Yet, when adjustments start adding up, the problem can usually be traced to some permutation of this fundamental issue: Ineffective procedures are being used to do the work. Still, they do happen, and for an array of reasons. Write-downs are sometimes unavoidable - for example, you’ve promised a long-time client a discount or the matter has taken longer than expected because you’re training a new associate. #Write down vs writedown professional#So, $40,000 in write-offs would require $100,000 in new legal fees to replace the lost income.Īccording to a 2014 LexisNexis® Legal & Professional report, 71% of law firms surveyed reported providing discounts or writing off legal work … even before invoicing clients. Assuming the same profit margin, it will take $25,000 in new revenue to replace the $10,000 lost to the write-off (i.e., dividing your write-off by your profit margin). There’s also the very real cost of replacing the value of services written off. Assuming your profit margin is 40%, the impact to your bottom line is actually closer to a 50% loss. The reality is that the true impact is more than double that. At a glance, it’s easy to dismiss the adjustment as “only” a 20% discount on your legal fees. Assume you have a $50,000 receivable that is written down to $40,000 - a $10,000 write-down. How costly are they? Well, here’s where some careful accounting comes in. In fact, write-downs of billable time can be one of the largest “expenses” of a law firm. Discounting works in retail - not in a law firm.
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