This post is the experience and lessons learned from an Enrolled Agent (EA). As small business owners, we can learn from ‘Tax Blonde’ and her experience (this isn’t my story — I do not provide tax services anymore) in the story below.
(Do you want to share your story with lessons learned? To be considered for future posts, please click here to submit it.)
Goodness, what a day. I had the great displeasure of suing a (former) client of mine in small claims court. This was not an easy decision for me, I struggled with it for quite a while. It goes directly against my business philosophy of helping my clients. I have had clients that haven’t paid me in the past, and I have let it go, but this one was different. This one I just couldn’t stop thinking about it, it got to me.
This was not an easy client to work with when they were supposed to be co-operating, one of the worst in fact. A real “stick my head in the sand and it will all go away” type. So it was not a surprise to me that once we identified the true amount to pay IRS and ME, this client vanished.
I tried to let it go. I tried to tell myself it was a difficult lesson to learn, but a lesson none the less. See, due to the nature of IRS hardball, I was under the assumption that the client could not pay me a retainer. My bad, I believed the client, I should know better. This wasn’t my first rodeo, but I had taken good faith accounts before and in the end they had all eventually paid.
So I spent a good portion of a day preparing my files and preparing myself to battle against someone that I had previously battled for… not a good feeling, didn’t sit well with me. I felt confident in my workpapers. I had been warned that the fastest way to ha
So there I sit in court, waiting. When it was our turn, the client admitted that yes they did owe me but they did not agree with the bill (first I had heard of this..). And here are the words that I need to remember. “You never told me how much you were going to charge me.” Now this is not true. I had discussed from the beginning how much the work would cost. It was a constant theme, “we can do this and it will pay IRS and ME, or how about this.. that will pay us both off, you know my fee is going to be $$$”. The client would always find a way of getting out of the meeting upon the utterance of these strategies. And due to the nature of how the client came to me, and the nature of the client, I never had this person sign an Engagement Letter. I have always been a hand shake business person. I have only a few clients that I began business with an engagement letter. After all, we are accountants and tax practitioners, if our clients can’t trust us what good are we to them? If I can’t have a friendly business, than why bother?
I asked for a trial in order to prove my bill, but the nagging thought in my head was “I don’t have anything in writing that proves the client knew my fee”. After a strong discussion outside the courthouse, the client and I came to an agreement and I was paid cash (amazing they could come up with the dough so quickly…). I settled for less than my invoice, but enough to let me put this behind me and get some sleep.
I never thought that someone I worked so hard for would stiff me. I never thought I’d actually sue a client. I very well could have lost if it went to trial and the judge deemed my invoice too high. And it would have been my fault because I didn’t have an engagement letter spelling it all out.
So, what did I learn today…. hmmmm. 
- I don’t care about the sob story, if it is a collections/non-filer case, get some payment up front as a retainer or deposit.
- Use an engagement letter that spells it all out to the client.
- Stand up for myself, I’ve worked hard to know what I know, it’s worth something.
- (the most important less) Respect my business, treat it well, take care of it. It keeps a roof over my head and food in my belly,… and provides good services for some of the best clients on the planet. I realized that I had documented everything for my client work, had notes of all phone calls, results, scanned every single document, etc. Like I said, my workpapers were good. It was my business that I had let down. I was so busy saving my clients that I forgot to protect my business.
Lessons learned.
Thank you “Tax Blonde” for sharing your story and lessons with everyone. A few more comments and resources:
- There are sample engagement letters for QuickBooks consulting services in the practice resources section here. For sample engagement letters for CPAs and taxes check here or ask your insurance provider.
- Before filing a claim or suing a client (or customer), contact your insurance provider for assistance and guidance.
- Communication (and documentation) with clients and customers is critical but sometimes things still go wrong. Learn from it like Tax Blonde.
Do you have a story to share with lessons you learned? If you would like to share it with others, send it in for consideration by clicking here.