In this tutorial, Linda Artesani of Artesani Accounting walks accountants and bookkeepers through the process of migrating a law‑firm’s financial records from legacy desktop systems (such as PC Law or CosmoLex) into QuickBooks Online. She explains why opening balances for both accounts receivable (AR) and client trust ledgers must be recreated rather than entered as lump‑sum figures, demonstrating how to back‑date invoices and trust transactions to preserve a complete audit trail. The video covers two main methods for handling trust opening balances—direct journal entry versus detailed reconstruction of each client’s trust ledger— and advises when each approach is appropriate based on data volume. Artesani also discusses special scenarios like partners leaving a firm and taking client matters, emphasizing the need to coordinate with tax professionals and to document the transfer of trust funds accurately. Throughout, she stresses the importance of rebuilding the full history within QuickBooks so the new system contains the entire picture, and she offers her firm’s data‑migration services and the Accountants Law Lab as resources for accountants needing deeper guidance.
Chapters
Hi there, Linda Artesani, Artesani Accounting. So this week is about entering— finally, we're to the point where we're entering the data. And this part is really about entering the opening balances, the opening balances in the trust ledger accounts and the opening AR. Most firms, when you book in the book-to-tax, that transaction where you're booking in the balance sheet of a tax return, Most attorneys that I work with, they are cash basis at tax time. So what happens when they're tax basis at tax time is their balance sheet's going to reflect that. There'll be no accounts receivable, no accounts payable on the books. So when you start to bring the scenario into real world, it's— you have to book that in because there was in fact open accounts receivable, maybe open accounts payable. So definitely need to bring in the records for the open trust balances. So in this scenario, we're looking at someone who's coming off of a desktop situation. They're coming off of maybe a PC Law. Maybe they're coming from another software like CosmoLex or something like that, where they need to completely move on to QuickBooks Online. And they're the same existing company. So we're moving the records from a system that's not working to a system that is working for them to be working in QuickBooks, maybe taking them off a desktop, making them more modernized to the cloud-based system. But you're going to need to show where the records ended on one system and show where they begin on another. But when it comes to doing this kind of record keeping, you want to not have to refer back to the old software. You want to have the whole picture inside of QuickBooks, and that means you might have to rebuild all the data that was inside of the other system when it comes to the open balances. So when it comes to any open accounts receivable, you want to have that inside of QuickBooks. You want to have that Inside. So you have the whole picture. You want to have all the open accounts receivable, which will mean you going in and entering all the invoices, dating them in the past. So you want to date them in the date that they happen. So when a client pays you, you're able to tick off the invoices and not just put in an open balance. I see that with clients sometimes when they migrate over, they just throw the total balance in. If there's 4 invoices attached to it, It makes messy accounting, and really the right way to do it is to just enter all the invoices. Now, when it comes to the trust accounting, there's 2 thoughts here, 2 ways, 2 methods. You can consider that whatever's on the old system, if you're in PT law, and whatever's on that old system for the opening balance, you just start with debiting the trust bank account and crediting all the individual trust ledgers. If a client disputes the amount, then you'll have to go back and go into like PC Law and look at the whole rundown of all the invoices, all the retainer deposits, any money moved out for expenses. You'll have to go back there to get the rundown and pull up the open invoices— not the open invoices, the paid invoices— to prove out that balance. My opinion, depending on the volume, and we do a lot of data migration, so we actually backfill a lot of files, and Mike's staff does an amazing job with that. I don't get into doing it too at all, really. I don't do that kind of work. They do it. But if I was doing a smaller file, I might just go back and rebuild what happened, what happened in the scenario. So we're going to take you through that step. Now, with— when it comes to maybe 2 partners being in a big firm and they leave and they go off and they start their own firm, that's a scenario where you really want to discuss the whole thing with the tax professionals involved in 2 partners leaving one firm, 2 partners starting, and those same 2 partners starting a new firm. How do you— if they take some of the client cases with them, how do you handle the ending of the trust account balances in the old file? That tax professional will help you. How do you enter the opening balances? Because that's going to have a whole history, a whole story to it with how you enter that, because maybe there was money involved, maybe the partners have to pay the old firm. However that is, you need to find out those details. You can't just assume. So you really need to get involved with the tax professionals that are involved in partners leaving and partners going to a new firm. This is something that happens if you work with attorneys. You haven't had that happen yet, you will see it because it's something they dance around all the time, especially at the end of the year. They kind of time it for the end of the year and they leave and they take their cases with them. And you have to understand the ins and the outs of the whole You want to see the new partnership agreement. Make sure you ask those questions when you discuss that transfer over to the new firm. These are questions we get really deep into with our Accountants Law Lab. So it's a resource if you are a little bit nervous because you know this is going to happen with the lawyers that you're working with. Join us over there and we'll definitely help you. And I'll provide links in the post that goes with this video. So let me share my screen. I'm going to take you in and just show you how to backbuild out some of the opening balance. that has to do with the trust accounting. And then you can decide how you want to handle this, how you want to map it. My preference, backbuild it all. Hire somebody if you need to, to restate all the ins and outs of each balance, because you really want to preserve it all in one software. Let me share my screen. So I wanted to take you into one of my clients that I have to show you. Now I'm in the AR side, so I'm in the invoicing tab. I'm under the customers, which probably have renamed clients. And I'm just showing you that, you know, at the beginning of the year we started this file, the very beginning of the year, and this person did have $728.19 owed to their— to this firm. And because we switched from one software to the other, I want to show that. So I just have to create the invoice, basically create the invoice, show it's overdue. And then if you're making the move during the year, you want to rebuild up to those dates so that you have an accurate reflection of what's open. Now let me take you over to the trust side. So we're going to assume that William here has open trust balance and we want to book that in. So if we go over to his register, you're going to access that by going over to the Accounting tab and picking the Chart of Accounts. And then we're going to type, you know, William in here so we pull up his account. So here's William's account. You can see that I'm in his trust liability account. You know, he had a divorce situation, so he's underneath the trust liability header as a subaccount. which we go over in the earlier videos. And now I can see here that at the end of 2020, his balance in the account— you can see here, if I pull this over— was $10,400. I could have booked that in as $10,400 William Aldridge and then add that to the bank account. And to show the bank account would be debited, the client trust would be credited. So I'm increasing both, and that would be the perfect one to book that in. But If Mr. Aldridge comes back to me and says, hey, I think I had more money in that account. Now I'm going to have to go over to PC Law to look it up. But if I have it here, I can prove that he gave me— you know, I'm going to date it when it was— when it happened. So 7/25/20, he gave me a retainer of $5,000. Then over here, he gave me another retainer of $2,700. So you can see here that I've got all these increases. That's what I had to book in. And then as you go through the year, you're going to recreate all the transactions as the money moves out. Maybe the attorney charged the money and it went to an invoice, and now we use the trust funds to pay the invoice. You're going to start to show that whole back history to get to the balance it is today, and you want to have that in there. Now, one of the things I will do if we want to get to that point of showing the balances, if you have a really, really, really big list— we had one that we had 2,000 open matters that we had to replicate And Sarah and I did this by hand. It was the first account we had, and it was massive. We had some work from our team, but we did a lot of it ourselves because we had to go through PC Law, you know, a really ugly client ledger file. It was like we nicknamed it our own— we had an affectionate nickname for it because it was our go-to source. It ended those balances with what was in the bank. So it was what we had to keep for compliance. When we went back to that, We went through and added all these. We recreated— so if you think of the trust ledgers, because it's not the client's money, think of them as little mini bank accounts for each client. You are replicating the ins and the outs of that bank account. So that's part of really doing this work to make sure that at the end of the day, if you booked in that journal entry for bank balance here, you know, on the debit side, Credit was all the client ledgers. As you start to recreate, like as I do Williams, I'm going to finish Williams. I'm going to go, yes, his balance is $10,200. I'm going to go back to that journal entry. I'm going to have that open, that journal entry, the beginning balance one. I'm just going to remove his amount. I'm going to lower his bank account balance by that $10,200 and then move on to the next. So eventually I'm going to get through every single account. I know it seems like redundant work, But for me, it works in my brain that I'm going to— when I'm done, the bank account is going to show zero. The client trust ledgers are going to have all their history back built in, and you're going to have perfectly clean new records to start the day. I hope that's helpful. And you want to see more in this series, please hit the subscribe button. I'd love for you to follow me and for any videos. We keep building on them every single week. If you're interested in not doing this kind of work, it's the work we do. So if you're moving off of one software and moving to another, migrating over, we specialize in data migration. So certainly reach out for that. And if you are an accountant or bookkeeper who want to learn more about partnerships dissolving and opening up, client engagements, whatever, we have all those topics in the Lab. All the links will be provided inside of this video. Until next week, bye now. Bye.
