Accounting for Law
Corporate, Real Estate

Large expenses justified when big billings at stake

While a lawyer’s decision to expense an extravagant meal may initially raise some eyebrows amongst colleagues, the purchase can be worthwhile if it has a significant impact on business development, Toronto real estate and business lawyer Robert Saunders tells Lawyers Weekly.

As Saunders, a lawyer with over 35 years of experience in private practice and managing a law firm explains in the article, the partners at his firm were shocked when a lawyer once billed $1,000 for a business dinner in Las Vegas.

“It jumped out. ‘What is this all about? You’re on a vacation in Las Vegas and we’re paying for it?’” he says.

However, Saunders explains, it was quickly understood that the meal was to entertain clients who bring in a large amount of business to the firm over the year.

“So we said, ‘Oh, well, that’s terrific.’ Of course the firm should pay for that because it’s helping you generate income,” says Saunders.

“If the answer was, this client has given us $500 worth of billings in the last two years, and I just spent $1,000 on dinner for them, that would be a problem. We’d have to have further discussion about that,” he adds.

At the same time, Saunders says he applies the “But For” test when determining whether something should be considered an expense.

“Would I be having lunch with you, but for the fact that you’re either a client or I’d like you to become a client? If that component was not in the equation, would I be sitting here at lunch with you?” he says.

Ultimately, Saunders tells Lawyers Weekly that law firms should encourage open discussions around expenses. When in doubt, he adds, it is always better to clear expenses with the firm in advance.

“You should have some conversations among the partners as to what is agreeable and what’s not and it should be an ongoing conversation because things will change,” he explains.

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