How and Why You Should Prune Your Client Base Annually

Firing clients, also known as Client Pruning, is a natural process for CPA firms that want to grow. The future of the accounting industry is becoming highly specialized and segmented. Pruning your client base to reflect your firm’s strategic goals and vision is a process that creates amazing results when implemented annually. Learn why client pruning is important to the health of your firm, the steps necessary to implement the process, and the appropriate approach for terminating a client relationship.

Where Do I Start?

The first step is to analyze your current client base. Firms that have implemented a client rating system are already one step ahead. Client rating systems use a set of criteria to assign a client rating from A-D. Criteria can include:

  • Pricing or total client size
  • Timely payment
  • Cross-selling opportunities
  • Referral capabilities
  • Organized resources
  • Relationship with staff
  • Client groupings
  • Mindset
  • Other unique criteria

Once your clients are assigned a rating, distribute each partner’s D-rated client report, along with the criteria we’re going to discuss next.

I’ve Rated My Clients – Now What?

Now that you know exactly where your clients rate within your set criteria you can focus on D-rated client pruning. Pruning is difficult for even the most advanced firms. It’s important to keep in mind that the purpose of pruning your lowest level clients is to free up time to focus on providing the highest level of service to your A-rated clients and identify services which will move your B and possibly C clients up in their client rating.

The decision of which clients to prune comes back to why you assigned the D rating. Ultimately, many partners make their decision based on how the client treats their staff and whether they’re paying their bills timely, or at all. There is also a level of risk associated with each client, and for many, the risk is too high to continue the relationship.

The Final Step

Firms take two approaches when contacting clients they wish to fire: in person or in writing. In the on-paper route, a letter is drafted to the client explaining the relationship termination, offering examples for the termination and alternative service providers.

A similar approach applies to a face-to-face meeting, but allows you to explain the situation, with the outcome resulting in an agreement to terminate the relationship or an agreement to improve the relationship. Come prepared to an in-person meeting with the new terms of the agreement in case the client wishes to continue their relationship and agrees to improve in the areas identified.

When the process is complete, you’ll reap the benefits with the amount of time gained to focus on the clients who are a true fit for your culture and vision.

If your firm is struggling with a client rating process or would like help implementing an annual client pruning process, contact Inovautus at www.inovautus.com

 

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