An Accounting Retainer Agreement is a contract in which a client pays a fee in advance for professional accounting services. An accounting retainer may be paid upfront for the full scope of services, such as tax preparation.
Alternatively, the accountant may remain on a periodic retainer schedule with weekly, monthly, or other periodic payments exchanged for ongoing services.
When to Use
What is a Retainer in Accounting?
A retainer in accounting is the client’s advance payment for professional accounting services. The retainer ensures prompt, regular payment for the accountant while providing clients with a specific budgeted amount for accounting services.
Unlike a standard service agreement, a retainer agreement relies on advance payment for future services. Accountants may also use a consulting agreement or independent contractor agreement for independent accounting services.
What to Include
Every accounting retainer agreement differs depending on the client, industry, services, and location. Most retainer agreements for accounting services incorporate the following elements:
- Name, address, and title of the accountant, client, and their respective companies
- Agreement date
- Scope of accounting services
- Retainer fee amount, including hourly or flat rate designation
- Retainer replenishment terms
- Contract term, including start and end date, if applicable
- Termination terms
- Confidentiality terms
- Governing laws, dispute resolution, and severability
- Any other applicable legal terms
- Accountant and client names, titles, and signatures
Simplify your contracting process with a fillable accounting retainer agreement template, available in PDF and Word format:
How to Record a Retainer in Accounting
Accountants record fees earned as income for their company, while the client must record the expenditure. Take the following steps to record your retainer correctly:
1. Document Accounting Hours
Upon accepting or paying the retainer, begin recording the hours worked within that retainer agreement. Tracking hours allows you to determine when the retainer has been depleted. It also ensures appropriate tracking of expenditures and income.
2. Calculate Fees for Each Accounting Period
For each accounting period, calculate the hours worked under the retainer agreement. The accountant will pay themselves for accounting services from the retainer. Under the accrual method of accounting, the retainer remains in trust and only becomes income once the accountant provides services.
Under the cash accounting method, the accountant may count the full retainer as income during the period it was received. Before requesting additional funds, they still deduct services from the retainer value until it is depleted.
3. Track the Retainer in Your Accounting Journal
Track your retainer fee by entering it into your accounting journal on the date it is paid. List it as cash, with a debit column subtracting hours worked per the accounting retainer agreement. Include a description of the entry so you know to subtract future hours as needed.
Once the retainer value reaches a certain threshold or is depleted, your accounting retainer agreement should address how to renew the retainer or otherwise bill for future services.
Whether you are an accountant offering services or a client hiring an accountant, you can streamline the contracting process with an accounting retainer agreement template from LegalTemplates.