A Practitioner’s Guide to Managing Cash Flow.

Successful practitioners know their firm or company’s bottom line and future depend on timely payment for services rendered at fair prices. Yet without effective policies and procedures to set fees, issue invoices and ensure payment, your organization is open to risks that threaten its growth and perhaps survival. Consider the following tips to help clients and customers meet your business’s needs.

Be sure to price your services as high as they should be. Underpricing can increase pressure on you to maintain revenue by hurrying through complex tasks, increasing the chance of error and liability.

Work with credit-reporting services to identify problem clients before accepting engagements. Where possible, check clients’ payment history with their prior CPAs. Listen carefully—sometimes what they don’t say is important. Fearful of liability for slander, practitioners are more likely to praise a good client than criticize a difficult one.

Use an engagement letter to spell out the scope of the work you will perform for a client. Consider including an estimate of your fee, noting that unforeseen circumstances or changes in the engagement could make a revision necessary.

Provide full details of pricing and payment methods in client and customer contracts.

Request a retainer at the beginning of an engagement, especially from clients with a poor credit history.


Bill only for tasks within the scope specified in the engagement letter. Charge for additional work only with the client’s written permission.

Keep invoices simple and easy to understand. In the event of a legal dispute, bills that are precise, accurate and agree with other engagement documentation could decide the case in your favor.

Negotiate a mutually convenient billing cycle with your clients. Then, bill for completed tasks as soon as possible, while the work is fresh in their minds.

Keep billing up-to-date so you won’t hesitate to end an engagement before completion because of outstanding receivables.


Establish billing and collection procedures and understand their legal ramifications. The primary law governing collection programs is the Fair Debt Collection Practices Act (Public Law 95-109).

Consider allowing clients and customers to use credit cards or promissory notes as payment options. Credit cards are convenient for them and—if you’re willing to pay bank fees—enable you to spend less time on collections and more on developing new business. State laws govern the terms of promissory notes, but within those limits you can customize the notes to suit your needs and those of your clients.

Never withhold a client’s records for nonpayment of your bill. The AICPA (see Code of Professional Conduct) and most states do not regard a client’s failure to pay fees as sufficient justification for a firm to withhold the client’s records. Check with your state board of accountancy to confirm its definition of “client records.”

Closely monitor and document clients’ payment history. When payments are late, speak directly with the client’s accounts payable manager and ensure that he or she understands the terms of your agreement.

Ensure that senior staff within your organization review bad-debt write-offs and inform other operating units of customers or clients who have defaulted.

Consider using a collection agency only after you have done everything possible on your own to settle the account.

If you consider suing your client for nonpayment, be sure also to consider mediation and arbitration, which are less confrontational and consume less of your time and money, especially if your client counter-sues you. Note that while arbitration is legally binding, mediation is not.

Source: Camico Mutual Insurance Co., Redwood City, California, www.camico.com.


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