*This article has been developed with the UK market in mind. If your accounting firm isn’t UK based, please consider how any advice mentioned would translate to your country’s market.
Building a library of engagement letters for your accounting practice is hard. They need to be robust to give you the protection you need, should something ever go wrong. They also need to be clear enough so that all parties fully understand their responsibilities.
Accountants typically decipher what they need from a bunch of engagement letter templates to correctly assemble into a suite of legally compliant documents. Unless you have a team of experts devoted to this, it’s an impossible task.
Under the pressure to get this right, many firms typically make a few mistakes that aren’t really their fault. Those mistakes typically come under one of 5 areas. Understand these, and you’ll understand how you can avoid them.
Key Takeaways:
- Engagement letter templates require too much customisation
- Overcomplicated documents are robust, but unclear
- For a great automating system to work, quality content must be input first
- You will have a complaint made against you at some point in your career. You can’t rely on hope
Mistake #1: using engagement letter templates
Whether you’ve been given a bank of engagement letter templates, or downloaded them yourself, templates typically come in the form of word documents that you’ve got to sift through and decipher.
You’re now expected to be a compliance and legal expert to understand how to assemble this documentation correctly.
You’re attempting to bridge a compliance gap in your firm. Engagement letter templates are essentially a set of building blocks, but to assemble them in the right way, it’s on you to bring:
- the resources
- the time
- the experience
- the knowledge
The likelihood of you making mistakes is high because it’s such a mammoth task. It’s an unfair burden on you.
While a whole library of engagement letter templates might look like a great thing on the surface, it becomes a huge problem. To get this right, is really, really difficult.
You must ensure these documents reflect the exact circumstances of your firm and if those circumstances change, all your documentation needs to change as well.
Suddenly, if you’re a sole trader, for example, and you become a limited company, you’ve got to manually change all your documentation. If you get another director, you’ve got to change your documentation. If you start to offshore and outsource work, or you start to use cloud software. If you start to provide investment services, or you start to take commission, again, you’ve got to change all of this documentation. The list goes on…
Mistake #2: using a law firm
Another mistake Accountants make in trying to build out their suite of engagement letters in the first place, is to use law firms.
Law firms are great at understanding law, but they typically don’t understand all the regulations and compliance obligations accountancy and bookkeeping firms must meet. Even if they do understand them, that regulatory landscape is constantly changing. We need to be looking to the horizon to see all changes coming our way, to ensure we’re making changes to your documentation before they happen, not after the fact. Updates are needed regularly.
Yes, law firms can be great to ensure you’re fully compliant and your terms and conditions tick all the boxes. But they can be overcomplicated with legalese, and typically don’t have all the experience they need for the accounting profession.
Mistake #3: over-complicating your engagement letters
The next mistake that firms make is huge and it stems from a fear of wanting to make sure you’re fully protected. Many accountants create very, very robust documentation, but in doing so, their engagement letters become extremely overcomplicated.
You end up with something that has every single term you could possibly imagine to protect you against every possible scenario, creating a very lengthy document that’s VERY difficult to understand.
Perhaps, you don’t even fully understand them yourself, unless you’re taken through them by an expert. If you do, which is a great achievement in itself, the likelihood is that your clients don’t. It’s unlikely that your team understands it either.
At the end of the day, it’s your team members who are delivering the services to your clients. If you’re going to sleep soundly at night, you need to know that they are fulfilling your obligations.
If you don’t have clarity around your engagement letters, it’s likely your team don’t know exactly what they’re meant to be doing and when. What’s more, your clients don’t understand either.
What you end up with is an overcomplicated document fulfilling the robustness you need to have, but it’s failing on clarity. When both of those components aren’t met, these documents don’t become as useful as they could be.
“Because everything is clearly articulated, everyone knows what’s covered. The client can sign at touch of a button.” – Suzannah Whelan | Sinclair Whelan
Mistake #4: high quality automation, low quality content
The next mistake accountants make is to automate garbage. Yes, a great automating system will generate your engagement letters instantly, but what is input in the first place, often isn’t good enough.
If you put garbage into the system, garbage is what comes out.
Technology can create a false sense of security, because you fall into the trap of thinking, ‘Great, we’ve got an automated system. Look, this is producing our engagement letters for us.’
But we don’t dig deeply into whether they’re robust and clear enough in the first place.
Mistake #5: relying on hope
The final mistake firms make is over-relying on hope…
They hope that nothing’s going to go wrong.
They hope that their clients are great clients, who will come and chat about any challenges that arise, and it’ll all be okay.
They hope their team knows exactly what they’re meant to do and that they do it all the time.
They hope that their clients understand their obligations and they’re going to give you exactly what you need when you need it.
They hope that if the worst were to happen, their engagement letters will easily protect them, that they’re legally robust with everything in there that’s meant to be.
But deep down, they know that’s not going to hold up.
It’s likely that in your professional career you will have a complaint made against you by a client. At that point, you need something far more robust than hope to rely on.
How can you avoid these engagement letter mistakes?
We’ve taken the know-how of leading compliance experts and built their experience & technical expertise into OverSuite. With simple, known inputs, you can generate your library of smart engagement letters in minutes. They’re robust, clear and actively adapt to the changing circumstances of your firm and the nature of the clients you serve, however complex.
Don’t just take our word for it–take the word of trailblazing accountants who swear by OverSuite, like Sarah…
“Engagement letters in OverSuite are going to make MTD really easy.” – Sarah Bedford | HMB Accountants
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