Businesses operate to make a profit. But, if companies don’t also effectively manage their risk, a lot of revenue can be left on the table. And, significant time can be lost resolving problems. This is especially true for a small tax practice. But, what is the best way for a small tax practice to manage its risk? Here are policies and procedures to consider implementing. And, if you have already employed them, way to go!

Ask Questions

We’ve all been there. We’re talking to a client, and he (or she) goes on and on about an event or transaction.  He acts like it’s something about which we know. Maybe it was a substantial incident or matter that happened in his business.

The person appears to think we know all the details. We get concerned that we’re just supposed to “know.” The best way to manage risk here is to stop and let the person know that you are not clear as to what they are referring. You need more details to best help with the issue.

Knowing all the facts clears up a lot of questions. Research and resolution are quicker and easier when you make inquiries and get clear answers. Manage risk and make more money by making it a policy to ask questions and get clear on the facts.


Get Clients To Talk With You Before Big Transactions

Another way to manage risk is to let clients know that it is better to contact you in the planning stage of a large transaction. Sometimes, it’s a good idea to make clients aware that you won’t charge them for shorter phone calls. That way, they’re more apt to call.

Then, once you get the opportunity for the consulting, you can make sure that you are compensated fairly for the work, including the time on the phone. That’s an upside. An even greater upside is that you can take care of understanding what proper reporting looks like way before you get into your busy time of year. Have a process whereby you do this. If more information is needed, get it.

Then, do the work to ensure the calculations are complete and the tax return reporting is clear. Go over what it looks like with your client. If the transaction is going to result in tax for your client, you can have a much easier conversation about it and give them time to gather up the needed funds. You make more money this way, and you don’t have to deal with uncomfortable conversations. Sounds like a win, win!


Review Client Information Early

Unfortunately, even if you have a policy of not charging for phone calls, clients don’t always let you know what’s going on. In fact, they might not tell you about a big event or transaction that happened last year until it gets to this tax season. This is when unanticipated consequences can arise. The client thought they knew how things would work from a tax perspective. But, it turns out it wasn’t the way they thought at all.

Sometimes the discussion can get a little complicated. But, if you review client information early, right after it comes in, you can mitigate some of the complications. Just like the last bit of advice, the more room you can give between now and when the tax bill needs to be paid (this doesn’t seem to be an issue when the tax bill is going down), you can better manage risk.

Even though you weren’t involved in a transaction, especially since your client didn’t tell you about it, you run the risk of suffering from the fallout of “shoot the messenger” syndrome. Have a process where client information is reviewed within the first couple of days of coming into the office. If you can put some space between when the client gets the news and when the taxes need to be paid, you can hopefully avoid getting in the crosshairs.


Anticipate Risks Based On Past Experience

Experience teaches a lot. We need to learn from it. If something happened at work that might be better served by a different process, implement that changed method. Don’t just talk about it. Don’t just complain that the bad experience happened. Change the outcome for next time.

Implementing new processes can be difficult and time-consuming. But, ultimately, they can be way worth it. Sit down and analyze what happened.

Discuss the situation with the people involved. Be proactive about understanding what happened and how to handle it better next time. Then, document and test your new procedure. Make sure that it works in the way intended. Then, if the issue involved a client, talk to the client.

Let them know the steps you have taken to make sure that what happened never occurs again. Sometimes mistakes will cost you a client. But, if you are proactive with the resolution and demonstrate that you have addressed the issue and have a new way of handling things, sometimes you can salvage the client relationship. That can give you another chance to impress later and hold onto the client long term.


Get Good At Documenting Things

Nobody’s perfect, so mistakes happen. And these errors are risks. But, implementing policies and procedures that address risk management can have loads of benefits. It shows that you are responding to outcomes to make them better.

It also shows that you care about doing things right. And, taking the time to discuss issues with clients further demonstrates that care. But, take it one step further. Don’t just implement new policies and procedures, be sure to document them thoroughly.

Even though we know that it is impossible to be completely error-free, documenting new policies and procedures is a great start. Then, make sure that the others in your office are aware of the need to follow these new rules after they are implemented.

In the end, you can manage both the risks and the relationships involved. What better outcome than that?