Engagement Letters for Accountants: Comprehensive Guide with Samples

Engagement Letters for Accountants: Comprehensive Guide

Does your firm use engagement letters for accountants when signing on new clients? This post dives deep into why you should.

In this article, you’re going to learn about:

• What engagement letters for accountants are
• The purpose and need for a quality engagement letter
• Key items to include in yours
• Tools to send this valuable document
• Sample sections and template letters

Let’s get started.

Read about the use of AI to facilitate engagement letter writing for your accounting practice.

What is An Engagement Letter?

Engagement letters for accountants are legal document agreements sent to clients that describe the overall business relationship, clearly defining:

• Services included and how they’ll be delivered
• Each party’s responsibilities
• The clearly-defined scope of work
• Price and payment terms

In addition to ensuring a structured business relationship, these documents play a crucial role in the applicable civil justice system, adding an extra layer of transparency to the engagement.

Why You Need an Engagement Letter for Your Firm

There are several reasons why your firm needs an engagement letter in place:

1. Support how communicate your service: By clearly laying out your service in a thorough and organized manner you'll be able to better communicate your value to prospective customers.
2. Prevent Scope Creep: Clearly define the terms, fee structure, and services provided (e.g., bookkeeping services, payroll, tax, type of support offered).
3. Reinforce Values and Quality Standards: Set the tone for the relationship and start everyone off on level ground.
4. Legal Protection: Define the rights and obligations of both parties to protect your firm.
5. Facilitate Project Adjustments and Changes: Adapt to evolving client needs without jeopardizing the understanding between your firm and the client.

Key Terms for Your Engagement Letter

If you’re reading this far, you likely have an idea about what each component of engagement letters, as legally binding documents, usually includes. Here are the key terms you need to be familiar with:

• Professional Body Requirements: Details such as the purpose of the letter, dispute handling, and other key items.
• Pricing and Services: Agreed-upon fees for the accounting services and specific services provided.
• Payment Terms: When you collect (e.g., upfront, quarterly).
• Period of Engagement: Duration during which the firm will provide its services.
• Termination Clause: Conditions under which either party can terminate the engagement.
• Confirmation of Terms: Client’s signature acknowledging the contents of your letter.
• Unanticipated Services: What happens when work exceeds agreed-upon terms.
• Dispute Resolution: Provisions for resolving disputes to avoid legal action.
• Price Guarantee: Assurance regarding agreed-upon pricing.
• Renewal Terms: Provisions for the automatic renewal of the engagement.

Software for Your Engagement Letter

Another important aspect to consider is how you’ll send the engagement letter to your clients.

Word/PDF (Free)

This is free and easy to set up, but not ideal for high-quality clients or cloud-based accounting firms. Because these document types don't offer an easy way to sign, it takes clients more time to sign and create more friction in the process.

Document Signing Tools like DocuSign or HelloSign (Free)

A simple solution that comes on free plans, using document signature apps like DocuSign allows you to send documents that are easy to sign. However you'll have to design your own template before uploading it. Making changes to a proposal after negotiations, re-uploading  and adding signature fields is a very time-intensive process. 

Signing documents with Hubspot (Free - 130$/month)

A great alternative a the first advanced tool in our list is HubSpot. HubSpot is a marketing and sales tool and offer a range of functionalities that we love as accountant firm owners. Not only does the free plan allow you to create templates that can be easily modified, sent and signed, but it also tracks your signed files and saves them with a contact on their platform created for each client.

Ignition ($99/month)

Ignition is a great tool for accountants and allows you to easily send proposals to be signed. It is a piece of software specifically designed for accountants and deserve more attention if you haven't looked into using this tool for your firm.

Ready to Create Your Engagement Letter?

Creating engagement letters for accountants can take some work, but the benefits are worthwhile. These written agreements set client expectations, provide a resource for clarification, and offer insight into the type of client you want to attract.

Will it change over time? Yes. Are there still going to be issues with some clients? Absolutely. But this step moves you toward a scalable accounting firm.

Now if you're ready come to learn how to bring attract new customers to be able to share your new engagement letters read out Ultimate Guide to Digital Marketing for Accountants.