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Wednesday, 3 August 2016

Getting Married and Software Implementation - similarities

Implementing new software systems, such as a small Payroll system, a Practice Management system and ERP systems, have a lot of commonalities as well as their own unique challenges and stages that span months or years.

However the the model of software implementation has been simple 2 step process in that it is: Purchase the software> Learn. On either side there is Vendor Demos, short listing of products, product selection and then after sale sign off, planning, discovery, scoping, requirements gathering, process changes, data conversion, testing, training, Go live strategy, etc.

The above seems pretty obvious. However my PCLaw selection and implementation model was opposite to the above conventional model. It was: Learn> Purchase the software. It is like a mini rollout before buying or actually committing to the system.

Whilst the former model is better suited for firms that have consultants support engaged in product selection, it is akin to finding a mate, getting married!

The latter, however is a slow but sure model, greatly reducing risk, ensuring a good fit where you greatly increase the chances of successful rollout. And it is akin to finding a mate, dating, getting married!

Which strategy would you choose to implement a new software system?

Wednesday, 24 September 2014

G/L Reconciliation Report Differences – Wrong Data Entry Dates

The G/L Reconciliation report is an invaluable tool in PCLaw to detect data inconsistencies and any corruption in the accounting data. This report is typically run at end month to spot any anomalies.

Any differences appearing on this report most likely points to data corruption. However there are cases when differences appearing are a result of data entry issues.

For firms on Accrual systems the following control accounts can get skewed due to wrong dates used at data entry:

·         Accounts Receivable (“AR”)

·         General Liabilities (“AP”)

For a mismatch in AR the cause at times can be current receipt dates used to receive payment for forward dated invoices. For example a user posts a receipt dated March against an invoice on a matter billed in April. This will definitely cause an imbalance in AR between G/L, Journal and Client balances.

When users exit a data entry screen that was used to process a backdated entry, the date stays when they re-open the same data entry window again (Receive Payment window in this case). They often times forget to change the date in the date box when opening the data entry window again to enter a new transaction.

In the case of AP a user may process a forward dated Payable using a cheque of current date. For Example: Payable is dated July and the cheque to settle the payable is dated June.

For AP Process Payables the issue is unlikely to be the date but what happens is at times Vendors send post dated invoices. For instance an ISP sends an advance invoice for internet use for the following month. Accounts Payable staff will enter the payable dated the following month and process payment in the current month. They do not realize that there is a difference in a) processing a current or old payable and b) making an advance payment to a Vendor for a future payable – there are steps for making advance payment to a Vendor.
With a little bit of vigilance above errors can be avoided.

Sunday, 21 September 2014

Multi Currency - Billing

PCLaw is not a multi currency accounting program. However, it is possible to account and track multi currency transactions. I plan to discuss here in a series of blog posts about multi currency.

I begin with Billing. The hardest part of all foreign currency transactions is in billing. How do you bill clients in foreign currency and track the A/R balances?

There is a way to reverse engineer the bill templates such that you can have all charges - Fees and Expenses appear in desired currency. This is a trial and error method and unless you are a freak you should engage aCIC to design bill templates to bill clients in foreign currency. This involves creating a custom tab for putting in the currency and rate and then creating formula tokens on the templates. The problem with this is that the custom tab token information is not available in all sections of the template. To get round this few users are able to find and replace the desired token from another section to the section that lacks that token. It involves intricate steps that involve opening a template on notepad and playing around...As I say you got to be freakish to be able to do this, otherwise better to hire an expert to do it.

Once the template is designed you simply insert the custom tab and indicate the exchange rate. Then bill the matter with the charges in local currency using the correct bill template. The bill will appear in foreign currency ready to be sent out.

Note that the accounting is still in system currency. You would have to make use of the Collection Memos to indicate that the A/R is in foreign currency.

Tuesday, 20 August 2013

Output VAT Does Not Reconcile with Revenue – Help

This post is written primarily for Kenya and related jurisdictions where firms operate on an Accruals environment and where VAT law states that Output VAT is a function of taxable income.
After month end when firms have to file their VAT returns they have to ensure that the VAT is computed correctly and it reconciles with the taxable revenue. The simple formula is: Sales per Income Statement X VAT % = Net Output. This net Output should agree with the VAT Journal  (VAT Collectible after ITC Adjustments in PCLaw's VAT Journal).
There are a myriad of possibilities why the output VAT will not agree/reconcile after factoring any round offs. The hunting of the difference will begin after identifying what the difference is whether it is over or under stated.
VAT is a component of Fees and Disbursements Recoveries billed. One would use the elimination method to narrow down the areas that need to be looked at but some of the areas to look at:
·         G/L Statements: Run the G/L statement (non-detailed report) for first income to last income and focus on the Fees and Exps recovery G/L Accounts and see if there are any mispostings. In Fee accounts the source journal should only be BJ and WUD. For Expense Recovery G/L accounts the source should be CER and WUD. If you have entries originating from GB, PJ or GJ then these need to be looked at.

·         Write Up/Down (WUD) Journal: If there are WUD entries on the Fees and Exps recovery income G/L Accounts, run the WUD Journal and ensure that the invoices on which the Write Ups/Downs were done relate to Credit Notes and VAT accounts have been affected accordingly.

·         Invoice Journal Report: Run this report with correct layouts for Fees VAT. Throw the report to Excel and work on the Fee column. If there are any invoices billed which have no VAT charged ascertain that those were the Zero Rated Sales invoices. Then create a column for Fees VAT and compute the Fees manually using formula: Cell with Fees X VAT Rate. Then create another column for the Diff between VAT computed on the PClaw report and VAT computed manually on Excel. The difference should be zero. If there are material differences then that means that the VAT amount on Fees was altered at billing time.

·         Client Cost Journal: Run this report for the period in question filtered to include Expense Recovery entries only. On the resultant report check under the G/L Account Summary that the G/L allocations are to the correct (income) accounts.

·         Register>Expense tab:  Filter this for Unbilled  entries. This will produce all anticipated (ANT) Disbs and any Expense Recovery entries that have been unbilled. For this to work the Register should be run on the last day of the VAT month or before the billings for the following month has commenced.

·         Client Ledger Report: Run the client ledger for Disbursements only with a start and end date of the month in question. This report can be run at any time after the end month. The report must be run with the following filters under Advance Search which I have discovered to be very useful:

o   Received From/Paid To is Equal To “Expense Recovery” And Invoice Number is Greater Than XXXX where (XXXX equals the first invoice number of the following month’s billing) (This will work if all invoice numbers are sequentially used for the firm’s billing). The resultant report will show up any Expense Recovery entries that were made in error in the VAT month in question (incorrect date) but billed in subsequent months. This is useful if you are doing the exercise past the VAT period and the billings for the subsequent period has commenced.

o   Received From/Paid To is Equal To “Expense Recovery” Or Received From/Paid To Has “Taxes on Disbursements”. The resultant report will give a list of all ledgers that have Expense Recovery and Taxes on Disbursements. The report can be exported to Excel and analyzed by sorting out. On Excel a) ANT Disbursement entries can be alienated, b) Zero VAT Rated Expense Recovery entries can be identified and alienated and c) any Vatable Expense Recovery entries that have no corresponding Taxes billed identified and alienated. The balance of entries can be checked for VAT calculation to ensure that the total VAT billed on Disbursements is correct.
From my experience a lot of the VAT differences arise from the Disbursement elements.  Unfortunately there is no way users can be able to tell the Vatable Disbursements from the Non-Vatable Disbursements billed using built in reports in PCLaw . One therefore has to rely on mining the information from the above reports. The above if looked at properly should enable one to identify the errant entries or incorrect VAT amounts.
As a rule I recomend Accounts staff at all offices to reconcile the VAT on the last day of the month by close of business.

Friday, 9 August 2013

About Accurate Billing and Collection Reports

Billing and Collection information plays a vital part in law firms' remuneration structure. This information is constantly needed to make objective/subjective assessments of lawyers or partners productivity.

There are numerous reports in PCLaw to get this information. However for information to be consistent and accurate the system must be configured and data entry rules set to properly reflect the company’s policies on fee credits and collections.

There are a number of areas in PCLaw that need to be configured properly.

To begin under System Settings>Billing tab the option “Allocate fee changes to Resp Lawyer” determines if any Bill Up/Down of Fee amounts during billing should be allocated to the responsible lawyer or not. This is important and most firms leave it disabled if they wish the changes to be pro-rated amongst the working lawyers.

The next important area is under System Systems>Data Entry tab. Here you define how the collections are applied. Most firms leave it to Taxes, Disbursements and Fees in that order. It is important that this setting reflects the company’s policies and once set this setting is not changed. However this can be overridden on a case by case basis. For instance if the client is only paying the Disbursements and Taxes portion of the bill and not the fees, this can be allocated at data entry under Receive Payment>invoices tab>Payment details button.

The other area to look carefully at is at Matter levels Bill Settings. Here under Options “Auto Allocate Time/Fees to Working Lawyers” is checked by default and that is what most firms wish to allow PCLaw to automatically determine and allocate the fee credits to the lawyers working on the case at billing time in proportion to the value of their time spent. If it is the company policy for all fee credits to go the file holder then this option must be left unchecked (fee credits in such a case will go the Responsible Lawyer).

Within these parameters PCLaw still allows you to override who gets the fee credits at billing stage. If fee credit overrides is to be done, this can be accomplished at the “Prompt for changes to Billed Amount” stage during billing or at Matter Manger>Billing tab under “Split Lawyer Charges”. Firms must set clear rules embedded at Prebill levels for partners in charge of the matter to indicate desired fee credit allocations on Prebills.

Properly setting up the system and defining rules for partners, billing/accounts staff to follow for fee credits and collections is therefore vital to get accurate and consistent billings and collections reports.

Wednesday, 7 August 2013

Journal Entry on Bank Journal Issue

The G/L Adjustment feature in PCLaw can be used to pass non-matter related entries (receipts/payments) via the General Bank journal. After performing the entry “Show Entry on Bank Journal” must be checked. The entry will appear on the General Bank Journal with a blank “Received From/Paid to” field while the "Rec/Chq #" will indicate the Journal Adjustment Ref #.
Tip: Faster way perhaps for accountants to record transactions for several office banks (e.g. monthly bank charges) in one go.
Bug: Once the entry is done NEVER drill down from the General Bank Journal or General Journal reports to delete the entry because although it will appear as deleted on the General Journal report,  the bank journal and G/L statements will still show the entry.  To get round this one would have to pass a reversal entry or call Technical Support to help fix the issue by removing the entry from the back-end. The only uneventful way to delete the entry would be via G/L>General Journal>Correct G/L Adjustment. This issue is true as of V10 SP5 HF3.

Friday, 7 June 2013

Tiered Rate Structures

I had a situation for a law firm who took up a matter which would proceed in stages/phases and the rate matrix for each phase and lawyer was different.  The firm entered into a billing arrangement where it would bill fees based on the phase the matter fell under. So, lawyers working on the first phase had to record time at particular rates. If the matter proceeded to phase 2,3, etc the rates changed accordingly.
Below is a write-up I did on how to accomplish this.
General Overview of Rates in PCLaw
·         Rate Categories Assigned: Rates assigned for a matter are predefined in the system at firm level or matter level. Rates can also fall in categories and the individual rates for each timekeeper may vary for each category as defined in the system. For example: If a matter has the “A” rate assigned, lawyer ABC who has an A rate of 1000.00 will bill at 1000.00 per hour; lawyer DEF who has an A rate of 750.00 will bill at 750.00 per hour, and so on. It is also possible to change the rates of the timekeepers for any category effective from user defined dates.
·         Monetary Rate Assigned: A matter can also have a fixed monetary rate assigned as opposed to the A, B, C, etc rate category. For example: If a matter has a charge out rate of 1400.00, any timekeeper who records time on the matter will bill at a rate of 1400.00 regardless of his/her rate under each rate category.
·         Task Based Billing: A matter can also be billed by Tasks (known as task based billing). This is where time is categorised by task with each task carrying their unique rates.
Whether a rate assigned to a matter is category (A, B, C, etc) based, task based or a monetary value defined, further rate exceptions are possible with a number of permutations including the ability to bill by stage/phase.
Time Recording for Matters to be billed in Stages/Phases
Whilst an array and flexibility of billing rates & styles is possible, how to assign rates based on stages or phases of the matter needs some thoughtful planning. Some matters progress in stages and the lawyer may agree with the client a tiered rate structure based on the lawyer working and stage the scope of work falls under. It is possible to bill time based on the stage /phase and the timekeeper working on the matter.
Prerequisites for achieving stage based billing on a matter
·         Use specially created Task Code (e.g. “ST” for Specials Tasks) instead of ”BW” (Billable Work) at matter manager level under Main tab as the Default Task Code. Use this Task Code as default for all matters that will be billed in Stages/Phases.
·         Define the Stages/Phases at firm level – Useful to have as many stages as possible e.g. Phase 1, Phase 2, etc at Task Code level (Options>Lists>Task Codes).
·         Use Rate exception at matter manger level under Billing tab to set up as many timekeepers as possible.
·         Users have to use appropriate Task Codes (Phase 1, Phase 2, etc) when docketing time to have that matter billed at the correct rate based on the phase for which time is being recorded.
·         If user does not define the task code at time entry level, the matter’s default rate will be used.
·         When new timekeepers join in, apart from setting their default category A, B, etc rates, all matters with rate exception should be updated. To aid in doing this, the list of client matters report layout can be designed, and printed specifically for this purpose. The report can be filtered under Advance Search to show only matters with particular Task Code – “ST” in this case.