The Dos and Don’ts of Disengaging
Terminating a client relationship can be a difficult, emotional process for all involved. But with the proper blueprint, it doesn’t have to be.
Digital Exclusive - 2022
Whether due to the “great resignation,” the “great reassessment,” or the “baby boomer departure,” the CPA profession is experiencing a diminishing workforce while facing standards overload, handling a variety of relief programs, coping with innumerable IRS issues, and dealing with the constant stress of limited resources and elevated client demands. As CPAs manage these stressors, some are reassessing their quality-of-life charts and identifying issues they wish were no longer accompanying them—some of those issues being clients. If this situation sounds familiar, it might be the right time to explore the option of disengaging.
There are many reasons why one might consider disengaging with a client. It may be time to consider disengaging when:
- Clients fail to pay or are slow to pay.
- The relationship deteriorates or you no longer possess the competence or capacity to perform the sought services.
- The risks outweigh the rewards or there’s a conflict of interest.
- Your independence (on attest services) is threatened or impaired.
Once you realize that the client relationship should end, take a moment to do it right and lay down the proper groundwork to protect yourself and your firm. Here are 11 steps to take to best disengage from a client.
1. Start With Verbal Communication
Don’t surprise clients you wish to terminate with a letter informing them of your decision. Get personal and talk to them. Recognize that it may be painful and difficult for them, but a good-natured touch will typically smooth the transition.
2. Explain Your Reasoning, Listen, and Be Empathetic
You’ve been a constant in their lives, and the change will likely not be welcomed as they won’t want to lose you. So, expect an emotional appeal—know it’s coming and stick to your guns.
3. Disengage in Writing
Yes, you’ve already had the difficult discussion, but your job isn’t complete until you finish the paperwork. Shortly after your disengagement conversation, memorialize your conversation with a “tweaked version” of the hybrid disengagement letter you crafted, using language harvested from illustrative disengagement letters.
It’s best to expeditiously communicate your decision, but you also need defensive documentation of your client receiving your disengagement communiqué. Email can be the solution if your client promptly replies to your email. A client’s email response acknowledging receipt of the letter eliminates the need to obtain proof of delivery from a delivery service. To best gauge how to obtain that defensive documentation, think about your previous working relationship with the client and how they operate. While email may be the fastest route, some clients may find email too informal and not reply. Certified mail has historically been the preferred mechanism, but some parties—expecting news they don’t wish to accept—decline to sign an acknowledging receipt. If you opt to send the communiqué via email, and your client doesn’t reply, follow up with a mechanism that provides proof of delivery.
4. Include Your Last Date of Service
Don’t be ambiguous—state the last date of service. Nine times out of 10 it’s best to disengage and have no further client expectations. Ideally, you should collect on the last item you agreed to deliver and promptly disengage thereafter. Often, you’re peppered with requests, your client is slow to pay, and you must disengage with work in process or on the horizon. Therefore, state that the most recent deliverable was your last or the penultimate.
5. State Your Work Status/Pending Due Dates
Take the time to state the status of services you were performing and detail the due dates of items on the horizon. Otherwise, you may be dragged back in, regardless of whether you had formally been engaged to perform those services. Why? Because if your client or your successor makes a mistake, you may be blamed for their oversight. Smoothing the transition reduces the likelihood of ruffled feathers that might result in allegations you were negligent.
6. Include the Account Balance Status
Outstanding invoices and work in progress are commonplace when accountants disengage. Collecting these fees may prove problematic but detail the amount they owe you in your disengagement letter, attach copies of the invoices, and include the statement “your prompt payment will be appreciated,” to significantly increase the likelihood you get paid. Pointing out the amounts owed also provides psychological leverage against clients’ unreasonable demands and expectations.
7. Encourage Retaining a New CPA
Encourage terminated clients to secure the services of another qualified professional. Doing so is an act of courtesy and an excellent defensive measure. The sooner a former client establishes a relationship with your successor, the greater the likelihood that the client’s ill will toward you will dissipate.
Occasionally, CPAs are tempted to provide terminated clients with someone to consider as their successor—don’t. Instead, when wishing to offer referrals, offer at least two names and encourage former clients to perform their own due diligence. Suggesting only one person or firm exposes you to liability should the former client later allege your successor didn’t meet the standard of care.
8. Cooperate With the Successor
The sooner and smoother the transition to your successor, the better it’ll be for you and your former client. As such, it’s typically best to make an offer in your disengagement letter to “cooperate as necessary” with your successor.
Your offer to cooperate shouldn’t indicate that you’ll bend over backwards or donate your time. Rather, your cooperation will be contingent on factors that need not (and shouldn’t) be specified in your disengagement letter.
If your transition assistance is sought, first obtain written authorization from your client to speak openly and share information with the specified professional(s). Second, secure the successor(s)’ signed agreement to the terms of your cooperation. Lastly, consider leveraging your cooperation pending payment of your outstanding fees and possibly a retainer to cover the anticipated cost of your cooperation. Keep in mind, however, that the AICPA prohibits its members from withholding client-provided records, and your state board of accountancy may prohibit withholding records—even though fees are owed for work you’ve performed.
9. Carefully Transfer, Retain All Client Records
CPAs are often tempted to enclose client records in the same envelope they send their disengagement letter—don’t. Clients have been known to allege they didn’t receive a CPA’s disengagement letter, and problems compound if a client’s records are lost.
Instead, ask the client when you converse (or in the disengagement letter) how they wish for you to provide them with the records they desire. And just to be safe, retain copies for your records of any records returned.
10. Consider Sending Your Letter to Multiple Parties
If you’re concerned that certain owners or those charged with governance won’t hear of your disengagement or your reasons for disengaging, consider the “noisy disengagement” option. Noisy disengagement letters are identical to traditional ones; however, noisy disengagement letters are addressed to concerned parties that might not promptly learn of your disengagement or reasoning. Be cognizant of the AICPA’s Confidential Client Information Rule, which prohibits accountants in public practice from disclosing confidential client information without client consent. Sharing the disengagement letter with owners and those charged with governance typically wouldn’t violate the rule but be careful not to inadvertently violate it when wishing to alert others you terminated the relationship.
11. Be Professional, Not Emotional
It can be cathartic to colorfully detail your reasons for disengaging but be mindful that your openness can have consequences. Experience has shown that letting clients down easily typically results in the quickest and least eventful parting of ways. Having a right to do something doesn’t make it the right thing to do.
Many CPAs prioritize the client acceptance process but don’t equally follow the client continuance process. Properly arm yourself with a disengagement blueprint that leads you to success when it’s time to say “happy trails” and goodbye to a select few clients.
Duncan B. Will, CPA, ABV, CFF, CFE, is loss prevention manager and accounting and auditing specialist, with CAMICO. He can be reached at [email protected].