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Accountant Interventions: How to Deliver Bad News

Accountant Interventions: How to Deliver Bad News

Jul 22, 2020 | By Isaac O'Bannon | 0 Comments

Topics: Best Practices, Accounting, Client Management, Featured

Let’s put the Covid situation on the shelf for a minute—over in a far corner where it doesn’t cloud the way we think of everything.

Every small business owner has big dreams of success and becoming the McDonald’s of their industry. And almost every taxpayer hopes to receive a huge refund at tax time. Unfortunately, not every client is going to be happy, particularly when your expertise as a tax or accounting professional results in having to tell them bad news: “Your business is losing money” or, “You owe the IRS … a lot of money.”

8 Steps for Accountants to Deliver Bad News

There are many pitfalls that a business or taxpayer might face, from unexpected taxes to identity theft, potential embezzlement, or fraud by one of their employees or contractors. And the fact is, you’re probably going to have to tell bad news to as many clients as you get to tell good news. Whether their coming headaches are because of their own doing or intervening factors, you need to figure out a way to tell them while protecting your relationship with them as much as possible. You also need to help them find a path to resolving their problems.

1. Do It Personally

Whatever the problem, even if it means you will no longer be providing them services, you need to have a chat with them. Although in-person discussions may not be appropriate these days, you should at least have this discussion via phone or video. Trying to explain bad news via email or voicemail can leave too many unresolved questions. And text-based communications can be especially poor at relaying the gravity of a situation or the tone of voice necessary. Bad news will also likely require testing out possible resolutions, which is best handled in real-time.

2. Put It In Writing, Too

A follow-up written record of the conversation will serve as official documentation of the conversation, helping to put the polish on these decisions. That allows the conversation itself to be more focused on troubleshooting in a less formal way, while still preserving a record of the engagement for future reference and evaluation of new actions.

3. Get to the Point

Just as many doctors may resort to their clinical diagnoses and terminology when discussing health matters, many accountants end up speaking in financial jargon. Not only may this mean that descriptions go over the head of their clients, but it also leaves them glossy-eyed and uninformed. Your clients should be aware that a problem already exists, so the key here is to get the worst news out of the way immediately. Then, the remainder of your time can be spent bringing them back up emotionally with realistic solutions.

4. No Surprises

From the moment the client meeting is scheduled, they should be aware that you are discussing a serious matter. They need to see that bad news is coming so that you can be sure to set the proper tone.

During the meeting, have clear-cut goals that you want to get through. Then, ensure that your clients are on the same page by asking them, “Do you understand that this means XX?” Keep in mind that alerting your client to bad news as early as you can helps to lessen the overall effect since, with your help, they can take action to relieve the issue.

5. Treat Clients with Respect

It may be hard to keep your composure when you realize your client has done something monumentally careless or stupid. But they will, and they will continue to (we are all human). Your job is to set them straight, explain the challenges they face, and remind them that (hopefully) it’s not too late to resolve the situation. But you must do so in a way that maintains the relationship in a positive light. People don’t usually blame a doctor for a disease because doctors with a good bedside manner approach the situation with compassion and integrity. If you do the same, most of your “bad news” clients will continue to respect you and retain your services.

6. Offer Real Solutions and a Silver Lining

While there may not be much easing of the immediate financial pain, the delivery of bad news can actually reset a negative situation. In the case of a business that has been losing money for a long time, the news may be what they need to make tough business or staffing decisions. For unexpected tax debts, the news may be the impetus for additional planning or restructuring their estimated tax payments. In some cases, the bad news of higher taxes might even be the result of an unexpected increase in profits.

While the last scenario is not as common as we would like, the addition of a positive outlook can give them reality-based hope that can increase low morale and motivate the client to make the changes you recommend. Along these lines, using neutral and supportive phrases, and avoiding blame, can help alleviate the situation. For instance, instead of saying “you need to do blank,” or “you can’t do blank,” offer phrases such as “we can do this,” or “another option may be blank.”

7. Never Hide the Facts

Especially when dealing with your own managers or close client-friend relationships, it can be easy to gloss over some information out of fear of upsetting your superiors or risking your relationship. But professionally, your duty is to provide the most accurate financial service possible, including likely causes. If the client is engaged in personal or business behaviors that threaten their solvency, then you need to be forthcoming. Delaying or obscuring the facts can cause greater harm than good.

8. Follow Up and Follow Through

By this point, you’ve given the bad news and, hopefully, offered expert advice on how the client can resolve the issue. Your job isn’t done, though. For many long-term negatives, it will take persistence and hard work to keep the client on the right track, making hard changes and financial decisions. Setting up a follow-up engagement for a few months down the road can ensure that both parties keep the issue on their radar, and keep assessing the results of the changes.

Your clients may display a wide range of emotions, from fear to anger, even denial and grief. But following these eight steps for delivering bad news can make the process less painful and stressful for you and your clients.

Power of Core
The Author

Isaac O'Bannon

Isaac M. O’Bannon is the managing editor of CPA Practice Advisor and has been advising accounting and technology firms for 20 years.

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