An accounting contract, alongside an accounting contract template (for reference), is a must-have for all recipients and providers of accounting services.  

Whether your business is big or small, you need proper accounting. Not only do you have to keep a close eye on income and expenditure, you also have to use those details to foretell your business operations. However, not everyone has a flair for accounting. Even if you do have the bandwidth for accounting, you may be too busy running your business to have time for these tasks. 

Most businesses find it more convenient to ‘outsource’ the accounting of their business and hire an accountant. Whether you’re a business looking to hire an accountant or you’re an accountant seeking to render your services to your clients, an accounting contract will be required in the relationship. 

Here, you’ll learn all about these contracts, including what should be in them and how to write an accounting contract. We have also included an accounting contract template that you can build on to create your own agreement.  

What is an accounting contract? 

An accounting contract is a legal agreement between an accountant and the business. The accounting contract is a company document used to identify the terms of the contract. The contract specifies the: 

• Particular work to be done 

• Needs of the client 

• Rights and duties of parties to the contract 

• Scope of the services to be rendered 

• Payment terms, and so on 

You should not confuse an accounting contract with a bookkeeping contract. Both contracts are similar, but they have their differences. Bookkeeping involves identifying, recording, and measuring of the financial transactions in your business. On the other hand, accounting gives meaning to the numbers provided by bookkeeping. Accounting summarizes, interprets, and provides insights or business implications of the transactions. 

Do you really need to have an accounting contract? 

An accounting contract will be critical for businesses that require the services of an accountant, as well as to accountants seeking to render their services to clients. The contract spells out details of the business relationship and helps parties to: 

• Set expectations and understand the scope of their responsibilities 

• Determine the tenure of the relationship 

• Avoid ambiguity about necessary contractual details and reduce the risk of disagreements 

A business relationship without an accounting contract opens both parties to the risks of disagreements, difficulties in meeting payment obligations, uncertain timelines, disparities in standards of quality, and so on. 

What does an accounting contract contain? 

Accounting contracts differ based on the individual terms of the relationship. Generally, however, an ideal accounting contract should include the: 

• Date the agreement was signed 

• Names and contact information of the parties 

• Details about the accounting services to be provided 

• Payment information 

• Duration of the agreement or business relationship 

• Independence of the relationship 

• Confidentiality clause 

• Data processing obligations  

• Termination of the contract 

• Signatures of the parties 

Guide to creating an accounting contract 

It’s no use filling up the contract with vocabulary or ambiguous words. Accounting contracts should be written in simple and easy-to-understand language. Using the listed items above, here’s a guide to creating an accounting contract: 

The date of the agreement 

This is the first statement of the agreement. You should start by recording the date both parties signed (or will sign) the contract. In some cases, an agreement is prepared for accounting services to be rendered in the future. Notwithstanding this, the proper date to input is the day, month, and year the contract would be signed. 

Here’s an example: “This accounting contract is made and entered into on [insert proper date]” 

Parties to the contract 

All parties to the contract should be identified. Additionally, their mailing or contact address must also be provided. Usually, the line is drafted: … between (insert the name of the accountant) with a mailing address of (insert the address of the accountant) and (insert the name of the client) with a mailing address of (insert the address of the accountant) … 

Accounting services to be provided 

After the date and the parties’ names have been specified, the following item is the precise nature or description of the services to be rendered or provided. Such accounting may include billing and payroll records, bank reconciliations, auditing, bill payment, customized reports, preparation of ledgers, financial statements, tax returns, or other related services. 

It helps to expressly identify the nature of the contract to avoid ambiguity or disagreements over the requirements. 

Nature of business relationship 

It is also typical to include the nature of the business employment relationship in accounting contracts. This clause in accounting agreements often states that the accountant is not an employee of the business; instead, the accountant is an independent contractor with inherent rights and duties. 

Payment information and agreed compensation 

Another essential item in accounting contracts is the fees to be exchanged between the parties. This item specifies the fees to be paid to the accountant, in what form, and over what duration. The specific dollar amount to be paid on an hourly rate or a monthly basis must be recorded. 

When payment for the accounting services are lump sums or fixed amounts, the contract should also contain details on whether the sum is to be paid at once and when. If the lump sum can be paid in installments, the contract should include the agreed-upon number of installments, the dates, and how much is to be paid per installment. 

Duration of the agreement or business relationship 

The tenure or duration of the agreement is the next item to be identified. This section should include details on when the accountant is expected to work; whether the timeline is fixed or the contract will be terminated once the performance of the services required is completed. Accurate dates of the commencement and expiration of the contract should be imputed.  

Importantly also, this section should contain how the contract may be terminated. Ideally, the contract may be terminated either upon the performance of the contract, upon a specified date, or by the individual or collective decision of the parties to the agreement. The termination options agreed upon by both parties should be included. The requirement of notice is equally essential. If the contract is to be terminated by either party, how many days’ notice is required? 

Confidentiality clause 

In rendering the required services, the accountant will be privy to financial information, industry knowledge, or trade secrets of the business. Confidentiality should not be taken for granted. An accounting agreement must contain a confidentiality clause. This helps to protect the proprietary information of companies. 

Data processing obligations 

It is typical for these agreements to include a clause that outlines the responsibilities of the accountant to securely collect, process, and store the client’s data in a manner that is mutually agreed to be acceptable. Generally, the data processing obligations of the accountant will be fixed by local data protection laws. However, the parties may also introduce stricter requirements for the assurance of client privacy and the protection of sensitive data.  

Obligations surrounding data processing may be regulated within the accounting contract, or it may be provided for separately in a Data Processing Agreement which is then annexed to the contract. Learn all about how to write a data processing agreement here.  

Governing law 

The laws that govern the contract should also be included in the agreement. This helps to avoid complications in case disputes arise from the contract. Typically, this section also covers the methods of dispute resolution and the liability for losses that may be incurred. 

Signature of parties to the contract 

The last item included in accounting contracts is the signature section. This marks the intention of the parties to be bound by the terms stated in the document. The signature of the accountant, the date it was signed, and the name of the accountant must be inputted in this section. Likewise, the section must also contain the signature of the client, the date, and the name of the signee.