The Side Spreadsheet Trap

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

Hello everybody. Welcome back to the podcast. You just missed a fun pre-podcast talk. We were picking on each other and having lots of fun. Good morning, Lynda and Sarah. Good morning.

How are you?

It's good. It's— I'm well. It's a nice Monday post-Mother's Day and So far, I'm gonna knock on wood, things are okay right at the moment.

And you look bright and cheery.

I know, Sarah, you look like you're ready to go to like somewhere big.

I did not have a lot of sleep. I went to the gym and I have my coffee.

You're sparkly.

Thank you.

That's it. She's sparkly. So, well, today we're going to talk about, um, why law firms rely on side spreadsheets. And I'm just going to start it off by saying, Why?

Why?

Oh, I think the question is why, why do you have them?

Yeah, why do you even jump into that? You know, mostly it's, it's smaller firms that usually jump into that bucket and, um, thinking they're going to save money and everything. And, and we're going to talk about that today, all the little pitfalls that can happen and when it's time to get out of those spreadsheets and go to the professional software and bill your clients, pay Pay attention to your law firm, pay attention to your business, and let the, let the software work for you. So who wants to kick that off?

Well, I mean, I think a lot of times these— sorry.

No, no, you go for it because I think Sarah was really pumped.

I'm 3 hours ahead, so you may not have had your coffee yet.

I'm in it. I'm just starting.

You know, and I'm just saying, I just feel, I feel like a whole different person. Like, as I was on a medication for 2 weeks, again, tried another medication for cholesterol, high cholesterol. And epic failure. Apparently I have some kind of gene, and it made me ill and tired. And now I feel sparkly because I feel like a whole— I feel like myself again.

Because I feel like Lynda today.

I stopped taking it. I mean, I was so dead last week. Last week was the worst. But why do they have a side spreadsheet? They have a side spreadsheet. Sometimes they get it in the beginning because they start out and they're like, well, I don't want to pay for software, so I'm going to just do my own trust in the spreadsheet. I don't need software. I can do it myself separately. We've seen all sorts of versions of that, huh, Sarah? Sometimes we get a spreadsheet and we're like, ooh, this is kind of creative. Like, they'll have a tab for every person, and then they have a cover sheet tab, and then it all tallies up. Sometimes they have the spreadsheet for trust where it maybe started out in one way, but they couldn't continue because that's a very manual process. And then it's either behind, or we find when we dig in, like, oh, there's— the formula's not—

Right.

Like you click on the formula box and it doesn't include everything. Well, there's a problem. And then sometimes they have a side spreadsheet for their calculating their compensation.

And a lot of them do that.

Yeah. And then of course the 3-way, you kind of need a spreadsheet for that to kind of tie all the pieces together because you have these, you know, Clio and LeanLaw and QuickBooks or however you have it.

There's one you haven't mentioned yet. One of the side spreadsheets a lot of times is costs associated with The file. So the client's advanced client cost, it's, it's a therapeutic way for some—

Firm client fees.

And, and/or some individuals, you know, depending on the size of the firm. So you're right, Steve, I do feel like it's on the smaller side, but there are some. And when you get into it, you're like, that's logical to your mind. That is very illogical to anyone else looking at it. It's not plain English because spreadsheets aren't their thing, right? Like, It's just a tally report is what I call it.

Well, you know, I've noticed some of the bar associations will tell attorneys and new attorneys, you can use a file box with cards, you can use a spreadsheet, you can do this, you can do that. And to me, it's a disservice to them. It's like, don't, don't go there.

It is. Yeah, for sure. Yeah, I know that we kind of touched on this earlier because Lynda had written a blog about this and Tierra kindly pointed this out where The broken formulas, some of the things like, Lynda, you mentioned initially, just start with empathy because it is— it isn't something you should, as an accounting professional, offer to take away from someone. It's a resource tab. It's a tool in your toolkit to utilize and validate against. But at some point, if you have valid ways to produce the information that can be tried and true, And that may go for a while. And I, I've, I've always been like, you don't need that anymore. I still have a client that does it very manual, but I understand why. It's the way he was trained. It's the way he looks at it.

Feels safe.

And that's okay. Like, I could still produce the information the, the way that I need it, but that's okay if that's what they want to do. There will come a point— I feel like this is true of all 3 of us as business owners— Where we realize it's not capable for us to maintain this because we have so many things going on. So—

Doesn't it make you wonder that now we've got Claude? Does it make you wonder? Because the attorneys are playing in the software, you know, the AI software, just like we are. I wonder what we're going to find there because it's not always right. And I wonder what kind of— if you ask them for a spreadsheet, it can make a spreadsheet and then you can say, well, can I see it? Because it's nice to have, um, in some respects, having a spreadsheet, depending on the process that the client's doing. Sometimes we have to coordinate on a spreadsheet. We have project lists that we use spreadsheets for. So it is something, but when you're talking about the manual processes, we're trying to eliminate them, but sometimes that's more task specialized. But then I like to call it their binky, because sometimes you have to be very careful when you meet with a new client. Always ask that question, though, because remember, Sarah, we met with somebody and then we went back and we're like, we forgot to ask the question if they had a spreadsheet. And then we went back because we were trying to do a trust cleanup after we got the client. And then eventually in a conversation when we did the little meetings, they said, well, I got a spreadsheet on that. Would you like that? It's like, you've been holding out on that spreadsheet all this time. We're trying to fix something that was older, and they had had a spreadsheet from a while ago. So you have to— we have it as a question now when we when we do the scope and the— and when we meet with a client, we actually have that as a question. Do you have any spreadsheets?

Mm-hmm.

Anything that would help us or assist us into getting you the proper quote? Because if they've got a side spreadsheet, maybe that will help us figure out the old trust and we don't have to rack our brains on it. Because sometimes that's missing information, or you— the bank is so old we don't have all the statements, or whatever the story is behind it, or they move bank to bank and nobody Attached it into QuickBooks where they moved the money over and that there's— they didn't break it out. They just made a transfer and just said, oh, there we go, and nobody tracked it. So we don't know what was in that initial deposit into the new trust account because they didn't book it in that way. And then what do you do?

I think Steve said it really well too. I mean, Lynda, you and I've seen this, is it's encouraged at the bar to, to just at the very minimum maintain it and Kind of to your point, those granular details don't always surface accurately. And if it's a source of information, or if you're like you're saying, you move bank to bank. Now, Steve, I know for, for you as a, as a tool in your toolkit, and we've kind of taken a little cue from you, we, you know, you have a side spreadsheet of just the additional asks or the out-of-scope things.

The wins.

The wins. Not to Penalize somebody, but just to, you know, everyone needs a reminder of like how much you've done for them, right? In a nice way. But do you feel that when you get into some of the deeper spreadsheets, when they're trying to analyze or slice data, do you feel like the right people are in the right place to look at that? Or does somebody double-check it? Because we've found incorrect formulas. What do you— what's your sense on—

Well, I had a client this year who created this massive spreadsheet, huge, on partner compensation. And things didn't tie out. And they asked me to take a look at it. And I could not figure out where all these formulas were because everything circled back to everything to everything to everything.

Yeah.

We finally had to get their CPA involved to figure out where they wanted to go with this spreadsheet because it just, it just went on and on and on. But You know, that's a great example of how a spreadsheet can be effective though, because they can parse out things and study them.

Like, they got to make sure it ties back to the books. They don't do that.

Exactly.

Well, that's my inquiring mind is down. Did you throw that— did that whole thing get thrown out and start over?

No, it ended up working. They found where the anomaly was in it. But, um, it took, it took a few weeks to get it worked out.

That's a lot of work.

But back to what you were talking about, I do have a spreadsheet that I use in my, my business that has a tab for every client. And Lynda said the word wins. The wins go in there. The scope creep goes in there. Everything that just, just goes in there. It's just kind of a dumping ground for my thoughts on each client as I work throughout the year. And then when I'm looking at whether I should be doing a price increase or, uh, right now I have a client who's really downsizing and, you know, so I have to look at, need to go the other direction with pricing maybe.

Right.

And, you know, I have all these notes in there and that to me, that's the depository for that. But here's the thing I don't like about attorneys using spreadsheets is there's no audit trail.

Yeah.

Well, unless it's a Google Sheet. If it's a Google Sheet, we're like, who touched this? Right to the cell and see who made the change. That's what I like about Google Sheets over an Excel spreadsheet.

Yeah.

Where it does lack in a few things, it has amazing features. And I prefer to be in a Google Sheet over Excel now because of that, because I can see Plus, I can see if somebody— because if you are sharing it with an attorney, say you've created something fantastic that's going to track compensation, it's going to track back to the books, and then you let them see it and they go in and look at it and they change it and they wreck it, you can go convert back to the last one and you have it back. Whereas it's just got a lot of protections to it. So, or you can see if somebody's manipulated or changed it, which we had that with a client one time too. Weren't they like putting— things in to get their bonus, and somebody went in and just took other people's.

Oh my God, it was horrific. Now, the thing that's fascinating to me though, do you— I feel this way, is I get that some softwares you're trying to put them all together, right? And so you don't have data in maybe one section, and why you need it for these, say the compensation. But why is the compensation so complex then that it can't be streamlined? Why can't we reevaluate that segment of the work? Or is it— and this is not attorneys, but you see this in other forms, in other professional services, where they just need to keep track of, let's say, the dollars that came in, the net that goes out to them, and what's the in-between. Keep it simple, I guess, in that way is what I'm thinking. Not overcomplicate it. But Steve, like you said, that is often the case. You have this robust workbook. It's crazy. Like—

It is. It is. And it's very granular. And then, you know, when they change course in the middle of it all, that comes into play, you know. And so you're trying to work through what happened, what if, what about, you know, those sort of things.

Like, wouldn't you want to— I guess my question in my brain is, Wouldn't you want to lean in back into your financials, extrapolate the data out of your practice management, lean it back into the financials? And I can understand, that's where I can see where you're coming together in a spreadsheet that's— you're not adding a lot of formulas to it, you're stating the data, and then you're showcasing, you know, potentials or hypotheticals and/or the final result. But it, to Lynda's point, it's got a A way to lock, or it's got a way to— you can protect your cells, which I know you can do that in other softwares too. But I just feel like if you're having a collaborative conversation with your accounting professionals, it should be a collaborative tool then that you're working in. So.

Now, I've used spreadsheets when I have a huge trust cleanup to do, and I will do the tab-by-tab, client-by-client. And, you know, and of course, I'll be very careful about getting all my formulas to go to the master tab and all that sort of stuff. But that's, that's come in very handy in those situations because I like those. Steve, yeah, I do too.

Papers. You know what I like about the— on the Google side of it, you can take a screenshot and have that image saved in that workbook and, and lock the cell so that way All the hard work you did is just for viewing. It's not for—

Exactly.

Yeah. I mean, I, I don't mind giving someone, okay, you can— here's a copy of it if you feel like you need to validate and write on it and challenge it, by all means. But I, I think you're right, Steve. Like, you do need some work papers. I mean, spreadsheets will not go away, obviously.

Correct, correct. Hopefully not.

Okay, so So here's a question, a scenario. Oftentimes you see it in, in obviously PI firms, their spreadsheets are heavily driven because it's— you're taking a percentage of what's been awarded and, and so forth and so on. But my question to you, Steve, is when you're working on like costs or you're looking at, you know, some clients come to you and it's just like a data dump out of their bank account. And then you've got to sift through all of it and you got to find out what's all this data, or, you know, what was this deposit for? What was this expense for? Because sometimes people pay things in groups, like you pay your court filing fees sometimes in a group. So, you know, how do you handle that for you? How do you— how have you sifted through that data? What do you do if you have to do it in a spreadsheet? Do you just like make—

You know, I haven't actually come across it where I've had to parse it out that way.

Oh, okay. Yeah, sometimes we just make it collaborative for us.

Yeah, to your example, like I'll use Clio as an example. The court fees and the filing fees and all that will be individual entries on the client bill. But then when the client pays, excuse me, they, you know, it's all lumped together. Here's $10,000 and $7,000 is legal fee income and, you know, $3,000 is all these costs. You can still parse it out because you can go back to your Clio software and look at the bill and Look at the reports and, and see how it does it. Or we've started using a software called My Firm Data with this firm I was mentioning a while ago. And oh my gosh, what a lifesaver that's going to be. And as an example, I've shared this firm with you guys before. They are so granular with their class accounting.

Yeah.

And, um, it got to be such a monster with the fee income category that that's what finally pushed us over to My Firm Data.

Yeah.

Because they— we needed to break it out so that they could see. Let's say Sarah's— excuse me— Sarah's the attorney and she worked on this, this situation for 2 years. And, you know, the transaction finally closed, but there was a huge discount. But 3 other attorneys jumped in throughout those 2 years and did different things. It got so granular that And My Firm Data does this for us.

Yeah.

Um, you know, we can say this bill is now allocated to these 3 people and so is the discount that was given. And here's how it parsed out the prior payments and so on. So that avoided spreadsheets because we were heading that direction. I was like, oh no, we just can't do that.

And you might want to explain what My Firm Data is.

My Firm Data links to Clio. These people are amazing. And it's, it's a reporting—

I'm with you.

It's—

oh, I just— you guys, I think you guys turned me on to it.

Yeah. Yeah.

And I was like, you know, the harps played and the sun came up.

Because it doesn't cost that much. That's the other piece. It's not that expensive to get the data. It's less than the time you take to do it manually, right?

It is. You don't have to spreadsheet everything, you know.

So they're a company that does It exports out in different versions, which is helpful. But, you know, the biggest thing, like, if you were to take— I can see on a small firm you'd take it out to a spreadsheet. But if you're trying to look at, like, you just brought up Clio, so I'll just use it. You're looking at the originating and the responsible, right?

Correct.

We have a client very recently that never really understood what they were doing inside the software. to be able to make sure historically they have the right data. So now it would be a matter of probably going back. I don't know if that would be us or someone, maybe more cost effective if someone's on their team, depending on timing, to go back and, and clean that up and make sure how it's aligned. And when you think about, and this is true of us, we, we can say this as accounting professionals when we're endeavoring into a newer software. So you're coming out of your spreadsheet, you're getting into a new software. You may not have the whole picture in front of you of all the pieces you need, but I feel like there are some fundamental core parts that you really should set up, which is responsible attorney, originating attorney, and—

Amen.

Practice manager or practice area, because 90% of the time, if you're asking us to slice that data back up, we have, we have to understand What it is that you're looking for, because I know you're looking to probably hire an associate.

Mm-hmm.

So what—

What's the backstory on that ask? Because if you ask us for, like, this random thing, we don't know why, why you're asking. We might be able to give you— you might ask us for a specific report. We might know something better or a better way to get that data out. And like Sarah said, slice and dice it. But if we don't know what you're trying to do, we can speculate. But, you know, you don't want to assume anything. You want to actually know what the reason is. And for some reason, they kind of keep everything such close to the vest that you can't— like, just let me know, you know. Sometimes, like, when they— all of a sudden you get a client that's like, I need this, this, this, this, and this report. And then you find out that they're actually getting a mortgage somewhere, or there's a reason for it. But they're like, I need it tomorrow, you know, I need tomorrow. It's like, whoa, hold on, cool your jets. And then you find out, well, they didn't tell you anything all this time, and now they really do need it tomorrow because they ignored their bank. And yeah, it's, it's become our fire. My favorite line is, there's no bookkeeping emergency, but sometimes there is when it comes to these things.

Well, and like, maybe for one example, and Steve, you've seen this too, is exit strategies. So all of a sudden the firm, the partnership isn't working, or a solo attorney is like realizing my life has changed. I've got to find somebody to take this over. Well, now how in the heck are you supposed to drive the bus? Because you only did it half baked, right? And you're asking all these questions and you didn't give us— to your point, Lynda, we don't get the story sometimes. We have certain clients that hold it a little too close to the vest. And I kind of question, like, look, we kind of have the whole pie. So can we just have the last quarter left, please, to help you drive? I know. Yeah. But I mean, you can pull those out into spreadsheets and make them pretty and nice and build these beautiful things. But if the data isn't where it needs to be, or if you didn't intentionally do it, I think the question is, is like, you gotta— what are you trying to track? Is it you're trying to track this little bit, or are you trying to— is there something that's a bigger goal in the end? And, um, it's never easy to go back and backfill data.

No, no.

Costly one like that. Data migrations, if you— if done wrong, we've had one come to us 5 times over, finally landed it, but 5 times they tried.

Oh yeah, it's bad. It's bad. And we see some really bad data migrations. And I think sometimes people just assume, well, I'm going to go through Clio or LeanLaw, they're going to help me through this. And they don't realize you still have the obligation to check the data after it's been migrated over and double-check the numbers because things, even if they tell you everything came through, you need to make that it came through. That's why you really need somebody to help guide you through the process, especially if you're moving to new software. Don't go by the salesman's conversation with you because they're trying to sell you the product.

Yeah.

I don't care who you're talking to, what company that you're working with. Find it— find an accountant or a bookkeeper that does this work that can help guide you through because it's an expense. I mean, you know, it's, it's, it's really expensive to change software and you don't want to have to do it. We've seen people have to do it twice, 3 times even, and they finally get to us and we're like, oh wow, oh, I see what they did. They just booked in journal entries. You got really no data here. And, and that's the thing that's kind of— you feel bad because they paid a lot of money to get it done that way. You really want someone that knows what they're doing when it comes to—

Oh, they have a side spreadsheet and poor—

Yeah.

Through this.

Yeah.

Well, and to your point, Sarah, if you're, if you're, let's say you're a solo. Yeah. And you set up your Clio as an example and you use it as originating and responsible or however you set it up. And then all of a sudden you're going to bring in the partner like you said, Lynda. You know, it's, it's not plug and play, folks. You have to stop and think it through because you can export whatever you want out of there into the spreadsheet, but garbage in, garbage out.

True.

You know?

Yeah, true.

Yeah. If you, if you're trusted and balanced in the old software, It's not going to balance in the new software. You're going to figure it out, unfortunately. And you can't change banks and make it magically balance either.

Linda, Linda, Linda, it doesn't work. Just too practical in this conversation. What's going on here?

It's like, I want to say, just shake them and say, don't. It doesn't work. Maybe it sounds good on paper, but it doesn't work. It doesn't work.

Yeah, it does. I will say, do you guys find it? I find it— I get, I understand it, but I find it funny to me that a lot of times when you're going, uh, say to a bank, they'll want your financials in a spreadsheet. And I'm always like, really? Why? But I, I mean, they're trying to run numbers off of it and, and—

Yeah, they're taking their own pieces out of it.

They're taking their own fee or something.

But it always scares me because I'm like, it can be easy, easily manipulate—

manipulated. Yeah.

Well, you send them a hard copy of the reports too out of the billing or out of QuickBooks.

Absolutely.

And put in the title, not audited, you know, all of that and send them whatever spreadsheet they want and let them play with it.

You would think banks would have OCR data. They could read these PDFs.

Well, yeah.

But, you know, that's just too, that's too practical.

That's coming in 2040.

When they join us with the rest of the crowd.

Here's a little side note on banks that's irritating me right now. Are you guys familiar with First Bank?

Oh yes.

Oh yeah.

Okay, well, First Bank is becoming PNC. Have you been receiving all the notices that you physically have to go into the bank and sign documents, re-sign all your documents physically? Do they have anybody in the bank?

Is there anybody in the bank to meet you physically?

There is in the one by my house because they know me. I've gone in enough times and I said, it's me, and they're like, we've got your documents, you know.

So PNC is not one of my favorite banks.

I know, I'm worried.

I will say though, I had an incident. I'm not going to announce it too much here, where— but I got a new device and I had to register the new device, and I did appreciate the fact that I had to jump through a few extra hoops where normally I would be upset about it.

Oh, good point.

Regarding Chase Bank and a couple other banks that I was like, oh, thank you, because Because, you know, they're doing it. It was nerve-wracking. Yeah. And I can say, even with the recent cybersecurity that has happened for all these schools, and it's not just universities, these are this Canvas product. The thing that I've been reading from some cyber individuals is that now they have the way to see how you write, the way they— you interact. Because it's a messaging platform, you know, so they know a lot about you. There's a lot about you. So now it will most likely, you know, sadly, you'll probably get links like we all get these phishing links of like, hey, your bill isn't paid for, or you've got a school pay. So these are like little things that are really challenging. And, um, I just find it, it's interesting at this day and age, like, going back to our topic is side spreadsheets have vulnerabilities.

Oh, yeah.

And they have vulnerable—

Well, then maybe we should go back to grid paper.

Well, I vote for that. Green grid is okay. Well, I guess—

It's very secure as long as it stays in the office.

As long as it doesn't get burned. Can you make them fireproof now?

No, who knows?

Who knows?

I'll tell you my first job.

Put it in the fire safe.

My first job in accounting, Westin Hotels.

Uh-huh. Was on a grid sheet, right?

Night auditor. The grid sheet was about 4 feet across and about 3 feet high. And at 11 o'clock at night, you started in the top left-hand corner, and by 7 in the morning, you finished across and down to the bottom right corner. Yeah, those great big sheets. And then you wrapped all the daily workup in it and sent it up to accounting.

Yeah.

Guess what? It balanced.

Well, and I'm the— I'm— I was one of the people that had to review the night auditor's work. Okay. Yeah. Yeah. For food and beverage.

You were that lady up in accounting, huh?

I was. I was in a— no, get this. I was in an office with no windows at one point.

Oh.

And I, I think I came out and said, I'm too young and too cute to be back there.

I don't think I'd like to be in that office.

I was kind of being sassy and funny, but I was joking around. And they're like, yeah, that's not actually a nice office.

Uh, are you guys ready for the funny AI story of the day?

Okay, are we moving into that before we wrap?

Before we wrap, in this morning's news, there was an article about a restaurant somewhere. I want to say it was in the United States, maybe it was in That is, they, their, their AI is running the business. It's hiring the employees. It's doing everything. And guess what? It's losing money.

Oh, what a surprise.

What a surprise.

It's AI. Can you imagine relinquishing that control? I can't at this point. I don't care how good it could do.

What's the point of entrepreneurship if you're going to have it do that?

Well, clearly it didn't work very well.

Yeah, I just started—

You didn't give it the right prompt, Steve. Yeah.

Wait, I can't make your coffee till I prompt this.

Were they hiring humans with this?

They're hiring humans. The AI is hiring humans.

Oh, it wasn't robots. Okay.

But they get to do the grunt work and it's losing money.

Wow.

Yeah.

In restaurants, you know, the edge of profit is big.

Razor, razor.

Yes, it is not— it's not— I remember looking at that industry when I thought about niching my practice and I'm like, Hell no. That's too cyclical. You know, any little thing, like we found out with COVID any little thing could just really end the business, you know?

Yeah.

No, and I didn't like all the daily slips. Oh my God. That was my other thing with— I had a couple of restaurants that I worked.

Well, it's easy to do under the table with tips and all kinds of—

Yeah.

The cash too.

Yeah.

It was just not, not my thing. So, yeah.

Yeah.

Well, that was a good subject today.

Yes, it was.

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Well, thanks, Tiara. Thank you, you guys.

Thank you.

Yeah, we'll see you all next time.

Bye-bye. Have a great week.