including a sample engagement letter.
by ed mendlowitz
202 questions and answers: managing an accounting practice
question: some of my clients are getting older and are becoming unable to handle their own financial affairs and i have been asked if i could assist them. what is involved and how do i charge for it?
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response: many large firms provide “family office” services. this is a complete one-stop financial service that helps clients manage their money, pay their bills, collect their dividends and interest, and make sure insurance isn’t cancelled, mortgage, car lease or condo fee payments aren’t skipped, and tax payments paid on time.
following is a sample engagement letter that i use with clients needing such services. also, this letter provides a detailed description of what the service involves.
sample engagement letter for “family office” services
date
client’s name and address
re: outsourced bookkeeping services
dear ,
we are pleased to provide you with this proposal of family office outsourced bookkeeping services that we will perform for you.
outsourced bookkeeping services
we will serve as your internal family office/outsourced bookkeeping office to include the following services:
- these services will include you individually, the trusts you established where you are trustee, and your ______________________________________.
- establish a computerized accounting and bookkeeping system suitable for you. this will include a review of your accounting and bookkeeping needs and configuration of an accounting system for you using quickbooks software. we will set up the chart of accounts, prepare recurring entries and memorized transactions, and configure the program to provide the reports and information that would best serve your needs.
- periodically, you will send us your bills for checks to be prepared and sent out. ideally we will directly receive all your bills and ascertain their validity and accuracy. note that we will pay your bills without prior approval from you unless we think it is necessary. you will have an opportunity to review everything we paid once a month. at that time we could make adjustments or request adjustments from your vendors.
- we will write and mail checks for payments due by you in a timely manner. generally we will review all items due on a weekly basis and perform whatever is necessary. checks for amounts in excess of a minimum amount, e.g. $5,000, with the exception of the monthly recurring expenses, real estate taxes, income taxes and estimated tax payments will not be paid by us without your advance approval.
- we will download all credit card transactions into the accounting system.
- entering the payroll information for the household or other employees employed by you from the payroll prepared by the payroll service including recording the tax payments. we will also review the quarterly and annual payroll tax returns that will be prepared by the payroll service.
- we will review income you are supposed to receive and ascertain that it is received or deposited timely. this will include all amounts you usually receive or should receive. note: most of the collection and depositing of income receipts will be done by you with the information sent to us to record and track.
- record receipt of income and deposits and track amounts that are expected to be received.
- we will review receipts for medical expenses and prepare the necessary forms for reimbursements and follow up on their payment.
- we will maintain electronic files of the original invoices and receipts in our office.
- prepare sales and use tax returns (if applicable).
- we will prepare annual forms 1096 and 1099 information returns for submission to the taxing authorities and distribute them to independent contractors, if any, and if necessary.
- maintain insurance, financial and tax calendars to make sure critical items are timely paid.
- work with your insurance agents to make sure you have current policies.
reports provided
- we will send you by email monthly a listing of all disbursements and receipts along with copies of all invoices and bills. this will generally be sent by the end of the first week of each month.
- we will send you by email copies of all bank reconciliations monthly, usually within one week of receiving the bank statements, along with a copy of the bank statements.
- we will reconcile all brokerage and fund accounts and send copies to you. we will arrange to receive copies directly from the brokerage firms and banks as applicable.
- monthly balance sheets and income statements in the form of a trend analysis to be discussed with you via telephone every month.
- we will always have available for your review a year-to-date general ledger. we will provide it as you request. generally, we will send these to you at six-month intervals.
other services
- provide secretarial services as needed.
- arrange for temporarily investing excess cash.
- telephone calls and email messages or updates to you as necessary.
- all other bookkeeping services as the needs arise.
bank account information
- we will not use a bank account in your name. we will open a separate checking account in our name for your funds and transactions. you would send us a check for an estimated two months expenses made out to us, as trustees for you. this amount would be replenished bimonthly after the first check.
- we will not deposit any of your income into our account. rather, all income will be deposited into accounts that you control and where we are not signatories. the only exception might be the automatic deposit of monthly recurring items that are transmitted to your accounts.
software system
- we will use quickbooks and/or quicken software for these services. the versions we will use will be licensed to us and will not be billed to you, unless the software providers change their policy and require us to purchase separate software packages for use in our servicing your work (which appears unlikely). we intend to order preprinted checks and these will be billed to you. initially, we will print a limited number of checks in our office for you so that there would be no delay in getting started.
control and oversight
- all disbursements we make will be subject to the approval and other controls we have established. however, in making those disbursements, we will be relying on the accuracy and reliability of information provided. we will not audit, examine or review the information, other than to review them for reasonableness and compare them to previous transactions.
- we will electronically scan and properly store in a paperless environment all correspondence, invoices, bills and worksheets in files to be maintained in our system with the same controls, safeguards and security. these records will always be available to you immediately upon your request. if you desire, we can grant you a password to access these files from your computer at your convenience.
- we will be fully responsible for our personnel training and the timely performance of their work. we anticipate using the same people; however, on occasion we will vary the personnel so we could be assured of sufficiently trained backup personnel should it be necessary to use someone not regularly working on your records. there will be at least two additional people in our firm familiar with your system, needs and requirements.
- we anticipate that someone from our firm will be working on your bookkeeping at least once a week. the number of hours will vary based upon the services required.
- you are not hiring a person; you are engaging a firm with the levels of the expertise you will need. you will have full-time availability at part-time prices.
avoidance of duplication of efforts
- in order to avoid duplication of efforts, unnecessary costs and multiple payments for the same items we suggest that a hold be put on disbursements, checks, wire transfers and stock and security transaction orders from all your bank and brokerage accounts unless there are letters signed by you and a second person designated by you. you will no longer be writing checks and making disbursements, except to us in accordance with our agreement.
- the transfers to us would done by wire transfers directed by a letter signed by you.
- additionally, two signatures would be required to execute security and banking transactions including purchases and sales of securities.
- your present method of making charges to your credit cards will not be affected by our arrangement.
benefits to you
we run the traditional side of your bookkeeping and finances so you can work on the unique things you do, or to lessen the pressure of your handling what seems to be a steadily increasing flow of paperwork.
we not only take a burden from you, we give you time – time to do what you do best and want to do and time that frees your mind from routine repetitive functions.
we give you an immediate turnkey operation with no waiting to get started.
services not covered
please note that outsourced bookkeeping services specified in this letter will not include the audit or review of any financial statements.
please also note that our outsourced bookkeeping engagement cannot be relied upon to disclose errors, irregularities or illegal acts, including fraud or defalcations that may exist. however, we will inform you of any material errors that come to our attention and any irregularities or illegal acts that come to our attention.
fees
there is a one-time setup fee of $_________.
our fee will be $______ per hour for outsourced bookkeeping services, $______ per hour for partner review and oversight, plus a $______ per month supervisory/administrative/facility fee. after the first year, when we have a better idea of the scope of the work, we will quote a fixed fee if you so desire. additionally, we will bill you for out-of-pocket disbursements including postage and delivery services.
fees are payable as billed. we will write our check on or near the 10th of each month for the previous month’s charges. there will be an additional charge of 1.5% per month for past due amounts. also, should you hire any of our personnel it is acknowledged that we would be entitled to a $25,000 “search” fee.
you may discontinue the services from us at any time. in that event our services to you would cease immediately, or continue until such time as mutually agreed upon including the appropriate fee. we will also issue a final invoice for unbilled work within a reasonable time, thereafter.
confidentiality
professional standards preclude us from disclosing client information without your specific consent.
conclusion
we are most pleased that you are considering us for these services. please call me to discuss this proposal and any additional questions you may have. if the above meets with your approval, please sign a copy and return it to us.
cordially,
_______________________, cpa
partner
this letter correctly sets forth my understanding of your engagement:
__________________________________ ______________
signature date