Bad Clients and How to Fire Them

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You may not be able to do anything about ever-changing tax laws, but you can reduce stress and create a better work environment if you take steps to identify and fire (yes, fire) your bad clients.

Every accountant has a few clients he or she would be better off without. Bad clients suck up your time and resources and are not profitable. Sending them packing is worth it because you will have more time to take better care of your best clients.

There are many businesses in which 20 percent of the customers (best clients) provide 80 percent of the revenue, so cutting out those who drain your resources, but don't do much for your bottom line is just smart business.

There are several ways to separate good, profitable clients from those who are draining your resources. You could analyze their profitability – which could take the work of a business analyst who assigns revenue and cost to each customer – or you can use a less-scientific but effective method that is this “15 Attributes” list.

Knowing the attributes of a bad client can help you to quickly weed them out or avoid adding them to your client mix. The same attributes you use to identify bad clients can be used to help screen potential clients.

Below I have compiled a list of 15 attributes of a “bad client.” Please also feel free to comment and share any “bad client” attributes you can add to this list as well:

15 Attributes of a Bad Client

1.     Slow paying or nonpayment of fees.

2.     Write-downs always exceed write-ups.

3.     Client frequently complains about billings.

4.     Client is unwilling to pay for added services.

5.     Not profitable when compared to other clients.

6.     Personality conflict with partners or staff.

7.     Client conduct makes staff uncomfortable.

8.     Client is abusive to staff, even if civil to partners.

9.     Client fails to cooperate or provide information on a timely basis.

10.  Client doesn't listen to advice given, and then complains about results.

11.  Client projects are always on a crisis time schedule.

12.  Client expresses lack of trust in the firm's work.

13.  Client has taken on new ventures outside the firm's area of expertise.

14.  Client is less-than truthful.

15.  Client's activities expose the firm to liability.

Now that we have a picture of what defines a bad client, how exactly do we go about firing the worst of them. Here I suggest three approaches to firing a client:

1.     Let the client make the decision. Inform the client that you are raising your fee for the services you provide. The amount of fee increase should be reflective of how badly you want to get rid of the client. If the firing is due to issues other than fees, be direct and tell the client exactly what changes they must make to stay with your firm. It is now up to the client to pull the plug. For some clients this works well.

2.     You do the firing. Inform the client that you will no longer be able to provide services to them. Explain your firm's business plan for the coming year makes it necessary to change some client services or the number of clients you serve in a particular category. If possible, provide a referral to another firm. State that your firm will be happy to transfer files and do what's necessary for a smooth transition. Depending on the services you have been providing, it may be appropriate to clearly identify the returns, filing and other specific items for which your firm will no longer be responsible.

3.     Sell the clients. Perhaps you have a group of clients that are not bad; they just are not profitable. Or perhaps they do not fit the current firm profile. Consider selling those clients as a group to another firm hungry for new business. Everybody wins in this scenario. The clients have a practitioner who is excited about doing their work, the other firm appreciates your passing the business to them, and your firm gets paid to cull out some of your less profitable clients.

Arvid Mostad, co-founder of Mostad & Christensen Inc., has more than 35 years' experience helping accounting firms market their services, build client loyalty, generate referrals, and be more visible in their communities. Mostad & Christensen provides marketing products and services for accounting firms.

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Jun 30th 2015 23:09

I had a client a few years ago - she was a nightmare to work with and if I'm honest I don't think I ever made a $ from her if I take into account the problems she caused.

I wish I could say I fired her but I didn't. I just kept going until she moved state....

I need to get tougher!!

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to BlueCharlie
Jul 9th 2015 22:01

Don't beat yourself up. You're not alone. We could all practice some more tough love with our unprofitable clients. In the end it would be mutually beneficial. Firm profits would improve and the "bad" client would hopefully mend their ways and become a better client in future dealings with their next accounting firm.

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Jul 21st 2015 16:29

A couple of years ago I added a column to my Excel workflow worksheet, called "cut next year". If clients are difficult, hassle me about their fee, are unprofitable (e.g. too much time written off), they get a "dear now-former-client" letter before tax season starts. As #2 states above, I use a fairly nebulous explanation in my letter that I'm taking my practice in another direction, and the client no longer fits into my practice profile. I've had a couple of people question and hassle me about the letter, which is just one final affirmation that I'm doing the right thing by cutting them loose.

The bottom line is that you can't be afraid to do some "weeding" on a regular basis. Life's too short for crappy clients, and for me, every year that I've gotten rid of bad clients, I've gotten way more new (and good) clients, so the pluses outweigh any possible minuses.

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