more-arw search

Q&A Forum

Modified Cash / Accrual Accounting

I recall from my audit days that most law firms use a modified accrual basis of accounting. This still permitted? I think there were some recent moves to force professional service companies onto pure accrual based accounting but have not followed it closely.

Answers

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

Are you talking from an income tax perspective?

From a management standpoint, why wouldn't you want full accrual accounting?

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Scott
Good question-there is also the dimension of rev rec that may be relevant. Accrual based performance metrics would be far better indicators of firm performance.

Anonymous
(Finance Director / Controller) |

Hi Scott / Hi Len,

Definitely prefer accrual basis. For some background, when I came on board our outsourced accountants were recording everything on a cash basis. Got rid of them and we now accrue everything with the exception of sales. Only reason we've not made the switch on the revenue side is it would require large reserves (our sales are highly contingent).

The scenario brought to mind that law firms often use modified cash / modified accrual, though I think they have far less uncertainty surrounding revenue than we do.

I am debating if it is worthwhile to make the change vs. leaving it as is. No one is asking at any level nor has an issue with status quo. Just my training and desire to "match".

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Anon
Can you clarify--are you now at a law firm or at some other professional service firm?
Are your billing rules and processes that complex/contingent that you do not regularly collect what you bill (e.g. large negotiation adjustments after issue of bills)?

3702 views
Topics

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.