(800) 931-6557
(800) 931-6557
ASP
  • Home
  • Accounting
    • FAQ
  • Recruiting
    • Recruiting Team
    • Recruiting Process
    • Recruiting FAQ
  • Openings
  • Oregon
  • Washington
  • Colorado
  • About
    • Clients
    • Testimonials
    • Diversity, Equity and Inclusion
    • Resources
    • Submit Resume
  • Contact
  • Payments
  • Blog
  • Home
  • Accounting
    • FAQ
  • Recruiting
    • Recruiting Team
    • Recruiting Process
    • Recruiting FAQ
  • Openings
  • Oregon
  • Washington
  • Colorado
  • About
    • Clients
    • Testimonials
    • Diversity, Equity and Inclusion
    • Resources
    • Submit Resume
  • Contact
  • Payments
  • Blog

​In Pursuit of Profit

Read our expert article below or sign up to get articles sent to your inbox.​

2/10/2020

Comments

What Should You Expect in an Accounting Engagement Letter?

 
What Should You Expect in an Accounting Engagement Letter?
When business owners hire third-party accounting firms to manage their finances, they may be provided with an engagement letter. This type of document is new to many business owners, especially those that are outsourcing financial functions for the first time.

Essentially, an accounting engagement letter is an agreement to provide services to a client. The agreement describes the business relationship and sets expectations for both parties in a way that is less formal than a traditional contract. 
An engagement letter can be a summary of a longer service contract or the contract itself. It is especially beneficial in situations when one or both parties do not want to hash out detailed contractual specifics but still need an agreement in place. Once it is signed by both parties, an engagement letter is legally binding, which means it should cover the same aspects that a traditional contract would.

Scope

An engagement letter will always indicate the specific services to be provided by the accounting company. It may also outline important milestones and deadlines, where applicable.

In some cases, the agreement may list the firm’s areas of expertise as well to clearly define the scope of the agreement for the client. Specifying the exact nature of the relationship protects both parties by limiting each side’s responsibilities to avoid scope creep.

Understanding the extent of the project scope beforehand helps control service provider costs and improves client satisfaction. The result is a more sustainable long-term business relationship focused on mutual success.

Payment

Accompanying the scope of the project are the payment terms for the work being performed. Compensation and payment timing will also be elaborated in the engagement letter. If special additional payment terms have been extended, they should be included here as well.

The engagement agreement may also specify additional anticipated costs that are not included in the service, for example a software usage license or annual tax filing fees. These are occasionally provided to give clients a complete picture of what their full financial obligations will be from the beginning. By specifying both the set costs that are included and the anticipated costs that are not included in the service fees, accounting firms aim to improve transparency to further improve client satisfaction.  

Performance

Not every accounting engagement letter will establish performance criteria. However, doing so can improve understanding on both sides of the agreement by defining the parameters that will be used to evaluate the work being done and establish performance metrics.
​
Understanding what an accounting firm uses to gauge their success shapes the business relationship and provides the opportunity for clients to start a conversation around the KPIs that they use. The subsequent dialogue that can occur helps to inform both parties.

Guarantees

Any applicable warranties or performance guarantees will also be included in an engagement letter. These will be included to establish goodwill and provide reassurances to less experienced clients, assuaging their concerns.

Disputes

While less common, an engagement letter may also specify mediation or arbitration directions for resolving disputes. Additionally, it can include the information regarding state courts that will rule over legal disputes or outline applicable legal protections.

Typically, dispute-related material is saved for longer documents like formal service contracts. However, accounting companies doing business across state lines may choose to include this information in the engagement letter as well to fully protect themselves.

While an engagement letter is typically part of the onboarding process, accounting companies may require long-term clients to re-sign the letter periodically or whenever terms may change. It is not unusual for clients to need to sign the engagement letter annually as part of maintaining their ongoing accounting service.

Need help? Contact Eric or Todd here!
Comments

    SUBSCRIBE:

    DOWNLOAD:

    The Ultimate New Business Formation Checklist

    DOWNLOAD:

    Accountant Evaluation

    Categories:

    All
    Accountant
    Accounting
    Accounting Systems
    Audit
    Bank Reconciliation
    Benefits
    Bookkeeper
    Bookkeeping
    Brand
    Budgeting
    Business Analysis
    Business Trends
    Cash Flow
    Change Management
    Checklist
    Closing The Books
    Colorado
    Community
    Contracts
    Controller
    Depreciation
    Ecommerce
    Economy
    Finance
    Fraud
    Government
    Hack
    Hiring
    HR
    Infographic
    Internal Controls
    IRS
    Laws
    Leadership
    Legal
    Local Economics
    Manuals
    Market Trends
    News
    Nonprofit
    Online Bookkeeping
    Oregon
    Outsource
    Payroll
    Payroll Taxes
    Planning
    Procedures
    QuickBooks
    Record Keeping
    Recruiting
    Recruiting Market Reports
    Remote Workforce
    Reporting
    Restaurants
    Risk
    Sales Tax
    Scam
    Security
    Small Business
    Social Media
    Software
    Startup
    Statistics
    Strategy
    Taxes
    Technology
    Time Management
    Washington State

    Archives:

    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    June 2015
    February 2013
    October 2012
    November 2011
    May 2011



    RSS Feed

Services

Accounting Services
Recruiting Services

​

Company

About
Oregon Team
​Washington Team
Colorado Team
Clients


Support

Contact
CC
FAQ
​Resources
​Blog
​

ASP

Your resource for accounting & recruiting services. Serving Seattle, Bellevue, Redmond, Kirkland, Portland, Beaverton, Hillsboro, Lake Oswego, Denver, Lakewood, Aurora and more.
Contact us today for a free,
no-obligation consultation:
Toll Free (800) 931-6557
WA (425) 492-1901
OR (503) 473-0122
​CO
(720) 572-8211
info@asp-nw.com
© COPYRIGHT ASP - ALL RIGHTS RESERVED 
 A CFO Selections Company
Privacy Policy