Practice Management: Thinning the Ranks

Practice Management: Thinning the Ranks

If you are like me, you’ve been building your business for many years. Possibly even decades. Early on your mantra was likely “the more the merrier.” Any warm body who was willing to meet with us was welcome at our door.

Is it time perhaps to re-evaluate this strategy and begin to eliminate problematic clients?

So, what are some examples of a “problematic client?”

Think of some of your own taxpayers who might fit one or more of these categories:

Always providing information at the last minute

I’m continually amazed at this one. I think of the client who complained about not being able to get in to see me for a month, then, during the appointment, whines about how he or she was up half the night putting their info together. And then proceeds to tell me that they still don’t have everything.

Starts asking for updates almost immediately after information is dropped off

The world today appears to be more and more self-centric. What I mean is that people only consider their own needs and issues without looking at the big picture. For the client who starts bothering me mere days after our appointment, I find myself needing to remind them that they are not my only client. I want to give them the best service I can but that takes time.

Asking for a status update and then telling you they have more information to provide

One of my favorites… The conversation begins with asking if their return is complete. My standard answer is that I’m about 80% through it and should have some numbers by Monday (translation: their packet is on my floor and hasn’t even been opened). The set response is that they have more information to provide so it’s likely good their return wasn’t complete to begin with!

Sketchy documentation

This is a dangerous one. While our due diligence requires us to make a reasonable inquiry, the client who always provides round numbers on a sheet of paper likely requires more investigation on our part. An equivalent danger here is that if or when this client is audited, they will most assuredly throw you under the bus and tell the government you agreed with what they provided.

Want you to enter SALY (same as last year) for various deductions

This builds on the previous scenario. It’s simply amazing to me that clients give the same amount to charities each year, or their mileage is determined based on what it was last year, or the numbers magically appear on my office ceiling.

Are rude, demanding, and perhaps demeaning to you or your staff

These taxpayers typically don’t beat you up in person but will do so on a voicemail, text, or e-mail. I have also found they can be very rude to your staff. In one instance, an irate taxpayer demanded to speak to me ASAP and hung up on my receptionist. I called the taxpayer back that evening at 9:30 p.m. when I finished appointments and I explained I had an urgent message. I must admit to experiencing the joy of a rude taxpayer back pedaling on their “urgent” request.

Always need something at the 12th hour

I used to send an annual newsletter to clients. One of the items I would stress is that requests from bankers, planning for next year, or needing copies of returns are nearly impossible to deal with during the filing season. I guess these statements were construed as being intended for someone other than them since the requests have never let up. Why taxpayers only think about their financial lives during tax season remains a mystery to me.

Complain about your fees and dissect each charge, line by line

I recall a situation where I bent over backwards for a client who was going through a messy divorce. After the returns were completed, I could feel the awkwardness at our front counter as the taxpayer was there for at least 15 minutes to pick up their packet. At that time, we produced invoices from our tax software, which listed each form or item. When I told the client the bill was correct, I was retorted with a no-win statement which was “I’m not allowed to review the billing?” To that no-win comment, I simply replied “yes.” By the way, our invoices now only read, “for professional services rendered.”

Challenge your advice at every turn

Isn’t it amazing when clients ask you a question then proceed to tell you why your answer is wrong? Or respond by telling you that’s not what they heard from their brother-in-law. I’m at a loss to comment further here.

Wanting me to check the status of their refund or ask me what their password to our portal might be.

I’ve been accused of creating monsters by enabling them. I have been guilty of holding my client’s hands and doing everything for them. Like a spoiled child, they now rebel when I tell them they need to do some things for themselves. How am I to know their password? I understand I can send a password reset for our portal, but come on. I have shown clients how they can check in with the IRS as to refund status or download an IRS app to their phone, but they still need me to do it for them.

Reading IRS correspondence over the phone or tell me there’s a problem.

Unlike “Carnac the Magnificent”, I can’t divine their issue, nor do I want the letter read to me. Send it, scan it, drop it off, but please don’t read to me.

Don’t get me wrong; the largest percentage of our clients are a joy to work with. We enjoy catching up with them. Some bring treats or show the best appreciation available by referring us to their friends and families. However, like anything else, a few bad apples can spoil the whole barrel.

How do you fire a client?

There’s an old saying that you never want to burn bridges, so I believe we can achieve our goal of getting troublemakers out of our practices by pursuing a number of options:

1. You might send a positive year end letter explaining that the direction of your practice has shifted, and this client might be better served with a firm which deals with their specific needs.
2. You are cutting back and can only keep a select number of clients. This type of notice can backfire in several ways:
   1. The taxpayer might tell others you are going out of business.
   2. You might end up firing the wrong client (this happened to me; I kept a referred client, and the “referrer” was livid that I did not keep her).
   3. How do you split up friends and families? Furthermore, do you know the relationships the clients have with each other?
3. You believe the client is not satisfied with the service you provide. You are sorry for the circumstance and believe the client would be better served by going elsewhere.

It is always better to approach even a negative circumstance from a positive position. You are suggesting that the client’s needs will be better addressed by some other firm. In some cases, the client you are firing may ask for a referral to another tax professional (your tax pro friend will just love that!).

One last point. If you carry liability insurance (if you don’t, you should), contact the carrier. Many of them have form type letters for “disengagement” you can customize for your specific client situation.

When disengaging, you should:

1. Indicate to the client what the future entails. By that I mean what your firm will do (and for how long) in terms of record retention, response to government inquiries, etc.
2. You will also want to tell them a date at which time all records will be destroyed and any inquiries they wish you to address will be charged according to a fee schedule.
3. What responsibilities the client has to you such as
   1. Retrieving records in your possession
   2. Settling any outstanding fees
   3. Withdrawing any Powers of Attorney

Many people want to work with you. Others return year after year out of familiarity or your level of competence. Or perhaps they return because of your fees. After being in practice for more than 30 years, I can tell you without seeming arrogant that I want to work with clients who want to work with me, appreciate what I do, and are willing to pay me what I’m worth. You should settle for no less. Eliminating the problem clients will make you more efficient and more importantly, make you a happier person.

By Tom O’Saben, EA