A Serious Disconnect With Clients and the Free Work They Ask I do for Them

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I have this serious disconnect with about 15 percent to 20 percent of my client base, and I don’t know what to do about it.

There's one client who I’ve had for many years email me, telling me his wife thinks that we have gotten too big for them and that they are paying too much for their tax returns. Literally, all I do is his companies’ tax returns. He has three S Corporations and his personal. One return is really simple, and the other two require a little more involvement.

I told him that his returns would be about the same as they were the year before — all of which require adjustments to his QuickBooks, which take about an hour to complete and I don’t even charge him for that work. He then remarks that my bills for a particular year were this, then went up to that. The difference was really a couple of hundred dollars. This guy’s adjusted gross income is $250,000, and he is upset over a few hundred dollars?

My wife says that I am pompous sometimes, and, maybe, I am. However, my usual retort to something like this exchange of email ends with me telling the client to go somewhere else. This upsets my wife, and I never hear the end of her saying, “You ruined an 18-year relationship because of your ego.” So, I actually explained what was involved, and that was good enough.

Let me give you an idea of what I've had to deal with regarding fees. I was a partner at a partnership for 18 years. I had a quota. I had to do a certain amount of billable time a week, or else I got fired. I put my blood, sweat and tears into that company. I had all of these great ideas, and they were shot down — over and over again. When the 2008 downturn came, I had to lay off so many people in my department. My other partners never lowered their salaries and would just fire their team. My team had families, and I forwent my guaranteed payment to pay them.

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About Craig W. Smalley, EA

Craig Smalley

Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.


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Feb 18th 2018 16:50

Love your story and approach, Craig. Every business has 20% problem clients. A dear old boss of mine taught me the easy way out when I was 22. His sage advice was to "price yourself out of the market" with this 20%. If they stay and pay great, if not, they have eliminated themselves and freed up your time for profitable practice.

The best part of this approach is you don't have fire clients! They opt out. And, people who hear this will understand you are running a real business where they will get high quality work and these types will pay.

My personal approach anymore especially with family and friends is this. My normal rate is $250/hr, for family and friends it is $350/hr, with a 2 hour minimum paid in advance, I don't don't do free consults without full documentation because the risk of error is to great.

They usually move on and don't waste my time.

Some relationships are not worth maintaining, especially those one side ones.

Happy for you.

Thanks (2)
Feb 21st 2018 17:16

Best article I've read so far with AccountingWeb. Most clients understand you're running a business and need to charge X amount, and some will do anything they can to not pay you.
Lots of great info here. I'm printing this out and showing this to my boss. I'm going to convince her to get out of her tax franchise, open up her own practice, and get rid of the deadbeats she must cater to in order to meet her franchise quota.

Thanks (1)
to yrlbaker
Feb 21st 2018 18:13

thank you. this is why we do what we do and have contributors like Craig who is not afraid to tell it like it is so other practitioners can learn.

Thanks (1)
Feb 21st 2018 17:55

Every engagement letter I have clients sign states clearly what their monthly rate is for. The next paragraph refers to extras that will be billed out separately; IE travel time, on site meetings, postage for sending payments out to vendors. If they start adding on things like another bank account or PayPal/online payment reporting, loans, credit cards... any addition to the "what I will do" section means a change in rates and a new engagement letter signed.

Thanks (1)
Feb 23rd 2018 00:44

Craig, Thank you for your well-written explanation of doing business with clients who are looking for "free" or "bare-bones" professional support (an oxymoron). I agree with your thinking. I respect your wife's opinion, but I trust yours more. I have seen it proven in my practice. Thank you for re-conforming the wisdom of freeing up space for new clients. Linda Qbq Russell

Thanks (1)
Aug 6th 2018 21:45

Stop billing using credit cards. Begin using ACH and drafting the checking account on the 1st of the month. So, instead of chasing expiration dates on cards, it only changes when the move/close the account. The fees are about $0.25 flat, instead of a 2% to 3.5% fee on the balance. Cut your costs, bring in stability, stop the madness.

Thanks (1)