The bill I just received from my accountant absolutely scorched my hands when I took it out of the envelope, and now I’m trying to decide whether I should be looking for a new one. Some of your clients could be thinking of withdrawing work from you—or even looking for a new lawyer—for the same reason. What brought this about? What should this firm have done to avoid this situation? And what can you do to sidestep this trap?
By way of background, I’ve been using a local accounting firm, one that could be considered a “big firm” by Montgomery, Ala., standards, for several years. They handled some estate tax work for me and have been doing income tax returns for my mother, my husband and me ever since. The work has been excellent, and the people have been a pleasure to work with. So it seemed natural that when my mother moved to Montgomery and I hired someone to help her with her daily activities and light housework, and it was necessary to withhold unemployment compensation (UC) taxes, that we retained this same accounting firm to prepare the required quarterly UC tax return.
When I approached the firm to do this work, they didn’t tell me how much it would cost and, like many clients, I didn’t bother to ask. I had a good working relationship with the firm, and I assumed that the charge would be reasonable, as it had been with the other work they had done for me. When I got the bill for the first quarterly return, I was a little startled by how much it was. But I tried to look at the situation from the firm’s point of view. After all, they had to send me a reminder to provide the necessary wage information. Then, someone had to prepare the original and a taxpayer copy of the UC return and get all this back to me in the mail, along with filing instructions and a preaddressed envelope, so that I could write the necessary check and send it in before the filing deadline. Even if the tax payment was de minimis, the firm had to do almost the same amount of work for me that they would have done for a larger employer with many more employees. So I decided that, given the amount of work involved and the benefit to me (I didn’t have to wrestle with a tax return), the charge, though high, was probably reasonable.
But then something changed. The Department of Industrial Relations began to require online filing of UC returns along with electronic payment. The accounting firm suggested that I might want to start doing it myself. But I liked the convenience of having them take care of it and didn’t want to take on learning how to do something new, so I asked them to continue. Again, they didn’t offer a cost estimate, and I didn’t ask for one. The next time I received an invoice after two more quarterly returns had been filed, I saw that the price to prepare this return had gone up substantially. The accounting firm was now doing nothing more than entering a couple of numbers and some bank account information into a website and hitting one button to file it, then printing a Web page and mailing it to me. The return was prepared and filed with much less time and effort, yet they were charging me more to handle it. Needless to say, it’s time for me to make some changes.
A lawyer with good management practices could easily avoid problems like this—and the unhappy clients connected with them—with a few simple steps.
- From time to time, reevaluate your internal cost to perform a given service and take a hard look at how that cost compares with what you are charging for it, its benefit to the client, and the client’s ability to have the work done more cheaply by another firm or pro se. This is particularly important if your internal processes have changed and your client is aware of it. Adjust your prices accordingly.
- Never take on any new work, even for an existing client of long standing, without discussing the cost. The best way to keep a happy client happy is to make sure you are both on the same page regarding what something is going to cost before you start to do the work. If the client doesn’t ask, it’s your responsibility to bring it up.
- Never raise prices without letting an existing client know up front. Price hikes that come as a shock are one of the single biggest reasons that clients don’t pay bills or start looking for a new lawyer.
- Send your bill as soon as service is rendered. By waiting until after filing two quarterly returns to send the bill, the accounting firm may have saved itself the cost of an extra sheet of paper, envelope and stamp, but it deprived me of the ability to object more promptly to the price increase or to avoid its application to additional work.
- If a certain type of work just isn’t profitable for you under any circumstances, even to appease an existing client—one who otherwise brings the kind of good work you’re looking for, pays promptly and has the ability to refer more—just come on out and say so. The client would much rather hear that and make other arrangements than have you exert not-so-subtle financial pressure in the form of an unreasonable fee to get rid of the unwanted work.
You can do a lot to keep your existing clients happy—and keep them sending you more work—if you continuously think about the services you are providing, your costs to do so, the benefits your clients are receiving and their ability to find other alternatives easily. Then, you can work to keep these elements in perfect balance.