Year End tasks for Attorneys

This week we're going to discuss closing your law firm books for the year end. And if you don't have a bookkeeper in place, this video will be for you to kind of walk you through the steps. Of course, if you need a bookkeeper to help you, you can reach out to us. We'll definitely help you through it. And these are just kind of the steps that I perform at the end of the year. It's also steps that we do all pretty much all year long. Monthly, we're looking at things, making sure things are in the right categories. We have a global team that does a lot of the work for us, the day-to-day downloading of the, the transactions. And then we also have the US-based staff that kind of handles the day-to-day, making sure things are in the right place, doing more of the high-level work. So these are just tasks that I like to accomplish for my clients at year-end, and it's more of a tidying up. It's a good time of the year. A lot of the law firms that we work with take the year— they take that week off after Christmas through New Year's. So it's a quiet week where there's not a lot of continuous work happening. It's also not January when all of a sudden everybody's going to be like, where's my books? Where's my books? I need it for the tax person. When actually most of the tax people push it out to extension anyway. So you might want to ask your tax person, are you going to put me on extension? Because then I don't have that time crunch. But that's going off track a little bit. I want— first thing I would do is you go into QuickBooks and you go into the Review the Books section, and I'll show you a little picture of that here inside this video so you get an idea of where to look. In that area, you're going to see if you had any transactions that didn't have vendor or payee names. You're going to see when the last time you reconciled, how many transactions were processed. It's got a whole multitude of steps, and we even have another article that kind of walks you through the books review. Highly recommend using that as your guide to making sure the records are in good shape. You want to make sure you reconcile regardless of having the bank feed connected. The bank feed is not exactly a— it's not a perfect science. Bank feeds can be wrong, they can be broken. There's lots of reasons why you don't want to consider that as your main, main way of reconciling. You want to go through the performance of reconciling your banking, your credit cards, your loans. Those are the main areas. And then with law firm accounting, you wanna do the advanced client cost account as well. You wanna go through that, make sure that there's nothing in there that maybe needs to be moved down as an expense 'cause you're never gonna collect on that. So once you've done that, I like to run the balance sheet. So I like to take the balance sheet and do an analysis of the balance sheet. I run the balance sheet. Year to date, comparing this year to last year. And why do I do that? Well, I want to see if the account balances have changed and in what ways they've changed. Obviously, if you've looked to see if it's been reconciled, if it's reconciled, then you know the money is accurate. But you want to make sure that those balances are correct. At a high level, look to see negative balances. There shouldn't be any negatives. So if you've got a loan, then the loan should be a positive. You owe that money. If it's a negative, that means something's wrong, and you've overpaid it or booked in something improperly. Credit card balances is another place where I see a lot of negative balances. And typically that's caused by somebody just putting the payment in on the bank side to show the payment to the credit card, but they never booked in their expenses of the credit card. And this is the opportunity to pull all that data in. You can go on the credit card site, download, download a QBO file or a CSV file, upload that, and then bring the transactions in. So you should see the balance building with all the transactions and then the payment kind of taking that away. So you really want to look at that. Payroll liability accounts. If you're using QuickBooks Payroll, congratulations, you probably won't have any problems because that's all kind of baked in the back. But one of the things you want to look at, because it's not also not always a perfect science, take a look in the gear and then look into payroll, payroll settings, and go into the accountant view and see how that stuff is mapped. If you are a firm where you have a— you're the— you're an S corp and you're, you're you're the shareholder, you want to make sure that your payroll, the wages, are separated because the tax person needs to see it that way, separated from the rest of the staff. So there should be a share, you know, officer's wages and then everybody else's wages. Same thing with your benefits. You want to separate your benefits. You want to separate any life insurance. Those are the things that they're going to ask you about. Another place you want to look at is your assets and any depreciation. If you had depreciation through the year and you have the schedule, book that in. Any assets, anything you've spent more than $2,500 on, that's a a high-ticket item. Maybe you built out a brand new website and you spent $12,000. You want to put that up in the asset under website, and then the accountant will— the tax accountant will depreciate that for you. But you don't get to take that $12,000 in the first year. It's broken out. That's something you definitely want to look at, make sure it's in the right place. And if anything you purchase, take a copy of that receipt and attach it to the purchase in QuickBooks. It's going to save you time, because a tax person, in order to determine the actual depreciation schedule, they need to look at that item and put it in their system to be able to give you that. So to be able to give you that. So if you're looking at anything, if you purchased a vehicle or anything like that, they need to have that information. So attaching that to the transaction will just allow them to go in when they're in QuickBooks and kind of look and see what you have there. Any prepaid accounts. So any prepaid, maybe insurance, if you're doing that, that's more accrual-based. But if you're at an accrual-based firm and you have anything booked into prepaid, you want to take a look at what the balance is and make sure it's accurate for the end of the year. You want to properly account for it, so make sure that you do that as you go through the records to make sure that there's anything that's in there. Maybe you do, um, AR retainers and you've got money that people paid you ahead of time for work that you've already performed. You want to apply that and make sure that that's accurate at the end of the year, that all that you're holding is work that's yet to be performed. Loans, we also touched upon that a little bit, and credit card balances. You want to make sure that those are accurate, reconciled. Loan balances should never be stated in, in a profit and loss side. They should be in the balance sheet side. And those are just kind of the important places that you want to look. Now you're gonna shift over to the profit and loss, compare that as well. Take a look and see what last year's was, was this year. And then the profit loss is really a nice place to have that view where you're looking at both years and you can kind of see, did I have more revenue than my expenses went up a little bit? You want to see maybe you had to hire another person to handle, maybe another staff attorney to handle the work. The revenue went up, but you also had wages that went up. So you want to start to see those balances and checks and balances when you're looking at a report like that. You want to be able to look at it as a comparison, but see if there's anything missing. Maybe you don't see a filing, you know, the filing fee, the annual filing fee to the state to be able to run your business. And if it's missing, find out where it is and make sure it's booked to the right account. So if you have any missing expenses, you want to look there as well. And those are kind of the things at a high level that you want to look at when you're pre— previewing your records for year-end. Another thing is you might want to run a list of people and 10— for your 1099s that you need to send out for your vendors. Anybody that's in there that you don't have their W-9 form, you want to send that out, start to get that information now. You should have actually gotten that before you paid them. That's the best time to get that information out of them, before you pay them. But if you have paid them And you want to get that information for tax time. You really want to get that together because you only have the month of January to really push those out. I think that's about it. Also, actually not. It's not just about it. You also want to make sure your trust account balances. So that's probably the most important for compliance purposes. I have tons of articles about trust compliance, but you want to make sure that the trust liability account equals the balance in the trust bank account. Both are reconciled. So you know that you've done the 3-way reconciliation. If you haven't, definitely do one for year end. You want to know what's inside that bank account, who it belongs to, and that's really the purpose of the 3-way reconciliation. Make sure that piece of work is done as well. I hope this is helpful, and if you have any questions or comments, please feel free to reach out. We're more than happy to help you and assist you with your accounting needs. If you're like, I really don't want to do all these things, Linda, give us a call. Take care. Bye-bye.