Putting off awkward client conversations is costing Australian accountants over $100k each year

Australia, August 24th — According to 97 per cent of accountants and bookkeepers surveyed in a new report, unrecovered out of scope work is costing Australian firms on average over $100,000 each year. What’s more, by putting off awkward client conversations, 43 per say their mental health has suffered.

The new findings in the ‘2022 State of Client Engagement’ report released by Ignition, the world’s first client engagement and commerce platform, shines 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 557 key decision makers in accounting and bookkeeping firms with 1-50 employees in Australia.

“As a former accountant, I’ve experienced my fair share of awkward client conversations,” said Guy Pearson, co-founder and CEO at Ignition. “For many accountants and bookkeepers, the fear of losing a client and the potential impact to the firm causes them to put off having these awkward conversations. We now know this has the opposite effect, with detrimental impacts to their firm, their people and their health and wellbeing.”

Awkward client situations a mainstay in the professional services industry 

In Australia, nine in ten (93%) of accountants and bookkeepers have encountered an awkward client situation, with accounting professionals naming the following as the most awkward: 

• 78% having to chase clients for late payments
• 76% advising clients that the work they have requested is out of the agreed scope
• 73% finding errors in the client proposals or engagement letters sent manually

On average, one in two accountants and bookkeepers encounter these awkward client situations at least 2-3 times in a month. The most common awkward situations encountered each month include: 

• 53% not billing clients for out of scope work
• 51% chasing clients for late payments
• 51% commencing client work without a signed letter of engagement
• 50% sending clients proposals or letters of engagement with errors

Avoiding or delaying awkward client conversations is the norm

In Australia, 95 per cent of accountants and bookkeepers said they have delayed or avoided having an awkward conversation with a client, with 72 per cent saying they were trying to improve or maintain the client relationship. According to respondents, the top barriers to having an awkward conversation are:

• 41% are concerned about the clients’ negative response or reaction
• 37% lack the confidence to confront the client
• 35% lack the information needed about the agreed scope of work
• 33% lack the the skills needed to negotiate with the client

For many accountants and bookkeepers, the fear of losing a client is stronger than the desire to confront or negotiate with a client. In fact, two in five (41%) accountants and bookkeepers have gone so far as to write off all or part of an invoice to avoid having an awkward conversation with a client. When managing increases in the scope of client work, 35 per cent admit they just absorb the increased time and costs themselves.

Avoiding awkward client conversations incurs financial costs 

By putting off awkward conversations, accountants and bookkeepers in Australia 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
• 36% saw a negative impact to the quality of the work
• 31% faced cash flow pressures
• 23% had to shut down part of the business due to profitability issues

On average, accountants and bookkeepers estimate that out-of-scope work that hasn’t been fully billed is costing their business $8,648 each month. That equates to more than $100,000 each year. In addition:

• 95% experience late payments
• 40% of client invoices are paid after the due date
• On average, client invoices are 31 days overdue

“Overdue client invoices are endemic to accounting firms,” said Pearson. “What the research tells us is that accountants are unwilling to confront clients about bills owing, so they absorb the costs themselves. “In a high inflationary environment, where cash flow is king and a vital ingredient for business survival, firms can no longer afford to put off these client conversations or leave their outstanding payments to chance.”

Avoiding awkward client conversations is taking toll on mental health 

Of accountants and bookkeepers that avoided or delayed awkward client conversations, two in five (43%) said it had a negative impact on their mental health and others in the practice. They also report: 

• 42% report staff are overworked
• 37% report  staff have taken sick leave or time away from work
• 35% report low morale among staff members, as well as resentment (35%)
• 33% report staff have quit and they have difficulty in retaining staff

To learn more, you can find the full report here: https://www.ignitionapp.com/au/state-of-client-engagement