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A Job Costing Advisor’s Guide to Unprofitable Clients
December 7, 2020 at 5:00 AM
Job costing advisors help businesses figure out how to handle unprofitable clients.

Most small to medium-sized business owners know that it can be five times more expensive to acquire a new client than retain an existing one. So, it’s understandable that many people will fight tirelessly to keep their customers happy and coming back for more business. However, not every client is the same, and according to job costing advisors, some actually cause the company to lose money. If you want to maximize your operation’s profitability, be on the lookout for these signs that it’s time to drop a client.

How to Know if a Client is Losing You Money

Your services are undervalued by the client.

It’s easy to ensure you earn the appropriate amount of money when you charge clients by the hour. You can simply set a rate that properly reflects your expertise and bill them accordingly. However, business owners who charge by the project often find that their time isn’t valued correctly. While some projects are completed quickly, others drag on and diminish your effective hourly rate. Job costing advisors recommend monitoring this by tracking how much time you spend on the project and then dividing the total payout by that number. If the pay rate isn’t satisfactory, either raise your price or drop the client.

There are problems with the client’s payments.

A common issue is clients who struggle to send payments on time. Sometimes you know the money will come, but you’re not sure when. This is problematic because it creates cash flow issues within the organization, and when that happens, it’s difficult to meet your own financial obligations on time. Not being able to pay bills that are due or process payroll opens you up to costly fines, late fees, and a diminished credit score, making it harder to borrow money in the future.

However, a bigger problem is clients who either short pay or don’t pay at all. You should always receive the agreed-upon payment once the job is complete, and if you don’t drop these kinds of clients, you’ll continue to lose money and have to pay for legal fees and collection agencies to recover the unpaid amount.

The client demands too much of your time.

Job costing advisors also recommend being wary of overly demanding clients. These are the type of clients who are always calling or emailing you, require extra service, or consistently try to renegotiate agreed-upon terms during your interactions. Not only are these customers a nuisance, but they also cost your business money. By having to incessantly tend to their unreasonable demands, you end up with less time to focus on other clients, drum up new business, or handle pertinent in-house needs that will improve the bottom line. If you have any clients like this, it’s best to either set more defined boundaries or drop them for higher quality business partners.

Do you have clients that are negatively impacting your company?

If you’re not sure, then you need to contact the expert job costing advisors at KRD Tax & Consulting. This Broomfield, CO company has helped clients in the Greater Denver area better manage their budgets and maximize profitability. We have a team of highly trained consultants who specialize in helping you recover lost money that you might not even be aware of and supercharge the entire operation. Let us see how we can help you further grow your business by visiting us online and scheduling a no-obligation consultation.