Bookkeeping Contracts: Everything You Need to Know
Bookkeeping contracts are also known as accounting contracts, bookkeeping contract agreements, bookkeeping agreements, or bookkeeping services contracts. This agreement is between a company or client and the bookkeeper who will offer the bookkeeping services.3 min read
Bookkeeping contracts are also known as accounting contracts, bookkeeping contract agreements, bookkeeping agreements, or bookkeeping services contracts. This agreement is between a company or client and the bookkeeper who will offer the bookkeeping services. A contract is important because it protects your legal rights and clearly outlines both parties' responsibilities.
You should use a bookkeeping contract under the following conditions:
- If you represent an accounting firm that is going to handle a new client's bookkeeping activities and would like each party's responsibilities to be clearly defined.
- If you are a bookkeeper taking on a new client and want to have a contract set up prior to providing accounting and bookkeeping services.
- If you want to hire an accountant to control your accounting activities and would like a written agreement defining the scope of their services.
- If you are a business owner and are looking to hire an accountant, accounting firm, or bookkeeper to handle specific aspects of your business finances.
Contents of a Bookkeeping Contract
A bookkeeping contract spells out the services that the bookkeeper (accountant or accounting firm) will perform and their payment plan. These services may include journal entries, full reporting, and monthly financials. It also describes the liabilities and responsibilities of each party. An accountant may be responsible for only individual taxes or for maintaining all bookkeeping, corporate financials, and taxes on a business. The contract should also include:
- The accounting firm or accountant's name and address
- The client's name and address
- The accountant's license information
- The date of commencement of the agreement and an indication of how long it is going to take
- The services offered by the accountant to the client
- Services that the bookkeeper will not provide
- Pricing of the services and payment plan
- Steps on the dissolution of the agreement
- State laws that govern the agreement
Deciding Whether to Use a Contract
Small business owners avoid getting into contracts because of horror stories of businesses who signed a contract and regretted it. Requesting a contract may kill the deal by jeopardizing the potential client relationship. However, a service contract primarily formalizes your verbal agreement with the client but that can as well be accomplished with an engagement letter.
An engagement letter is a one-page letter that lists all of the bookkeeper's services and fees. If the agreement outlined in the letter falls through, the greatest potential loss that you would incur is only one month's billing since you will essentially pick up the setup fee before you begin any work. You would then demand payment upon delivery of financial statements from your client. The contract is therefore not necessary for payment purposes.
The client has a right to refuse to pay for your work if they are not satisfied whether you have a contract or not. You are taking all the risk since you guaranteed their satisfaction. However, in some situations, a client may make a request for a contract for their own peace of mind, legal reasons, or for their own personal records.
It's recommended that you acquire the services of a licensed attorney to review the details of your contract to ensure that it contains all the legal requirements for the area you conduct your business in.
The accountant swears to perform all their listed services as per the high standards clearly stated by the National Tax Preparers' Association and the National Association of Accountants.
Material and Data Access
The accountant is provided with a full access to the client's financial records and accounts. The accuracy of the existing financial records is the full responsibility of the client.
The bookkeeping contract comes into effect on the created date and proceeds on a month to month basis. It is ended by a cancellation by either party.
The accountant is engaged as an independent contractor as per the agreement of the client. The accountant shall therefore not be considered an agent of the client, a broker or an employee.
Every 30 calendar days, the client shall receive an itemized invoice from the accountant for the services rendered. The client shall pay the invoice in full within 30 days of receipt.
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