“Where do I begin?” … “There’s no way to predict what is going to happen, so why bother?” … “There’s not enough time to do this.” … “I can build it, but no one will ever use it.”

Regardless of your thoughts on budgets, they are a workplace reality that is here to stay.

Your budget maps out your firm’s plan for financial success.

Here are some budgeting basics:

• Budgeting is the future plan of the business, and where the strategic plans are translated into financial numbers.
• Budgeting ensures that the firm’s plans are financially viable.

The advantages of good budgeting:

• Enables you to better plan for the future
• Allows you to determine if the firm’s strategic goals are attainable
• Provides an opportunity to identify areas of potential cost savings
• Revenue and cost variances can be more easily identified, providing an opportunity for quicker action.
• Budget time is a good opportunity to evaluate the rate that you are charging clients. Are you profit driven or client driven?
• It is important to understand the effective rate that will be needed to bill in order to achieve the desired level of profit. (This is so critical!!!)
• Review the firm’s strategic plan and note activities for the budget. Separate activities into existing and new. Document your assumptions.
• Know your general ledger – it is your friend!
• Identify areas of potential cost savings—are there other vendors who may be able to provide better value and/or service? Are certain services no longer being used?
• Some costs simply can’t be controlled—recognize them and budget accurately.

Remember….

If you don’t know where you’re going, you’ll probably end up somewhere else. —Yogi Berra

If you haven’t started your budgeting process, you probably are already behind. With our team of CFOs, we can help you with the budgeting process and get your roadmap to financial success established. Call us!

For more information on HR, accounting & bookkeeping services, please contact Brenda Barnes at bbarnes@b2-mgmt.com.

Employee handbooks set forth expectations between the employer and the employee. A handbook is important in providing clear boundaries for the employees and establishing what to expect regarding benefits and workplace rules. Employers can clearly communicate to employees how they should behave, what constitutes appropriate workplace attire, and how the employer will compensate discipline, and reward employees. Employees will understand their responsibilities and have a reference point for how to do their jobs, maintain their status, and possibly advance.

Our HR team at B2 Management and Consulting knows the importance of employee handbooks and making sure they are properly tailored for your company.

For more information on HR, accounting & bookkeeping services, please contact Brenda Barnes at bbarnes@b2-mgmt.com.

Unfortunately, and far too often, accounting is also connected with scandal or fraud. The preparation of fraudulent financial documents, inflated earnings, concealed bad debt or other expenses, manipulated payroll, misreported tax liabilities and false insurance claims or banking applications. The wrongdoers were able to commit fraud because the victim organization lacked strong internal accounting controls. Without strong internal control measures in place, the wrongdoers can manipulate documents and data, misrepresent the company’s performance, and commit outright fraud.

According to the International Federation of Accountants (IFAC), the COVID-19 pandemic has heightened the risk of fraud and illicit financial reporting because of the shift to remote working; when employees are separated from the main office, internal controls can be easier to bypass.
No organization is immune to such scandals. What controls can you put in place to minimize the potential loss and embarrassment?

Detective internal accounting controls include: inventory counts and checks; internal and external audits, surprise cash counts, and reconciliations.

Preventative internal accounting controls include: segregation of duties; controlled access to the accounting and financial reporting system; double-entry accounting; limiting management involvement in financial statement preparation, expense verification; and limiting physical access to cash, equipment, inventory, and other assets.

Corrective internal accounting controls include: physical audits of assets and inventory; adjustments or rectification entries in the accounting system; and ledger verification.

All organizations need solid internal controls to assure the reliability of the financial reporting, processes, and compliance with various laws and regulations. Outsourcing your accounting functions to an organization such as B2 Management & Consulting (B2) can strengthen the segregation of duties, whether it be through our handling of the day-to-day transactions or we can act as an overlay to your internal accounting department. B2 can review underlying financial data, payroll registers, bank reconciliations and other key areas that are susceptible to error -intentional or unintentional. B2 can also provide consulting services to help you establish sound internal control procedures in your organization.

Call us; we are happy to help!

For more information on accounting & bookkeeping services, please contact Brenda Barnes at bbarnes@b2-mgmt.com.

Since many attorneys and paralegals are compensated by an end-of-year bonus based on productivity, this is an excellent time to review productivity reports. Is the firm meeting its overall goals? Are there underperforming individuals? There are many reasons as to why a timekeeper may be underperforming when compared to budget. The client workloads may have lessened this year; the timekeeper may have had some personal issues that impacted their ability to perform at 100%, or they simply may not be focused on their client production. This may be a time for a kick in the pants or, better yet, some encouragement to finish the year strong.

You will also want to review the financial health of the firm. Some of the key metrics to review are:
Fees per partner/shareholder. The metric can be run using billed dollars or collected dollars. For billed dollars, the firm’s billings are divided by the number of partners/shareholders. The more billings each partner can manage, the higher the firm’s profit margin.

Fees per all timekeepers. Similar metric but including the associates and paralegals.

Staff to partner ratio. The number of professional staff is divided by the number of equity partners/shareholders.

Effective billing rates. Each timekeeper has a standard default billing rate. There may be other rates that are higher or lower depending on the industry and the client. The effective billing rate is the rate after discounts and write-offs/write-downs.

Accounts Receivable per partner/shareholder. The review of accounts receivable (and unbilled time) should be reviewed now. Collection efforts should be underway for dollars to be collected before end of year.

If a client’s debt has been on your books more than six (6) months, consider offering the client a discount if paid before the end of the year. The longer a receivable is on the books, the less likely you will collect it.

The key metrics can be compared to other firms by utilizing some of the surveys that are issued every year. Many can be expensive, but if you have not checked your firm against others in a while, it may be worth spending the money. Also, compare to prior years and see how the firm measures. The effective billing rate metric is extremely critical, especially if the firm bases its budget on default billing rates. For example, if a $500 per hour partner has an effective rate of $325 per hour, it will be an indicator of either efficiency issues or clients being offered discounted rates. Finally, the push to collect receivables will happen, so you might as well get as much runway as possible by starting now!

For more information on accounting & bookkeeping services, please contact Brenda Barnes at bbarnes@b2-mgmt.com.

Rule 1.15 specifically requires the lawyer to preserve “complete records” with a law firm’s trust accounts which include promptly rendering a full accounting for all receipts and distributions from the trust account. Any violation of Rule 1.15 may subject a lawyer to professional discipline.

Each state bar association will also have model rules of conduct concerning the lawyer’s trust accounting.

Consult your state bar association and familiarize yourself with the standards of conduct and record maintenance. (IOLTA, IOLA)

Here are a few general best practices to follow:

1. Always segregate trust accounts from operating accounts. A client fee can only be deposited in a firm’s operating account if it has been “earned” or there is a specific non-refundable retainer agreement in place with the client. Best practice is to deposit in the trust account first and then transfer to the operating account once the fee has been earned.
2. Lawyers should never receive, nor are they entitled to receive, any interest from client trust accounts. Typically, a separate trust bank account is set up and can be interest-bearing, but the accrued interest is for the benefit of legal aids or pro bono programs. If a single client trust deposit is significant, the attorney has a due diligence to separate the funds in an interest-bearing account for benefit of the single client. If the deposit is short-term (which is typical), a separate account for benefit of the single client is not necessary but should be disclosed to the single client that the deposit will be in the general trust account. Please consult your state bar rules.
3. Full accounting should be provided to any client upon request, which may include copies of vendor invoices for any disbursements made from the client trust account. The client trust accounting should include a running balance of the account. Trust accounts should never have a negative balance. If you have a separate practice management system from the accounting software, ensure that the client ledgers balance to the bank account balance for that particular client.
4. ALWAYS ensure that a client trust check has cleared the bank before disbursing funds. If you disburse before the funds are collected, you are in essence borrowing funds from another client account and this is unacceptable.
5. The lawyer is accountable for supervising the trust account and only lawyers are authorized to sign trust checks.

Trust accounting is not complex if you know the rules and comply accordingly. If your firm handles trust accounting internally, it is in your best interest to have an outside firm such as B2 Management & Consulting to review your trust accounting. Let us help! For more information on accounting & bookkeeping services, please contact Brenda Barnes at b2-mgmt.com.

Looking for help with your legal billing or need specialists to help you recover accounts, contact B2 today.

As a full-service management consulting firm, B2 partners with our clients to deliver solutions that help solve their most complicated needs. Utilizing decades of industry experience and functional expertise, we can assist you in growing your business in a strategic way and help prepare you for the future.

“Outsourcing our back office was one of the best decisions I made. The team at B2 is experienced, efficient and responsive to our needs.” – Michael R. Perkins, Perkins Law Group PLLC

B2 Management & Consulting has been handling the billing for law firms for over 13 years. We process over 2,000 invoices per month, and the count is growing. Part of the growth is realizing that outsourcing your billing department isn’t just for small firms any longer. B2 started working with new mid-size clients last year. We can do specific clients – for example, LEDES clients. LEDES clients are the law firm clients, mostly institutional, requiring task and activity codes to be assigned to each time entry. In addition to assigning the correct task and activity codes, many clients have strict guidelines on what can and cannot be charged to them. For example, most of the clients have specifically excluded internal office conferences. The clients also require budgets to be uploaded and approved on a quarterly basis. Once all time entries have been reviewed and corrected, the billing department must upload the invoice to the third-party billing platform. The platforms will differ on how the information is put in their system, but most of them will kick-out time entries that do not comply with their billing requirements. When an item is kicked-out, it could be the single time entry or the whole invoice. If the entire invoice is rejected, then someone must make sure that the rejections are addressed and resubmitted. This is probably where most lawyers get frustrated with the systems – if your billing department doesn’t stay on it, your invoice, your time, perhaps your compensation will be impacted by the delayed billing.

The facts are that your billing department may be really good at processing your bills, but they do not have the time to monitor your third-party billing clients/LEDES clients. B2 can help your billing department. We have dedicated personnel that have experience in a multitude of platforms: TyMetrix 360, Legal eXchange, CounselLink, Collaborati, LSS, Datalytics, Legal Tracker, CSC and CounselGo.

Call B2 today to discuss how we can help.

In the most recent Citi Private Bank report, the key trends to watch in 2022 are:

Getting the Hybrid Model Right
As firms settle on the right mix of in-office and remote work, there are three main considerations for law firm leaders:

(1) what is best for the firm; (2) what is best for clients; and (3) what lawyers and staff want. Given the current talent war, the dominant consideration this year will be item 3. Whichever way firms decide to go, they will need to be intentional in how they approach developing their people. You may want to consider getting partners and associates in on the same days and making time to focus on office collaboration.

Leverage Growth
There continues to be a strong emphasis on increasing the number of income partners, of counsels and associates.

Associate retention continues to be a big challenge, with 78% of firms reporting a higher attrition level in 2021 compared with 2019. The mobility in first-and second-year associates is particularly easy since they have had only the pandemic to work in, and training by videoconferencing hasn’t made them stick. Attorneys at any level are at risk if the firm neglects the discussion of their career prospects.

Equity Partner Growth
Large firms will pick up steam on promoting attorneys to equity partners. With that, 83% of firms reporting an increase in their equity partners are making changes to their compensation models to retain and attract talent. While some firms have made no changes, others are shifting to a merit-based system.

Continued Focus on Operational Efficiencies
The focus will continue to be on operational efficiencies in 2022: (1)Many firms will be rethinking space – while many firms plan to reduce their square footage as leases come up for renewal, around 30% still choose not to reduce square footage. Collaborative spaces are trending. (2) Firms will also continue to focus on technology, especially practice management tools. The focus will be on systems that support knowledge management, client relationship management, billing and collections, and contribution analysis.

(3) Firms will continue to reduce administrative support expenses, but there will be a growth in pricing specialists, business development professionals and technology staff, as well as project managers and billing and collections teams. (4) Firms will likely continue to invest in business development activities but will be more mindful of client travel expenses. Clients now know that meetings can be conducted via video conferencing and will demand it.

Continued Growth in Alternative Fee Arrangements (AFAs)
According to the report, there will be continued growth in AFAs though it is likely to remain a relatively small proportion of law firms’ revenue. The greatest significance of AFAs is that there is an expanding number of firms that will be reporting more than 20% of their revenue from AFAs.

We hope that you found this summary insightful. For the full report, consult https://www.privatebank.citibank.com/insights/citi-hildebrandt-client-advisory

Bookkeepers Embezzle Over $1 Million From Small Business Clients – Small restaurant owner paid over $130,000 in payroll taxes to the IRS to only later find the funds had been diverted to their bookkeeping firm. The bookkeeping firm used their access to the small businesses’ accounts to transfer the payroll tax funds into their own checking account instead of making payments.

When IRS sent delinquency letters to the business, the bookkeeping company claimed it was a timing difference.

It was not until they applied for their Paycheck Protection Program loans did they discover they owed hundreds of thousands of past-due payroll taxes.

Law Firm Bookkeeper Pleads guilty to stealing $1.7M from Employer – In this case, the law firm’s bookkeeper and financial manager were given complete control of the firm’s business accounts with no oversight.

The bookkeeper was given authority to issue business credit cards to employees and to close the accounts for those who left the firm. The bookkeeper began using office credit cards assigned to employees or former employees to make non-firm-related purchases totaling over $1.2M. Then, she added to her scheme by slowly withdrawing an estimated $417,000 in funds from the operating account. She disguised the withdrawals as vendor payments.

Bookkeeper gets 4 years in Prison for Embezzling Over $1 Million from Medical Practice – Office manager and bookkeeper used her position and wrote business checks to herself to cover personal expenses. To hide her illicit actions, the bookkeeper prepared false business financial records that overstated expenses and estimated tax payments. She then opened a business bank account in the medical practice owner’s name without his consent, deposited checks from the state department of revenue into her own account, and falsified documents. Her web of deceit just goes on!

At B2 Management & Consulting, we understand the need for internal control processes. All of our team members have full background checks performed during the hiring process. Every financial statement and the underlying support documents are reviewed by someone in management before they are submitted to the client. We also understand how to assist you in implementing your own internal controls.

Call us and let us help!

First and foremost, you need to have solid billing policies that are agreed upon and followed!

• • Enter your time daily. With today’s mobile technology, there is really no excuse for not entering time daily. Your practice management software should be so easy to use, so easy to access that there are really no excuses. Enter time from your desktop, laptop, iPad, cellular phone and dictate it directly to your software. If your software is not providing your attorneys this flexibility, make the investment now to migrate to a system that will. The return on investment will be recognized immediately.
  • Run your prebills per your billing schedule. If you invoice clients for time through the end of the month, prebills should run on the first or second business day following the end of the month. There is no good excuse as to why this cannot happen if everyone is entering their time daily.
  • Return Prebill Edits to your billing department by the deadline. Again, billing must be a priority for all billing partners. No exceptions. If your firm still uses paper for prebills, that’s okay, just make sure the efficiency of print is the best use of firm resources. There are practice management software tools for billing workflows. Centerbase, for example even has a Prebill Approval Process that will simplify the approval process chain of events.
  • Final Bills should be distributed to your clients no later than 5 days after the close of your billing cycle. It can be done with a commitment from you!
  • LEDES Billing is often the nemesis of your billing department. The billing process must hold your billing department accountable to upload the LEDES invoices into the third-party system. They also MUST follow up on rejected invoices and follow the appeals process through to resolution. We cannot tell you how often we hear from a prospective client that they were shocked to know that the reason their collections were down was because there was no follow up on the appeal.

B2 has a team of billing specialists that understand the importance of following billing processes. We understand the intricacies of the LEDES process and will ensure that no dollar is left on the table due to apathy! We process over 2,500 invoices per month for our clients and the count is growing. Outsourcing your billing department makes financial sense and will get cash flow moving in the right direction.