Scope Creep

Welcome to Accountants Law Pod, where accounting professionals and law firms converge, hosted by Linda Artesani, Sarah Prevost, and Stephen Libhart.

Welcome back to the podcast, everyone. How's everybody doing?

Fabulous.

Great. Well, let's see, it's gone up in temperature. It's 74 degrees today.

It's getting dark here.

I'll bet. I'll bet. Yeah, doing good. Doing good.

Doing well.

Doing well.

I understand we're talking about scope creep today, our favorite subject. Oh, yeah. Scope creep.

I know, right?

Freaky. You know, it's so funny because when I think of scope creep, I never heard that term until not that long ago. It's kind of funny. But I think when you think of scope creep, it all comes down to the communication between us and the client. If it's us that we're talking about, same thing for the attorneys, right? They have to have clear communication. They have to have a good engagement letter. You have to spell it out, what is included, what's not included. I mean, those are the things that are so important when you start an engagement with the client and you're setting the table for the whole relationship with the client. So you have to set clear expectations. And let's face it, we don't speak the same language.

Mm-hmm.

Sometimes we just kind of assume they know, but then all of a sudden you find out they— whoa, they don't know. And then it can cause a world of hurt.

So I think the, the thing for you and I too on that point is we've gotten to the stage where we've had to put a lot of things in our agreement that's what's not included, or delineation days. If we find things that are prior to this date, yeah, then, then it needs to be worked on, um, which is not included in the current service, uh, engagement letter. So it's tough because the easy ones Right off the top of my head that I'm thinking of, the easy ones are you think the trust account's in balance, you find out it's not, and it's prior to the date. Or, uh, whoops, I, I forgot to tell you, I did a— I got a new credit card and it's not included in the entire, you know, ledger system. And before you know it, it's like 800 transactions because it's been—

Can I jump in there? So give me your opinion on credit card transactions.

Yeah.

Is scope creep— is it scope creep if you discover that they're using the firm credit card for their personal expenses as well?

Oh, that's not— I don't think—

look at it through that lens personally. I would, but I would definitely advise—

I had a client who went to coffee every day. You know, we had, you know, 52 weeks of 5 days a week of coffee receipts. That we're not the firm.

Yeah, it's not the firm. But again, it's, um, you're just gonna handle the transaction and the transaction's gonna land into your distribution or owner's draw because those are not, those are not client meetings. Those are not employee sessions.

And I think we're lucky now with, in the age of AI.

Yeah.

One thing that AI does a really good job of is you have to clearly define the range of services that you're providing to the client. And sometimes you just kind of blast them out. I've written mine out like in bullet points and things like that, and I just plunk it into AI and I go, please refine this to sound more professional, give it a lot of clarity, and make it readable. Those prompts, and they come, it'll spit out a beautiful document that you still gotta tweak it a little bit. But I think that part of that is making sure that the client understands exactly what you're selling to them and where those boundaries are. Because really scope creep is everything that goes outside the boundaries. And there's a lot of that that can happen.

Okay.

So this hangs above my desk for when I'm doing consultations, and it's called Scope Creep.

Wouldn't you put it as, you know, the Nightmare on Elm Street, the title with the law? Wouldn't that be—

Yeah, I should do that. But I have 7 different points on here.

Okay.

That should be included in the letter of agreement. One is build awareness. What is the scope of the project? Be clear on the outcome in the letter of agreement. Have clarity over the scope of the work in the agreement and what's not included. Make sure the project is signed off by both parties. Communicate how we're gonna do the work and how are we going to communicate, you know, with the results. Develop scripts to communicate with the client. Give them a choice. Do you want the work back to fix things or do you want us to fix them? You know, because that really does help to find scope creep and carry out a post-project review.

You're reminding me of something. We had this come up. There was a confusion on the way that they were working in a software, and they had funds going into the wrong account. They needed it to be in the other account, and there was a change of scope that was not the client's doing. It was an outside service that said, hey, we have to change your bank. It's going to fold into this. Everything has been built properly around the old account, but now we had to have a brand new number, a new account. So inside their practice management software, we needed to make sure all of those funds transferred to the new one.

Oh, yeah.

Yeah.

However, that was not within our scope. That's not our due diligence. So to your point, we gave it back and said, here are your 2 options. Surprisingly, they opted to do the work themselves.

Wow.

And so the, uh, the secondary point to that was, if it's not done right, there will be a fee for us to fix it.

That's the very first thing that I thought of when you said that.

Yeah.

But there's scope creep in accounting services that you're going ongoing and there's scope creep. In cleanup, totally different, uh, the project work. In fact, we always try to do the cleanup project first to see if we want it. It was kind of like dating before we get married. We want to know if we really like working with the client. So we do it that way. And then if you, if you look at it that way, that's going to give you a good picture of it. But then that happens a lot in project work where all of a sudden that you find something that's not in there. And for example, is this scope creep, Steve? You price out a job, you missed that the undeposited funds had 20 pages there. You only saw the front page and said, oh, there's not much here to clean up. Is it scope creep if you gave them a price to clean it up and that's in there and you found 20?

Oh, boy.

To the client and say, I didn't realize that instead of having 50, you have 250 things hanging.

Well, I think that that's on us because we didn't review the file correctly.

Okay, Sarah, what do you think?

It's a mix. It would be— hey, it is a tough one. It depends too. It depends on, did you do a discovery charge to list it? That's part of your checks and balances. So it would be on you. The other part is something that we do differently now is we list how many accounts are in the file.

Yeah, we do, because some things all of a sudden more accounts pop up as you go on. But I just want to go back to that because This actually happened to me. That's why I asked the question, because, Steve, I did exactly what you did, what you said. I didn't— I ate it, ended up doing the work myself instead of giving it to staff. I missed that there was— I saw the front page and I didn't realize that there was 50 more pages. And this was caused— this is a long time ago. This was caused by somebody. Remember when the PayPal app got connected and it just brought everything in and there was no—

Oh, yeah.

Remember that? That's what happened to this file. It was a mess and it was It was more than 50. It was like 500 pages. I should have gone back to the client and said, look, I missed this. Can you— this is gonna take— I mean, I did go back and say it's gonna take a lot of time, but I ate that. And it really— I should have gone back and said, look, this was caused by the paper. This is before, like, I think before online even. No, had to be with online. But it was just a mess. And it was that whole— that app pulled in differently than a bank feed. And it was just—

Well, no.

My question, though, on that, because it happened to me. I connected an app, and I ended up with a lot of receivables and undeposited funds that should have never landed there. Well, that was on me.

It's a big messy place, though.

It's a big messy place. It just depends. It depends on were you paid for the time to scope out the work? Did you list it out? Was it part of your findings? And if it was part of your findings, or if it wasn't part of your findings, but it's something you ultimately missed, then it is— I'm sorry, that's on you.

Okay, so here we just talked about this a little while ago before we started this recording. We keep a scope creep file for each client, and within that file— and you brought this up, Linda, which I thought was brilliant— also have in that file wins where we've saved money for the client, where we've done all these things.

Yeah.

And then you can go back in your scenario where all of a sudden you had several hundred undeposited funds when you only saw 50 or so in the beginning. You can say, you know what? I didn't realize there were this many out here, but now I see it. So the scope of this is bigger. But here's where I've saved you money here. Boy, boy, didn't we get excited when we did X, Y, or Z or whatever it was? And you can say, but this is going to cost A little bit more. And I apologize, but I really want to be honest and upfront with you.

I probably should have gone to the client and said, I totally missed this and see if I could work it out. I didn't do that. But in my head, how I resolved it in my brain was like, there's been where I've priced them. This is like right in the beginning when we stopped doing hourly and we shifted over to— I started shifting over to fixed pricing. And I remember thinking to myself, all right, you win some, you lose some.

That's right.

Yeah.

On the weekends, I didn't— obviously, if I had made staff do it, it would have taken— cost me more. So I did the work myself and cleaned it up, and then it was just awful.

It's a learning process. I did the same thing when I realized my biggest mistake there. I was like, oh, you're kidding me. Had I known what I— at that level at that time. And this was, to your point, Linda, years ago. That's why we're speaking right now from so much experience.

We are.

To be fair to the audience, once that happens, you never miss on the base.

Never miss Oh, haven't we all been there at some point in our infancy way back when? Work, you know, what's an undeposited fund? And then you learn to love them because you get to clear them out and keep it clean.

You know, you get the undeposited. Now you've got the overview screen and all those flags are there. You've got that. We didn't have that back in the day. We didn't have that. You had to kind of—

in the day.

Yeah.

I think that's one of the things it really Defining the workflow. If you have staff, make sure they're in the same place of—

Yes.

Knowing what the workflow is. Um, I had my daughter who worked for me who I— unbeknownst to me, because she worked really well independently, and then when I end up taking over that particular client, she was doing all sorts of extra things for the client, including taking photographs of every check that was received. And he received a lot of checks, and she was Mm-hmm. Propping them in, splitting them up, putting on each an individual payment. And I'm like, why were you doing this? He's not paying for that. Well, I like it because if there's a problem with a payment, I can click on the payment and click on the check. I said, dump it into the deposit, and then you can click on the payment, click on the deposit, click and find it that way. Because it was costing me a lot of money for that to happen. And, you know, now I've— now she's working with me again. I've got her thinking like a business owner. Instead of thinking like an employee that was just trying to please, please, please. So always remember that your, your staff is trying to please, please, please the client, which we appreciate. But sometimes they might be overpleasing and over, overgiving. We had that happen with one of our staff members. You know, the guy didn't pay for payroll and he was asking, can I wanna know if they have how much PTO? And I wanna know, and he didn't pay for that. And, you know, finally we had to jump in and we had her answer it. He still kept on it and we had to jump in and answer it very clearly. Again, great use case for ChatGPT. Write what you wanna write. Can be as nasty as you want. Plunk it in, say, make this nice and professional but clear. And then all of a sudden it spits out something. Well, it sounds a lot better than what I was gonna say, you know?

Yeah. Yeah.

I use that so much for it. That's one of the main use cases for me for not just chat, but like, just we use you.com, just using the AI. That, that's the most successful use case. Is it perfect? No, I still have to go in and make it me. But it helps me make me— I can tell it, look, I know this is a really angry-toned email. Can you make this more just professional or more clear or not so angry? And then it can fix that stuff. So it's a good place to put it in. And then kind of you gotta take out the part where they go, I hope you're doing well, because every time they start an email, it's always like, I hope you're doing well. It's like, we don't talk like that. But that's kind of how the AI is trained, I guess, to be.

You know, I think of the, the little things, the nuances, um, with team staff or anybody else for that matter. You gotta also decide what's immaterial at some point. Chasing down $20 on something that's very—

You don't wanna nickel and dime them. No.

No, it's ridiculous. I, I mean, if I was in an hourly space, I'd be—

I—

you'd be mad as a client. Yeah. Right. To be having to pay for something like that. And it— I think of it in the sense of similar to what attorneys discuss is they'll do a certain level of work. A junior associate might do another level of work. A paralegal might do another level of work. It's the same thing. It's the same conversation. So scope creep can happen outside of our engagements with clients. It can happen internally with the staff and how we lay that out. And I believe that what we need to go back to is the structure as best as possible. But also, it is sometimes really hard to navigate the space to understand Are you asking for something more? Is that really outside the scope? Sometimes it does feel, and sometimes you have somebody on your team that makes a mistake.

Yeah.

And they have to go back and clean it up, which I have, you know, faced recently and directed on how to orchestrate that cleanup as best as I can. But it comes down to following the money, ensuring that you've got the data in the right place.

So, and I think that, you know, the type of clients that we work with are professionals. They spend a lot of money to become attorneys. They learn how to write, they learn how to listen, they learn how to speak to their clients. And scope creep is something that they're very aware of. And I've really, you know, having worked in several law firms over the past 20 years, I really admire when I find an attorney who handles scope creep professionally and they're like, okay, fine, we'll do this extra work. And they just bill the client for it and it's not a big issue. You know, it just, it just, it's— you asked me to do it, I did it. Like you always say, Sarah, we're in business too. We get it.

We get it. Yeah.

We get it. So it's not something to be afraid of to broach with the client, but it's something you need to be organized with and keeping track of.

Steve, you were— we were talking about this earlier. You likened it to the construction industry.

Right.

And work scope change. And something for you that recently came up, you agreed upon a design and implementation, and then you went back and said, hey, I want to have X, Y, and Z. And it was like, well, of course that's going to cost more because it's material and labor charge included in that. And that's very similar to what we do. I think where it gets really murky, to, to Linda's point earlier, and you were saying this too, Steve, is the conversation around it. Just because you decided, lucky stars, you landed the Amex Platinum and now card number 5 is walking in the door doesn't mean you're losing card number 4.

Right.

Or switching it out. Right. You're, you're gonna have that much more in transaction volume. Uh, that was not included in our engagement 2 years ago, a year ago, whatever it is.

Um, so 5 more bank accounts, business changes. So they started And we're like, yay, yay, this is wonderful, you're growing your firm. But then if you've added a lot more attorneys to staff and then they need them to be tracked to see if they're productive, all of that leads to a complete overhaul. If they started small, 4 employees, and now they have 50 employees, it's a different, different, a whole different game. And I think that has to be addressed. I think it's— you can address it in the right way though, so you can end up making that a profitability moment in your firm. If you address it properly, you have good communication lines open with your client. I think that you can implement some good strategies to transform scope creep, which can be very bad on our end, and it can be very, really impactful that it hurts our bottom line, our profitability. And you can spin that to an opportunity to add services and grow your firm.

Absolutely. Absolutely. It's a great door opener.

Yeah.

You know, I'm glad, I'm glad you asked us to do this. It may take us, we may not be able to get to it for another month, but I talked to you, I'm role-playing now. I talked to you, Ms. Artesani, about this KPI in your firm, and you've just opened the door. We're going to do this. It's going to cost you this much more, and we're going to tie it to this conversation we had 3 months ago, and I'm going to give you these numbers. And you've just sold them the scope creep lock, stock, and barrel, and they're like, they can't wait to get the results. Yeah, I swear to you, I've done that.

Yeah, you have to be a good salesperson though. But also you can look at, and there's also ways for us to look at maybe how the work is being managed. And the way we had a client recently that was doing everything manually, every piece of data was being put in by hand. No bank feeds were there. And our opportunity was to jump in and say, okay, let's get the bank feeds connected. Because now we can help with automation, and now we can do more for the client. We freed up— we can do more for the client. I think that that's a key part too, because you can— automation and technology can definitely play a key role in efficiently managing the file. And I think that that's an opportunity that we don't want to miss. And sometimes we just need to look at the file, look at what we sold them, especially if it's a client that's been with us for a long time. Kind of take a look at what we've told them because, you know, these scope creep things can happen little bits at a time where a job was here and now is actually here. And without knowing it, it's now so much bigger than when you initially started with them. And maybe they had 2 bank accounts and now they have 10. And, you know, those are extreme conditions, but that can happen very easily where it's just another extra bank account. Like Sarah said, perfect example, the credit cards. And then there's all this volume coming in that, you know, you're looking at staff. Why is this taking you so long to do this job? No, never used to. We have to keep eyes on all of that stuff because they don't even tell you that they've added all these things.

What about the one, Linda, with, well, you handle this, aren't you going to handle my payroll? Or you handle this, aren't you going to have my 1099s? No, that's why we have an exclusion list.

Or the 401 annual audit.

Oh, yeah.

No. All of a sudden it's like, Surprise.

This workers' comp thing, doesn't this land in your scope?

Yeah.

No, sorry, that doesn't fully land in our scope.

So sometimes it's— that's where the assumptions come in because they don't understand what we do and we just assume—

Keyword, they assume. It's accounting. You know, they may have had— with the work environment the way it is nowadays, so many of us working remotely, they— a lot of these law firms have been used to having an accountant sitting in the corner office behind the stairs. For the last 20 years. And they did the 401 audit, they did the workers' comp audit, they did all this stuff, and they went and bought the coffee on Saturday to make sure that the office was stocked for the next week and all that stuff. And then they come to us, well, my accountant did that. My in-house accountant did all this stuff. I just thought this was part of accounting.

And it works. You mean you want me to order coffee for you, Steve? Is that what you're—

Yeah, I'll send you an order.

I think one of the biggest places scope creep can happen is in payroll.

Yeah.

That it just becomes— I mean, the littlest thing can turn into a huge thing where you're on the phone on hold getting courtesy hung up on, Sarah, for hours and hours and hours trying to fix something that wasn't anything that we even had— we were involved in, but she ended up having to work and fix. And a lot of time went into that so that that can end up being scope creep. Yeah.

And you know what? Things that were not in our space are agreed upon. We didn't even handle it.

Right.

Yeah.

It's okay, I think, to track the scope creep. Let's say you have a flat rate client, but you have this extra project now that became scope creep. It's okay to actually create an invoice. Let's pretend like you're not going to charge for it this time. Create an invoice, show the number of hours, show everything that you did and say no charge or courtesy discount or whatever, and present that to the client and say, this is the value of what I just did this time for you. And now you've added this on. I project that this is going to take about that same amount of time every month now. So we're going to have to look at this addendum to the letter of agreement that we have. That says going forward, this is what this extra payroll add-on is going to cost or whatever. We don't mind doing it.

It's a new lever. I'd say it's a new letter of engagement as far as the services go. I mean, I'm not gonna— to me, it just feels like the addendums do not make the whole pie anymore. You're a different structure or you're a different entity.

That's the other thing.

Entity changes. Okay, get— I get it. That's fine. Entity changes with hiring, entity changes with more locations, compliance, like all of these things. All right, you've just become a brand new client again. Let's get into fair market value at this point because we're not the same. We're not the solo, we're now X. We're not the 2 attorneys, we're now this.

It can be the initial conversation you have, maybe you have with I don't know, the lead, whoever, not the partner, not the managing partner. And sometimes they're not involved. They're way too busy. They're too important to be bothered with something like this.

Mm-hmm.

And then they're not around. They're not really giving you— and then information comes out secondary to— you're already working in the file and all of a sudden something that you had no clue about lands in your lap that made a complete pivot on the file. That's scope creep. And if it ends up causing more work, you kind of have to go back to that and say that this was not divulged to us in the initial Discovery meeting, and it's not in the file as something we wouldn't naturally know. But this is gonna change a lot of what we have to do. Have that in the— I think you have that.

Yeah.

I think it really comes down to having a really strong foundation when you start working with a client. Have a good conversation, be super clear, make sure you open it up to any questions that they may or may not have. Redefine it, regurgitate the details in case they have questions in the conversation. I think that a lot of times there's a lot of complexity that we just kind of blur over because we know what we're talking about. And I think with working with the attorneys, it's not their forte. So we have to be careful what we say and how we explain it and just set clear and really, really clear defined tasks. And it sometimes you don't want to go too overboard. This is where we use Ignition, and it does a great job. They've implemented AI in a beautiful way. So we can put something together and then ask it to redo it. And it does a really great job of redefining the details so that our quote is super clear and it will rewrite it in a way that sounds better. That's, it just writes it out in a way that I think is more defined and clear because that's what it's built for. And anytime you can do that and make it better and better and better, I think that's gonna help you get that foundation so that, because really that's the beginning of your relationship with the client. And if that goes wrong in the beginning or goes south or sour, that can really ruin your time with the client or animosity. I mean, if you have to go back and charge them more, money conversations are always difficult with clients. So yeah, but always have your contract in writing. Don't, um, don't not have it in writing. Make sure it's written down. I've heard people say that, oh, this went really bad, it was a handshake deal. Oh, Please don't do a handshake deal. Make sure you have it written down. And this goes for the attorneys as well. I mean, they know that. I mean, they're smart people. Always have a backup plan. Have a meeting. Onboarding is key. We know some people that actually charge for onboarding because it is a bigger lift for us in the beginning of a file. So you might want to— that's another important piece as you start building your relationship with the client and keeping lines of communication open. I can't tell you how many times Sarah has said, how many emails did you send? Pick up the phone and call them.

Yes.

Because that can be so much better than just writing out an email.

Yeah.

It's just, it's misinterpreted, or a text, or however you're messaging. She just says, why don't you just call? Just call them. Call them right now. But it's true. And it's a lot easier just to send out that email. And then they're like, they never responded. Well, call them. And sometimes if you call them and you call them and you say, you know, I'm thinking about you and start the conversation in a way that they're like, wow, they really care about me, it's going to go a long way.

Well, you know, for those, those bookkeepers and accountants that are listening to this today or watching this today, this comes up a lot in a lot of the different subjects that we talk about in the podcast. And it always comes back in and I'm thinking of it now is that We are more than just putting numbers in and turning around and turning the computer off and walking away for the night. If you're doing those kinds of books, you're not doing not only the client a good service, but you're not doing a good service to yourself.

Mm-hmm.

And that's where, like you said, Lynda, things can go south. There can be misunderstandings. The client can say, well, now I need this done, or I need that done, or whatever. And, and if you're not monitoring and running your business the way you professionally should, And really focusing in on how you're putting those numbers together, scope creep can come in and take over the whole picture very easily.

It can make you feel resentful.

Yes.

Especially resentful to yourself because you didn't open up your mouth and say something like, this is well out of the, out of the scope and we need to have the conversation and do that before you actually do the extra work. Because once the work is done, going back and billing them, it's a harder, harder conversation because then they weren't aware that it was going to cost them more, even though they probably should know. So you really want to make sure that you have the— it's just all about communication, really, when it comes to—

It is. And, you know, they know that a letter of agreement is coming, but don't be afraid to talk to them right up front and say, you know, if you have extra projects, we call that scope creep. You know, if you have these extra things, we're open to it. We're open to being a big part of your team and communicating with you, but know that we're going to watch that and we're going to make you aware of it when it happens. Yeah, they, they'll get it because they— that's what they do in their business.

Oh, I'm sure they have it happen with them as well. Like, you see all the time, like family law, and they just like— I just remember going through it, you know, my daughter going through it and having a call and they're calling at all hours of the night. All I could think of is the clock is ticking and that's money being burnt. But I mean, they really have a hard job, so I could see where that could really expand into. He said, he said, she said, and all of a sudden This little tiny divorce that might have been mediated is now big, and it's hard to put the bumpers on it.

Yeah.

Good conversation. Yeah, it's a lot. It's a lot of stuff behind scope creep.

To support The Accountant's Law Pod, please take a moment to like, share, and review this episode. And be sure to subscribe to this podcast on YouTube and wherever you find your favorite podcasts. If you have questions, topic requests, or guest suggestions, you can email us at info@accountantslawpod.com or send us a message through our website, accountantslawpod.com. To join us in the Accountants Law Lab, which meets every Friday, visit our website at accountantslollab.com to sign up.

This has been good.

It has been.

For sure.

Yeah. Thank you all for watching. We'll see you all next week.

Yes.

Bye-bye.

Bye-bye.