What should be in a letter of engagement?
Last month we published a blog on “Why tailored letters of engagement are important for bookkeepers and accountants?” This follow-up blog provides more detail about the key terms that should be included in a bookkeeper or accountant’s letter of engagement.
These are terms which should be included to clearly define the scope of the services you are providing to your clients and each party’s liability to one another.
So what should be in my letter of engagement?
Now this is not an essential part of the letter. However it is nice to thank your clients for taking up your services and welcome them.
- Service description
As a bookkeeper and/or accountant it is likely you will offer a wide ran
ge of services, from general bookkeeping services, to preparation of annual accounts and self-assessments for a sole trader, to preparation of payroll accounts for a limited company.
It is important to clearly state from the outset the services which you have agreed to provide to your client.
When Contracts4You write a letter of engagement we usually include a ‘Service Overview’ section which briefly lists the services to be provided to the client. We then break down the services into more detailed individual sections which explain each party’s obligations. For example if you are preparing the annual accounts and self-assessments of a sole trader you should clearly state timescales by which your client must provide you with the information and documents you need to ensure your client meets HMRC’s deadlines for self-assessment submission.
- General obligations
There are general obligation which both you and the client may be required to meet regardless of the type of service being provided.
For example you may require the client to provide all information or documents (e.g. invoices, bank statements) in a timely manner upon request. Or requiring your clients to respond to your communications within a reasonable time and explaining that you will not be held responsible for delays to the services which are caused by the client.
- Payment terms
You may have different payment options available to a client. Many of our clients charge a fixed cost for certain services, for example the preparation and submission of annual accounts, and then require them to pay on a monthly basis for other services, for example for payroll preparation and submission services.
You may also require your clients to pay a deposit and this should be made clear from the outset.
In addition to the above this section should also state the payment methods and also what happens in the event of late payment by the client.
Here you should make clear how long you will be providing the services to clients for, whether there are any renewal periods and how the contract can be renewed, and lastly, under what circumstances the contract can be ended early (for example if your client fails to pay you).
Limitation of liability clauses are some of the most important clauses which are included in any contract. They ensure that you are not opening your business up to unlimited liability if anything goes wrong with your client. This is why such clauses must be written clearly and must not contain any ambiguity. If you include an unclear term this could lead to that term being held to be unenforceable, and as a consequence you may be opened up to unlimited liability.
- Data protection
As bookkeepers and accountants are handling sensitive data (for example an employee’s national insurance details) on a day-to-day basis your letter of engagement should explain how you will use such data and how you protect it. Equally as important is ensuring you take practical steps to ensure you implement your letter of engagement terms effectively. For example if you say you will only retain data for a certain period, then you should have processes in place for disposing of such data securely after that period has ended.
The above are the vital terms and conditions which no letter of engagement should be missing. In addition we would also include other details which make clear how your business operates, including how you ensure compliance with money laundering regulation, your complaints policy, and what measures you take in the event of a conflict of interest.
All of the above can apply to letters of engagement for other businesses providing professional services for example business consultancy or accounting services.
Get in touch with us if you would like us to review your existing letter of engagement. Or if you are starting a business and need a letter of engagement putting in place. We are happy to help.
You can contact Contracts4You by emailing firstname.lastname@example.org or telephoning 0800 699 0706.
You may also find it useful to read my recent blog “Why tailored letters of engagement are important for bookkeepers and accountants?”. It provides further detail about why it is not a good idea to use contract templates.
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