If someone refuses to pay for expert advice, they shouldn’t be shocked when ignoring it costs them a whole lot more later.

So, what would you do if a client dismissed your warnings about a flawed system, just to avoid a couple hours of billable time?

Would you keep pushing?

Or would you step back and let reality do the talking?

In the following story, one CPA lets a stubborn business owner learn the hard way, leading to a costly audit and a whole lot of finger-pointing.

Here’s what happened.

Pay me 2 hours now, or 40 hours later to fix it plus $40,000 in taxes.

A while back I worked as a business consultant (Certified Public Accountant – CPA) for young and startup companies.

I was hired by a food delivery service (“client”) (think Uber Eats type delivery) with a primarily corporate clientele.

After setting up the client’s systems for payroll, accounting, and banking, but not order entry or billing, the owner installed a new “state-of-the-art” order entry/billing system.

The new system seemed to work fine, but sales taxes charged to clients were noticeably low.

It seemed to use the same rate for all cities/suburbs, and counties, even though each one had different additional rates over and above the base state rate.

The owner made it clear he wasn’t worried.

When brought to the attention of the owner, he insisted the new software company knew what they were doing and were experts in food delivery service billing.

(Later learned it was a small boutique firm from out of state with a very good salesperson.)

When I requested access to the system to check tax rates, I was told not to waste billable hours on the new system, because he was certain they knew what they were doing, and was unwilling to pay my “exorbitant” hourly rate to check something that was brand new.

I explained that if the taxes being collected were wrong, his company would be liable for any shortfall.

When I showed examples of taxes being under billed, I was met with “you don’t know what you are talking about.”

Unfortunately for the owner, the state scheduled an audit.

As the business grew, my consulting hours dropped off.

At this point, I only reviewed month-end financial information with the client after closing the books each month, while making the requisite deposits of collected sales tax to the state Department of Revenue.

Malicious Compliance: I had no control or access over the tax rates being billed, but I did know the state frequently scheduled audits of new companies after their first year of operations.

If the client was unwilling to pay for a few hours to check the system, they would wait until it was necessary to pay for 40 billable hours to handle a state audit.

Lo and behold, on the 13th month after installing the new software, the state sent a notice announcing an audit of the client’s sales and use tax payments scheduled for the following week.

Of course, the client blamed him, even though the software caused the problem.

To make a long story short, it was found that the new software did in fact only bill the base state sales tax rate, totally omitting both city and county taxes.

The assessment for unpaid taxes, including penalty and interest, exceeded $40,000, not including my hourly rate to work with the state auditors,

I spent more billable hours going back to the larger corporate customers and billing them for unpaid sales tax, recovering almost half of the assessment.

Most were willing to pay after my threat to report them to the state for non-payment of use tax.

The client blamed me for not insisting more strongly on changing the tax rates, and terminated our relationship after it was felt as much as possible had been recovered from customers.

Yikes! Reality must’ve hit that guy pretty hard.

Let’s see what Reddit readers have to say about this story.

This person is impressed that some clients sent payment.

Here’s a great point.

It’s hard to tell if this is sarcasm.

You wouldn’t think it’s like this, but it is.

Better to learn that lesson early.

At least it happened right after his first year, and not down the line when he should know better and has more to lose.

If you liked that story, check out this post about an oblivious CEO who tells a web developer to “act his wage”… and it results in 30% of the workforce being laid off.