Building solid client relationships through engagement letters

Building solid client relationships through engagement letters

The proposal is accepted! A new client is added to your list! What an exciting day! But wait – there is one more step to complete before you begin. What is that step? Agreeing what you will do, what you won’t do, what you will charge, the timeframe for delivery of the results, the terms of payment and, most importantly, what your client will do for you to complete your work.

In our profession, these are engagement letters. These documents spell out the details of your new arrangement with your client.

Engagement letters can be scary for our clients and our firms. Why? They are contracts. I’ve seen some that are 10+ pages long full of legalese covering every “ifs, ands & frying pans.” Let’s not scare off a client before we even begin.

Your letters do not have to read as if they’re written by an attorney with clients signing their life away. Keep it simple. One to two pages is enough. This document sets the tone of your interaction with your clients. If you make it too intimidating, you won’t have an easy time. Clients will be frightened of you! We know things they don’t. In many clients’ minds, what we do is overwhelming.

Words matter. Let’s call them agreements. A little less intimidating, don’t you agree? Your agreements will say what you will do and not do, what they will do, and for what price. Keeping it simple makes you approachable and not the scary accountant of yore with the green eyeshade! It’s all about your relationship, and it formally begins now.

So, what should be in your agreement? Here’s what to include:

#1: Welcome! Focus on how excited you are to have them as clients and part of your team. Talk about how you follow accounting rules, perhaps their industry standards, IRS and state tax regulations. In other words, this paragraph lets them know you won’t bend the rules because their brother-in-law does. Your focus is building their business and making their vision happen.

#2: Specific tasks you will complete. List the actual tasks you had in your proposal. These may include:

  • Bank reconciliations for bank and credit cards.
  • Monthly sales tax filing.
  • Importing of sales transactions.
  • Weekly payroll.
  • Filing of payroll tax returns.
  • Preparation of the month-end financial statement, balance sheet, and profit and loss
  • Working with the tax preparer at tax time.
  • Available to answer questions throughout the month.
  • A monthly management meeting.
  • Job costing, bill payment and accounts receivable management.
  • App research and recommendation.
  • Included apps, such as Receipt Bank or Hubdoc.
  • Deliverables – when you will complete the tasks.

Once you list what is in the proposal, add the sentence, “Anything outside of this list may have an additional charge. Any additional charges will be communicated to you, Mr./Ms. Client, before any work begins.

#3: Specific things may not include audit representation to the IRS or sales tax audit representation. Tasks on this list may be subject to additional charges. If there is something you know you will not do, include it here. If you do not include what you won’t do, clients will assume it’s part of your service.

#4: Specific tasks for you required by the client. Getting your client involved in their accounting process is critical. Have you ever had a customer who thought you were a mind reader? I sure have! You never received the documents you need or get answers to your questions in a timely manner. And, sometimes, not at all. You cannot do your job without the tools like bank statements. I learned pretty quickly when I started my business to include exactly what I needed to get the job done. Don’t be shy here. If you need it, ask for it.

  • Answers to questions in a timely manner.
  • Online bank and credit card access to ALL accounts. This is a requirement in my office.
  • If they pay for the software, the upgrade schedule you require or the subscription type.
  • Backup documents, such as loan agreements, fixed asset purchases, and payroll documents, including copies of Social Security cards and W4s.

#5: Terms – how will you get paid? We ACH all accounts at the beginning of the month. On page two, we include an ACH permission slip spelling out when our charge will be withdrawn from their bank and any charges for returned ACHs.

#6: Disengagement. It’s almost as important to talk about the end as it is the beginning! What happens when one of you doesn’t want to continue for whatever reason? We let customers know they can leave at any time. All documents will be turned over to them. The transitions will be made painless. All we ask is to let us know where we can do better.

Follow the above paragraphs outlining your business relationship to create your own agreements. Both of you now know what is expected. Anything falling outside of your agreement, talk about it! As ironclad as you believe your agreement is, things will come up. Guaranteed! No worries. You’ve created an accounting firm where you are easy to talk to, approachable and demonstrated you care about their success.

Here are some examples to help you get started. Feel free to use these as guides to help you create your own, personalized agreement.

Congratulations on getting that new client! I am excited to hear how you use agreements in your accounting practice to build the firm of your dreams!