How a CPA Should Work with Vendors: A Vendor’s Perspective

By Robert Basso

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JULY 2007 - Accountants are their clients’ most trusted advisors. As a result, referrals from accountants or accounting firms are invaluable and sought after. Service providers from many industries seek to build relationships with accountants, hoping to obtain referrals. The desire and the need for these referrals have led to the development of a number of tactics that are innovative and, in some instances, aggressive. Many seek to manipulate accountants to get to their clients to sell them various products and services. To combat these tactics, accounting professionals need to take a serious and strategic approach to developing relationships with vendors and service providers that they use or that they refer to their clients.

Beyond Basic Due Diligence

Outsourcing has increased in popularity over the last decade. Accounting firms are looking to service providers to take over certain operations to aid them in becoming more efficient and profitable. Many accounting firms delegate certain services, including tax preparation, payroll, and bookkeeping, to outside vendors. Embarking on this path has many pros and cons. Before a firm begins outsourcing, it must be confident and comfortable with the company that will be providing the services.

Before entering into a relationship with a particular vendor and providing a client with a referral, it is of utmost importance to conduct due diligence to confirm the vendor’s abilities and verify that it can offer the services the client requires in a timely, professional, and efficient manner. Encourage clients, to speak with the provider’s current clients, and ask for information that demonstrates financial stability and competence. Failure to provide acceptable information should immediately send up a red flag, leading to additional review or moving on to another provider. This simple measure can give insight as to how the vendor operates and how the client will be treated.

Often, businesses neglect to investigate people they meet at networking events and business functions, relying solely on their impression of the people and the circumstances under which they meet. This is a risky proposition.

For example, in the payroll industry, vendors must be insured and bonded. Referrals involve more than passing on contact information to people in different sectors. Just because a large corporation or well-known name has the proper credentials is no reason to forgo the review. Every office, department, and individual in a large company operates differently. The quality, or lack thereof, provided to various clients from different departments within the same company can be surprising.

Referrals Are a Two-Way Street

Referrals should not come with strings attached. In some instances, a specific vendor is the exclusive recipient of referrals from a particular accounting firm, and vendors work hard to earn and maintain this level of confidence. Nevertheless, accounting professionals should understand that referrals and working with service providers should be a two-way street. The accounting firm is in business to provide services for clients and promote growth. Whenever possible, businesses that receive referrals should do what they can to return value to the referring firm. I am not talking about referral fees or finder’s fees, which is a complex issue to be addressed later, but about developing relationships that will assist the firm to grow over the long term and help individual accountants attract business. Accountants should view those to whom they provide referrals as allies, and the recipients should understand this as well. Individuals who receive referrals should be a firm’s advocate and should provide added value whenever possible.

Reciprocating in the referral relationship and staying within ethical boundaries is complicated. Frequently, vendors are not in a position to return value with direct referrals. This is because businesses do not change accounting firms often and most businesses don’t announce that they are seeking new representation.

Added value can be derived from a relationship in several ways. To be effective, the vendor must understand the referral practice and its capabilities and goals. This knowledge equips the vendor to recognize opportunities when they arise. These opportunities can involve identifying prospects, recommending networking or business events, or proactively introducing members of the firm to others who can use their services or provide referrals.

Practices reap significant benefits when they provide a referral where clients are well served, especially if the results are cost-effective. This should not be the only value that comes with the referral. When a new vendor enters a relationship with a CPA firm’s client, it is an opportunity to learn about the relationship the firm has established with that client, as well as to look for additional opportunities to provide service. Opening this dialogue could lead to a greater understanding of a client’s needs by being in the right position to offer appropriate solutions.

In most cases, accounting firms will decide not to accept compensation or finder’s fees. When granting a referral, many accounting firms suggest that in lieu of compensation the firm would rather the vendor pass along the savings to the client by way of lower fees or additional services. In this case, both the client and the accounting firm are well served.

Sometimes referral recipients can return tangible value through their own referrals. This is an ideal situation, and relationships with these sources should be a priority. Referral sources can also bring other value to the table. Some will host CPE classes for accountants, work with firms to secure speaking engagements, and possibly provide marketing or other expertise to the firm to enhance its growth initiatives. These proactive steps demonstrate that a referral recipient understands the CPA firm’s challenges and those they are seeking to assist with indirect support. In some instances, this support can go a long way in helping an accounting firm attract new clients or secure more business from current clients.

Regular communication is another important factor for accountants to keep in mind when working with service providers. Sometimes long periods of time pass between referrals, which means limited contact. During these periods, there may have been significant changes within the provider’s company or industry, adversely affecting the vendor’s ability to provide the level of service the CPA firm’s clients need. Therefore, it is good to maintain periodic two-way communication with referral recipients.

After a service provider is engaged by a firm’s client, monitoring progress is important, especially for a new provider. The firm providing the referral should ask its client how things are going and if the vendor is meeting expectations. If all is going well, everyone is in a good position. If there are problems, the CPA firm will still look good because of its proactive communication.

Accepting the Bad with the Good

Along with the good, one also has to take the bad. Although problems can be minimized by choosing referral recipients wisely, it is common for referrals to not work out as originally intended or for vendors to make a mistake. Each case warrants review, and there may or may not be a need to stop using the provider. It is important, however, for accountants not to end a relationship over a single mistake or problem. Mistakes are in the nature of business. One referral that goes awry isn’t necessarily evidence of a systemic problem with the vendor.

The most valuable long-term relationships are forged by communicating through problems and building trust. The way a service provider handles a problem or an issue with a client is often indicative of how it provides service. A service provider that works hard to overcome an issue and takes immediate responsibility may be the best kind to work with. If the provider handles a problem poorly and the clients are not well served, then certainly it is time to seriously rethink providing future referrals, even if the provider impacts the CPA firm positively.

Robert Basso is the president of Advantage Payroll Services, Hicksville, N.Y. He can be reached at 516-931-8400 or




















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