What Should Your Bookkeeping Engagement Letters Include?

Bookkeeping engagement letters are written documents that provide an explicit understanding of the expectations of bookkeepers for their clients. A well-constructed engagement letter outlines the services of the bookkeeper, the responsibilities of the bookkeeper and the client, and the terms on which the bookkeeping engagement shall be carried out. An engagement letter can protect you from any potential misunderstandings or disputes that could arise and help guarantee a smooth working relationship.

What should you then, therefore, include in your bookkeeping engagement letter? Let us break down and take a look at all the essentials.

Introduction and Scope of Services

It is usually suggested that the first section of your Bookkeeping engagement letters properly define the scope of your services. What bookkeeping work will you be doing for the client? Will you be handling payroll, accounts, or monthly financial reports? This is also a place where you can indicate what services are not included unless specifically requested.

The introduction usually includes:

• A description of the services you will perform – e.g. general ledger maintenance, bank reconciliation
• What is not included in these services unless mentioned, such as tax filing, financial audits
• Any specialist services provided at an additional fee

Clearly note the services you provide so you and your client know the totality of your liability.

Responsibilities of the Client

This brings us back to the need to outline the client’s role. Good bookkeeping engagement letters explains what you will do and what the client will have to do so that you can provide them with effective service.

This section explains:

• Client-supplied material, such as bank statements and invoices.
• Any deadlines for when the client must provide information
• Client’s responsibilities regarding accuracy and time

This will help you do your work effectively and on time while ensuring the client knows their obligations.

Timeline and Deliverables

This section outlines when and how the deliverables will be performed. The clients must be informed when they can expect their financial reports, reconciliations, or whatever other services the engagement may call for.

It is suggested to include:

• Frequency of service, whether it is weekly, monthly, quarterly or even yearly
• Milestones/ key deadlines for deliverables
• How the deliverables are to be submitted-whether by email in PDF or via an online portal

This also gives insight into the timeline, which could help manage client expectations, especially if the services rendered are time-sensitive.

Fee Structure and Payment Terms

Having well-defined bookkeeping engagement letters help in reducing the likelihood of awkward billing conversations later on. You must clearly outline your fee and payment terms so that the client understands what they will be paying for from the beginning.

You must include the following:

• Total service costs – hourly or flat-rate
• Payment schedules, such as monthly or upon completion
• Any late payment penalty that may be applied

Transparency in this section helps show professionalism and also helps avoid any dispute that could arise over billing.

Confidentiality and Data Security

Two important factors that a bookkeeper must consider are confidentiality and data security. The profession requires you to deal with the client’s sensitive financial information, which helps make clients feel more at ease about how their information is protected and used properly.

You can include the following in this section:

• A statement with respect to the handling and protection of the data of the clients
• If applicable, to any third-party service providers who may gain access to data
• Single confidentiality clauses for client information protection

Indeed, addressing these upfront can instil much confidence in your clients and make them comfortable sharing all financial data with you.

Termination and Dispute Resolution

This may be one of the most important sections of your bookkeeping engagement letters. It states the situations where the agreement might be considered null and void on either party’s end, stating what happens in the case of disputes.

Include the following:

• How and when either party can terminate the engagement
• Procedure for resolving disputes or differences
• Any fees or obligations that are outstanding in the event of early termination of the engagement

Having these terms mentioned can help prevent misunderstandings and make the end of the working relationship cleaner if it does come to that.

Agreement and Signature

Lastly, you will want to include a section where both parties can sign and agree to the terms of the Bookkeeping engagement letters. This section solidifies the agreement between you and your client and should include the following:

• Names of both parties
• Signature lines for you and the client
• The date of the agreement

Both parties must sign the bookkeeping engagement letters and have a signed copy for each party to keep records.

Conclusion

Writing thorough bookkeeping engagement letters is a critical first step in developing client expectations, protection, and trust. You will be able to make one clear and professional with all the information that the engagement will need to cover, from the scope of services to confidentiality agreements, which will assist in the success of the business relationship.

If done well, however, bookkeeping engagement letters are much more than a mere formality—it is one of the most powerful tools for managing your clients and determining how smoothly your bookkeeping service will operate.

---