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I currently received the job of budgeting, monitoring, and paying the personal bills for a business client due to constantly using the business’s accounts as their personal account when personal funds are low. So…I only am in charge of the personal account/budget/etc., not the business accounts. After having a group meeting, reviewing the budget I set up for them, and planning the next weeks spending…my work began. First of all, I don’t have an expected income flow due to business expenses must come first. So I budget based on what I “hope” they can pay themselves from their businesses. This is difficult, but do-able. However, within the first 2 weeks, the business owners returned quickly to using the funds in their business accounts to spend on personal items (because they saw no money in the personal account) and they traded a vehicle for a different one with a higher payment. I have been working with their personal bills and budget for one month now and we still don’t have anything under control. We are robbing from the business accounts, shuffling money around to avoid late fees and overdraft charges but often can’t fail due to lack of funds. The overdraft charges in all their accounts are eating up the profit from the businesses. After a month of trying to control their spending behavior, I need suggestions that are do-able. Can I freeze their credit cards except for the two business cards they need for the business expenses? and if so, how? What documents do I need to control the cash flow on their behalf? and what can I NOT do ethically or legally? This is a middle-aged family with children and only self-employed businesses for income. Just really bad at managing their cash flow. Any suggestions and processes would be helpful. Thank you ahead of time. Also, they almost have the income from the businesses to pay the bills IF we can eliminate the overdraft fees and late charges. This is a problem of cash flow and spending control.
That sounds like it has the potential for never ending frustration and you will be setting yourself up for failure. I always like to start with clients by trying to figure out what the real goal is. If it savings goals, retirement goals, debt reduction goals, cash flow, etc. I would discuss what they are doing and how it is preventing them from accomplishing their goals and how we could turn that around. I would sort out how much they will need to pay bills and require that the account be adequately funded either monthly or every two weeks. I understand that the business expenses need to be paid as well, but if they can’t commit to funding the personal account with enough money to cover the bills, you will never be able to do your job. If you take their personal cards, they will just use the business cards to pay personal expenses. I would have them commit to one card for personal and one for business and a set contribution to the personal account that covers expenses and spending. If they can’t do that, I would not continue to work with the client. You will never be successful. They will continue to sabotage themselves.
Hi Lisa,
I agree with Caitlin that this seems to be a set-up for failure. If you have shown them what they need to do to manage their business and personal accounts separately, and they insist on doing it their way, then you become a part of their dysfunctional system. (There may be some jeopardy with their business/personal expenses with IRS as well).Your clients may be oblivious to what they are doing, but the car purchase has me wondering if that is the case. There are some things you can do, such as setting up credit freezes and having one account for personal and one for business, but if they continue with this current pattern of undermining the systems you put in place, that’s not sustainable. As DMMs, it’s important to remember we cannot save some people from themselves no matter how hard we try. I reserve the right to terminate my relationship with clients who have chosen to ignore my recommendations or disregarded what is specified in our contract.
Clarifying Barbara’s comment, the credit freeze has to be done by the client, and keeps them from getting new cards until the freeze is lifted. It also has to be lifted by the client. It doesn’t cap their current card. You can help them freeze their credit.
Question for Barbara: your right to terminate the relationship — is that in your agreement?
Thanks for the clarification Vera. You are correct, the credit freeze has to be initiated by the client. I work with clients in person so we do that together. If I feel the client is not working with me on what we agreed to do, then I can terminate with 30 days notice.That is in my initial letter of engagement which has been signed by both the client, and/or their POA and myself.
I want to add a slightly different perspective. I do Coaching for DMM clients. So part of my practice involves helping clients who make these poor decisions become aware of their actions (good and bad), help them build upon their strengths and work with their values and needs (personal, family, financial, etc.) to help them learn to make better financial decisions for themselves.
Just this month I helped a client that I have been working for the past 2 years pay off all of her debt and learn to stay within a monthly budget. This did not happen right away. There were many, many stumbling blocks and set backs. But during the process we spent some time identifying her goals and constantly throughout the coaching tying back her actions to see if they met up with her financial goals. We did end up having to put in some severe restrictions (credit freezes, debit card with funds transferred over for weekly “personal needs” spending, and the card we chose was one that when the money ran out it wasn’t a credit card where she could spend more, she had to wait until the next transfer). All of the steps were agreed to and put in place by the client. She knew she wanted a better future, but there were lots of moments where she continued to make poor decisions and we had to adjust the plan to allow for the learning to take root.
Now I’m not saying that in this particular situation it makes sense to walk away, but with some of my clients who are really stuck in terrible money management patterns I do a little digging to see what is possible and try to guide them along the path towards helping them improve their financial circumstances.
Alix
Hello Alix,
Thanks so much for sharing this perspective! I also do business/financial coaching with entrepreneurs and others, but do not do this as part of my DMM business.
For DMMs who do not have your background and expertise in this area, you could be a wonderful resource to DMMs who are struggling with clients similar to the one you described in your post.
Lisa, maybe a consultation with Alix about your client would be useful and provide you with the tools you need. My only caveat is that this may be a different contract than what your clients initially agreed to, so they would need to be willing to accept your assistance in working with them in a longer term “coaching”arrangement, which would also have the benefit of sustainability.
Another wonderful resource in our AADMM network is Clare Dube, AADMM Board member who does Financial Education, Financial Coaching and DMM work. She explains each of these on her website. https://www.claredube.com/
Thanks,
BarbaraThank you Barbara,
And yes, the original agreement is something to be aware of, as in a Coaching Relationship, the client needs to willingly “opt into” the process and needs to be “coachable”. In the initial intake conversation this is discussed along with how coaching works, the process, etc.
FYI: I’m in the process of re-doing my website (current one is over ten years old) but when complete I’ll be sure to post a follow up note on this thread should anyone be interested to learn about this kind of DMM / Coaching relationship. Coaching is about the client gaining insight, enabling them to use that awareness, to help them make decisions and take action. It can be a powerful process helping them make long lasting, positive changes.
In the meantime if anyone has any questions please feel free to reach out.
Kind Regards,
Alix Longfellow
609.884.3482
alix@lionheartpro.comThis discussion is very helpful! Alex, I will definitely reach out as I can because I do feel its important to collaborate with each other. I am no longer working with the specific client that instigated this discussion, however, I have another one coming that may also be in the same need. Maybe I’m developing a small reputation? None the less, I really appreciate this input! Just another good reason to stay involved with AADMM! Thank You!
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