It’s time for accountancy firms to muscle up to improve collections. Times are getting tougher. Money is tighter. Business slower. Legal costs are rising. Clients that used to pay on time are now paying later than normal. Out of trading terms. And those that used to pay late are now almost at a standstill. More work needed to chase up payment. Sound familiar?
So. What are the options?
- sit it out – keep on doing the same ole’, same ole’ – hoping that things’ll turn out ok, or
- take steps to make sure that your firm suffers as little as possible.
I’m opting for #2 and when I visit several of our accounting firm clients over the next few weeks I’m going to suggest that now’s the time to make a few changes. It really is time for old paradigms to change, for accounting firms to become much more commercial. Many of the following points, you already know should be being done, but, simply put, in most firms, they are not. Anyway, here are the points I’m going to discuss.
1: Check out new clients before taking on large engagements.
Why undertake a big job utilising the firms resources and the associated personnel costs if the new client has a suspicious history. For Australian firms, consider becoming a subscriber to Veda Advantage (AU$195 to join, AU$42 monthly subscription) Also useful when collecting payments.
2: Get all instructions in writing
This will NOT always be possible but, from an accounts receivable point of view, and whenever in doubt, absolutely vital. I have personally seen many hundreds of thousands of dollars NOT collected due to lack of proper documentation.
3: Get paid “up front” for long engagements
There are several companies that offer professional fee funding. 100% of a fee raised is paid to the accounting firm and the client “pays it off” over an agreed period. A “win-win” for both. The one we have suggested to Australian clients is FeeLink. There is no cost to the practice whatsoever. There is an interest charged to the client, but why should firms “carry” large debts on the ‘never never’ and provide an interest-free banking facility for their clients? Why take on new work for a possibly already-financially-strapped client without being confident of payment?
4: Get all arrangements in writing
When a client has a large unpaid debt and wants to “pay it off”, it should be policy to get that arrangement in writing (consider using FeeLink here as well). This post explains why.
5: Send a circular to all clients
Advise clients of two changes to policy
a: that “Due to (put in some reasons here – rising costs … GFC … over the last nine months many clients have been taking longer to settle their accounts than in the past …) the firm is obliged to start charging interest on any fees that are not paid within our normal credit facility unless there is an approved payment arrangement in place. (see point 4 above)
b: that a discount of 2.5% will be applied to payment of all fees that are received in the firm before the due date.
Always has been, always will be about good communication between firms and their clients. And vice versa. Establishing the intent of the client. It’s NOT too “heavy”. It’s commercially realistic. Sadly, many firms will continue to provide that interest-free banking facility. But, those that don’t, will not just survive, they’ll thrive.