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Avoiding Awkward Client Conversations is Costly

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Normally, AccountingWEB has been hesitant to publish research we ourselves did not conduct, commission or were directly associated with. However, finding out that there was one that looked into out of scope work for bookkeepers and accountants alike, as well as the true cost of avoiding client conversations, we had to dig in.

 

Aug 23rd 2022
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New research from client engagement platform, Ignition, quantifies the financial and mental cost of avoiding or delaying awkward client conversations in accounting, and the professional services industry in general.

Specifically, the research found that by putting off awkward client conversations, 40 percent say their mental health has suffered as a result.

The new findings in the ‘2022 State of Client Engagement’ report from Ignition, shines a light on the financial and human cost to accounting and bookkeeping firms by avoiding or delaying awkward client conversations. Conducted by YouGov, the study interviewed 506 key decision makers in accounting and bookkeeping firms with 1-50 employees in the US.

What's more is 95 percent of accountants and bookkeepers surveyed in the new report, unrecovered out of scope work is costing United States firms on average $76,636 each year.

Awkward Client Situations are a Mainstay

In the US, virtually all (94%) accountants and bookkeepers said they have encountered an awkward client situation in their practice, including:

  • 94% having to chase clients for late payments
  • 90% advising that they have clients that are not being billed for out-of-scope work, with 43% of respondents saying their firm just absorbs these costs and work
  • 88% experience clients being sent proposals or engagement letters with errors, 2-3 times a month on average

The report found that 9 in 10 (88%) accountants and bookkeepers in the US have admitted to delaying or avoiding an awkward conversation with a client, including 68% who said they were trying to improve or maintain the client relationship. According to the survey respondents, the top barriers to having an awkward conversation are:

  • 39% are concerned about the clients’ negative response or reaction
  • 34% lack the information needed about the agreed upon scope
  • 34% lack the skills to negotiate with clients

More surprisingly, to avoid having an awkward conversation with clients, two in five (38%) accountants and bookkeepers admit that their business has written off part or all of an invoice in the past 12 months.

The Financial Cost

By putting off awkward conversations, accountants and bookkeepers in the US have traded short-term comfort for the long-term health of their firm. The top financial and business consequences include:

  • 41% experienced a loss of potential income for the business
  • 35% faced cash flow pressures
  • 21% had to shut down part of their business due to profitability issues

On average, accountants and bookkeepers in the US estimate that out of scope work that hasn’t been fully billed is costing their business more than $76,000 each year and in the last 12 months alone, 43% of respondents said the quality of their work had suffered and three in ten (30%) say their projects had run over budget. In addition:

  • 92% experienced late payments
  • 31% of invoices were paid after the due date
  • On average, client invoices past their due date are 30 days overdue

The Mental Health Cost

Putting off awkward client conversations has also impacted the workplace culture of firms. By avoiding or delaying awkward client conversations, survey respondents reported detrimental implications for personal and team health and well-being, including:

  • 43% low morale and 28% resentment among staff members
  • 40% reporting that it has had a negative impact on their and their staff’s mental health
  • 30% reporting that their staff have quit and they’ve had difficulty retaining staff

For more information, you can find the full report here: ignitionapp.com/state-of-client-engagement

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