Handling complex client scenarios
Handling complex client scenarios Vertical

Handling complex client scenarios

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Whether it’s tax season or another time of the year, if all you’re offering your clients is tax prep without an eye on tax advisory, you soon could find yourself at a loss to help clients work through complex scenarios. Each tax season unfolds with its unique set of challenges, often propelling professionals into the intricacies of client relationships, complete with legal, financial, and ethical complexities.

To steer through this dynamic interplay of relationships, laws, ethics, and time pressures, we’ll look at the scenarios you may encounter, the importance of recognizing red flags sooner rather than later, and actionable ways you can minimize the risk of these situations occurring. 

Examples of complex scenarios

With its relentless pace and high stakes, it’s not surprising that tax season brings multifaceted challenges to the desks of accounting and tax professionals. Among these are circumstances that can test your technical know-how, problem-solving acumen, and judgment. Let’s take a look at four complex situations you may encounter:

  1. Last-minute tax law changes: Legislation can shift rapidly, so keeping up with these changes is crucial. You have to readily adapt to these adjustments, as well as understand their implications for various clients, especially those in niche sectors.
  2. Poor financial recordkeeping: You may encounter clients with disorganized or incomplete financial records. These scenarios often require you to meticulously reconstruct their records and educate them about the importance of maintaining proper financial documentation.
  3. Complex estate and trust matters: Estate and trust taxation can be highly complex, especially when dealing with large estates, cross-jurisdictional issues, or unique assets. You need to be well versed in the laws and strategies that govern estate planning, gifting, and intergenerational wealth transfer.
  4. Cryptocurrency: With the growing prominence of digital assets such as cryptocurrencies, navigating the tax treatment for clients presents fresh and evolving challenges. Staying abreast of the latest developments in tax implications, reporting requirements, and compliance for digital assets is crucial when providing informed and accurate advice to clients in this rapidly changing area.

Spotting the early warning signs in complex client situations

The key to managing these types of scenarios is the ability to spot red flags early. Here are eight potential early warning signs to be on the lookout for and practical ways to identify them.

  1. Inconsistent data: Be vigilant in keeping an eye out for any discrepancies in the financial data your clients provide. Inconsistencies might rear up, for example, as unexplained fluctuations in income or expenses, gaps in financial records, or mismatched figures in different documents. 
  2. Sudden financial changes: A significant change in a client’s financial status, such as a sudden increase in income or unexpected expenses, should trigger a closer look. These changes could result from various factors, including new business ventures, loss of a major client, or changes in personal circumstances, such as divorce or inheritance.
  3. Delayed or incomplete information: Clients who consistently provide information late or submit incomplete records are bright red flags. This kind of behavior can not only disrupt your timelines, but indicate deeper issues around their financial management.
  4. Communication breakdowns: Pay attention to how clients communicate with you. Frequent misunderstandings, reluctance to provide the necessary information, or evasive responses to straightforward questions can signal potential problems.
  5. Discomfort with change: Sure, change is hard, but clients who are resistant to necessary changes, whether it’s updated software, new billing methods, or revised tax strategies, might struggle to adapt to the evolving tax landscape and make your job even harder.
  6. Reliance on “urgency:” Clients who constantly present their issues as urgent or demand immediate attention, often without reasonable cause, should also set off your alarm bells. This behavior can indicate a lack of planning on their part or unrealistic expectations of your services.
  7. Hesitation to commit to client engagement letter: If clients frequently hesitate or refuse to commit to your proposals–especially after you’ve discussed terms–this can likewise be a sign of potential future difficulties in your professional relationship. By recognizing these red flags early, you can take proactive steps to effectively manage these situations.
  8. Questionable or illegal financial dealings: Be alert for signs that a client may be involved in questionable or illegal financial activities. Warning signs might include unexplained large cash transactions, requests for unusual deductions, or reluctance to provide complete information about sources of income. These circumstances not only pose ethical dilemmas, but also put you at risk of falling short of legal standards. 

By recognizing these red flags early, you can take proactive steps to effectively manage these situations. 

Preemptive strategies for a smoother tax season

Before the whirlwind of tax season begins, it pays to lay the groundwork for minimizing any of the above scenarios. 

Attracting clients that align with your ideal client profile is a good first step to ensuring smoother interactions. This means focusing your sales and marketing efforts, and client onboarding processes toward individuals and businesses that fit your firm’s expertise and values.

In “How to Build a Million Dollar Tax Representation Practice: A Step-by-Step Approach,” Eric L. Green, an attorney and founder of Tax Rep Network, takes this strategy to the next level by asking, “What you do need to do is get your arms around your practice so that it works for you, not the other way around?”

His recommendations for doing that include printing out a list of every tax preparation client you have, making sure the list includes the fees they pay you, and to  print your receivable list. 

“Rank the clients from A-F,” said Green. “The As are excellent clients; you love working with these people and they always pay your bill. The Bs are good clients who do not bother you and generally pay on time in full. C clients are those who could be A or B clients, but you cannot really focus on them, and they usually complain about their bill or are slow payers. D clients are clients you would rather not deal with, and F clients are people you wonder why they are even still clients. These people owe you money and are so annoying they suck your will to live. They are the last ones to get you documents, refuse to go on extension, do not listen to you, and probably owe you money … You should charge a fair rate from day one. Unfortunately, most practitioners do not do this and end up with a practice of lots of cheap clients they would rather not work with.”

Also, make sure your proposals and engagement letters are comprehensive. These documents clarify the scope of work, set expectations, and legally protect you and your clients. They’re your first line of defense against scope creep and misunderstandings about your services.

Some platforms can help you optimize a number of these processes by providing legally-vetted templates for engagement letters for example, and automate the sending of these, too. Technology can also automate other mundane or repetitive tasks as well, such as client billing and taking upfront payments, allowing you to focus on delivering top-tier tax services – and spending more time for those more complex clients. 

Let clear communication be your friend

With your preemptive strategies, expand your focus to communication. At the start of any client engagement, be explicit about the services you provide, the timelines, your pricing, payment terms, and expected outcomes. This sets a clear foundation for your relationship and helps avoid misunderstandings later on. A well-crafted proposal and letter of engagement ensures you’re clearly setting out these expectations before you start any work. 

The right technology can fast track your firm to a more profitable and efficient tax season. But don’t forget the human element of your professional relationships. Schedule consistent meetings or updates with your clients. These check-ins serve as opportunities to review progress, address any emerging issues, and reaffirm mutual expectations. What’s more, they foster trust and ensure that you and your clients remain on the same page throughout your engagement.

Turning tax season challenges into opportunities for growth

During tax season, you’re juggling tax preparation with client relationships, changing regulations, and ethics—all with the clock ticking away.

Effectively managing complex client scenarios can lead to enhanced accuracy, stronger client relationships, and smoother operations. Using technology in your tech stack can help you navigate these challenges with ease. When you use a revenue generation platform such as Ignition to reclaim your time and unlock your revenue, you’ll not only survive tax season—you’ll master it with efficiency and confidence. Find out more by watching an instant demo.

Matt Kanas
Matt Kanas

Written by Matt Kanas

Matt Kanas is a seasoned professional who serves as managing director for AMER at Ignition, a leading all-in-one platform for professional services businesses to get paid faster and run smarter. With a proven track record of driving growth and innovation at companies such as Intuit, Matt has earned a distinguished reputation within the technology industry. More from Matt Kanas

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