Date posted: 06/10/2022

Show me the money: How to avoid client bill disputes

Preemptive actions accountants can take to lower the possibility of client fee disputes, and if disputes do arise, how to manage them.

In brief

  • There are several reasons why a client may dispute a bill – it’s important to know the triggers.
  • Transparent communication can help prevent future disputes.
  • If you do need to collect a debt, always behave ethically and professionally.

Client tensions over a bill can devour time, sour a client relationship and even take an emotional toll. CA ANZ’s professional standards and guidance on fees and billing can help you guide conversations to avoid or manage a bill dispute.

Why bills can be disputed

The reasons clients push back on bills usually fall into these four camps:  

  • Financial pressure. The client is unable to or is having difficulty paying their bills.
  • Bill shock. The bill is much more than the client was expecting based on the explanation at the outset.
  • More to the story. The client is unhappy with something about the work and disputing the bill is a way for the client to make a point. 
  • Disagreement with the client. Perhaps you did work for a company and the outcome wasn’t what the CEO was expecting and now they refuse to pay. Or perhaps you’ve performed work for a couple who are now divorcing – you’ve done work for both of them, but the silent spouse refuses to settle the bill. 
The good news is that most bill disputes can be prevented. It’s about laying the groundwork before the work starts – setting clear expectations with your client about what you’ll do for them and what it will cost.

How to avoid bill disputes 

The good news is that most bill disputes can be avoided. It’s about laying the groundwork before the work starts – setting clear expectations with your client about what you’ll do for them and what it will cost.

1. Provide a clear Terms of Engagement letter

Set out your fees and payment terms in your initial Terms of Engagement letter to your client. Make sure you get your client’s agreement in writing before commencing the work. Take the time to set out in plain English what is and isn’t covered by the engagement. This is often a sticking point between a client and a member.

CA ANZ regulations require your Terms of Engagement letter to set out: 

  • The basis on which fees will be calculated 
  • A clearly defined billing arrangement 
  • What your client needs to do or provide so you can complete the work
  • Details of any referral fees or commissions (note these aren’t allowed for assurance engagements).

During the course of the engagement, additional work may need to be done. This could mean that changes to the fee structure or billing arrangements are necessary. Make sure you alert the client to these changes and obtain their consent (preferably in writing) – this might involve updating your Terms of Engagement letter.

2. Be able to justify your fees

You have the flexibility to charge what you need to run your business. When deciding on fees, strike the right balance, considering:  

  • the time it takes to get the work done – is the cost a fair representation of the work performed?
  • the value of the service to the client
  • the risk to you and if you have any statutory responsibilities
  • the qualifications and expertise of those in your firm who are performing the work 
  • the complexity of the work 
  • industry practice and competitive pressures.

3. Note some practical tips 

Refining your practice procedures can also reduce the likelihood of a bill dispute:

  • Move to shorter billing periods for clients facing financial pressure to minimise the risk of a large unpaid bill.  You can also consider seeking payment in advance.
  • Send your bill immediately after completing the work, while your client’s memory is still fresh, or as agreed in your Terms of Engagement letter.
  • Set out the work you’ve done on your invoice including the hours and rate of the person who did the work. In some circumstances, consumer law may require an itemised bill. 
  • Be clear on who’s paying you. You may want to hold the person engaging you personally responsible for costs if they’re requesting work outside the scope of their mandate.
  • Take special care if you are using retainers as the scope of work can be unclear. Also, the timing of your bill may not align with when the work was done. 
  • Avoid discounting fees for initial engagements, with the intention of recovering fees lost in future periods. You may be sending mixed messages about how much work costs.

Your obligations when collecting a debt 

If you do need to recover a debt, the Australian Competition and Consumer Commission (ACCC) in conjunction with the Australian Securities and Investments Commission (ASIC), have produced a useful guideline. When navigating these tricky client conversations, it’s important to always behave ethically and professionally. 

Debt collection guideline

This ACCC and ASIC guide sets out your obligations when collecting debt.

Read more

Some points to consider include:

  • Time of contact. In the course of working together, it may be typical for you to phone your client late in the evening. However, when calling about a debt, you’ll need to note the guidance about reasonable contact times.
  • Frequency of contact. Don’t excessively follow-up your client about the debt. Refer to the guidelines on reasonable contact.
  • Confidentiality. Take care when leaving messages for the debtor. It’s important that people around them don’t infer your reason for making contact.

Finally, experience is a great teacher. So, if you do experience a billing dispute, incorporate the lessons learned into your future Terms of Engagement letters, processes for discussing costs with your clients and your dispute resolution procedures.

Where to go for more information

Do you have any further questions or need practical guidance on a complex professional issue? As part of your membership with CA ANZ, you can speak directly to an experienced member of the Professional Standards and Ethics Advisory team. 

This free support service is completely confidential and available to all current members. Make an enquiry via phone or email, or by using the online form provided on our contact page below..

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Dispute Prevention, Management and Resolution Toolkit

A toolkit to assist members build and maintain mutually beneficial client relationships.

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Engagement letter tool

Engagement letter tool containing sample clauses to assist members in practice to prepare engagement documents for use with their clients in Australia. 

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