By Diane L. Camacho CLM.
With the holiday season approaching, getting caught up in the festivities is easy. However, taking a moment to address essential firm housekeeping tasks can save you time, money, and stress in the long run. While often overlooked, these tasks are crucial for maintaining a well-organized and compliant practice.
- IOLTA Review and Clean-Up
If you are a California attorney, you know the requirement to certify your understanding and adherence to the IOLTA guidelines when renewing a bar membership. However, even if you are not in California or another state that requires this, it is a good time to review your IOLTA account and practices.
a. Return Money
Review your open and closed matters. If there are matters that should be closed, close them. If there is money for that client in trust, return it. If you are a firm that doesn’t formally close matters, but there is no active work for a client and you are holding trust money on their behalf, return it.
We are often asked by firms what to do with trust money for clients they can’t find. You must send the money to the state through a process called escheatment. If you are unsure how to handle this, ask your banker.
b. Carefully Review Balances
Look at a list of trust money for each client. Make sure it looks correct. Make sure you don’t see clients you don’t know and are not holding large amounts of money you are unaware of.
Your bank balance, General Ledger balance, and time and billing software balance MUST MATCH. Three-way reconciliation is required. Don’t trust anyone to tell you this is balanced without seeing the reports personally. You are going to be fined or disbarred, not your accounting manager, bookkeeper, or CPA if there are problems.
- Review Upcoming Labor Law Changes
Do a quick search online for “new labor laws in XYZ state for 2025”. Look for labor law update reports and information. Check your state labor board website and search for new laws.
If you don’t have an internal HR person who keeps up with these changes, it is best to ask someone on your team to research this or reach out to your Labor Law Counsel (which you should have if you are managing people).
There was a change in the sick time law in California in 2024 that many firms didn’t know about.
- Uncollectable AR
Figure out a way to get your uncollectable AR off your AR aging report. If you don’t want to write it off completely and remove it from your reports, create an originating attorney ZZZ and change the originating attorney to that so it is easily deducted from your active AR.
Collecting AR should be a priority for the firm and if the numbers are muddled with irrelevant information, it is easy to discount the entire report. Remember, when you work and don’t get paid, you are doing Pro Bono work you didn’t sign up for.
- Audit Your Payroll
Be sure that the time off accrual rate is accurate. Look at the balances, if there are large balances of Paid Time off “PTO” or vacation time, your employees need to use it. If you don’t have a maximum accrual amount, you may want to consider putting some caps in place. Unmanaged vacation accrual banks can represent significant “phantom” payroll liability at termination as time is cashed out at the current rate of pay, not the rate when it was awarded.
We often find that accruals are not correct, vacation or PTO time is not marked as used when it has been, and pay rates are incorrect. Understand what it means for employees to be “salaried”. The best practice is for hourly employees to be paid for the hours they work, not for ½ a month. This can cause major problems if there is OT or people leave in the middle of the year and the hours worked don’t equal the “salary” they have been paid. Not to mention partial days off.
If your accounting folks never take time off, it is a red flag. You should have them leave for at least two weeks in a stretch and make sure good instructions are left and there are no surprises.
- Review Software Subscriptions
Have your accounts payable person or your bookkeeper give you a list of every subscription being paid annually or monthly, the number of users, and be sure you are not paying for something you aren’t using. Getting one line item in your P&L entitled “Subscriptions” can hide all kinds of annoying things.
These are a few items that often get out of hand. If they are reviewed each year when you are closing out one year and opening the next, some costly and annoying problems can be avoided.