I was mentoring a licensee this week about a client she has who is running their business into the ground. They incurred a large debt to start the business because they had insufficient capital and they haven’t been able to get on top of that. They are not looking at any reports she provides to help them understand what the figures mean and when there is money in the bank they are taking “wages” out that their business can’t afford. She is worried about their financial position and losing sleep over it while the client carries on regardless!
One of the admirable traits of a great bookkeeper is empathy. Wikipedia describes empathy as “the capacity to recognize feelings that are being experienced by another.” Bookkeeping is not just about number crunching, it’s about how that makes the client feel. However we can go too far by taking on the burden of your client’s business and that’s not your job. You’re not their parent.
When you have children you teach them to take responsibility for their own actions. It can be challenging as parents as we learn to let go and allow them to make their own decisions and sometimes see them suffer the consequences. We do whatever we can to guide them and we’re there to pick up the pieces when things don’t work out.
Be clear about what your role is in your client’s business. You are not their parent! You don’t and can’t take responsibility for them. That doesn’t mean that you don’t care though.
My advice to her was that the client needs a metaphorical “slap in the face” by having a meeting with their accountant to wake them up to the reality of their situation and to start behaving like business owners and taking responsibility for their actions.
Love to hear your thoughts. Please leave them below.
I agree clients need to be mindful of what they are getting into. So many people go into business with the idea of making alot of money without realising the cost to set it up. Once the business is at the point where they are in trouble it is too usually too late. Potential business owners should speak to their accountant prior to the venture, do a business plan and hire a bookkeeper with commercial skills to assist them.
I have a few clients who were headed down that path but by seeking my assistance early enough they are now in great shape and improving every day.
Understanding their business and what they want to achieve and working with them toward their goals is the only way to go.
Sue
Deb,
This email was perfect timing as usual. I am feeling exactly the same as what your client is feeling. I have been helping a client for a number of years now. He has racked up his Tax Debt since last year. His wife drew “wages” quite a bit and especially at this time of year being Christmas when it came to paying the Oct-Dec Bas they had no funds so we scheduled an extension and so forth until now it is quite high and the ATO basically want their money. The business owner is aware of this and I have asked his accountant to speak with him about an arrangement to pay his ATO debt. But why do I feel partly to blame? Guilty? Feel sorry. I know it is not my fault but I do really feel sorry. I think a new year resolution is to harden up? But on the other hand that is my personality as we like to help also.
Deb, a common situation. It reminds me of the surf lifesavers that go to the aid of drowning people only to have the swimmer fight them and try and drown them as well. They have methods for dealing with that. I was recently facilitating one of the ICB meetings and we discussed the issue of communication and being a bookkeeper. I believe most of the situations we come across – we all come across and they are repeated over and over. We need to set our posture correctly from the start – right back at the first meeting through the letter of engagement and the day to day contact. I emphasize to clients that the journey will have it’s ups and downs and at times we will need to visit with other professionals on the advisory panel. One of mine is an insolvency practitioner and he has such a way of getting the message through to clients! We are onto these as soon as there is a glimpse that the cliff could be approaching. We don’t save them all but with team work you can give/show people another path and the consequences of each direction. In the end though you are right – there is only one person responsible for your life – you yours – theirs -them.
The situation described here is a common one. I am dealing with a client right now in a similar situation. When dealing with sole traders and partnerships there is a tendency to just keep taking drawings at will. At the start of any engagement I tell my client that they should have a separate bank account for personal expenditure. All cash should be banked no money should be taken from the cash takings. I instruct them to work out a budget for private expenses. Once a figure is established draw a set weekly amount. Unfortunately the majority of business owners do not understand financial reports particularly cash flow. I spend a lot of time trying to educate my clients to read and understand their financial statements. Budgets with cash flow forecasts are important. But despite the best efforts clients often will not listen or heed the advice until it is to late. When things go bad there is a tendancy to blame the bookkeeper. I put my instructions in email so there can be no mistake about the warnings and the instruction to seek help early. It is important to avoid problem transferal, where there problem becomes your problem.
So timely! I have a newish client of about 6 weeks. Each time I’d get ready to have the insolvency talk he pulls a rabbit out of a hat and makes a big sale. But it is getting closer and closer to the point of no return and I feel a little bit sick every day I have to go there in case this is the week we cant make payroll.