The Tax Practitioners Board (TPB) recommends that accounting firms formally re-engage clients regularly, preferably on an annual basis. It further recommends re-engagements occur when there is a change in the client's circumstances, such as the appointment of a new director or even business growth.
However, according to a survey of 800 Australian accountants conducted by client engagement and commerce platform Ignition, more than 80% of accounting firms are not taking this advice.
“80% of accounting firms are not re-engaging clients as regularly as the TPB recommends.”
Ethan Cooney, Senior Partnership Manager at Ignition, says most accounting businesses aren’t aware of what is mandatory and what is a recommendation. Typically, he sees firms fail to re-engage as regularly as they should due to the administrative burden of doing so.
Regular re-engagement reduces professional risk
He says this situation is unfortunate because outdated agreements can lead to scope creep, an increase in debtor clients, and has implications for insurance claims.
“If there is incorrect information submitted in a business grant application, a fee dispute or professional indemnity insurance claim, the engagement letter is the first port of call. If an up-to-date letter does not exist, accountants are less likely to be covered under their professional indemnity insurance,” says Cooney.
“If an up-to-date letter does not exist, accountants are less likely to be covered under their professional indemnity insurance.”
There’s also a strong business case for engaging and re-engaging clients as quickly as possible. The Good, the Bad and the Ugly of the Australian Accounting Profession report from Business Insights shows that when it comes to cash flow, the average lock-up time experienced by accounting firms is 76 days. A failure to formally engage clients quickly contributes to this length, due to expectations not being set.
Old or incorrect terms in the engagement agreement can also lead to firms being forced to write off fees in the event of non-payment, not to mention wasting time that could be used to win and retain new business.
Dealing with scope creep
Provisions for out-of-scope work and guidelines for fee adjustments should be included in your engagement terms.
“Beyond managing risk, there’s an opportunity to review and confirm scope each year with clients,” says Cooney. “Accountants sometimes let terms blow out and do lots of additional work, all in the interest of helping clients, which leads to writing off a lot of billed hours.”
Accountants who re-engage regularly can avoid having pricing discussions and can use re-engagements to get billing details into a system to avoid payment lag.
The benefits of an engagement platform
One way to streamline client re-engagement is with an integrated client engagement and commerce platform, such as Ignition.
Ignition makes it simple to win new business with impressive digital proposals, engage new and existing clients with a clear scope of work, and get paid promptly with automated payment collection.
The platform offers benefits unique to CA ANZ members. They receive exclusive service and pricing templates and access to specialised onboarding and support so they can hit the ground running.
Importantly, the latest CA ANZ engagement letter template – that can be quickly modified to suit business needs – is integrated on the platform.\
“Manually staying on top of client engagements can take hundreds of hours per year,” says Clooney. “Putting in place the right systems can save you time, ensure compliance, and solve several business problems simultaneously.”
Find out more
Ignition has been vetted by CA ANZ’s professional standards team and has so far assisted 500 members get on top of their re-engagement. To find out more about the platform's unique benefits for CAs, visit http://info.ignitionapp.com/acuity.