When should your accounting practice let a difficult client go?

This article was current at the time of publication.

In a tight and competitive market, public practices, especially small ones, may find it hard to let go of low-earning or troublesome clients. 

With small businesses facing a complex and challenging economic landscape and difficult clients costing them time and money, firms may have no choice but to part ways. Going by the Pareto (80/20) rule, calling it quits is a sound business decision. 

Difficult clients vs values 

Brent Kirchner, Director of Active Business Advisory, says deciding whether to cut ties with a problematic client can keep you awake at night. 

He’s done it, usually because clients aren’t listening to the reasons why an approach may not be within the rules and refuse to compromise to ensure compliance.

“We're not going to compromise our values for what the accounting profession demands of us, so it comes down to ‘Why are we saying we don't like this client?’ Is it that they won't pay? If they're not paying, they can go. If they're putting us at risk, they can go.

“Some clients have also probably moved on because we took a stance and they think, ‘Oh, geez, you don't push the boundaries hard enough’. Well, we push boundaries that are legal and strategic within the legislation.”

Abusing staff a ‘no no’

As well as pushing boundaries, wanting you to take risks, difficult clients can also try and micro-manage you, be aggressive, unresponsive, disrespectful, waste your time and attack your staff. 

Kirchner says ill-treating staff is as bad as trying to get you to cheat the system. Labour shortage is a harsh reality “which is why we say our staff are more valuable than our clients”.

“We hate losing clients and will do everything in our power to provide the best outcomes for a client. But if staff lose confidence in leadership, you're going to lose them.”

Choose your clients wisely

Dino Del Medico, Director at Austens, says good client relations start at the first point of contact.

“It’s about client selection at the initial stages. And making sure they know who you are and the way you do things. For instance, ‘If you want a cowboy, I'm not your person’.”

Tricky clients, though, can still try it on.

Del Medico recalls a client who’d done A$45,000 worth of renovations. He didn’t get quotes prior to the work, was shocked at the invoice and thought he could level the playing field by claiming a large tax deduction. 

“After a bit of discussion, he came around, but it was a bit of an education.

“No company wants to lose or give away business but if that client wants to do something that has risks to it, they're not worth my time. That type of client could cost the practice even more money.”

Review client base regularly

The client-practice relationship should be built on trust, respect, and communication … these things should all be in your annual client review.

Del Medico says they consider “when their job [was] finished, how much did we bill them, what has been the communication like, how receptive is the client to advice and then implementing that advice”.

Kirchner runs reports at the end of each job and at year-end to establish the revenue from clients plus the inefficiencies on those jobs.

“Where clients have caused inefficiency, we will try and educate them to provide better information; if they don’t, they will pay a higher fee.”

Is your client strategy working?

Client relationships are the lifeblood of success so you need a strategy that maps out your goals, expected outcomes and risks. 

Del Medico’s advice? “Always be clear on your price point.”

“Our fees basically cover the knowledge that we have had to gain from years of experience … from the first contact [I provide] to end-to-end service delivery, and that it is built into my price. 

“The clearer you are at first, the better the outcomes are and the less likely you will need to make a tough decision.”

Dino Del Medico tells of a client who frequently travelled internationally. On one occasion, he went “missing” for weeks on end. At the point of removing him from his list, Del Medico realised he had to reach him by letter first.

“You then cover yourself, so you can't be criticised for not trying to communicate your position.”

Dos and don’ts of ‘breaking up’ with clients

Once you’ve decided to cut off a client:

1. DO be clear about why you’re letting them go
2. DO anticipate pushback and have the important bits in writing
3. DON’T play the blame game or lose your professionalism
4. DO remember: this is business, not friendship
5. DON’T ever “break up” via text.