can accountants recover debt from long term clients and keep their clients? For most, this statement is more a dream than any hope of reality. When a debt recovery lawyer such as myself suggests this to an accountant, the response is usually either abrupt or hysterical.ow
The good thing is that it’s true.
Unfortunately for current clients the best way to accomplish this is usually through initial agreements, or through renewal agreements that are sent out each year?! That silence suggests there are not many who issue renewal agreements each year, or ever.
To get down to basics, the problem in a nutshell is this; most clients see accountants as a necessary evil at the end of each financial year, and like most accountants it takes time to get the work done within the required time frames. The billing actually then might not be done for a few months after this, and all of a sudden the new financial year has passed. So when were you paid? Well, there was some money last year, and then we rceived a few payments the year before. The two years before that were fantastic because we had just had them on as a client and they paid almost straight away…
The real problem is that no one wants to offend their clients because they might go away. Asking them to pay is often seen as offensive, and especially where money is tight (when isn’t it?), it might lead to just that.
Or it might not.
A better solution would be if the clients paid consistently throughout the year. Better still, if part of the fees were actually paid in advance of your services, and the balance flowed automatically, regularly throughout the year? As accountants, you would be familiar with the concepts of future value and present value, so if your clients might not actually pay for your services for a number of years, what are your services worth if they are to be paid now? If you offer your current clients the opportunity to pay their accounts by direct debit, and discount them the amount you would gain by the difference in payment time frames, essentially you are not even giving a discount.
So now you have an inducement to get your clients to enter into fresh agreements with no real cost to you – assuming of course that the clients actually pay according to the agreement. Enter the direct debit.
By having your client agree to pay your fees by direct debit each month, you can offer them better fees and have the confidence that you will be paid regularly without having to send reminders with those stickers that say “Just a friendly reminder…”. Assuming the majority of your clients convert to the new system for payment, at least some of your time might be freed up to provide more extensive services.
Incidentally when reviewing your agreements to incorporate the above direct debit system you can also remedy some of the credit management issues most engagements fall down on.
Some of those services at least can be automated, for instance providing reports regularly that will assist with the financial management of the business. By offering better support and information you can upgrade yourself from being just the accountant to becoming an integral part of your clients operations – no only will you be assured of your fees, but your value to the client increases, as coincidentally does your revenue.