Management Matters: Wrap it up - How to close out your 2022 fiscal year
Vol. 78, No. 5 / September - October 2022
Jennifer M. Ramovs is the director of practice management at Affinity Consulting. At no cost, Missouri lawyers can email their practice management questions to an expert or schedule a one-on-one, remote consultation. Ramovs is available at firstname.lastname@example.org.
With just around a dozen more Saturdays until the start of 2023, it can be hard to imagine how this year is already almost over. We will soon go into holiday planning mode, figuring out travel, gifts, gatherings, and ways to give back to our communities during the season.
The reality is the year is almost over for your business, too. Your law firm has end-of-year obligations that you should tend to so that you are in the best position to start 2023. Here are some things to consider.
Budgets. While looking at the status of your 2022 budget, don’t forget to start on your 2023 budget. And don't just create a budget by looking at last year's expenses. Plan for personnel changes, equipment purchases, lease renewals or office moves, conference attendance, etc. Make sure your accounting system is properly configured to track expenses in a way that makes reporting easy and can provide you with real insight.
WIP. Review your aged Work in Progress (WIP, unbilled time). Your time and billing system should report WIP by responsible lawyer so that you can bill out any files. If there are files with time that should be written off and closed, do that now. There’s no sense carrying over WIP or balances you will never collect to the new year.
Accounts receivable. What does your 30-, 60-, and 90-day aging report show you? Are there receivables older than 90 days? Is it truly uncollectable, and if so, why? Maybe you need to employ stronger collection efforts. Of particular importance here are the costs advanced that you may need to write off. Consult your accountant, and don't forget to use the IRS Attorney Audit Technique Guide to understand the implications of write-offs.
Stale bank items. Review any stale items on your bank reconciliations (no uncleared deposits and stale uncashed checks greater than six months old), along with any unallocated payments or credit balances. Make sure any money that should have been refunded or moved to trust has been appropriately handled.
Trust account. Review your trust account to verify you transferred amounts to operating that you have rightfully earned and can transfer. Confirm there are no amounts due to be returned to a client or sent to the Missouri Lawyer Trust Account Foundation. You should do this every month, but make sure you do it before the year's end.
Data entry. Finish any data entry for the year, and make sure all client payments are posted, all bills are finalized, accounts payable are handled, and payroll is posted. Reconcile all your bank accounts, including the three-way reconciliation for your trust accounts.
Tax forms. Review your list of vendors and send W-9s as needed. Review the requirements (basically anyone who is not incorporated should get a W-9). Limited liability companies require 1099s unless filing as a corporation (if filing as partnership, 1099s are required). So, it is best to send W-9s to limited liability companies, too, if uncertain. When in doubt, put the onus back on the vendor by sending them a W-9, or ask your accountant about the rules.
If you struggled to take care of end-of-year items in 2022, start 2023 by putting the right people, process, and technology in place to make year-end preparation a holiday treat. For more information about preparing for year-end processes, visit the “Money” section of The Missouri Bar’s “Manage a Practice” page in the Practice Management Center at MoBar.org/LPM.
1 Jennifer M. Ramovs is the director of practice management at Affinity Consulting. At no cost, Missouri lawyers can email their practice management questions to an expert or schedule a one-on-one, remote consultation. Ramovs is available at email@example.com.