Is It Time to Fire Your Clients?
Source: Journal of Accountancy
Author Amy Waldron recommends that CPA firms evaluate their clients annually to determine whether they're still a good fit and to identify and terminate any problem clients. Although firms are often reluctant to terminate a long-term relationship and give up the associated revenue, maintaining such a relationship can hurt the firm's profitability and increase the firm's litigation risk.
Common indicators of a problem client include:
- Nonpayment or consistently late payment of fees
- Frequent price or service complaints
- Disagreements or disputes over fees, aggressive tax positions, accounting treatments, or other issues
- Disputes among the client's partners or shareholders
- Difficulty obtaining, or consistent delays in receiving, requested information
- Patterns of failing to follow or ignoring advice
- Consistently negative reactions to suggested improvements
- Lack of management integrity
- Lack of internal controls
- High accounting and management turnover
- Poor treatment of CPA firm staff
- Poor treatment of the client's own accounting department or evidence that accounting oversight is not a priority
- Potential and actual conflicts of interest between the CPA and the client
Waldron offers guidance on terminating the relationship in a formal and effective manner.
For the complete article, read “Clients: The end is near.”
From Journal of Accountancy, American Institute of Certified Public Accountants, February 2013, http://www.journalofaccountancy.com/Issues/2013/Mar.