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Is it OK to Fire Your Clients?

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March 23, 2009

Is it OK for accountants to give their less profitable clients the boot and only keep the ones that make their firms the most money?

Brian Murphy, CPA, of Aurora, Ill.-based Murphy & Associates posed that question after reading Liz Gold's Accounting Tomorrow roundup in our sister publication, Accounting Today. One of the items mentioned was a discussion we had on this blog back in late January, "Should Firms Stop Seeking More Work."

Another accountant had asked, "if a firm already has as much work as it can handle and has difficulty finding competent staff, isn't it irresponsible to be looking for even more work?

LG and I disagreed on this topic, but part of my response was that firms could evaluate which clients yield the lowest ROI and cause the most headaches and replace them with more profitable clients.

Here's what Murphy had to say:

" (Accounting Tomorrow editors) as well as many advisors tell CPAs and accounting professionals to 'fire' those less profitable clients and only keep the ones that makes us the most money. That is great, but isn't it part of (our) responsibility to train and help those people
become better clients and business owners.

"If all of us continue to fire all of these clients is the
business world better off. Do they not have loans, tax issues and other
problems that may have led to our current financial and economic
situation? Do they not need advice? Where do they go to get this advice
if CPAs are being advised to launch them because they are not as
profitable?
"This has always been an interesting dilemma for me. When I have
questioned the marketing and advising gurus, they never seem to have an
answer. I suppose we should just let them fend for themselves, in a
capitalist sort of way."

Murphy brings an interesting perspective to the table.

Perhaps he's looking at the glass as half full. These clients have problems? What can I, as their advisor, do to help them?

And what we're hearing from many accountants is that existing customers are actually asking them for advice in areas they had never asked about before—many of those areas being the one Murphy mentioned.

Intuit released a survey last week that found the accountant-small business relationship has expanded into several new areas as more small business owners seek guidance on personal money management and tips on how to weather the economy.

The survey found that 73 percent of accountants are proactively advising their clients on how to conduct business during the economic downturn, with 66 percent of accountants saying they've increased services they offer, including business consulting, payroll services. tax services. bookkeeping and online accounting.

Are companies receptive to this type of help?

Roughly 80 percent of small business owners said they would feel more confident having an accountant as a close business advisor during this time, according to the survey.

But if Murphy or any other accountant wants to tap into those struggling clients for more services and potentially more money, they better make sure those clients can pay them.What's your take on the issue? Comment in the section below or email us at tomorrow@sourcemedia.com.

Comments (8)
Great comments on a very important topic. All have very valid points and I think everyone is right in their views. Brian Murphy is right that we do have a responsibility to educate clients and get them to be a better client and what the firm's expectations are. Then all of the comments relating to additional measures beyond just profitability are right on the mark.

At the Private Companies Practice Section of the AICPA we have a tool to help evaluate based on 6 criteria. Check it out here if you are a PCPS member firm: http://pcps.aicpa.org/Resources/Firm Strategy and Planning/Client Evaluation.htm

The system calls for evaluating your clients A, B, C or D and to fire the D's and figure out how to better the B's and C's. Fact is firms grow and as they grow, they outgrow some of the clients they started with. It would be good business practice to let them go to smaller firms as your firm gets bigger.
Posted by markkoziel | Wednesday, April 22 2009 at 10:09AM ET
I think No. 1 is important, especially if a business client is seeking advice in the poor economy. It's crucial to make sure they will pay you. Some firms I know are collecting credit cards and charging clients monthly instead of at the end of the quarter or year so the payment is automatic and they don't have to keep hounding them. AD
Posted by Alexandra D | Thursday, March 26 2009 at 8:32AM ET
I only have 4 criteria for firing a client:
1) Does not pay in accordance with the engagement letter,
2) Complains about the time spent while not recognizing that he contributed and would not supply information as agreed upon,
3) After evaluating the file, if my feeling is I'd rather spend the time at the beach with my wife than deal with the client.
4) Asks for advice, does not follow it and then complains. Asks for advice, does not follow it and then complains. Asks for advice, does not follow it and then complains.
Posted by Brian | Thursday, March 26 2009 at 8:21AM ET
You are the professional. If the client doesn't listen to the Dr. (Accountant), and doesn't pay (or is slow to pay) the Dr. (Accountant), have a nice day...you're fired.
Posted by Sean M | Wednesday, March 25 2009 at 10:17AM ET
I like that. I think what I like more is the fact that you let the staff decide. It shows that you are putting them first. Alexandra
Posted by Alexandra D | Wednesday, March 25 2009 at 8:51AM ET
In our office, profitability of clients is probably last in the criteria for firing clients. We dropped about a half dozen before this busy season came along. I had passed a list of clients to my staff and asked them who they didn;t want to work with. The most frequent reasons were client issues such as not doing what we told them, and then coming back and blaming us; clients who just creeped out staffers; clients who habitually paid the prior year's fee just before bringing in the current year's info; clients who sent information in dribs and drabs and then complained about getting returns just before the due dates. Staffers weren't using profitability as a reason. Two words that sum it up are "client cooperation".
Posted by Bill M | Wednesday, March 25 2009 at 8:06AM ET
I agree with Brian Murphy to an extent. I think it is okay in certain circumstances, but a client's profitability today should only be one factor. Some small business have huge potential to grow and develop into large business and will require additional services. Additonally, a client can be great referal source and depending on their industry, this may be very beneficial to the firm.
Many firms want to move their client base "upstream," but who will be there for the mom and pops that are going to reemerge again.
I don't think firms should establish rules for firing clients, but evaluate each situation individually.
Often firms can strengthen relationships with other firms that might better be able to handle the client based on their size or other factors. Rather than "fire" the client, firms should consider lending them to a friendly firm.
Posted by Jessica L | Tuesday, March 24 2009 at 1:44PM ET
Maybe I'm going to minimize the issue by writing this, but there are plenty of accountants out there - surely there must be one for everyone. If we're talking about sole practitioners, It's the accountant's personal choice who they take on and retain as clients. If they find one that is difficult, clashes with their personality even after compromise, and is just overall stressful, who's to say dumping them is wrong? Help them find a better match. In a perfect world, maybe the accountant would work with that client regardless, and I'd like to think they would, but realistically, how long should they stick with them before calling it quits? It's purely subjective. And while making money and growing the business is optimal (obviously) is it worth a constant headache? Transitioning them out of your care to someone else's service, who perhaps could be a better fit for your client, does you both a favor in the long run.
Posted by Liz G | Tuesday, March 24 2009 at 1:14PM ET
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