Why tailored letters of engagement are important for bookkeepers and accountants?
I am often asked by my clients, many of whom are bookkeepers and accountants, why it is important to have tailored letters of engagement with their clients. Letters of engagement are the written contracts between bookkeepers and accountants and their clients to provide their services to their clients.
Why have a contract at all?
This is a question that is asked time and time again, and one I think should be addressed before we move onto the issue of why bookkeepers and accountants should have tailored letters of engagement.
Some businesses simply do not see the importance of having written contracts in place in the first place. Well-written contracts make it easier to show what was agreed between two parties. And of course provides evidence that a contract existed in the first place.
Would you want to enter into a business arrangement that you have agreed with a client, or a business associate, without knowing what the specifics of that arrangement were? Without having anything tangible to show for what was agreed between the both of you?
Verbal contracts are a “no-no”
Lets put it in another way. If you were due to submit business accounts on behalf of a client would you assess their accounts without the necessary receipts, statements and other documented evidence? Would you accept just verbal information from your clients? The answer would be no.
And it is the same for contracts. Yes, verbal contracts MAY (AND IT’S A BIG MAY) be upheld in a court of law. But the question becomes how do you prove what the specific terms of that contract were? And you may even have to prove there was a contract in the first place if the other party denies that they agreed to anything.
Why risk not putting in place written contracts to support your business operations? Investing some money in seeking professional advice and legal services will save you money and hassle in the long run. Recent research has shown that one legal dispute can cost a small business on average £35,000.
What about templates provided by regulatory bodies?
One of my first clients when I started Contracts4You in 2013 was Alison Edward, Chief Balancer at Simply Balanced Solutions. She was also just starting in her new business venture and asked me to review her letter of engagement.
Alison sent me a one page document which she said had been provided by her regulatory body (I won’t name which one).
What was wrong with the letter of engagement template?
It did not take me long to review the document, pick holes in it and come to the conclusion that it did not provide Alison and her business with the protection she required against commercial and legal risk. The terms did not fully explain the full range of services that Alison provided; it did not adequately limit her liability creating the risk of greater financial loss; and it did not fully outline her intended payment terms. These are just some of the shortfalls I identified.
And this seems to be the norm within the bookkeeping and accountancy industry in England and Wales. Other bookkeeping and accounting clients that have approached us after Alison have provided me with letters of engagement templates sourced from various regulatory bodies. And I have identified similar weaknesses in these templates. Some even contain out of date legislation and out of date accounting practices.
The process we take in writing letters of engagement.
Returning to Alison and the work carried out by Contracts4You to improve her letter of engagement, I started by identifying the gaps and weaknesses in the template letter of engagement. I worked closely with Alison to understand the range of services she offered to her customers, the approach she took to delivering her services and to identify particular risks associated with her practices. I then drafted a specific letter of engagement which reflected Alison’s business and mitigated the identified risks. Once I was sure Alison was happy with the final letter, I ensured she was fully aware of the contents of her letter of engagement before she started using it with her clients.
I have come to the conclusion, and other professionals agree, that legal teams within bookkeeper and accountancy regulatory bodies purposely develop vague letter of engagement templates in order to avoid any recourse if its members have a legal case bought against them by a client for breach of their letter of engagement. A big cop out for these so-called representative bodies for bookkeepers and accountants.
AND SO THIS IS WHERE CONTRACTS4YOU WANT TO HELP.
We are here to remind you that your business is unique and has its own tailored requirements. What may fit for your business may not fit for another business.
We want to support bookkeepers and accountants to ensure they have a professional letter of engagement that protects your business.
Our partnership with the Bookkeepers Alliance
Hence why we have partnered with the Bookkeepers Alliance. We are offering a 10% discount to all members who engage us for the first time. If you are a member of Bookkeepers Alliance and would like to claim this offer, you can do so by visiting the Bookkeepers Alliance website.
Even if you are not a member of the Bookkeepers Alliance we are happy to help you.
You can contact Contracts4You by emailing info@contracts4you.co.uk or telephoning 0800 699 0706.
You may also find it useful to read my recent blog “Tailored contracts versus off-the-shelf contract templates”. It provides further detail about why it is not a good idea to use contract templates.
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