What can I do to Better Explain Terms of Engagement with New Clients?

In today’s episode of ‘From the eLearning Trenches,’ we asked one of our learners, a manager in public practice, to critically review the firm’s engagement documents and consider what could be changed to turn these documents into service agreements.

Learner Reflection

To turn the firm’s current engagement documents into service agreements, multiple changes may be needed, such as;

Clarity of Services: Review the engagement documents to ensure that they clearly outline the services provided to clients including the scope of work, timelines and both client and firm responsibilities. We will need to specify the exact service in detail to be undertaken, while avoiding vague language that could lead to misunderstandings or disputes.

Fee structure and payments: Define and streamline the fee structure including pricing, billing methods and additional charges or expenses. We will need to outline in detail the payment terms including invoicing schedules, due dates and consequences for late payments or non-payment.

Termination of Service Clause: Specify the duration of the service agreement including start and end dates, re-engagement options and termination clauses. By doing this we can clearly outline the conditions under which either party can terminate the agreement as well as any notice periods or penalties that may apply

Confidentiality and data protection: Include provision for confidentiality and data protection to keep sensitive information protected during the engagement. This will outline to responsibilities of both parties regarding the handling, storage and protection of confidential information.

By making small yet simple and highly effective changes, the firms engagement documents can be transformed to comprehensive service agreements that provide clarity and transparency for both the firm and the clients. The aim is to help mitigate risks, establish expectations and develop stronger relationships.

Feedback from our experts

The traditional engagement document used by accounting firms is generally little more than a legal contract that explains in simple terms what is to be done and how much it will cost. Engagement documents also discuss how the firm deals with special work.

Whilst this is acceptable for a commoditised service that incorporates specific inputs and outputs, it is often insufficient when the scope of work moves towards ongoing advisory services. In this situation, process becomes much more important. The engagement letter should transition towards a service agreement, where the level of ongoing communication becomes more important. Key questions to be discussed should include (1) how often will we communicate, (2) how will this communication occur, (3) what is expected of both parties in managing the relationship (mutual commitment), (4) what is (and isn’t) included in the scope of work and (5) what will the process of regular review look like?

A true service agreement makes it clear that the business relationship is a lot more than transactional in purpose and outcome. It’s so much easier to manage the relationships when the terms of engagement are clear.

What can you do to transition your engagement document to a comprehensive service agreement?

1. Clearly Communicate What’s Included and Not Included in Scope of Work

Detail Specific Services: Clearly outline the specific services to be provided. This includes breaking down tasks and deliverables so that clients understand exactly what they are paying for.

Exclusions: Equally important is to specify what services are not included within the scope. This helps prevent misunderstandings and sets clear boundaries, reducing the likelihood of scope creep.

Customisation: Tailor the scope to each client’s needs, ensuring that the agreement reflects the precise nature of the services to be provided. This personalisation helps in building trust and satisfaction.

2. Identify the Intrinsic Value of the Work to Be Completed

Value Proposition: Explain how the services provided will benefit the client, not just in terms of compliance but also in adding value to their business. This might include strategic advice, tax savings, or business growth support.

Outcome-Based Descriptions: Instead of focusing solely on the tasks, highlight the outcomes and benefits that the client can expect. This approach helps clients see the value beyond the price.

Benchmarking Success: Establish clear metrics or benchmarks for success that align with the client’s goals, demonstrating how the firm’s work contributes to achieving these objectives.

3. Discuss Mutual Commitments: What Each Party Can Expect of the Other

Client Responsibilities: Outline what is expected from the client, such as providing information in a timely manner, making payments, and communicating needs and feedback.

Firm Commitments: Clearly state what the client can expect from the firm, including timelines, quality of work, and availability for consultation.

Collaboration Framework: Establish a framework for ongoing collaboration, emphasising partnership rather than a transactional relationship. This should include how both parties will work together to achieve the outlined objectives.

4. Outline Guidelines in Relation to Communication from Both Parties

Communication Channels: Specify preferred channels and protocols for communication, whether it be email, phone calls, or meetings. This helps in managing expectations and ensuring effective exchange of information.

Response Times: Set clear expectations for response times to inquiries from both sides. This ensures that communication is timely and reduces frustration.

Escalation Procedures: Provide a clear process for escalating issues if they cannot be resolved at the initial level of contact. This ensures that problems are addressed promptly and efficiently.

5. Outline the Process of Regular Review of the Relationship, Including Scope of Work and Fee for Service

Review Schedule: Establish a regular schedule for reviewing the relationship, scope of work, and fees. This could be annually, bi-annually, or at another agreed-upon interval.

Adjustments and Updates: Allow for adjustments to the scope of work and fees based on the review outcomes. This ensures that the agreement remains relevant and aligned with the client’s evolving needs.

Feedback Mechanism: Incorporate a structured feedback mechanism into the review process. This allows both parties to express satisfaction, concerns, and suggestions for improvement.

Key takeaway: Look for ways to transition your standard engagement letters into comprehensive service agreements that better serve both the firm and its clients. This approach fosters transparency, mutual respect, and a partnership-oriented relationship that can lead to increased client satisfaction and loyalty.

This assessment task and response is taken from the Client Manager eLearning course (assessment task 3.1). Click here to explore this course

Also, take a look at the Client Concierge eLearning Course

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