Generally, today’s clients are making more demands and expecting broader services at a time when CPAs are becoming more specialized. When clients 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 doesn’t have to happen. By identifying clients and situations that call for disengaging, and by recognizing when to disengage, the CPA will be on the way to knowing how to disengage skillfully.
What Exactly Is DisengagementThe disengagement process is as important as the engagement process in that it is a critical part of a successful practice. Initiated by the CPA, disengagement seeks to formally terminate the CPA-client relationship in the most positive way possible, freeing each party to pursue other professional ties.
A skillfully handled disengagement is mutually beneficial to you and the client. You are left with more time to grow your business by selling new services to existing clients, and to bring in new clients. The client from whom you disengage is also free to move on and find a successor CPA to meet their needs.
When to DisengageA proactive attitude that treats disengaging as a practice management tool means, in part, putting into place a system that allows you to re-evaluate your client base on a regular basis, be it annually or semi-annually. Incorporating such a plan into your business practice enables you to monitor your client base and note any changes that could have an impact on your professional relationship.
Of course, even the most proactive evaluation plans will sometimes be thwarted, creating a need to disengage immediately due to a critical situation, such as the discovery of fraudulent activity. However, by using a procedure that enables you to regularly monitor your clients, you can better protect yourself and your business from having situations 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 disengaging or 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 the client for obtaining financing or satisfying loan covenants, disengaging while the engagement is in process requires careful attention to potentially negative effects.
Opportunity Cost of Continuing RelationshipWhen 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 is losing the opportunity to provide additional services to the existing client base and to build a stronger base in the firm’s area of expertise – a course of action that could be far more productive and profitable for the firm. Consider different options to best serve the client, such as a friendly joint venture with another accounting firm that specializes in another area of expertise. Such arrangements can be quite successful.
Pay Attention to Difficult ClientsWhen performing regular screening of existing clients, pay special attention to difficult or manipulative clients. Difficult behavior, such as consistently delinquent payment, should not be ignored and should be followed up. Take swift action on your own behalf to investigate. The following checklist of pertinent questions is intended to help you and your staff get to the heart of the matter and solve problems.
- 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?
How to DisengageWhen you decide to disengage, you should seek to terminate the relationship professionally and formally, in writing. At a minimum, the 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
- A description of any work that is in process or unfinished; and
- A statement of any due dates or filing deadlines that exist with regard to the work, whether finished, in process, or unfinished.
Disengagement is an important practice management tool, and knowing how to do it skillfully and professionally will serve to help you expand your practice and avoid liability. Any time you need advice about a client situation or a disengagement letter, call your risk advisor.