Dental Practice Owners Should Read, Understand Engagement Letters

NONWARIT / STOCK.ADOBE.COM

This article is very important even though its title projects that a dentist is signing something without understanding or reading it carefully, which is hard to imagine. One would be surprised at how often this occurs.

The engagement letter can be about a topic such as a divorce situation, partnership dispute or any type of financial problem that may involve a lender, dental office supply company, equipment provider, or others. It is hard to grasp that anyone who receives an engagement letter and who wants to retain the author or his or her firm, will not truly understand what they are reading and what they are going to sign before proceeding with the services explained in the letter.

Let’s start by describing how many dentists do or don’t carefully read the engagement letter and still can’t understand what they are going to execute. How many of them are too busy and just scan it after speaking with the provider of the service who is to be retained? The engagement letter from a reputable valuation expert, dental CPA or other financial advisor is probably very clear and explains the details of what is expected of the author, his or her firm and the dentist as well as what the costs will be.There will be paragraphs for example, explaining the charges involved with phone calls. Emailing back and forth will probably be cheaper than the phone calls but will still have a charge. They will replace the “telephone tag,” exasperation of trying to reach a busy professional by calling. Think how busy the dentist is who requires the service of someone who was never thought to be needed by the dentist? Neither has time to waste. 

What did the dentist request when contacting the author of the engagement letter?

When calls are placed, it is important to arrange a time and date for the return call or when the availability of each is known so time is not lost if the party is not there. In terms of the content of the engagement letter, it is important for the participants concerned to go back to see what was originally requested. The preparer of the letter will certainly have notes expressing what is being requested, the charge that was explained and the estimated time frame the project will take. Often a short email exchange between the author and the recipient will explain the general terms to be expressed in the engagement letter and will give each participant an opportunity to acknowledge the message before the finalized engagement letter is sent.

All of this involves a large financial investment by the dentist as well as an enormous amount of his or her time to assist in the gathering of documents that will be needed by the professional preparing the report. The finalized version of the report will be the product of the work involved that is expressed in the engagement letter. If the involvement of the expert retained by the dentist is going to be lengthy, it is important that the dentist pay attention and not merely scan the engagement letter before signing it. The cost of the service being rendered is one point, but the result of those efforts is what the dentist really has signed up for with the retention of the expert. The consequence of the work and its outcome will be many times the cost of the engagement itself so the dentist should really be sure before signing.

Some examples of rushing because the dentist is too busy with his or her own work:

After the initial conference with the expert, the dentist is typically back to work and involved with his or her own issues. The onslaught of worries about the case causing the issue continues but there may now be a feeling that someone else will be taking over the responsibility of getting it resolved. Not taking notes during the conference may lead to another conference or a request for the summary in an email or letter. This may also be something quickly scanned by the dentist before signing and not carefully examined.

Financially, the engagement letter will almost certainly require a large down payment to the expert who is going to assist in helping the dentist resolve his or her problem. Once that is paid, it is usually up to the dentist to gather information for the expert since he or she needs a lot of assistance to understand what the dentist owns and owes. This information is best accumulated by the dentist who can at least contact his or her dental CPA, attorney, dental supply sales representative or other financial advisor to collect the information if it is not readily available. If the dentist reads the engagement letter, there is surely a detailed explanation of how the time spent will be charged by the expert in the preparation of the report. The more the dentist can do, the cheaper the cost will be for him or her. The more the expert must do, the more expensive the charge will be for the dentist. Additional charges to the dentist are not necessary if he or she assists as much as possible.

What steps does the dentist take to protect his or her assets prior to signing the engagement letter?

Prior to signing the engagement letter, it is important to read it carefully and to understand its content as thoroughly as possible. The dentist is typically aware of his or her responsibilities and expertise and needs little explanation when attending a study club or a webcast to review what he or she knows for reinforcement. When engaging in a field with almost no expertise, for the dentist to rely on himself or herself for the understanding of the letter’s content should be avoided. The expert financial analyst is the one giving advice and advising what steps to take to protect the dentist’s assets. If there are questions about the letter and the dentist is either embarrassed or does not have the time to make his or her issues about it known, the dental CPA or financial advisor can help.