Which clients left the firm this year, and why
How an accounting or audit firm counts the clients it lost this year, groups them, finds out why they left, and acts before the lost fees show.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Firms are good at celebrating new clients. The new audit appointment is announced at the partners' meeting, the referral source is thanked, the engagement letter is framed in everyone's memory. Clients who leave get far less attention. A bookkeeping client stops sending its documents. A payroll client moves to a cheaper provider. A company's new financial director appoints a different auditor. Often nobody at the firm can say, at year end, exactly how many clients went, or why.
The loss shows up eventually, in fee income that does not grow as it should. By then the reasons are months old and the clients are hard to win back. A firm that tracks its lost clients, and asks them what went wrong, can see the problem while it is still small.
The measure: client churn
Harvard Business Review, quoting Professor Jill Avery, defines customer churn rate as the percentage of customers who end their relationship with a company in a particular period: the customers who left during the period divided by the total customers at its start.
For a firm, that becomes:
Client churn for the year = clients lost during the year ÷ clients at the start of the year
Decide what "lost" means before you count. A client whose company was deregistered or sold is different from one who moved to a competitor, and a client the firm chose to let go is different again. Count all of them, but label each one, because only some of them say anything about your service.
Why lost fees show up months later
HBR describes churn as a lagging indicator, quoting a software company's vice president of services that by the time churn rises it is six or eight months after the company actually failed the customer.
Professional services work the same way, often more slowly. A client who was unhappy with last year's late financial statements may stay for the current year's tax return out of habit, then quietly appoint someone else for the next year end. The failure happened over a year before the fee disappeared from your budget.
That is why counting lost clients once a year is not enough on its own. You also need to know why they left, while the people who dealt with them still remember the details.
Look at losses by group
HBR also recommends looking at churn by customer segment to show which types of customers are at risk and may need attention. In a firm, useful groups are:
| Group | Why it might differ |
|---|---|
| Service line: bookkeeping, payroll, tax, audit | Different teams, different pressures, different competitors |
| Size of client | Small clients may be more price-sensitive; large ones may outgrow the firm |
| Industry | A sector downturn can take several clients at once |
| Partner or manager | Not a judgement of the person, but a sign of where workloads or handovers broke down |
A single churn figure for the whole firm hides almost everything useful. A firm losing very few audit clients but many bookkeeping clients has a specific problem to solve, not a general one.
Ask the clients who left
David Skok, writing about subscription businesses, recommends that where churn is a significant part of the business, the founders themselves phone churned customers to find out why they left. His guide to SaaS metrics puts that advice alongside the measures of churn themselves.
The firm's equivalent is a short call from a partner who was not directly responsible for the client, so the client can speak freely. Keep the questions simple:
- What made you decide to move?
- Was there a moment when you started looking elsewhere?
- What would have had to be different for you to stay?
- Is there anything we should know about how we handled your work?
Write down what was said, in the client's own words where possible, and keep it with the client's record. The first few calls may be uncomfortable. They are also the most honest feedback a firm ever gets.
What Achekam records about a client who leaves
Some of the information you need is already captured as clients leave.
- Ended appointments. Where a business uses Achekam for its books and has appointed the firm, either the business or the firm can end the appointment. The firm then loses access to the books, and the business keeps them. A reason is asked for, kept on the record and shown to the other side, so the business's own stated reason is there for you to read.
- Archived clients. A firm keeps its client directory on Achekam's server, adding clients with a step-by-step wizard or a CSV import, and editing and archiving them. If the firm archives every client it loses, the clients archived during the year give you the top half of the churn calculation. Agree that rule with everyone who maintains the directory.
- The client's history. Staff can open any client's Client 360 record, which reads the client's services, contacts, timeline and profile from the server. Before the exit call, read the timeline to see what the firm did for the client in its last year, and when.
Turn the reasons into changes
Amy Gallo writes in HBR that, depending on the study and the industry, acquiring a new customer is anywhere from five to 25 times more expensive than keeping an existing one. Whatever the true figure for an accounting practice, winning a new client means proposals, meetings and onboarding, while keeping one means fixing what annoyed them.
Once a year, put the reasons side by side and look for patterns. If several clients mention late statements, the problem may be capacity in the busy months. If several mention fees, the problem may be how fees are explained rather than their level. If clients left after their manager changed, look at how handovers are done. Choose one or two changes, give each an owner, and check next year whether the losses in that group fell.
Start with this year's list
Make a list of every client that left in the past twelve months, label each with a reason and a group, and call the ones who left for reasons you can fix. When it is the firm that decides to part ways, see disengaging from a client, and for complaints that come before a departure, handling client complaints.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
