Susan Pruskin, a Top 100 QuickBooks ProAdvisor who writes for ClockShark, created this helpful post on how to write good engagement letters. (It’s harder than you think!)
An engagement letter is an absolute necessity in any service business. Your client must know exactly what to expect from you. Words can be tricky little things, especially if they are ambiguous. Be specific to eliminate any misunderstandings.
Disclaimer: I’m not a lawyer. I don’t even play one on TV. But I have been a wordsmith for a few decades, so let’s take a look at some of the words you may be using and what they mean to both you and your client.
“As often as requested by you….”
The client has to request that you bring in transactions, or classify transactions, or whatever you agree to do? That’s enabling a procrastinator. If the client were on top of this task, he wouldn’t be asking you for help.
Better: “Once a week, we will update your QBO file by accepting transactions through your bank feed.”
“This project will begin as soon as possible.”
Well, it’s possible to begin it right now, isn’t it? But that’s probably not what you had in mind.
Better: “This project will be placed in our production queue and is expected to begin the week of October 10.”
Make sure you give a specific date for ending the project as well. If you think you’ll be finished by October 20, tell them the 25th. It’s always good to surprise them with an early finish.
“This price will remain the same unless there is a significant change in activity.”
What does significant mean? Ten percent increase? Thirty? It depends on the client and the activity, doesn’t it? Use a specific, measurable target instead.
Better: “This price is for up to 100 transactions per month. Or, this price is for two bank accounts plus one credit card account. Enumerate exactly how much you are doing for the listed price.”
“Plus out of pocket expenses.”
I used to have this in my engagement letter, and it was the most frequently questioned phrase. I knew what I meant, but some clients wanted to be sure it didn’t mean stopping off for coffee on my way to their offices.
Better: “Plus the actual cost of 1099 forms.”
If you’re going to be billing something back to them, say exactly what it is. And provide your client with a receipt to show that you billed the correct amount. It would be even better to eliminate the charge by wrapping it into your fee for the project. If you know you’re going to be processing 23 1099’s, then figure the cost of those forms in the package price.
“$XX per hour.”
Value billing is a whole separate discussion, but think for a minute about what you’re telling your client when you quote an hourly price: Nothing. Unless they know exactly how many hours this project will take, the per hour rate doesn’t mean a thing. It isn’t even useful to the client as a comparison tool because they don’t know how many hours the other guy will take either. He may charge half as much per hour but take three times as long to do the work.
Better: “The total cost of this project will be $1000. Or, $XX per hour, not to exceed fifteen hours.”
“This project should be finished by…”
Does that mean should unless you decide to take a two-week vacation in the middle of it? Should unless you get a better project that pays more so you put this one on the back burner? Eliminate should from your vocabulary.
Better: “This project will take two weeks.”
Is this engagement offered indefinitely? We’ve all had that client whom we have to remind over and over to sign the engagement letter. Put a deadline in the letter, and perhaps it will spur the client to act more quickly.
Who will be doing this work? Spell that out in the letter as well. Let the client know which staff member will be taking care of them. Provide the phone number and email address. Make it easy for the client to get to the right person with questions and information.
“What we need from you:”
When compiling the list of information you need, don’t just say “Bank Statements.” Be specific. For example:
“Acme Bank statements from January 2017 through September 2017”
More importantly, be sure the client knows how to give you that information. You can wait for weeks because the list is overwhelming or confusing to the client. If you need Payroll Summaries from a QB Desktop file, attach step-by-step instructions on how to produce those reports. Don’t assume the client knows how to do anything. No one will be insulted if you explain something unnecessarily. They’ll be grateful for your attention to detail.
The key word here is specific. In all of our examples, we’ve used specific terms with measurable goals. Keep this in mind when preparing your engagement letters, and you’ll avoid surprises for everyone.
About the Author:
Susan Pruskin writes for ClockShark and is a Top 100 QuickBooks ProAdvisor with an Intuit-centric accounting practice in Cary, North Carolina.
ClockShark is a GPS time tracking app built for construction and field service companies.