If your accounting, tax, or bookkeeping practice isn’t using an engagement letter when onboarding new clients, you should start. An engagement letter establishes a clear scope of services, a payment schedule, and provides a path forward with your client relationship. Here’s everything you should know about an accounting engagement letter and how to write one so that you can start establishing meaningful & profitable client relationships.
- Like any other, your bookkeeping engagement letter should start with the date of the agreement.
- Often overlooked, how you send the engagement letter can be just as crucial as having one in the first place.
- Setting the billing upfront (whether it’s a flat rate or hourly fees) forces this discussion to take place prior to the project.
Client further acknowledges that in the event Client commingles its business accounts with its or its spouse’s personal accounts and expenses, that Collective cannot accurately perform the Bookkeeping Services. As such Client, agrees that it shall not commingle any business accounts or expenses with any of Client’s (or its spouse’s or other third party’s) accounts or expenses. In essence, a bookkeeping engagement letter stands as a vital tool for setting the tone, boundaries, and expectations, making the bookkeeping journey a well-structured and transparent expedition. As soon as you strike an initial agreement or express interest in moving forward with a project, you should compose an engagement letter. This sets the expectation that you must work on the details before formalizing anything and starting work.
How can I efficiently implement engagement letters if I’m not using them right now? Or not using them on all engagements?
Hourly rates for different professionals should be included, if relevant. All expenses, including, but not limited to, travel expenses, audit fees, tax fees, and postage shall be the responsibility of the Accountant/Bookkeeper. Moreover, it serves as a legal shield, offering protection to both parties by clearly stating what is included and excluded from the service. First, think about your client and how you want your firm to be represented. If your niche is software companies, sending a one-off email doesn’t convey the right message.
This section of the engagement letter is significant and clearly defines what you will deliver and what work is not included. This will help mitigate scope creep, which is when the deliverables of a project expand from what was initially set – without allocating additional time or money. To add to the objective, it is crucial to be specific in this section of the letter, so there are no misunderstandings between you and your clients. This is where you outline what you will and will not do as part of the bookkeeping services you’re providing. This can help avoid any confusion or misunderstandings down the road.
I’ve been working with my clients for years; why would I start using engagement letters now?
If you perform one-time services, like a cleanup, specify what the completed job looks like. Your engagement letter should clearly outline the services you will provide, in this case, bookkeeping, payroll, or any related service. First and foremost, your bookkeeping engagement letter should provide the date of the agreement. Who handles the accuracy of any information provided to complete the accounting engagement?
An effectively written engagement letter is not just a contractual agreement; it’s a testament to a professional relationship built on trust, clarity, and mutual respect. Any time your agreement changes, you should create and sign an updated engagement letter. We also suggest that you reaffirm your agreement yearly even if the scope of work has not changed. The letter needs to write out the duties and responsibilities of the client as they relate to the work expected of the bookkeeper. Have a good discussion about how you want every task done and how the workflow will proceed.
An annual review can ensure that the scope of services, fee structure, and other details still accurately reflect the reality of the engagement. Something you may not have thought about when writing your accounting engagement letter is… location. Oftentimes, accountants serve clients worldwide and each country, state, province, etc. has its own regulations and specific structures. If your scope of services with a client brings you outside of the United States, it’s worth explicitly addressing that and any other related complications in your engagement letter as well. An accounting engagement letter should be signed and accepted by each party to signify acceptance of the contract and understanding of the services to be rendered and at what price. In addition, it should include language for billing practices of additional services that might be outside the scope of the initial project.
Why are engagement letters important?
It is also crucial for the client to know what happens when they do not fulfill their obligations promptly. This could include providing you with all necessary paperwork and information or letting you know of any changes that occur within the company. By having this information spelled out up front, you and your client can avoid any misunderstandings later.
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Any material changes or additions to the terms set forth in this letter will only become effective if evidenced by a written amendment to this letter, signed by all of the parties. We will conduct our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform how to generate ancillary revenue in your hotel or resort the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The term “reasonable assurance” implies a risk that material monetary misstatements may remain undetected and precludes our guaranteeing the accuracy and completeness of the financial statements.
This Engagement Letter may be terminated by either party by giving a thirty (30) day written notice in accordance with the Agreement. Furthermore, either party may terminate this Engagement Letter for cause in the event the other party breaches any material term and fails to cure such breach within seven (7) days of the non-breaching party’s notice thereof. Be absolutely clear in your bookkeeping engagement letter who owns all the records and documents that the bookkeeper is working on, creating, etc. That person should be the owner of the company, the Chief Executive Officer, or the Chief Financial Officer. First of all, remember that one sample engagement letter will have specific elements that not all other templates include. We also encourage you to add what you believe is important, depending on the specific role.
Names of each party and their role in the engagement
If there are areas that you are as yet unsure of, make a note of that. Once you both have enough information to proceed, sign an updated bookkeeping engagement letter. If you are using a sample bookkeeping engagement letter template, do not forget to add in any missing sections. It’s always a good idea to specify the conditions under which the agreement can be terminated. This could be for various reasons, such as a failure to pay fees, a breach of the terms of the agreement, or simply at the discretion of either party with notice.
Engagement letters are an effective medium through which you can smartly expand your business while alleviating risks. Such types of letters depict the details of the contract between your firm and your clients. An engagement letter can cover any type and scope of work depending on how you define and delineate obligations, performance criteria, timelines, warranties of performance, and the like. Include both parties’ names and addresses so that it can serve as an official employment agreement in lieu of an employment contract in case of any dispute. Senior Manager and CPA with over 20 years of experience in accounting and financial services, specializing in risk management and regulatory compliance.
If this letter correctly expresses your understanding, please sign the enclosed copy where indicated and return it to us. It leaves a bad taste in everyone’s mouth, whether you’re the client who feels like they’re being overcharged or the bookkeeper who feels like they’re being cheated out of well-earned compensation. CocoSign is an easy and affordable alternative to DocuSign, helping SMBs and professionals sign contracts 5x faster. In the amount of $________________ that shall act as an advanced payment on the Services provided by the Accountant/Bookkeeper. The elements in this section are to help you establish healthy boundaries. When you define everything at the outset, everyone can get on the same page regarding the engagement.