Law Firm Profitability: Accounts Receivable
This week and the next few weeks we will be repeating some of our favorite Advisory posts. Why? Well, we just completed a very interesting series of courses at Scaling New Heights. I had the good fortune to teach:
- Why A Niche Strategy Is Your Path To The Future
- Role Play Your Way to Advisory
- What You Need To Know When Working With Law Firms
- I just Started My Bookkeeping/Accounting Firm, Now What?
For the last two sessions, I co-taught with my partner-in-crime, Matthew Fulton. We have really worked hard to put together some great content to help you all learn how to add advisory services and grow your business.
The theme of this conference was The Rise of the Advisor.
Enjoy the article below. They are definitely areas you can add those advisory services for your clients.
When we get into discussions with new clients, we have had quite a few tell us, “We don’t have accounts receivable (AR). We simply ask, “do you create invoices for your clients?” If the answer is YES, then you have AR.
Data Migration Clients
Accounts receivable is one of the areas that are important when we do the data migrations. Since we always tie the books to the source documents, the tax return, for example, is our opening entry. Most of the time, the tax return is on a cash basis. But there are always existing accounts receivable transactions. We have to enter them. But it always adds complexity to the workflow.
For clients not in migration, accounts receivable is always a pain point. Most firms we work with are very busy. Many have been not using software or automation for the generation of invoices. Some firms do their invoicing in Microsoft Word. How do you track that? Who paid you, who is still outstanding?
Often if they are using some outside program, it is not efficient. Many use a desktop program and then re-enter the simple invoice into Quick books. Why do work twice? Or why do the work manually without any assistance from technology.
Manual processes equal ERRORS!
Obviously, both of these methods are open to errors. Errors in math, in tracking the accounts receivable in managing the payments. One of the areas we can assist in helping manage this crucial cash producing task.
Top 5 reasons tips for Organizing Accounts Receivable
1. Get the software. I love LeanLaw, but there is also Clio or other cloud-based applications. Do they come with a price tag? Yes, but I guarantee you that missed billable hours recovered will more than pay for the software.
2. Monitor the receivables, designate a staff member for this job. With Quick Books, we can refine that person’s role to allow him or her to have access to the accounting areas they need without access to sensitive information, like payroll. We can set up automatic reports to track this work.
3. Use Intuit Merchant Services. This feature alone will save time. Technology at its best. You won’t have to enter the payments or create the deposits. It is all done for you automatically!
4. Use the automation of Quickbooks Online Advanced Workflows: I think this one tool will help with staying on top of invoices that are due and invoices that are past due. In the video below, we demonstrate how easy it is to set up this feature.
5. Stay on top of any payments entered without an invoice (it causes negative AR) and also track your bank account for any payments not clearing the bank. I am always surprised at how many times we find these mistakes in a new client’s book. Reconciling and monitoring the payments will keep your records in good order.
These are just a few tips for proper workflows around accounts receivable. Are you a law firm that needs help in this area? We can help you! Reach out!
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