The worst mistake accountants make

A journalist asked me recently “What is the worst mistake accountants can make when they are trying to ‘close’ a prospective client?” says Mark Lee.

Normally I have prepared for the most likely questions I will be asked when I am being interviewed. This one was not on my list as it was not closely related to the main topics we had been discussing.

I have since reflected on the question and wonder if AccountingWEB readers will agree that I singled out the right failing as the one worst mistake? What would you have replied to the question? I’ll share my response in a moment.

Thinking about the issue subsequently I quickly constructed this list of 12 mistakes that are all too easy to make:

  1. Taking on clients you don’t trust
  2. Taking on work you don’t have time to do
  3. Making promises you can’t keep
  4. Failing to check the client can afford your fees
  5. Failing to ensure the client accepts your fee rates are reasonable (i.e. is the client willing, as distinct from able, to pay your fees?)
  6. Devoting significant time and effort upfront without seeking a payment on account
  7. Agreeing a fixed fee without adequately scoping and limiting the work it is intended to cover
  8. Starting work or giving advice before completing the MLR identity verification process
  9. Failing to contact your predecessor (if there is one) to see if there is anything you need to know that could impact your decision to take over the client from them
  10. Quoting a low fee to win the client and hoping you can raise it to a commercial rate in the future
  11. Failing to clarify whether the client expects you to personally give advice on technical challenges that go beyond your experience and knowledge (normally it’s fine to outsource such issues and to bring in experts as and when required)
  12. Failing to conduct due diligence that might reveal unsavoury information about the prospective new client or their business

I suspect this list is incomplete. But which of the above did I identify, off the top of my head, as the one most serious mistake that accountants make when talking to prospective new clients?

I realise now that my reply to the journalist encompassed a number of the above mistakes. I said that the worst thing an accountant can do is to ‘wing it’.

What I meant by this was more about where an accountant pretends to have relevant knowledge and experience sufficient to win the client over. It also includes failing to prepare adequately for an initial meeting and that’s not good either.

Pressures and benefits

I understand the pressures to ‘wing it’. These include the risk of losing the sale if you admit that you do not have specific experience or knowledge. And sometimes the pressure of the moment is such that you may agree with the prospect without thinking through the consequences – e.g. of agreeing to prioritise work despite conflicting client obligations and commitments.

Do some accountants ‘wing it’ in the hope that everything will work out in the end? “Once the new client is ‘on board’ we can adapt things so that we are happy and they are happy, even though not quite in the way expected at the outset.”

Downsides

I think there are four possible outcomes of winging it:

  1. The client never finds out
  2. The client thinks they must have misremembered what was said at the outset
  3. The client finds out but appears not to mind
  4. The client is upset that they were lied to

Clients’ memories are not infallible. Often they will remember what they wanted to hear as distinct from what a new accountant actually said to them. This is one reason why it can be so valuable to confirm key elements of what you will do for them in writing. So that there is contemporaneous evidence of what you promised to do.

It’s also probably quite common that the client never finds out because the accountant sources the necessary information and support in good time to provide the necessary advice. And when that happens there is no adverse consequence so all is fine.

Three concerns

I suppose I have three main concerns with the idea of winging it. The first is for the reputation of our profession if ex-clients spread the word and complain about accountants over-promising and under-delivering.

My second concern is for the poor client who takes on an accountant who is not able to do what was required. Many such people just walk away ‘scarred’ by the experience, out of pocket and yet still needing the help that prompted them to approach you originally.

My third concern is for the accountant who is so lacking in self confidence that they are unable to be truthful. I can understand why this happens. But how far removed is this from those who deliberately set out to deceive?

A lack of self-confidence is key I think. I would prefer it if accountants had the confidence, experience and communication skills to be honest with clients from the outset. You don’t have to claim to know more than you do. You do need to be able to inspire confidence when you confirm that you will be able to source the necessary information. There is no shame in admitting that you are not superhuman. 

Is winging it worth the risks and downsides?

 

What do you think are the worst mistakes accountants make when seeking new clients? Have you ever tried to wing it? Did it work for you?

 

Mark Lee is consultant practice editor of AccountingWEB. If you like this article, do check out his BookMarkLee blog and ebooks for accountants who want to accelerate their success. He is also chairman of the Tax Advice Network of independent tax specialists.

Comments

Jason Dormer's picture

Ties in slighly with the

Jason Dormer |

Ties in slighly with the scoping of the work, but one of the main mistakes that accountants make when closing the deal is not ensuring that mutual expectations are discussed and agreed.

Whilst the engagement letter and fixed price agreement may state 'unlimted support' what that means to one client may mean something completely different to another.  And what is the limit of that support and what does it include, what falls outside of it?  How is the client going to fulfil his obligations, and what are the consequence if they don't?  What specifically, does the client expect from you and what do you want from them?

Everyone in practice knows that expectations of clients will greatly differ, especially if they are new to business and haven't a history, but could also be true for clients moving from another accountant (because expectations have not been met).

Decide, agree and act on mutual expectations and the relationship should be a long and rewarding one for both sides, all else being equal.

 

Top mistake: Failing to say what you will charge for the meeting

taxwriter |

I have recently been on the client side of the table when consulting an accountant about a regulatory regime I knew nothing about (Australia). We had a meeting arranged by a relative with his accountant in Australia (Crowe Horwath). It lasted just under an hour, and the conversation was useful as the accountant was able to talk through with us the various business structures which would and would not work.

However, her fees were never discussed, not even the range of fees. Perhaps I should have asked. No client  ID procedures were done - she didn't ask to see our passports or any other form of ID, and there was certainly no letter of engagement. Then on return to the UK an email arrives in my inbox with a fee for $385 ( Australian dollars). To say I was shocked was an understatement.

Happy Up North Accountant's picture

methaphorical accountant hammer bashing

Happy Up North ... |

I do like Mark Lee's articles - they are a much needed manual on how we as accountants are (can be) complete utter failures!

And being honest I absolutely have saw myself doing all 12 of the above! I'm learning, but even now I'm still making these mistakes, and even when I am aware, in the moment, that I've made them, I continue to make them regardless.

Steve-EBL's picture

accountant

Steve-EBL |

I think clients think an accountant is an accountant i.e. all knowing, and there is a natural embarrasment/pride that prevents accountants from saying they do not have the competency to perform what is required. Are accountants forced to wing it though from the outset? If not from a trainee/audit background, maybe qualified in industry seems to be jump in and sink or swim. Knowledge from exams soon obsolete or not adequate in the 1st place.

DON'T TAKE ON UNPROFITABLE AND RISKY CLIENTS

penelope pitstop |

For the first time in my working life I am now in a position to take or leave clients. Some clients are just not worth the bother. I have just taken on a new client but when sitting with her said that at £125 plus vat her previous accountant was not ripping her off for SA Return plus simple property rental account. Going forward I reckon I will be able to do the job in half a day for £125 so it is probably worth keeping. However, I have taken on a big new trust client. The trust was being charged £1, 500 to £3,000 pa recently (with 10 year IHT charge issues) and I have quoted £1,000 believing I could undercut. But there is more to this job than meets the eye. I was led to believe it was a straightforward job but there are historic issues which need to be resolved. To cut the story short, what appeared to be a lucrative job is turning into a time-consuming drag. So the £1,000 I quoted may turn out to be far too little for the work involved and there may be some technical traps to overcome. When taking on new clients the moral is ensure you quote enough to cover the work involved. Some low fee jobs take forever to finish whereas others can be done in no time. If you are in a position to be selective don't touch garbage. A prospective SA client telephoned my around 20th January wanting me to do his SA Return for £100. When asked about his record-keeping he said his son had split some juice on his paperwork. I told him not to worry, I'd seen far worse. He then said his papers had turned into paper mache and I'd be able to "dream up some figures". DO NOT TOUCH THIS SORT OF CLIENT UNDER ANY CIRCUMSTANCE. THEY ARE DANGEROUS, SLOW PAYING TROUBLEMAKERS WHO WILL GET YOU INTO TROUBLE.

We all make those mistakes

pr27 |

I can say I'm guilty of all the twelve listed mistakes, and have learnt, and am still learning from all of them.

In respect of winging it, a partner in a firm I used to work for was the master of winging it. He would accept work in which he or any other member of the firm had no knowledge or experience in undertaking, under quote for work with no knowledge of the details involved and accepting work that threw independence into question. I learnt the most from him and now have the confidence to be honest with clients. If I'm not sure or have a lack of experience in a particular area, I tell them but then say I know someone who specialises in this area and will consult with them. This has not failed to date.

I am also not scared to turn work away. If I don't feel able to do the work a potential client requests, I don't have faith in the client's desire to pay me or don't have confidence in their 'ethical mindset' I don't do the work and simply refer them to another local firm who I feel could help them.

I've possibly gone off on a tangent there, but failing to plan is the biggest mistake an accountant can make.

Tom 7000's picture

The worst mistake...

Tom 7000 |

Isnt the worst mistake not to answer the question the client has put to you

The question was

What is the worst mistake accountants can make when they are trying to ‘close’ a prospective client .

 

Closing a client means providing sufficient relevant relaible and persuasive information to the client so they decide to become a client and sign an engagement letter.

 

So I am not sure the top 12 apply...take your pick...No8 Starting work before MLR...they arent even a client yet so how can this answer the question

 

I reckon...

1-5 irrelevant

6 I would say the word NOT at the start was missing ie the opposite

 

Half mark for no7 and No 11

 

1/12...you have no new clients

 

I had my best day ever yesterday and have probably signed up 16  new ones

 

But then...what do I know

 

A thought from the other side of the fence!

Anita Houlson |

We had an accountant who sat on our accounts [all neatly laid out in a ledger] told HMRC that they would be submitted on a certain date, failed to send them in. Result was that, the then Inland Revenue, declared my husband bankrupt for assessed amounts of tax. I completed the accounts to the satisfaction of the tax-inspector and realised a repayment of tax to the value of £9,700.

Lost our marital home and tenanted farm as a result of the bankruptcy.

Sad thing was we moved from Arthur Anderson to this particular accountant because AA had been disclosing information to my husband's bank without his permission.

Wish our new accountant hadn't taken this account on!

Jason Dormer's picture

Tom7000

Jason Dormer |

16 (probable) sign ups in one day?  Could be argued that goes against closing diligence, more of a sign up regardless numbers game.  Sure that's not the case.

Tom 7000's picture

clients pick up

Tom 7000 |

I quote the fees at an acceptable level that a profit will be made.

My people deal with the engagement letters and MLR that follow and ensure they are in place once the clients agree.

To be fair it wasnt an average day and special circumstances surrounded it, that I won't bore you with, normally its one or two new ones a day. Eg looking forward I have 2 today 1 tomorrow and 2 on Saturday am.

 

As the boss of the firm, its all about bringing in the new clients ( and it goes without saying, but I will say it...retaining existing ones)  so the staff can be kept busy. Everywhere you go and everything you do you should be sniffing out new ones, constantly trying and probing new metods of fishing for them. Your holiday reading shouldnt be capital gains tax or employment related securitie,. it should be 101 selling and marketing techniques... 

 

 

carole.businessheads's picture

Closing

carole.businessheads |

 

The mistake I make when TRYING to close is not following up properly afterwards.  I do everything in writing and scope the job as well as I can and usually my quotes are accurate.

But, I find myself in competition with people who seem to make up what sounds like a very affordable fee without enough information.  Virtually every client we've lost have been to people who don't know what they are taking on.

Clients and prospects also don't seem to understand that a non-qualified or part- qualified accountant may not be sufficient for their business.  I am not very good at buildng the value of our qualifications.

We get some of them back when the client realises they are not receiving the service they expected but it is all very time consuming.

 

 

 

Jason Dormer's picture

Tom7000

Jason Dormer |

Agreed.