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Diffidence and a fear of losing clients cost firms dearly, according to an Ignition survey.
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Accountants ‘lose $100k a year’ by dodging awkward conversations
25 August 2022
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Out-of-scope work costs the average practice $8,648 each month – more than $100,000 a year – thanks to a reluctance to confront clients, according to an Ignition survey.
If found more than nine out of 10 accountants had avoided an awkward conversation with a client and that led to a loss of income, cash flow problems or a decline in work quality.
“For many accountants and bookkeepers, the fear of losing a client and the potential impact to the firm causes them to put off having these awkward conversations,” said Guy Pearson, co-founder and chief executive at Ignition.
“We now know this has the opposite effect, with detrimental impacts to their firm, their people and their health and wellbeing.”
Ignition’s State of Client Engagement report found accountants were most reluctant to chase late payments (78 per cent), advise that work falls out of the agreed scope (76 per cent), or raise errors in proposals or engagement letters.
On average, one in two accountants and bookkeepers encountered these awkward client situations at least two or three times in a month, but two in five had written off all or part of an invoice to avoid confronting the issue.
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“Overdue client invoices are endemic to accounting firms,” Mr Pearson said. “Accountants are unwilling to confront clients about bills owing, so they absorb the costs themselves.
“In a high inflationary environment, where cash flow is king and a vital ingredient for business survival, firms can no longer afford to put off these client conversations or leave their outstanding payments to chance.”
The survey, conducted by YouGov, interviewed 557 decision-makers in accounting and bookkeeping firms with up to 50 employees.
It found that accountants felt they were trading short-term comfort for the long-term health of their firms, with 72 per cent saying they were trying to improve or maintain the client relationship.
However, that led to 41 per cent losing potential income, 36 per cent reporting negative impacts on work quality, 31 per cent facing cash flow pressures and 23 per cent forced to shutter part of the business due to profitability issues.
The most common awkward situations encountered each month included not billing clients for out-of-scope work (53 per cent), chasing clients for late payments (51 per cent), commencing client work without a signed letter of engagement (51 per cent) and sending clients proposals or letters of engagement with errors (50 per cent).
According to respondents, the top barriers to having an awkward conversation were concerns about the clients’ negative response or reaction (41 per cent), lack of confidence to confront the client (37 per cent), insufficient information about the agreed scope of work (35 per cent), and lack of negotiation skills.
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