Don’t Let Your Client’s Financial Woes Become Your Financial Woes

Being the owner of an accounting and bookkeeping services firm, my company has a front row seat to how “well” our client’s business are doing. One particular client, made the decision to wind down operations and close the magazine he was trying to get off the ground.  At the time this decision was made, there was a tremendous amount of debt on the books, investors who needed to be notified, a tax return that needed to be completed as well as some bookkeeping work to wrap up.

When the owner called me with his decision to wind down operations, he asked me if I would assist him with the accounting work that needed to be done and if I wouldn’t mind being paid after the work was completed. Red flag!  My gut instinct told me to get paid up front (as I do with all of my other clients and had in the past with this particular client) but I felt sorry for the financial situation this young man was in and I agreed to let him pay me once the work was complete.

My firm went about doing the work and coordinating with the attorney in charge of winding down operations. As soon as our part was complete I received a letter in the mail from that very same attorney stating that the company was bankrupt and we would not be paid for the services we provided. Needless to say I was a little angry!

We had spent at least a two weeks preparing the information that was needed on the word of this young man that we would be paid.  We also had first-hand knowledge that he received a severance package. I had made a classic mistake, I allowed my client’s financial woes to become my financial woes, and as a result my firm walked away without being paid while he did get paid. My decision placed his well-being, both financial and spiritual, above my own, and thought because I performed the services in good faith, that he would in return, act in good faith. It was a tough, expensive lesson to learn.

Since then, I make it a point to engage my prospective clients in a dialog that will provide me with clues to the financial condition of their business. For example, I’ll ask a prospective client “What impact will our service have on assisting you to grow your business?” or “What direct impact will our service have on your business and how will you measure that impact – through the acquisition of new customers, increased revenue, etc.”

I’m really curious as to what their response to those two questions will be.  I like to make the questions thought provoking and open-ended because my main objective is to start a dialog, to obtain more clues obtain more clues about the financial condition of that business. 

The other thing I do is ask those same questions a couple of different ways.  When you ask the same question a couple of different ways and you receive different answers or inconsistent answers you will be able to string together new questions that will help you to get a better picture of what is going on.

With existing clients I make sure I have clear, concise, boundaries surrounding how and when I will be paid because once you provide the service, as you saw from my story, you are left with little recourse other than hiring an attorney or going to small claims court to obtain payment – both of which will cost you more time and money!