Art of Accounting: My wife wanted to call the gardener…

A couple of weeks ago my wife Ronnie told me she wanted some of our bushes and shrubs taken out and replaced. I thought they were fine and told her so and she gave me one of those looks…so I said what any good husband would say, “Go ahead and do whatever you want.”

The job was just completed and it looks great. I liked what we had, but Ronnie was right. They also pruned some overgrown bushes and trees that did not need to be replaced.

That got me thinking about client lists. There is a tendency to keep the clients we have, whether they are overgrown or not, or whether or not they still fit. People leading accounting practices, either as sole owners or partners in mega firms, need to periodically review their clients to determine if they are still appropriate for the firm. There are many factors to consider, both from the clients’ and the practice’s standpoints. Here are some things to reflect on:

Types of inappropriate clients

• Perpetual complainers;
• Very slow payers;
• Clients that continually try to bargain the fees down (note: fees and their collection should be a very big criterion for you);
• Clients that are not willing to permit reasonable increases intended to pass on increased costs;
• Stagnant or declining businesses;
• Fading leaders;
• Clients that are excessively demanding;
• Clients that do not do what they say they will do;
• Clients that never have their part of the work done timely or accurately;
• Clients that are litigious;
• Clients that do not appreciate the value you provide to them.

Clients that are not a good fit for your practice

You may not have sufficient expertise to service the client properly in these cases:

• Clients in industries that need increasingly specialized services that you are not willing to acquire knowledge in;
• Your cost structure for certain services makes your fees uncompetitive;
• You cannot replace a staff person you lost who was managing a segment of your practice and you do not feel you could continue the high level of service they require;
• You no longer want to perform financial statement audits;
• A partner is retiring and you do not have anyone to transition certain clients to (this could be the result of poor succession planning and, if you feel you might be in this position, you should start working on this now);
• A long-term staff person that refused to make anyone else aware of what services are provided to the clients he/she worked suddenly becomes disabled or dies. This could also happen to a partner (this also needs planning now);
• Certain clients where the fees simply do not cover the services and it is not possible to increase the fees or reduce the services;
• Overly needy clients;
• Clients who demand far greater services than they are willing to pay for;
• Clients requiring services your firm could no longer perform profitably, timely or appropriately;
• Certain tax returns that exacerbate your workload during your busiest period;
• Certain tax returns that crowd out the smooth administration of the balance of work needed to be done during that same period;
• Certain tax returns that should be dropped in order to reduce overtime to a reasonable level;
• Clients that for whatever reason just rub you the wrong way;
• Personally obnoxious people;
• Clients that demand immediate attention regardless of your scheduling protocols;
• Very large clients with high fees that are not profitable in that your costs are pretty much equal to their fees. Dropping them could either free up existing staff or would enable you to discharge underperforming staff, simplifying the management of your practice. A suggested alternative to dropping that client would be to share an analysis of your costs with the client and determine what the fee would need to be increased to so you would be able to continue with that client. Be realistic and approach it in a manner where you want to retain the client and do not be prepared to bargain that amount.

These are some suggestions. Add your own. Keep in mind that you cannot grow by reducing your client base, but you might become either more profitable or have your pressure eased by selectively lightening your load. Also, if the amount of clients you are considering dropping is excessive, I suggest examining your management techniques and staff and client services oversight techniques.
Comment: My Memoirs as a CPA book has been published and is available in Kindle and print editions at amazon.com. Buy it, read it and enjoy it! Do not hesitate to contact me at emendlowitz@withum.com with your practice management questions or about engagements you might not be able to perform.