Free Engagement Letter Template

What is an engagement letter?

An engagement letter is the letter a professional firm sends a new client to confirm the work before it begins. It is also called a letter of engagement or a client engagement letter. Accountants, bookkeepers, tax preparers, and payroll providers send one with almost every new client, and many other professionals use one too.

It is written as a letter from your firm to your client, but once the client signs it, it is an agreement. It records the services you will provide, what you will not do, the records and information the client must give you, your fees, how you handle their information, who keeps which records, and how either of you can end the engagement.

Why you need one

Most disputes between a firm and its client come down to a gap between what the client expected and what the firm agreed to do. A signed engagement letter closes that gap before the work starts.

• Scope. The client knows exactly which returns, periods, or services are included, so an extra request becomes extra work you are paid for, not a favor.
• The client’s part. Your deadlines depend on the client’s records. The letter makes the client responsible for providing them on time and for the accuracy of what they give you.
• Fees. The client agrees to your fee, how you invoice, and your right to pause work, including filings, while an invoice is overdue.
• Responsibility. The letter makes clear that you are not auditing the client’s records or looking for fraud unless that is the job, and it caps your liability.
• Records. It settles who owns the client’s records, the finished returns, and your own work papers.
• Professional rules. Many professional bodies expect their members to confirm the terms of each engagement in writing, and insurers often ask for it too.

What to include in an engagement letter

These are the elements that matter most, and where each one lives in this letter.

1. The services

List the work precisely: the services, the periods or tax years they cover, and any regular meetings or deadlines. “Monthly bookkeeping and bank reconciliations for January to December, and the federal and state income tax returns for that year” is a scope. “Accounting services” is not. Section 1 holds this description.

2. What is not included

Saying what you will not do is as important as saying what you will. This letter excludes audit and other assurance work, legal advice, and representing the client before a tax authority unless you list them, and says you are not engaged to find fraud. Section 2 covers this, and promises to confirm any extra work and its fee in writing first.

3. The client’s responsibilities

The client is responsible for the accuracy of their records, for keeping originals, and for the decisions they make. They must give you what you need by a deadline you set, and review and approve anything you file for them. Section 3 covers this, including who bears the cost when records arrive late.

4. Fees and billing

Choose the fee structure that fits the work, such as a fixed monthly fee, a fixed fee per return, or an hourly rate, then set how often you invoice and how quickly the client must pay. Section 4 covers fees and billing, including pausing work while an invoice is overdue and billing extra work caused by late records or a tax authority’s inquiry.

5. Term

Say when the engagement starts and whether it ends on a date or runs until either side ends it. Section 5 lets one letter cover work that repeats each month or year.

6. Confidentiality and data

Promise to keep the client’s information confidential and to protect their personal data. Section 6 covers both, and notes that some uses of tax return information need a separate signed consent.

7. Records and work papers

Agree who owns what: the client’s original records, the returns and reports you prepare, and your own work papers. Section 7 covers this and sets how long you keep your files.

8. Ending the engagement

Include a notice period for either side, the cases where you can end it sooner, and payment for work already done. Section 9 covers ending the engagement, and Section 8 limits your liability.

Best practices for engagement letters

• Send it before you start work. Get the letter signed before the client sends you their records, so every hour you spend is covered by it.
• Send a new one when the work changes. A new service, a new fee, or a new tax year is a good moment for a fresh letter.
• Check your professional body’s rules. Some require specific wording for certain work, such as tax or audit engagements. Add it to this letter where it applies.
• Set a records deadline. A date for the client’s records protects your filing deadlines and your weekends.
• Keep the signed copy. Store the signed letter with the record of who signed and when.

How to fill in this letter

1. Name both parties and the date. Use your firm’s legal name and the client’s full legal name, such as their registered company name, and address the letter to the person who will sign it.
2. Describe the services. Write the work and the periods it covers in Section 1.
3. Set the records deadline. Choose a date or a number of days before each filing deadline in Section 3.
4. Set your fee and invoicing. Describe the fee structure, how often you invoice, and the payment period.
5. Choose the record-keeping and notice periods. Keep work papers for at least as long as the law and your professional body require, and choose a notice period, often thirty days.

Any blank you would rather your client complete, such as their title or the signing date, can stay empty. When you send the letter in Inkly, you place a field over that line and your client fills it in when they sign.

Engagement letter vs. consulting agreement

Both confirm professional work for a client. An engagement letter suits recurring compliance work, such as bookkeeping, tax returns, and payroll, where the client supplies the records and you prepare and file from them, so it focuses on the client’s responsibilities, deadlines, and records. A consulting agreement suits advisory projects, where the client pays for your expertise and recommendations, so it focuses on deliverables, ownership of your methods, and non-solicitation.

If the client is handing you their records to keep, prepare, or file, start from this letter. If they are paying for advice on a project, start from the consulting agreement.

How to get it signed

Once it is filled in, save the letter as a PDF, sign up for Inkly, and upload it from your dashboard. Add your client as a signer, place their signature and date fields, add your own, and send. Your client signs from a link in their email without creating an account, and you get the signed PDF back with an audit trail of who signed and when.

If you send the same letter to every new client, save it for reuse on Pro and Teams, so the next client only needs a name and an email address, and automatic reminders follow up until they sign. When two spouses or business partners both need to sign, add each one as a separate signer.