When it comes to communicating your firm's fees, don't dish out surprises.

It may seem like an obvious tactic for keeping clients happy and paying, but talking about fees while maintaining a client relationship can be delicate, especially in an economic climate that has left many businesses struggling.

"We don't talk thoroughly about fees up front," said Rita Keller, president of Keller Advisors in Beavercreek, Ohio. "We tend to avoid it. CPAs will give clients a [fee] range, and that's the last time they'll talk about them, until they get the bill."

Keller, the former chief operating officer at Brady Ware in Dayton, Ohio, and now a management consultant who works with firms on this and other issues, said that the goal is to not surprise your client later when it comes to fees just to avoid an initial awkward conversation.

Instead, she recommended, at the very least, having a discussion up front about the work being done and how your firm's billing and collections process works.

"Many CPAs will send that bill and it is a surprise because the client wasn't expecting it," she explained. "There was additional work, and although they spell it out on the invoice, they don't have the conversation."

While many firms will add collection language into their engagement letters, Keller recommended a tactic for new clients that she used in her own firm - enclose a collections policy statement along with a point person's direct phone and a welcome letter. This is important because legally, a firm can't call a client for collections unless that client is made aware of that firm's collections policy.

"The biggest mistake is not having an agreement that lets the person know how you want to be paid," said Michelle Dunn, president of American Credit and Collections Association in Plymouth, N.H., and author of 12 books on the subject of collections. "Being specific is very important."

WHAT, ANOTHER POLICY?

Nobody wants to inundate a client with calls for an unpaid invoice, and experts say that with a little planning and a communicated collections policy, it can be largely avoided.

Though they can vary, billing and collections policies should include a statement of how often billings will be submitted, what the hourly rates are, when payments are due, and that direct out-of-pocket expenses will be billed, according to Michael Davenport, JD, a professional liability claims specialist with Camico Mutual Insurance Co. It should also include when billings become delinquent, and a stop-work clause stating that if billings are not paid within the number of days specified, the firm may elect to stop all work until the client's account is brought current.

The stop-work clause should include acknowledgement by the client that the firm is not required to continue work in the event of nonpayment on a timely basis. "It should also include an acknowledgement by the client that in the event of a work stoppage or disengagement as a result of nonpayment, the firm shall not be liable to the client for any damages that occur as a result of the firm ceasing to render services," Davenport said.

A late charge can also be specified in the event the invoice is not paid within a specific number of days of the date of the invoice, Davenport added.

"Bill on a timely basis," he advised. "And do not allow fees to build up to the point where you can no longer walk away from them. When unpaid fees become too large, they provide an incentive for the client to assert or sue for malpractice, especially when the CPA has sued to collect fees."

Dunn suggested that a simple contract between client and CPA should suffice, one that is "something easy and simple, very blunt and to the point."

"Having people sign something just portrays to the customer a sense of importance," she said. "When people have to sign something, they remember that in their mind and they might pay that bill before they pay another bill where they didn't have to sign anything. It lets the customer know you are serious about getting paid."

While most large regional firms do have policies in place, Keller said that she's seen firms with up to 100 employees without formal processes, instead leaving the collections to partners. She advised designating an employee or hiring someone part-time whose sole job is administering the accounts receivable process and executing the policy. This administrator should coordinate the accounts receivable statements, write notes on those statements and call clients with outstanding payments.

Sometimes following firm policy isn't so cut and dried, especially in an economic climate that has long-term clients coming to you for financial relief.

Boca Raton, Fla.-based Daszkal Bolton's collection policy is stated in its engagement letter, but partner Tim Devlin admitted that those rules are often broken and adjusted - especially when it comes to long-standing clients. "In the relationship business, when someone's hurting, if you do some of the things you are supposed to do, you could damage the relationship," he said.

He noted that some partners at his firm are more empathetic than others when it comes to paying up, and that the policies are often not modified formally or firmwide, but added that with newer clients, communicating and upholding the firm's policies are easier, and he is less concerned if they don't like the way business is done.

"Personal service is a difficult business and it's all about trust," he said. "That element kind of eats away at some of these contractual obligations - not in all situations, but certainly in long-time client relationships. We are doing things we would tell our clients not to do."

ASK AND YOU SHALL RECEIVE

A month after Hurricane Katrina hit the Gulf Coast in late August 2005, Jim Koerber, principal of The Koerber Co., a niche business valuation and litigation support firm in Hattiesburg, Miss., saw his firm's billings drop 80 percent. "I just got on the phone and contacted people about what they owed," he recalled. "I said, 'Look, what can you send me?' and they sent what they could. Within a couple of months I was paid off."

Prior to Katrina, the firm didn't have a formal collections policy; now, there's a retainer fee request in its engagement letter. In one instance where a client had a $15,000 outstanding bill, Koerber asked for three postdated $5,000 checks. After receiving them, he notified the client when they were going to be deposited.

"Once we learned our lesson from Katrina, we were ahead of the game when the economy hit," Koerber said. "We stayed in better contact with the client ... . If you're providing a service, you need to be in touch with that client and let them know they owe you money."

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