Do's and Don't's For Legal Accounting Rookies

Welcome to Accountants Law Pod, where accounting professionals and law firms converge, hosted by Lynda Artesani, Sarah Prevost, and Stephen Libhart.

Welcome back to the podcast, everyone, and, uh, we had a pretty good Law Lab today, didn't we?

Oh yeah, definitely. We had a pretty, uh, nice group of people chatting about Really interested in the topic this, this go around.

And new people, which was nice. So the Law Lab is our mastermind group where anybody that's new to legal accounting can hop in and ask us questions. But it's more of a group collaboration, I would say. And we had a new, new person, which a lot of times new people just sit with their camera off. And today she actually turned her camera on and she goes, I have some questions. And it was about this topic.

Great questions.

Called the, you know, ad for it and said, I need to ask these questions. So we It was about scope creep. So it was really interesting. Yeah, she did have good questions.

Yeah, definitely. Well, it ties into what we're thinking about talking about.

Our topic today. Yeah. So we're going to talk about legal accounting, I guess, rookie mistakes or just tips on if you're just starting out and you just don't know what to do. Because let's face it, I mean, how many times have we had people call us up and say, I kind of know bookkeeping, but the law firm, I just know there's a trust account or something like that, but I don't really know anything else. And it's like, there's so much more.

Uh-huh. Um, also, it— a lot of people don't understand how integration works with a lot of the practice management software.

Right, right.

Doesn't that add an extra— it seems to add an extra layer to just even doing accounting, which it does, but it's not, it's not that bad. It's just a lot to untangle.

But, you know, a lot of times people fall into this because they got a law firm client came to them and they don't do that type of accounting. But then all of a sudden they're like, wait a minute, this looks super interesting. And to your point then, you know, getting the right tech stack, the right, you know, programs that are going to work for them. And that usually seems to be the first question is like, what should I get to make this work? And then I think we also need to remind them that they need to look at studying the trust laws for wherever their client is located.

Yeah.

You know, those, that's a big, those 2 things are a big do, if you will. One is, is Figure out how you're going to track your workflow and get that down. And number 2, study those trust laws because to your point, Lynda, they don't know what trust is and that'll explain a lot to them. And then of course, coming to the Law Lab, like you mentioned, that's a great place to go. Uh-oh, you know, where's my support group? And the Law Lab is great for that.

There's also, you know, advanced client costs. So we also have that to deal with. And I think client costs is one of those areas too that you kind of need to know if If you don't know what that is, I mean, even the attorneys sometimes don't know what that is. Like, they don't know how to handle it.

You're right. You're right.

Yeah. You need to have that expertise. But over and above that, Sarah, don't you think, like, payroll is so— it's not that it's different, but there's a different complexity level. Sarah and the payroll. She's our payroll queen. So, you know.

I've been in pay— I feel like I made it kind of a joke about Feeling over— not overwhelmed, but a glorified payroll expert at my pay grade. Like, this is crazy at this point.

There's so many tentacles to law firm payroll.

And, well, and multi-state and complexity of meeting the independent contractor versus an employee compensation, all of these tracking.

Especially nowadays.

Yeah. Yeah. And there are some things on the horizon, I believe, if I read. So I'll have to pull what those notes are about more about independent contractors. There are some— I think there's like a federal thing that's coming out and I just need to go read it again.

I read something just this morning. The employee said, my employer is upset with me because I turned my phone off at lunch and he says he's going to fire me if he can't get a hold of me during my lunch hour. And it went into this whole discussion on what the employer is liable for if they interrupt you during your lunch hour. And just, it got really deep in this discussion. I was like, oh, wow.

Well, good point in the segment of when you're first starting out, the dos and don'ts of what to know, what you should have in your engagement letters. You're not at beck and call. This is a contracted service. You are a professional. So to your point, it's the same tentacle of arrangement agreement, right, as far as employee-employer, but not because it's a business with another business. And so, I mean, you both could speak to it, but depending on how you— like you were saying earlier, Steve, you have— how are you going to set up your workflows? How are you going to set up that engagement? How you're going to interact? Lynda, you could probably speak to this, is how we choose to interact when we first engage with attorneys.

But I think also, Sarah, we actually toyed around with the idea of 3 prices. Yeah, 48-hour response, 24-hour response.

Oh, wow.

Within the same-day response. And I think that, you know, and the price would go up the more, you know, how much more you want to pay for the urgency, right? So some attorneys think everything is urgent and sometimes they don't. I think that's definitely something you might want to consider. Contract is so huge when you first start working with lawyers because you have to make sure that you've got your Scope tied down perfectly so they know exactly what works good for both parties, not just the attorneys, but the bookkeeper as well, or the accountant as well.

Any profession is what you're saying.

I think, though, for dos and don'ts, I mean, learn the lingo because that's going to help you. You might hear eat what you kill and think, oh my God, what the heck are they talking about?

Yeah, first time I heard it, I was like, what?

Me too. I was like, wow. And then I thought only attorneys could create that kind of a compensation plan called eat what you kill. But Yeah, that's one. And then you think about the word— I was just writing an article the other day about— when you think of the word trust account, what does that mean to you? Does that mean trust bank account? Does that mean trust liability account? What does the word trust account mean? It can have kind of a dual meaning.

And then it's different in different industries too.

And then IOLTA, IOLA, IOTA. I think that's another one. There's like all this, like, well, what is that? And those are things that come up. In conversations, depending on the location, it's all an IOLTA account, but they have different names for them and different rules around them by the state. So the bar association website will be your best friend for the location where your attorney practices. That's the first place to do to start with, is that. And then I think the other thing to do with the don't was don't oversell yourself or your expertise if you don't have it yet. Price accordingly if you're not because it took us a lot of years to learn this stuff. And I think being honest is your best bet to have a great clear communication line with your client. That, I mean, I remember my first client and I remember saying to him, you know, your industry is new to me. And he was a solo and he was so happy to like, I will just work with you and I'll teach you what you need to know. And he was very generous with that. I gave him a great price. He got an experienced bookkeeper that just had never worked with With that industry. And I thought that was fascinating, a good way to kind of walk your way in. I wouldn't want to take on some of the bigger firms that Sarah and I have now because I'd be like, oh, I don't know about that. That would have been hard to navigate not having some kind of a foundational awareness or knowledge of the legal industry and how it works to be able to work with a lawyer. I mean, you can always find anything on Google or ChatGPT.

There's a lot of presumptions too. You handle My expenses? Why aren't you handling my 1099s? That's not the same service.

Right.

You don't process their payroll, but you have to record it. So why are you not doing X, Y, and Z? Again, these are things that as you're first starting out are really important pieces to lay out, as you're saying, Lynda. Additionally, Steve, I'm looking at you on this one. You've got to clean up a mess. Oh, it shouldn't take— they tell you how long it takes.

It shouldn't take that long. Yeah, right.

However, how long did it take you to get yourself in that mess? So let's be honest about what the work product is. To your point, Linda and Steve, you've had this come up very recently where somebody is not— they're basically kind of like eking it out, like saying, hey, you're going to clean it up and I'm going to tell you what you're going to clean up almost without—

Yeah.

And you're at a tenured seasoned space and you know how to handle it. If you're new.

Yeah.

Well, you know what just came to mind too? I'm glad you brought that up. And it made me think about the piece you were just talking about where, you know, are you doing payroll? Are you doing this? Are you doing that? A lot of businesses coming out of law firms, they're now learning the value of outsourcing their accounting work, but they're coming from an environment where they've had somebody sitting at a desk in a corner Doing accounting and they do everything. And so accounting to the attorney is this big giant coffee can full of stuff, you know, that their account, their in-house accounting person does. And now they're outsourcing it and we have to be very abundantly clear in our contracts, like you said, and what we will and won't do based on what you're asking us to do. And Also spelling out what happens when the client doesn't perform, i.e., taking on— we had in the Law Lab this morning, I think we had somebody mention that, that they couldn't get the bank account information. You know, and that's, that's just a non-negotiable. We have to have that read-only access into the bank accounts and credit card accounts and setting up the bank feeds and all that into QuickBooks. So to your point, Lynda, Learning the lingo if you're brand new to it, and also not having to answer the attorney right away because this is so crucial. Attorneys, as you know, are—I'm on a roll now—but as you know, they are—they're very good at asking questions and snipping out when somebody doesn't know something. That's what they got—they were trained to do.

That's their job, right?

You know, so we don't have to have, especially when you're new, you don't have to have an answer right away. But what you can say to them—I like what. You said, Lynda, I'm new to your industry, but I'm not new to accounting, or I will get back to you. Let me do a little bit more research and I will get back to you by X.

That's a very good answer.

They will appreciate that instead of you freezing up and going, oh, I don't know what IOLTA is. Yeah.

And those are terms. There's a lot of terms. I think I actually have a blog post on LawLab that has like learn the lingo or it's somewhere.

Well, and we have that map that we did in our podcast.

The map is critical. Yep. We've got the map, which Tierra shared on another one, so she probably can share it here as well, where it's a map that just kind of takes you with every link to every state that has the bar except for Florida. They don't have the Florida one linked for some reason. I don't know why. I don't know why.

But yeah. Let me guess.

No, I'm kidding. Yeah. No, but that one was broken from the beginning. It was there once and then it went away. But yeah, so every— and you can Google it and you can find it. But it's nice to have the map. You can click on the state and just grab it, and that's a nice thing to do.

Yeah, I do feel, though, if you get into it, you find out you're really— it's not for you. Be honest about it. Pair them up correctly. I mean, this is— this has happened to all of us in our tenure while we're kind of deciding if we want to go with certain verticals or, you know, not. And we've seen this. I do like what you're saying, Steve and Lynda. It's like you have to caution yourself and be prepared to be like, you know what? I'm actually not seasoned enough for this, or I might need some support. And that's—

or talk about these groups before.

Study the different types of law. If law is speaking to you, law is not just this little bubble. It's all of these bubbles that are out here. I figured I have my favorite types of law firms that I like to work with, as you guys do as well.

Family law. You talk about family law and how much you love it.

I do like family law. We've got one family law firm.

That took a second, Sarah. Did you see how that took a second for him to react? Because I took a second to float by.

I was like, yeah, how am I going to comment on that?

What I'm trying to say, Steve, is before that, like, you know accounting, you don't know this vertical.

Right.

It does feel you're not confident maybe in a particular software or the ledger system that it needs to be in.

Right.

Really, first you really need to get honest about some of those things. We've seen it before. That's why I bring it up, to be fair.

Great advice. Yeah.

Very seasoned people dipping their toe in, and then we're getting questions, and I'm like, well, okay. But so, and then if you choose to, like you're saying, and then you Just as you mature into it, you'll find a micro niche inside of it.

Exactly.

Master the first part. If you're not, if that's too much, and we had this happen where somebody came to us and said, I know this for this many years, but I don't feel comfortable in this. What am I missing? It was the integration. It was the software. We're coaching her through. And she even said, if I can't get this figured out, I'm just gonna have to probably find somebody else or have you all help me and move this on because I may not be the right fit. We're a great group together as a client-customer kind of relationship, but it's not— it's interesting.

So, and that's the other piece too, knowing the legal tech software, knowing the software that the client uses, that also software that we use when it comes to the billing, that you need to know how that works. And that can be A learning curve that could take a bit of time.

That's a huge learning curve.

Yeah.

So yeah, I mean, sometimes, and they all have their little quirks, so not all of them integrate real well. Some of them don't integrate at all. So know that and know the proper workflow to get that in. Because if you are taking, for example, I don't know what software, but there's some software out there that you can't connect to QuickBooks. So you can push out a CSV of the invoices or of the payments to pull it in. But make sure that you do all those steps and don't just download the income because now you're doubling up the income. So There's a lot of things there, and that does take time. And if you're willing to invest that time to get the knowledge, I mean, like we said, join the Law Lab, listen to our podcast. There's plenty of information out there that we, we provide that I think will help you. We even have coaching one-on-one. I know you do too, Steve, if you need help on an individualized basis.

Mm-hmm.

So there's ways of doing it that people can help you, at least get you over the hump, and then you'll gain the knowledge. It just takes time to really grasp the big picture. But once you have it, I mean, you have to be— if you're going to work in this industry, you have to be very detail-oriented. You've got to have good workflows. You have to set yourself up in a place. You have to be very organized. I think you cannot not be organized to be a bookkeeper in this particular industry. It would be very difficult.

Very clear.

And very clear. Oh, yeah, that's the other— Sarah can speak to this.

You have to be very direct.

I was just going to say, Sarah, you're on.

Yeah. When I hear something presented to us that I know is being misstated, or the firm down the street shared some partial information, we see this all the time with things across social media. And you're sitting front and center and you're trying to use this conversation with us in an attorney-client, attorney-professional meeting with us. And I'm like, well, that actually doesn't work for you. You're not that entity type, or you're not this, or let's talk about why these things would hinder you in your business.

When they call their friend down the street and say, what software do you use? And then they bring it in.

And I saw my buddy in court and he told me about XYZ. I should be using XYZ, or I should be doing 1, 2, 3. And it's like, okay, what does your attorney friend do? What practice area? Oh, they're a personal injury attorney, but you're not. This is a little bit different.

You're family law, or you're estate, or you're this. Wait, hold on. Let's get equal, equal, or you're equal. But you approach it differently. You're flat fee, they're hourly. And then you're asking us to do— you like something they do, but how does that fit in your model? So I'm not going to say no to you per se, but I'm going to guide you down that road and be very clear of what the intricacies are because it might cost us more time, which would cost you time on your bill. So it's not just a simple check and then you just—

Don't think that you're not going to be asked about software because for some reason they realize that we're very technologically advanced from them and they come to us, I don't know how to get this to work. Can you tell me why this isn't working? Like, did you clear your cache and cookies? And then they don't even know what that is.

Yeah.

So sometimes you run into some of your clients that are like, they turn to you for the strangest things that I never thought that someone would ever, ever, ever be asking as a bookkeeper or an accountant. Like, the questions we get asked are incredible. And it's just fascinating that that's something I didn't think I'd ever wear the IT hat. But we, we do sometimes, which is interesting.

That's a, that's a, that's a tough one to learn on the fly.

So I do enjoy teaching people who are in their 40s, 30s, 20s something that I'm like, you don't know that. Let this old lady teach you this.

Oh, please. I do. It is so true. It goes with our profession now. We are a hybrid, HR hybrid into IT. Not that that's our expertise on something.

How did we become the HR specialist though, Sarah? We can't know everything about everything.

Because the in-house accounting person they had was also HR. This is what they're expecting. I mean, I came from, I came from working in the law firm and I know exactly where they're coming from when they fall on our front porch and they want to use our services. We really have to educate them.

Yeah, definitely. Well, this was a good topic. I think we had a good bit of nuggets in here.

Yeah, I mean, just don't be afraid to fail. Like, if something doesn't go quite right and you have to fix something, be okay with it. And if you're just starting out, don't charge a lot if you don't know a lot and really work pricing that way because you're gonna be learning from them. Um, you know, kind of factor that in your price.

Yeah.

You can try, but I mean, if you think you might not get the client, if you're— don't oversell, right? Don't say you're this phenomenal bookkeeper person that knows everything when you really don't, because then you're only setting yourself up for failure. You don't want to do that. You wanna, What is it? Over— underpromise and overdeliver. Underpromise and overdeliver.

Yeah.

Right. You don't want to be sitting there in a place where you told them you could do all these things and you can't. And I think if you're honest, honesty will take you far in your journey as a rookie, as you start to learn and build. And then before you know it, you'll be charging top dollar. I mean, I charged a very little amount for my first client. I actually didn't even know what to charge. And eventually you will charge more and more because you're going to gain this knowledge base. You're gonna set yourself way above all the other generalists.

Yeah, but don't be so cheap that you're not feeding yourself.

Correct. Don't undersell either.

The phrase there is, you won't wanna work there. If it gets you outta bed and you're excited about doing it, our dear friend Seth David says it great. But in the same breath, you are learning. So you take it, take a consideration of that when you're pricing yourself.

But well, they came to you because they see you as a professional. So don't be afraid to charge a review fee. And take a look at their books.

We should all be charging that. I'm sorry. This is like, if our profession isn't, I find this—

I agree.

Yeah.

You know what?

I didn't for the longest time. Didn't charge that.

Until you met me.

Yeah. No. And then not only that, sorry, we now we start charging if they even wanna talk to us, but we've elevated ourselves to that place. We didn't start out there, but you should. I don't care if you're just starting out, you should charge to look at the books because it's gonna take your time. To do it. And then you'll know if they balk at that, they're gonna balk at everything else. You don't want them for a client anyway. So that should be that, you know, go to a mechanic, they charge you a fee to look at everything. Same thing applies for our work.

Back to the other side, we're expecting to pay attorneys for consult fees. It goes the same way for us attorneys.

Sometimes it feels like for them to lick the stamp.

Yeah.

You know. Yeah, so, well, I think we covered a lot in a good little segment. So, Tiara, do you have, uh—

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And before you know it, you won't be a rookie anymore. Love it. I love it.

I'm curious, what do you all have going on for the weekend?

Wow. Well—

Oh my God. Well, I'll tell you, my bike that I had built for me, because obviously of my height, I need something a little bit more custom. Is being featured at a bike show right now from the—

What?

Yeah.

So it's a Craftmaker. It's a world kind of pro, like—

So do you have to put your feet down? So you had to have a bike made so you could put your feet down when you— I didn't know regular bike you couldn't.

No.

So actually, it's the frame size, Linda. Oh, because they're so big. I can't reach. And I was—

Oh, you can't reach the handles.

Yeah. And so I needed—

I never thought about that.

I needed something more tailored, and I even bought the most petite one, and it was still, you know, after all these years. And so joking around with my husband, I said, I guess you get to a certain age and you start buying more custom things to meet your— because I'm, I'm definitely well under the 5 foot. I'm under that size.

You worked it. You earned it. You can buy it.

I can have it. But I'm so excited because I saw the pictures and it's super cute. So that's what I will be doing is joining in and having a good time with them.

I don't know what I'm doing because I was away for a week. So yeah.

We're having a big fundraiser at our house tomorrow for the community where the Airstream Club is going in 2 weeks. I mean, we do a big thing for their food bank every year. And so we're having a little party here at the house and people are bringing food donations for the food bank and we'll take it with us to the Airstream rally. Yeah. So that's what we're doing this weekend.

Well, don't worry, Lynda. I'll keep you busy working with me.

No, no, it's—

you were gone with your bike. We had overlapping weeks too.

Get your beach chair out.

Yeah, yeah, it's actually cooler. So yeah, yeah, um, till next time, everybody.

Bye-bye.

Bye-bye.