April 27, 2020 at 5:45 pm #2988176
My dad has built a very successful CPA firm over the past 25 years and we have over 100 clients. Most of them are great and despite the firm being very lucrative, there are a handful of clients that are lousy when it comes to paying us.
Some of these people don't pay us for the entire year, others don't pay us until a few months have gone by, despite us sending invoices and them knowing how much they owe us.
I don't like this and I think it's wrong. Doing work for someone for an entire year and not getting paid until the next year isn't right at all, especially since we charge on a monthly basis. Not only that but there have been a few cases over the past 25 years where a client goes out of business and they use that as an excuse not to pay us.
I've brought this up to my dad many times and his response is, “This is how these people are, they've gotten used to paying like this”. I'm very blunt and I'm tempted to tell these people to pay us the money they owe us and start paying us in a timely manner or find another accountant but I honestly believe these people would be tremendously offend by that since they're so used to lax paying standards. I'm fine with that but my dad has built a relationship with these people for nearly 30 years so he isn't open to making these people mad.
Is there a way to get these clients to start paying correctly without losing them or do we just have to cut them loose?April 27, 2020 at 7:04 pm #2988236monikerncParticipant
You can request a retainer, or start adding a late charge each month on unpaid balances or add a premium knowing there will be a delay in payment. Or you can accept that it is your Dad's relationship with those clients and stay out of it. He is right, that is how some people pay, hence the bad debt expense and its associated estimate, but these folks do pay. If you only have a few, you are probably lucky. When he retires and it is your practice, you will have more of a say over your clients. Good luck finding only those who pay timely and in full.April 27, 2020 at 10:31 pm #2988383fsugirl2005Participant
Another option is to get an ACH service through your bank if possible and ask the client if you can obtain their banking info from them. Have them sign an ACH agreement giving you authorization to draft their account monthly if they don't want to pay in lump sum. Maybe have them pay their fee over 3 months? At least you'll be getting something.April 27, 2020 at 11:40 pm #2988404LongShotParticipant
Are they really “great” or even “clients” if they don't pay? Clients pay, charity cases don't pay. Send a letter saying, basically, “this is what you owe, we aren't doing your current year's taxes or any bookkeeping until this has been paid.” Maybe they pay, maybe they go somewhere else…they'll probably just pay though.April 28, 2020 at 12:02 am #2988413Jeff Elliott, CPAKeymaster
Start calling them once a week. Be firm, polite, and annoying.April 28, 2020 at 11:52 am #2988659turo9992000Participant
We had clients like this that would take almost a year to pay, or would only pay when they needed something. At our firm we basically just started calling people and asking them if there is an issue and how we can help them pay us. What we came to realize is that some clients do indeed pay very slowly, and some had another problem. A lot of time they didn't understand their bill and would not pay rather than calling us to clarify. After that we started adding a lot more detail on the invoices and making it very clear on the invoice that they can pay online or on the phone.
Our AR is still high, but we are improving, our next step is to stop doing work for the slow payers and request payment up front.April 28, 2020 at 1:48 pm #2988788ReckedParticipant
I'm like a call girl, money up front.
I don't release the work until I'm paid.
At my day job we have lots of these deadbeat type tax clients. Don't hear from them all year and then they pay the prior year's invoice when they want the next year done.
My boss still lets it slide, and figures late money is better than no money, but my feeling is, what if they find a new accountant, or die before they need something else.
I've switched all my slow payers over to retainer/cash and carry only.
Sometimes I lose the client over it, but I'd rather not do the work to begin with, vs doing the work for free.
It's a delicate issue for sure, and your father has let them get into that habit, and has personal relationships with them and doesn't want to cause confrontation, etc.
I get it, it's tricky. But sometimes you just need to lean on them to enforce proper behavior.
There are 2 types of people in the word. The ones that hate owing anyone anything, and will pay almost immediately. And the other type that is completely out of sight, out of mind, and have no problems not paying you. Those entitled types usually feel you probably make lots of money, so you can afford to not be paid in a timely fashion.April 28, 2020 at 2:19 pm #2988809
Thank you all for the replies! I think a solution will be a hybrid of what you all have suggested.
All of these individuals know how much they owe us on a monthly basis and exactly what for. They choose not to pay simply because my dad has allowed it over the years which is tragic I think. In aggregate these individuals owe us over $100,000 and my dad's nonchalance about it is shocking to me.
Thankfully most of them pay in full and on time, it's just this handful of clients that don't. I suppose it's my dad's issue more than mine but still, at some point it'll fall in my hands.April 28, 2020 at 5:05 pm #2988980MikeyParticipant
Most of my clients are on a monthly retainer. I just find it is so much easier. They can call and e-mail as much as they want, and get their books and payroll done, without getting several bills each time. It just makes sense to me. The ones who aren't often don't pay for several months, and it is somewhat awkward discussing those things with them when I want to focus on being their CPA, giving them accounting/tax advice, etc. It's also nice because you can really budget/plan as a business owner with all of your clients paying each month at the same time.
The trouble I'm having right now is getting bogged down with phone calls/e-mails from my growing tax business. I can't bill for five or six minutes of my time, but when i have hundreds of people wanting five or six minutes of my time throughout the year it gets tough.April 28, 2020 at 5:29 pm #2989019
@Mikey, we're similar in that our monthly fee includes consulting, payroll, fin statements, etc. (not taxes).
I definitely understand where you're coming from with respect to getting swamped with calls and emails. I think that comes down to what I was talking about above. Even if I don't send a client an invoice every month, they now what work I'm doing for them and they know how much I'm charging. To have months or even a year go by without them taking it upon themselves to pay is wrong, just as it's wrong for a client to think that they can call you 20 times a day. At some point it comes down to common sense and professionalism which apparently some people don't have.May 22, 2020 at 12:40 am #3007581AenXParticipant
I've been on the other side. CEO was making millions (a month) and had the mentality that late fees are scam, and bookkeeping and CPAs are some sort of leeches that he tolerated until they became too fat. Normally, he would pay a lump sum once a year and would play some transparent play of how poor he is and how business going to die any moment now.
It's a mentality thing, so I'd get rid of those. They are nothing but a liability for you. If they can't get your payment once a month – let them go and find someone else