Why Accountants Are Afraid to Collect From Their Own Clients

Why Accountants Are Afraid to Collect From Their Own Clients

Last week, I had the pleasure of speaking about credit and collections at one of the local Illinois CPA Society chapters, of which I’m a member. There were about 30 CPAs present and most were either operating their own small CPA offices or working at small- to medium-size CPA firms.

As a CPA myself, it’s a little unusual for me to be working in the credit and collections field, since most CPAs are inclined to work in the areas of tax, auditing, financial analysis, cost, budgeting and estate planning. As such, most are a little curious about me, so  whenever I have a chance to speak to a group, I usually get a decent crowd to attend.

At the start of the seminar, I asked the group of attendees to raise their hands if they have any clients whose invoices were outstanding, and not surprisingly, almost every one of them sheepishly raised their hands. I then asked them for the average length of time their clients are past due, and was totally blown away by the answers.

For the most part, many told me that they have clients with unpaid fees well past two years from when the services were performed. I asked them how they could let these clients become so delinquent. Below is a list of the most common reasons that I would like to share with you:

  1. We often accept the idea that we may not get paid for our services, even when we know that, from the start, the client is having terrible cash flow and other financial issues.
  2. We very rarely ever think in terms of confirming the credit worthiness of our clients. Perhaps we are too focused on just putting together our clients’ financial statements and tax returns without going below the surface of what the numbers actually mean.
  3. We are very hesitant to get too aggressive with our clients’ past due bills because we are concerned that our aggressive approach – including 3rd-party collections – will become known in the business community and impact our firm’s reputation.
  4. Sometimes when invoices are sent late and the client baulks at the cost, it’s better to just let it sit for a while until the next engagement and try to couch the unpaid fees into the new fees (yes, I was told this by one person and the room fell silent).
  5. We just don’t have the time, energy and confidence to communicate clearly with some clients over certain fees and it’s best to write them off.

When I heard their reasons, I explained that CPAs and accountants must recognize that their firms are also businesses that need to be properly managed – and a key part of that is establishing and executing an effective credit and collection policy that sets out the guidelines for determining creditworthy clients and procedures for collecting past due accounts in a professional and effective manner.

CPAs also need to learn how to communicate their value in a way that shows clients that what they are paying for is worth it. Failure to improve an ineffective credit, billing and collection process will hurt their firm’s revenue, cash flow, morale, and in the end, their own viability.