An engagement letter might sound like an entirely different beast on the surface, but it is an important document for your business. While people who are not in the industry might think that you are talking about an agreement between two people working toward matrimony, this is not quite what an engagement letter is. When you’re asked to write one, you may be confused about what wording you should use and what kind of things should be agreed upon. Therefore, when entering into this particular business agreement, it is important that you do your research.
What Is an Engagement Letter?
An engagement letter might sound like a letter written by or to people entering into a matrimonial agreement; it is actually a letter written as an agreement between two businesses or between a client and a company. An engagement letter details the terms of an arrangement – the agreement, the terms, and the cost. It sets the expectations for both sides of the arrangement so that everything is outlined initially.
This is less formal than a business contract, so it is not necessarily legally binding and can be more fluid. It is important that, before entering into any kind of business agreement, you should have a contract drawn up.
Engagement Letter (Word Template)
How to Write an Engagement Letter
When writing a “good” engagement letter, you need to make sure that you have a few things.
- A Good Introduction: Much like a contract, you need to have a solid introduction that outlines things for both parties. This is especially important as this is a legal document.
- Specifying the Services to Be Delivered: The services being delivered should be specifically outlined within the document. This makes sure both parties understand the scope of what will be performed.
- Specifying the Timeline: All services have a timeline in which they should be delivered. It is important that this timetable is outlined within the letter so that both parties have a mutual understanding of when a service will be provided.
- The Terms of Payment: Including how the client will pay you or how often you will be paid by the client is important so that financial issues will not arise later in your business arrangement.
- What You Expect From the Client: Making sure to outline what is expected from the client is important so that you can have a better working relationship and the client knows what they will need to do.
- What the Client Should Expect From You: Outlining what you will do when you will be available and what they need. This could be updated on the status of a project or, maybe, a non-compete clause.
- Signatures: Both parties must sign this document so that it becomes legally binding. It is best practice to do this in front of a notary so that each party sees the legality of the document.
Following these steps when writing an engagement letter will see that you have a solid agreement written between you and your clients.
Sample Engagement Letter
Eugene Ryder Accounting Services
123 Main Street
New York, NY 12345
RE: Accounting Services for Carlisle and Associates, LLP
Dear Mr. Hemingway,
This Engagement Letter (“Letter”), dated March 4, 2022, confirms the services requested by Carlisle and Associates, LLP (“Client”) and provided by Eugene Ryder Accounting Services (“Service Provider”).
The services provided under this Letter are as follows: Full accounting services for the year ending December 31, 2022
The fees charged for providing the services are:
- $75 / Hour.
In addition, the Client may be charged for any additional administrative fees, filings, or any other costs not directly or indirectly related to the services.
Upon receipt of the signature by the Client of this Letter:
A retainer will be required in the amount of $1700.
The primary contact for the Client in regard to the services mentioned in this Letter shall be the following:
Individual’s Name: Gregory Hilldebrandt
E-Mail: [email protected]
Under this Letter, the services shall be terminated under the following:
- Upon completion of work.
The Client shall always be required to provide truthful information to the Service Provider in a timely manner. If any information produced by the Client is not accurate, the Service Provider shall be protected from any legal, financial, or other liability as a result of such information.
IN WITNESS WHEREOF, the Client and Service Provider agree to the terms and conditions contained in this Letter.
Client’s Signature _______________ Date March 4, 2022
Service Provider’s Signature _______________ Date March 4, 2022
How an Engagement Letter Works
An engagement letter works much like a contract. Fortunately, this is still legally binding, but it usually avoids legal jargon, making it much easier for both parties to read and understand. The terms are all agreed to and briefly outlined within the document, making it much shorter than a contract. These letters limit the responsibility of the business, whether directly or indirectly.
An engagement letter also limits the services that a company will provide. This will outline the kinds of services that a company will provide a client during this particular venture.
Benefits of Engagement Letter
An engagement letter is beneficial because it sets expectations from the very beginning. This is important in any relationship. You are giving the client the security of when a service will be delivered and what it will cost. As a business, you are setting important boundaries about what is expected of you, as well. This helps to make sure that your business does not get dragged into unnecessary work or legal battles. It can also provide guidance on what to do if a legal issue were to arise.
In an ongoing business relationship, you may need to continuously update your engagement letter to make sure that all parameters are met.
While an engagement letter might seem like work added to a contract, it is one of the most beneficial documents that you can utilize in a business relationship. An engagement letter is as legally binding as a contract but is easy to understand for you and your client without the unnecessary legal jargon. Overall, a letter of engagement is the best way to protect your business while setting expectations upfront.