Letters of engagement: An effective marketing toolby
Jennifer Adams considers how the letter of engagement can be used for reasons other than professional indemnity.
Having other matters on your mind during the first lockdown, you could be forgiven if you missed the update to the Engagement letters for tax practitioners guidance issued on 27 April 2020. Every few years the various accounting and tax bodies get together and update this publication. The current edition is 163 pages long which makes for daunting bed-time reading.
Now that many practices have changed the way they work due to Covid, this might be a good time to review your letters of engagement (LofE) before the January rush to include anything that your practice is now doing, for exampe with secure communications and information transfers.
Before everyone groans, look closely and 93 pages are the same template amended for the different services offered; 10 pages are the Privacy Notice (this should be on your website already), three pages are a template for a disengagement letter and the standard terms take up 10 pages (hardly altered).
The guide is made easy to follow by highlighting areas that the accounting bodies believe should be included or are an update. The document is intended to be relevant to as many practitioners as possible (including some text about Covid) - which means that there is a lot that many of us will edit out. But it does offer a good reminder of the GDPR/ICO rules and includes links to the various acts under which accountants operate, including one of which you might be forgiven for thinking applies only to goods, but is especially relevant to Covid if you have not met your new client, (The Consumer Protection (Distance Selling) Regulations 2000).
Remember that a LoE is a vital piece of evidence if the firm is sued being the first line of defence or evidence against the firm. Professional indemnity insurers regard failing to issue an LoE as an increased risk and may raise the premiums if they find out that one is not in place. The professional bodies also take a dim view in their reviews if one has not been issued.
The first time you prepare a LoE it will take you a few hours, but once it’s done it’s done and standard sections can be cut and pasted to meet the needs of specific clients in the future.
Strike a balance
Good enagement letters find a balance between providing enough information and clarity about the services being provided, but not too much detail that might scare off the client as too long to read. Reading attention spans are now shorter ever – reportedly down to 8secs from 12secs in 2000. A client’s attention span is arguably even shorter.
The Institutes’ guide is comprehensive and would take a long time to rewrite in more approachable words, so best to leave it as it is. Your covering letter, however, can be amended to suit your writing style and professional approach.
Think of the LoE not as a chore, but an advertising opportunity. In what manner did you speak to the intended client initially? If you were dry and formal then plough in with the ‘The attached is a letter of engagement which I need to ask all clients to sign and return’ approach.
But if you were friendly and approachable then the covering letter needs to be in the same tone. QuickBooks has an engagement letter for their own services and the covering letter is an example of the tone that could be set.
Since my original 2012 article Engagement Letters: Get it Right technology has moved on and you can find templates from your practice software suppliers that are on the guide - the TaxCalc template is a good example - and others are available from sources such as Croner-i for a separate price.
With AccountancyManager the cloud-based software allows you to tick a box for the different services you provide and pulls togeter the (editable) sections into one attachment so the client doesn’t have to read through anything not relevant to them). The client then logs onto the portal and the first communication they receive is a LoE to return by e-sign. Many accountants use Docusign as their e-signing tool.
A while ago Glenn Martin investigated various proposal software apps for accountants that included LofE templates. He liked the look of Practice Ignition’s engagement letter and noted that the developer had a partnership with ACCA for its templates and with the Institute of Certified Bookkeepers.
The annual engagement letter question comes around every year in Any Answers and the the answer is usually the same: “Life is too short,”
By all means send the full pack initially, and put the privacy notice and a copy of the standard terms on your website, but note that the accounting bodies are not happy if this is all that you do. Sections 10 and 11 of the LoE guide state that “for anything other than insignificant amendments, the use of the website is not recommended”.
The minimum requirement is to email each client informing them of new terms, and explaining that can be found on your website - and ask for confirmation of their acceptance. The professional bodies expect a returned acknowledgement from the client that they have read the document.
The guide does state that when there is a change (or is an update from the accounting bodies) then it is acceptable to send a copy of the relevant page as amended. Again, instead of thinking of an update as a chore, take the opportunity for a bit of marketing and interaction especially if you have not heard from the client for a while.
Remind them what you do for them. Point out that you want them to be as up to date as possible because tax law is changing all the time (for example with MTD 2 on the way) and that you at “ABC accountants pride ourselves in keeping up to date for our clients” or some such.
Follow this up by saying that you will be giving them advice specific to their circumstances separately or when you meet for an annual review. You could also take the opportunity to remind them to use the Portal (If you use Portal software) by saying that you have loaded the amendment together with the original LoE “for their convenience”. Remind them you are there and finish with usual call to action: “If you need any further detail please let me know.”
Then, after you have finished and sent your LoE to all your clients, congratulate yourself, have a cup of tea and take a view of the link below - a letter of engagement instruction by video - perhaps this is the future,