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How to manage delivering bad news to clients

· 9 minute read

· 9 minute read

Some of the hardest information to tell clients is the not-so-good news. After that’s done, you have to make sure you’re communicating well about what has happened or what will happen next as a result of this bad news. Often, not-so-good news can be quite impactful to clients’ lives and livelihoods and sometimes this can lead to some challenging conversations.

In this episode of Pulse of the Podcast, ”Delivering Bad News”, the discussion is about how to manage delivering bad news to clients and how to use these tough situations as learning experiences for your firm as well as the client. Good communication is key in the accounting industry especially, and it’s imperative to speak to clients clearly, even if the news isn’t good. All the technical tax knowledge that is learned while earning your CPA is really secondary. As a CPA, you will find the most important thing beyond knowledge is that you have to communicate well with clients and coworkers.

Enhance your communication skills when delivering bad news

Of course accountants have to know technical skills too, but it’s imperative for partners and those doing the hiring in firms to remember what kind of education has not happened in school. It’s common for upper management, even owners, to struggle with communicating, especially when it comes to delivering bad news to clients.

In general, in the accounting industry, there’s a lack of teaching skills about talking to clients. There are many CPAs that have a lot of good technical knowledge, but when it comes to actually communicating with clients, there seems to be a void. And again, the technical expertise is important; we’re not downplaying that accountants need the technical aspect as well. But the ability to communicate to someone at a certain basic level, especially when the news may not be great, is sometimes lacking.

Assess the situation to learn from delivering bad news

Sometimes, the bad news is no fault of your firm. As an accountant, you try to do a tax projection for your client. You come up with a number that you think the client is going to owe on April 15 (let’s say $10K, for example). Then when preparing the tax return, all of a sudden you realize the client actually owes $20K. Maybe he mixed up his books. Maybe he gave you some bad information. Whatever the case may be, this is not good news. Your natural reaction is to dive in and prove why you were right based on the projections the client originally gave you. You may feel like you need to defend your position.

Clients don’t really care at that point. When delivering bad news to clients, what needs to occur is that you have to just communicate well. And more than likely, even though you realized the client’s numbers were wrong, you have to take the full brunt of that responsibility as you communicate with the client. Of course, every client is going to be different. $10K more in taxes than was expected could be life changing, or it could just be a rounding error. As the relationship manager, you have to assess that situation. And from there you have to quickly move beyond the issue and figure out how you prevent it from happening again. Sometimes, it’s easy to get hung up on these little things. We keep doing the same thing over and over again and expect different results, which is as you know, is the definition of insanity.

So instead of dwelling on it, you have to figure out how to change the way in which you received the information that gave you the wrong number. Or maybe you’ve been telling the client for years that he shouldn’t be doing his own books, and now he just got an unfortunate $10,000 education as to why he shouldn’t be doing his own books. This is not an easy lesson, nor is it easy to have that conversation. What do you do to handle the situation?

Provide solutions to create a learning opportunity

The main thing is that you need to move away from troubleshooting and fact-finding and begin providing solutions and moving forward. At this point, it’s not about whether you were right or not. Clients don’t care about you being right. They care about the end result. Where are you going to go from here? How are you going to fix it? That’s what the client wants.

In some cases, the client may not even be concerned about your accuracy; more than likely, they’re concerned about your awareness of the situation, it’s impact, and your next steps. Communicating well and keeping the client focused is key to driving through these tough times. Firms often have the tendency to shuffle that task up the chain to have the highest level person handle delivering bad news to clients. But you could be missing significant development opportunities for junior staff when you do this. They have to learn sometime, after all.

If all you do is cover for staff, how will they learn from this opportunity? You have to get staff exposed to thinking on their feet about some of these difficult conversations. Emails commonly have the greatest room for error in terms of misinterpretation. There is too much margin for error and too many missed opportunities for the chance to proactively acknowledge a complex situation. One of the key aspects of communicating well to clients, even when it’s not good news, is that you can use it as a teaching opportunity for staff with less experience. What’s appropriate for email, and when do you know that you need to pick up the phone and talk to someone directly? These are important lessons to learn and aspects to discern.

How do you deliver bad news to clients?

Going back to the example that your client owes $10K more than you thought, the reality is: it is what it is. What you need to do first is call up the client. This isn’t the kind of news to deliver over email or text. You can’t just drop an email bomb when delivering bad news to clients. A better way to handle the situation is call your client up and say something like, “I’ve been trying to wrap up your tax return. I’m having some trouble reconciling the numbers. The numbers that we came up with on our review are not matching where we’re ending up right now on the return. I want to go over this with you to make sure I’m right.”

You have to give staff the opportunity to work and solve the problem. And that’s where a lot of people leave it. They don’t let the client help participate in solving the end result or fixing the problem. The difficult reality is that the client probably didn’t behave properly throughout the year with regards to some aspect of their business. Maybe they overspent or made some kind of behavior change. And by going through this process together, and communicating, you realize that the client has to be part of the conversation.

Maybe you didn’t get all the information or didn’t get something right from the client. It’s not that firms never make mistakes. However, more than likely, the client did something wrong. The challenge is that it’s bad form to blame the client. This is a relationship and it has to be massaged in a way that helps the client understand that you’re working together on this, not laying blame. The hope is that you take something away from this experience that you’ll be able to do a little differently going forward as you work with your clients. Empower them, use it as a training tool for staff, and even while you’re nervous about it, let newer staff learn from these difficult conversations.

Focus on the future to further the client relationship

What you should be doing is giving your clients hope that tomorrow is going to be a better day. The next year is going to be a better year. How do you avoid this situation again? Don’t dwell on the fact that the mistake happened. What matters is how you fix it. Give the client hope that it’s not going to happen again and that there’s a way out of this issue in the future. That’s good bedside manner that you should really emphasize when training less experienced staff on how to deliver hope to clients.

Listen to the “Delivering Bad News” episode of the Pulse of the Practice podcast on your preferred platform (Google Play, Apple, Spotify, Stitcher) or here.



Want to learn more about how managing relationships, including delivering bad news to clients? Join us on 1/15/20.


Calibrate to Your Clients: A Virtual Conference

Join hundreds of your peers in the tax and accounting profession for this exclusive full-day virtual event on January 15, 2020 and learn how you can add value not only to your client relationships but also to your firm’s bottom line through advisory services. As technology and regulations shift and move, so do client expectations and needs. It is time to look at how both relationships and operations are managed through the lens of client service to maximize value and deepen relationships.  

This event is chock-full of informative, actionable content that you will be able to walk away with and implement at your firm for maximum impact – all while earning up to 6 CPE credits.

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