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Rules of engagement

9th Jun 2013
Practioner Unknown
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We take letters of engagement very seriously. I know we're meant to under ICAEW guidelines, and general common sense as professionals, but we have devoted a lot of effort to make issuing and updating them as easy as possible, and ensuring that they are re-issued regularly.

But reflecting on the entries on last week's timesheet I can't help remarking that most of what I spent doing was not really covered by the standard engagement letter. For example:

  • Mortgage and letting agency references
  • Cashflow forecasting
  • VAT planning
  • New company formation, and the related HMRC registrations

Should we have separate engagement letters for these activities? Or should we include them in the standard letters, just in case? - I hope not, the standard letters are long enough already.

What do you do? Do you issue a simple sort of order confirmation letter when clients ask you to provide this sort of one-off service?

If, like us, you basically don't have any sort of terms of engagement for such services, doesn't that make a bit of a mockery of the main letter? We go to great trouble to issue detailed terms, over some four to six pages, plus standard Ts & Cs, and even that doesn't cover what we spend a lot of our time doing!

I recall 2020 Group produces what it calls an "Invisibles Menu" to cover such services, a good name for something that is all too often taken for granted. That's not a bad idea, after all they tend to be self-contained jobs that can easily be subject to standard fixed fees. What 2020 don't do though is include some standard engagement terms with this menu.

I'd be interested to know what other firms do, but I definitely think it's an area we need to look at and produce some sensible terms so that we and clients understand exactly the scope of these one-off services.

I can tell some readers are not convinced there's a problem here. OK, take company formations. What do you do for clients - do you just fill in the forms or do you offer additional features (either as standard or extras)? How about providing the registered office address - I assume you charge separately for that, but is it a one-off or an annual fee? And if you're the registered office, what happens when you receive post for the company? Do you charge for forwarding it?

Do you also register the new company for PAYE, and for VAT if applicable? Is that included or an extra fee? What responsibility do you take for this?

And how about statutory registers - do you provide them/maintain them/write them up? If so, is that included, or an additional fee - again, one-off or annual?

And so on - most of these simple one-off services could come in a variety of service levels. How do clients know how much your proposing to do (and how much it's going to cost)? A good engagement letter should cover that off - except most of us don't have one!


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Replies (5)

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By MarionMorrison
10th Jun 2013 00:55

It all makes work for the working men to do

As a passing cowboy I have the luxury of regarding engagement letters as utter hogwash, providing no real protections for us and very little for them.  The sheer time and effort inherent in planning, editing mailing and progress-checking letters of engagement has a cost and that cost is borne somewhere.  A letter of engagement will strengthen the case for sueing people for unpaid bills?  Hasn't been a problem for us - we sue very reulctantly and win.  It regulates and defines the services which we provide?  But as you say, we all get around this and I have advised clients about relationships, mental health issues, abortions, you name it....  It commits clients to provide information in a timely fashion?  Yeah right; and when they don't, we either let them get away with it or we up their charges or we kick them off the ranch, but none of these actions is governed by LoE's.

My only conclusion is that most firms have LoE's because ICAEW of whoever, tell them to.  And because it's the way it's been done before.  From the point of view of the clients you could write a commitment in there for the client to provide cake at all future partner birthday parties and no-one would notice.  Try it next time - insert a paragraph that says failure to provide information in a timely fashion will result in the death penalty.  Bet you get it back with a signed 64-8 by return. 

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By RussellD
10th Jun 2013 09:02

Terms of Business

Another approach could be to separate the work carried out from 'the way we will do business'. 

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By carnmores
10th Jun 2013 18:43

I am with Marion but look here


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By Old Greying Accountant
10th Jun 2013 23:02

My letter has a clause ...

... that states

"You may request that we provide other services from time to time. If our fees for these services will exceed £XXX.XX, we will issue a separate letter of engagement and scope of work to be performed accordingly."

This covers the small items of other work of an ad-hoc basis, if it is more substantial than your de-minimis limit then a separate letter is a good idea, it doesn't need to be long, just state what you will provide or not provide as part of that work.

I do act as registered office, I do not charge as I like to make sure I see all relevant post, not just HMRC/Co House but you see the solicitors letter/judgements etc. arrive so you get a bit of any early warning.

I always tell new company clients they can go online and form their own company for £30-40 and let them know what they will get for that. I tell them my company formation fee includes writing up the statutory books, alloting the subscriber shares, dealing with the CT41G, registering for PAYE/CIS and VAT as appropriate (most of which is part of setting the client up on my systems anyway) so very little additional work required (IRIS will import most of the data back from Companies House anyway so you only have to key the data in once on the online formation forms). I have very few decline my offer, for which I insist they pay up front as I have to disburse fees to a formation agent.

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By ChrisScullard
11th Jun 2013 10:10

Generally I issue an extra work order for anything like this which is along the lines of we agree to do x for a fee of y.  Please note that the Ts & Cs in our engagement letter dated xxxxx apply.  Obviously it's a bit more wordy and detailed than that but you get the picture

If it's something tiny like a mortgage reference sometimes I will just send an email saying I will do it but will charge x.  Please confirm your acceptance by return email.

One of the beauties of collecting fees monthly by DD is that I simply can add it on to the next month's DD

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