2020 is fast approaching, and with it a clear vision for a profitable future. But before you can embrace the new decade, you have to close the books on 2019. If you’ve been diligent all year with keeping your accounting current, you have nothing to worry about. But so many firms unfortunately have to move bookkeeping to the back burner in order to keep up with their case load. A mountain of unfiled receipts and invoices in the weeks leading up to the new year can leave a dark cloud of anxiety over your practice. Here are some tips to successful year-end filing.
Review outstanding invoices
Your accounts receivables can make the difference between a profitable year or a year in the red. Make a last effort to collect on invoices that have been collecting dust. If you write off the loss this year and the client pays in the new year, it could create a discrepancy in your tax claims.
Before you start your review, confirm that your time entries and billing are current through the fall. Then run an accounts receivables report. This will provide a summary of amounts outstanding on all open invoices. You can then sort your report from greatest balance to least, so you can go after the highest amounts first to maximize your efforts.
The probability that you will be able to collect on overdue accounts decreases the longer the balance is active. Make a year-end attempt to collect on your oldest accounts. If you are unsuccessful, write off the balance by the end of the year.
It may seem counter-intuitive to try to collect funds in December when everyone is shopping for the holidays. But you aren’t the only professionals looking to close out their accounts for the end of the year. Many clients and businesses will be looking to zero out their own books and take care of any unpaid bills. Your reminder is helping you both. People also can become suddenly flush with holiday bonuses and may be more likely to pay off that outstanding balance.
Reconcile trust accounts
State law requires you to reconcile your trust accounts monthly, so the year end reconciliation should be a simple process if you’ve been keeping up with it. If you’ve fallen behind, now is the time to catch up. Reconcile your bank account, trust ledger, and client ledger so all three reflect the correct balances.
Also check that funds have been moved from the trust account to the operating account properly. If you find that you have expenses and time that you haven’t withdrawn, invoice yourself and collect the appropriate funds to balance the accounts.
Review profit and loss
Your profit and loss reports will give you an idea of the kind of year you had. If you took on some pro bono clients this year, you can write that off in the loss column. Your time and expenses on pro bono cases can help balance out your write offs. Showing a total loss on the year can flag you for an audit, so don’t be afraid to show a profit on the business.
Organize your paperwork
Receipts, utility bills, pay stubs, and invoices don’t belong in a huge pile waiting for a clerk to file them. Scan or photograph your receipts so you can properly record them in your accounting software. Download bank statements and bills to PDF files. Use QuickBooks to generate pay stubs. Properly handling your records ensures that you don’t leave money on the table at the end of the year. A lost receipt that you need to expense or a bill that went unpaid can throw off your accounting.
Take your accounting to the next level
Most law firms’ accounting practices have room for improvement. If you’re struggling to close out your books for the year, give JADDE Financial Solutions a call. We have a comprehensive approach to our clients’ financials that can pinpoint your issues and set you on the path to a clear 2020.