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A Guide to Modern Engagement Letters for Accounting Firms

Carl Coe
Posted by Carl Coe on Oct 24, 2023 7:45:20 AM

The engagement letter serves a critical role in the relationship between an accounting firm and its clients. The letter binds the client together with the service provider through an agreement in writing that states the responsibilities and duties of each party. Engagement letters are also valuable to give both sides of the accountant-client relationship clear insight into what a service does or does not include.  

And while some in the industry may consider engagement letters to be an antiquated relic, a well-done engagement letter can still set the foundation for a positive and healthy relationship with clients. Most of the drawbacks involved with engagement letters can be at least partially rectified by optimizing internal processes.   

Here are a few tips on modernizing engagement letters: 



Be thorough about what services do – and don’t – include 

One of the most common challenges for any type of service business is defining fair and solid boundaries on what they can and can’t do during the normal course of a client engagement. Confusion about what a service provider will do for the price of the service is frequently a point of conflict and frustration for clients. 

That’s why it’s so important to be as thorough as you can while you’re describing the things your firm will do during the course of your engagement with the client. You should already have this language ironed out and standardized for a typical engagement. If there’s a need for exceptions, they should be pointed out clearly in a designated section that’s easy for both sides of the agreement to understand. 

Make letters eSignature compatible 

eSignature technology is commonplace in many industries these days, but it’s especially valuable in a field like accounting where a huge number of forms and documents need to be sent back and forth between provider and client. The specific amount of time you save can vary, but in certain situations research has shown that eSignature tools can save multiple days of time between when a contract or document is sent out and when it’s signed and sent back. 

It may sound simple, but using electronic signatures can provide a serious boost to firm productivity just by allowing clients to digitally sign. 

Use customizable templates for engagement letters 

Making use of a template for your engagement letter is key for minimizing the amount of time and resources you have to expend to produce each engagement letter. With a template, you can generate great-looking engagement letters that have all the important information necessary in just a few clicks.  

Some firms may worry that using a template will require them to sacrifice a personal touch. This is where the benefit of customizable templates comes into play. You can generate the template instantly and then type in a few key custom elements: the client’s name, any unique service items that need to be called out so they differ from the normal service agreement, etc.  

As long as your template is customizable, you get all the benefits of automation in engagement letters without losing the personalized touch on your correspondence. These minor elements can help add up to a superior client experience that separates your accounting firm from competitors in the field. 

Establish a streamlined workflow and schedule for engagement letters 

Besides the use of customizable templates, you should also create a standardized process for getting engagement letters sent out and completed. Once you’ve solidified the content of each kind of letter and the way you create and send them to clients, the next step is leveraging automation to reduce manual effort. 

For example, you might create a specific process that outlines which member of your team sends the letter, how long it’s typically supposed to take for the client to send it back, how long they should wait before following up with the client, and how to handle any client inquiries or requests outside of the norm. Try to think of as many possible uncommon situations as you can, then document how to handle them. You’ll never be able to think of every engagement letter issue you’ll actually face, of course, but it’s helpful to prepare in advance for questions or challenges posed by clients. If you find that one specific scenario comes up more than you thought, document it so that other members of your team know how to handle it in the future. 

Engagement letters are more than another to-do 

Our main message: don’t neglect engagement letters thinking they are just one more item on your lengthy to-do list. With the right accounting practice management software and process you can not only remove the biggest challenges of producing engagement letters, but maintain the many benefits of well-executed letters. Clear, well-branded engagement letters that are easy to sign and return are a strong positive marker to your clients, creating a good foundation for a successful client relationship that lasts long into the future.  

Topics: Practice Management


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