The February Tax Practice Monthly addressed all aspects of terminating tax clients. Our speakers were Henry Grzes, CPA and Deborah Rood, CPA. Henry is a Lead Tax Technical Manager at the AICPA and Deborah is a Risk Control Consulting Director at CNA Accountants Professional Liability Risk Control. Henry and Deborah both have experience in public accounting from their previous roles.
Henry and Deborah explained three important aspects of terminating tax clients:
- Client acceptance procedures
- Reviewing the current client base
- Recommended procedures for client termination
To begin the discussion, Henry explained why one of the most important steps is to ensure that your firm has client acceptance procedures in place. These procedures involve identifying risks that might be associated with a particular client and ensuring that your firm has both the time and experience necessary to properly service the prospective client. Deborah mentioned that a lot of the problems she sees in her role with CNA deal with CPAs “dabbling” in areas. Deborah encouraged the listeners to perform proper due diligence to ensure that the potential client will be a good fit to the firm.
Both speakers expressed the need for firms to review their client base on a regular basis to ensure that the current clients still meet the acceptance criteria. Henry discussed the “80/20 rule,” which simply means that 80% of your revenue and 80% of your complaints normally come from 20% of your clients. Based on that principle, it is important to identify those clients to determine if they are potential candidates for termination or if you feel that, with communication and work on both sides, the client could be moved from a “bad” client to a “good” client.
Once you have determined that the client in question is a candidate for termination, the speakers discussed the recommended procedures for your firm. Henry mentioned the importance of reviewing the AICPA rules on client termination and informing your professional liability insurance provider, and potentially your legal counsel. Then, the decision, with all the relevant facts, should be documented in a memo. Finally, you should plan your communication strategy with your staff and the client.
The AICPA Tax Section has resources to aid in terminating tax clients:
- Client Termination Sample Letter: Sample template to help you draft the correspondence with your client.
- Client Termination Checklist: Checklist to assist you in the process of determining if it is necessary to terminate a client.
- Tax Practitioner's Toolkit: Resources to help you position your practice as the premier provider of tax services while saving you time and money.
Throughout the event we were able to answer several questions about past experiences from the speakers. Listen to the full webcast archive in our webcast archives and download the presentation material.
Join us next month on our Tax Practice Monthly: Busy Season Workflow Management.