Small Business, Big Numbers
An Accountant's Guide to Landing and Keeping Small Business Clients

Chapter 3: How to Avoid Lawsuits from Small Business Clients
Part 2: The Role of Documentation in Limiting Lawsuits

Business sometimes relies on a promise and a handshake, but if your agreements aren't in writing, you leave your firm wide open to messy disputes and potential lawsuits. Documentation can help iron out disagreements and foster communication at the same time. Plus, using contracts makes you look prepared and professional.

For starters, always outline your scope of services in your retention letter. Remember: if it's not in writing, it didn't happen. (For additional advice, see The Savvy CPA's guide to drafting an engagement letter New browser window icon..)

Icon - Sheet of paper.

Always include a "scope of services" clause in your retention letters.

When communicating with a client about your services or business matters, document, save, and file…

  • Phone calls.
  • Face-to-face discussions.
  • Emails and letters.
  • Any other important decisions.

If you agree to something over the phone, send a follow-up email to create a written record. Write a memo after a conversation, date it, and file it away. In the event of a lawsuit, this evidence will be invaluable support for your case.

If, for example, you find a problem in the numbers and notify the client, you'll have evidence of your recommendations and whether or not the client chose to follow them. Enough written evidence to support your case may dissuade an upset client from even considering a lawsuit. (If a lawsuit is underway, know that your evidence will be important during the discovery process.)

Next: Part 3: Quality Control: The Importance of Double-Checking Your Work

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