Having awkward talks with clients over the course of a year is nothing new to accountants and bookkeepers. In fact, these conversations often occur at least once a week for many professionals.
For 94% of accountants and bookkeepers, chasing clients for late payments is the No. 1 most common awkward client situation they encounter nearly weekly on average, according to a new study by practice management software provider Ignition, in collaboration with YouGov. This is closely followed by clients not being billed for out-of-scope work at 90%; clients being sent proposals or engagement letters with errors at 88%; clients refusing to pay for out-of-scope work, also at 88%; and commencing client work without a signed engagement letter at 87%.
But many accounting and bookkeeping professionals shy away from having these tough talks with clients—and it is costing their businesses a lot of money.
Eighty-nine percent of accountants and bookkeepers say they have delayed or avoided having an awkward conversation with a client, with two-thirds saying they were trying to maintain or improve the client relationship. A third of accountants and bookkeepers say they lack the confidence to confront clients, as well as the right information about the agreed-upon scope of work and the skills to negotiate with their clients.
In some cases, accountants and bookkeepers avoid having awkward talks with clients altogether, with nearly two in five going as far as to write off an entire or part of an invoice for work completed. And about two in five accounting and bookkeeping professionals also admit they manage increases in scope by just absorbing the increased time and costs themselves.
Putting off awkward and uncomfortable talks with clients has a significant financial implication for the business, particularly in a high-inflationary environment, the study found. On average, accountants and bookkeepers estimate that out-of-scope work that hasn’t been fully billed is costing their accounting and bookkeeping firms $6,386 each month—or roughly $76,636 each year.
Of accountants and bookkeepers who have avoided or delayed awkward client conversations, two in five say consequences include loss of potential income for the business, with 35% citing cash flow pressures. In addition, one in five say they had to close or shut down part of their business due to profitability issues.
“As an accountant or anyone in the professional services world, you’re selling your time and experience. Your value is intrinsically tied to the price you put on your services. If you don’t communicate this early, price it correctly or set clear boundaries about what you can or can’t do, it can lead to confusion and awkwardness later on with clients, when they ask you to do this ‘one thing,’” said Guy Pearson, co-founder and CEO of Ignition.
The stress of having, or not having, these types of conversations with clients has taken a huge toll on people’s health and wellbeing, according to the study. Of those who have put off awkward client conversations, 40% say it has had a negative impact not only on their mental health, but also on that of their team members. More than two in five say it has led to staff overworking and low morale. Additionally, around a third of accountants report that staff have taken sick leave or time away from work, and three in 10 have even resigned, due to the increased workload and levels of stress.
The study is based on an online survey of 21 questions administered by YouGov on behalf of Ignition. The research comprised of a national sample of 506 key decision makers at accounting and bookkeeping firms with one to 50 employees in the U.S. Decision makers included practice owners, partners, directors, practice managers, and senior client managers.