ALA Financial Management and Billing Flashcards
6 cards from real ALA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 ALA Financial Management and Billing flashcards as text
Which internal control best prevents check fraud in a law firm?
Answer: Separation of check preparation and check signing duties
Segregating the duties of preparing checks from those of authorizing and signing them reduces the risk of fraud.
A law firm's leverage ratio refers to:
Answer: The ratio of associates to equity partners
Leverage in a law firm context measures how many associates support each equity partner, affecting profitability per partner.
What is the primary purpose of a budget variance report?
Answer: To compare actual financial results against budgeted projections
A variance report highlights differences between budgeted and actual revenues or expenses so management can investigate and respond.
Which practice helps a law firm manage unbilled time (write-offs) effectively?
Answer: Regular billing review meetings to capture and bill all compensable time
Frequent billing reviews ensure time is captured, billed promptly, and write-offs are authorized and documented systematically.
In law firm financial management, 'lock-up' refers to:
Answer: Capital tied up in work-in-progress and unpaid receivables
Lock-up measures the total days of revenue tied up in unbilled WIP and outstanding AR, affecting the firm's cash flow.
Which expense category typically represents the largest cost in most US law firms?
Answer: Personnel costs (attorney and staff compensation)
Personnel costs, including attorney salaries, bonuses, and benefits, typically account for 60–75% of a law firm's total expenses.