Wednesday, January 20, 2010

Are they REALLY an ideal prospect?

I’ve received several comments from readers who have had bad experiences while prospecting for new clients. A recurring theme is that they hadn’t previously experienced these problems, suggesting that the present state of the economy may be introducing some new wrinkles into the finding-new-clients challenge.

Marsha in Florida attended a local networking get together and met a couple who own several home/internet based businesses. She wasn’t familiar with the business model, so Marsha began asking some questions about how they made it all work. One thing led to another and she was told they were not happy with their present accounting services and would prefer to work with an accountant who understood their economic model and could provide advice and financial projections for new ideas as well as competent compliance and tax work.

Marsha rose to the moment and described how she might be of assistance; talking about her practice areas, how she interfaced with clients, and the like. A meeting at the couple’s house was scheduled.

The house looked very impressive as Marsha drove up and when she saw the computers, boxes of products ready to ship, a dedicated shipping area and a couple of employees scurrying about, she felt comfortable she was viewing a going concern.

A deal was struck and Marsha drove away with a box of records and data. She worked up a needed refiling, did some timely compliance work, cleaned up a couple of other areas and completed everything by the agreed upon due date.

She submitted a bill for $2800. In the meantime, some more compliance work was due, so she prepared that also. The bill was now $4100. To make a long story short, the bill still hasn’t been paid after over 180 days. Marsha had another client run a credit check and found the couple was in arrears to practically everyone, including the lease payments on the big house. She eventually found out the prior accountant hadn’t been paid either, which explained the couple’s presence at the networking meeting.

Marsha had previously operated on trust and her instinct. She’s changed her approach when evaluating prospective clients in light of this experience, and will be considerably more careful in the future.

Gino in New York has a lot of clients who invest in real estate. The essence of his practice is working with high wealth individuals and providing accounting services for their (primarily) commercial real estate investments. Most of it is old money, and his practice has been in mild decline for several years as clients passed away, sold assets to free up cash and generally tightened their belts in a declining market.

Sarah, a client and heiress, recommended he talk with a gentleman – we’ll call him Stephen - she had done some business with who she felt would be a “wonderful” contact for Gino. A meeting was set and Gino was introduced to a man in his 50s, quite elegant, and apparently heavily involved in commercial real estate.

Stephen told Gino he had heard “great things” about him from Sarah and other clients they shared and that Stephen was always on the lookout for an accountant who understood the nuances surrounding real estate investments of this magnitude. Suitably flattered, Gino made his case that he was indeed the right guy for any of Stephen or any of his clients who might need accounting services.

At a subsequent lunch, Stephen again talked about how Gino’s revenues could really take a jump if he began doing work for his clients, and Stephen promised to “see what he could do” to make this happen.

When Gino did Sarah’s 2008 taxes he noticed some irregularities in the data for one of the properties. As it turned out, it was the property Stephen had brought Sarah in on. He was struck by a series of events and transactions completed just before the end of the reporting period that had a disproportionately positive effect upon operational results.

When he called Stephen, his questions were downplayed and deflected, and Stephen again emphasized how Gino’s skills could be particularly valuable to some of Stephen’s large clients.

With the hair rising on his neck and sensing a scam, Gino carefully began to probe around. Sure enough, Stephen was being investigated. Several complaints had been filed and at least one other accountant had blown the whistle on him.

In retrospect, Gino believes Stephen’s vision of more revenue was a subtle bribe to either keep quiet or perhaps it was a first step in recruiting him to become part of the scam. In the following months Gino has been drawn further into the investigation and spent untold hours dealing with frightened clients.

It’s tough out there. A lot of people are in trouble. Why is your prospect looking for a new accountant? Are you sure it isn’t because they couldn’t pay the last one? None of us can afford to expend hours on activities that don’t produce collectible revenue, let alone spending billable time participating in a fraud investigation.

Be careful. When in doubt, run a credit check. Another strategy is to use retainers, so you are – even if it is only partially – working with the client’s money. When in doubt, check ‘em out!

Blogger’s Note:
You may have noticed I’m not posting as often as I have in the past and this is because I began Proton treatment for prostate cancer a month ago. My prognosis is excellent and the treatments will last through mid-January. In my case, the side effects are tiredness. Coupling that with the several hours each day dedicated to going and coming, standing by, dressing/undressing, getting zapped, etc. and my current production is less than stellar.

By the way, if any of you of the male persuasion are or in the future become similarly afflicted, I can not speak more highly of the Loma Linda Proton Center in Loma Linda, CA. Incredible technology, facility and people. Check it out. I’m very glad I did the research and made what I strongly believe to be the correct treatment choice. Oh, and a final note, they treat over 40 different types of cancer and are just now embarking upon a breast cancer study and looking for volunteers.


Ian Brodie said...

Glad to see you back posting Craig - I find your articles to be hugely insightful.

Hope all goes well with the treatment. A good friend of mine has Prostate cancer and I help out when I can with his charity raising funds for improved testing and scanning facilities.

Best Regards


Craig said...

Thanks, Ian...
I really appreciate your kind thoughts. I finished the treatments (45!) last week and the prognosis is really good. Very few side effects, too.