Accountancy & Management: Getting to grips with a bad debt problem: Roger Trapp hears it said that accountants are not good managers

ONE might have thought that the experience of trying to sort out other people's financial troubles would make accountancy firms determined to keep their own affairs in order.

It appears, though, that this is not necessarily the case. But, like the doctors who smoke or drink while extolling the benefits of preventive medicine, some accountants fall into the 'Do as I say, not as I do' category.

Of course, this is partly a result of another syndrome - 'One person's gain is another's pain' - in that every lucrative insolvency appointment picked up is another firm's audit client lost. But less than secure management may have something to do with it.

After all, while the collapse of the Canary Wharf developer and other high- profile financial failures in the property sector and elsewhere all have their own peculiar circumstances, there are general lessons to be learnt by businesses striving to cope with the tougher trading conditions of the 1990s. And it could be that they are not being taken to heart among those closest to the action.

This, at least, is the suggestion arising from a recent survey of accountants' bad debts. It showed that accountancy firms - ranging from the big six to sole practitioners - typically had bad debt levels of between 1 and 5 per cent, with figures near the top of the scale not uncommon.

Small firms and those just outside the big six had the most serious problems - with most writing off up to 5 per cent of bad debts every year - while medium- sized partnerships and sole practitioners suffered only marginally more than the big six, which typically wrote off less than 1 per cent.

Perhaps more surprising is the finding that more than half said this was satisfactory. And, while 60 per cent said external collectors would be considered, only a quarter were actually using one.

The latter is certainly good news for Credit Limits, the Hertfordshire-based debt collection agency that employed an accountancy student, James Ward, under the Shell Technology Enterprise Programme to carry out the research.

Derek Dishman, the company's managing director, decided on the project to test a hunch that arose out of his work with liquidators in recent years. 'I had this feeling that accountants were not very good managers,' he said.

He was trying to spot fresh opportunities for when the corporate recovery work that had sustained his company for much of its six-year life fell away in the wake of the end of the recession.

His belief was that, while the insolvency specialists might be aware of the problems, the management consultancy arms and general practice areas could be in need of help in recovering fees.

Perhaps the most dramatic case was that of the national firm that writes off 15 per cent of its debts. It called in Mr Dishman - who, like his fellow director Susan Hawkins, was a credit manager in industry before setting up the company - for advice.

For obvious reasons, he will not give details of his prescriptions - but he offers an enticing picture of what getting debts under control can lead to. The firm could reduce fees by 10 per cent, or it could reduce staffing because such inefficiencies mean that it is employing more people than it needs.

Even firms with write-off levels around 5 per cent are likely to change procedures in response to the findings, Mr Dishman says. He predicts that firms of all sizes will take steps to monitor their business properly.

Even at a highly competitive time like this, firms should not be afraid of sacking clients if not entirely happy with them. 'They have to be brave,' he says.

As a way of concentrating the minds of employees, he holds out the example of one big six firm with which he is currently working. It has set its partners targets for fee collection - and if they are not met the partners do not get paid.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Recruitment Genius: Mortgage Administrator

£20000 - £25000 per annum: Recruitment Genius: We are a vibrant and establishe...

Day In a Page

Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference
Rugby World Cup 2015: The tournament's forgotten XV

Forgotten XV of the rugby World Cup

Now the squads are out, Chris Hewett picks a side of stars who missed the cut
A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'
Britain is still addicted to 'dirty coal'

Britain still addicted to 'dirty' coal

Biggest energy suppliers are more dependent on fossil fuel than a decade ago
Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests