How to Write an Engagement Letter: Tips and Examples

An engagement letter template provides a starting point and ensures documents are standardized—and it’s even better if it’s automated. A great client-centered relationship is key to the success of any business, but it’s especially important for law firms. One of the best ways to establish a positive client experience is by establishing clear expectations. Additionally, having the details of a client relationship and scope of service in writing can help protect attorneys from liability and potential malpractice claims.

Or you’ve finally decided to update the same old letter you’ve used for years. You may be fine-tuning your current letter, intent on taking it from great to flawless. Regardless, in seven simple steps, you’re in the right preparing financial statements example income statement next step place to learn how to construct an engagement letter properly. Sick of creating engagement letters from scratch for every new client?

1. They also specify what to do if there are likely to be any additional costs involved.
2. An engagement letter helps set expectations for both parties, protecting them from any legal issues or disputes that may arise during the course of their working relationship.
3. Cone seamlessly integrates proposal creation, agreement signing, and payment processing, simplifying the entire journey from initial engagement to receiving payment.
4. A contractor who hires an attorney to draw up a land purchase cannot call the attorney for advice about his divorce.
5. An effective engagement letter identifies the services to be performed, each party’s responsibilities, and the terms and conditions of the engagement.

This way, you and your client are clear on the proposed timeline of deliverables. You how to write a winning grant proposal can store (and organize) engagement letters and other docs in a single online location and receive alerts when they’re due for renewal. If the scope of services or anything else changes during the year, the letter must be reissued. In long-term relationships, it’s common to review and update the engagement letter annually. However, it’s important to remember that the document doesn’t become binding until it’s signed by both parties.

Examples of Engagement letters from Legal and Accounting:

They can be used by any size business, from individuals who are sole proprietors to large corporations. The business benefits from having clear boundaries regarding the work that will be performed from the beginning of the project. This is intended to prevent “scope creep,” something that every tax accountant and attorney dreads. The letter may also cite services that lie outside the current agreement but may be added in the future as needed, with an estimate of the costs of these additions.

Scope of Services

The introduction of your engagement letter has two purposes — to lay out the letter’s purpose to the client and to set the letter’s tone. State that the letter’s purpose is to document key components of the engagement, such as scope and pricing. Just because this is a legally binding document doesn’t mean it needs to read like fine print. An engagement letter is primarily used in the accounting industry because it can be specific about the services provided. An engagement letter typically uses industry-specific terms related to the services offered, such as audit, tax preparation, and legal consultation.

Besides accurately describing the services or products the organization will deliver, the letter mentions the compensation, deadlines, and the terms and conditions. One must note that this document is not legally binding until both parties sign it. Setting expectations is an important part of a business relationship, and an engagement letter makes these expectations clear on both sides. The client gets the reassurance of knowing when a service will be completed, how much it will cost, and the specifics of the scope of work. The letter also makes it clear if other costs are involved that are not covered in the agreement, such as required software that must be purchased separately by the client. An engagement letter is recommended for all professional services, especially for engagements involving complex tasks, sensitive information, or significant financial considerations.

Is an Engagement Letter the Same As a Contract?

Think of them as the foundation for a successful partnership between your accounting firm and clients. Use these letters to set the pace and establish the rules of engagement. Including the fees or fee estimate in your engagement letter helps clarify, in writing, the anticipated cost to your client. This specificity increases the likelihood of being paid and reduces the likelihood of a fee dispute.

Miscommunication drives conflict and, ultimately, the breakdown of otherwise fruitful connections. For this reason, an engagement letter can be a game-changer for many professionals and their clients. There are a few good options to send engagement letters that will allow you to use (and re-use) your template, customize it to your client, and have your client e-sign the document. If your firm does not have engagement letters for existing client work, the most efficient way to implement would be to prioritize high-risk clients as well as each new client. There may be a time it may be necessary for the accounting firm to withdraw from the engagement. The engagement letter may be valid until a certain date or until the service is fully rendered and completed.

A strong engagement letter gives clients clear boundaries of what they can expect while also protecting the business from misunderstandings—especially when it comes to lawyers and their clients. Dear Mr. Jones,This letter confirms the services provided by ABC Accounting to Jones Co. and it outlines the terms, nature, and extent of the professional services we will be providing. Engagement letters are drafted and entered into before a professional services firm starts providing its service to the client. A single engagement letter may contain details regarding multiple services to be performed by a firm, but most often, each specific type of service to be performed is detailed in a separate engagement letter. Engagement letter meaning refers to a document outlining the professional and financial relationship between a company supplying any product or service and its client receiving the offering. It offers accounts payable procedures legal protection to both parties involved and shows that both parties understand their obligations.