Sunday, November 28, 2010

LSUC spot audits – Common errors - #1 of 7

Often times the spot audit program found the “accounting records in arrears” one month or more in entering and posting. The Society expects accounting records to be entered and posted currently at all times as set out in By-law 9, sec. 18.  In this posting I will discuss why it happens and a practical solution.  In a later post, I will illustrate, with some examples, why maintaining current records is so important.

In most small law practices, the secretary has many duties.  While not meant to be exhaustive, the wide ranging roles that they must juggle on a daily basis include:
  1. first and foremost the secretary/law clerk, responsible for preparing correspondence and pleadings;
  2. the receptionist, answering the telephone, greeting clients, scheduling appointments and court dates:
  3. the office manager, supervising junior staff, ordering office supplies, opening the mail, and ensuring the smooth operation of the office;
  4. the bookkeeper, preparing invoices going out to clients, recording payments received, entering expense receipts, and preparing cheques for signing.
From the partial list above, it is easy to see why a secretary can become overwhelmed.  Too often, the urge to produce a greater volume of work to maximize income dominates the situation.  Other things tend to get pushed aside, to be done at a later date.  And this is only the regular day-to-day work.  Add to this monthly bank reconciliations, trust comparisons, payroll and HST remittances.

PCLaw can greatly reduce the workload, and the time it takes to enter your bookkeeping records.  One entry can post an invoice to the payables journal, expense the cost, recover the expense to the client ledger, and cut a cheque.  Likewise, you can invoice the client, record the account receivable, and transfer a payment from trust.

Ultimately, the cause of this LSUC spot audit error is usually a staffing issue.  Your staff simply do not have the time to keep your bookkeeping current.  Hiring another full-time employee can put a strain on your finances; a part-time employee may not be committed to the job and could leave you stranded in order to pursue full-time employment elsewhere.

The solution most firms use is to outsource the work to a self-employed bookkeeper, on a monthly or weekly basis, to resolve any outstanding issues.  Being as they are in business for themselves, they are motivated to do good work and their cost is less due to no payroll taxes.

The only things I would add as personal advice – make sure the bookkeeper you retain knows about law practices and trust funds, and that they are fully trained in all aspects of PCLaw bookkeeping.  Mistakes happen, and your bookkeeper must be able to detect the errors and re-enter the information correctly.

As always, I invite your comments and suggestions for future posts.  Next week – error #2 - Trust reconciliations and trust comparisons in arrears.