Clients are what make it possible for you to run your tax and accounting business, and naturally, growing your book of business is a consistent goal each year. But sometimes it’s necessary to reevaluate which clients have held up their end of the bargain and which clients have not.
Sometimes, these relationships can be salvaged by clearly defining expectations (engagement letters are a great tool for this), and not every annoying client deserves the boot. Other times, the problem client just has to go. It’s not pleasant, but it is best for your firm. Part of being a business owner is learning to overcome irritations with grace.
The silver lining to firing a client that causes problems is that you’ll be able to free up your time to help clients who are easier to work with and bring more value to your business. In this post, we’ll go over the characteristics of both good and problematic clients, as well as how to fire a client the right way.
Reasons for firing a client
Problem clients come in all shapes and sizes. Some are rude and dismissive. Others badger you constantly about your fees or never pay on time. But just because you can fire clients, doesn’t always mean that you should. It’s always best to exhaust all of your options and try to salvage the relationship if possible—most effective during the early stages of a relationship. If you have already tried with no success, then it may be time to move on.
As a business owner, it pays to stay aware of the types of red flags that indicate a problem client in the making. Problem clients often possess one or more of the following characteristics:
- Communication barrier
- Don’t pay you in full or take a long time to pay you
- Make you lose money
- Unreasonable expectations
- Backlogging your work
- Don’t give you information in a timely manner
- Have a different code of ethics than you
- Don’t respect your staff
What you have to decide is if these kinds of clients bring more value to your business than they do headaches. If a client is just disorganized, maybe there’s a way to help them become more organized, such as having them use a client portal. However, if a client doesn’t have the same code of ethics as you do and wants to push the envelope, you should probably let them go.
A good time to do this is after the tax extension deadline while it’s fresh on your mind. If you let clients go at the end of the year, you’ll allow them enough time to find another accountant before the upcoming tax season.
Which clients should you keep?
Good clients are the opposite of problem clients. They possess characteristics such as:
- Being organized
- Reliable and consistent
- Respectful of your time and expertise
- Pay bills on time
- Answer your questions promptly so you can get work done
- Same code of ethics as you
- Enjoyable to work with
Besides being a joy to work with, your good clients can also offer a lot of value to your practice if they refer people they know to your services. Usually, good clients refer other good clients, and those referrals can replace some of the clients you let go.
Want to start off on the right foot with new clients so they don’t become problem clients? Check out How to Build Good Relationships with Clients in Your Accounting Firm.
5 tips for how to fire a client the right way
Once you’ve evaluated which clients to keep and which ones to let go, the next step is ensuring that saying goodbye goes as smoothly and cordially as possible. Here are five tips for how to fire a client who's causing problems the right way.
1. Wait until the contract ends
Waiting until the contract runs out when firing a client can help avoid uncomfortable discussions and also provides an exit route for the business. You can simply choose not to renew their contract. The drawback is that you would still have to continue working with the problematic client until the contract end date.
2. Be direct
If you’re firing your client, the whole point is to remove a stressful relationship. So don’t draw out the firing process and create a whole new source of stress. Drawn-out client-firings often devolve into finger-pointing, assigning blame, and wounded pride.
To head all that off, keep the firing short and simple. Inform your client that you will no longer be able to work with them. Say it as simply as possible without being rude. You don’t want to leave any room for misunderstanding here.
3. Keep it cordial
You can be direct and polite at the same time. You may be tempted to engage in a he-said-she-said blaming contest. The client may make petty remarks and try to pull you into an argument. Resist. The truth is that once you’ve decided to fire a client, the blame for the failed business relationship ceases to matter (except as it helps you make better business relationship choices in the future).
To help keep the firing from going south on you, avoid getting into details. Stick to broad, nonspecific reasons for terminating the relationship. The obvious exception to this rule is if the client has been outright abusive to you or your staff. In that case, you can simply tell the client that you don’t tolerate such behavior and are ending the relationship as a result.
4. Tell the truth
You’ve surely heard this before, but it bears repeating. Be honest when ending a relationship with a client. Lying or using deceptive language when firing a client can come back to bite you if the client ever catches on. A fired client may be disgruntled. Don’t give them a legitimate reason to badmouth your business. You may never intend to do business with that client again, but the consequences of being caught in a lie will spread beyond just that client.
5. Make it official
The original engagement letter should make this last step relatively simple. Write up a client termination letter that restates the conditions stated in the termination clause of your engagement letter. This should include the date of the termination (immediately), the information and documents the client will need to provide to their new practitioner, and any outstanding fees the client may owe you.
The Journal of Accountancy warns that not detailing outstanding fees in your client termination letter may result in some belligerent clients trying to claim this as an admission of failure on your end. To avoid this, be sure your termination letter clearly states all outstanding fees, regardless of whether you expect to collect them or not.
How often should you evaluate your book of business?
Some accounting practices conduct this evaluation process annually, but depending on the size and nature of your business, the frequency may need to increase to keep up with demand. Each business is unique, so determine what the right frequency is for your firm. More or less often may work better for the number of clients you have, but the end of the year is an ideal time to start the process for most firms.
As mentioned above, it provides enough time for the clients you choose to end a working relationship with to find a new accountant for the upcoming tax season. While some individuals can test your patience, it’s always a smart idea to end on a cordial note.
A good CRM can make client management easy
Once you’ve followed through with your decision to fire problematic clients, it’s important to update your CRM to stay up to date and accurate. Canopy makes it easy to manage and update your book of business with accounting practice management software. You can quickly remove past clients, update existing client information, and even add new business or leads. It helps accounting and tax businesses stay on top of the essentials without the hassle.