Engagement letter not signed, work already started: count it, then close the gap

What the signed letter does for the firm’s operations

Professional-liability risk is the usual reason given for a signed letter, and that conversation belongs to the firm’s insurer and counsel. The operational reasons get less attention, and each one costs money when the letter is missing.

The letter is the scope baseline. Without a signed list of what the fee covers, nothing is out of scope, and every extra entity, state or notice becomes a negotiation after the fact instead of a line on an addendum. The letter also carries the fee, the payment terms, the document cutoff and the extension terms — the four things a client will dispute later if they were never agreed.

It also bears on what the firm may hold back. Under 31 CFR 10.28, a practitioner must return a client’s records on request even when there is a fee dispute, and the rule’s definition of records excludes a return the firm prepared “if the practitioner is withholding such document pending the client’s performance of its contractual obligation to pay fees.” The word that matters is contractual. Whether an unsigned letter, an email thread or a course of dealing creates that obligation is a question for the firm’s attorney.

Speed is not a reason to skip the signature. Under 15 U.S.C. 7001(a), a contract “may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.” An e-signature request in the same message as the portal invite costs the client one click. Whether a particular e-signature process meets every requirement in the firm’s state is, again, counsel’s call. Not legal advice.

Count the jobs that started before the signature

Getting letters signed before work begins is standard advice in engagement-letter templates and risk guides. What a template cannot hand the firm is its own count. The records exist in the practice-management system, the e-signature tool and billing. Build one row per engagement from last season, with client IDs instead of names:

• Client ID and service — individual return, partnership, S corporation, bookkeeping, a notice response.
• Letter sent date, from the e-signature or proposal tool.
• Letter signed date, or a blank.
• First work date — the first document upload, or the day the job first left “waiting on client.”
• Delivered date — return sent for signature or filed, or the first monthly close.
• Invoice date and paid date, from billing.
• The gap: first work date minus signed date, in days. A positive number means work started first; a blank signed date means it never stopped.

Illustrative example: a firm runs 400 engagements in a season. Sixty started before the letter was signed, fifteen were never signed at all, and five of those fifteen are still unpaid at a hypothetical $1,500 each — $7,500 of finished work resting on terms nobody agreed to. Replace every number with the firm’s own. If the export cannot produce a signed date for a job, that blank is the first finding.

A four-part rule for the next season

The fix the count points to is a gate, not more reminders. Reminders without a gate let documents keep pulling work forward. The rule below fits on one page and can be set up in the practice-management system the firm already pays for:

• Renewal letters go out on one fixed date before the documents can start arriving, with the year’s fee and the payment or deposit link in the same message. For calendar-year individual clients, that means before W-2s and Forms 1099, which IRS Publication 509 has businesses furnish to recipients by February 2, 2026.
• No portal invite, organizer or job start without a signed letter. Make it a status: the job cannot leave “awaiting engagement” until the signed-date field is filled. Exceptions need a partner’s name and a reason code, so they are visible.
• Mid-year work gets a short addendum before it starts — a notice response, a new entity, a new state, a cleanup. One page, signed electronically, with the price or the rate method on it.
• One named owner, an administrator or client-service lead rather than a preparer, runs a weekly unsigned list. Illustrative example of a written chase schedule: an email on day three, a call on day seven, a partner email on day fourteen, a close-out review on day twenty-one. The exact days are the firm’s choice; what matters is that they exist before the first letter goes unanswered.

October to January is when firms set next year’s letters and fees. A gate set up now is in place before the first upload of the new season.

When the client stays silent: a close-out, not another reminder

A client who has run the whole chase schedule without signing needs an ending, for the firm’s sake as much as the client’s. Operationally, that means a date on which the firm decides, in writing, whether it is engaged for the year. If it is not, a short letter says so, lists what the firm holds, and notes that tax deadlines may still apply to the client. The wording belongs to the firm’s counsel and insurer.

Client documents go back on request. 31 CFR 10.28(a) requires a practitioner to “promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations,” and lets the firm keep copies. A firm that holds uploaded documents for a client it never engaged has no reason to hold them longer.

The hard case is the unsigned client with a deadline close — documents uploaded, letter unsigned, April or October two weeks away. Whether to file an extension, prepare the return or decline is the partner’s judgment. The operational rule is only that the decision is written down and dated by a named person, not made by default by whoever opens the file next.

When not to hire anyone for this

If the count turns up a handful of unsigned jobs, nobody needs a consultant. Set the status gate, send the addenda, name the owner of the weekly list, and recount in a month. A practice-management vendor’s support team may be able to help build the gate. A solo practitioner who personally opens every file and checks the letter first already runs the system this guide describes.

If the count is large, or the records cannot produce the dates at all, the Revenue Review takes two weeks. It reads counts, dates and stages from the firm’s own practice-management, e-signature and billing exports, with client IDs rather than names: no returns, no workpapers, no client tax information. The written report prices each leak and sets out a 90-day plan; any build afterward is scoped and priced separately.

Lumina is not a CPA firm and gives no tax, legal or ethics advice. Below about $1 million a year in fees, the Review’s price does not fit the arithmetic, and the free 20-minute call says so plainly.