The importance of engagement letters for accountants and advisors

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Accountants and advisors know that engagement letters form a critical part of an effective client relationship. For most of them, it’s a standard procedure — even considered best practice — utilised when onboarding a new client. At TOA Global and Ignition, we understand the importance of such documentation in any business transaction, as they lay out expectations from both parties at the outset, setting the overall tone and providing clarity on the scope of the relationship.

A robust engagement process can be an early determining factor of a successful — or not-so-successful — working relationship. Advisors who don’t pay attention to this process are at risk of overservicing clients (known as scope creep) and of exposing themselves to a range of other challenges.

Let’s take a closer look at how you can start optimising your engagement process.

What’s in an engagement letter?

A new, or the reviewing of a current, engagement letter provides the perfect platform to reassess fees, understand whether expectations have been met, and stay ahead of any changes to client circumstances that would enable you to add additional value.

Ignition brings together everything you need to engage clients, stay compliant and get paid effortlessly into one place. From creating impressive digital proposals with automatically generated terms, through to automated invoicing and payment collection, Ignition helps you to build strong relationships that work for you and your clients.

In addition, both the Accounting Professional & Ethical Standards Board (APESB) and the Tax Practitioners Board provide guidance surrounding what should be included.

When to issue an engagement letter

We strongly recommend that accountants review and re-engage clients annually, or whenever there is a change to the scope of services provided. This is referenced by the Tax Practitioners Board TPB PN3/2019 and Accounting Professional and Ethical Standards (APES) 305 “Terms of Engagement.”

Industry guidance surrounding engagement letter inclusions is updated regularly — annual “re-engagements” ensure you are mitigating your risk in the event of a dispute with the most up-to-date terms.

Test-drive how Ignition helps thousands of accounting and bookkeeping firms send professional, up-to-date proposals and engagement letters in a matter of minutes. By starting your free trial today, you can access a comprehensive library of free, legally-vetted templates to use.

Engagement letters now include provisions around offshore teams and cloud technology.

Engagement letters and outsourced accounting

Accounting, along with IT, are the most commonly outsourced business processes, so it should be no surprise that offshore team provisions are now included in engagement letter guidelines. Here at TOA Global, the offshore teams we help you build, grow and manage are resourced and covered in this way.

As a company specialising in business process outsourcing, we always advise that our accountants and advisors document and communicate the terms of their agreement each time they provide professional services to a client. These services include anything from accountancy, taxation, auditing, management consulting and financial management to marketing and administration.

In fact, a new subsection within APES 305 “Terms of Engagements” (which accountants must adhere to) dictates that firms must include details of outsourced service and/or cloud computing provider use in their engagement letter.

Disclosing the nature of the offshore team and any cloud technology utilised by the firm should be a key update in your engagement letter review process.

Our collaborative efforts

In close partnership with Ignition, TOA Global has optimised the client onboarding process so that it’s seamless and compliant.

We believe that all accountants and advisers should have easy access to the processes and technology that help them run their businesses like clockwork. This includes outsourced talent, services, automated proposals and engagement letters with an all-in-one client onboarding package, so you can focus on what matters — your client.

Having an engagement letter completed at the outset of a client relationship can prevent future obstacles, confusion, and miscommunication. It helps mitigate the risk of disputes, as well as offers transparency, confidence, and clarity within the client relationship.

Creating, sending and getting signed engagement letters can be an easy process. With Ignition and TOA Global on your side, your firm can rest assured that compliance will be covered at every step of your outsourced accounting journey.

Discover the process that has enabled more than 750 firms worldwide to focus on scale, growth and client service, by signing up to receive a free accounting outsourcing strategy today.

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