Thinking of ditching a client? If you’re struggling with the idea, take comfort in the fact that you aren’t alone. Even if it makes sense for your business, there always seem to be reasons stopping you from making the move.
How will I plug the gap with new clients? Can I really do without that income? Can I change their unreasonable behaviour? Shouldn’t I be more loyal? These are just some of the questions and fears preventing you, and many others, from moving on.
There are occasions when it’s necessary to move on, though, and often from what are essentially toxic relationships.
When applied to the accounting industry, the Pareto Principle suggests that more often than not 80% of sales come from 20% of clients.
If this sounds like you, you can probably afford to politely say goodbye to some clients. We realised this is something that’s often talked about in our QuickBooks community, so we decided to offer a client termination letter template. It’s designed so you don’t need to worry about how to word things, or what you should and shouldn’t include.
Just hang on and consider this: deciding whether to cut ties with a client isn’t just a question of profits. You need to face up to each of those niggling worries preventing you from making the move before you can make a properly informed decision.
Most importantly, think about how losing a client might affect your cash flow. Even the smallest incomes need careful consideration. As well as cash flow, you need to consider your contractual commitments, and whether losing this client could affect other deals.
Also, if you work in a small, close-knit market, could a bad break-up affect your reputation?
Still tempted? Read on.
It’s crucial to assess the financial consequences of ditching a client before you push ahead. However, if payment is your main issue with a client, that decision becomes a lot easier.
If their payment process is affecting your ability to pay wages and bills, or to commit to other jobs, it’s time to ditch them. A single late payment can be a blip rather than a catastrophe, but serial bad debtors are always easier to cut loose.
If you find your contractual obligations no longer make business sense, the first step should always be negotiation. Your client may well be happy to renegotiate rather than lose you altogether. However, if that doesn’t work, it’s probably time to serve notice on the deal. Either they’ll rethink their hard stance or you’re free of a situation that was hindering you anyway.
There isn’t a magic formula to business. Different companies find success by employing totally different approaches.
Whilst you’ve hopefully ascertained what sort of company you’re dealing with before you start doing business, you often don’t find out exactly what they’re really like until you’re working together. Maybe you think they want more than they’re paying for, or they shift the goalposts too often.
Don’t ditch a client because they aren’t perfect. But equally don’t let one client grind you down so much that your relationships with other clients suffer.
Once you’ve decided to part company with your client, it’s crucial you follow the correct procedure to avoid problems in the future. Make sure that what you outline in your letter is watertight, and refer to your letter of engagement for details like termination date.
And by the way, there’s no need to go into reasons why you’re calling things off. In fact, it’s best not to mention this at all.
Take a look at our sample termination letter to get the ball rolling.
Re: Termination of professional services
Dear XX,
I am writing to inform you that AAA ACCOUNTING FIRM will no longer be able to offer CLIENT accounting services. According to the terms set out in our letter of engagement (dated x), our services to your firm will terminate as of (date).
Unfortunately, due to current circumstances ACC ACCOUNTING FIRM are obliged to terminate agreements with some of our clients, including CLIENT. I apologise for any convenience this may cause.
I would urge you to engage an alternative accounting firm as soon as possible who can better meet your needs. In this case I am able to recommend XYZ & Co, or ABC Associates. We are very happy to work with the firm you employ in order to ensure a smooth transition for your business.
Any original documents pertaining to your business which are still in our possession will be returned to you by recorded delivery forthwith.
I would like to take the opportunity to thank you for your business. ACC ACCOUNTING FIRM wish you and your company success going forward.
Yours sincerely,
Saying goodbye to a client is never easy, but if you assess the consequences of your decision properly in advance, it can be less painful than you think. Using the QuickBooks client termination letter template takes the stress out of what is a potentially painful situation.
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