Difficult Client

by Megan

What do you do when clients don't learn?

What do you do when clients don't learn?

I've been working, or attempting to work, with a new client for approximately 2 months now. It is a small service based business with 6 employees. I have yet to meet either of the owners of the company, a family duo. All of my contact has been through the Office Manager who requested my services. I have been tasked with cleaning up their QBO file, which is the biggest mess I have ever encountered, and an ongoing every other week relationship to ensure their books stay clean. I'm having a bit of a moral dilemma as well as a lot of frustration with the Office Manager.

My biggest concern is the lack of attention to detail that the Office Manager is displaying. Here are a few examples:

(1) She runs Payroll through QB Payroll. At the first of the year there were small tax amount changes which affected the checks by a few cents. Instead of accepting that she ran the checks in QB for the new amount then hand wrote checks for the 2015 amounts.....every week for 5 months until I was called in and told her it needed to stop. There have been weeks where no payroll was recorded in QB but handwritten checks were issued. There have been weeks where payroll was ran 2 and 3 times.

(2) Another concern is how many times I have to ask for information before it is provided and how many times I am re-correcting transactions because I am told one thing then a few weeks later told something else. For example, vehicle loan payments are coming out of the business checking account. I was on site with her and asked if they were business vehicles. She said yes so I walked her through setting up the liability accounts and we reclassified each transaction to correctly account for prin/int. She has now, a month later, told me that all of the vehicles are for personal use and need to go to Owner's Draw so I now have to redo all of those transactions.

(3) Another example is payroll taxes. She has not consistently been using the Pay Payroll Taxes feature and instead pays it and only accounts for it when it downloads from the bank so it all goes to one liability account. Their 2015 federal taxes show a huge overage while SS and Medicare show very few payments have been made. The amount of overage on Federal vs the amount not paid to SS and Medicare match. 2016 is also going down that path. I have been asking for 2 months that she provide me with a printout that breaks down where each payment was applied so that I can manually correct them and she, just a few days ago, gave me a copy of the bank transactions with nothing more than the amounts that were paid but no detail about how much to federal, SS, and medicare. Unfortunately they got behind on their payroll taxes and have been making payments so it's not a simple and clear reclassification.

(4) Another concern is when I send her an email asking about a specific transaction and am routinely told I don't know or no, it was not for that with no further information and when I ask for more information she is beginning to get quite snotty with me.

(5) Another big concern, I don't know why she is doing it, she is saying she hasn't but the audit log says otherwise. She has been deleting transactions after they have been reconciled.

(6) Another one is they offer contract services for a large company and sometimes receive payment for up to 100 invoices at a time. She will receive payment towards the customer invoice for most of them but says she gets bored with it or doesn't have time to deal with it so the remainder is applied to a general services account and they have almost $50,000 sitting in uncollected A/R that is 90 or more days past due and she says they have no invoices that are that over due. I suggested they start creating all of the invoices to the larger
company but that is something they are not interested in doing. That is another area where I have asked and asked and asked for a printout from the checks so that I can clear those old invoices and I'll get one here and there but not all of them so I can't even completely clear March at this point. Those are just a few, I'm sure you get the idea.

My moral concern is that this woman just does not seem to get bookkeeping and for some reason thinks I can magically figure it out without her providing any information or documentation. Unfortunately she also thinks she is a QB expert which she definitely is not and does not want to take any kind of direction at all. She has begun asking when they will have an accurate P & L and is getting upset when I tell her I cannot provide one until I am given the information I have asked for and can ensure all of the transactions are correct in the Chart of Accounts.

There are a LOT of personal purchases coming out of the checking account. They were supposed to open a personal checking account this week so that money could be transferred between the business and personal account but to the best of my knowledge that did not happen. I have approximately 100 transactions sitting in a Miscellaneous Expenses account waiting on her to tell me what they are for and that's just for Jan-March. I have a feeling at least half of those are personal items. I have printed out the account, I have sent emails, I have taken a printout with me when I have met with her and she says she will take a look at it and let me know but never does. She also just doesn't seem to care. I've tried training her, I've tried explaining, I've tried showing, and it just goes in one ear and out the other. I feel like I have a responsibility to have a conversation with the owner but my requests to meet him have not been answered.

A little background, she is a HS friend of the owner's wife and was begged by the wife to take this job. My gut tells me it had nothing to do with her abilities but more to do with the fact that the wife didn't want to be stuck in the office by herself and wanted her friend there. That also puts me in a sticky position with having a conversation with the owner.

I did have them sign a contract and part of my contract, in legal mumbo jumbo, addresses bad info in, bad info out so I know I am legally covered there if they get audited. I have also began making sure all communication is either an email from the beginning or a follow up email is sent after conversations.

Another one of my concerns is that I quoted a monthly rate up front and I have gone waaaaayyyyy over that. I included a small buffer for myself in case it took longer than expected but I based it on how long it would normally take me to handle an account with the amount of transactions they have and reasonably being able to provide some training to help make sure the transactions are more accurate from the beginning. I don't have a problem with going over the quoted amount in the beginning so that I can ensure everything is up to par and I know I am working with a good set of books but at this point it has become very clear that a monthly clean up on a large scale is going to be a necessity and I will need to increase my rate. They are going to have a problem with that.

Does anyone have any suggestions? I would really like to keep this client, I recently lost a large client....they grew to a point that they needed someone full time and I couldn't do it so I have taken a pretty big financial hit and need to try keeping this one if I can.

Comments for Difficult Client

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Jul 31, 2016
by: Lake

First, breathe in and out slowly through your nose four times. Then get up and take a short walk somewhere for about 10-15 minutes. On your way back to your desk, refill your favorite drink .... and let's chat. These are just random thoughts in no particular order.

If you are dead set with wanting to keep this client ... it sounds like you need to introduce a "change in scope" letter ... that amends your current engagement letter. This will give you permission to change your pricing ... just like the mechanic who phones once he finds out the problem with your car.

In the change of scope, outline your expectations with regards their responsibilities in detail and the turnaround time when you expect to have the information returned. Sometimes I am even blunt enough to explain their bookkeeping is sooooo baaad, it will cost them more if they want to continue doing the bookkeeping. I explain it is cheaper to let me do it right because correcting entries takes more time. I try to do it in a humorous manner. She could still have read access to reports but would not be allowed to enter data.

After that all conversations are followed up in writing. Before I would make any account changes, I would have proof of the transactions. I'm thinking about the vehicles here. So I wouldn't have shown her how to set it up. I would have requested she provide me with the documents and then set up the accounts based on the documents. It is possible the owners provided the feedback that the vehicles were personally owned.

I create a "No Information No Deduction" account (NIND) on the balance sheet just for clients like this. It is a suspense account that holds all the transactions I am waiting for more information on. Once I receive the information ... even if it months later ... I reclassify the transaction to the appropriate account. If I don't receive it by year-end, it gets cleared to the owner as a draw or shareholder loan (not sure how tis works in the states).

With regards the personal expenses, if you are fairly certain it is a personal expense, I wouldn't run it thought the NIND account, I would code it directly to the "Owner's Draw" account. The report can be reviewed every month and you can reclassify any transactions that are legitimately business expenses. For some of my clients, I include an "Owner's Draw" report as part of the monthly management reporting package.

For payroll, create a payroll clearing account to handle this type of client. That way she can book her handwritten pay cheques to the clearing account. You can book the actual payroll entry from the information you have (what it should be to pass audit). When done correctly, it should clear to zero although as you can see this doesn't always happen. This allows you to do the bank reconciliation without affecting the payroll information and you can make changes to the payroll information without affecting the bank account.

You mentioned payroll taxes. You need to be careful here. It is my understanding that the IRS can come after the bookkeeper for the arrears. You might want to research that.

To solve the A/R issue for the contract service, you could contact the company (or companies) requesting a statement from them explaining you are reconciling the account. This way you can see what they say they have paid ... you can also see what they have been billed.

With regards deleting transactions, do you have the permissions to go in and close a period after you have done period? If yes, ensure you set a password. That means she can't go in and delete transactions. Also, QBO let's you set user permissions. For a "regular" user, you can limit their rights so they are not able to delete transactions. The problem I see here with this solution is what access do you have?

I see red flags here due to lack of detail, lack of reconciliation, deletions and "boredom". While it appears she doesn't have the experience or training to do the bookkeeping work, I would be worried about the possibility of fraud if the Office Manager has access to all the books, the bank statements and bank feeds and also has signing authority and isn't willing to provide you with the information you need to do your job.

I like to work with a client to teach them the paperwork side of their business. However, if they don't learn, I usually let them go. Even though this client is proving you cash flow, you have said you are working at a loss. How long do you want to do that ... if you can't find a way to increase your billing.

I would think about writing a letter to the owners expressing your concerns. You can copy the Office Manager or not on the letter ... it depends on the tone and content. It can be an email if you have their email addresses or sent by post. If you go this route, I'd probably send it registered.

You have a lot of problems to solve here, so you have to address each one one at a time. You also need to read the "riot act" to your client. Explain the consequences and if not cooperative, you will be informing the owners of the state of their books.

Personally, I would be chatting with the owners then walking away if there are no changes made.

Nov 03, 2017
In regard to asking for information
by: Janet

Hi there,

Sorry to hear you're having a difficult client! I think we have all been there!

What accounting software are you using? If you choose a good one that is automatic, you can solve at least one of your problems, i.e. having to constantly chase for information and being given the incorrect figures.

I use a cloud based accounting software that works well for both myself and my clients. I don't have to chase them for details and information and they don't have to update me. I simply invite them to use my software with me, they fill in their details and everything thereafter is automatic. 

I get to see transactions as they happen, in great detail, and can see for an unlimited amount of time which is great for when you want to give your client some long-term advice. 
I can also see all that I need to regarding checks which is a great bonus! 
I don't know how many accounts you manage, but you can see, access and manage lots of different bank accounts all in one place so sign up all clients to make your life easier! 
The software I use is called Ledgersync and I would recommend it to anyone! 

I really hope that's helpful with managing this client!

Nov 11, 2017
by: Lake

Thanks Janet. Hubdoc and LedgerDocs are great as well. SmartVault has been around for a long time and issued by a lot of bookkeepers as well.

I have started a series of chats on automating your workflow ... you can find it here ...


If you know someone at LedgerSync who would like to submit an article on how to use their software to automate the workflow process, please have them contact me.

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