, etc.?
• Is the company going through changes with which you have helped other clients?
• What will the client expect from you in terms of services and fees? Is it open to value billings?
• Why is the company changing to a new CPA firm? How will this information impact your relationship?

Then apply these criteria to clients:

• Do you like them?
• Do they fit your demographic and industry criteria?
• Categorize them:
  • A clients are well established and use many of your services.
  • B clients have potential future needs because they are growing.
  • C clients may use compliance services and will never use additional services, but they pay timely.
  • F clients require excessive attention, may be abusive, do not pay in a timely manner, and do not pay for value.

Try to move clients to a higher level. Raise fees in some cases, especially for F clients. Use the following initiatives:

• Charge premium fees for special service such as late tax return filings.
• Offer discounts for clients who fill out tax preparation forms or who help with audits.
• Late payers may need help in streamlining their office procedures. You may be able to offer such help.
• Clients probably understand the pressure you have from staff shortages—use this to get them to improve their behavior. Tell good clients how grateful you are for their good behavior.

When terminating a client, write a letter detailing the reasons. The letter can be delivered at a face-to-face meeting. Offer referrals to other firms you think might serve the client better.

Also see Setting Standards for Client Acceptance in CPA Leadership Report, July 2005 and How to Fire Clients  in CPA Leadership Report, September 2006.

From Accounting Office Management & Administration Report, November 2007, p. 1. For subscription information contact Institute of Management & Administration, Inc., 3 Park Avenue, 30th Floor, New York, NY 10016-5902. One-year subscription $399. 212-244-0360, [email protected]. For the complete article, click here.