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How to Select the Right Clients (and Keep Them)

Oct 7th 2016
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Client risk management is the foundation for client success. It is what ensures that you’re selecting clients who are a good strategic fit for your business and sets the groundwork for long-term client satisfaction, giving you a healthy and lucrative client portfolio.

Risk management starts before you take on a new client and continues throughout the entire engagement lifecycle. Through a mix of systematized processes and technology, firms can determine if a potential client will be a valuable asset, set up the appropriate safeguards to protect against professional risks, and meet the client’s objectives and success metrics for the engagement.

First Things First, Selecting the Right Clients

A client assessment is a process by which potential clients are evaluated to determine if they are a worthwhile investment for your firm. This includes professional risks, financial suitability, strategic alignment with your firm’s long-term market strategy, resource alignment with your firm’s expertise, and terms alignment. Compliance with anti-money laundering regulations and “know your customer” guidelines through due diligence is also a critical component of client assessment.

Many firms assign a “risk rating” to potential customers, a means of formalizing the results of the client assessment according to a predefined set of rules. Firms may choose to employ a different set of parameters based on jurisdiction, service line, or client industry, where there may be varying regulations or risk tolerance.

Ensure Your Independence – and Protect It

The AICPA professional standards requires your firm “to be independent in accordance with the ‘Independence Rule’ whenever your firm performs a [client engagement].” Potential threats to independence and other possible conflicts of interest should be systematically evaluated, and safeguards should be put in place to reduce or eliminate conflicts of interest. Documentation around how these threats were evaluated and what safeguards were employed will provide a defensible audit trail for regulatory compliance and future reference.

Controlling access to client information via ethical screens and information barriers is an effective safeguard to preserve independence, and it can also protect client confidential information to comply with regulatory rules and terms of business established during the client assessment.

Formalize Your Client Acceptance Process

Firms should establish a well-defined process for client acceptance and onboarding that is transparent to partners, risk stakeholders, and management. Who is responsible for the ultimate decision to approve or reject new business, and what the approvals process is should be clearly documented. Once new clients are accepted, onboarding should follow an equally well-defined process that should include the creation and tracking of engagement letters that clearly define the scope of the engagement.

Keeping Your Clients – Engagement Management and Continuance

At this point, your understanding of your clients and their needs should be well-established. By systematically codifying and centrally storing your clients’ goals, success metrics, and terms of engagement throughout this process, you will be better able to deliver on the commitments you have made to your clients. For instance, real-time information on how each engagement is tracking to budget will give your partners (and your clients) more visibility and enable necessary adjustments to be made.

Continuance should be reviewed periodically to ensure that your client engagements are still meeting your firm’s client assessment criteria.

The Role of Technology

These essential components of a client risk management program are bolstered by the effective use of technology to automate key steps in the process, centralize searches, increase efficiency, enhance visibility, improve data hygiene, and preserve an audit trail for future reference.

Though it may seem like a massive undertaking, solutions exist that can leverage your existing infrastructure and may be implemented with minimal change management pain.

The accounting industry is in a period of rapid change. Without the right systems and processes in place, it may be a matter of time before you find your staff overwhelmed by client demands. Is your firm equipped to manage the increasing risks?

Have you been struggling trying to improve something? LSS and DMAIC are a powerful methodology and tool that you can use to not only improve your processes but your entire firm! I challenge you to find ways to use DMAIC for more than just compliance processes.

The original post appeared in the Boomer Consulting blog.

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