Many of your clients probably maintain their financial information in QuickBooks with little or no assistance from you throughout the year. Then, they engage with you at year-end to produce the Company's tax return and, if necessary, a compiled financial statement.
Unfortunately most small businesses do not have a fully qualified bookkeeper on staff and, unsupported by a QuickBooks consultant, are usually without accurate financial records. After twelve months of compounded erroneous data entry, the accountant usually finds that the QuickBooks file is of little or no value in either managing the financial position of the company or for preparing the tax return.
Your relationship to this type of client is typically strained and unprofitable. Not only do you provide only one service for these clients each year (the tax return), clients are typically in this situation because they are unable or unwilling to pay for the accounting and QuickBooks training and support they need. The thrifty nature of these clients typically extends to the tax return, forcing you to work with a hopelessly distorted QuickBooks file under tight budget constraints.
You can respond to these clients in three ways:
Provide the Client with Regular QuickBooks Support throughout the Year. A client who is unwilling to pay the fees you deserve but still receives the benefit of your services is taking advantage of you, even if he is doing so unknowingly or unintentionally. Schedule a meeting or telephone conversation with the client early in their fiscal year. Show the client your time reports and the amount of write-downs you have been granting him each year. Tactfully, but boldly, communicate to the client that you must begin billing for all of the time you spend working for them. Then, as an alternative, present the client with a QuickBooks support program that includes a strategy for training the Company's QuickBooks users as well as monthly or quarterly analyses of the data file. This support plan will reduce the amount of time you spend analyzing the data and making corrections at the end of the year. Explain to the client that most of the cost associated with regular QuickBooks support will occur in the first year, whereas the alternative billing for your time preparing financial information at year-end will either stay the same or increase from year to year.
Separate the preparation of financial statements from the tax
return engagement.
If the client will not pay you to help them maintain accurate QuickBooks
information throughout the year, have the client send you their QuickBooks file
shortly before year-end (as early as November), along with the source documents
you need to analyze the condition of the data and determine problems. (The
Sleeter Group offers tools for analyzing the condition of a QuickBooks data
file.) Doing so allows you to make corrections to their file, or determine that
the file is unusable, before tax season. Though you will not have
enough information to prepare the return, you will have a lot of the work
behind you. Once you have prepared financial statements, bill the preparation
of financial statements separately from the tax return, with little or no
write-downs. Then, charge the client a moderate, reasonable fee for tax return
preparation. The much larger fees for the financial statement preparation will place
a tangible, and often painful, emphasis on the need for the client to maintain
accurate financial information.
During your annual tax interview with the client, communicate the direct
relationship between the accuracy and completeness of their financial records
and the amount of time you expect to bill for tax preparation services. Then,
remind them that regular QuickBooks support engagements could help them to
avoid exorbitant year-end accounting fees.
Terminate the Relationship. If the client is unwilling or unable to pay for the services you perform, is careless with their bookkeeping, and refuses to take steps to correct the problem, they are a drag on your productivity. Consider terminating the relationship. Some criteria for ending a relationship with a client include:
o The client is unwilling or unable to pay fees
o The client complains about fees or pays late
o The client is careless with bookkeeping and refuses to learn
o The client refuses to organize their filing system
o The client has excessive and recurring payroll and sales tax notices
o The client has a history of unresolved income tax issues
o The client refuses to invest in hardware and software upgrades
o The client frequently calls for telephone support with refusal to pay
o The client participates in unethical business practices
o The client withholds information from their accountant
Perform an exit interview in which you explain the reasons why you are ending the relationship and provide the client with those reasons in writing. The interview may serve as a wake up call for some clients, encouraging them to either hire a qualified bookkeeper or to purchase regular QuickBooks support. If not, you will have more time to focus on profitable engagements and practice development.