Category: Uncategorized

What is the Corporate Veil?

Piercing the corporate veil refers to a court ignoring the limited liability of a particular business entity when there is outright fraud or abuse taking place within a business. Each state has its own case law concerning when the corporate veil can be pierced, but one circumstance that is a consistent requirement for many states, is when the business owner intermingles or commingles personal and corporate assets. A business necessarily is defined as its own business entity with its own separate funds and fiduciary interests. When a company pays for the owner’s personal expenses directly, this may not be considered “arms-length” when in litigation. Take the necessary step to loan funds to or from business entities when needed in an official capacity.

Tax Consequences to Avoid Commingling funds should be avoided with proper workflows and procedures, like keeping separate bank accounts and a separate set of books for each business and personal entity. Not only can this meet the legal requirements, but it is also the best method to keep track of all tax-deductible expenses. Commingling funds can lead to missed expenses which may lead to higher tax liability at the end of the year.

Legal Ramifications of Commingling Funds

The court’s reasoning behind this treatment to pierce the corporate veil when a business owner commingles funds is that the business owner isn’t actually operating the company as its own separate entity, but as an extension of their own personal assets. Many times creditors seek to pierce the corporate veil in order to recover debts personally from business owners who have failed to uphold their fiduciary responsibility to their company. That is why it’s so important to take the time to keep the expenses and incomes within a company within their own accounts and set of books. If you have partners, and the company is in litigation creditors may try to pierce the corporate veil. If they succeed, creditors can then go after all personal assets, bank accounts, investments, and other assets to satisfy the corporate debt. Be sure to look at the specifics of piercing the corporate veil in your state. In the meantime, set up the necessary structures and workflow to avoid commingling company and personal assets.

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The quality of law firm accounts receivable (AR) is made possible by way of key performance indicators (KPIs) reporting records of old and new accounts, as well as payment activity, billing collections, and client communications. Metric KPIs permit a firm to evaluate clients who have partial payments, and scale accounts for the determination of which accounts to pursue collections. An example is a large account with a 50% paid invoice not sent to collections, versus a collection notice of an account in nonpayment status despite an overall smaller balance.

Old vs New Client Accounts

The benefit of aging report KPIs is the age and percentage paid on invoices are viewed for smarter evaluation of collection. KPIs provide firms with insight into outstanding billing and payment trends. Performance analysis of law firm AR account data in aging reports indicates client account age, and percentage of payment to the standard term: 0-30 days, 31-60 days, 61-90, 91-120, and 120+ days due. KPIs also offer a second level of evaluation indicating client payment, and outstanding owed across multiple invoices or accounts.

firmTRAK is a Collection of Solution

If outstanding accounts are a serious obstacle to firm operational liquidity, the firmTRAK dashboard of KPIs offers the tool to get AR billing back on track. Track billed time for AR quality assurance with KPIs.

Visit firmTRAK : https://firmtraksolutions.com/

Law firms and other business owners can be focused on the action first and the organization second when setting up their business accounts. However, a business needs guard rails to keep funds associated with their business in their business account and take the necessary steps to move funds to and from personal accounts or other unrelated business accounts. When a purchase needs to be made for the company, there may not be a distinction that matters in the owner’s mind which leads to treating business accounts as a personal checkbook. However, that approach leads to more work later. Using one checking account to make personal and business purchases saves 2 minutes now and create hours of work later for multiple people including the business owner, the bookkeeper, and the tax preparer.

Solution, hire a bookkeeper to keep company finances organized:

If the firm is running short on funds, make an owner contribution to the business operating account. If the owner’s personal expenses are being paid for out of the business operating account, consider making a weekly distribution to pay for personal items out of personal accounts. This will save all parties involved, time and money. If the owner has multiple entities and EIN #’s never pay for one entity’s expenses in an unrelated company’s account. This may lead to legal liability down the road. The proper solution is to set up a loan from one company to the other and charge interest.

Saving time now is actually borrowing time from the future. Also, serially making business purchases out of a personal account is much more likely to have missed deductions on the business’s tax return, increasing the tax liability of the business.

Get your firm’s bookkeeping organized with firmTRAK Solutions’ outsourced accounting services for law firms.

Visit: https://firmtraksolutions.com

Today, law firms can improve their AR collections by subscribing to the firmTRAK reporting solution. This automation can outsource business processes, designed to translate the payment behavior of individual client accounts into KPIs useful for tracking and profitability reporting. A unified approach to doing business accounts receivable (AR) key performance indicators (KPIs) reflect client account payment responsiveness in the billing cycle. With automated reporting of client accounts receivable, law firms can proactively break the cycle of mounting debt, by understanding how to fast-track, outstanding client billing, into operations liquidity.

A General Theory of ‘Risk’ Reduction

Risk theories shared by the field of accounting and consumer psychology, suggest that loss mitigation is typically an iterative process requiring notice of issues along the way. A core priority for law firm operations, the risk of outstanding accounts within the billing cycle may be both a short-run and/or long-run threat to operational liquidity. AR aging reports, when regularly reviewed, enable law firms to identify and track risky client payment behaviors affecting the billing cycle before it is too late.

Once client responsiveness to the billing cycle is established with payment (or non-payment), figuring out what motivates them is the next step. Empathy is always an important lever for client relations management and can help firms by collecting information about a client’s income, circumstance, and ability to pay on time. An effective B2C communication method is to reach out to clients automatically with template reminders from your billing or accounting system. These auto-reminders can assist clients to stay on track during the billing cycle. The inclusion of AR aging report KPIs in letters, billing notices, and email reminders provide summary information to the client about the invoice term and schedule of their payment.

Proactive Solution to An Age-Old AR Problem

Changes in customer behavior can be an indicator they are avoiding billing notices and related communications because they have late invoices or other issues with payment. Sometimes a drop off in quality client communication is merely a matter of systemic confusion. The use of your AR aging schedule to monitor accounts approaching 0-30 days, 31 – 60 days, and later in the billing cycle, is a proactive solution for early communication with clients and can improve cash flow.

By staying on top of the billing cycle and individual client accounts, a law firm can analyze payment responsiveness, communicate about invoices or an outstanding balance, or address any issues the client may have with your service. Many customers have unforeseen challenges and would be willing to make payments according to a schedule. AR aging reports provide firm reliable data about the status of outstanding invoices on record. Reach out to clients with incentivized or convenient methods for payment (i.e., electronic payment options or discounts). These solutions to cash flow problems might not otherwise be evident without an AR aging report.

‘Break the Cycle’

firmTRAK automated suite of law firm reporting tools with Clio and Xero integration provides law firm subscribers the real-time analysis and KPIs they require to interpret billing risk. Break the cycle of client late payments with firmTRAK AR aging reports. Visit: https://firmtraksolutions.com/

Many times business owners fall into established routines in their day-to-day. Every so often workflow processes and procedures should be evaluated for efficiency and effectiveness. This is doubly true when it comes to using technology. iPhones in particular have had many different iterations and, as one TikTok user discovered, the charging habits we used to know don’t apply to the latest generation of phones. The big secret he revealed was that you should leave your phone unplugged when possible overnight, and only charge the phone when it’s below 20% battery charge left. This reduces the amount of charging cycles on the phone and extends battery life. There are 5 important lessons to be learned from this technique that can be applied to running a business.

1. Evaluate your workflows regularly

Just like plugging in your phone when you sleep was the logical step when cell phones first became ubiquitous in the early 2000’s, many workplaces follow established routines they picked up from just being in the workforce over the years. Many times, there are no deliberate considerations as to how workers interact with the tools and technology that are available as an employee. The person is hired, set in front of a computer, and left to their own after minimal training. Tips and tricks should be shared throughout the company periodically to promote communication and efficiency among colleagues. Just because someone has always done something one way, doesn’t mean it’s the best or even practical. Documenting job’s by deliverables and establishing a workflow diagram should be considered if no current documentation exists.

2. Invest in technology that is productive

Don’t throw money at a problem and expect it to solve workplace performance concerns. With SAAS models for software now being the norm, each tool should be evaluated on its merits and function. A good example would be forcing all employees to join a chat app when email already serves this function. More apps may simply end up adding more systems employees have to log into and check before they begin their work day. Each piece of technology should have a clearly defined role in the organization.

3. Don’t be afraid to try something new

With that being said, don’t be afraid to switch up employees routines if there is efficiency to be gained. If data entry can be eliminated or communication is automated, employees are now free to take on neglected tasks or service more customers. Chat apps, in some business models, may actually improve employee communication where emails get ignored.

4. Outsource work to experts or specialists

In your workflow evaluation, always consider the best use of employee time. It may make sense for a business owner to take care of the bookkeeping and data entry for accounting to save money, but that time could have been spent acquiring new customers or servicing current customers. There is an opportunity cost for the time spent doing the administrative tasks of the business. Look for cloud-based advisors or bookkeepers. They will be able to do the bookkeeping and accounting faster and more accurately. Reports should be included as a standard service so time can be spent planning the strategic goals of the company rather than the data entry of the accounting.

5. Stay current on feature webinars for your office’s technology

The last item that was pointed out by how to charge your iPhone was a feature that was available in the settings of the phone. There is no way a normal person generally knows all the settings and options when setting up a smartphone. It’s the same in accounting, CRM, and other business software. The only way to stay current is to make an effort to certify members of your staff on the latest updates and features of the technology stack your company is using. This is another advantage of outsourcing to an experienced cloud accounting company. Their staff will be familiar with all the new features, as they would typically be required to maintain certification to keep their partner status with the software. This knowledge is then passed on to business owners in the form of better service.

In conclusion, when it comes to technology in your business, stay current with updates, and don’t be afraid to try something new. As a busy business owner, you may no longer find you have the time to evaluate every new software tool. In that situation, consider finding an outsourced expert to help add a new perspective and some leverage to your company by completing administrative tasks more effectively and efficiently. Evaluate and document your workflow processes for areas of improvement. By learning from these tips your business won’t get stuck in a rut and improve on meeting your companies financial goals.

Visit firmTRAK for more information. https://firmtraksolutions.com/

One of the most effective methods of enhancing law firm billing process performance is automated invoicing and scheduled payment reminders. firmTRAK Solutions can help you set up CLIO, PracticePanther, and Xero accounting software to generate automated invoices and client reminders during the billing process based on invoice terms and account records of payment.

Xero Invoice Automation

Xero expertise from firmTRAK offers law firm subscribers an automated solution to automate invoicing reminders based on individual terms (i.e., 7 days 14 days 21 days, etc.). Automated invoicing eliminates billing collections risks to firm operational cash flows, conveying the terms of payment to a client upfront. Friendly with iOS or Android, Xero email reminders can link to a preferred online payment gateway to reduce the time to pay.

CLIO or PracticePanther Client Reminders

With CLIO or PracticePanther, the billing process is supported by single or multiple payment deadline reminders. Manage billing collections according to schedule by contacting clients directly. Both systems permit attorneys to communicate to a client based on the number of days, with repeated reminders scheduled when the account status indicates payment is late as predetermined by the law firm.

Billing Process Perfected

firmTRAK Solutions expertise with Xero,  CLIO, PracticePanther, and accounting operations for law firms, can improve the efficiency of the billing process with automated invoice reminders.  firmTRAK is a law firm billing solved. https://firmtraksolutions.com/

 

 

Record of days sales outstanding (DSO) is one of the key performance indicators (KPIs) for determining law firm liquidity. Reporting of DSO rates for a firm’s sales cycle assists in determining the time frame until outstanding client accounts are paid. By dividing the total of accounts receivables for a period by the total net credit sales, multiplied by the DSO, a firm can estimate its cash conversion cycle rate, signaling AR billing performance.

Accounts Receivables ➗ Total Net Credit Sales × Day Sales Outstanding (DSO) = Cash Conversion Cycle Rate

Why KPIs Boost Liquidity

With metric KPIs, a law firm has the insights it needs to improve collections efficiency, thus enhancing liquidity. Credit sales conversion rates and other transactions signaling a high DSO rate are a risk to finance that could otherwise be used for covering the operational expenses. Conversely, a firm can boost overall AR performance by decreasing DSO-related billing cycle risk. Capture your firm’s DSO to build a better financial model for the future.

Cash Flow Solution

Decrease billing cycle time to payment with direct API integration. Our application supports CLIO Lawpay and Xero GoCardless (ACH) transactions. Experience firmTRAK’s robust reporting KPIs and turn insights about firm billing cycle productivity into profit. Find out how to catalyze firm AR reporting performance with firmTRAK metric KPIs and reporting tools. Visit: https://firmtraksolutions.com/

Accounts Receivable Risk

Accounts receivable “risk” corresponding with outstanding accounts, can have a negative impact on a firm’s bottom line. When law firms seek solutions for mitigating accounts receivables risk, benchmark comparison of those assets with key performance indicators or “KPIs” are the answer. KPIs afford a deeper dive into AR records, giving insight into the quality of accounts, as well as the potential risk of accounts to profits over time.  

Concentration Ratio and Diversity Index KPIs

KPIs permit a firm to analyze individual accounts relative to the overall AR balance. A standard metric for evaluating AR risk, the concentration ratio is an aggregate comparison of outstanding account balances on invoices.  As the concentration ratio of accounts approaches 1, the risk on profits increases.  The fewer clients are billed, the greater the risk of losing profits if a client becomes unable to pay.  The inverse of concentration ratios is the diversity index. This number shows how many clients you would have after applying for risk. 

The Accounting Solution

firmTRAK accounting metric KPIs offer law firm clients the analytic expertise they require for estimating the value of their accounts receivable assets. Visit firmTRAK for more information about how your firm can benefit from metric KPIs: https://firmtraksolutions.com/ 

Accounting Data Lead Source for KPIs

Expert CPAs and financial controllers can turn financial analysis of accounting records into a viable data set for purposes of measuring firm performance alongside industry benchmark standards. Metric key performance indicators or “KPIs” are a priority for any law firm seeking to build capacity over time. For instance, analytic reporting of a firm’s cost of capital also estimates the length of time outstanding accounts are owed. Accounting is perhaps the single most important source used by law firms for capturing KPIs. With firmTRAK accounting software application as a service, consolidation of a law firm’s financial operations enhances the strategic planning process similar to big law firm competitors.

Avoiding “Garbage In, Garbage Out” Errors

Forecasting requires reliable historical data to determine the frequency and probability of performance by a firm by way of regression analysis, notably recognized as a “trend”. The same holds for the reporting of accounting data for use in strategic forecasting of a firm’s AR, revenues, and outstanding debts. The concept “garbage in, garbage out” then, is relevant for understanding the obstacles a firm may face when attempting to capture reliable KPIs.

Historic Accounting Record, Future Forecast

Moreover, accounting offers the best source for the forecasting scenario, as the fundamental calculus (i.e., algebra and statistics) required for financial analysis is at the base of profitability estimates and other key data parts of financial reporting. While profitability is obviously a key priority for any firm no matter the size, the budgeting, costing, and financial reporting analytics all part of the firm’s accounting record, provide robust insights about the process-related performance factors impacting a firm as well. firmTRAK permits a law firm to integrate accounting records, including invoices, trust ledgers, AR, bank reconciliations, and billing schedules.

Boost Law Firm Competitiveness

Law firm competitiveness can be put at risk by outstanding billing remittances. KPIs reflecting the activity of accounts receivables on the ledger, assists a firm in its evaluation of the solvency of its operations. Measured benchmark reporting provides an overview of a law firm’s financial control of outstanding billing collections. firmTRAK accounting metrics offer the option of accounting system integration and consolidation, with continuously up-to-date account reconciliation.

firmTRAK

Key performance indicators are benchmark reporting solutions for the strategic financial control of competitive attorney practices and their billing and collection accounts on record. TRAK Law Firm Metrics by firmTRAK is a comprehensive analytics environment for billing and financial control of a firm. We offer law firm client subscribers PracticePanther integration with CLIO withaccounting software, Xero, and Quickbooks Online for optimal operations tracking. firmTRAK law firm metrics reflect consolidation of data relevant to the accounting for lawyers, accounting for law firms, and trust accounting analytics and reporting seen across the industry.

 

Law firm competitiveness is more than the efficacy of attorney representation. Optimization of accounts receivables on the ledger with measured benchmark reporting enhance law firm financial control that might otherwise be compromised by outstanding billing collections. When it comes to crunching numbers, firmTRAK Accounting offers attorney practices the law firm key performance indicators (KPIs) they require to enhance profitability.

WIP Turnover

Of the measured KPIs essential for the strategic financial management of law firms, WIP turnover is one of the most applied in the financial control process. WIP turnover is a benchmark estimate of a firm’s cost of capital correspondent to the number of days of outstanding accounts. A firm’s WIP turnover “inventory” is calculated by deducting any unbilled account contingencies or transactions to be paid on closing from the total account, divided by the number of days. The sum of those outstanding accounts is then divided by the average revenue generated per day to reach the WIP turnover.

firmTRAK Law Firm Metrics 

Law firm profitability begins with benchmark reporting. Our law firm metric solutions report WIP turnover and other financial analysis to accounting. With firmTRAK Accounting a practice can improve its financial outlook with metric reporting of outstanding billing and collections. firmTRAK Accounting law firm metrics provide firms the KPIs they require to compete more effectively in the marketplace.