Guy Pearson for BoxFree IT writes: Like many others in the cloud accounting world, I’ve been watching the Oscar De Vries case – a dispute between a business and an accountant over unpaid fees – very closely. As we share offices with the firm Interactive Accounting, I’ve overheard the concerns of new clients about data ownership, a central concern that emerged from the De Vries saga.
Truth be told, though, many of these concerns can be handled by contracts and agreements. The accountant and client must agree on the answers to the following questions before they can begin working together.
- Who owns what? (subscription, data, accountant’s work)
- How do we deal with disputes?
- How much am I paying for services?
In the De Vries case these questions hadn’t been resolved before the accountant started the work.
For example, De Vries spoke about a “$20k mistake” in moving his accounting data from MYOB to Xero. I know that the “$20k” was not just for the conversion. There would also be a large inventory setup (as required for a products company such as his) that was not mentioned in the article.
There was clearly a miscommunication and lack of documentation about the price, the method of dispute resolution and what was delivered. This is exactly why engagement letters are so important.
One of the reasons I set about creating Practice Ignition was a firm belief that agreed fees are the future of the accounting profession. This methodology would enable a clear scope, price and rights for both accountants and their clients. Why?
I hated dealing with debtor issues and arguments around price variances in my former career as an accountant.
Now, it’s not to say that a dispute will never arise for a firm that follows this methodology. But if executed correctly you will have a full legal audit trail. This significantly reduces the likelihood of miscommunication between accountant and client.
Best Practice for Client Engagement
Every firm should review their letters of engagement to make sure they never find themselves in the newspaper over a bad debt gone public. Here are some tips to follow best practice and minimise disputes.
- Have a custom engagement letter for each type of engagement (systems, accounting, bookkeeping etc.) that spells out your policy for privacy, ownership of data and terms of doing business.
- When you implement new software, make sure you have a set price and timeframe. That way you avoid a cost blow-out and both parties are aware of the dollars changing hands.
- Outline the exact scope of engagement. Don’t just say “set up of inventory system”.
- Make sure the client signs off on the terms before you start and there’s an audit trail of comments, edits, alterations so it will stand up in court.
- Get your engagement letters in a central hub for when the ICAA, CPA, IPA or other professional association comes to see you – or in the event you need to claim against professional indemnity insurance (heaven forbid). You need to have it ready to stay compliant.
- Don’t just use the standard. Start with the standard from your professional body and then overlay it with your language and have it checked off by your lawyer so it’s a binding contract.
Just do them. It’s a contract. It’s good business and it will protect you as much as it will protect your clients. Here are the full requirements as set out by the Accounting Professional and Ethical Standards Board.
Advice for Clients
What would you advise your clients to do? Read the contract. Check it with their lawyer. Make sure there’s no risk and perhaps get a reference from the accountant. In the event it all goes pear shaped, you are protected and know how to resolve any conflicts.
Don’t you think it’s time we did the same?
Surely in De Vries’ scenario there were no dispute resolution clauses so a stalemate existed which went public. In my opinion, ownership of the subscription is irrelevant as long as you’re guarded by your engagement letter or contract.
Guy Pearson is the CEO of Practice Ignition, an app that helps onboard clients, assign tasks and reduce debtors in accounting practices.
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