Last updated November 6, 2026
Rules and figures from other sources checked on November 6, 2026. They change, so confirm with the source before you rely on them.
General information, not tax or legal advice. The rules depend on your country and your situation, so check anything with a tax or legal consequence with your accountant.
The fees section of an accountant's engagement letter states how the fee is calculated, what it covers, what costs extra, when it is invoiced and paid, and how it can change. Write it so a client can predict every invoice from the letter, because fee disputes tend to start where the letter went quiet.
What should the fees section of an engagement letter say?
The fees section of an engagement letter should answer seven questions, all of which the client will eventually ask.
| The client's question | What the clause does | Without it |
|---|---|---|
| How is the fee worked out? | States fixed, hourly or a mix, with the figures | The first invoice is the first they hear of it |
| What does it cover? | Points to the schedule of services, by name | "I thought the tax return was included" |
| What is it based on? | States volumes, deadlines and the state of the records | You absorb the extra work as the client grows |
| What costs extra? | Gives the rate and promises to ask first | An argument over every extra line |
| When do I pay? | Sets invoice dates, payment terms and late-payment terms | Slow payment, with nothing to point to |
| What about expenses and VAT? | Separates expenses, disbursements and VAT | Confusion on the first recharge |
| Can it change, and can I leave? | Sets the fee review, the notice and what's owed on exit | A surprise rate rise, and an unpaid final balance |
Some of this is a professional requirement as well as good practice. ICAEW's fee information helpsheet sets out what its Code of Ethics asks of members: explain the basis on which fees will be calculated, give an estimated initial fee where applicable, and provide fee quotes or the basis of fees in writing, normally in the engagement letter. It also says a firm should make it clear when an estimate isn't a fixed fee. Other bodies have their own codes, so check yours.
In the EU, Article 22 of the Services Directive points the same way. A provider must make a pre-determined price available. Where the price isn't pre-determined, the provider must on request give the price, a method of calculating it that the client can check, or a sufficiently detailed estimate.
Fee clauses you can copy
These are starting points with invented figures. Check them against your own body's model wording, such as ICAEW's engagement letters helpsheet, and against what your professional indemnity insurer expects.
Fixed fee:
Our fee for the services in Schedule 1 is €3,060 a year plus VAT, invoiced at €255 a month on the first working day of each month, for the twelve months from 1 January 2027.
What the fee assumes:
The fee assumes up to 80 transactions a month, complete records by the 10th of the following month, and one set of annual accounts. If any of these changes, we will tell you before charging anything further.
Work outside the scope:
Work outside Schedule 1 is charged at €85 an hour plus VAT, or at a fixed price we agree first. We will not start chargeable extra work without your agreement in writing, and an email is enough.
An estimate:
This figure is an estimate and not a fixed fee. If we expect to exceed it, we will tell you first, explain why and give you a revised figure.
Expenses and disbursements:
We recharge expenses at cost, plus VAT where it applies. Amounts we pay on your behalf, such as filing fees, are shown separately on the invoice at the exact amount paid.
Payment:
Invoices are payable within 14 days of their date. On overdue amounts we may charge interest as the law allows, and we may pause work after giving you 7 days' written notice.
Fee review:
We review fees each January and give you 30 days' written notice of any change. If you don't accept the change, you may end this engagement by written notice before it takes effect.
Ending part-way through:
If this engagement ends before the end of the year, we will charge for the work done to that date at the prices in this letter, less what you have paid, and refund any excess.
If the letter says nothing about late payment, the law may still help with business clients. In the EU, the Late Payment Directive sets statutory interest at the reference rate plus at least eight percentage points, with at least €40 for recovery costs. In the UK, statutory interest is 8% plus the Bank of England base rate. The guide to charging a late fee goes further, and payment terms examples will help you pick the number of days.
Why does a spread fee need an exit clause?
A fee spread evenly over a year stops matching the work the moment a client leaves part-way through, which is why the last clause above matters. Annual fees include lumpy jobs, such as year-end accounts, and the monthly figure smooths them out.
Here's an invented example. A practice charges €180 a month for bookkeeping and €900 for year-end accounts: €3,060 a year, billed at €255 a month. The client leaves after seven months, having paid €1,785.
| When the client leaves | Paid | Work done | Result |
|---|---|---|---|
| Year-end accounts already finished | €1,785 | €1,260 + €900 = €2,160 | Client owes €375 |
| Year-end accounts not started | €1,785 | €1,260 | You owe €525 |
Without the clause you are arguing over €375 with nothing to point to, or a client is asking for €525 back and you have no agreed way to work it out. ICAEW's helpsheet makes a related point about standing orders: clients may assume the payments cover everything, so be clear about the terms and be ready to reconcile fees to payments.
Where do fee clauses go wrong?
Fee clauses usually go wrong by being vague at the exact point the client needs a number.
- "Based on time spent", with no rate. ICAEW treats time records as a management tool and says they aren't on their own a justification for a fee. Give the client the rate or a method they can check.
- "Fixed fee" with no limits. Without stated volumes, a client who doubles in size can reasonably expect the same price.
- An estimate with no trigger. Say you will warn them before exceeding it. ICAEW also expects an explanation of any excess and how it was calculated.
- Silence on late records. If records arrive three weeks after the deadline, who pays for the rush?
- No review clause. You then need the client's agreement for every increase, and a rate increase letter has much less to stand on.
How do you change fees without reissuing the whole letter?
Change fees without reissuing the whole letter by keeping the figures in a separate fee schedule that the letter refers to. The main letter then covers the terms, and the schedule covers the current services and prices. A new schedule, with a date and the notice the letter promised, replaces the old one.
Reissue the whole letter when the type of work or the terms change. Keep every dated version, because a later fee query turns on which schedule applied that month. How to arrive at the price in the first place is covered in fixed fee accounting.
Turning an engagement letter's fees into invoices in ERPFlow
ERPFlow doesn't write or sign engagement letters. It has no letter templates and no electronic signature. It handles what comes after the fee is agreed, for accounting and bookkeeping practices and anyone else billing this way.
- Keep the signed letter: attach the file to the customer's record, so the agreed terms sit beside their invoices.
- Set the price list: add each fee in your schedule as a service with its price, so the invoice line matches the schedule.
- Send a fee proposal if you use one: a quote has line items and VAT, goes out as a PDF and converts to an invoice. You mark it accepted by hand.
- Bill the monthly fee: a recurring invoice issues it each month, emailed or left as a draft. It bills and never collects, so payments go in by hand.
- Bill extras: add them to a draft as their own line, with the agreement in the description.
ERPFlow doesn't compare what you've billed against an estimate or warn you before you pass one. That check stays with you.