The close of the year is a busy time at every law firm. Back-office finance staff are scrambling with end-of-year processes, and attorneys are anticipating the collections crunch. Finance-related work tends to snowball, adding to the stress of the holiday season.
Starting early, however, can ease that stress. Read on for our top tips for an easier year end.
For the back office: get ahead with 1099s and rate changes
Most of the time, year-end closeout is similar to month-end close-out. In some firms, your team may be responsible for annual tasks like booking depreciation and setting up the transactions needed to clean out attorney draw and/or attorney capital accounts in the general ledger. But there are two year-end-only tasks that can make your January a little easier.
1. Do a trial run of 1099s
Avoid chasing down missing W-9s and issuing extra statements with a 1099 trial run:
- Make sure that all 1099 vendors are flagged properly in the system.
- Verify that you have valid W-9s for all 1099 vendors.
Also, remember that if you file 10 or more 1099s (or other information returns), as of 2023, you must e-file them.
2. Update timekeeper rates
Will the firm’s rates be changing in the new year? If the official rate change date is confirmed, Orion users can add the new rates to the system anytime. When a timekeeper enters time, Orion will automatically choose the correct rate based on when the work was completed (not when the time was entered).
For attorneys: push through rate changes and move on collections
Year-end work doesn’t just impact back-office staff. Collectively, attorneys have a role to play in rate decisions, and attorneys who think ahead may take home more money. These tips will set you up for a prosperous new year.
1. Make decisions about rate changes early
Ensure timely rate updates by starting the internal approval and client notification process as early as possible. Firms typically give clients about 60 days’ notice of rate changes, and many firm committees may be required to sign off on the change.
You’ll also have a smoother time-entry experience if you allow ample time for back-office staff to update rates in your financial management system.
2. Protect your compensation by thinking ahead
If your compensation is determined by the revenue you collect, going after unpaid bills early can translate to money in your pocket. The sooner you collect, the more money you’re likely to bring in. Closed cases are the most difficult to collect, especially if the client wasn’t happy with the result. And the faster your firm gets paid, the more cash there is to fund your cases and business development activities.
Here’s another reason to stay on top of collections: checking your work in progress (WIP) report and aging accounts receivable (AR) report regularly can reveal costly time entry errors. A common mistake is entering time under the wrong matter and failing to bill for that time.
If you aren’t doing so already, now’s the time to review the following:
- WIP report. See what’s ready to be billed and bill it.
- Aging AR report. Where can you intervene to make sure the bills are paid?
- Investment report (if you’re an Orion user). It shows WP and AR netted by Retainer and/or Trust by Responsible Attorney. If the balance is negative, you are holding more money than you’ve earned. Go through the WIP report, make sure things have been billed, and get the AR collected.
- Retainer balances. Even non-refundable retainers don’t count as fee income for purposes of productivity until they’re applied to a bill.
- Trust balances. Have you earned money that’s still in the trust account? It only counts when it’s applied to a bill.
- Client advance accounts. If you have a lot on your books, it’s possible you haven’t billed the client for relevant expenses, or there may be unpaid invoices. (In some cases, the firm might write off this balance to reduce the firm’s net income.)
- Your productivity report. Ideally, you’d check this monthly, and it’s something firm leadership reviews monthly in many firms.
For a happy new financial year, start now
Sorting out rate changes early and thinking ahead on 1099s will make your year-end smoother. For attorneys, stepping up collections efforts now might even inspire a lucrative 2025 resolution: doing collection work throughout the year. If you’re already an Orion user, you can use the AR Collections Manager module to automate collections and keep the revenue flowing all year long. Contact us today to schedule a demo.