Why Accountants Are Afraid to Collect From Their Own Clients

Last week I had the pleasure of speaking about credit and collections at one of the local Illinois CPA Society Chapters of which I'm a member. There were about 30 CPA's present and most are either operating their own small CPA offices or are working at small to medium size CPA firms.

As a CPA myself, it's a little unusual for me to be working in the credit & collections field since most CPA's are inclined to work in the areas of tax, auditing, financial analysis, cost, budgeting, and estate planning. As such, most CPA's are a little curious about me and whenever I have a chance to speak to a group, I usually get a descent crowd to attend.

At the start of the seminar I asked the group of attendees to raise their hands if they have any clients that are outstanding and not surprisingly almost everyone of them sheepishly raised their hands. I then asked them for the average length of time that their clients are past due and I was totally blown away by the answers.

For the most part many of the attendees told me that they have clients with unpaid fees well past two years from when the services were performed. I asked them how they could let these clients become so delinquent and following below are a list of the most common reasons that I would like to share with you.

1) We CPA's often accept the idea that we may not get paid for our services even when we know that from the start the client is having terrible cash flow and other financial issues.

2) We very rarely ever think in terms of confirming the credit worthiness of our clients. Perhaps we are too focused on just putting together our clients' financial statements and tax returns without going below the surface of what the numbers actually mean.

3) We are very hesitant to get too aggressive with our clients' past due bills because we are concerned that an aggressive approach, including 3rd collections, will become known in the business community and will impact our firm's reputation.

4) Some times when invoices are sent late and the client baulks at the cost, it's better to just let it sit for a while until the next engagement and try to couch the unpaid fees into the new fees (yes, I was told this by one person and the room fell silent).

5) Just don't have the time, energy, and confidence to communicate clearly with some clients over certain fees and best to write them off.

When I heard their reasons I explained that CPAs must recognize that their firms are also businesses that need to be properly managed. And a key part of that is establishing and executing an effective credit and collection policy that sets out the the guidelines for determining creditworthy clients and procedures for collecting past due accounts in a professional and effective manner.

CPAs also need to learn how to communicate their value in a way that shows clients that what they are paying for is worth it. Failure to improve an ineffective credit, billing, and collection process will hurt their firm’s revenue, cash flow, morale, and in the end their own viability.