Just Say No to Co$tly Clients
Elizabeth Danziger · Journal of accountancy online/Journal of accountancy · 1999
EXECUTIVE SUMMARY * SEPARATING BAD CLIENTS FROM YOUR FIRM is not as easy as picking up the phone and telling them they must find a new CPA. First, you must clarify your firm's long-term goals. Second, you must decide which clients will be most profitable as your firm prepares to meet its goals. Finally, you must determine the best way to inform your potentially unprofitable clients that they would be better served elsewhere. * PRACTITIONERS HAVE TO DECIDE WHAT they're good at--what they really like to do. After they determine those two things, it is much easier to look at clients and say, take up too much time. * DEAL WITH TIE PROBLEM CLIENT in a courteous and straightforward manner. While some techniques, such as not returning telephone calls or raising fees, might succeed in driving your client away, they might also damage your reputation among people who are good prospects --dissatisfied customers tend to tell many people about a bad experience. * THE BEST WAY TO AVOID COSTLY CLIENTS is never to let them become clients at all. It is helpful to have a set of specific criteria by which to judge whether to take on a new client. Many firms use checklists to evaluate the business potential of prospective clients. The way to a quality practice is through quality clients. Accentuate the positive, eliminate the negative. These are lyrics to live by if your firm has clients who cost you more than they could ever pay. A costly client is one who detracts from your productivity, profitability or peace of mind, and he--or she--should be mustered out of a survival-minded CPA's client base. The costliest clients are those who don't pay their bills or who pose high litigation risks. Unpleasant clients also take a toll on your staff's morale. Even worse, they tend to reproduce--by referring others like themselves. Difficult clients can cost you indirectly, too. The time you spend on an unprofitable client is time not spent on a profitable one. For many CPAs, the idea of turning away business is nothing short of heresy. CPAs traditionally have learned to live with their costly clients. However, more and more managing partners are discovering the benefits of winnowing their firm's client base as a practice management tool. These CPAs are divesting those clients whose business does not help the firm reach its long-term strategic goals. PLAY TO YOUR STRENGTHS Separating unsuitable clients from your firm is not as easy as picking up the phone and telling them they must find a new CPA. You first must have a clear picture of your firm's long-term game plan. Then you must decide which clients will be most profitable as your firm prepares to meet these goals. And, finally, you must determine the best way to inform inappropriate clients they would be better served elsewhere. The first step in identifying which clients you might be better off without is to consider your strengths. What are you best at? What industries are you best qualified to serve? What do you want to specialize in? The client who is a waste of time for one firm might be a welcome addition to a firm with a different focus. According to Janet Caswell, a CPA and consultant based in Bloomfield Hills, Michigan, Practitioners have to decide what they're good at--what they really like to do! After that it's easier to look at clients and say, `You take up too much time!' Caswell stresses the importance of leveraging knowledge effectively. If you've worked for several printing companies, then you've already climbed the learning curve in that Build on that knowledge by looking for more clients in your target industry. APPRAISE YOUR CLIENTS When you are clear about your professional strengths and goals, it's time to take stock of the intangibles that contribute to making a client too costly to retain. A customer whose constant complaining drives you to an early heart attack is not worth any amount of money. …