Why the Least Loved Basic Tax Return could have a Silver Lining
The basic ‘I’ return is probably one of the least loved compliance requirements of the current tax system. Most firms endeavour to avoid attracting such clients or having to complete such work unless of course they are part of a larger family group or a referral they simply cannot avoid.
Many practitioners place little value on ‘I’ returns when reviewing practices for sale, often pricing this type of work at a significant discount to other types of lodgements. Probably the only groups that become enthusiastic about these types of returns are financial planners, who perceive these clients as hot opportunities, and those who operate high turnover tax return franchises such as H & R Block and ITP.
So why is the humble ‘I’ return so unloved?
Most firms consider them less profitable than other types of returns (although this has yet to be proved)
To be able to make a profit on this work firms often require select or specific types of personnel. Such staff may be hard to find or difficult to replace when they leave and these particular firms are often structured not dissimilar to a factory at times.
Expensive or senior staff are often unable to perform the work profitably
The work is not perceived as interesting as other clients’ requirements
These types of clients are perceived as more transient and less sticky to a specific firm or adviser, therefore more likely to move upon the sale of a practice.
So what about the silver lining? This comes in to play where some of the most basic compliance clients turn into the clients of the future. The number of firms I speak to who freely admit that some of their largest clients today started off as some of the smallest clients is amazing.
So I challenge you, review your firm’s current top 20 or 30 client groups and ponder their origins. Did any of these groups start off as a small, perhaps less desirable client? I would be surprised if most firms weren’t answering yes to this question. That being so, perhaps this just reminds us not to be too quick to decline or turn away a new client or referral. You never know where they and you might end up.