Do you send out new engagement letters/contracts to clients every year?

Exploring Annual Contract Renewals in Bookkeeping Firms

For those managing their own Bookkeeping businesses, do you require your clients to sign a fresh contract or engagement letter each year?

While it makes sense to update contracts if there are changes in pricing or services, I’ve noticed some bookkeepers seem to have clients “renew” their services annually.

Having run my own practice for 2.5 years, I’m currently focused on expanding, which includes refining all my standard operating procedures (SOPs). I’m keen to learn about how others approach this aspect of their business. Your insights would be greatly appreciated!

Sending out new engagement letters or contracts to clients every year is a common practice among Bookkeeping and Accounting firms, but whether it’s necessary can depend on several factors. Here’s a detailed breakdown to help you decide what might be best for your practice:

Why Issue Annual Engagement Letters?

Clarity and Transparency: Annual engagement letters help to reinforce the scope of services, fees, and expectations for both parties. As your practice evolves, your services and fee structures might change, and it’s important to communicate these changes clearly to clients.
Legal Protection: Engagement letters serve as legally binding documents that protect both you and your client. They clarify responsibilities, reduce misunderstandings, and can provide a defense in case of a dispute.
Professional Standards: Some professional organizations and legal jurisdictions recommend or require annual engagement letters to ensure compliance with the latest standards and regulations.
Renewal Opportunity: Annual renewal allows you to reassess the relationship with your client. If a client’s needs have grown or changed, this is a perfect opportunity to discuss adjustments in services and fees.
Client Relationship Management: Regular updates can strengthen client relationships by showing that you are proactive and attentive to their changing needs.

When You Might Not Need Annual Letters

Stable Relationships: If the relationship and scope of work have remained stable, and there are no price or service changes, some bookkeepers choose not to issue a new letter each year. Instead, they may use a rolling or evergreen contract, which continues until terminated by either party.
Efficient Communication: Regular checkpoints throughout the year can also serve the purpose that an annual update would, by ensuring both parties are aligned without reissuing formal documents.

Best Practices

Establish a Clear Policy: Whether you choose to issue new letters annually or not, having a clear standard operating procedure (SOP) helps ensure consistency across your practice.
Communicate Changes: If not issuing new letters annually, make sure any changes in terms, conditions, services, or fees are still communicated clearly and agreed upon in writing.
Use Technology: Consider using client management software to manage contracts and communications, which can streamline the process of issuing renewals and tracking client agreements.
Seek Legal Advice: Consult with a lawyer specializing in business contracts to ensure your engagement letters are legally sound and tailored to your specific needs.

Conclusion

Issuing annual engagement letters can provide clarity

One response

APAdmin

26 February 2025 at 2:30 PM
Sending out new engagement letters or contracts to clients every year is a common practice among Bookkeeping and Accounting firms, but whether it’s necessary can depend on several factors. Here’s a detailed breakdown to help you decide what might be best for your practice:

Why Issue Annual Engagement Letters?
1. Clarity and Transparency: Annual engagement letters help to reinforce the scope of services, fees, and expectations for both parties. As your practice evolves, your services and fee structures might change, and it’s important to communicate these changes clearly to clients.
2. Legal Protection: Engagement letters serve as legally binding documents that protect both you and your client. They clarify responsibilities, reduce misunderstandings, and can provide a defense in case of a dispute.
3. Professional Standards: Some professional organizations and legal jurisdictions recommend or require annual engagement letters to ensure compliance with the latest standards and regulations.
4. Renewal Opportunity: Annual renewal allows you to reassess the relationship with your client. If a client’s needs have grown or changed, this is a perfect opportunity to discuss adjustments in services and fees.
5. Client Relationship Management: Regular updates can strengthen client relationships by showing that you are proactive and attentive to their changing needs.
When You Might Not Need Annual Letters
- Stable Relationships: If the relationship and scope of work have remained stable, and there are no price or service changes, some bookkeepers choose not to issue a new letter each year. Instead, they may use a rolling or evergreen contract, which continues until terminated by either party.
- Efficient Communication: Regular checkpoints throughout the year can also serve the purpose that an annual update would, by ensuring both parties are aligned without reissuing formal documents.
Best Practices
- Establish a Clear Policy: Whether you choose to issue new letters annually or not, having a clear standard operating procedure (SOP) helps ensure consistency across your practice.
- Communicate Changes: If not issuing new letters annually, make sure any changes in terms, conditions, services, or fees are still communicated clearly and agreed upon in writing.
- Use Technology: Consider using client management software to manage contracts and communications, which can streamline the process of issuing renewals and tracking client agreements.
- Seek Legal Advice: Consult with a lawyer specializing in business contracts to ensure your engagement letters are legally sound and tailored to your specific needs.
Conclusion

Issuing annual engagement letters can provide clarity
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