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Termination III – Firing clients

Termination III – Firing clients

Termination III – Firing clients

By James Stork
VP of Education, Drake Software


Sooner or later, every firm has to fire a client. 

That’s counter-intuitive, because one of the most powerful tenets in client relationship management is that it is less costly to keep a client than find a new one.  For this reason, accounting and tax preparation firms will go to almost any length to placate the client and maintain a prosperous relationship.  To do this, most service companies are guided by simple philosophies -- usually beginning with “the client is always right” and ending with “I will have one of the partners contact you to help resolve this.” 

But the reality is that in every accounting firm and tax preparer’s office in America, there is a secret list.  It is seldom written down, and almost never shared with anyone outside of the firm.  It is a list of clients whose calls no one wants to take – the ones who are impossible to please or even understand -- the whiners, the screamers, the cursers, the telephone Romeos, the sociopaths and the psychopaths.                                                                                                                                                                                      

These problem clients have always existed.  In spite of them, firms have grown, survived and prospered.  This being the case, why should today be any different from the past?  What makes it critical for management to identify and deal with these problem clients? 

Consider four factors: 

  • There are more problem causers today than ever before.  Sociological and psychological profiles of the American population indicate that we are becoming increasingly alienated, frustrated and unable to cope.  This is what sociologists call sociopathic behavior -- an ability to relate or to cope with the demands of life.  According to the Diagnostic and Statistical Manual of Mental Disorders, Version IV, approximately 26.2 percent of Americans ages 18 – 54 suffer from a mental disorder each year.  Roughly 10 percent have serious mental illnesses – and they, too, use tax and accounting services. 
  • There are not many real statistics on this point, but anecdotal evidence shows that tax preparation firms lose as much as 15 percent of their client base each year – half of which are first-time clients who do not return the following year.  Accounting firms tend to have lower client turnover rates, in about the 7 percent range.  The point is that some of these are clients that had to be fired – and some actually fire you. 
  • Problem clients are expensive.  They take up inordinate amounts of time with each service or sales call.  They quibble over bills more frequently, increase the stress on already-busy staff members, and may simply be impossible to please.  And they contribute to internal overhead costs that can drive profitability to new lows. 
  • There are hidden costs as well.  We know today that increased stress is a contributing factor to alcohol and drug abuse, divorce, emotional problems and other employee problems that can lower the firm’s ability to compete and profit.  

Problem clients are a minority in your base who make exorbitant demands on your organization, your people and your profits.  They disrupt the organization, lower efficiency, increase stress and cost the firm money.  And they are doing this at an increasing rate, at a time when market conditions have made profit margins thin and competition fierce. 

Accounting and tax preparation firms today need every competitive edge they can get.  And given the losses that can be directly attributed to problem clients, one place to start is to find a better way to handle them.  Even if it means firing the client.


How to Fire a Client 

In even the most egregious partings, when it becomes necessary to outright fire the client, there are still some protocols to be followed.  Even if you may not want to work with a particular client again, it may be possible to turn the situation positive by performing well enough that the problem client feels good about leaving – and will recommend the firm to other possible clients. 

  • When a client leaves, make it easy for them.  Give them everything they need to start up with a new accountant or tax preparer, such as copies of old returns, and tell them they can always come to see you again. If they have an unpaid balance, waive it if you can afford to.  If you are in the middle of providing a service for them (tax return, monthly payroll, etc…), offer to finish what you’ve started if it’s reasonable to do so.  You'd be amazed how many continue to recommend you to others, even though they can't continue to see you themselves.
  • This isn’t personal; it’s about honoring the principles of your business.  If you can’t provide what a customer needs, within the means of your business model, it’s the right business decision to end the relationship.  You have to be a little selfish on this one, and stay focused on your responsibility to your business, yourself, and your employees.  And let’s not forget your other customers -- in most cases, a difficult client monopolizes your time and impacts your ability to serve other customers.
  • Stay professional.  Whether you care if you ever see or hear from this client again or not, it’s always best to act professional and courteous.  You, your staff and your other customers will consider it a mark of your integrity that you maintained your demeanor and treated them respectfully.  Don’t give them any reason not to recommend you.
  • Document the circumstances.  It simply a good policy to document interactions with clients, but may be critical when the interactions are unusual unpleasant or.  Difficult customers tend to have selective hearing and selective memory.  Good records can provide specific evidence to support your decision.  In addition to customer interaction records, you should document contracts or legal agreements that govern your responsibilities. 
  • Be direct and honest.  Just as in firing an employee, don’t beat around the bush and don’t be ambiguous.  Tell them they will no longer be a customer, and tell them why.  If you’ve made it to this point, you know in your gut it’s the best thing to do.  And it’s uncomfortable anyway.  Don’t make it any more uncomfortable by dragging it out. You’ve made your decision and it’s not going to change, so don’t leave room for consideration of other alternatives.

These strategies work well enough when there is a clear-cut reason for severing a client from the firm – in the case of suspected fraud, for example, or simply unpleasant or rude behavior toward you and other staff members.  But sometimes the situation is not clear-cut.  Sometimes it is only over time that the partners can realize that the client relationship is more negative than positive. 

The earlier a problem client can be identified and dealt with, the better off the firm will be.  But that requires a new philosophy. 


A New Paradigm 

Begin by constructing a new paradigm -- that's what buzz-word mongers use to mean a new set of philosophies that allow the company to take a fresh perspective.  In this paradigm, client service and staff members operate under the following rules: 

  • Service is a two-way street.  The client is entitled to as much reasonable service as they require to solve problems, find the right tax solutions, solve management problems and keep their companies productive and profitable.  On their part, staff members of the accounting or tax firm are entitled to respect, cooperation, courtesy and understanding on the part of the client.  If both sides of the street are not open, the street should be closed. 
  • The client is not always right.  If the client were always right, why would they need the assistance of professionals?  As a courtesy to respected and valued clients, the firm may elect to take extra time to explain situations, waive certain fees or otherwise act with generosity toward the client.  However, it is important clients understand this is a courtesy extended to good clients, not an acknowledgment of their position or an inherent right. 
  • Where these services are not extended as a courtesy, or if the needs of the client fall outside of the boundaries of good and professional relations, the client should be expected to pay for the additional services received. 
  • Staff members of the firm are hired for their talents, their knowledge and their willingness to contribute to the success of the clients.  They are not hired for their ability or willingness to tolerate abuse from those clients.  Staff members are given guidelines within which to work, and within those guidelines they are empowered to terminate abusive client interactions, refer problem clients to management for resolution or otherwise end the contact with the client. 
  • Management must refuse to tolerate problem clients.  Management, as a general philosophy, extends its support to all clients – often leading them to somehow infer that their own staff professionals are wrong.  This can mean nothing but trouble, as staff members realize that a bad client is more important to senior management than a good employee. 

These five points lay out a tough but fair philosophy, requiring a shift in thinking, and presenting some concerns from the outset. 

For example, partners of the firm (who often have relationships with the clients outside of the professional relationship) may not give the problem of problem clients much credence.  Let’s face it, some partners are acknowledged and promoted because, on the surface, they appear keenly aware of challenges facing the firm, yet are inherently unable or unwilling to actually deal with or address the problems.  In some ways, their innate perception coupled with their status quo mantra keeps them informed and out of trouble, making them likable and promotable.  This is a problem, because a paradigm shift requires strong leaders who can set clear expectations and, most importantly, lead by example. 

Clients will need to be trained.  Some have been accustomed to bullying staff members all of their lives without ever realizing it.  A new working relationship will take time and patience while clients come to understand that -- at least with your firm -- this behavior is not acceptable. 

Good clients will make the transition quickly.  They will understand the value of people, and the value of having a respectful, professional relationship with the accounting or tax firm. 

Real problem clients won't make the transition.  They will insist on talking to the partners, and likely will demand compensation for the loss of the relationship.  During their meeting with the partners, they will likely seem reasonable and sane.  They will point out how much business they do with the firm, their long-standing relationship, etc.  Once the partner caves in, these problem clients will return to terrorizing the staff.  These clients believe, at some level, that by purchasing services they are also buying the right to abuse the staff. 

It is not important to understand why these clients are abusive, or that some have never had boundaries set on their behavior.  Leave that to the realm of qualified mental health professionals.  It is important to understand that these clients are costing more than they are worth, and that the firm is better off without them -- regardless of how much profitability they may bring. 

All of these concerns can be handled through use of established, written set of rules that define what a problem client is, how such a client should be handled, and what the correct procedures are for terminating an unproductive relationship. 


Firing the Client 

Rethinking client service, and making accommodations for firing clients who are not productive for the firm, is not an easy task.  It requires a commitment from the firms’ owners and partners, an agreement on the steps to be taken, and some nurturing to make sure the system takes root. 

Learning how to fire such clients is an important skill for any firm.  The tax or accounting businesses that is not able to trim the problems from its client roster inevitably suffers from lower productivity and profitability.




Seven Rules and Five Steps


The Seven Rules: 

1)    The following kinds of behavior are considered inappropriate on the part of any client: 

Obnoxious use of profanity

References to male or female anatomy

Inappropriate discussion of the employee or client’s personal or love life

Invitations for personal meetings other than for company business


Calling the company while intoxicated or incoherent

Negative references to an employee's intelligence, competence or appearance

Discussion of any other employee of the company

Continual venting of anger and hostility with a refusal to calm down


2)    All staff members are required to terminate client contacts that continue inappropriate behavior.  Personal discretion is not permitted.  Just because you do not find four-letter words or flirtation objectionable is not sufficient reason to subject your co-workers to this kind of behavior. 

3)    An angry client is angry, not necessarily abusive.  Try to determine the reason for the anger, work with the client to calm him or her down, and do your best to help solve the problem.  Clients are often upset when they call for help.  That in itself is not reason to terminate the relationship, unless the client refuses to work with you to resolve the problem.  Pass the problem to an account manager or partner if you are unable to help the client. 

4)    Be pleasant, professional and polite but firm with all clients.  Do not allow their anger or hostility to create anger or hostility in you.  If you find your own feelings interfering with your ability to help, take a break, count to ten, breath slowly and deeply until your feelings are more stable, then either continue or terminate the call as appropriate. 

5)    Respect the privacy of your co-workers.  Do not provide clients with information about other employees - their marital status, their personal habits, or their address and telephone numbers.  If the client has a legitimate need to contact an employee who is not available, pass the call to your manager. 

6)    Do not permit clients to draw you into a discussion of their personal lives and problems to any degree greater than that needed to resolve a tax or accounting issue.  You are paid to be a service professional, not an emotional counsellor. 

7)    Promises to change behavior in the future must be sincere and believable.  If the client promises to stop one of the behaviors listed above but then continues the behavior, terminate the relationship.


Five Steps: 

These are the steps that must be taken when a client violates the rules as stated above.  These steps must be taken exactly as stated, in the sequence given.  Failure to follow all five steps in sequence may subject the firm to legal or disciplinary sanctions. 

1)    Inform the caller that the rules of the firm prohibit certain kinds of behavior (as noted in the Seven Rules).  Explain the behavior on the part of the client that violates the rules.  Be precise in explaining the rules, reading them to the client if necessary.  It is usually helpful for you to explain the affect the client's behavior has on your ability to help them: 

        "Mr. Jones, may I interrupt for a moment?  Our firm does not allow us to try to help people who are shouting.  When you shout at me, it makes me feel uncomfortable and makes it more difficult for me to help you.  Could you take a minute to calm yourself?  If you do, I'll make every effort to help solve your problem." 

2)    Explain to the client what the consequences will be if the behavior is continued.  Be specific: 

        "If you continue to shout at me, I will have to terminate this meeting and try to help someone else.  If I have to terminate the meeting, you will need to call us back in order to get the help you need.  I would very much like to work with you, but I cannot if you continue to break our rules.  Could you stop shouting at me so we can work together?" 

3)    Give the client the opportunity to modify his or her behavior.  Be patient.  This may take a minute or two.  But do not permit the client to continue inappropriate behavior.  A good rule of thumb is that if the client changes his or her behavior, but later in the conversation reverts to the original behavior, it is appropriate to give one second warning.  But no more.  If the behavior does not change immediately, or if the client does not stick to the agreed upon behavior, terminate the meeting or relationship. 

4)    If necessary, inform the client that you are ending the meeting because of his or her behavior: 

        "Mr. Smith, I am sorry but I am required to end this meeting now.  Please call us again for another appointment, and we will make every effort to assist you.  Thank you and goodbye." 

5)    Document the termination.  Put in writing the exact circumstances, the behavior of the client, any efforts made in following these five steps, and the responses of the client.  

Drake Software Blog Team

The Drake Software Blog Team is proud to cover the latest in tax-industry-related news, from tax law and IRS updates to technology and business strategies. If you have questions about an article or just want to reach out to our staff, email comments@taxingsubjects.com.