Law Department Budgets Management - Month-end Reconciliation

For legal departments the top two expenses are usually outside legal services and internal salaries and benefits, followed by technology.  Once you have a handle on your matter budgets, there is often an opportunity to tighten up one’s full department budget processes and controls.

Ops in a  Box, Legal Edition includes a template for creating your full department budget, as well as month-end reconciliation, employee salary and benefits tracking and a reclassification request.  Also included is a full guide on how to deploy these resources. 

In this new series next week, we will address in turn:

• Month-end reconciliation
• Budget estimates
• Internal hourly rates, and
• Internal benchmarks for external service providers

This week is month-end reconciliation.

When I have taken on the management of the department budget and month-end reconciliation, I have without fail found tens to hundreds of thousands of dollars mis-booked to the legal department budget. By reconciling expenses carefully at month end in year one, you will find yourself well-positioned to submit the budget for year two.

When you receive the line itemized financial results at month end, summarize them by vendor or employee. The latter is more useful for travel expenses and professional associations, and sometimes for publications.  For expenses you do not recognize, it is helpful tp place a few phone calls or emails to trace their origin and purpose.  Maintain a folder to track inquiries and responses not received right away for next month’s reconciliation. 

Any expenses that have been booked against the wrong budget or against the wrong object code within the budget can be recorded on the reclassification spreadsheet, with the expected credit and debit noted on the object code rows in the accrual column on the budget reconciliation sheet. If you know of expenses that have not yet been recorded, add them to the accrual column also.

Update the estimated run rate for the remaining months to remain flat to budget.  Building this into the month end routine saves you the angst of figuring out where you can trim costs to accommodate higher than anticipated expenditures under the pressure of the quarterly or semi-annual budget estimate update. 

Before you send the reclassification request to finance double-check that the reclass request you submitted the prior month has been booked.  Once you have sent off the reclassification request, send the budget results to the budget owners summarizing the variance and requesting updates or changes.