Of all the variables involved in the client/tax advisor relationship, one of the seemingly simplest, yet surprisingly time-consuming, is the creation and management of engagement letters. These key documents, which lay the groundwork for the client-advisor relationship, often serve as a bottleneck in the onboarding process, delaying tax work and frustrating both firms and their clients.
This article will look at how the engagement letter process can be automated, the wider benefits that this automation offers tax advisors and their clients, and how platforms like Harness can help the process.
Table of Contents
- What are the challenges in the traditional tax engagement letter process?
- How automated engagement letters simplify client onboarding
- How Harness can help
Key takeaways
- Traditional engagement letter processes are time-consuming, prone to errors, and delay client onboarding, impacting a firm’s profitability.
- Automated systems use templates and pre-population to drastically reduce drafting time and minimize errors.
- Faster turnaround times improve client satisfaction, while intelligent allocation optimizes team efficiency.
- Automated systems centralize information, improve client collaboration via portals, and boost data security and regulatory adherence.
What are the challenges in the traditional tax engagement letter process?
The conventional way in which tax engagement letters are generated and managed is anything but efficient. It’s a manual, often arduous task that can consume hours, or even days, of a tax advisor’s time. A number of issues contribute to this inefficiency:
Finding the right template: The first hurdle often involves sifting through a collection of digital folders or physical archives to locate the correct engagement letter template. Tax advisors need to be sure the template is the most up-to-date version and includes all the necessary clauses for a specific client type or service.
Information retrieval: Once a template is found, the next step is populating it with client-specific data. This often means logging into various systems, pulling data from disparate sources, and manually inputting names, addresses, service details, and fee structures. As well as being time-consuming, the potential for errors during this part of the process is significant.
Drafting and customization: Even with a template, many engagement letters require customization based on the specific needs of each client. This might involve adding specialist scopes of work, outlining complex fee arrangements, or incorporating disclaimers. This bespoke tailoring, while necessary, adds to the time involved.
Reviewing the document: Once drafted, an engagement letter typically enters a review cycle. This often involves multiple stakeholders—senior partners, legal counsel, or even other tax advisors—scrutinizing the document for accuracy, compliance, and completeness. This back-and-forth can be a major source of delays, especially if reviewers are busy or working in multiple locations.
Sending for signature: After all internal approvals are secured, the letter must be sent to the client for their signature. This might involve printing, mailing, emailing, or using a separate e-signature platform. Then begins the waiting game, as firms wait for clients to review, sign, and return the document. For many tax practices, simply chasing up unsigned letters can be a major task on its own.
Client returns and follow-ups: When the signed letter finally returns, it needs to be properly filed and recorded before the client onboarding process can truly begin. However, any issues or questions from the client during their review can result in further delays and additional administrative work.
The manual, time-consuming nature of this traditional approach to engagement letters can turn what should be a relatively straightforward technicality into a drain on a firm’s resources. While this drain may not serve as any kind of existential threat to a tax firm, it’s an unnecessary cost—one that can severely impact a firm’s profitability if the firm is taking on a number of new clients.
How automated engagement letters simplify client onboarding
Fortunately for tax advisors, the challenges of the traditional engagement letter process are no longer insurmountable. Modern automated platforms are turning this once laborious administrative burden into an efficient, client-centric experience. Automated platforms achieve this in a number of ways:
A reduction in manual involvement
One of the most immediate and impactful benefits of automation is the removal of the search for correct templates. Automated systems centralize and standardize your engagement letter templates, making sure that the most current and compliant versions are always readily available.
Tax firms can use these standardized templates, pre-populated with common clauses and fields, significantly reducing time spent drafting documents from scratch. This consistency not only saves considerable time in setting up initial project plans for each client but minimizes the risk of human error, resulting in more accurate and legally sound agreements.
Faster turnaround and optimized resource allocation
Speed and efficiency are major selling points for tax advisors, especially when it comes to high-income clients. Automation dramatically accelerates the creation, review, and approval of engagement letters, meaning they can be sent for e-signature and returned within minutes, as opposed to days. This expedited process allows clients to gain access to tax services sooner, which can be a major plus when it comes to client satisfaction.
Beyond speed, automation tools offer sophisticated capabilities for optimizing resource allocation. Integrating with your firm’s project management or CRM systems, these tools can help allocate the right team members to tasks based on their availability, specific skills, and relevant experience. This intelligent allocation makes sure each client receives the highest quality of service from the most qualified advisor, ultimately improving the firm’s overall efficiency.
More effective communication and collaboration
Miscommunication and fragmented information are common pitfalls in traditional engagement letter processes. Automated systems act as a central hub, ensuring that all team members involved in the client onboarding process have access to the most current information related to engagement letters. This reduces miscommunication and duplicated efforts, keeping everyone working from the same, up-to-date document.
What’s more, many automated solutions incorporate secure client portals. These portals streamline client interaction and project reviews, allowing for smooth communication, document sharing, and real-time status updates. Clients can easily access their engagement letters, review them at their convenience, and provide necessary information or signatures without the need for endless email exchanges or phone calls.
Improved consistency and reliability
Consistency in quality of service is one of the hallmarks of a sought-after tax practice, and automation helps deliver that. Standardizing key tasks and workflows associated with engagement letters, automated systems guarantee that every client receives a consistent, high-quality onboarding experience. From the initial outreach to the final signed agreement, each step is systematically executed, reducing variations and maintaining a predictable process.
This consistency not only contributes to a more professional and reliable image for your firm but also makes it significantly easier to identify and resolve any issues that may arise. When processes are standardized, deviations become apparent, allowing for quick analysis and corrective action—and a smoother and more reliable journey for the client.
Heightened data security and compliance automation
Arguably, the most important advantage that automated engagement letters offer is improved data security. Traditional, paper-based, or email-heavy engagement letter processes can expose firms to major security risks. Automated systems are designed with powerful security protocols in mind. They can enforce key measures such as data encryption, secure cloud storage, and granular access controls, reducing the risk of data breaches and unauthorized access.
Moreover, automation helps maintain compliance with relevant industry regulations by standardizing data collection, storage, and handling procedures within the onboarding process. Audit trails within automated systems provide a clear record of all actions, facilitating compliance audits and demonstrating due diligence.
How Harness can help
To deliver the most effective client services, tax advisors should concentrate on what their job title implies—advising on tax—not handling administration. To help tax advisors achieve this, Harness has developed a platform specifically designed to streamline behind-the-scenes processes like engagement letters for tax practitioners.
Combining advanced software with dedicated human support, we help tax advisors improve operational efficiency across the board. Our client portal, for instance, reduces back-and-forth communication during the onboarding process, with our AI-powered data extraction and import functionality accurately pulling data from client documents directly into your tax preparation software.
When you add our dedicated concierge team to the equation—a team that handles client questions and administrative tasks—we provide a support system that allows tax advisors to concentrate on their clients and improve their firm’s growth prospects. Get started with Harness and improve the efficiency of your tax practice today.
Disclaimer:
Tax-related products and services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. Registration does not imply a certain level of skill or training. This article should not be considered tax or legal advice and is provided for informational purposes only. Please consult a tax and/or legal professional for advice specific to your individual circumstances. This article is a product of Harness Tax LLC.
Content was prepared by a third-party provider and not the adviser. Content should not be regarded as a complete analysis of the subjects discussed. Although we believe the content is reliable, it is not guaranteed as to accuracy and does not purport to be complete nor is it intended to be the primary basis for financial or tax decisions.