keeping bad clients can do more harm than you might think.
by alan anderson, cpa
transforming audit for the future
have you ever sat down with your team to get their honest opinions about what it’s like working with each one of your clients? this is an essential exercise if you want to build an empowered team. their experiences with the same client and people may differ vastly from yours. clients may treat the audit partner with respect but not the staff.
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your team wants to do quality work, but they may struggle to deliver if the clients don’t honor their end of the agreement.
it can be nearly impossible for your team to do a great job when the clients deliver incomplete or late information. it sets a poor example of leadership for your team if you retain all the d clients year after year. i have team members who left audit firms partly because of the wrong clients their firms would not get rid of. here are some of their observations:
unequal relationships: management took the statement “the customer is always right” to a nearly abusive extent. there were no consequences to the client if they provided information late. the deadline for delivering the audit never changed, so staff would bend over backward and practically do back flips to get the work done on time. firm management let clients push them around and never pushed back on holding clients accountable. whatever the clients wanted, the staff had to provide.
presenteeism over quality of work: even though someone was completing all their work and doing an excellent job, if that person wasn’t in the office all the time, that meant they weren’t working. a guy would walk the floor every afternoon, noting who was there and who wasn’t. the number of hours spent in the office preceded the quality of work.
only the revenue side mattered: for some partners, pulling in as much revenue as possible was all that mattered. it didn’t matter that fee realization would be terrible because the clients’ books were in such bad shape, or the fees might not cover the costs of getting the work done. the team would suffer to turn around those garbage books. nonprofits were especially notorious in that regard. they didn’t care about the audit or their books but needed audited financials. so, the team would spend hours or days cleaning them up before they could even start.
the clients never improved: realization only improved year to year because the staff was more familiar with cleaning up messy pbc schedules and could more easily identify the source documents needed. this meant they could finish the work faster, which was still tedious and time-consuming. firm management never took the opportunity to teach the client how to get staff what they needed to make it easier to get the audit done.
you’ll need a pile of employees to get that work done: when firms have a high number of d and c clients, you need more people to get the mechanics of the work done. that means that firms retain employees they should have fired because they need the warm bodies to move the work through the process, even if those warm bodies get the work wrong more often than they get it right. firm leaders feared the hit to morale if they fired someone because everyone would now have even more work to do. however, firms can be more profitable with fewer clients and a smaller, tighter and better team of auditors. plus, if you keep some of these awful employees, you risk running off your a and b clients because they won’t tolerate working with poor-quality staff. you also risk running off your best people.
be the role model no one wants to emulate: many of us rose through the ranks, working long hours and working hard. but today’s younger generations – and plenty of the older ones – want a different quality of life. when supervisors and new managers see younger partners working all the time, never seeing their families and in poor health, it doesn’t give them much hope for the future. some partners would still be hard at work at 7 p.m. or 8 p.m., even into july and beyond, working on messy jobs that no one else knew how to fix. your team sees that it worsens the longer they stay on the job.
complaints like these are common across accounting firms of all sizes and exemplify how audit leaders have failed at business-mindedness. your team can’t be empowered if they can’t speak up about bad clients. they can’t provide relevance if they’re too busy to pick up their heads and think about what’s essential for the client. quality suffers when they rush through the work to meet the deadlines. and they’re certainly not going to try an innovative approach if they don’t feel support from above.