If you’re a provider of professional services, engagement letters are essential—not just to set the terms of the client relationship, but to protect you from litigation. Companies offering a service can face all sorts of problems if they don’t lay out their expectations and boundaries in a written, legally binding contract. An engagement letter is similar to a contract but generally shorter and less formal. 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.
Key takeaways
Focus on core activities like legal research, drafting documents, court filings, client consultations, and negotiations with opposing counsel. Depending on the matter, you may list additional work, such as requesting records, advising on settlement options, or conducting discovery. Encourage your clients to review the engagement letter thoroughly, ask questions, and suggest modifications, if necessary. While it’s practical to have a base template, always tailor each engagement letter to the specifics of the client and the scope of work. Ensure the terms address the unique nuances of the particular engagement. Your engagement letter should discuss how sensitive information will be treated, how long it’s to remain confidential, and under what conditions (if any) it can be disclosed.
Benefits of Engagement Letters
You know you should use engagement letters in your tax resolution cases, but you need to figure out what your engagement letter should look like. 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 place to learn maximum rows and columns in excel worksheet how to construct an engagement letter properly.
BILLING AND FEES
Before sending out the letter, have it reviewed by your legal team, especially if there’s any reduce inventory loss uncertainty or if you’re venturing into new areas of service. Engagement letters are essential for any firm; take the guesswork out of your relationship with your clients and create a good roadmap for communication. By following these seven steps, you will quickly become an expert in writing your letters.
Another area where we have seen claims arise includes going beyond the scope of work set out in your engagement letter. In one example, the accountant was engaged to provide advice in relation to tax returns, but along the way was asked for advice relating to VAT and capital gains tax. All engagement letters also generally contain various deadlines for each sub-task. Your engagement letter should include details about your fee structure, payment schedule, accepted payment methods, late payment terms (if applicable), and potential additional charges. By being transparent about the financial aspects of your engagement, you can prevent misunderstandings later on. An engagement letter is a written document that establishes a business relationship between a client and a provider of professional services—usually financial, economic order quantity legal, or consultancy.
- After the scope of services is drafted, consider asking a colleague or an impartial party to read your engagement letter to help evaluate whether it’s sufficiently specific.
- The specific service section would typically also include deadlines and the fee structure.
- Engagement letters are drafted and entered into before a professional services firm starts providing its service to the client.
- Would an individual turn a car over to a mechanic without first approving what is to be repaired and at what cost?
Have It Reviewed by Legal Counsel
While nobody likes to contemplate ending an engagement before work is complete, it can and does occur. You may wish to terminate an engagement if your client insists that you take an unreasonable tax position or if your client hasn’t paid you for your services. So, make sure to include a statement in your engagement letter that notes you may withdraw from the engagement at any time without completing the services. If you feel providing examples is necessary, be sure to include the phrase, “including but not limited to,” to convey that other circumstances may result in termination or withdrawal.
On occasion, your client may ask you to sign a letter of engagement or contract. In this case, so long as you agree with the terms of the document, then you should sign that to provide yourself with legal protection. The business will have discussed the client’s requirements; the engagement letter then describes in detail the professional service contract between the business and the client. Before signing it, the client should check to ensure that it meets all their requirements. Until such a time a new or updated engagement letter has been signed, the legally binding parameters of the client–business relationship will be the one signed by both parties.
