Welcome to Auto Allocations Configurations! This one’s a little nuanced, so if at any moment while following this Guide you feel overwhelmed or confused, I highly encourage you to click the Video above and let me walk you through it there.

In this Guide, we’ll discuss what Auto Allocations are, how to create them, how to execute them, and even include some best-practice conversation for your bookkeepers.

Ultimately, Auto Allocation Configurations are a set of rules that you create that tells your system how you want to Allocate funds from Payments to existing Bills. Bills can be made up of Billings, Flat Fees, Hard and Soft Costs, Interest, and other Fees, and the Auto Allocation Configurations can be used to decide what gets paid in what order. Additionally, you'll want these Auto Allocations set up in order to for your Auto Retainer Replenishments to work.

But before we can start to make those micro-adjustments, we have to decide on something a little more macro – whether or not we even want to get this granular with our Auto Allocations - so let’s begin!

Setting the Auto Allocation Strategy

To establish the Allocation Behavior, we first need to set it in your main Configuration. To find that, click the Advanced Find icon on the top right of your screen.

Then set the Dropdown to Configurations and click Results at the top.

There should only be one result, so click the link to open your Configuration.

Scroll down to the bottom of the Configuration interface to find the following Dropdown. Here, you’ll find two options: Oldest First and Type First.

When Oldest First is selected, the system will Allocate Payments based first on the age of the Bill, and second, based on the Auto Allocation Configurations that you'll set up further down the line in this Guide. So if you have three Bills, the system will pay the Oldest Bill first.

Conversely, when you select Type First, it will look at all Bills, and pay based on the Type of charge first, again, taking into account your Auto Allocation Configuration rules. If you set those Configurations to prioritize Interest, then the system will Allocate Payments to all Interest on all Bills first, and then continue down the chain of other prioritized Payment Types.

Once you’ve selected the Auto Allocation Strategy, click Save & Close at the top.

Creating your Auto Allocation Configurations

Next, we need to set up our Auto Allocations Configurations. Let’s begin by going to the Business Center entity on the left side.

Then select your Business Center.

In the top Tabs, choose Advanced Settings.

Scroll down until you find this area, and then select + New Auto Allocation Configurations.

You’re now in the Auto Allocation Configuration Interface, and we have some things to look at.

*NOTE* Your interface here may look different than mine, depending on whether or not the system went into a Quick Create view, but regardless, the Fields and Functions will still be the same, even everything looks a little different.

The Auto Allocation Priority is a number that you set for the Order of Auto Allocations, and the Balance Type is used to decide what you’re Allocating to. So if you created one Allocation at Priority 1 and set the Balance Type to Interest and then created another Configuration at Priority 2 and set the Balance Type to Fees, then when you Allocated based on these rules, you would first Allocate available funds to existing Interest, and then to existing Fees.

In this first example, we’ve actually selected All Balance Types, and you would choose this if you don’t have a particular preference as to what is paid first. The system will combine all non-Interest (we’ll discuss the difference between Interest and other charges below) charges into one total and apply the Payment Allocation evenly.

However, if you choose a specific Balance Type for this Allocation Configuration, as we’ve done below with Interest,

and another Balance Type on another Configuration, as we see here with Fees, then they’ll execute in his order during Allocation.

*VERY IMPORTANT NOTE* - For bookkeeping purposes, it is HIGHLY recommended that EACH Balance Type have its own Auto Allocation Configuration and Priority set to ensure that every single Allocation of every single Type can be tracked and produced. This is vital for GAAP Compliance, as well as having the ability to simply stay organized in your accounting. You can ignore this VERY IMPORTANT NOTE and set your basic 2 Allocation Configurations (one for Interest, and one for everything else), but again, this is not advised.

Next, set your Business Center (the Business Center in which you plan to use these Auto Allocation Configurations (you likely only have one Business Center)) and choose your Payment Allocation Type. As a general rule, you’ll only choose between Interest, in the case of an Interest Payment Configuration, or else you’ll choose Invoice Payment for everything else.

*NOTE* For this reason, you will always have at least 2 Auto Allocation Configurations, even if you’re combining everything together. One Allocation Configuration needs to be of the Payment Allocation Type Interest, while the others will be for Invoice Payment. You *MUST* have at least 2 Auto Allocation Configurations to account for the two, separate, required Payment Allocation Types. I go into more detail on this in the video above.

These last two fields can be a little confusing, but they are asking the user if the Balance Type from a few steps above can be paid by Credits or Discounts. So in the case of an Auto Allocation Configuration for Interest, the system is asking if that Interest can be paid by Credits or Discounts. If it can be, then the Auto Allocation will look at the Credits or Discounts on the Matter/Bill, internally apply those first, and then Allocate funds based on the final amount on the Bill. I’ll break it down below the pic:

Let’s say that we have a Payment of $100 on a Bill for $99, $9 of which is Interest and $90 of which are comprised of Billings. This Matter also has a Discount of $20 that it’s waiting to apply to the Bill, and for the Interest Auto Allocation Configuration, the Paid By Discounts is set to Yes (as shown above).

When you use the Auto Allocation button on the $100 Payment, the system will *first* take that $20 Discount and apply it to the Interest (because you have Paid By Discounts set to Yes).

--------$20 Discount - $9 Interest = $11 Remaining Discount and a $90 Remaining Balance comprised of Billings.

Then it will apply the remaining Discount to the Bill Balance.

--------$90 Remaining Balance – $11 Remaining Discount = $79 Remaining Balance

Finally, it will apply the remaining Payment Allocation to the remainder of the Bill, comprised now of only $79 in Billings.

--------$100 Payment Allocation - $79 Bill Balance = $0 Bill Balance and $21 remaining in the Payment to be Allocated to something else.

*IMPORTANT NOTE* For the time being, this feature cannot AUTOMATICALLY apply unapplied Discounts and Credits. It can simply take note of what has been manually applied for bookkeeping purposes. In the near future, however, this feature will work exactly as described above, and the current disclaimer that you're reading will be removed.

This can be a lot to take in text alone, so if you’re struggling, check the video above at 10:30 (10 minutes and 30 seconds) for a breakdown of this portion of the Guide.

Final Example and Conclusion

So let's take a look at our final Auto Allocation Configuration setup in the pic below. You'll note that it lists them alphabetically, but I've included some numbering so that you know how my Priorities are set.

Here, we have our Payments being Applied to Interest, then Costs (Soft and Hard), and finally, everything else (shown in the pic above). We've also set our initial Auto Allocation Strategy to Type, meaning that, if we have multiple Bills, the system will Allocate to the Interest on all Bills, then the Costs on all Bills, and finally, everything else.

If you're unclear on how to set this up or you simply want to cover your bases without giving this whole process too much thought, we highly recommend the above Configurations!

And that should be it! From here, you can execute your Auto Allocations from your Payments, and for a short and sweet Guide on that Auto Allocation Execution from Payments, click here!

Additionally, you can get pretty specific on how you want to prioritize your Auto Allocations if you have multiple Business Centers, but that's unusual and we've separated that into a different Guide, found here!

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