The new findings in the “2022 State of Client Engagement” report released by Ignition, the world’s first client engagement and commerce platform, shone a light on the financial and human cost to accounting and bookkeeping firms by avoiding or delaying awkward client conversations.
Conducted by YouGov, the study interviewed 557 key decision-makers in accounting and bookkeeping firms with one to 50 employees in Australia.
“As a former accountant, I’ve experienced my fair share of awkward client conversations,” said Guy Pearson, co-founder and chief executive at Ignition.
“For many accountants and bookkeepers, the fear of losing a client and the potential impact to the firm causes them to put off having these awkward conversations. We now know this has the opposite effect, with detrimental impacts to their firm, their people and their health and wellbeing.”
In Australia, 93 per cent of accountants and bookkeepers have encountered an awkward client situation.
Accounting professionals said the most awkward conversations they have to have with clients include having to chase clients for late payments (78 per cent), advising clients that the work they have requested is out of the agreed scope (76 per cent), and finding errors in the client proposals or engagement letters sent manually (73 per cent).
On average, one in two accountants and bookkeepers encounter these awkward client situations at least two or three times a month.
The most common awkward situations encountered each month include not billing clients for out-of-scope work (53 per cent), chasing clients for late payments (51 per cent), commencing client work without a signed letter of engagement (51 per cent) and sending clients proposals or letters of engagement with errors (50 per cent).
In Australia, 95 per cent of accountants and bookkeepers said they have delayed or avoided having an awkward conversation with a client, with 72 per cent saying they were trying to improve or maintain the client relationship.
According to respondents, the top barriers to having an awkward conversation are concerns about the clients’ negative response or reaction (41 per cent), lack the confidence to confront the client (37 per cent), lack the information needed about the agreed scope of work (35 per cent) and lack the skills needed to negotiate with the client (33 per cent).
For many accountants and bookkeepers, the fear of losing a client is stronger than the desire to confront or negotiate with a client. In fact, two in five (41 per cent) accountants and bookkeepers have gone so far as to write off all or part of an invoice to avoid having an awkward conversation with a client. When managing increases in the scope of client work, 35 per cent admitted they just absorb the increased time and costs themselves.
According to the research, by putting off awkward conversations, accountants and bookkeepers in Australia have traded short-term comfort for the long-term health of their firm with 41 per cent experiencing a loss of potential income for the business, 36 per cent saw a negative impact on the quality of the work, 31 per cent faced cash flow pressures and 23 per cent had to shut down part of the business due to profitability issues.
On average, accountants and bookkeepers estimate that out-of-scope work that hasn’t been fully billed is costing their business $8,648 each month. That equates to more than $100,000 each year.
“Overdue client invoices are endemic to accounting firms,” said Mr Pearson.
“What the research tells us is that accountants are unwilling to confront clients about bills owing, so they absorb the costs themselves.
“In a high inflationary environment, where cash flow is king and a vital ingredient for business survival, firms can no longer afford to put off these client conversations or leave their outstanding payments to chance.”
