Get Your Financial House in Order Now

thFor the last few years I’ve shared an
annual tradition with you: getting financial records organized for year-end.

This entails gathering up receipts, identifying deductible expenses, updating your accounts, running reports, and possibly pre-paying some 2017 bills.  Whew!

Fight the Urge to Procrastinate

With all the responsibilities that vie for our attention this time of year, it’s easy to push aside the task of gathering, organizing, and updating financial records.  Don’t succumb!

Getting organized for year-end is an absolute necessity – especially for the sole practitioner.

Step 1: Get Started

If needed, begin with a little background reading from the experts:

General Tips on Tax Preparation

Tax Deductions FOR SOLOS AND HOME-BASED LAW PRACTICES

Step 2: Learn How to Organize Tax Records

Step 3:  Begin the Process by Chipping Away at Organization and Prep

I don’t recommend a marathon session of tax organization and prep.  The only time it makes sense to do this is if you’ve procrastinated and you’re up against a filing deadline. The point here is to avoid that.  It’s too stressful!  And as we all know: when you’re up against a deadline the odds of making a mistake rise exponentially.  Let’s not go there.

Instead, open your calendar and schedule some dates to start gathering and organizing records.  30 or 60 minute appointments will allow you to chip away and make progress:

First appointment

Assuming your accounts are reasonably up to date (income and expense entries are current), do a quick check. Does it make sense to pre-pay 2017 expenses [bar dues, professional liability coverage, rent] or contribute to your IRA/retirement fund? Make this assessment early to take advantage of 2016 deductions.

Second appointment

Prepare to organize your records.  Physically gather receipts.  If necessary, schedule follow-up appointments to finish the process.  If your records are digital, use this time to pull all receipts into one 2016 expense folder.  If you have unscanned receipts, catch up on your scanning.

Third appointment

If you are paper-based, label a manila envelope “Personal Expenses.” Start sorting your paper receipts.  For now, anything that is a personal expense goes into the “Personal Expenses” envelope to be dealt with later.  If your records are digital, create a file folder labeled “2016 Personal Expenses” and segregate personal receipts.  Once you’ve achieved this basic separation, start organizing your business expenses.  This can be done a variety of ways – see the reading above.  While date order is good, it is preferable to sort by expense category first, then by date.  If necessary, schedule follow-up appointments to finish the process.

Future appointments

You get the drift. Even the most robust procrastinator can generally commit to increments of 30 or 60 minute appointments.  Keep moving.  Anything you do helps advance the cause.

Step 4: Jumping Ahead to the CPA

If you already work with a CPA, hallelujah!  If your CPA is like mine, he or she will automatically send you a tax organization packet, which will go a long way toward helping with the steps above.

You Do your own taxes?

I know some of you are stubbornly independent, as I once was, and you prepare your own taxes, as I once did.  Please: at least contact a CPA for a ballpark estimate of what it would cost to delegate this task.  What can it hurt?  You can still prepare your own taxes if you prefer.

But my taxes are simple!

Kudos! Guess what?  The cost to prepare your return will be nominal.  If your taxes are complex, anything you pay a CPA will be well worth it.

I have used CPAs for business, personal, and trust-related tax preparation and have never been sorry I did.  The prep work is enough for me!  Try it at least once and see what you think.  I’ll bet you free admission to one of my future CLEs that you won’t go back to doing your own tax returns.  Select the Contact page on the menu above to take me up on this offer.

A Quick Thought About Apps

The tech-savvy among may you may be curious about apps, so here are two suggestions: 7 of the Best Apps to Scan, Track, & Manage Receipts and Best Free Finance Apps for the iPhone and iPad.  (The latter is my list of favorites.)

Parting Thoughts

Get started now by scheduling those appointments on your calendar!  I promise you that doing a bit here and there makes the process less overwhelming.  Good luck!

All Rights Reserved – Beverly Michaelis [2016]

Get Organized for Year End

Wthith all the demands on our time during the holiday season it’s easy to push aside the
task of getting records organized for year-end.  But doing so is an absolute necessity – especially for the sole practitioner.  Here is some solid advice from the experts:

Get started today. By beginning the process before year-end you will have a better sense of where you stand financially.  You may find it makes sense to pre-pay 2016 expenses [bar dues, professional liability coverage, rent] or make a contribution to your IRA or other retirement fund.  Wait until January 1 and it will be too late for some of these tax-saving steps.

All Rights Reserved – Beverly Michaelis [2015]

Making Money: Maximizing the Business Side of Practicing Law

Law is both a profession and a business. So what pearls of wisdom did the experts at the 2014 ABA TECHSHOW have to say about the business side of law practice? Read on…

How Are We Doing?

  • According to Lexis’s Chris Anderson, over 50% of solos have no accounting software at all. @MrsMacLawyer RT @lawyerist (My 2 cents: true and sadly ineffective – the return on investment in purchasing quality billing and accounting software can’t be overstated.)
  • Law firms used to raise rates 10% a year; now just about 3% says @gnawledge – @Business_of_Law
  • Key Business Challenges for Lawyers [INFOGRAPHIC] – MyCase Blog @nikiblack

Talking to Clients about Fees

  • Calling a client that’s behind on payment is a hard thing to do; manage expectations — says Steve Best of @affinitytech @Business_of_Law
  • Lawyers are not comfortable having conversations about fees (both sides) – feels “salesy” and “confrontational” says @gnawledge – @Business_of_Law

Setting Rates and Crafting Agreements: The Rule of 3

  • Law firm billing discounts are a 1-way street; once you give them, you’ll continue to give them; protect the price – @gnawledge – @Business_of_Law  (My thought: I don’t believe in continually marking down bills.  I do believe in offering early payment discounts.  The client saves money.  The lawyer is paid more quickly.  Win-win.)
  • Rule of 3 in law firm pricing: 1% cut in price = 3% cut in profit – @gnawledge – @Business_of_Law
  • Rule of 3 defined: Attorney bills at $300/hr; 1st 100 is salary; 2nd 100 is law firm cost; 3rd 100 is profit – @gnawledge – @Business_of_Law
  • Bills Out – Money In – #ABATECHSHOW session @PeggyGruenke makes this case for flat fees – @Business_of_Law
  • New meaning for AFA: “appropriate” fee arrangement – @gnawledge – @Business_of_Law
  • The better law firms are at pricing, the better it is for the market – @gnawledge – @Business_of_Law
  • Resources for law firm pricing: LMA Group (Legal Marketing Association) | ILTA. (International Legal Technology Association) @gnawledge – @Business_of_Law

Billing

  • Some firms have 300 billing codes…but just 20 are used. Need to think through codes – @gnawledge – @Business_of_Law
  • Billing codes are gamed; got a cap on one code, the hours get logged in another. @gnawledge – @Business_of_Law
  • Where’d those billable hours go? Right here in the matter management system – @Business_of_Law (Link to LexisNexis FirmManager “Money Finder.”)

Trends and Where to go from Here

  • Litigation finance is a growing trend — several financing companies have raised lots of capital @gnawledge – @Business_of_Law  (My input – this can be a slippery slope.)
  • The Essential Survival Guide for the Independent Attorney: summary here. @Business_of_Law
  • Session Summary: 5 Effective Law Firm Billing Techniques – @Business_of_Law

All Rights Reserved – Beverly Michaelis [2014]

Choosing Legal Billing Software

4-30-2013 1-49-03 PMShould time and billing be integrated with your practice management software?  Or are you better off with a stand-alone program?  Before deciding, do your homework.  Here are some useful links and posts:

Software Comparison Charts and Buying Guides

Time and Billing Software Comparison Chart – ABA Legal Technology Resource Center

Buyer’s Guide to Legal Billing Software – Technolawyer

Billing and Practice Management Software Integration

Avoid Mistakes with Time, Billing and Accounting Software

System Considerations: Cloud, Hybrid Cloud, Mobile Timekeeping, Auto Capture

Ten Things You Need to Know About Back-Office Systems – ABA GP/Solo

Options for Mac Lawyers

The Fine Art of Getting Paid on a Mac – ABA Law Practice TODAY

Best Practice Tips

Billing & Collections – ABA Law Practice TODAY

ABCs of Best Billing Practices – ABA Webinar

Finance: Timekeeping by the Numbers – ABA Law Practice Magazine

When Are You Going to Get Help With Your Bookkeeping?

Good question!  If you loathe it, don’t have the time, or find aspects of bookkeeping confusing, then it may be time for an outside bookkeeper.  Or at least a pointer or two. 

To quote Certified QuickBooks Pro Advisor Belinda Bixby, get help when you are:

• Starting your own practice.
• Growing an established practice including hiring employees or bringing on partners.
• Preparing for tax time.
• Getting caught up on past financial tasks.
• Preparing to apply for a loan or line of credit.

Also reach out for help any time you are stumped, worried, or just can’t get to what needs to be done on an ongoing basis.  To paraphrase Belinda, “You tell your clients that investing in a lawyer can save them money in the long run.  The same applies to you and bookkeeping.  You are an attorney.  That’s where your talent lies. You did not put in all of that time and effort obtaining your degree and building your practice to spend it wrestling with bookkeeping.”

If your bookkeeping practices or skills are not quite what you want them to be, read Belinda’s post on Law Office Bookkeeping at the Oregon Sole and Small Firm Practitioner’s Web site.  While there, you can get other useful tips from my article, Financial Management 101.

If trust accounting makes you want to pull your hair out, remember that we offer a free Guide to Setting Up and Using Your Lawyer Trust Account for Oregon lawyers.  Visit the PLF Web site and click on Books from the PLF.  Oregon lawyers and staff are also welcome to call or write PLF practice management advisors at any time with trust accounting questions.  To locate a practice management advisor, contact yours truly or visit the PLF Web site and follow the link to Advisors under the heading Practice Mgmt Advisors.  You may also want to watch my video, How to Reconcile Your Trust Account, or search for other posts on this blog related to financial management or credit cards

Copyright 2010 Beverly Michaelis