The feedback I received from clients and others within the accounting profession was that this past tax season was one of the most challenging tax seasons ever. Now that the dust has cleared – and you’ve hopefully taken a vacation – it’s time to get serious about firing clients.
Bad or “D” clients have an impact on your profits, productivity, and staff retention. These are the clients who want the most attention while paying as little as possible. Typical D Clients:
- Can’t attract and retain quality staff
- Have a weak upper management team
- Demonstrate low commitment to technology
- Have unreasonable expectations
- Show little willingness to follow advice
- Have poor teamwork and commitment
- Pay late
- Abuse your people
- Are poor record keepers
- Always need their work yesterday
- Continually put your firm at risk
Your accounting firm – like every accounting firm – has D clients that should be removed from your client list. Here is how to do it.
Evaluate Your Client Base
Develop criteria to identify A-B-C-D clients. Criteria to consider include:
- Annual revenue
- Payment history
- Growth potential
- Referral history and potential
- Job risk/complexity
- Timing of the work
- Satisfaction/enjoyment working with the client
A helpful resource for PCPS members is the Client Evaluation Tool, part of the Trusted Advisor Toolbox. Set a deadline for each partner to rate their clients using the agreed upon criteria. Meet as a partner group to review the ratings and determine action steps.
Determine Action Steps
The decision to fire a client is not black and white. All D clients need not necessarily be fired. Figure out how to move them up the ratings ladder. You also want to figure out how to turn C clients into B clients, and B clients into A clients. This can be done by:
- Changing the scope of the work.
- Changing the engagement team members.
- Changing the timing of the work.
- Raising the fee.
How you communicate with your clients is important. To notify individual or smaller clients about an increase in fee or termination a letter is sufficient. For sample letters click here. Give these clients a few months to hire another firm. It’s helpful for you to identify other accounting firms to recommend.
For most other client communications face-to-face meetings are best. The bottom line is your desire to grow your firm in a smart, focused manner. You need to spend your time on the clients that you can serve in an efficient, profitable way. This requires you to change the client relationship or fire the clients that don’t fit the bill (pun intended).
Identify the champion. As with any firm-wide effort you need the champion – the person who will follow through and make everyone accountable. To evaluate your client base and then rationalize why every client should remain with the firm is a waste of your time.
Get your partners on board. Make your case for why firing clients – or setting minimum fee levels – is important for your firm. At a partner meeting present how the process works and seek their feedback.
Consider implementing this process in stages, e.g., corporate clients, nonprofit clients, individuals. The key is to get started.
Evaluate your client base every year. Firms that regularly fire – or transition out – their D clients improve their profitability, efficiency and morale. This process also gives you more time to spend on your best clients and practice development.
Have you fired any clients recently? What was the impact on your firm? Let me know in the reply box below.