Safeguarding your practice: Rethinking client relationships as DIY tax returns become a reality

Dec 12, 2023 | Business Strategy

Historically most clients stay with their accountant for many years. They generally move only when they feel their accountant doesn’t care enough about them, puts their fees up significantly or messes up.

Of course there are also those clients who only ever wanted to go to the cheapest accountant around and move on whenever they think they can do better.

My advice in this blog post about safeguarding your practice largely concerns only what I might call ‘simpler’ clients.  But there are wider lessons too 😉

At some stage, many clients with ‘simpler’ needs will decide (wrongly perhaps) that they don’t need an accountant any more.

I had thought this might not happen until MTD for income tax becomes a reality. But I have already started to see a change.

The Rise of DIY Tax Returns
This year, in the Facebook groups I frequent, a number of magicians, speakers and consultants have been almost boasting about ho, for the first time, they have completed their own tax returns.

They say things like “It was so much easier than I expected” and “If I’d known how straightforward it was, I’d have stopped paying my accountant years ago”.

I’m not suggesting this is happening across the board but it’s a trend I am sure will continue.

I hope, but do not know for  certain, that none of those who started to do things themselves had good strong relationships with their accountants.

Cloud bookkeeping is ‘easy’

We have all seen the adverts that suggest that cloud bookkeeping services can effectively replace an accountant.

I suggest that these are having a related impact on two types of people:

1 – Those who do not feel they are getting value from their accountant; and who feel that it must be worth trying to do it themselves.

2 – Those who are starting a simple business and believe, more than such people did in the past, that they can cope without an accountant.

You are only at risk of losing clients if any of your clients are in group one. BUT remember too that people like this won‘t be looking for a new accountant so you may find it more challenging to win new such clients in the future.

And an increasing number of those in group two may mean you need to up your game if you want to attract small start up businesses as new clients.

Simply stated, the  extent and level of the support from online bookkeeping services, together with apps, add-ons, AI support and extensions, will only  grow each year.  And this is bound to impact an increasing number of clients’ perceptions each year as to the value of the work you need to do for them.

Many will look to pay lower fees for what they perceive to be a simpler service from their accountant. Indeed, as I have started to see happening, they may try to do without you all together.  This will be most often the case if they feel that you do not provide sufficient peace of mind or added value to justify continuing to pay you an annual fee.

This is a double-edged sword as other accountants’ unhappy clients may be on the look out for someone more focused on providing such peace of mind and pro-active advice.

Categorising Your Clients
In this context I would suggest that it makes sense to consider the impact of upcoming developments on your client base by categorising your clients in terms of the level of service required, the amount of time they take and their future value to the practice.  I have summarised this approach as follows:

  • Complex (or sophisticated) clients – those that require advice to resolve issues on a regular basis
  • Ambitious clients – those that recognise they benefit from your business advice, but whose affairs are not very sophisticated or complex
  • Typical OMBs – the majority of  ‘Owner Managed Business’ clients
  • Sole traders, consultants, contractors – those swapping their time for money and whose growth is therefore limited by the time they have available to work.

This is quite distinct from more traditional categorisation approaches, such as the ABCD client types I have referenced before:

  • A = Best clients (however you define them)
  • B = Those with the potential to become A clients
  • C = Those who are no trouble but are unlikely to become A clients
  • D = Those you’d rather not act for.
    Most accountants know only too well who are their D-list clients 😉

Each accountant I have worked with sets their own criteria when identifying their ‘best’ clients. Fee levels may have a bearing but so too may other factors such as the range of services required, each client’s attitude to you and to paying decent fees as well as their propensity for referring other good clients to you.

Clearly you want to nurture and keep in touch with your A-listers. Many, if not all of them, will be Complex or Ambitious (as defined above).

The distinction between clients on your B-list and C-list is less crucial.

If you ever get this far, the value comes in identifying those B-listers who, with some encouragement could become A-listers. And those C-listers you want to retain even though they aren’t contributing very much. Crucially, they are good payers and nice to deal with so should not be confused with D-listers.

In contrast, the four new categories I have highlighted are intended to focus your attention on those clients most at risk as compliance work becomes more commoditised, as clients become more familiar with cloud accounting systems and as AI further simplifies the role of the traditional accountant.

Many of the sole practitioner accountants I speak with often suggest that a majority of their clients are in categories 3 and 4 above.

Looking at them in turn:

Sole traders, consultants and contractors
As I have started seeing already, the likelihood is that, in a few years’ time many of these clients will perceive less need, than they do now, for accountancy support – at least until HMRC start asking tough questions.

Much of the recurring compliance focused service they get from you will fall in value due to the increasing popularity and ease of use of bookkeeping apps and new simplified tax filing obligations.

This means that the fees that such clients will be prepared to pay you each year will also be lower (or maybe non-existent!). Chances are they won’t be paying more than now or requiring much in the way of ongoing advice.

Typical Owner Managed Businesses
Much the same will be true here as for the sole traders etc. I distinguish them though as they could grow, so they may have more potential for additional services and advice.

The question is whether YOU have or will build the skills to provide and charge for those additional services and advice?

These clients may also need help with more frequent enquiries from HMRC.

The related question will be whether you can ensure that such clients appreciate the value of the advice you can provide to them and that they are willing to pay decent fees to you for such advice.

Attracting more ambitious and/or complex clients

Those clients you most want to encourage and retain are those in the first two categories (Ambitious and/or Complex). The sooner you start focusing your attention  on winning and retaining such clients the more confident you can be that your practice will survive and thrive in the future.

To what extent do you currently attract and advise Ambitious clients who recognise the value of your business advice (and are both willing and able to pay for this)?

What about those ideal (for many) clients, whose affairs are Complex such that they regularly require your advice on a range of issues?

These might include: property/business acquisitions, sales, HMRC challenges, specific tax incentives, anti-avoidance rules and so on.

If you do not consider these to be your areas of expertise at the moment I would encourage you to start expanding your skill set so that you are better placed to retain these clients in the future and to win new ones too.

Larger firms have long recognised the importance of focusing on clients who fall into the Complex and Ambitious categories. Historically though this has been because the smaller and less complex clients are less economic for bigger firms to service.  Imminent developments in technology mean this could well become the same for smaller firms too.

What’s next?

Once you have categorised your clients you can start to forecast the likely impact on your firm’s finances and resource requirements.

Historically you may have assumed that little will change in the foreseeable future.

I have echoed these views for a long time now.

But we are now approaching a tipping point. You can probably continue with those assumptions for another couple of years but I’d strongly encourage you to forecast what might be happening thereafter. Then you can start planning now so that you don’t lose out or have to panic as you play ‘catch up’.

If you’d like to have a chat about how you can promote and build your practice so that it is sustainable into the future, feel free to book a call with me >>>


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