Engagement letter clauses that disclose third-party referral compensation

When to use a referral compensation disclosure clause

Use a disclosure clause whenever a provider you introduce a client to might pay you. The disclosure goes to the client in writing before the introduction, never after a payment arrives.

Fractional CFOs, outsourced controllers and client accounting services (CAS) teams meet this more often than they expect: payroll providers, lenders, insurance brokers and data licensing platforms such as SourceX can all offer a referral share. Two documents cover nearly every case, and a third line records the client's answer.

Interim CFOs placed through an agency should also read the agency contract before accepting anything from a third party; the guide to referral opportunities for interim CFOs covers that role in more depth.

What the professional rules say before you draft

Whether you may accept third-party referral compensation, and how you must disclose it, depends on your license, your state and the services your firm performs for the client. The clause only documents a decision your rules already allow.

• CPAs in public practice. The AICPA Code of Professional Conduct's commissions and referral fees rule (ET 1.520) bars a member from accepting a commission for recommending a product or service to a client when the member or firm also performs an audit, review, certain compilations or an examination of prospective financial information for that client. Permitted commissions and referral fees must be disclosed to the client. A copy of the AICPA Code hosted by the Minnesota Board of Accountancy shows the rule; the AICPA's online Code is the authoritative current version.
• State boards can go further. State rules can differ from the AICPA Code and be stricter, as the New Jersey Society of CPAs' summary on commissions and contingent fees shows. Florida addresses CPA commissions and referral fees in statute, including written disclosure of commissions; the linked Florida Statutes section 473.3205 page is the 2017 text, so check the current version.
• Fractional CFOs who are not licensed CPAs. An accountancy rule may not apply, but your consulting agreement, the client's conflict-of-interest or vendor policy and any agency contract can still restrict outside compensation. Written disclosure is the sensible default either way.
• Public recommendations. If you also recommend a provider in a newsletter, webinar or LinkedIn post while earning referral compensation, the FTC's endorsement guides FAQ says the connection should be disclosed clearly and conspicuously, close to the recommendation.

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting. For firm-wide rules on who may accept what, pair this page with the referral compensation policy template for CAS and advisory firms.

Template A: standing clause for the engagement letter

Place it after the fees section. Replace each placeholder in braces.

Template B: one-off notice before a SourceX introduction

Send it by email after the owner has said they want the introduction, and wait for a reply.

Template C: client acknowledgment line

Add it below Template B if you prefer a countersigned PDF to an email reply.

How to personalize the clause

When to send it and how to follow up

1. Raise the idea in an ordinary meeting first, such as a year-end tax planning meeting, and ask whether the owner wants an introduction at all.
2. Check basic fit with the company fit checker, a preliminary, non-binding screen that needs no contact details, so you are not disclosing compensation for a company that clearly falls outside the baseline.
3. Send Template B within a day or two, while the conversation is fresh.
4. Wait for the written acknowledgment. If a week passes, send one short reminder, then let it go.
5. Make the introduction through your referral link or the referral form, and file the acknowledgment.
6. Disclose again if the arrangement changes, and refresh Template A at each renewal.

What never belongs in a disclosure

• An estimate of what you might earn or what the company might be paid. No reward is guaranteed, and no licensing price exists until the company agrees terms.
• Any statement that a deal will happen or that buyers are waiting.
• Descriptions of the client's records, screenshots or sample files. You make the introduction only; the company shares information with SourceX directly.
• Wording that suggests you will negotiate the license on the client's behalf while the platform pays you. If you will advise on the terms, raise that conflict separately.
• Claims that a regulator, board or society has approved the arrangement.

How the SourceX reward reads in a disclosure

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company, and the reward becomes payable only after the buyer pays and SourceX receives its fee. Credit goes to the first valid referrer whose introduction leads to a verified company application within the attribution window, so it is the referral link or referral form, not the notice, that records your introduction.

The companies worth disclosing for are US businesses with 50+ full-time employees at peak (contractors excluded), several years of documented operations, the rights to license their records and an authorized sponsor; the who qualifies page has the full baseline. The program terms govern the details.

Next step

Add Template A to your next engagement letter and keep Template B ready for the first client who asks. When you are ready to make introductions, register as a partner; the overview for fractional CFOs explains where introductions fit in a finance leader's year.