How to identify Unbilled Expense Recoveries to be removed

A lot of firms have a policy to bill soft costs (i.e. expense recoveries – courier, printing, photocopies, stationery, phones, etc) at point of billing. The following are some of the reasons for doing this:

·    Indiscriminately tracking expense recoveries on matters hypes up the income statement before even the matters have been billed and this distorts the financials of the company.

·    Tax implications – expense recoveries increase the overall revenue and this may increase the tax liability in some jurisdictions before even clients have been billed for the recoveries.

·    VAT Implications – there could be breach of VAT regulations. Some VAT jurisdictions state that VAT is payable at the earlier of a) delivery of goods/services, b) receipt of money or c) issuance of an invoice. VAT only crystallizes at time of billing in PCLaw. By recording recoveries before billing a firm has met the criteria of “delivery of goods/services” even though there is no Output VAT and the client may be billed many months later.

One of the challenges as part of the monthly exercise is to determine if there have been any Expense Recovery items charged on matters that have not yet been billed in the same month. The following reports are not worth running for this purpose:

·    Client Costs Journal: It will give all the expense recoveries entered in the month but it is not possible to determine the billing status.

·    Client Disbursement Analysis and Interest: This can give a list of unbilled soft costs but it is very clogged up and cannot be analyzed.

I have discovered the efficient way to do this is by running the client ledger for the month with the following advanced filters:

Ø  Field: Received From/Paid To

Ø  Comparison: Is Equal To

Ø  Compare To: “Expense Recovery”

The resultant report will give all expense recoveries for the month with the invoice numbers tagged to it for all relevant matters. This report can be exported to Excel for analysis and sorting by invoice number, etc. One can quickly identify whether there have been expense recoveries that should be removed. Once this task is complete, other month end tasks can be completed and accounting restriction date re-set.

Another quicker way is through the Register>Expense tab which can be filtered for all unbilled entries. However for this the user needs access to the Register under Security.

My wish would be for PCLaw to have an option of having a Memorandum account for recording soft recoveries while recognizing the income/expense recoveries (G/L) at point of billing.