Linda Artesani shows how to fix trust account problems in law firm QuickBooks files. She covers three-way bank reconciliation, deciding whether to rebuild or redo a file, and backbilling IOLTA activity across multiple years. She emphasizes tying the books to the tax return and pricing the time-intensive work.
Chapters
Hi there. Linda Artesani, Artesani Bookkeeping. The topic of the week is IOLTA messes. How do you fix them? It's a tricky topic. It comes up every single week. And in our Accountants Law Lab group, we've got a group of amazing people that are with me and they meet with Sarah and I to go over law firm work. Some are brand new to having their first attorney client and some have been experienced and they only work with attorneys. So it's a pretty fun group. And we get asked this all the time because it's one of those questions. You tend to get files from lawyers this time of the year because it's messy file season. You might get a messy file and you're trying to determine how to find the beginning balance or when it last balanced. And that's really the key to fixing this work. If you log into a client's QuickBooks file and you go into the report options and look to see the last time it was balanced and the IOLTA is never balanced, then you need to go back to the beginning and you wanna price it as such. If you log in and you see it's balanced on, say, August 31st, 2020, then you want to validate that. And by validating that, I mean pull up the balance sheet, pull up where all the subledgers are, and see if they total the amount that is reconciled in the books to the bank. You want to make sure that that bank balance equals all the individual trust ledgers. So that's what the 3-way bank reconciliation means, right? We're trying to validate the amounts of all the subledgers. The total of the client liability equals the total of the bank account, plus or minus any outstanding deposits or checks that are there. So that is key to working with attorneys and law firms, why it's a higher level of work, why it's not something that's quick and easy. You have to dive in and figure it out. A lot of times we'll start with a client and they'll have done a tax return, say 2019, and their books are a mess. And we'll go in and we'll start new file, and then we'll backbill the IOLTA however many years it's needed to be backbilled. Maybe it's 5 years, maybe it's 10 years. We'll backbill the open, open IOLTA accounts. We won't backbill all of them unless the client asks us for that. Big work. That's a lot of work. So you want to factor that in your pricing because it's going to be time-consuming. It's a lot of manual entry, and it's important that you take a look at the file and really target into that account. Advanced client cost also, but messy files, IOLTA, definitely you want to figure out where's the last time it balanced, when's that good time that it balanced back to those subledgers, and then go forward from there. And maybe you have to redo the file. Sometimes it's easier to redo a file than to start new. It's less work if it's really messy. We had a really messy one the other day, and if you've got a really messy file, you want to be sure that Is it easier to detangle a mess or is it easier and better for the client if you start fresh and just drag those bank feeds in and rebuild the file and then maybe backbuild IOLTA and just backbuild that one bank balance, especially if there's been tax returns. You always want to tie the books to the tax return. So that's it. Short video this week, but I hope that it's helpful. And if you have any questions or comments, please feel free to reach out to me on Facebook. We have an amazing Facebook group called QB Community Live, real active and fun one. And I also have Accountants Law Lab Facebook group. and the private groups. You can also join us there. And on that note, I wish you all a wonderful, wonderful week. Bye now. Bye.
