Fixed-fee tax work needs a stop point

You quoted the company return in March. In April, the client sends a folder called Ready for tax. Inside are the accounts, a bank export, and an email explaining that the last bookkeeper left in November. By Wednesday your senior has rebuilt two months of transactions. By Thursday someone has found another bank account. The fee in the engagement letter has remained impressively still.

Fixed-fee tax work needs a point at which the team stops and checks what was actually agreed. Put that point before the clean-up begins. Once the work is finished, a discussion about scope becomes a discussion about an invoice the client did not expect.

My preference is to make the starting condition of the records part of the quote, then give the preparer a practical way to flag a change. That leaves room for a fair fixed fee, ordinary questions and proper review, without treating every untidy folder as an unlimited reconstruction job.

Inspect the starting point before pricing the finish

“Bookkeeping is up to date” can mean the bank feed has no unmatched items. It can also mean the client opened the software yesterday. Neither tells you whether the closing balances are supported or the prior-year adjustments made it into the ledger.

For a business return, a useful intake review might cover the following. This is a suggested scoping check, not a complete tax review:

Check before quoting	What it helps you establish
Which entity, which income year and which deliverables?	Whether the request is one return, accounts and a return, or work across a group
Latest trial balance and ledger, with export dates	The state of the books the fee is based on
Bank and loan accounts, with the last supported reconciliations	Whether there is a defined starting balance and an identifiable backlog
Prior-year accounts, return and adjustment journals	Whether opening balances and carry-forwards can be checked
Changes during the year	Whether a sale, new activity, restructure or additional entity needs separate attention
Who maintains the books, and what remains unfinished?	Who can answer a query and who is expected to correct the records

You do not need to complete the job to quote it. You do need to distinguish something you inspected from something the client told you. A scoping note that says “June reconciliation supplied; earlier months not checked” is more useful than a confident tick beside “records complete”.

If the opening position cannot yet be established, offer a separately agreed diagnostic stage. Give that stage a deliverable: a record of the gaps, the reconstruction needed, who will do it, and a basis for the next quote. “We'll have a look and let you know” is easy to approve and remarkably hard to price.

Put the records assumption beside the fee

The TPB's guidance on letters of engagement recommends a written agreement before services start. It suggests covering the client entities, work to be done, client information obligations and how fees are calculated. It also makes clear that having a letter does not, by itself, establish compliance with the Code.

The practical question is what your particular letter says about this particular file.

For example, a plain-language scope summary could distinguish preparing the current-year accounts and return from reconstructing an unreconciled earlier period. It could identify the ledger export on which the quote relies and name the bookkeeper who will resolve the gaps. It should also say what happens if that starting point changes.

Avoid “all records must be satisfactory”. Satisfactory to whom, and when will anyone find out? Name the missing thing: bank statements covering the period, the loan closing balance, or the prior-year adjustments. You can link to a dated records list rather than squeezing every filename into the letter.

Keep ordinary preparation and review inside the agreed service. Asking what a payment was for does not automatically create a second engagement. Nor should a firm charge extra merely because its own initial estimate was optimistic. The distinction to make is between doing the agreed job and being asked to do additional work that was excluded or was not contemplated in the agreed scope.

Give the preparer a stop point they can use

Do that when the difference becomes clear. A senior should not have to spend an afternoon proving how long a reconstruction will take before they are allowed to mention that it exists.

I would use three questions:

1. What has changed from the recorded starting point? For example, the supplied June ledger contains an account absent from the records list.
2. What additional work follows? Obtain that account's statements, establish its opening position, and determine which transactions are missing from the books.
3. Who decides the next step? Name the engagement owner, with the affected delivery date visible.

Do not turn the answer into “stop the whole file” by default. Record which work can continue, which part depends on the missing information, and whether any deadline needs immediate attention. Pausing a reconstruction does not make an existing deadline disappear.

A team's rule might be: do enough to identify the issue, then refer it before rebuilding the account. Choose the trigger around the nature of the task. A blanket rule to escalate after a fixed number of minutes can discourage a sensible check while letting an obvious change proceed until the clock runs out.

The useful sentence is “this account was outside the records we priced, and here is what dealing with it involves”. “This client is a nightmare” may be sincere. It is not a scoping note.

Agree the next job while the client still has a choice

The options might be for the client's bookkeeper to correct the ledger, for your practice to undertake a separately priced clean-up, or for you to assess the problem further under a limited diagnostic engagement. Present only options that are workable for that file and its deadlines.

Here is an illustrative message about a hypothetical scope change, not a contract clause:

Our preparation quote assumed the supplied ledger included all business bank accounts. The new statement shows an additional account with transactions that are not in that ledger. We need those records brought in and checked before we can finish the accounts. Your bookkeeper could do that and send us the corrected file, or we can quote for the reconstruction. Please confirm which route you prefer so we can agree the work, fee and revised delivery timing before proceeding.

That message names the assumption, the new evidence and the decision. It does not blame the client for failing to understand your internal workflow.

Keep the agreed change with the original scope: what was added, who accepted it, the fee basis and any new dates. Where an existing agreement needs changing, use the firm's established engagement process. The TPB's detailed engagement guidance recommends regular review of ongoing arrangements, preferably annually, and identifies changed scope or misunderstood terms as circumstances in which it would generally expect a new agreement.

Do not let a verbal “yes, go ahead” become a memory only one person holds. Confirm the details in writing before the file returns to the preparer.

Separate a changed job from your own overrun

Consider this hypothetical internal review. These are illustrative hours, not a market benchmark or a recommended allowance:

Work on the file	Hours
Preparation and review originally budgeted	4.0
Actual preparation and review within that scope	4.5
Separately agreed reconstruction of the additional account	2.5
Total actual time	7.0

The original-scope overrun is 4.5 − 4.0 = 0.5 hours. The additional work is 2.5 hours. Together they explain the 3.0-hour difference between the original budget and the total actual time. Calling all three hours “scope creep” would hide the part of the estimate the practice got wrong.

Time is useful here as an internal diagnostic, even when it does not determine the client's fee. Compare like with like: preparation with preparation, additional reconstruction with additional reconstruction, review with review. Otherwise a faster preparer appears to have solved a pricing problem that is still waiting on the partner's desk.

Choose what the firm will absorb deliberately. A small extra task may be worth including for a longstanding client. Record that decision as a concession and its extent, rather than quietly adding it to the permanent meaning of “annual compliance”. Next year's preparer should not have to infer the commercial arrangement from this year's write-off.

Make the revised scope travel with the file

A useful record contains:

• The entities, period and deliverables covered by the current agreement.
• The source records inspected when quoting, and any assumptions left unverified.
• Who is responsible for correcting the books and supplying missing information.
• The new finding, with a reference to the document that established it.
• The agreed response, fee basis, authorisation and effect on delivery dates.
• Work still waiting on a decision, with an owner and a next action.

This is where the document chase and the commercial conversation meet. A missing file needs a specific request. A missing year of bookkeeping needs a decision about who will reconstruct it. Putting both into the same “waiting on client” status conceals the difference from the person planning the week.

At review, check that the extra work agreed with the client has actually reached the working paper. Agreement to reconstruct the account is not evidence that the reconstruction is complete. The normal bank reconciliation checks still apply.

Test software against the difficult part of the job

Use a file with a known gap. Can the team see what is missing? Can a reviewer trace a changed balance back to its source? Does the unresolved question remain visible when a new version arrives? These are concrete acceptance tests you can apply to any AI tax software, including ours.

BeforeMay's working paper templates provide a starting point for examining the schedules. Judge whatever tool you choose on the whole assignment: intake, preparation, questions, corrections and review. A saving in one step is useful; it does not establish the economics of all the others.

Then open the next file marked Ready for tax and compare its contents with the quote. If the job has changed, have the conversation while there is still a decision to make.