After meeting with a potential client, you should compose a letter of engagement immediately to formalize your business relationship. The letter not only seals the deal, but it articulates and solidifies expectations of both contractor and client.
Most small businesses respect a formal agreement but appreciate one that is not written like a legal document. Typically they are interested in a gentleman’s agreement and not something they will need a lawyer to look over (chances are both you and your client do not have the resources to consult regularly with lawyers). A letter of engagement will stand as a contract between you and your client, making the relationship formal and binding. And if done correctly, this document can protect your interests as you move forward in your business.
A letter of engagement should specify the services you agree to provide. Start the letter by stating, “This is a list of my services as per our conversation today. If there is anything that I have missed or neglected to include, please contact me immediately as these are the services I am currently prepared to provide.” This avoids any misunderstanding as to what you agreed to do. Your client cannot come back months later and say, “I thought you were also going to…” This letter provides your client with the opportunity to ask for additional services upfront if necessary, and it protects you from doing work you had not originally planned on.
Timeline and Reporting Mechanisms
Be specific as to the services you will provide, but not the timeline in which they are to be performed. In managing your clients you will need flexibility in order to accomplish all the tasks associated with your business. For example, if you are collecting information from your client weekly, do not give an exact day or time. If you have specified a pick-up time and are late by even a day you are in breach of the contract. Simply state that you will collect the information weekly; perhaps you could say the “end of the week” or the “beginning of the following week.”
In your letter you must formalize the necessary reporting mechanisms you plan to use with your client. Provide a time when you will have the month-end prepared and ready to deliver; based on the client’s needs this can be monthly or perhaps quarterly. Again, do not be specific as to the times you will meet, as this could change. For example, you may want to state that you will meet with them by the 15th of each month with the previous month’s data. This allows for you to schedule a new appointment each month with leeway as to when the actual meeting time is.
Fees and Billing Processes
State the monthly fee charged for your services and the accepted method of payment (CC, Check, trade, etc.). You also need to state when the payment is due. If you require payment “at the time of pick-up,” you expect to be paid at the time you pick-up weekly information, before the work is done. If you require payment “at the time of delivery,” you expect to be paid before you handover the reports in your monthly meeting with the client.
You may also consider payment on a reoccurring date. Billing the client on a given date each month has many advantages; it is a bill that will be more likely to be paid by the client because it’s an expected monthly expense. This also helps your relations with your client, because they will be less likely to avoid you or postpone meetings because of a lack of funds. Make it clear whether or not the payment is for the previous month or for the work to be done in the upcoming month. Clarify that the set-up fee is in addition to your monthly billing fee.
Send the letter to the potential client through certified mail. This signifies to your client the letter’s importance and provides you with notification that it has been received. Once you have a receipt, you can rest assured that your client has access to the document and will notify you if any changes are necessary.
A letter of engagement documents expectations of both contractor and client. It can be a means through which both feel comfortable in their business relationship. In this way, a prompt response following your first meeting with a potential client can seal the deal and provide you with a safety net as you move forward in your business.
Proper Business Processes Help Guard Your Success
With your business’ legal issues, it is critical to dot all your I’s and cross your T’s. Most startup business owners that you run into have a few stories of things they learned the hard way.
One of the most important ways that the Professional Bookkeeper™ program really distinguishes itself is in how it helps new businesses avoid legal hangups. Knowing the best ways to protect yourself ensures that you get paid for every hour of work that you do. You will learn how to earn $30-$60 per hour doing the kind of bookkeeping needed by every small business.