Year-End Law Firm Billing and Financial Review: A Q4 Checklist

For many firms, the year's result is decided in the fourth quarter. Work done in the spring that was never invoiced, invoices sent in the summer that were never chased, a fixed-fee matter that quietly consumed twice its budget — all of it surfaces at once if the review waits until the last week of December.

Started in October or early November, the same review gives the firm six to eight weeks to bill what was worked and collect what was billed — before corporate clients close their own budgets for the year.

This is general guidance on running a practice. It is not accounting, tax or legal advice; your accountant should be involved in closing the year.

Where year-end revenue leaks

• Unrecorded and unbilled time. Time reconstructed from memory at month-end misses short calls, document reviews and court attendances. Time that was recorded but never invoiced is just as lost.
• Late invoices to clients who have closed their budgets. A large, unexpected invoice in late December is easy for a corporate client to push into next year.
• Fixed fees and retainers that overran. Without comparing the hours worked against what was agreed, the firm discovers too late that a matter was unprofitable.

A six-step year-end review

Step 1: Find all recorded time that has not been invoiced

List every time entry not yet on an invoice, matter by matter. For each, decide: invoice now, hold for an agreed stage, or write off deliberately. Then make sure time for the rest of the quarter is recorded as the work happens, not reconstructed. Where billable hours go missing covers the habits that fix this.

Step 2: Check fixed fees and retainers against the work done

For each fixed-fee or retainer matter, compare the hours actually recorded with what the fee assumed. Where a matter has gone well beyond its scope, raise it with the client now, while there is time to agree an additional fee or a revised scope for next year. Our guide to fee models explains why time should be recorded on fixed-fee work too.

Step 3: Work through unpaid invoices by age

Group unpaid invoices by how long they have been outstanding — under 30 days, 30 to 60, 60 to 90 and over 90 — and work from the oldest. For each, check that the client received the invoice, understands what it covers, and has an easy way to pay. Make a personal call on anything over 60 days.

Step 4: Calculate three ratios

Three numbers explain most of a firm's financial year:

1. Utilisation: hours recorded on client matters, as a share of available working hours.
2. Realisation: the value of time invoiced, as a share of the value of time recorded.
3. Collection: the amount paid, as a share of the amount invoiced.

Low utilisation means time is not being recorded, or there is not enough work. Low realisation means work is being written off or discounted. Low collection means invoices are not being paid. Each needs a different fix, which is why it is worth calculating all three rather than looking only at revenue.

Step 5: Review how enquiries became clients

Look forward as well as back. How many enquiries came in this year, how many became clients, and from which sources? Which proposals are still open and worth a follow-up call before year-end? Our guide to client intake covers what to look for.

Step 6: Close finished matters cleanly

Before the new year, close matters that are finished, make sure final judgments, signed agreements and closing letters are on the file, and settle or return any client money held on account. Rules on client money differ between jurisdictions, so confirm with your accountant how balances must be handled.

How Smart Legal OS supports the review

What the platform gives you today, and what you will still calculate yourself:

• Unbilled time is marked on the billing screen. Each time entry shows whether it has been invoiced, and invoices are built by selecting unbilled entries for a client, with manual lines and tax added.
• Outstanding invoices are listed on the owner dashboard, and the reports page shows the total outstanding and the number of invoices.
• Reports (Professional plan and up) show revenue this month against last month, the amount billed this month, hours this month against last, cases by status, a six-month revenue chart, and leads by status with the conversion rate.
• Client funds: money held for a client is recorded as deposits and applications to invoices, with a printable statement.
• Cases can be closed or archived, and the closing date is recorded.
• Clients pay by card in the client portal, and bank transfer details are included when an invoice is emailed.

You will calculate yourself: utilisation, realisation and collection ratios, aging buckets, and hours by lawyer. The figures they need — recorded time, invoices and payments — are all in the platform.

See the full feature list, or compare plans.

Frequently asked questions

When should a year-end billing review start? In October or early November. That leaves six to eight weeks to issue invoices and collect before clients close their budgets in December.

Should we write off old unbilled time? Sometimes, but deliberately. Writing off time is a decision; letting it sit unbilled until it is forgotten is not. Record the reason so pricing can improve next year.

What is a healthy realisation or collection rate? It varies by practice and market, so the most useful comparison is with your own previous year. A rate that is falling tells you more than any benchmark.