The question of why I started Engage is really three questions: what is the problem; why Engage solves the problem; and why I decided to start the company and build the app.
This is the second in a six-part series. Part I explains how engagement letters can improve a CPA’s practice and protect his or her interests. On one hand, they can improve client relationships, increase retention and increase profitability; while on the other, they are the easiest and most direct way to avoid or resolve client disputes. Regardless of the benefits, still less than half of the CPAs use engagement letters.
In Using Engagement Letters in my Practice, I describe how I was disciplined in using engagement letters for all my tax projects, going so far as to detail separate letters for different projects with the same client. Creating and managing these letters was a persistent pain point and led to my thinking about possible solutions.
Part II, below, describes what we built and how Engage improves small and solo CPA practices by automatically creating digitally signed engagement letters with integrated advance fee payments. See our explainer video for a demonstration.
Part II: The Solution
I have the benefit of being both an accountant and a lawyer. Accountants do some things that lawyers don’t, like using compliance checklists; and unlike accountants, lawyers collect advance fee deposits and use automated document drafting software.
It seemed like I could create a check-the-box and fill-in-the-blank software program that would allow accountants to automatically publish engagement letters for their clients.
So I did.
My first ‘prototype’ was written using Microsoft Excel and MS Word. I used a spreadsheet with if/then logic to make a virtual flowchart. The client information, details and check-the-box options assembled the appropriate contract language into a rough draft. The spreadsheet draft was then exported into a Microsoft Word document using mail merge functions, polished up and saved as a pdf engagement letter for my client.
This was the basic structure that evolved into Engage for CPAs. The app is designed to remove the obstacles and pain points that most small CPA firms encounter when using engagement letters in their practices.
Painless drafting: Engage uses basic information about the client and the engagement to automatically create an engagement letter for professional services. The automation of routine admin tasks reduces non-billable time and increases time for billable work, especially during tax season when you need it most.
Easy execution: Once the letter is created, the accountant sends the letter to the client though Engage; the client confirms their identity and checks a box to digitally sign the letter. If it is required by the accountant, the client also enters credit card information and authorizes an advance fee processed by Stripe, a third-party payment service. The accountant receives a notice through the app that the engagement has been signed.
Effortless compliance: The engagement letters are written by experienced tax attorneys and reviewed by legal experts. This ensures continued compliance with the rules of practice and makes sure the engagement letters are current with state laws.
Status tracking: Open client engagements are displayed in the dashboard and classified by the status of the engagement letter. When the client signs the letter and pays the advance fee, the engagement is ‘active’ until the accountant completes the work and closes the engagement. The accountant can easily assess practice workflow by reading visual markers that show where each project stands.
Increased cash-flow: Accountants can use Engage to set an advance fee deposit for services. This could be a nominal amount to cover the administrative costs of opening a new engagement; a percentage of the estimated total fees; or even the entire estimated fee in advance (e.g. based on the prior years’ fee for similar services). Collecting some or all the fee in advance reduces accounts receivable, reduces credit risk and increases cash-flow.
Client on-boarding: The engagement letter clearly communicates the terms of service as well as the policies and procedures of the accountant’s practice. Automatic engagement letters mean that prospective clients can be signed up within minutes. It also means that some potential clients are eliminated quickly, before non-billable time is spent on a dead-end prospect.
The original concept for Engage was to build an automated drafting system that accountants could use in their practices. Our first concern was compliance with the rules of practice, basic information security and creating effective legal agreements under state law. Based on user feedback, we added status tracking features and the integrated payment function for advance fee deposits.
The current version of the app is a simple, sophisticated solution to a common pain point that also improves a CPA’s practice and strengthens accountant-client relationships.