Compliance Problems

I remember when it was the Tax Man's responsibility to issue a Tax Assessment.

Those were the days. With self-assessment now an almost universal world-wide curse on the profession, this is just another compliance responsibility that, by proxy, lands on your desk every year for almost every client. Pain in the ass, isn't it?

We've seen many a "new, improved" method introduced by government bodies, for example in the UK in the early 90's we saw first a new filing deadline for companies to submit their audited accounts within 10 months of their year end. This caused wide spread panic among many smaller practitioners as most of their clients didn't even bring their records in for compiling their accounts until WAY after that time line had been passed!

Next, we saw tighter controls on financial services provided by Accountants, with self-regulation via the Institute and the need to disclose commissions earned on pension plans sold to clients. "Self-Assessment" and "Pay & File" was next up, introduced by the Inland Revenue to pass more of the work from them onto the tax payer, but guess where the burden landed?

We also saw the formation, and demise, of FIMBRA after "The Robert Maxwell Affair" and the establishment of the PIA. Next came the introduction of the "Registered Auditor" status and the additional costs, training and peer review requirements, adding to the cost of work-in-progress.

To add insult to injury, just to keep our practicing certificates, we were exposed to ridiculous increases in Professional Indemnity Insurance rates.

Now IR35 is causing a rumble for all firms who have "self-employed consultants" as clients. (Which firms don't?)

All this in less than 10 years, and that's only in the UK. For Practitioners in the USA, Canada and Australia the story has different players, but the tale is essentially the same.

Compounding the problem is the fact that the client expects all these issues to be dealt with by you, but doesn't expect it to cost him or her any more. In fact many DEMAND that you do it, and REFUSE to pay any more for their work.

But you know what? We only have ourselves to blame.

Fear of losing the client often dominates our actions at the office. Ask yourself if clients like this are really worth dealing with. You see, there are three reasons why we go to work in the first place:

If a client is not satisfying you on one of the above points, we can, maybe, live with it. If they fail to satisfy us on two of them, then the client becomes a borderline case. When all three are not satisfied, then they simply have to go.

To give you a better explanation, I'll describe a scenario I went through as a Partner in a small firm:

The Case Of Mark

Mark was a young entrepreneur. He flew in the face of adversity every day of his working life yet he survived.

He made a living by buying and selling anything he thought there was a market for, a sort of middle man if you like. He was street wise and energetic, and I couldn't help but like the guy.

However, he was terribly disorganized. His accounting records were little more than a cardboard box full of coffee stained receipts and three months worth of bank statements for the year!

I tried and tried to coach him on bookkeeping issues. He wouldn't listen. I tried to sell him my bookkeeper's time. He was having none of that! I tried to warn him of the additional costs he will incur to prepare some accounts from his "records". He thought he knew better. I warned him of the SERIOUS trouble and large tax assessment he could face if he was selected for investigation. It wouldn't happen to him, he explained.

Of course, it did.

Mark was subject to a full, in-depth tax investigation. He would NEVER get his tax returns to me, he dealt in cash a great deal of the time, and his lifestyle certainly did not match that possible on the income his limited records accounted for. Despite my warnings and pleadings with him, he sailed straight into the storm.

The outcome was real messy and real unpleasant. In his opinion, I went from being a "great Accountant" to "That S.O.B. who caused all my tax problems".

We have to explain what the CLIENT's responsibilities are, how seriously they are taken by the Tax Man, and what trouble they could be in if they neglect these issues. THEN we should offer some solutions, and their prices.

It's one of the key marketing issues I learned at an early stage - Don't try to sell the solution, until you have built up the problem in the eyes of the client. In the end, it's for their own good, as problems such as Mark's can be avoided and you turn a borderline client into a grade "A" file to work on.

These type of clients CAN provide you with a good level of profitability, job satisfaction and security - they just have to be coached and educated into knowing what they need from you.