Take a Hike: Ending Client Relationships
Consider this scenario: A key deadline is nearing, and the client is just now returning your calls and emails. But instead of responding to the open issues, the client indicates there is no real problem and irately demands that services be completed immediately. It is clearly time to end this client relationship. Many accountants confess to daydreams of uttering "Take a hike!" to a less-than-ideal client. While it may seem like a good idea in the moment, such phrasing is not the most desirable way to terminate a client relationship. However, the process of telling a client to take a hike provides a useful analogy to guide a more professional, less risky end to contentious and cooperative client relationships alike. Treat a client termination as if it were a hike through uncharted lands. STEP 1: PREPARE FOR THE JOURNEY Most journeys take expert planning and attention to detail. A client termination requires similar efforts. It is important to remember that both good and bad client relationships may need to end unexpectedly. No signpost indicates when a client relationship takes a wrong turn. The following are tools that may be useful in preparing for an unforeseen client termination: * Termination provisions: Including a clear termination provision in an engagement letter, indicating an engagement can be terminated without completion for any reason, can provide significant latitude, if termination becomes necessary. By including such a provision, the CPA firm may reduce the likelihood of a client asserting that the firm cannot withdraw from the engagement. * Deadline communication: Clients that are chronically noncompliant with terms of the engagement may need a gentle reminder of their responsibilities in the form of a written communication. Deadlines should be communicated in an engagement letter. A separate stand-alone letter or email may be appropriate if there are concerns about a client's ability to meet the identified timing. A properly timed communication could even prevent the need for a client termination. * Ideal client profile: CPA firms should establish an ideal client profile and regularly evaluate the existing client base against the profile to identify clients that are no longer a fit for the firm. This protocol helps identify potential problem clients before the relationship becomes tenuous. STEP 2: BE AWARE OF THE DANGERS Any journey will have its own set of pitfalls and obstacles. The same can be said of client relationships. Though no maps, GPS, or satellite imagery guide a termination, awareness can help CPAs through the dangers of a contentious client relationship. It can be easy to overlook negative indicators, especially if the fees are substantial, the relationship is long-standing, or new clients are hard to find. Even more difficult to overcome are strong interpersonal connections between the engagement team and the client. Recognizing a bias toward retaining a client and being mindful of already serious or mounting issues can be the difference between exiting a client relationship unharmed or falling into a conflict. Common indictors may include: * Concerns regarding client integrity. * Fee or service complaints. * Disputes within the client organization. * Untimely or incomplete responses to requests. * Negative responses to constructive suggestions. * Poor attitude toward internal controls. * High accounting or management turnover. * Dismissive treatment of engagement team members. * Disrespectful treatment of client employees. While counterintuitive, a client's rapid success or expansion also could be an indicator that the relationship may need to be reevaluated. The client's successes may require services and expertise that are beyond the CPA firm's capabilities. However a proactive plan may prevent the CPA from making unintended errors that could result in professional liability claims, if services were to continue. …