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Getting a bad billing

Would you be happy to receive a bill ten years late? Tony Bromell warns that ICAEW will take a dim view of members who may behave in a unprofessional manner in these times.

Tony Bromell is Head of Integrity and Markets. This article first appeared in Accountancy Magazine, Jan 2009.

By and large, ICAEW’s professional people are unshockable. But recently, even they have been taken aback at some of the complaints that have been lodged against several members in the UK.

It seems that in a desire to claw back as much outstanding debt as possible, firms have been sending out invoices to clients that are rather old – indeed, in two cases, an astonishing seven to 10 years after the relevant work took place.

Now, it is quite likely that a chartered accountant in practice, who does work for a client over a long period of time, will send bills on account because the precise amount of work cannot be determined in advance. The total bill will be worked out in due course, on the basis of time spent.

As time moves on, the work finishes and the standing orders finish at the same time. But what is now happening is that, after a few years’ silence from the accountant, an invoice is arriving out of the blue for the total of the work done, less amounts billed to date.

This is not good commercial sense. ACAs should be setting a good example with their sound business knowledge, good internal controls and common sense: they should not be allowing cashflow to slip up so badly.

Is it ethical?

People use ACAs partly because they can expect them to behave in a professional manner. ICAEW's Code of Ethics is based on a set of fundamental ethical principles, which must always be complied with to demonstrate that professionalism. It also includes some detailed discussions and requirements showing how these principles should be applied in particular circumstances.

The code makes it clear the principles of integrity, fair dealing, and the principle of professional competence and due care requires acting on a timely basis. There is also a detailed section on fees (s240). This does not discuss late billing specifically, but does require that the basis on which fees will be calculated should be discussed and explained at the earliest opportunity. It also states that the arrangements should be confirmed in writing prior to the commencement of any engagement, including a confirmation of any estimates and how any future fees will be rendered.

It notes that, in the event of a complaint being made, members should be prepared to demonstrate that the client was not misled as to the basis on which fees would be determined.

Protecting our reputation

All this makes it fairly clear in the absence of clear indication to the contrary, lobbing a bill a long time after the related event is not timely, does not count as fair dealing and is certainly poor professional behaviour.

It would be wrong to set a precise rule saying something like ‘all fees rendered more than x months after the work is completed can be challenged and not paid’: there may be all sorts of reasons why the client ought to have expected a late invoice. For example, the client may have agreed an element of the fee would be invoiced at a given point after the end of the work.

However, if an invoice is rendered more than, say, 12 months after the end of the work to which it relates and a complaint is made, then there will be at least a presumption by the professional standards department that the matter shall be looked into. Are there good reasons why the bill should be expected? If not, there may be a case to answer.

We are not trying to set rules for the sake of it: our reputation depends on all of us adhering to high standards of professional behaviour. And here we have an example of good sense and doing the right thing going hand in hand. So don’t sit on those bills until the dust gathers.