Art of Accounting: Legacy clients and staff

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I never had legacy staff but did have some legacy clients. This refers to staff and clients that I couldn’t fire or drop.

A legacy staff person could be a child, parent, relative, childhood friend or a child of your largest client. A legacy client is a client you cannot drop such as a close relative or friend, or their child, or someone who helped you get started, or who arranged for your child to get into a school they were rejected from.

Another type of client you might not want to drop is a well-known celebrity. I’ve had my share of them and liked to name drop, thinking it made me important. It certainly made me important in my own mind, but I found that it also provided validation to my clients that they had an accountant who was a “player.” It also gave them bragging rights. However, at the end of the day, I needed to produce for my clients and serve them effectively, or I would lose them, notwithstanding my celebrity roster. One problem I had was, when I no longer had that celebrity as a client, I occasionally needed to admit at some point that I was no longer working with them. In the long run I found it better to forgo the bragging. It was always exciting being with celebrities, but with a few exceptions the more exciting work was done for clients that people would probably find uninteresting, such as a manufacturer, construction contractor or large not-for-profit that owned for-profit businesses.

A type of client I never had in my own practice was a wheeler dealer. My clients were dyed in the wool business people who put their energies into making their businesses great. The bad part of not having the “players” is that I didn’t get the businesses they acquired as clients. The good part of it is that I never had a dominant client group that, if I lost them, I would need to downsize my practice. I have friends who have such a client and upwards of 40 percent of their practices are concentrated with these clients. That would make me nervous.

I know some CPA firms that have a no nepotism rule. They won’t hire relatives. Here at Withum, we have hired children of partners of some of those firms and they are doing very well, are very bright and fully understand the CPA working environment. When I run into those parents, I tell them they made a big mistake with that rule. But it works for them. Withum doesn’t have this rule, and we have many fine people working here who are children or relatives of partners. We have also bred many marriages of staff that met here. In my office alone we’ve had at least half a dozen marriages since I joined Withum 13 years ago. As I am completing this column, I received an email about a fine healthy boy just born to a couple who met working in my office. What joy!

Firms set the rules that work for them and are comfortable for them. When there are staff members or clients you cannot fire, it can create stress when the relationship is not working the way it should. Most times the choices are limited after the initial hiring or engagement. Once in, you need to tread carefully but still need to understand you are running a business, and sometimes unpleasant things need to be done. Good luck!

Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com along with the Pay-Less-Tax Man blog for Bottom Line. Ed is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 964-9329 or emendlowitz@withum.com.

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Client relations Client retention Ed Mendlowitz WithumSmith+Brown