What Is A Bookkeeping Engagement Letter? W/ Free Templates


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Have you ever come across a sample bookkeeping engagement letter template? We think these are amazing tools for anyone who is entering a new professional relationship. You may be optimistic about the new deal, and that’s great! It’s an amazing feeling when a client and a contractor express the same vision and values! However, executing an engagement letter for bookkeeping services is a much-needed security feature for both parties.


What Is an Engagement Letter? 


First of all, remember that one sample engagement letter will have specific elements that not all other templates include. We recommend several following core elements below. We also encourage you to add what you believe is important, depending on the specific role. 


Basically, an engagement letter puts into writing everything about the project. It includes the clear details of what the client and contractor agreed to. This ensures that both parties have the same expectations. In case of any discrepancies, the clear wording of the letter will set things to rights again. 


What Is the Importance of an Engagement Letter?


A good engagement letter is important because it will help you create the perfect one for your needs. You need to have this template ready to review with anyone you work with before any official hiring. This is because you must have the terms and conditions all laid out explicitly before a legal relationship forms and work begins. You will find it very difficult to set the scope of work, agree on expectations, and enforce timeframes without such an agreement.


This way, if anything comes up that non-negotiable for either party, you can walk away without incurring any damages. A good bookkeeping engagement letter will protect you both from:


  • Inordinate changes to the scope of the project that can amount to big losses over the long term
  • Billing disputes resulting from unclear quotes and payment terms or undefined charges for additional services outside the defined scope of work
  • Additional expenses related to the work like software, subscriptions, etc., because you did not clarify who is responsible
  • Various errors and oversights because you did not clarify who should deal with third parties and anything not explicitly stated in the scope of work 


What Are the Key Components of a Bookkeeping Engagement Letter?


A handwritten note with eyeglasses on top.


The elements in this section are to help you establish healthy boundaries. When you define everything at the outset, everyone can get on the same page regarding the engagement. 


If you are using a sample bookkeeping engagement letter template, do not forget to add in any missing sections.


Client and Bookkeeper Information


Include both parties’ names and addresses so that it can serve as an official employment agreement in lieu of an employment contract in case of any dispute. 


Scope of Services


Make sure that you have written out all of the service duties and responsibilities clearly and in as much detail as possible. Your average bookkeeping work will include the following:


  • Accounts payable and receivable
  • Accounts reconciliation with a list of said accounts 
  • Payroll with the number of personnel 
  • Sales and income tax filing
  • Additional consulting services, and the specifics


Responsibilities of the Bookkeeper


Your bookkeeping engagement letter must list every task and the corresponding duties and responsibilities for each. For example, what a full charge bookkeeper needs to do. The letter should also have a timeline for the work. This is the deadlines by when each part of the bookkeeping work must be completed. 


Identify by name the party responsible for meeting each milestone and deadline. Make sure that you include contingencies for access to the needed information and whatever software tools and systems are required. Then add reasonable turnaround times for the work after the information is provided.


Responsibilities of the Client


The letter needs to write out the duties and responsibilities of the client as they relate to the work expected of the bookkeeper. Have a good discussion about how you want every task done and how the workflow will proceed. If there are areas that you are as yet unsure of, make a note of that. Once you both have enough information to proceed, sign an updated bookkeeping engagement letter.


Compensation and Payment Terms


Clearly define the compensation agreed upon and what work that covers. Whether you are working with milestone payments, a retainer, or paying hourly, make sure you flesh it out with the bookkeeper. Your billing practices must be defined. You might have a different process for different tasks or areas of service. Include these as separate line items in the letter. 


Confidentiality and Non-Disclosure


Especially where financials are concerned, you must execute an official confidentiality agreement. This outlines the intent of the bookkeeper to maintain the confidentiality of their books and finances. It also includes the responsibility of the client to secure and protect other avenues of access to all the accounts. If several people are using the same credentials, you can’t hold a specific individual responsible.


Ownership of Records and Documents


Be absolutely clear in your bookkeeping engagement letter who owns all the records and documents that the bookkeeper is working on, creating, etc. That person should be the owner of the company, the Chief Executive Officer, or the Chief Financial Officer. 


Termination and Renewal


Define a provision in the letter for how the agreement can be terminated without repercussions. Make sure that this applies to either party. For example, you might say that a bookkeeper must give 30 days’ notice by email and train a replacement whom the client must hire within 15 days of notice being served. Then you must include how many days’ notice the client must provide to the bookkeeper before they find themselves without a job. For renewal, simply state whether the agreement terminates automatically and when.


Limitations of Liability


This section of a sample bookkeeping engagement letter doesn’t usually need much tweaking. It’s a simple clause that limits the amount of money or damages that one party can sue for in case of breach of contract or non-performance. 


For example: All bookkeeping work to be performed is prepared based on information provided by the client. This means that the client cannot and will not hold the bookkeeper liable for any missed deadlines based on information the client withheld or failed to provide. 


Governing Law and Jurisdiction


On top of the above, we encourage you to look into any additional considerations that apply based on specific regulations and laws in your city and state. A bookkeeping engagement letter template that you download from the internet will not have these specifics unless it has been created for your particular area and business type.


What Is the Difference Between Engagement Letters and Contracts?


Two men shaking hands over a sample bookkeeping engagement letter template.


Engagement letters are agreements for services, just like contracts. The difference is that engagement letters are shorter and more simple. Most companies offering services like finance consulting, tax preparation, financial audits, legal advice, bookkeeping and accounting require engagement letters. A bookkeeping engagement letter, for example, is useful when a client and contractor are not willing to get involved in a heavily detailed contractual arrangement. This is commonly the case with short-term or outsourced per-project work.


Where Can I Find Free Templates for Bookkeeping Engagement Letters?


There are countless bookkeeping engagement letter templates available on the internet. The key is to find the one that fits your needs best. We suggest that you do a search for your business type specifically, then use the sample bookkeeping engagement letters you find as inspiration. Here are a few examples you can check out to see the similarities and difference you can expect to encounter: Markel, Content Snare, and eForms.


Frequently Asked Questions


1. Do I need a bookkeeping engagement letter if I already have a contract?


As soon as you strike an initial agreement or express interest in moving forward with a project, you should compose an engagement letter. This sets the expectation that you must work on the details before formalizing anything and starting work. 


2. Is a bookkeeping engagement letter legally binding?


An engagement letter gives both parties a legally binding document without needing to consult a lawyer. However, it must be signed by authorized representatives of both parties first. 


3. Can a bookkeeping engagement letter be used for both ongoing and one-time bookkeeping services?


An engagement letter can cover any type and scope of work depending on how you define and delineate obligations, performance criteria, timelines, warranties of performance, and the like. 


4. What happens if there are changes in the scope of services after the engagement letter is signed?


Any time your agreement changes, you should create and sign an updated engagement letter. We also suggest that you reaffirm your agreement yearly even if the scope of work has not changed. This strengthens the legal standing of the document. 


What Is EcomBalance? 



EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, Ebay, Etsy, WooCommerce, & other eCommerce channels.


We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.


You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.


Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.


And here’s some free resources:




An engagement letter is a crucial piece of any new bookkeeping project. It protects both parties from all kinds of problems. Define your boundaries and expectations early so you don’t risk big losses later on. 


Want bookkeeping off your plate? We’ve got you! Get started, Speak w/ a Founder, or Schedule a Callback

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Julia Valdez

Julia Valdez is Freelance Writer and Agency Owner. She regularly writes on topics related to Business Finances, Growth, Hiring, Entrepreneurship, and more.

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