Scope Management for Consulting: What You Need to Know

Gusto Editors

What is scope management, and why is it critical to your consulting success? How is project scope defined, and how do you communicate it clearly to your clients? If you’re transitioning to consulting work, you’ll be managing client relationships on your own. This means it’s up to you to protect your time and energy with clear expectations, which can be defined through project scope.

Here at Gusto, we’re committed to helping you achieve excellence in every aspect of accounting. So we’re thrilled to partner with CPA Academy to deliver key insights into project scope management and how you can use it to thrive as a CPA Consultant

The webinar “Engagement Letters: You’re Under Consulting Risk Since the First Client Signed,” was hosted by Josh Lance, and you can check out the full webinar here. Josh expertly defined scope management and shared examples to illuminate how poorly defined scope impacts advisors.

Josh is the Head of Accounting at Practice Ignition and the founder of Lance CPA Group, a virtual CPA firm that provides cloud accounting, tax, and consulting services to craft breweries and digital agencies across the United States. He’s a certified CPA, a Chartered Global Management Consultant, and was named one of CPA Practice Advisor’s 40 under 40 in 2017, 2018, and 2019. 

Josh harnessed his considerable experience to deliver key insights into project scope management. Project scope is essentially the blueprint for all work performed on a project, including activities, resources, and deliverables. It defines its limits and exclusions in addition to its components. Project scope will identify stakeholders, assumptions, and constraints to the project.

The risks of poor scope management 

Clearly defined scope is important for all practicing CPAs, but it’s even more critical for consultants. The details of the work you perform can easily become obscured by vague definitions and generalities. If you’re not specific in your engagement letter, you may find yourself in situations in which you’re out of your depth. This can impact you negatively in a few important ways. 

Team of accounts outline who they know in the scope of the project

First, you may work on issues you never intended to work on—and for which you’re not getting paid. If you left the scope details vague, the client may not agree that a process is outside the bounds of scope. You may end up feeling obligated to do work that you’re not being fairly  compensated for. If you decide you’re unable to do that extra work, you run the risk of disagreeing with the client, straining the relationship, and potentially losing a referral.

Secondly, you run the risk of performing work you’re not well-qualified for. Doing so leads to mistakes and sloppy work, leaving you vulnerable to lawsuits. It’s always best to communicate your limitations ahead of time to avoid feeling pressured to do something you’re not equipped to handle.

It’s important to understand that many projects will evolve, which may naturally lead you into areas you didn’t anticipate entering. Accounting issues rarely have just one cause. You may go into a project with a spotlight on one area only to discover several more related issues that are involved.

[We’re] seeing how things evolve over time. … We may start digging, and we may start trying to assess the situation …  and find out that there are three more issues that come up. … Like you turn over [a] rock and there are all those bugs underneath there.

Josh Lance

As a consultant, you should always anticipate changes and curveballs. Josh shared an example of how what appears to be a simple project can escalate quickly.

A new client came to us [with] what seemed to be a simple request. [They just needed a] 941 file. … But once we … took a consultative approach to it, we saw a bunch of other issues that we uncovered by just doing that 941, and we were able to come back to them and say, ‘Hey, there are some other things you need to be doing here. From a compliance aspect, we’re missing some other files here. From an advisory aspect, we need to take any consideration into the employee retention credit, or how that’s going to apply here.’

Josh Lance

Projects can always evolve in unforeseen ways. It’s not your job to anticipate every single one, but it is essential that you know how to handle them if they arise. If you’re not qualified to perform unexpected duties, let the client know right away and suggest a referral to avoid a lawsuit. Otherwise, you’ll need to amend the project scope formally in your engagement letter. 

Don’t be afraid that the scope may evolve, but also be in communication with your client about that evolution, and make sure that we get a change order in place to cover that additional scope work. That is all necessary from coming into this with a consultative approach.

Josh Lance

A change order or amendment to the engagement letter will protect you from lawsuits, strengthen your client relationships, and ensure you are properly paid for all work. A change order is a change to the engagement letter that describes the nature of new services performed by the contractor, which entitles the contractor to additional compensation. Ideally, you’ll want to create a change order before you start any of the services that are defined within the order. If possible, state in the original engagement letter that a change order will be required if the project scope evolves.

Why clear communication is key

Being in alignment with your client is also about defining and assigning responsibilities. Your client has a part to play in how successful any project is. Make sure you assign responsibilities to the appropriate side and communicate them clearly in the engagement letter.

The responsibilities may be things like, ‘The client is responsible for providing this timely financial information,’ or ‘The client is responsible for filing their own W-2,’  or whatever that may be, right? But it needs to be in there … and we need to be keeping each other accountable to ensure that we’re still doing the scope we are supposed to be doing and that we are doing responsibilities that we’ve agreed upon to do with each other here.

Josh Lance
Arial view of team sitting around table discussing scope management

In consulting agreements, there will usually be responsibilities of the firm and responsibilities of the customer. For example, customers may be responsible for doing their own accounting, while the consultant may be responsible for verifying, reviewing, and assessing the work for any issues. Include this in your engagement letter to reduce any conflict that could potentially arise.

It’s also important to define how work will be performed. Josh shared a cautionary tale of a consulting firm that was asked to perform advisory services around testing for proper security in a building where their servers were located. The consultants had planned to go to the facility after business hours to trigger the alarm system, as part of their responsibility was to determine if the alarm system actually worked. It did work, which meant that law enforcement arrived on the scene. The consultants showed the officers the engagement letter, which said “We are providing consulting services to ensure your security is correct.” The consultants were in for a surprise: 

It was a poorly worded scope. … It said no such thing that the client authorized them to break in and enter that facility. Therefore, that team of consultants … found themselves arrested on the spot, because [the] engagement letter …  made no mention of what they’re doing.

Josh Lance

The practice of testing a facility’s security—known as a penetration test—is actually quite common in consultant engagement. However, failing to communicate such a method had serious consequences. Assuming that the client will understand or know what’s involved was a mistake.

The client did not anticipate that [there’d] be a forced entry in there. … So, [there was a] lack of communication, [a] lack of scope in their engagement that [said], ‘Hey, by the way, we’re going to try to break into your facility to test if this actually works,’ and there was no communication with law enforcement [about it].

Josh Lance

Learn more about scope management for consulting

Your ability to clearly communicate project scope and responsibilities will determine how much risk you take on a consultant. Never assume you’re on the same page with your clients when it comes to what a project involves. It’s not uncommon for the scope to evolve, in which case you’ll need to determine if you’re qualified to perform the additional work. If you do, you’ll need to adjust your engagement letter formally using a change order or amendment.

Keep up good communication throughout the entirety of your relationship. Clearly define both your client’s and your responsibilities. Keep in mind that the way you provide your services can matter as much as what they are. Define what approaches you’ll take as much as possible in your agreement. 

Gusto’s mission is to create a world that empowers a better life. We’re here to support the professional development that will help you thrive in all areas of your life. Don’t forget to check out our previous article based on the same webinar: “How to Mitigate Risk for Consulting Engagements.”

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