Legal Accounting Horror Stories

Welcome to Accountants LawPod, where accounting professionals and law firms converge, hosted by Lynda Artesani, Sarah Prevost, and Steven Libhart.

Welcome back, everybody. Today, uh, it's just the two of us.

We can sing up. Hi, Sarah.

How are you?

Hi.

Party time.

Party time. No, we're missing Lynda this week, but Um, I figured we'd get started in a loose conversation around horror stories.

It's Halloween time, it's appropriate.

Okay, it's the month of October, so yeah, we could protect the innocent and go into the conversation of some of the horror stories or some of the moments where it's hard. We feel that the The situation that the clients are in. Our heart goes out to them. And because we're on a special Halloween kick this month, we're going to discuss some of the moments where maybe our listeners could decide if that's them and identify and need support. Raise your hand. Any of the accounting professional people are available. Or if it's a— Just something that you're like, oh, I hope to God that never happens to me. Right.

Hear you. Yeah, yeah, yeah.

So what do you have, Steve?

Oh my goodness. Um, in all the years I've been doing this, I've been pretty lucky, but there's been a few.

Okay.

Um, an example of one that we have right now where their cafeteria plan has gone south on them and It's over many years that this has been happening. And so now they need major adjustments done on their payroll. And it's an emergency for them, but we're already booked full right now with other client emergencies. And that kind of creates a horror situation when you dive into it and you're like, oh boy, they could have really gotten in trouble.

Well, can I ask you though, with the cafeteria plan, a lot of times that's not something— it depends on your engagement of services. That isn't something you're always The accounting professional isn't always the one handling it.

Right. And in our letter of agreement with this particular client, we said we would assist them.

Ah, okay.

With their plan. But we don't do the calculations or any of that. We just help facilitate between Gusto and them and that sort of thing. Some other ones, when they— when they commingle and don't listen to us on the trust accounts because we're working with attorneys who are regulated. And those can create some pretty intense moments and horror stories trying to clean that up. And especially with attorneys who don't completely understand the ramifications of what could happen to them if they don't follow our advice on that, because that's one of the main reasons we get hired is because of trust accounting. And boy, there are some— I've seen some really big, ugly horror stories in that arena.

I was gonna say, to go back to your cafeteria moment, this has occurred actually. This is in general in business, and I feel like we're in the— we've experienced this where we've inherited. One thing we saw was that, not to pick on our dear friends Gusto, but we love them dearly, but we inherited similar to you where the client actually didn't appropriately mark that it was an S corp file.

Ah.

They did not inform. It's not just Gusto. I've seen this with Paychex or other payroll providers where whoever was handling the onboarding and the setup of their payroll never properly informed of an entity switch. So that now you're faced with an owner who is an S corp owner that's not properly marked, didn't have the health insurance, accounted for correctly. And oddly enough, there was also similar to what you've experienced with the cafeteria plan. They had some funny math with their unintegrated, non-integrated 401 situation. So—

This sounds familiar.

Multi-layered moment. And we've all inherited these. And the funny thing is, is the, in the whole thing that, like you're saying about We are facilitating does not seem to compute in owners' minds. Facilitating and being the actual cleanup creator janitor of the entire thing— those are very widely different things.

They are.

To project manage and explain to you what needs to happen, but I am not the individual that's going to facilitate all the things that need to occur. With it because there might be an outside broker, there might be a 401 TPA, there might be a multitude of things that need to transpire.

Well, and to give Gusto a plug, this is why I like the Gusto platform, because they do offer that service to keep people from getting in trouble. And once the horror story is created, it's hard to backtrack it. So you have to be very careful.

Yeah, I mean, I definitely love working with them for all the support that we get.

Right.

special spot myself, but for the most part, they are— they lead with the customer support. They, they lead with their hearts in, in that way.

Well, and quite often our clients come to us in the legal arena because they've had horror stories in their firm. Yeah, maybe, maybe they've already had an in-house person, they— or they assigned their receptionist or a paralegal to be the bookkeeper, which they're not Qualified for those positions. They've ignored their accounting. All those— there's lots of little horror stories that can happen on the way to bring them to us. And then getting to educate them and bring them along and help them can kind of be a challenge from time to time if they don't want to listen.

Well, the horror of it is, Steve, don't you feel this way, is you've got the wrong person sitting in the seat and then you Sadly, you're expecting magic to happen, and they do not. They don't follow the proper protocols, or they don't understand how to even create protocols that need to be surrounded around this. And so that's where I feel like you're saying is the tipping point of you getting into trouble or creating your own nest of issues.

You know, the nest of issues. We have to remember that. I like that. We have a nest of issues here.

Yeah, or it could be that cauldron that you've got the soup.

Yeah, yeah, yeah.

All of it spewing out. But you, you did bring up something I wanted to ask if you've experienced this. We were, we've been previously, we were cleaning up a mess where the intention was to set up a bank account, a checking account and an IOLTA account, and somewhere it got set up incorrectly. So it wasn't actually an IOLTA account. It was treated as such, but it wasn't handled as such.

So was it not earning interest the right way and all of that?

Precisely. It didn't have all the right things to it. So once that got identified and realized, oh, it needs to be a proper IOLTA, disengaging and, and distangling this whole mess inside the practice management software Oh boy, yeah. Counting all of that. I, we've seen a lot, as you have through the years, a lot of messes. I think this one really kind of, this and a different one, there were 2, really caught me off guard in the sense of, oh my God, we've got an account that's really not an IOLTA, but I've got it treated as such in this money movement. It, it was really challenging.

Well, you know, the horror story behind that one is that the IRS could come in and seize that account that's not an IOLTA account that's being treated as one. That would be— that's the huge horror piece right there.

Oh, that is so true. Of course, you give me more reasons to be worried about this work.

Oh, you're still in it?

Well, we're wrapped up on it, but, um, it just in general, when you see that—

I—

now that one I always say I should never be surprised. I think I've seen it all, and then I, of course, don't. I get something like this that comes in front.

How about the horror stories that can be created innocently in the billing software? And then the client takes on the viewpoint of, this software sucks, I hate it, they didn't train me. I don't want to use it. I just, you know, you do it. And, and, you know, the horror stories and the things that they can create in that software because they just, they, they're used to having somebody in their office handle the billing. And then they, they try to push it over on us and we're not billing people, we're accounting people.

Well, we could be billing people.

We could be.

Engagement, but that's not a lot of times where we're starting.

Right. Right.

Yeah.

Yeah.

And so you can see a lot of horror stories inside the billing software if they're not careful and they let it go too long to where you're like, oh my God, why didn't you tell me this several months ago? You know?

That's funny that you say that because I got into a file, a very small file, kind of a beginning file, and I pulled a report out of the practice management software. I was like, where's the revenue? It's nowhere in here.

Oh, yeah, yeah.

Come to find out, it was how they were recording the—

We've talked about this one before. Yeah, yeah.

Something— this was— there's another one. It was—

okay.

So I literally had to go back, untangle out of the practice management software, redo all of the billing, properly state the billing to show it's accounted for so we can actually have revenue and show that the transfer of money that really did occur It just didn't, it just wasn't showcased in the proper space that way. And my first inclination is I've got to train this individual to ensure that they follow the flow of money because really, as we say, and it's something I coined, is we do, we follow the money. So I don't care if you tell me, like you're saying, Steve, what happened in your billing platform? I don't care what happened.

You have to follow the truth of the money. Yeah.

What's going on with the bank? And it's scary. There's multiple ways to have money come into trust accounts and/or operating accounts and moved over. But when people are doing net transfers, when they're doing a culmination of different things and, oh, well, I just came up with— yeah, sorry, that's not compliant.

And the worst horror story I saw on trust is to your net transfer point where they would run into cash flow issues. And so they'd say, okay, well, we're probably going to bill X number of dollars at the end of the month, so we're going to go ahead and take that now and put it in our operating account to run the business. But they didn't run the bills yet, and so they're in violation of the, the trust requirements regulations.

Yeah.

And they lump it all together, but the lump that they put together doesn't equal what they end up billing. And you're trying to unravel that. So you end up at the end of it, let's say, with $58.10, and you're like, well, Who does this belong to? You know, and they're like, oh, well, we're going to save that for next month. And that was one of the biggest horror stories I've seen.

Yeah, yeah, it's really hard there. I feel like in the trust compliance side we've seen a lot, but in the general business side, the one biggest area that you— like you initially brought it up is the cafeteria plan. But not only that, your employee handbook And what you have in your payroll system or what you have in written form in a different— they don't line up always.

Right.

And that's a problem because it just takes that one employee to cause that ruckus. And some people are malicious and not kind about it. Some staff that, you know, it depends on your hiring methods. And then there's also just in general people that it just That's unintentional, which I always want to lead with. It was unintentional. It wasn't meant to be that way.

Right.

But your handbook didn't grow with the company, or your changes didn't mirror what you're saying. And so a lot of times what we'll do is we read through those things and go back and say—

Good point.

The staff is saying this, the state requires this, and your document says something. I don't know. It doesn't even address it.

I went to work for a law firm many, many years ago, and their employee manual was about 25, 30 years old, and they had never updated it. And I read through the thing and I'm like, what does this mean? That's a horror story to, to go in and say, you know, you have exposure here, you have exposure there, you know.

Well, okay, so here we are in modern day right now, and, and this is scary to think about. We're hiring people everywhere, right? People are not just us.

Right. All over the place.

Firms are hiring all over the place. And I was having a conversation with a client that I meet on a regular basis to assist the accounting side of it. And we don't do the work, but I assist in training and cleaning up and making sure maintaining and just having a casual conversation and come to find out And they have a PEO, right, set up. Well, unfortunately, the detriment that happened to them was the PEO is set up and they don't offer all of these things because that's protected in the sense of how a PEO works. And somebody wanted a paid family leave moment, and the state rules and the— they don't align. They're not the same.

Boy, that can open you up to a huge mess.

It would. It will. And then it changes the— it protects you in one space, but then it changes the level of engagement and trust with the staff. Right now, what the staff is thinking, like, well, why did I come work for you?

You hired me under this premise.

And it's nothing wrong. The firm owners did nothing wrong. But that's That's the unfortunate thing is it goes both sides. It's in a situation where you see it from both angles. You see it as, oh, that makes sense.

Right.

I would go with that path of least resistance on a PEO for volume of benefit discounts on health insurance and all these other things and not having to manage. And yet you've got the whole other side of the coin of, well, what does that mean for my vision and mission as a company?

Right.

What a mess. It felt bad for them.

How about a physical horror story? I worked for a law firm and our office was on the 20th floor of a high-rise downtown and went in on a Saturday morning, as luck would have it. And here's water literally pouring through the ceilings. Yeah. And it was, it was a tenant about 3 floors above us. Their pipe broke and it would have flooded the entire weekend. Down all the floors of that building. It had made it down to our floor and it hadn't got yet below our floor. But you want to talk about a horror story. We had documents that were soaked wet. We had furniture. We had to replace carpet. I mean, what a horror story that was. And that's very disruptive to the business.

Mm-hmm.

We had to put a contingency plan in right away over the weekend of how are we going to handle this case next Tuesday that we're seeing in court and, and so on and so forth. And oh my goodness, that was a fun one to undo.

It's also really scary. And we always— we don't— we talk about it, but it does occur is all the fraud and the uptick.

Oh, I know. And it breaks my heart when I see that.

Especially when it's happening at the trust account level, because that's a hard one, right? And the— and making sure you take the precautions to fix it all. But additionally, it's increased so much and you see more and more and they're getting really, really good. So an unfortunate moment. That thankfully didn't occur, but it did transpire. One of our employees over the weekend received a phone call and they were acting as if they were from the police, local jurisdiction police department, and really escalated and got and, and really said things along the lines of, if you tell anybody, it's a breach.

Oh my goodness.

And it went into this whole legal space and it really rattled This individual. And at the same time, it was like the words that, as she was sharing the story, was, you, you know it's wrong, but you're so caught up in the moment, and they're so good, and they're so— they, they really get you. And it's true, it happens to the best of people so innocently. And it only— it took about 30 minutes, I think, in total. For this individual to figure out, you know, actually, that's not legal, what you just said, that was wrong. But they used it under the disguise of— kind of under the legal disguise and the police using the police department, their local jurisdiction. It was so unnerving and so kind of frightening to think about after the fact. It was probably an emotional moment too for that individual.

Oh, sure.

Yeah, it happens. And it's so— I can't tell you. I mean, just before we got on, I'm in my email and there's this email and I'm like, that, that looks wrong. And sure enough, if I had clicked a little further, that would have exposed, you know what I mean?

But I had one like that this morning, just this morning as well. And it was from somebody, it looked like somebody I knew.

Yeah. Yeah.

And it said, Robert wants you to take a look at this. This is why this is this way. And I looked at the link and I'm like, No, I don't think so. Yeah, you know, but oh my gosh, the, the horror stories that could come out of that, you know.

Oh yeah, well, and, and it's— to play off the words, it is spooky that someone could call you and sound like you, that someone could facilitate something that's so close. They— the, the thing I think was most interesting about the story that was shared with us from this employee was It was the city in which they lived in. So it wasn't some random jurisdiction. It was like they knew enough to know how to have a conversation and really validate this individual's location, space, and information. And I thought, wow, that's frightening. And to have like an AI voice potentially at some point.

Oh, with AI now? Yeah. Oh my gosh. You know, I really, I have a very soft spot for elderly people.

Oh, yes.

Not because I'm older, but for elderly people. And, you know, the way that they're so easy for, in a lot of cases, to be taken advantage of. And oh my gosh, the horror stories you hear about a little old lady. You know, she and her husband saved their entire 50 years together. He passes away, and then all of a sudden she gets this You know, can't pass up deal to invest money, and or a bail bond. A bail bond.

A bail bond one.

Oh yeah, Grandma, I'm in jail.

Yeah, and it sounded like the grandchild, and it yeah, yeah, oh yeah.

So sad.

It is. It's really sad. And the thing I feel like it it's how not only for myself, how do I protect myself? How do I make sure my information is protected, how do we have these conversations to support, to enrich a benefit at a firm level? Because it's just so frightening to think of the exposure.

It is.

But shoot. Well, you had an interesting one at one point in your career where you shared with me about someone who was really not being forthcoming to you, but was being sly about how they were handling trust funds. And it put you in a position where you had to make a solid decision and how you proceeded. And that feeling of emotion, that horror feeling of like—

Exactly. That's the word for it.

In somebody's career. But dutifully, it was a responsibility that, you know, ultimately they were mishandling things incorrectly. And you really— I remember when you went through that and that emotion, and I— but ultimately, I'm grateful that you called and we chatted together about it. But it was—

You know, sometimes when we run into these horror situations, we have to bounce them off somebody else because— and I did with that one. I sat for a good week or 2 weeks just Giving opinions, saying, this is what they did, this is wrong, here's the proof. What, what do we do? And yeah, I had to make some tough decisions on that one. And the word horror is so appropriate for that particular situation because I lost lots of sleep over it.

Oh, I know.

I just, I just commiserated over it. And, and, but I am happy that I did what I did to Stop the bleeding, if you will, and, you know, help show this attorney that this— you just, you can't do what you just did. Yeah, yeah.

It's the thing that the liberty is taken. You go through school, you do all of these things, you know your fiduciary responsibility in this. You know, you don't— you may not know all the components to making it right. That's why people like us exist to support you. But yet you intentionally made the wrong decisions and didn't want to own up to it.

Intentionally is the word. Yeah.

So, yeah, that's, that's tough. And I remember you going through that and I felt for you.

Oh, thank you.

Yeah, but it was pretty— it was definitely one of those black and white moments.

Yeah, it was. Yeah, it was. And boy, you just, you second-guess yourself. You're like, am I looking at this right? Did you Did you really do this? Did you, you know, do you know what you just did?

Yeah. Well, and, you know, honestly, it's sometimes it's even more frightening as you, like we were talking about earlier, you get away from the fundamentals of all of the balancing. And then when you have someone come in and rebalance your trust properly, and now you find out you have all these uncleared items that are owed to people. and the dutiful responsibility that goes on with that. And what does your state require? And all of this, you said it earlier, Steve, you can't just carry it over one more month.

Right.

You have to handle it.

We have a firm right now that's in that scenario with lots of uncashed trust checks from prior years. And the firm's going out of business.

Oh no.

And yeah, and they've stuck their head in the sand. They're like, oh, it'll just go away. And we keep, the CPA and I keep telling them, You've got to do these steps to prove, yeah, that you're trying to give that money back to the rightful owners because they haven't cashed the checks. And then you take that proof to the state and say, here's the money. But the state's not going to help you out with it if you don't go through those steps first, if you don't do your due diligence. Oh my goodness. Yeah, yeah, yeah.

It is, it's a big weight on your shoulders. Goodness. Well, in business I mean, sure, if you don't, if you're, you're in business for yourself and you don't try it out, like, you know, and it's scary, I guess, no matter what you do, but you've gotta, you take the leadership in all of this, you take the accountability and the liability no matter what as an owner.

And when you create your own horror story, own up to it because we all make mistakes. It's okay. Like, oh my God, did I just send that report out that way? You, you see some little glitch somewhere that you overlooked. And so that's a horror story, but it's how you handle it. You know, you can—

great point. I love that, that you— yeah, you have to handle it with professionalism and admitting like your team.

That's why we double-check our work and triple-check our work sometimes, you know.

And the best of us make mistakes, so there's got to be grace for that. I want People need to have a little bit more— I feel like we're in a precarious climate change of situation right now, given we're on an election year and there's a lot of heated conversations going on with people. And it's just, it's easy to get feisty. But yet, I mean, it's— we should be a little bit more graceful with each other and give kindness to one another, I guess.

Absolutely.

Absolutely. Well, this was good. This was a lively conversation about speaking.

I didn't realize we had that many stories to share. Wait, there's more. Let me open a drawer up. Yeah, yeah. But it's important to, to your point, to have grace and to really think things through. And, you know, when you come across the horror stories, then get your act together, figure it all out, your approach to it, and attack it. Don't stick your head in the sand.

Absolutely. Yeah.

Yeah, this is a— this was a nice one. I'm glad we're talking about this.

Absolutely.

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I have a question for you.

Yes, ma'am.

Question. Is there like a favorite candy or a favorite thing that you like to do for Halloween or participate in? Is there anything that you—

I like to turn the porch lights off and hide. You had to ask, right?

Some people really get into their candy, and I'm always amazed at like—

Yeah, we live— we've lived in this house almost 30 years, and so we've seen it's cyclical. There'll be a whole bunch of kids.

Yeah.

Then they grow up and they're gone, and then here comes a bunch more kids. And right now we're kind of in a dry spell. We don't We don't see them, you know. But for Halloween, let me think. Um, trying to think. I don't know. I don't, I don't go out and play like I used to on Halloween. How about you?

No, I've, I've only— I mean, only kid-driven, and I've always loved it. I'm the last-minute Halloween candy purchaser, and then I have so much of it that I can't have it in my house kind of thing. But, um, this year with all of the business travel, I I made a decision with my husband early on. We're just going to turn the lights off.

You are?

Only because I know I will have just gotten back from an event, and I know my reserves will be tapped. So, yeah, but I was just curious.

I have a Halloween horror story. This was many years ago. I had an Irish Setter, and his name was Wally. Oh, and Wally loved everybody. And this little witch came to the door, rang the doorbell, went out to give her candy. And for some reason, Wally just took a real nice liking to her, if you know what I mean. Knocked her over on the porch and off he went. And I'm like, oh my God, no, no, no, no. And the mother's yelling and yeah, out of horror story.

What a great name though for a dog.

I love it.

Yeah, Wally. Well, now we have Hector, so.

That's all.

But that was a horror story because I was so mortified. I'm like, oh my God, no.

Yeah, yeah.

Knocked this poor little girl over in the yard.

And, you know, well, there we are. There's our parting spookiness. Happy Halloween, everyone.

Happy Halloween, everybody. Take care.