WIP-ing Clients Into Shape

Do you think you can’t control client behavior? Think again.

Clients are as trainable as the average Jack Russell terrier, which is to say they are somewhat trainable. Many clients can be taught to fetch their tax documents on a timely basis with a few treats.

We have covered reducing WIP by better scheduling on our part. Let’s see if we can reduce aging WIP caused by clients. There are two main ways clients unnecessarily increase WIP:

1. Delay in providing additional documents and answering our questions
2. Delay in approving draft returns

Delay, delay, and more delay. I provided an example above showing how WIP can be increased when clients don’t give us enough data to meaningfully start tax preparation. However, they can also sabotage turnaround time after we begin tax preparation by not providing additional documents that we need.

We have already begun tax return preparation, have questions, and need some additional documents. How do we gently nudge clients to answer our questions quickly, given a world that frowns on terroristic threats?

First, ask better questions. Train your staff to ask questions that clients can actually answer. Do you ask, “What was the basis of the Ford stock you sold on May 5^th?”

How many clients understand the term “basis”? Pretty much none. Most won’t know that they ever owned Ford stock.

Instead ask, “You sold 10,000 shares of Ford stock on May 5^th. When did you buy the stock, and how much did you pay for it?”

This uses language that can be understood by normal human beings. The first wording showcases our technical expertise. The second wording gets an answer. I’ll take the answer, because it moves the return toward completion, and I get paid. Note the “I get paid” part.

Here’s another example of self-sabotage.

“Did you pay any personal property taxes in 2016?”

Do you really want to know if they paid personal property taxes? Well yes, but what we really want is the amount. Change to:

“How much did you pay in personal property taxes in 2016?”

I once had a client respond, “How much should I have paid?”

No question is perfect. Socrates clients – the ones who answer questions with questions – are worse than warm beer in August.

Second, use your project management system to remind clients to answer questions. Our software has an auto-nagging feature that reminds clients every few days that they haven’t answered questions. Train clients to answer more quickly by being consistent in followup. If they know you’ll nag them until entropy ends the universe, they’ll answer the questions.

Do you present draft tax returns for approval? We do and have for probably 10 years. There are a couple of reasons why we started giving clients drafts. First, I hate wasting time rerunning returns for small changes. You present a finalized return that shows a client that he owes $10,000. Here’s what’s next:

“I can’t owe that much. I don’t have that much. You missed some of my expenses.”

Once again, you forgot IRS code section 666, which states that someone can’t owe more than he has.

Then he comes back a week later with a receipt for a $15 lunch that he never gave you that you “missed.” You get to rerun a return over an $8 tax deduction. Because almost all of our clients have Schedules C or E, we started delivering drafts.

Most 21^st-century clients believe they should have some input into the tax return process. I agree. For the most part, clients don’t understand much more than name, address and Social Security number, but a blind hog finds an acorn once in a while.

A few times each year, clients will “find” new children that they didn’t tell us about. Or based on the balance due, they discover that their elderly parents are actually dependents. It happens. Or they remember that 10-year-old Nissan that they donated that was worth $10,000.

Lastly, the drafts are cheap CYA insurance. When a client approves a draft that is missing $20,000 in interest from that foreign bank account, you have some cover when the attorneys call. Not much cover, but some.

What’s the downside of drafts? They keep returns in progress longer. They increase WIP and thus decrease turnaround time. I’ll let you do the math on whether drafts are worth this downside. They are for us.

When clients don’t approve or disapprove drafts quickly, we’re stuck in process. To prod clients into addressing drafts, we use the same auto-nagging feature in our project management software. Again, consistency in follow-up is key. When a draft sits unapproved and unloved for a week, I send a more personalized nagging message. When that doesn’t work, I send an invoice. That pretty much always works.

Also, tell clients how to approve drafts. We have standard wording that we use, and we then customize the language to present the results with a few paragraphs of commentary explaining the results. Our software also presents a great big button that says “APPROVE” in extra-large characters next to the draft. Two thirds of our clients figure out how to press that button. For the remaining third, well, blind hogs don’t find acorns very often.

Make consistency in followup a key part of your project management system. You train clients gradually that the tax return process need not last until the sun becomes a white dwarf.

Capacity planning goes hand in hand with reducing WIP. Once you’ve done as much as you can to reduce WIP, move on to capacity. In one of examples above, we saw how reducing WIP can work to better utilize existing capacity. We changed when returns got started to better match our existing capacity.

The goal with capacity planning is to efficiently use every last bit of your capacity before adding more. When you add more capacity, i.e. hiring more people, you increase expenses. That is your last resort.

Convincing your corporate tax clients to start their returns in January is a fine example of better utilizing existing capacity. You have excess capacity in January that you don’t have in February and March. How can you convince clients to come in earlier? Train them to come in earlier.

Training clients to come in earlier doesn’t happen in one tax season. Every December and January, we send a series of e-blasts to our clients called “Countdown to Tax Season.” We try to make it funny as well as informative – at least as far as funny gets you with tax returns. We use two characters, the Tax Lady and the Grim Reaper, to communicate important information about tax season, including our deadlines for documents and due dates for tax returns.

The Tax Lady and the Grim Reaper are involved in a romantic relationship. The Tax Lady is a picture of the Church Lady from “Saturday Night Live,” with my head Photoshopped over her head.

A few years ago, we began using the e-blast series to encourage business tax clients to start their tax returns earlier. We started by letting them know that our cutoff date to receive information for getting corporate returns done by the March 15^th deadline had changed from February 28^th to the 23^rd.

We also sent an e-blast in December called, “Do you know where your bookkeeper is?” We poked fun at bookkeepers, who do little all year long, then in February start the big push to get the books ready for income tax preparation. We may have even insinuated that bookkeepers who do this cost our clients money by assembling hastily prepared records. I got a few angry calls from bookkeepers about this.

I responded, “Of course, we weren’t talking about you.” We were talking about them. Guilt works wonders.

This past January was scary. Our billings were up almost 60 percent. Almost all of the increase came from corporate returns coming in the door earlier than in past tax seasons. After three years, our dastardly plan worked. I don’t know if our clients pushed to get ready earlier or if we shamed their bookkeepers into doing their jobs, but it worked. This made my life better, which was the whole point.