Keeping your eye on the ball
Preparing your law firm for Year-End!
The past two years have been difficult for law firms. Not only do you need to prepare your law firm for 2022 and any uncertainty it may bring, but now may also be the time that you need to get your year-end accounts in order.
It is important to start the year-end accounting process early.
Taking the time now to methodically review your records, close outstanding customer accounts, and budget for next year will give your law firm an edge. It will also be easier for you to plan for the coming year.
Additionally, gathering essential financial information from the law firm at the end of the year will help streamline the process when dealing with HMRC and your accountant.
Reviewing your law firm’s finances before year-end is critical for setting up the practice for financial success in 2022. So, what could you be thinking about now?
Identify and collect outstanding balances.
It is good practice to collect on all debtors in a timely manner, the longer an invoice is outstanding, the less chance you will have to collect the full value of your fee.
Ensure time recording and fees are up to date:
Before looking at your collections, it’s important to ensure that your firm is on top of time recording and feeing. Make sure that all your fee earners are recording their time throughout the month of February, so that subsequent billing can take place at the beginning of March.
Run an accounts receivable report:
Your accounts receivable report will provide amounts outstanding on any open and past-due fee notes. Remember to review any fee notes that are older than 6 months.
Identify the outstanding balances:
Your chances of collection decrease with time so it is good practice to identify any overdue balances and act on these before the end of your financial year.
Collect Monies:
If you represent businesses, they are usually looking to pay all their expenses before their own year-end. Therefore, it is advisable to get your fee notes out early in March so that your own clients can get on top of making payments. If you represent individuals, you could consider offering discounts for any fees paid before the year-end. For any clients unable to pay on time it may be worth considering payment plans.
Review your trust accounts.
It is worth spending some time before year-end to ensure you have been diligent in moving money from your trust accounts when fees have been generated.
Make sure your client ledgers are balanced.
By running a Work in Progress report, you will be able to identify any outstanding time or expenses which can be feed before year-end.
Reconcile your trust accounts before year-end.
Spend some time to reconcile your trust accounts during February, when you get the bank statements in March this will speed up the process.
Review your financials.
The key to setting yourself up for success in the new financial year is to understand how you have performed this year by properly tracking your law firm finances.
Consider running a comparison report on your revenue and expenses using this year and last year.
This will give you an awareness of any overspending or underperformance.
Run an accounts receivable report:
Your accounts receivable report will provide amounts outstanding on any open and past-due fee notes. Remember to review any fee notes that are older than 6 months.
Identify the outstanding balances:
Your chances of collection decrease with time so it is good practice to identify any overdue balances and act on these before the end of your financial year.
Collect Monies:
If you represent businesses, they are usually looking to pay all their expenses before their own year-end. Therefore, it is advisable to get your fee notes out early in March so that your own clients can get on top of making payments. If you represent individuals, you could consider offering discounts for any fees paid before the year-end. For any clients unable to pay on time it may be worth considering payment plans.
Tidy up your balance sheet.
Review your balance sheet items to establish if any can be cleared down. This is a good time to look at your nominal accounts to establish if any can be cleared down prior to the year-end.
Drawings accounts, dividends, tax and NI accounts:
Check your drawings accounts, dividends, tax and NI accounts, the current year should only be shown.
Suspense accounts:
Are you using suspense accounts to hold any unidentified funds, if so, these should also be cleared down.
Loan accounts:
Are your loans being recorded correctly, they should be recorded as a credit and match the balance on your loans statement, they should not be recorded as a debit.
Spring clean your ledgers.
Client ledgers:
Check your client ledger positions and ensure any credit or debit balances over 2 months old have been dealt with accurately.
Deposit accounts:
These should be treated with the same diligence as client ledgers.
Whether you are based in England, Scotland or Wales, the accounts rules are complex.
Our outsourced legal cashiering service will ensure your books and records are kept fully up to date.
Outsourcing is also much more cost-effective than having an in-house cashroom to handle your finance function. Outsourcing eliminates several cost layers, and you only pay for the services you need – when you need them. Firms can choose from full outsourcing, co-sourcing, or needs-based deployment to address temporary staff shortages such as holidays or long-term absences.
