Tax Practice Management: Managing Toxic Clients

October 23, 2015

Perfect people don’t exist. My 10 year old son reminded me of this when he excitedly shared that he had learned the Ten Commandments from a book he was reading. We may strive for perfection, or put others on a pedestal, but in reality none of us does everything right all the time. The same applies to clients, so the key is to determine which offenses can be overlooked and which require some action on your part or theirs.

I share this because I believe that often when a situation gets heated, the natural response is to take an extreme action, even if the conflict resolution isn’t necessarily a negative action. When there is conflict with a CPA and a client, the pendulum swings from taking no action to firing the client on spot. Having been married for over 20 years, I can say that this behavior is not exclusive to office relationships. A marital disagreement may end in the “silent treatment” or the pillows being thrown on the couch promptly followed by a slamming door.

With a personal relationship it isn’t healthy to have extreme responses to conflict. Hopefully there is a mutual desire to identify the problem, agreement to take action, and a commitment to be successful.
Our speakers on the recent webcast, Managing Toxic Clients – When to Rehabilitate vs. Terminate approached the issue in a similar manner, and strayed from the usual approach of simply identifying and firing bad clients.

Instead they spent some time helping the tax practitioner understand the importance of trust and how it plays out in the professional relationship.  They emphasized the importance of setting proper expectations and boundaries to minimize the likelihood of conflict.  They also shared examples of possible toxic clients to reinforce the concept that risky clients are not always the ones screaming at the staff, but instead may be more subtle, if equally dangerous.

Perhaps as important, the speakers backed up the discussion with references to the professional standards that govern all CPAs in tax practice. Not just that they exist, but how a toxic client may be putting the CPA at risk of violating these standards.

So the next time you find yourself questioning a client’s behavior or integrity, consider the following:
  • How may you have contributed to the situation?
  • Is it possible to salvage the relationship?
  • What risk will a lack of action impose on yourself and your firm?
  • How will you terminate the relationship if appropriate?
And most importantly, develop a process going forward to ensure that clients are screened upfront, trained, monitored and managed throughout the relationship.

Visit some of these AICPA resources for additional information and tools.

Managing Toxic Clients - When to Rehabilitate vs. Terminate (webcast)
Firing Clients Can Be Good for Business (The Tax Adviser, March 1, 2013)
Pruning Clients to Make More Money and Provide Better Service (The Practicing CPA)
Client Acceptance Questionnaire
Client Termination Checklist
Sample Client Termination Letter