Accountants losing more than $100k a year from unrecovered costs

Ignition conducted an online survey of accounting and bookkeeping firms in July this year, interviewing a national sample of 557 key decision-makers in accounting and bookkeeping firms with 1–50 employees in Australia.

The aim of the survey was to explore the types of awkward client situations that can arise in the accounting and bookkeeping industry and to understand and quantify the financial and human cost of avoiding or delaying awkward client conversations.

The results revealed that many accountants and bookkeepers avoid awkward conversations over money with their clients and consequently are losing on average more than $8,600 each month — cash flow that is vital for business survival.

“If accountants and bookkeepers don’t set clear project guardrails and have awkward conversations with clients early on about unplanned tasks, it can lead to revenue loss and potential cash flow issues,” said Ignition chief executive Guy Pearson.

“On average, affected accountants and bookkeepers estimate that out-of-scope work that has not been fully billed for is costing their business $8,648.13 each month. That’s $103,778 that accounting and bookkeeping firms could be losing out on each year, in a volatile business landscape.”

The data compiled from the online survey found that for 95 per cent of accountants and bookkeepers in Australia, chasing clients for late payments and clients not being billed for out-of-scope reports are the most awkward client situations they encounter once a week on average. This is closely followed by clients being sent proposals with errors, with 93 per cent experiencing this.

Additionally, 95 per cent of accountants and bookkeepers said they have delayed or avoided having an awkward conversation with a client, with 72 per cent saying they were trying to maintain or improve the client relationship.

More than a third admitted they lack the confidence to confront the client as well as the right information about the agreed scope of work and the skills to negotiate with their clients.

In some cases, accountants and bookkeepers are avoiding awkward client situations at all costs, with two in five going so far as to write off an entire or part of an invoice for work completed.

More than a third also admit they manage increases in scope by just absorbing the increased time and costs themselves.

Overdue invoices are endemic to accounting and bookkeeping firms. By avoiding or delaying awkward conversations, accountants and bookkeepers may not be enforcing 30-day payment terms with the clients and chasing overdue accounts, leading to tardy payment practices.

Almost all (95 per cent) of accountants and bookkeepers experience late payments, with client invoices that are past their due date on average 31 days overdue.

According to Australian accountants and bookkeepers, on average 40 per cent of invoices are paid late, a greater proportion compared to peers in the US and the UK (31 per cent and 28 per cent, respectively).

“By putting off awkward and uncomfortable conversations with clients, accountants and bookkeepers are trading short-term comfort for the long-term health of their teams and firms,” said Mr Pearce.

“Of those who have put off awkward client conversations, 43 per cent say it has had a negative impact not only on their mental health, but also on that of their team members. More than a third say it has led to low morale and resentment among staff.

“Even more concerning, around a third of accountants report that staff have taken sick leave or time away from work and even gone as far as to resign, due to the increased workload and levels of stress.

“This study reveals that avoiding or delaying awkward client conversations comes at a huge financial and human cost, for firms and their people in the professional services industry. By embracing new ways of working and technology, accountants and bookkeepers can automate and transform how they run their business and engage clients to put an end to the awkward conversations.”