Retainers

[AuditorTurnedGood]

Hey All,
Anyone here using retainers for ongoing clients? I never have, but after enough cases of non payment to make me learn a fairly expensive lesson, I am planning to have all of my clients place on deposit with me 2 months of estimated billings, and to bill again whenever they dip below one month on deposit. If you are doing this, how do you handle it on your books, and what kind of agreements do you have in place? Thanks!

ATG

[outwest]

In general, I've only used retainers..

when some one has several years of back returns to catch up. If they are not scared of the IRS, I don't think there is anything more I could do to collect!

Case by case, I've collected retainers a few times when the situation was good enough to take the engagement but had doubts about solvency.

I think in your situation, I'd look into setting up credit card payments or contact my bank about direct debit (ACH) processing. Then at the first of the month, the charge is collected. That is often a easy sell to the client and doesn't seem so distrustful of them. I've got a gym client that does that for the monthly memberships.

[AuditorTurnedGood]

Good advice, I've

had clients that are on auto billing to a credit card. Problem is, I have gone to run through the credit card and had it declined because they are over their limits. I'm planning on only doing this with new clients, and clients who have had payment issues (greater than 60 days late) in the past. Do you think they'll see it as distrustful, or, since most are business owners, simply sound practice?

[JohnH]

I don't think you can paint with a broad brush - this is something you'll need to decide on a case-by-case basis. I have clients who would be insulted to the point that I might lose their business if I suddenly put them on a retainer. I also have some whom I should have put on a retainer a long time ago and I've been dragging my feet. I'm glad you started this thread as maybe it will build a fire under me to get going on this as well.

[AuditorTurnedGood]

I do plan to talk to each of my clients through it individually. I have some clients that are 10 day payers, which I appreciate. The three issues I have are:

1. Clients that don't pay for months because they "don't have the money", which is not a good excuse to use with the accountant that saw you blow $300 at the trendy local bistro the night you told me you were broke,
2. The clients who I can see are on the edge of insolvency or needing to file for Chapter 11, or
3. Clients who are not in the state for months at a time, who pay the rest of their bills as late as they pay mine.

How do the rest of you handle such clients? I learn so much each time I visit this board. Thanks!

ATG

[outwest]

Just finished reviewing statements

to mail..

I may have to use some more discipline also, John H...

A lot of the reception is how you sell it, one approach might be to just call and say "you know, I've noticed you had trouble staying current on your account. What would be a good way to prevent that going forward?"

For me, it's to turn the problem to my wife, who everyone loves, but can get payment out of a turnip. Should have seen her eyes light up when I mentioned she needed to call some clients.

[JohnH]

So what % will your wife charge me if I send her a few to follow up on?

[outwest]

She's a gem..

and I've been repeated told that everyone loves M.A. .

Kinda implies "what's she doing with you?"

[geekgirldany]

For monthly bookkeeping and payroll most clients bring me a check when they bring the information. If they do not bring it by the next month then I won't do the work. I have also told new clients that I won't release the payroll forms or financial reports unless they bring payment with them. Most do and if they try to get out of it by saying they did not bring a check I tell them I take a credit card.

Same goes for tax return clients. Especially them. They must bring payment before I will file and/or release the return.

[AuditorTurnedGood]

For monthly bookkeeping and payroll most clients bring me a check when they bring the information. If they do not bring it by the next month then I won't do the work.

I never thought of doing it that way. I charge by the hour, but I suppose any overpayment up front could be credted to next month's service. I'll have to think about that.

[geekgirldany]

As of now I have been doing a min. charge of two hours. So really it is a flat fee each month. I would say if you already know about how much time you spend on each account you could get your check for that. Then if there is any extra or overage as you said it can be accounted for the next month.

[erchess]

My Policy

I will do a return and wait to collect a fee until it is done because I guarantee that at the end of the process they will be convinced that my charge is fair and the return is well done or if they don't agree they don't have to pay me. That was the policy everywhere I have worked and in 17 years there were very few who were not satisfied. There have been none since I went out on my own and very few have quibbled further about the price once I told them what I pay for tax related software. All of the returns I have lost or seen lost were over issues of how the return was to be prepared. We all lose a few to the self preparer and the guy down the street when we won't do as clients ask.

I do demand payment before I will give them their return copy and other papers I produced or e-file the return. For a correspondence audit I charge one fee for up to six rounds of correspondence and another for each round thereafter. I collect fees when I give them the first of six letters and then when I give them letters seven and following. In one correspondence audit I did not charge for a round that was made necessary only by my error. Had it not been for my error that round would have sealed the deal and the IRS response even pointed out my mistake and told me if I would fix it everything would work out. For an in person audit I have a time charge for the preparation and a per meeting charge for meeting with the revenue people. I collect the fees before doing the work.

Since I went out on my own I have not had but one problem check and it was not a bounce. It was simply made out for the correct fee as the numerical value but ending in "and eight" instead of the correct "and eighty" for the verbal part. The bank teller I drew insisted that the verbiage was controlling. The client replaced the check.

[luke]

payment up front

My psychologist wife had a "lady of the evening" client who explained to my wife about collecting for services - "we get our money up front"!

[Black Bart]

It

...I have not had but one problem check and it was not a bounce. It was simply made out for the correct fee as the numerical value but ending in "and eight" instead of the correct "and eighty" for the verbal part. The bank teller I drew insisted that the verbiage was controlling...

just depends on what teller you're talking to. The following still amazes me: I once got a cashier's check at a major bank's mall booth and the teller typed in figures only, leaving blank the second line ordinarily used to spell out the amount. I asked about it -- she said she had never filled in that line before. I insisted and she asked her supervisor who casually glanced at the check (and me) without comment (probably never heard of such either), then merely nodded an okay, as if to say "Humor this nut."

Re: Collections, retainers, and so forth:
I have everybody on C.O.D. except a couple of notable exceptions whom I've slowly let accumulate to $2,500 total over the last three years. They're cash now, but one's going out and I'll probably lose his $2K. What a dopey thing to do and I swear I'm never letting anybody get in that deep again no matter how solid I think they are.

[taxxcpa]

Retainers

Unless a job was something like $ 1000 or more, I would not ask for a retainer. If someone owes me $ 100 and doesn't pay me, I chalk it off as a bad debt and refuse to do any further work for them. It seldom happens.

I had one client who originally paid very promptly for monthly accounting service. Then he sold his business and began waiting for about a year to pay me when I did his tax return. After a couple of times, I told him 'No more," and dropped him. He sent me the money he owed, but I did not want him back.