The new year can sneak up fast, so it pays to make a plan to tackle those eleventh-hour tasks now instead of waiting until the last minute.
After all, the end of the year should be a time of relaxation and restoration, not a time to burn the midnight oil while drinking endless cups of coffee at the office.
Get a handle on those crucial end-of-year tasks by starting now. Accounts receivable is what you’re owed (very important!), but why not start with the tasks that are fully under your control, like your accounts payable?
To help you do that, let’s review four essential tips for optimizing your accounts payable and a simple step-by-step approach to getting your bills and expenses squared away well before the holiday parties.
(Plus, we’ll explain how to establish a central dashboard to manage payees using a fully integrated, legal-specific software solution that streamlines legal practice billing and accounting in one place.)
Common challenges for a law firm’s accounts payable
Law firms face unique challenges in their accounts payable, from managing cash flow in a contingency-based practice to tracking and allocating costs per client or case.
One particular challenge is recording disbursements and out-of-pocket expenses in a timely and accurate manner. These expenses need to be meticulously documented so they can be passed along to the client or deducted from a settlement, yet doing so can require extra manual effort.
Another area where timeliness can cause problems for law firms? Payment to vendors and third parties, which is vital to ensure good relationships and smooth operations.
And, as with all things legal, there are compliance challenges. Law firms must uphold compliance requirements in their accounts payable as set by the American Bar Association and state ethics rules, which adds another layer of complexity to managing accounts payable.
4 tips for optimizing your accounts payable
Whether you’ve just hung your first shingle or you’re at the helm of a large firm, getting your accounts payable wrapped up by the end of the year is a smart move. These tips can get you started:
1. Tackle general office bills
Go over your chart of accounts
To start, examine your chart of accounts. This list of all accounts in your firm’s general ledger is the foundation of your accounting system. As such, organization is key.
Here are some questions to consider as you review your chart of accounts:
- Are you categorizing your firm’s expenses correctly?
- Are you categorizing expenses in the most efficient manner possible?
- Are you using the correct account codes?
- Could any of these accounts be consolidated or simplified?
Even if you’re confident that your chart of accounts is in order, running through these questions can identify red flags or errors that might escape your attention.
Track and pay all office bills and vendor credits
Once you’ve gone over your chart of accounts and made sure it’s organized and accurate, move on to tracking and paying all of your firm’s office bills and vendor credits.
This is another area where you want to verify that nothing falls through the cracks. By addressing all outstanding office bills and vendor credits before the end of the year, your firm is primed to begin the new year with a clean slate, ready to maximize its profitability and achieve new levels of financial health.
Ideally, you should establish an efficient system for tracking important information like outstanding invoices, payment due dates, vendor contact information, and more. (We’ll talk about how software solutions can effectively automate these kinds of processes, making it easy to stay on top of your firm’s accounts payable.)
2. Deal with case cost bills
Having a clear and consistent system for managing case cost bills is key. Doing so will not only simplify your year-end accounting but will also facilitate client billing and ensure accurate financial reporting. To effectively manage case cost bills:
- Keep a record of all case cost payments made throughout the year
- Organize and track invoices for each individual client matter
- Regularly review and reconcile case cost accounts to ensure accuracy
Note that legal-specific software makes this easy by automatically completing the required accounting steps for case cost bills, e.g.: distinguishing between invoices for client/firm expenses, linking each vendor bill to its associated client matter, and holding payments until client payments have been received.
3. Set up a central dashboard to manage all payees
One of the most effective ways to optimize your accounts payable before the end of the year is to set up a central dashboard for managing all payees in a legal-specific software solution.
From this dashboard, you can not only manage all your payees but also accomplish (and even automate!) other essential functions like tracking payments, monitoring your firm’s health in real time, and much more. Ideally, it will be the first thing you’ll see when you log into your software, so it’s easy to access and check on a regular basis.
Look for the option to customize dashboards, too. CosmoLex allows you to edit the layout of their dashboards by moving around, resizing, and modifying the view of the tiles for accounting features like “Snapshot,” “Balances,” “Money Finder,” “Billing Summary,” and more.
For more info on how to get the most out of CosmoLex dashboards, check out the detailed, step-by-step instructions in this article.
4. Check your policies and payment terms to identify bottlenecks, obstacles, and other issues
What better way to start out the new year than by addressing issues of the year past? Now is the time to assess whether your policies and terms of payment are clear and working as intended.
- If you’re experiencing challenges with your policies, determine whether your team needs further training on them or whether they need to be refreshed.
- If you’re experiencing challenges with your terms of payment, consider whether you need to improve internal systems for reminders or automated payments.
Reduce accounts payable problems for law firms with legal accounting software
Accounts payable doesn’t manage itself. Law firms need dedicated software to effectively manage it…along with all other aspects of their finances. However, there are numerous legal-specific accounting and billing tools on the market. How do you choose the right solution for your practice?
Look for the following:
- A fully integrated software solution that allows you to oversee accounting, bill clients, and manage your practice in a single, intuitive, web-based application.
- A tool that handles time tracking to trust (IOLTA) accounting, calendaring, task and document management, and more. As a result, it frees your firm from having to use a hodgepodge of different programs and/or third-party integrations (such as generic accounting software like QuickBooks).
- Software with payment processing included, so your firm receives payments quicker and easier. This makes it simple for your firm to securely (and compliantly!) accept credit card payments both online and in person.
- A client portal to streamline client communications and document sharing. Portals with bank-grade security protect all the information you share with your clients and vice versa while maximizing convenience for both parties.
CosmoLex has you covered
If you’re in search of an easy-to-use and efficient application with a wide range of robust legal practice management features that are all accessible with a single login, give CosmoLex a try.