CPA INSIDER

How to deliver bad news to clients

Follow these seven tips to navigate difficult conversations.
By Dawn Wotapka

Sometimes an accountant can find savings and advantages that equate to good news for an organization or client. But, as any professional knows, there can also be times CPAs need to report negative news that clients may not want to hear.

Explaining bad news in the right way can, however, make you more valuable to both your client and your employer, said Bob Prather, general manager of the accounting and finance recruiting practice for Lucas Group in Houston.

"Being able to identify issues and deliver that bad news is one of the most critical parts of your role in being a steward of the company," said Prather. "Come to terms with that early and embrace it, because it is an area where you can establish your value."

Here's how:

Set the stage. Prather suggested having a conversation about the likelihood of a bad-news scenario long before it actually happens. This helps show clients that you are looking out for everyone's best interests. "Mention to [clients] early on in your relationship that, 'From time to time, I am going to tell you bad news. It's inevitable,'" he said. Setting the stage early helps deflect some of the "kill the messenger" reaction that could come along with bad news, said Prather, who has two decades of experience.

Don't use email exclusively. While email may seem like the easiest delivery method, relying on it solely can seem impersonal or even rude, said Logan Allec, CPA, who runs Money Done Right, a personal finance blog. Have a phone conversation or, if possible, an in-person visit, which allows you to observe body language and other nonverbal cues, he said. Send email after the conversation to ensure everything is documented. 

Don't wait. When it is time to deliver the news, don't delay, advised Karen Castle, CPA, owner of Castle Business Accounting in Olney, Md. "Problems occur — that is the nature of business," she said. "Accountants owe to it their clients to communicate all information, both good and bad, in a timely manner."

What's more, delaying these conversations could harm your standing with the client, said Peter Gurian, CPA, founder and principal of Gurian PLLC, a tax accountancy and business advisory firm in Dallas. It could "make clients lose trust in you and make them feel like there is something that you're hiding from them," he said.

Be concise. Ensure your communications are simple, drama-free, and factual. Even if the issue is particularly complex, limit the initial conversation to simple terms and a graphic or two, Prather said. Be ready to dive into the details regarding the negative news if asked but try to keep things straightforward otherwise. "Once the recipient understands the issue, they are likely to ask you questions that will allow you to offer your thoughts and opinions," he said. "Give those, but hold the dramatics." 

Remember that clients don't necessarily want the nitty-gritty details. "They just want the bottom-line answer," Allec pointed out.

Recognize that mistakes can happen. If you think that you or your employer messed up, assess the situation and notify your professional liability carrier, who likely has resources to guide you through timely and straightforward communication of the issue with your client.

"Most of the time clients will understand mistakes are inevitable," Gurian notes. "It's how you handle the situation that will show your true colors." 

Offer solutions. When delivering the bad news, explain it simply and calmly, and offer solutions, Prather said. Being able to offer strategic options and sound advice help establish you as a go-to partner worthy of trust. There's no need for dramatic doom and gloom. Simply deliver the full story and reaffirm your desire to get the job done, said Jacob Dayan, J.D., CEO and co-founder of Community Tax, a tax firm based in Chicago. "Reinforce that whatever the situation may be, you will work with them to find a solution," he said.

If your firm can't tackle the entire situation, come to the meeting armed with the names of other people who can help, Gurian said.

Keep the client in the loop. Once you've identified the problem and the action plan, stay in communication with the client so they're aware you remain engaged and active in solving the problem. Gurian stays in contact with clients until the issue is resolved. He then follows up to ensure things are back to normal and running smoothly.

No one likes to have a difficult conversation, but it is a necessary part of being a successful accountant.

"It is critical that your bosses and peers can trust that you are going to give them the truth — good, bad, or ugly," Prather pointed out.

Dawn Wotapka is a freelance writer in Atlanta. To comment on this article or to suggest an idea for another article, contact Chris Baysden, a JofA associate director, at Chris.Baysden@aicpa-cima.com.

SPONSORED REPORT

2019 State of Financial Reporting Survey

We surveyed nearly 600 finance and accounting professionals on their month-end close and reporting processes. See the results.

VIDEO

What RPA is and how it works

Robotic process automation is like an Excel macro that can work on multiple applications, says Danielle Supkis Cheek, CPA. RPA can complete routine, repetitive tasks such as data entry, freeing up employee time from lower-level chores.