Accounting and Allocations for Flat Fee (Project or Subscription) Arrangements.

Accounting

When adding a project or subscription fee arrangement to a matter you have to select an “Unallocated Fees Account” for the fee arrangement. The account selected will be credited as payments are made to the project or subscription and debited when allocations are run.

For payments from trust the credits are made when the money is transferred from trust to operating.

Transactions generated by flat fee arrangements are in addition to the normal line items made for payments.

• Unallocated Flat Fee Payment: This is made when a normal payment distribution is added to a bill, the date is the date of the payment distribution.
• Flat Fee Allocation: This is the allocation for a payment distribution. It is created when you run allocations and dated the end date selected in the run allocations dialog.
• Trust to Operating Transfer: Equivalent to Unallocated Flat Fee Payment but for Payment Distributions made from trust. This will be created when the trust to operating transfer is made and given the same date.

Allocation

Flat Fee Arrangements do not handle allocations automatically, they must be run by a User. They are run on the matter’s fee arrangement settings page. When you run the allocations, you must enter a start and end date. The system will then look at all payment distributions received within that time range and for bills generated under that fee arrangement. The system allocates the funds proportionally based on the value of the billing entries for each timekeeper within the time range and fee arrangement.

The process used to determine how to make the allocations for a Project is as follows:

1. If the given Start Date is before the System Closing Date, it is changed to the day after the Closing Date.
2. If the given End Date is before the System Closing Date, an error is shown and no allocations are created.
3. Finds all Payment Distributions dated within the given Start and End Date on Bills from the chosen Fee Arrangement. The date of the Bills is not considered here.
4. Finds all Time Entries between the Effective Date and the End Date of the chosen Fee Arrangement.
5. For each Timekeeper, calculates what percentage of the Allocations they will receive.
6. This percentage is calculated by taking the total amount (Billed Rate * Billed Hours) for that Timekeeper’s Time Entries in comparison to other Timekeepers’
7. Delete any existing Time Allocations for the Payment Distributions being allocated.
8. Create new allocations to each Timekeeper from each Payment Distribution based on the percentages calculated earlier.

The process used to determine how to make the allocations for a Subscription is as follows (differences from Project are bolded):

*IMPORTANT NOTE: Please note that bills generated on matters with a Subscription Fee Arrangement must have an Issue Date with the same day as the Initial Billing Date. For example, if the Initial Billing Date is 09/01/2021, then the bill Issue Date will need to be 10/01/2021.

Additionally, for any months with no time entries, you'll want to create an entry for $0.00 for the Timekeeper you want to allocate the payment to. This should be done prior to posting the bill. If the entry was created after the bill was posted, unpost and repost the bill.

1. If the given Start Date is before the System Closing Date, it is changed to the day after the Closing Date.
2. If the given End Date is before the System Closing Date, an error is shown and no allocations are created.
3. Finds all Payment Distributions dated within the given Start and End Date on Bills from the chosen Fee Arrangement. The date of the Bills is not considered here.
4. For each Payment Distribution, finds which Allocation Period it belongs to. Each Allocation Period is determined by the Fee Arrangement settings. E.x. Say the Fee Arrangement’s settings are ‘Initial Billing Date’ is 1/1/2020 and the ‘Billing Period’ is 1 Month and the ‘Number of Bills per Allocation Period’ is 3. Then any payment to the Jan, Feb, or March Bills are in the first Allocation Period, all payments to the April, May, or June Bills are in the second Allocation Period, and so on.
5. Finds all Time Entries between the Effective Date and the End Date of the chosen Fee Arrangement.
6. For each Time Entry, finds which Allocation Period it belongs to. Following from the previous example, any Entries dated in Jan, Feb, or March are in the first Allocation Period, all Entries dated in April, May, or June are in the second Allocation Period, and so on.
7. For each Timekeeper, calculates what percentage of the Allocations they will receive for each Allocation Period.
8. This percentage is calculated by taking the total amount (Billed Rate * Billed Hours) for that Timekeeper’s Time Entries in comparison to other Timekeepers’ in the same Allocation Period
9. Delete any existing Time/Fee Allocations for the Payment Distributions being allocated.
10. Create new allocations to each Timekeeper from each Payment Distribution based on the percentages calculated earlier.

Potential Flat Fee Allocations Report

• The new report shows what would change when running allocations for a given Matter, including all Fee Arrangements on that Matter.
• One column shows the existing allocations for that Timekeeper and Matter, and another shows what the allocations would be if ran with the given dates.
• Does the same calculations that running the allocations would do, but for all the Fee Arrangements on a Matter instead of each one individually.

Related Articles

Fee Arrangements Settings

Billing for Flat Fee Arrangements