It’s not me, it’s you: Breaking off client relationships the right way

It's not me, it's you: Breaking off client relationships the right way

Breaking the client-accountant relationship can be both daunting and exciting, but there are a few areas for firms to consider before making the break-up official.

It’s not me, it’s you: Breaking off client relationships the right way

Customers are crucial to business, but not every business relationship is built to last. In accountancy, the client-accountant relationship can be a beautiful business partnership, or a years-long struggle to chase payments and handle bad attitudes. 

When the latter is occurring much more than the former, it may be time to reconsider the partnership and usher the client out the door. 

In fairness, nobody likes to be broken up with, particularly when money is involvedHowever, for your sanity and the fiscal future of your business, it’s necessary to re-evaluate when client-accountant partnerships are no longer compatible and take action. 

Make a list and check it twice 

If there are particular clients that you’re considering firing, it’s important to think about the relationship as a whole, what those clients bring to the table, and how they compare to the firm’s other clients. 

Firstly, the financial benefit (or lack thereof) for each company should be considered. Does a client cost more money to manage than they’re worth? Could that be navigated with a fee increase? 

“I’m a strong believer that accountants should always trust their gut rather than their head in these situations,” explains Carl Reader, chairman of Swindon-based firm d&t. 

“Whilst we might be tempted to put up with a bad client-advisor relationship because of finances, or even not wanting to create tension, if the thought of dumping a client is going through your mind, then you should really dig deep into the reasons why you shouldn’t do it,” Reader continues. “Unless this is simply a one-off frustration, is it unlikely that this client is benefitting your business or your sanity.” 

Reader also believes it is important to weigh both the financial and mental benefit of a client, particularly if a client has become rude, offensive or otherwise hard to deal with. 

Additionally, a firm should consider whether a client is easy to deal with, what connections they provide, and the overall length of the relationship against any problems. 

It’s important to weigh both the pros and cons of a client before making any major decision—it may be that a difficult client is financially profitable, or a personable client loses your firm money. 

Thinning the herd 

Once a list of potential ex-clients has been created, it’s time to honest with yourself about each clientMaybe a client pays lower-than-average fees, but they are a joy to deal with. 

On the flip side, they may be a fine client, but they take up a disproportionate amount of the firm’s time—this may be solved by setting some boundaries with the client, but it may make more fiscal sense to just cut them off. 

“If the difficulties are about fees, then you can continue and hopefully make some money with a minimum discomfort,” says Gary Green, principal of Key Business Consultants. 

“However, if the difficulties are about the relationship, about who is the advisor, about what services are included or not, then these clients should be removed sooner rather than later, since it will likely end in an actual dispute and they will end up trying not to pay.” 

Additionally, this is the time to think honestly about whether your firm can afford to lose a client. Consider if this particular client is a constant thorn in your company’s side, or if these difficult times are few and far between, before making a decision. 

Lastly, think honestly about what a client requires from your business, particularly if they are draining resources from your firm or placing undue amounts of stress on staff. 

“If they don’t accept service levels for the fees that they are paying and continually demand extra work free of charge, perpetually pay their bills late, or are otherwise unprofitable, we have to try and address it—and if it can’t be resolved, part ways,” Reader says. 

“It’s only fair on every other client who pays the right fees for the right services, on time; otherwise, they would be subsidising the bad clients. 

Delivering the news 

Unfortunately, once your firm has made a final decision on a client, someone has to deliver the news.  

Much like the iconic ‘it’s not you, it’s me’ line, firms should package this bad news in more diplomatic language than ‘we’re incompatible’Rather than lying about the reason that your firm is leaving the relationship, be honest and provide as many answers as possible 

Additionally, before letting a client know that your firm will be splitting ways, take action to protect your firm in advance of any backlash. Make sure that all invoices have been paid and that there is a clear plan in place for transitioning this client out of your firm before any official statements are given. 

Reader recommends tailoring each breakup to the client, noting that if the situation is based on incompatible pricing, it can be beneficial for the firm to suggest other options.

“Often a phone call followed by written communication is best,” Reader says. “However, if there is significant tension, I would suggest just writing an email/letter setting out clearly the reasons for the decision—there is no point in both sides getting into an emotional argument over something that will soon be forgotten.” 

Lastly, make sure that all discussions are above-board and backed up in writing. Each time a client is let go, a termination of services agreement should be supplied to the client, so that it’s clear what both parties are responsible for. 

Focusing on the future 

Once your client list has been thinned out, your firm needs to double down on providing service to remaining clients. Aggressive ex-clients may work to ‘poison the waterhole’, so proactive and positive discussions with current clients will help cull any negative thoughts. 

When taking on new clients, consider the qualities that you want your firm to reflect moving forward. If possible, avoid rushing into a new contract before fully considering if this partnership is in the best interest of your firm. 

To avoid a situation like this in the future, be sure to vet clients and set parameters before taking any new clients on board. Every new client is a learning experience, and as your firm grows, you’ll gain a better understanding of what type of client you’re best suited to. 

 

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