How to stop ‘scope creep’ that costs accounting firms nearly £70k per year
Difficult conversations are a cornerstone of professional services, but Ignition’s 2022 State of client engagement in the UK report into the sometimes difficult relationships between accountants, bookkeepers and their clients only serves to illustrate George Bernard Shaw’s comment that: “The biggest single problem with communication is the illusion it has taken place.”
The report by Ignition, the professional services client engagement and commerce platform, and researcher YouGov, was of 470 key UK decision makers in accounting and bookkeeping firms with 1-50 employees. It reveals that 58% of professionals found it awkward telling clients that work they had requested was out of any agreed scope of engagement.
Absorbing costs: Don’t put off awkward conversations
Respondents said the problems of ‘scope creep’ were costing their firms an average of £69,957 in unrecovered costs every year, with one in three going as far as to write off an entire, or part of, an invoice to avoid having an awkward conversation with a client. More than a third also admit they manage increases in scope by just absorbing the increased time and costs themselves.
Emma Crawford-Falekaono, Managing Director, EMEA, at Ignition, said: “If you work in professional services, chances are you’ve experienced an awkward client situation. Accountants and bookkeepers are putting off these awkward conversations as they’re worried about their clients' reaction or losing their business. What we now know is that this has the opposite effect, with detrimental impact to the firm and its people.”
Meanwhile, 38% said they’ve suffered a loss of potential income by putting off an awkward client conversation, and in some cases accountants and bookkeepers are avoiding awkward situations at all costs.
Beyond financial: Mental health harmed as much as profits
Guy Pearson, co-founder and CEO of Ignition, in the forward to the report, quotes research into ‘fight or flight’ responses in difficult situations by psychologist Joshua W Clegg, who tested participants in 16 socially awkward situations. Guy Pearson said: “Those who addressed the awkwardness were able to establish a ‘sense of social harmony’ and connection with others. Those who avoided it? They magnified and extended the negative impacts of the awkwardness.”
The price that is being paid by professionals for this is not just financial. Of accountants and bookkeepers that avoided or delayed awkward client conversations, a third (33%) said it had a negative impact on their mental health and that of others in their practice. More than a third of respondents (36%) said they were worried that awkward client interactions could also affect compliance.
Carl Reader, Head of Accounting at Ignition and Chairman at d&t Chartered Accountants, said the effects of professionals avoiding difficult situations was something he and his team encountered regularly. “The numbers of those impacted might sound quite big, so this may seem abstract to people, but my team and I have seen the huge impact on firms of not billing clients correctly for the work they do. This is because accountants and bookkeepers have a passion for their clients and so have put off having difficult conversations, sometimes not just for months but for years,” he said.
Over to you
Changes in the scope of work can and often do happen. Making sure you can charge and get paid for work that goes out of scope can be the challenging part. The key to managing an out of scope request is having processes and solutions firmly in place, so you feel confident about renegotiating any additional work or pushing back on your client’s request, if you need to.
To address the issues of confidence and expectation setting, and to show how automation can assist with client relationships, Ignition has a free on demand webinar available.
In the meantime, Ignition offers guidance on how to manage changes of scope, including:
- Set clear expectations. Don't start work without a signed engagement so you and your clients are on the same page about the deliverables and value from day one.
- Anticipate change. Make provisions for out-of-scope work in your proposal to set expectations upfront that it will incur additional costs.
- Communicate regularly. Regularly review and address any changes in scope with your client early on.
- Don’t delay difficult conversations. When your client makes a request that isn’t covered by their agreement, politely (but firmly) address it with them immediately and confirm it in writing with a review or new engagement letter.
The price of doing business in the UK is set to rise amidst the cost of living crisis, and now is the time for accounting firms to act, Emma Crawford-Falekaono said. “Addressing out of scope work is a way to make a big impact in these uncertain times without a huge amount of effort or affecting clients. This is not only low hanging fruit, it’s the right thing to do.”
And Carl Reader added: “My one bit of advice would be to avoid the awkward situation from day one. You need a clear scope of engagement, including fees rather than estimated quotes, and setting up payments from the moment you start work, so both sides know what the relationship is.”
The good news for firms looking to improve client relations is that there are tools and resources that can improve existing client relationships, and help future ones get off to a good start.
Find out how avoiding or delaying awkward client conversations could be affecting your firm. Download Ignition’s 2022 State of client engagement in the UK report.
This blog is one of a series of articles from our commercial partners. The views expressed are those of the author and not necessarily those of ICAS.