Key Takeaways:
- Crafting effective engagement letters ensures clarity and trust, minimizing misunderstandings
- These letters set expectations, offer legal protection, streamline onboarding, manage scope creep, reduce disagreements, align with industry standards, build trust, and simplify communication.
- With the basics outlined in the guide and tools like Cone Proposal Software, bookkeepers can confidently create well-crafted engagement letters to establish successful partnerships.
Free, Downloadable and Editable Bookkeeping Engagement Letter Template
To make your life easier, we have developed a free bookkeeping engagement letter template.
This template is available as Google Doc or PDF for you to use.
Note:
Using Cone Engagement letter Software, you can send professional proposals with engagement letters, receive e-signatures, payment information upfront and streamline billing and payments(Stripe, GoCardless) in a single platform at 8$ or 6.5£ per month.
Bookkeeping Engagement Letter Template
[Client name]
[Client address]
Dear Client name: We are pleased to confirm our understanding of the services we are to provide and the nature and limitations of the services.
This agreement is between [Your Business Name] ("Bookkeeper") and [Client's Business Name] ("Client"). Our services will begin on [Start Date] and are expected to continue until [End Date] or until terminated by either party as outlined below.
1. Objective and Scope of Services
Services Provided:
- Expense Tracking
- Entering All Accounting Records
- Bank, Credit Card, and PayPal Reconciliation
- Cash Flow Management
Frequency of Services:
- Weekly expense tracking
- Monthly account reconciliation by the tenth of the month
- Monthly financial reporting, due by the fifteenth of every month
Service exclusions:
- Financial Statement Preparation
2. Fees and Billing Arrangements
Hourly Rate: $75 per hour.
Retainer fee:$300 retainer fee each month in exchange for up to four hours of service per month.
Time of Payment:
Refunds each month: The $300 retainer charge is due on the first of every month.
Extra Hours: Any time beyond the 4 hours that are covered by the retainer will be invoiced at the end of each month and paid within 15 days of the invoice being received.
3. Duration of Agreement
This contract will begin on August 1, 2024, and could be for 365 days, ending on July 31, 2025.
Renewal and Termination:
- Renewal: The contract can be prolonged If both parties agree for an additional 12 months.
- Termination: This agreement can be terminated by either party with 30 days' written notice.
4. Confidentiality
The Parties understand that they are vulnerable to the sharing of information, or documentation, written or oral, that is considered confidential or unpublished in nature. Thus, by accepting this clause, the Parties agree to keep all confidential information obtained during this term of the Agreement as private without the written consent of the other Party, during and after the execution of this Agreement.
5. Client Responsibilities
You are responsible for the following:
- Providing us with all records, documentation, and other information necessary to perform the services.
- Designating a responsible party to oversee the engagement and communicate with us as necessary.
- Complying with all laws and regulations applicable to your business.
6. Termination
You are responsible for the following:
- Providing us with all records, documentation, and other information necessary to perform the services.
- Designating a responsible party to oversee the engagement and communicate with us as necessary.
- Complying with all laws and regulations applicable to your business.
7. Indemnification
The Client agrees to indemnify, defend, and hold harmless the Service Provider from and against any and all claims, liabilities, damages, losses, or expenses arising out of or in connection with the services provided under this Agreement.
8. Governing Law and Jurisdiction
Mediation/Arbitration:
In the occasion of any dispute or declaration arising out of or regarding this settlement, the Parties comply with first try to remedy the problem via mediation. Mediation can be achieved by means of manner of an unbiased 3rd party mediator, selected via mutual settlement of the Parties, and will take place within 30 days of the attention of dispute.
If mediation is unsuccessful, the dispute will be resolved thru binding arbitration. The arbitration could be conducted according to the policies of the American Arbitration Association (AAA) and could take place in Anytown, USA. The decision of the arbitrator will be very last and binding on each party.
Governing Law:
This agreement shall be governed through and construed according with the laws of the State of [State], without regard to its conflict of regulation principles.
Jurisdiction for Legal Actions:
If either Party seeks to pursue legal action after mediation and arbitration have failed, such action shall be brought in the courts located in [County], [State]. Both Parties consent to the jurisdiction of these courts for resolving any legal disputes
9. Amendments
This Agreement may be amended or modified only by a written agreement signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.
[Service Provider Name]
By: _______________________________
Name: [Name of Signatory]
Title: [Title of Signatory]
Date: _____________________________
[Client Name]
By: _______________________________
Name: [Name of Signatory]
Title: [Title of Signatory]
Date: _____________________________
What is a Bookkeeping Engagement Letter?
An engagement letter for bookkeeping is a formal, written contract between a business and its client, typically drafted at the start of a bookkeeping engagement. It contains essential details such as the parties involved, financial terms, deadlines, deliverables, and more.
It is an important document that keeps everyone clear on what's happening. By clearly defining rules of engagement, both the bookkeeper and the client can be on the same page about the nature of their relationship, thereby minimizing the risks of misunderstanding or future mix-ups.
Key Components of a Bookkeeping Engagement Letter
To write a bookkeeping engagement letter similar to an accounting engagement letter, a bookkeeping engagement letter should typically include the following components to be complete:
1. Client And Bookkeeper Information
Names, addresses, and contact information of the bookkeeper and client.
2. Scope of Services
The description of the services that will be provided, such as data entry, bank reconciliation, and tax preparation.
3. Engagement Timing
The duration of the engagement, including start and end dates, milestones, and reporting periods.
4. Responsibilities
The bookkeeper's and client's responsibilities and obligations related to the engagement.
5. Fee Structure
Details of the fees, billing frequency (hourly, monthly), and any additional costs or expenses.
6. Payment Terms
Terms of compensation and payment, including payment methods and payment terms (for example, net 30).
7. Confidentiality and Non-Disclosure
Agreement to protect financial information and sensitive data.
8. Data Protection and Privacy Measures
This section on data protection and privacy measures in your engagement letter reassures your clients of the security of their information and shows the firm's commitment to compliance and professionalism.
9. Ownership of Records
Clarification on the ownership of records and documents created or maintained during the engagement.
10. Cancellation Terms
Conditions under which either party can terminate the engagement, including notice periods and any applicable fees.
11. Signatures of Both Parties
The agreement becomes official once both you and your bookkeeper sign it. This shows you're both on the same page and happy to move forward.
Digital signatures and e-signatures are being increasingly used in regular day-to-day business transactions, including the signing of engagement letters. So it becomes crucial to comply with applicable laws and regulations when using digital signatures or e-signatures in engagement letters.
Many countries have enacted electronic signature laws, such as the Electronic Signatures in Global and National Commerce (ESIGN) Act in the United States and the eIDAS Regulation in the European Union, which provide legal frameworks for the use of electronic signatures in business transactions.
Using a reputable E-sign platform like Cone that complies with industry standards and provides strong security measures can further ensure the validity and authenticity of electronic signatures.
Do bookkeepers need engagement letters?
Yes, bookkeepers need engagement letters as they serve as formal agreement which outline the terms and conditions of the services offered.
Importance of a Bookkeeping Engagement Letter
Here's why sending a letter at the start of each job is imperative:
Setting Expectations: A letter clearly establishes expectations for both you and the client from the start. No more wondering, "What's included? What’s not?" The letter details the specifics of the bookkeeping services provided.
Legal Protection: The letter is designed to protect both you and your client legally. An engagement letter for bookkeeping outlines subjects such as how you will be paid, how information will be kept confidential, and who will be held liable if something goes wrong.
Streamlines Onboarding: Sample letters can be a great starting point for creating a customized agreement for each client. A smooth experience fosters trust and keeps clients coming back for more.
Clarity is Key: The letter ensures everyone is "on the same page" regarding the bookkeeping services provided.
Manages Scope Creep: By outlining included services, the letter helps prevent clients from requesting additional services outside the agreement.
Reduces Disagreements: A clear document minimizes the risk of future conflicts about what was promised.
Industry Standard: Most bookkeeping businesses use engagement letters, so it's a common practice.
Builds Trust: A clear agreement demonstrates your commitment to open communication and client satisfaction.
Simple and Clear: Engagement letters don't have to be complex legal jargon. Keep it straightforward and easy to understand.
Benefits Everyone: Ultimately, a letter of engagement protects both you and your client, fostering a strong working relationship.
So, even though it may appear as unnecessary labour, writing an engagement letter is crucial. It keeps everyone on the same page, protects both sides and ensures that your job runs well.
Learn more beyond the engagement process and how you can use software to streamline workflows for bookkeeping and accounting services.
Best Practices For Crafting a Professional Bookkeeping Engagement Letter
Here are six unique tips for crafting a professional bookkeeping engagement letter:
- Tailor the Letter to Each Client: Don't use a one-size-fits-all template for your engagement letters. Customize each letter to the client's individual wants and circumstances. This shows that you understand their specific needs, increasing the likelihood of a successful interaction.
- Use Clear and Plain Language: While it is critical to contain the relevant legal and technical words, avoid using too complicated language that may confuse the client. Use straightforward and simple wording to ensure that the client knows the terms and conditions of the engagement.
- Pricing Structure: Explain your pricing structure clearly. Will you charge by hour, per project, or on a retainer basis? Outline any additional costs associated with software or third-party services. Transparency builds trust and avoids future surprises.
- Deadlines and Deliverables: Set clear deadlines for both parties. When will you deliver the reports? When are payments due? Establishing a timeline keeps everyone on track and avoids last-minute scrambles.
- Termination Clause: Life throws curveballs. So always include a clause outlining the process for terminating the engagement, should the need arise. Be fair and professional in outlining the terms for both parties.
- Seek Legal Advice: Seeking professional legal advice when drafting or using engagement letters can ensure that your engagement letter complies with relevant laws and regulations that are essential to protect both your business and your clients.
Pro Tip: In a future where AI is rising faster than ever, it is a smart move to choose software that uses AI to create bookkeeping engagement letters. Also, learn more about engagement software for accountants.
Renewing Your Bookkeeping Engagement Letter
Ensuring that your bookkeeper engagement letters remain up-to-date and reflective of your current terms and services is essential for maintaining clarity and legal compliance. Here's how you can establish a systematic process for renewing and reviewing your engagement letters:
Annual Review: Schedule an annual review of all your bookkeeper engagement letters. Set a specific time each year to revisit each client's agreement to ensure it still accurately reflects the services provided, pricing structure, and any other terms.
Documentation: Keep detailed records of when each engagement letter was last reviewed and any changes that were made. This documentation helps track the history of each client's agreement and ensures accountability.
Reminders: Set up reminders or alerts to prompt you to review engagement letters before they expire. This could be done through calendar notifications or task management systems to ensure no agreements lapse inadvertently.
Client Communication: Notify clients in advance of any upcoming renewal or review of their engagement letter. This proactive communication allows them to provide input or request changes if necessary, fostering transparency and trust.
Streamlined Process: Establish a streamlined process for making updates or revisions to engagement letters. This could include using template documents with standardized language for common clauses, making it easier to make changes efficiently.
Legal Consultation: Consider consulting with legal professionals periodically to ensure that your engagement letters comply with current laws and regulations. Legal advice can help you address any potential risks and ensure that your agreements offer adequate protection for both parties.
By implementing a structured approach to renewing and reviewing your bookkeeper engagement letters, you can maintain strong client relationships, minimize legal risks, and ensure that your agreements remain relevant and effective over time.!
Cone Proposal Software for Streamlined Bookkeeping Engagement Letter Processes
You might have come across a lot of software on the market. But one software that stands out with its exciting features is Cone’s proposal to payment software which includes a comprehensive bookkeeping engagement letter assistance tool.
Cone provides a comprehensive solution to professionals in a variety of areas, including accounting, legal, marketing, freelance, IT, photography, and home cleaning services. Cone's proposal software can help you optimize your engagement letter operations and increase client satisfaction.
But why should you choose Cone? Here’s why:
Efficient Engagement Letters: Cone's proposal software allows you to effortlessly create and manage engagement letters, ensuring that your clients receive clear, professional, and legally binding papers as part of the proposal-to-payment process.
Personalized Solution: Cone offers tailored solutions to satisfy the unique needs of accountants, lawyers, marketers, freelancers, IT professionals, photographers, and house cleaners.
Cost-Effective Solutions: Compared to competitors such as Ignition and GoProposal, Cone's pricing begins at $8 per user/month, making it accessible for small businesses and independent freelancers.
Best Features: Along with creating effective engagement letters for bookkeeping Cone's proposal software comes with extensive features such as a flexible proposal editor, automated billing and invoicing system, a simple E-sign option, sales pipeline management, and extensive pricing capabilities.
Minimal Learning Curve: The user-friendly interface of Cone makes getting started fast and easy.
Integrated Solution: The cone platform combines proposal, billing, and invoicing features, so you don't have to worry about multiple expensive software solutions.
Enhance your engagement letter processes with Cone Proposal Software and take your client interactions to the next level. Try it for free now!
Learn more about CRM options for bookkeepers.
Ready To Create A Bookkeeping Engagement Letter?
When both parties in a contract have clear communication, defined expectations, and legal protection, they may confidently and trustfully handle the intricacies of financial management.
Using the basic aspects mentioned in this article and the accompanying advice, you can develop an accounting engagement letter that answers each client's specific needs while maintaining transparency and clarity throughout the process.
Also, using technologies such as Cone Proposal Software will help you optimize your engagement letter operations, making managing and maintaining professional connections easier while increasing client satisfaction.
Also, learn more about client management software for accountants.
So, take the time to write a thorough and well-crafted bookkeeping engagement letter to lay the groundwork for long-term, successful partnerships in bookkeeping and beyond. Good luck!
FAQs
- How do I write an engagement letter for bookkeeping?
Keeping the services in mind, an engagement letter for bookkeeping can be created manually or using software like Cone Proposal to Payment. You can also use a bookkeeping engagement letter template to make the job simpler. To create an engagement engagement letter for bookkeeping, add following key components to it like:
- A concise introduction
- Details of the services
- Responsibilities
- Rates and terms
- Dispute resolution and Liability sections
- Signatures from both sides
Also, one can start using Google Doc as a reference.
- What information should a bookkeeping engagement letter include?
The main information that should be included is
- A concise introduction
- Details of the services
- Responsibilities
- Rates and terms
- Dispute resolution and Liability sections
- Signatures from both sides
- What is a letter of engagement in accounting?
It's a formal agreement between a client and an accountant or bookkeeper that specifies the terms and conditions of their working relationship and the services that will be provided.
- Who prepares the engagement letter?
Accounting firms or bookkeepers usually prepare engagement letters, which are then delivered to customers.
- What is the distinction between a bookkeeper's engagement letter and a contract?
Engagement letters specify the terms and conditions of the relationship, whereas contracts may include additional legal conditions. However, an engagement letter can serve as a legally binding contract.
- How frequently should I update and renew my bookkeeper engagement letters?
You can review and update engagement letters once a year, when the scope of services, prices, or terms of the engagement change, and after the term.
- What will happen if I do not send an engagement letter?
Without an engagement letter, there may be confusion regarding the agreement's contents, which could lead to future arguments or legal concerns.
- Is it required to prepare an accounting engagement letter for each client?
Yes, it is necessary to have a written agreement for each collaboration to establish clarity, protect both parties and maintain professionalism.
- How can I verify that my engagement letter meets legal requirements?
Consult a legal practitioner or use templates from trusted sources to ensure that your engagement letter follows legal norms and criteria.