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Disengaging with a Client to Benefit Your Firm

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By Suzanne M. Holl, CPA

Even CPAs who are highly skilled at bringing in new clients and nurturing those relationships will periodically encounter situations that call for a client disengagement. Disengaging with a client has the potential to be unpleasant, but this measure can be a practice management tool that increases firm profitability and creates a better situation for both the CPA and the client.

Should a client begin to expect more from you than what your experience and staffing enable you to provide, the resulting expectation gap could lead to a deterioration of the professional relationship. But that potential animosity doesn’t have to happen. Disengaging skillfully is the ability to identify clients and situations that call for a split and to recognize when to part ways peacefully.

What Is Disengagement?

The disengagement process is a critical part of a successful practice, even if it is never emphasized as much as the engagement process. When initiated by the CPA, disengagement seeks to formally terminate the client relationship in the most positive way possible, freeing each party to pursue other professional ties.

With a skillfully handled disengagement, you are left with more time to grow your business by selling new services to existing clients or bringing in new clients. The client is provided the opportunity to find a successor CPA who may better suit their needs.

When to Disengage

Having a proactive attitude, and treating disengagement as a practice management tool, means, in part, establishing a system of evaluating your client base on a regular basis, be it annually or semi-annually. Incorporating such a plan enables you to monitor your client base and note any changes that may impact your professional relationship.

Of course, even the most proactive evaluation plans may be thwarted, creating a need to disengage immediately due to a critical situation (such as the discovery of fraudulent activity). However, having a procedure that enables you to regularly monitor clients, you can better protect yourself and your business from situations that may escalate into crises calling for disengagement.

Another benefit that comes from regularly evaluating clients is that you place yourself in an excellent position to gauge their changing business needs and therefore sell them new or different services that complement their growth or change.

Care needs to be taken when withdrawing from an engagement after it has started, especially when the scope of the engagement includes audit, review, or compilation. Since attestation engagements are often used by clients to obtain financing or satisfy loan covenants, pondering a split while an engagement is in process requires careful attention to the potentially negative effects.

The Opportunity Costs of Continuation

Only you can decide whether it is in the best interest of your firm to continue with a client who makes you uncomfortable, upsets your staff, or otherwise exhibits unseemly behavior. But do consider the time and energy your firm spends on serving that client. Working with certain clients may be so disruptive and upsetting that it is simply not worth the money they bring into the firm.

You should also carefully consider changes to a client’s business. New management or moves in a new direction can create problems for you if you are not professionally staffed to perform the additional or different services the client will require.

In fact, if you are not qualified to accommodate a client’s new needs, yet choose to accommodate the client rather than disengage, you make yourself vulnerable to litigation. Not only are you inviting a potential lawsuit, but the firm also is losing the opportunity to provide additional services to the existing client base and to build a stronger base in your area of expertise. Consider different options to best serve the client, such as a joint venture with a friendly accounting firm that specializes in another area of expertise. Such arrangements can be quite successful.

CPAs often try to adjust to a client’s behaviors or needs, especially for long-time clients. However, eagerness to make adjustments can cause you to overlook risk factors and eventually expose yourself to disputes and lawsuits.

Difficult Clients

When performing a regular screening of existing clients, pay special attention to difficult or manipulative clients. Difficult behavior, such as consistently delinquent payment, should not be ignored. Take swift action on your own behalf to investigate. Here are a few questions intended to help you and your staff get to the heart of the matter:

  • What is causing the problem?
  • Who is causing the problem?
  • Does the client’s behavior indicate that there is a problem with the service provided?
  • Are you dealing with a manipulative client?
  • Is the problem due to a personality conflict?
  • Could someone else better serve the client?
  • When did you first realize you had a problem with the client?
  • What tipped you off – an unpaid bill? A change in attitude?
  • Are you allowing emotional ties to overshadow professional concerns?

It is possible that the behavior is a reaction to something that was done months ago but is still bothering the client.

Additional Questions

Dealing right away with difficult behavior may save a relationship and help you avoid disengagement. On the other hand, it may confirm that it is time to sever the relationship. Here are a few questions to help you clarify the situation:

  • What can your firm do to better communicate with the client?
  • Does the client feel the fees charged by your firm are too high?
  • Was a new staff member assigned to the engagement?
  • Is the client suffering a business or personal hardship?
  • Is your firm’s billing method clear?

How to Disengage

When you decide to disengage, all efforts should be made to terminate the relationship professionally and formally, in writing. At a minimum, a disengagement letter should always contain the following:
• A clear statement that you are disengaging and the effective date of the disengagement (e.g., We must formally end our relationship with you as your accounting firm [effective immediately, or as-of date])
• A description of any work that is in process or unfinished
• A statement of any due dates or filing deadlines that exist with regard to the work, whether finished, in process, or unfinished

Review and edit your disengagement letter carefully to ensure that it is professional, objective, and rational. Situations that provoke disengagements are often emotionally charged. Don’t let your letter reflect your personal feelings – you don’t want your client to feel antagonized in any way. When done effectively, disengagement can leave your client feeling that you have acted in the best interests of both parties.

Disengagement is an important practice management tool, and knowing how to do it skillfully and professionally can help you expand your practice and avoid liability. Any time you need advice about a client situation or a disengagement letter, call your risk adviser.

Suzanne M. Holl, CPA, is senior vice president of loss prevention services with CAMICO.

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