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According to 95% of accountants and bookkeepers surveyed in a new report, unrecoverable out of scope work is costing US firms on average $76,636 each year. What’s more, by putting off awkward client conversations, 40% say their mental health has suffered as a result.
The new findings in Ignition’s “2022 State of Client Engagement” report help shine 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 506 key decision-makers in accounting and bookkeeping firms with one to 50 employees in the US.
Matthew Kanas, head of AMER at Ignition, says that having awkward conversations with clients is one of the parts of working in the professional services industry. “While we knew anecdotally that accountants and bookkeepers encounter these awkward client situations, this study reveals that avoiding or delaying these conversations with clients can have detrimental outcomes on firms and their employees.”
Awkward client situations are a mainstay in the professional services industry
In the US, virtually all (94%) accountants and bookkeepers said they have encountered an awkward client situation in their practice, including:
- 94% having to chase clients for late payments
- 90% advising that they have clients that are not being billed for out-of-scope work, with 43% of respondents saying their firm just absorbs these costs and work
- 88% experience clients being sent proposals or engagement letters with errors, 2-3 times a month on average
Avoiding or delaying awkward client conversations is the norm
The report found that 88% of US accountants and bookkeepers have admitted to delaying or avoiding an awkward conversation with a client, including 68% who said they were trying to improve or maintain the client relationship.
According to the survey respondents, the top barriers to having an awkward conversation include:
- 39% are concerned about the clients’ negative response or reaction
- 34% lack the information needed about the agreed upon scope
- 34% lack the skills to negotiate with clients
More surprisingly, to avoid having an awkward conversation with clients, two in five (38%) accountants and bookkeepers admit that their business has written off part or all of an invoice in the past 12 months.
The financial cost of avoiding or delaying awkward client conversations
By putting off awkward conversations, accountants and bookkeepers in the US have traded short-term comfort for the long-term health of their firm.
The top financial and business consequences include:
- 41% experienced a loss of potential income for the business
- 35% faced cash flow pressures
- 21% had to shut down part of their business due to profitability issues
On average, accountants and bookkeepers in the US estimate that out of scope work that hasn’t been fully billed is costing their business more than $76,000 each year and in the last 12 months alone, 43% of respondents said the quality of their work had suffered and three in ten (30%) say their projects had run over budget.
In addition:
- 92% experienced late payments
- 31% of invoices were paid after the due date
- On average, client invoices past their due date are 30 days overdue
The mental health cost of avoiding or delaying awkward client conversations
Putting off awkward client conversations has also impacted the workplace culture of firms. By avoiding or delaying awkward client conversations, survey respondents reported detrimental implications for personal and team health and well-being, including:
- 43% low morale and 28% resentment among staff members
- 40% reporting that it has had a negative impact on their and their staff’s mental health
- 30% reporting that their staff have quit and they’ve had difficulty retaining staff
Kanas says the key to dealing with any awkward conversation is tackling them head-on. “By using tools that streamline the client engagement process, firms will either put an end to awkward client situations or make them easier to navigate. Tools like Ignition can help protect a firm’s bottom line, improve its growth, help employee morale, all while maintaining healthy and honest client relationships.”
For more information, you can find the full report HERE.
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