It is customary across many professional industries to use engagement letters or client agreements when on-boarding a new client. They are used by most accounting professionals and are considered best practice. An engagement letter protects both the consultant and the client in the event anything should go awry during the engagement. We certainly use engagement letters in our practice and if you are a new client you will be asked to sign one. The engagement letter is step three in our on-boarding procedure (see step one here and step two here). This blog will cover why you need to sign one and details what we include in our letters.
What is an engagement letter?
The engagement letter or client agreement, is a document used to outline our responsibilities to one another. Put simply, it says, “I, as your BAS Agent agree to do this, this and this” and “I, as the client agree to do this, this and this”. The letter also states what will happen should either one of us fail to honor our responsibilities. The letter provides clarity from the get-go about who is to do what, when and how – it assists in avoiding future disagreements and confusion.
Why do I have to sign an engagement letter?
The engagement letter acts as protection mechanism. Should either party fail to behave according to the agreed details in the letter, it is used as the starting point in a conversation we can have about where things are going wrong and how we might fix them. The letter makes having this conversation easier for both of us because it is written proof about our working relationship and clearly states what was agreed to initially.
What exactly am I being asked to agree to?
Our engagement letter has several layers. Here is a summary of the various areas covered:
- Who is covered by this letter?
- Is there a particular time-frame for the engagement or is it on-going?
- What are the client’s contact details? What are our contact details?
- What does e-BAS Accounts agree to do for you? (detailed list of the services we will provide for you)
- What will happen should you request extra services not covered by the engagement letter.
- What do you as the client, agree to do for us?
- What are the terms of engagement? – e.g. how much will I need to pay? | what happens if I don’t pay? | what happens if the engagement is suddenly ended?
- If we employ staff, how does this affect you?
- Confidentiality matters.
- Payroll matters in detail (if applicable)
- Lodging documents with the ATO – signing authority forms.
- How we deal with your business records.
- Our standards and their connection to the Code of Professional Conduct as regulated by the Tax Practitioners Board.
- Your specific items (you are given the opportunity to include anything in the letter that you believe is important in regards to your bookkeeping and our working relationship not already covered in the letter by us).
While the engagement letter may sound a little onerous and perhaps even a bit scary, this isn’t really the case. It’s a simple process that helps both you as the client, and us as your BAS Agent, begin our journey together the right way, providing clarity for the way forward and a sounding board should things not go so well. Signing the engagement letter is a smart move!
Speaking of signing documents, next week we’ll look at how this is done in our practice (hint, we don’t use paper!).