An Accountant’s Guide to Minimizing Professional Liability Risks
There are many different facets to being an independent accountant. From offering crucial advice to crunching numbers, there is a myriad of tasks to tackle each day. One of the less spoken about—but just as important—aspects of the role is figuring out the most effective ways in which to protect yourself from professional liability risks.
As a contractor who works with and offers advice to various clients, you open yourself up to the possibility of being accused of wrongdoing. You may even be sued.
This is a position nobody ever wants to find themself in, however, it’s a possibility you’ll need to prepare yourself for. This guide will help you to do just that. Read on for some simple and straightforward ways you can minimize your risk of professional liability.
Make Sure Your Data Is Secure
As a contractor dealing with sensitive information from different clients, it is absolutely imperative that you make sure your data is secure. Leaked or missing files could result in big trouble for you professionally.
Update your antivirus software on a regular basis, make sure your site has an SSL certificate, and always use two-step authentication. You should also make sure all of your business communications are encrypted.
Sign a CPA Engagement Letter for Each New Client
As a rule of thumb, a CPA letter is a good thing to have when entering into any new partnership. This states you and the client agree about the scope of services you’ll be performing. It will prevent misunderstandings or objections down the line.
These letters are easy to obtain. Templates are available from the American Institute of CPAs website to customize as you need. Both parties will need to sign for it to be valid, so don’t skip this step.
Procure Professional Liability Insurance
This step is important for any independent contractor. Setting yourself up with liability insurance means even in the case that you are sued, you’ll have protection and support in place.
There are a number of different providers available, so make sure to do your research before making your decision. This type of insurance is usually not expensive and can end up saving you untold amounts in the long run.
Don’t Work Outside the Scope of Your Specific Field
One of the easiest ways to make a mistake and be hit with professional liability claims is to offer services beyond the scope of your training. You should never do this, even if asked by a client. Always make sure that you are only offering services that you’re fully trained in and confident about.
Protect Yourself and Your Business
Learning to avoid professional liability lawsuits and reduce professional liability risks is a necessary part of being a freelance accountant. Protect yourself and your livelihood by implementing the above tips into your business immediately. If you’re looking for more tips on accounting, insurance, or anything else, check out the rest of our content now.