Not every client is an ideal customer. In fact, accepting work from the wrong clients can create a whole host of problems for your accounting firm.
How can you assess if working with a client will be an asset or liability for your business? Consider asking the following questions to weed out prospects that won’t be a good fit.
1. Were you using a different accountant before? If yes, why are you interested in switching to a new firm?
This can tell you a lot. It can shed light on your competition's capabilities. It can also give you insight about how the prospect approaches relationships with accounting professionals. Red flags to watch for include:
- Jumping around from firm to firm.
- Blatant bad-mouthing that implies former accountants did nothing right.
- Unwillingness to share specifics about why former accountants didn’t satisfy their needs.
Be wary of these signs and others that indicate clients might have unreasonable expectations or poor collaboration skills.
2. What business entity type is your company?
Whether a sole proprietor, LLC, partnership, S Corp, or C Corp, knowing the prospect’s business entity type from the start will set the stage for other questions that will allow you to draw out critical information about clients’ needs and the scope of work you’ll face when handling their books.
3. What financial accounts do you have?
This will help you assess the time you’ll need to devote to reconciling monthly statements. In addition to business and personal checking, savings, and credit cards, find out if they have a PayPal account, car loans or leases, bank loans, etc.
4. Does your business have employees or inventory?
Payroll can complicate matters if prospective clients haven't used a dependable payroll service to ensure it's done correctly. If a client has employees, ask additional probing questions to find out how payroll is processed. If they don't have a reliable payroll service provider, consider if you want to be responsible for their payroll schedule and payroll tax payments. Do you have the capacity and knowledge to handle that for them?
Also, accounts that involve inventory accounting may require specialized expertise. The degree of complexity when working with inventory can vary significantly from one business to the next.
5. What system or tools are you using to create invoices and pay your bills?
Clients’ current method of handling their accounts receivables and accounts payables will give you insight into how much work you’ll need to do each month. For example, if they’re producing invoices in Word documents and tracking payments in Excel, you’ll face re-inventing those invoices and received payments in an accounting system.
What about how they issue payments to vendors? With so many possibilities—such as EFT, PayPal, online bill pay, manual checks, and others—you’ll want to know what to expect. Before you commit to helping a client, it’s important to know if they expect you to use a payables system you haven’t used before (or one that you dislike immensely!).
6. Are you up to date on your tax filings?
Find out upfront if you might enter a hornets’ nest of neglected tax payments. Inquire about their income tax—and sales tax, if applicable. Clients who have failed to file returns or make payments on time might prove to be highly unorganized, irresponsible, or unethical. Proceed with caution!
7. Are you keeping your business and personal finances separate?
Companies operating as LLCs and corporations, by law, must maintain separation between their personal and business bank accounts, credit cards, etc. If they have been paying personal bills from their business checking account or vice versa, you could find yourself dealing with a major mess, and they could face serious legal ramifications.
It Pays to Be Choosy
When you vet clients properly to ensure a good fit, you’ll find your work more fulfilling. The right clients will energize you; the wrong ones will deplete your enthusiasm and distract you from providing exceptional service to the clients you value most. Take the time to ask meaningful questions BEFORE accepting clients.
MarvinSteindler
Nellie Akalp CorpNet FINAL
Author Bio: Nellie Akalp is a passionate entrepreneur, small business expert and mother of four. She is the CEO of CorpNet.com, a trusted resource for Business Incorporation, LLC Filings, and Corporate Compliance Services in all 50 states. Nellie and her team recently launched a partner program for accountants, bookkeepers, CPAs, and other professionals to help them streamline the business incorporation and compliance process for their clients. More info at: CorpNet.com/partners