STRATEGIES FOR IMPROVING CLIENT PAYMENTS PRESENTED BY SAM M. ALLRED, DIRECTOR AT UPSTREAM ACADEMY

OUR FOCUS FOR 60 MINUTES Every firm gives away some time (and the accompanying fees).  That’s as it should be.  Important and often unasked questions are: Who is deciding what you’re giving away—you or your clients?  What strategies and changes can you make to improve client payments and your bottom line? 

PRESENTATION ROADMAP Email questions to sama@upstreamacademy.com Observations regarding firm struggles with client payments Strategies for improving client payments Questions and answers Email questions to sama@upstreamacademy.com

 OBSERVATIONS REGARDING FIRM STRUGGLES WITH CLIENT PAYMENTS

OBSERVATION #1 When firm leaders harp on the need to bill clients in a timely and effective manner, many partners say they didn’t go to school to be bill collectors. They simply want to serve clients and let someone else bill and collect the fees.

OBSERVATION #2 Many partners do not think of themselves as stewards over their firm’s limited resources. Many feel that their primary objective is to serve clients (and prospective clients) regardless of the client’s ability and intent to pay for those services.

OBSERVATION #3 Many partners focus only on their top line book and fail to realize or acknowledge they are using scarce firm resources ineffectively.

OBSERVATION #4 When partners stay in their comfort zones and do the same things year after year, they are often working below their pay grade. When partners work below their pay grade, they become overly shy about billing and collecting from clients.

OBSERVATION #5 A systemic problem associated with write downs and write offs is the failure of so many partners to become recognized experts in one or more areas. Too many work diligently to get good enough to become a partner and then spend the rest of their careers competing with those who are equally good.

OBSERVATION #6 The costs to run an accounting firm rise every year and yet many partners want to do the same work each year and bill the same amount for the work performed.

OBSERVATION #7 Some partners are so excited at the possibility of landing a new prospect that they don’t want to do or say anything that might jeopardize the chance to win a new client. Many take on the role of a vendor in this due diligence process.

OBSERVATION #8 Too many client/advisor relationships get started on the wrong track (off by a few degrees). This creates a life-long challenging relationship where clients treat each bill as an invitation to debate something.

OBSERVATION #9 Most partners struggle to get rid of D clients who generally contribute little profit to the bottom line and always leave those who serve them with a pit in their stomach.

OBSERVATION #10 Nearly every report regarding clients served measures the revenue value of services performed rather than the cash collected. If cash in the bank isn’t the primary measurement, how do partners know how effectively they are using firm resources?

OBSERVATION #11 Too many partners got accustomed to minimizing their services in the recent recession and have lost the idea of creating profitable relationships with clients.

OBSERVATION #12 It’s too easy and common for some partners to stay so busy with one engagement after another that they fail to look at the profitability of the work they are doing. It appears that busyness trumps profitability in way too many cases.

OBSERVATION #13 Too many partners are reluctant to use retainers. And if they do use them, they often apply those retainers to the first payment due on the engagement, thereby negating the protective nature of the retainer.

OBSERVATION #14 Some partners do work others should do because the partners feel they can do it more efficiently than the staff. These partners generally feel their time is worth full value. When staff does the work, they find reasons to discount the work because of the “inefficiencies” of the staff.

OBSERVATION #15 Our profession has honorable people who wouldn’t think of shorting or delaying payment to someone they had personally engaged to perform a particular service. Unfortunately, firms are easy targets for clients who want/need to do immediate cost cutting or want someone to become their bank for short-term cash needs.

OBSERVATION #16 We are a bright, talented profession in almost every regard except in managing the service area in which we are the only licensed profession: financial statement audits. In this special area we have become increasingly cannibalistic, undercutting fees and creating bidding wars.

 STRATEGIES FOR IMPROVING CLIENT PAYMENTS

COURSE CORRECTIONS My focus in this presentation is to provide some strategies for improving client payments. Please realize that I’m not attempting to provide a process or a blueprint, as no two firms or partners are exactly alike. Think of these strategies as course corrections to improve your bottom line.

THE BIG ISSUE Why are you giving clients good service and letting them determine whether or not to pay your fees? Raise your expectations for being paid to include every minute you spend serving clients – unless you choose to donate the services. 23

1. TEACH THE STEWARDSHIP ROLE Help partners understand they are stewards over the firm’s limited resources and no partner has the right to use firm resources (including his/her own time) in an unproductive manner with a low ROI. 24

2. TRAIN ON CRUCIAL CONVERSATIONS Train partners in how to have difficult discussions with new clients and prospective clients and create long-term profitable relationships. 25

3. CREATE AN ANNUAL BILLING CLASS Work with one of your best billing partners to develop an annual class/workshop focused on best billing practices, including value billing (billing what services are worth versus the time investment). This annual class should be mandatory for all billers. 26

4. REQUIRE RETAINERS Require retainers for engagements if clients have not yet proven they can pay their invoices in full and on time. Be sure to hold the retainer and apply it against the last invoice on the engagement. 27

5. CHANGE ENGAGEMENT LETTERS Modify engagement letters to include payment plans for clients who are struggling to pay for services received. 28

6. USE AUTO PROCESS FOR 90 DAY BILLS Develop an automatic process that prompts a letter to clients when their AR is 90 days old. The letter should state that their services have been suspended until payment is received. 29

7. HOLD PARTNERS ACCOUNTABLE Partners need to be held to client acceptance, billing and collecting standards. Partner compensation should be affected when the partner is not meeting the expectations. This helps to remind partners of their stewardship responsibility. 30

8. TRANSFER OUT BAD CLIENTS Transfer out clients who refuse to pay good value for services they receive. 31

9. PROVIDE PARTNER TRAINING Train partners in how to have difficult discussions with slow pay clients. Hold them accountable for having these discussions. 32

10. PERFORM ANNUAL CLIENT REVIEW Develop an annual process to review your bottom clients and develop a plan to change the losing games. 33

11. OTHER CONSIDERATIONS Firms have found success establishing and implementing interim billing requirements. Firms should consider standardized monthly billing percentages (e.g., how much WIP should be billed by every biller every month). 34

 QUESTIONS AND ANSWERS Email questions to sama@upstreamacademy.com

UPCOMING EVENTS Registration deadline for 2014-2015 program – May 15 Management Presentations Avoiding the Managing Partner Traps and Pitfalls February 4 & February 20, 2014 How to Stay Refreshed and Maintain Balance as a Leader May 6 & May 22, 2014 Emerging Leaders Academy Registration deadline for 2014-2015 program – May 15 High Performance Firms Registration deadline for Workshop 1 July 24-25 – June 20 36

Thank You! sama@upstreamacademy.com