Why it’s hard to reconcile your matter management system to your accounts payable system

Ideally, the system in the law department that tracks outside spending ought to produce the same numbers as the company’s accounts payable system. For many reasons, however, that correspondence doesn’t happen.

Both systems would have to treat an invoice as paid as of the same date. They would have to include the invoice in the same period of time. A second source of discrepancy is that people make mistakes: they miscode a general ledger account, they don’t realize a vendor is already in the system; they allocate a fee among different budgets. Conversions of foreign currency may throw off the amounts in one system (See my posts of Sept. 5, 2005: currency conversion; and Nov. 5, 2007: current thinking on currency conversion.). Possibly there are either duplicate payments or incomplete adjustments (See my post of May 8, 2007: duplicate payment of invoices.).

Third, not all payments that should be charged to the legal general ledger code are done properly, and some payments that are not the responsibility of the law department end up on their accounts.

Sometimes data entry people may make different judgments about the accounting treatment of an expense, such as to capitalize it for one system but not for another. Or perhaps settlements are treated as part of the legal budget for the accounts payable system but not for the matter tracking system of the law department.

For reasons such as these, the data from a matter management system and the data from the corporate accounts payable system usually do not track.