Legal Bookkeeping Basics

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

Well, hello everybody and welcome back. And welcome back, Steve. Where have you been?

I'm just gonna say that. I'm like, shouldn't we be going, Steve, where have you been?

Just got back from a little road trip, so it was, it was fun and And, uh, back at work, back heavy at work. I'm glad to be here. I went to a family reunion in the middle of Kansas. We were at literally a couple miles from the geographical center of the country. It was kind of interesting.

Wow.

And the fields are just— it's like rolling hill country, lots of trees. The fields were all just lush green and as far as you could see. It was just beautiful there, just beautiful. And teeny tiny itty-bitty little towns. And, um, on Highway 36, you literally, like, every 10 miles is a town. And so you slow down and you go through these little towns and it's just old houses and old post offices and nobody— it was like every town was— nobody was there. So I guess they were all out in the fields. I don't know.

Well, it's a lot of farms, right? A lot of farming.

Lots of farms. Yeah. Yeah.

I've never been. I mean, it's not even a place you stop on the way anywhere.

Halfway.

I can go like, depending where I'm going. I went to Houston to go to California, or I can go to— I'd go to Colorado, but I wouldn't go to Kansas.

Well, there's nowhere on that part of Kansas that really any airline would go to. So yeah, no. But if you can ever drive from like Joplin, Missouri all the way across Kansas to Colorado, Highway 36 is a beautiful drive.

Really?

Yeah, I just loved it. Just loved it.

I think it was lush and green because of all the rain you were mentioning.

Yeah, they've had like— in Colorado, we're here in the Denver area, we're way ahead on our rain this year. It's just been dumping on us. And then they move east and get Kansas and Missouri and all that stuff. And so, um, everything's just green. I mean, they're already harvesting. They're getting ready to harvest some stuff already. So, wow.

Yeah, like Sarah and I went to California while you were gone. And, um, yeah, we, um, actually, we love where we were so much. We went to Napa. We love where we were so much. We're like, next year we're gonna bring the team and do our team.

There you go. Isn't that gorgeous up there?

So pretty.

So pretty. And we just— she and I had so much fun in this tiny little, uh, town. Yeah, we walked around. We— it was nice because we were trying to find something one night. We drove around, then we realized we wanted to come back and walk around, and we up walking around and it was super hot, but it was also just really nice. We were just kind of looking at everything and enjoying the art and just the little adorable moments of things that were going on, like just little things.

It was such a pretty area. Sarah found a French bakery that people— you knew it was good when you walked up to it because there was a line out the door.

Oh yeah.

Then as you got closer, you could smell the pastry and the bread and that sandwich.

We had to walk that off for a few hours. We tried.

Yeah, we walked around for a while. It was just so pretty. It was just one of our off days, it was like Monday, and we just said, let's just try to check out the area. And where we were was really nice too. You know, we went to Carbon Next, which was a fantastic, really a fantastic conference. I don't know if you want to call it a conference. It was, it was really cool to be with other firm members and people that are equivalent to us or even at another level than we are and talk to them and hear their pain points, hear how they're using AI, which was the big takeaway for us.

Yeah.

And just connect with people that we know, and it was just great. Get to connect with Ian, who who's this? Is he CEO founder? He's founder of Carbon.

Co-founder. Yeah.

Nice.

Nicest, nicest.

Yeah.

Co-founder. Nicest, nicest human being you ever want to meet. Down to earth, caring. I don't know other words we could use to describe Ian, and you could tell that. And I didn't really get to meet his partner. His partner kind of hangs in the background, but. You could tell by everybody that worked for them that it trickles down, you know, people-wise.

Oh, cool, cool.

It was really good.

It was nice following your trip on Facebook too. I loved all the pictures.

Yeah, I get to put the pictures up there. She's like, oh, you already did that? I'm like, yeah, I did that. Because I know the mom is at home wanting to know what we're doing.

She's so good. I'm like, um, Tira, let me just remember to send you these photos.

She's like, oh, you already put 'em up there? I'm like, yeah.

Great, okay.

So yeah.

Well, we've got a great podcast today and, you know, it made me think about, we have a lot of new people coming into the Law Lab these days and Tiara will talk about the Law Lab at the end of the recording.

Yeah.

And some of our more popular podcasts, it's nice to refresh this subject every once in a while. A lot of people react positively to our basics and that's what we're going to talk about today. So all of you people who are new, Or want a refresher course on some of these subjects. Today we're going to talk about legal bookkeeping basics. And we're going to talk about all kinds of different things that the firm needs to consider with its accounting and bookkeeping, because we're in the middle of the year while we're recording this podcast. And, you know, we're in that season where this is the time to really look at what you're doing with your bookkeeping and getting ready for, you know, the extended tax time and then getting ready for the end of the year.

Yep.

All of those things and 1099s. I mean, we're halfway through the year already. I'm just blown away.

So— I know.

Who wants to kick it off today? What's your favorite subject to talk about with Bookkeeping Basics?

For just for legal bookkeepers or—

Yes, yes.

In the law.

I know it's got to be trust deed.

I mean, of course.

I think we're a 3-way tie on that. A 3-way reconciliation.

Yeah, I mean, that, that or client costs. Those are the 2 kind of Those are the two, yeah. It's really the two things that set aside legal accounting from regular accounting. I think a lot of times people think that, oh, I can do this, this is not a big deal, you know, how hard can it be? And then they get into it and they're like, oh God, this is kind of hard. And only because you haven't done it, right? So I think there's a huge compliance issue, risk, whatever you want to call it, with trust accounting. A lot of the attorneys don't do a very good job, quite frankly, of tracking their And you probably will get your first client and then right away realize that it doesn't balance. And then how do you fix it? And that's usually the first entry point. Or you get a client that's on something that's just so archaic, uh, that they're wanting you to help them move over to another platform, or they've done it themselves and they go, I think it's right. And then you're like, okay, not so right. Did anybody check this data that you brought in? No. Okay. But they just kept on going with it. So yeah, I mean, it's kind of a couple of areas, I think. And we just talked about— didn't we just talk about costs the other day, Sarah?

About costs, we talked. And I do feel it, to your point, Linda. Stephen, you can chime in on this one, is I do feel that you really do have to understand the type of law that's being practiced to understand how it's formatted.

Oh, definitely. Yeah.

Yeah, because there's nuances to each practice area.

Each practice area. And I do— and if you are a hybrid, if you are a multi, and what are the rules that govern some of that billing structure and so forth. So yeah, the 2 key areas define it slightly differently than, than, like, I wouldn't pretend to understand how to do convenience stores or gas stations. Heck, I don't even know how to do that, right? Or like nonprofits per se. But in this realm, there are some really deep, consistent things that can really quickly go awry and unravel when it comes to tracking expenses. expenses when it comes to handling trust, or how money comes into the, the set of books and how you handle that with the intention that it's getting corrected. And then what we had discussion about yesterday was when it doesn't go the right way, when it's not being handled correctly, what then? So some tough conversations. The basics really To your point, Steve, though, the basics of the accounting is like any business. You have your basic ledger. Now you have to understand how the firm works and how you need to interact with software, how you need to set up that ledger system so it's intuitive, how the timing of everything works. And from there, it just kind of rolls out to all the other regular business details that you need to handle.

So, well, and with trust, knowing what your state's requirements are for handling lawyer trust accounts. Some states require that you keep copies of all the checks front and back for several years. Other ones don't care. Um, you know, there's a lot of different rules and regulations that you need to be aware of that apply to the particular law firm and understanding those and holding to them. And when you're interviewing with an attorney, to your point, Sarah, what practice area are they? A personal injury law firm usually doesn't have as many trust transactions all at once as, let's say, a corporate attorney, you know, and the timing of the trust transactions is completely different. So, you know, finding out what the flavor of the trust is for the type of firm that you're working with. I know our largest client has very small amounts comparatively of trust Transactions, yet one of our smaller ones just goes bananas with trust transactions. So it's the type of law that they're practicing as well.

Yeah. So what's interesting too, Steve, is like you mentioned, the, the contingency style. So with those, and Linda and I've seen this, when they have their windfalls, because that's not consistent, right?

Right.

You plan on the cash moment.

It's a big, it's a big tornado when it hits. Which is kind of fun. I love doing those. But, um, you're right. I mean, all of a sudden, here comes all this cash in the trust account. And, um, we've talked about this before, and sometimes the attorney gets a little bit ahead of the cart— the horse, again, you know, the cart or the horse, whatever.

The cart.

They're like, we, we meet— yeah, you know, I'm getting it all mixed up when I was just in Kansas. But, uh, but, uh, um, you know, the money comes in all of a sudden in that type of contingency case, in that type of case, and The attorney's like, let's get that money out the door. Let's pay this. Let's do this. So it's like, slow down, slow down. You know, we've gotta, we've gotta do the accounting. We've gotta make sure that you have provided all the required information on all the vendors that need to be paid, you know, all those sorts of things before you just go and pay the client their, their piece of it. And so, yeah, that's what— then that's completely different from, let's say, a divorce attorney or a—

Yeah.

What have you, a real estate attorney. I mean, it's all different everywhere. So good point.

Real estate transactions, um, like Linda has done quite a bit of those. When you're handling all of those transactions, those move fast. You have to be on it, right, Linda? Like you have to really do. Yeah. I feel like you have to be careful of all the little incremental costs that are associated is my experience from watching you handle.

Yeah. Yeah.

I mean, very quickly, right?

It's very true though. I mean, you get these, the different practice areas have their different nuances. And I think if you're a new bookkeeper to this. It's really smart to, if your first client is somebody smaller, kind of getting a smaller scale, maybe dealing with the attorney right off the bat and be honest with them as you're trying to learn these basics so that you can really, you know, not to not swallow a bigger pill than you should take. You know, don't take on such a project that you really are out of your realm of expertise because it can really go south. On you really quickly if you don't have the expertise. Though Sarah and I do know that in our, in our experience is that if you get somebody who's been working with construction, that'll typically lend itself to coming over to working with law firms because a lot of the similarities, even though the, the naming is different.

I think it's more the trades specific.

Yeah.

Well, because you get a lot of the You get deposits. So retainers, deposits, it's the same kind of thing. But yeah, for sure. It's just in the practice areas are different and you want to know the differences. Like a divorce lawyer, you're gonna have a lot of transactions, a huge volume. You're gonna have a lot of similar names. I mean, those are things you're gonna have to deal with that make it a little bit more challenging. Flip side of that, you work with a contingency lawyer. Now you're working with really heavily in the advanced client cost section, tracking all the billable expenses. But then you're not having to deal with the trust. The trust money comes in, it gets divvied out, it's done, closed out, should be zero when you're done. For the most part. So it's a little bit different scenario. It's easier to learn that trust side when it's that way. But then you also have to know about the, the fact that there also can be liens and things like that. So there's a lot of nuances in that too with that type of practice area.

What about patent and trademark? That's a whole new, you know, area that we haven't really talked much about. It's not new to us, but it's an area that—

It's a very interesting practice.

It is. Yeah. Yeah. And then you've got, uh, you know, the overall business, which Steve, you have had so much experience on just the overall business. But within that, there is— I feel like business can deem a lot of different ways of billing practices, correct?

Oh, absolutely. And there's, there's different types of transactions. There's a lot of buy-sell agreements and things like that that happen. And, you know, the, the money can only be released upon certain things happening and Yeah. You know, so there's, there's all these different handles that come into play. And, you know, Linda, with you mentioning that, you know, you can, it can go south on you pretty quick. One of the biggest pieces of advice to give to a new person that's doing accounting for this is, you know, you've been attracted to the law profession for some reason, and it is exciting and it's a lot of fun, or we wouldn't be doing it. But it's a lot of work and it takes a lot of patience and a lot of Learning. But if you're brand new to it, um, this— that's the time that you really can cement yourself to that attorney, maybe a, a solo law firm. And to your point, Linda, you'd be very honest with them. I'm newer at this. I really want to learn this. You know, my fee right now is going to be X, and when we reach a certain level with your, with your accounting, we'll review it again. And, and you take that time. And you learn with the attorney and you really communicate with them, and they're going to love you because as they grow, you'll celebrate together, um, your, your wins. And you'll get to a point where you've got the confidence, but you got to do it with somebody who was new at the same time, which is a fun, fun way to learn and go and grow.

Yeah.

And then you've got the— well, you guys tell me what you think of this. Then we're talking about the basics, but then you, you get invited in and it's beyond basics because now you have to clean up a mess.

Yeah. Sarah, give me a ballpark number. What's it going to cost? They love to do that to you. Can you give me a range?

No.

I mean, first of all, can you give me a range when I go to the lawyer?

No.

So why do you think I'm going to give you— it should be easy, right? Based on what I told you. Yeah, but what you told me and what I see are usually 2 different things. They're never the same. It's like, oh yeah, I think my trust account— sometimes you get people that'll say, I think my trust accounting isn't that bad. And then other times they'll say they think it's okay that it is bad and it's not as bad. It's always kind of the opposite of what you think it's going to be.

Also, do you do that with your doctor? Do you do that with your—

Exactly.

No, you don't. There's general ranges. Yeah, but they're all tailored to specifics. And why would we set ourselves up to fail? You said this. It doesn't matter what I tell you. I could tell you it's $5 million and okay.

You give them a range and what do they, what do they think? They hear that low number and that's it. That's the end of the range.

Yeah.

You know, so yeah.

In all fairness, that's why there's consulting fees, right, Steve? Like, I don't know.

You've got to be brutally honest with them that, you know, you can't really answer on a range until you dive into it. And, but you've got to keep them very informed on the progress. And if they're pushing back on that, that's usually a red flag that they know something or that they're not comfortable with. That they have, to, to just put it brutally. Um, but, you know, but I think really communicating with them is huge when you're in that situation where you're cleaning up that trust account. Yeah, you're identifying the problems, and sometimes you have to go client by client by client by client, you know, spread it all out and, and look at it, and transaction by transaction. And oh, it just—

It can get messy. I mean, it can get really messy, and that's the thing is it can be Where do you start? Then we get those questions at the Law Lab, like, I don't know where to start. I know it's bad. I know it's messy. I know I want to clean it. And usually you can tell when you start working with somebody that they're going to be good at legal bookkeeping because they'll be like, I just love figuring this out. And then they come on, they go, hey, guess what? I figured it all out. And we're all like, yay, that's so awesome. Because it is hard to figure out sometimes.

It does.

You have to like jigsaw puzzles in order to do this.

Like, I would liken it to a Rubik's Cube. Like, you're just almost there and you're not. And yeah, even with Sarah and I, we first started doing the work together, it was like, I was so glad we had each other. Because sometimes you have to walk away. And then sometimes you have to come back and you're like, okay, or the two of us will look at it. And then sometimes it's just a matter of talking through it. It's the weirdest thing.

Like, another set of eyes.

Yeah, it's weird. And then the person will— because you're looking at a number and seeing one thing. And sometimes it's completely different.

Well, and one, some of the complexities are quite literally how clients receive money, how firms receive money at a client level, at a matter level, or there's 20 matters under one client, and how does it get divvied up? Who determines what that is? How do you know what software is working with what type of ledger system? Does it tell you that? The complexities behind it. I mean, it can be an infinite number of moments of compliance diligence that you have to do in order to drive yourself to the final number. And it helps that you got it right when you're looking at 3,000 matters.

Exactly. Let's put a big curve in the road and go another direction, because this morning, Tiara thankfully gave— thank you, Tiara, for giving us a list of some things just to kind of keep us thinking while we're doing this this morning. And I honed in on tax reserve and savings. And the reason I did that was because of, you know, where the economy is in our country right now, which is very uncertain. And so, this is a really good time to recommend or take a look at the cash flow and what your different clients are experiencing and maybe recommend, you know what, let's open up a savings account to accrue for your estimated tax payments, to accrue for your payroll taxes, to accrue whatever. Uh, um, to protect the firm and to protect its cash flow. Because I think— I mean, you guys jump in here— what are you seeing as far as accounts receivable? I'm seeing some of them slowing down right now on, on clients paying our clients. What are you seeing?

I think it's a mix. Yeah.

Again, probably by the type of law that they're practicing. But, hmm, interesting to think about, isn't it?

It is.

Yeah.

I mean, Regardless of where we are right now today, just in general, we're in such a state that it's kind of a joke. People make a tongue-in-cheek joke about it where we're such a litigious country, right? There's always something happening regardless of where we are either 5 years ago or today.

Right.

Whatever. There's something always brewing. I don't know as far as accounts receivable goes, because I see it in— the work is still being done. It is coming in.

It is.

But maybe I— yeah, frankly, it's a little hard to tell right now.

Maybe like real estate.

Different.

Real estate's definitely— I mean, it's totally different now. I mean, we were totally different place a few years ago where it was kind of buyer's market, and now— yeah, then it went to a seller's market, and now it's back to a buyer's market. I can tell by walking out the door here, there's a lot of houses for sale.

Yeah.

But that's real estate. I mean, that's why I don't want to work with real estate clients for the most part, although we have a real estate attorney that he can't keep up.

Yeah.

He works with more people coming into the country from a different country, and they buy Through this one bank, and he's associated with the one bank, and he's so busy he can't keep up. And I know— and that's in the Miami area. So it's— I'm surprised, unless it's just taking longer. But I mean, I'm not that far from him, and I can tell you right now that here it's definitely slowed way down. We were thinking about selling one of our condos, and it's not a good time to sell anything right now.

The market— Commercial real estate is really struggling to keep, like, downtown buildings full.

Yeah, well, nobody wants to be downtown anymore, not with remote work. Nobody wants to be downtown. You pay extra. I mean, a lot of towns, you pay extra to be in the city, and then who really wants to deal with that, you know? And the taxes change, are different sometimes depending on the city you're in. Um, even in Naples, they charge a whole different tax rate if you want to be near Fifth Avenue where all the, the fanciness is.

Even a different tax rate? Wow. Okay.

Yeah, it's incredible. I never realized that until one of my friends bought a condo there, and it was— it's for everybody. It's not just businesses. They owned a condo and the different rate because they were right in the city, which is not really what I would call a city. I mean, it's not a city city, but the tax rate was different. So yeah, you paid a premium to be walking distance from all the pretty stores and everything and the restaurants.

That's true of a lot of places. The county lines will determine this, the jurisdiction of whether it's a downtown metro versus, you know, you hear all the different, like especially when you're on the East Coast, you hear a lot about the New Jersey, New York, all the little jurisdictions. things. But yeah, it's hard to say, I think, right now because I feel like every day is a new day. And I think that also depending on what's happening in people's lives, I mean, Linda, you have a workers' comp group that you work with. Yeah.

And they're busy. Yeah, they're busy. Yeah.

So employment laws seems to be still at its peak. So yeah, I guess it would just depend right now. However, it is going to— I'm sure that they're with the focus of the generation of AI coming into a lot of these platforms and the way that things are going to happen and move. I feel like legal will see a definitive change in their billing practices based on What the information that's gathered and collected and what the assessment is of time spent will change what revenue is going to look like for a law firm. So.

Do you think they'll change more to fixed fee billing? Because that would make life easier for everybody as far as legal bookkeeping as well. Or do you think it's going to be more subscription and go away from the hourly? I mean, we as professionals, we've kind of moved away from that completely years ago. Because it's just freeing to not have to time every minute of the day. Plus, Sarah and I are terrible at it, but, um, time tracking our own time. But I think that it's always going to kind of be a hybrid. But you think that firms will get away with that, get away from that, because they'll be able to open up the cash flow?

I think so. But also, Linda, we've seen this conversation before where what are the— what's going to be the bar's governance Surrounding how that works with trust accounting. Yeah, I mean, I don't know if you've heard about this, Steve, but we see it kind of happening where, well, if I just do subscription or payment plan models, I— it doesn't need to go into my trust account.

No, that makes me so nervous.

Yeah, and honestly, if I'm a client of that, I would rather have my subscription money go into a trust account and you're presenting me the bill based on what I know that the work has been done.

Um, to me it just opens a door for things to happen. Yeah, too many gray areas with that.

Yeah, I think about it. I, Linda, I do think for cash flow purposes, yeah, obviously that seems fair. But I think about it in my own personal life, um, and what I've experienced, and every dollar that we have spent has gone into a retainer. It is a definitive retainer.

All right, well, let's, let's go another direction. Let's talk about—

let's—

this is fun. We get to go all over the place with this this morning, but let's talk about the role of the bookkeeper The role of the CPA and the role of the paralegal. Go Sarah!

I'm gonna make a clarification. Everyone loves to say CPA, and we have enrolled agents, and to be fair, we have also the LTPs. So we really— this is a tax accountant, because you can have the demarcation of a CPA and not be practicing at all, and you could only do bookkeeping or accounting, is what I'd like to say. The connotation of a bookkeeper, it needs to be very clearly stated. A bookkeeper is not just somebody that puts in numbers. We go beyond that. We do a lot of accounting services beyond just the roll.

Absolutely.

So for clarity, there is a tax accountant. You may have the certification, or there is all of these other areas. Now, one thing, and I appreciate you tossing me the ball. One thing in my conversation about an upcoming event I'll be doing, a webinar I'll be doing, the number one question a particular group gets is, I have a paralegal, why would I need a bookkeeper? Why don't I do it myself? Linda, tell me why you wouldn't do it yourself. What happens?

Oh, they don't have any of the training or the knowledge of it. So you can absolutely teach them how to bank match feeds. And, um, but if they don't understand Again, picture, right? So if you teach them little segments of what to do in bookkeeping, the data entry parts of it, and they don't understand what accounts receivable is, what accounts payable is, anything to do with the journal entry, uh, what a financial statement even is— those are things that are really important to know. Now you're taking somebody who's a paralegal, they have training in being a paralegal, and you're saying, okay, I want you to also do this that you have no training in, and then they're going to try to learn it. QuickBooks advertises itself as anybody can do it. We've just seen so many places that it can get messy and so many places that that can go awry. Do you really want to do that with your records that you may need for a bank loan, or you may need for a mortgage, or you may need for any reason, for paying your tax bill every year? Do you really want to put it into that place? We've seen it where a person that's not quite a bookkeeper matches the bank. They go by whatever the bank feed says. Uncategorized income, okay, um, you know, we've seen it. And then there's invoices and payments, but they're in undeposited funds that the bookkeeper doesn't even know what that is. So they, they sit up in undeposited funds, that starts to bloat. And then you've got this double income scenario happening because the money is coming in, the payments are coming in.

Mm-hmm.

QuickBooks is recognizing the payments as your income. And then the person's doing the bank feed and going, okay, deposit, that's legal income, money coming in from a client. And they're just doing that, or they use transfers. I mean, I can go on and on for probably another hour of things that we've seen.

Oh boy.

Of things we've seen in files. And it's like, you don't want to ever throw the bookkeeper under the bus. But if the bookkeeper is a paralegal, I'm sure they're great at what they do. Why are you wasting their skill set doing bookkeeping Why not give that to somebody who knows what they're doing with bookkeeping?

They can miss so many client costs that should be passed on for billing and things like that.

Yeah, I agree. The other thing too is, and Steve, tell me what you think, because Linda and I have heard this in our calls. We're business owners. You're talking to people that run a firm that is a business owner. I'm looking at your accounting books and I'm questioning things as if I'm the owner of that firm. As a business.

And we know before you do.

And so you're going to trust somebody who doesn't have the expertise or experience and isn't a business owner to supply you with the records, or you're going to do it yourself? At what time of the day do you do this work?

Yeah, 10:30 at night.

Usually PM, not AM.

Yeah, flip the scenario. Would you ask your bookkeeper to do the paralegal work? No. Or we're two different things.

Yeah, no, you wouldn't.

You wouldn't.

Yeah, yeah.

So, um, you're gonna burn out that paralegal.

That's where we have an honest guy— stay in the lane. And what's nice is a lot of firms, sure, you could have someone in-house supporting you. What's the oversight you have? Do you know what you're looking at? A lot of times we're explaining the financial records. To be able to digest it and understand. This happened for us. I mentioned this in a podcast previously. You know, a client, somewhere in the path, someone decided that all of their advanced costs was going to go ahead and sit in the asset section. Not a problem, but it is a problem if you never clear it off. So it's just growing exponentially on a balance sheet.

Yeah.

And you've got all this revenue. And when in conversation we learned from this individual that, no, no, that's not how I do my billing. Okay, now we have a huge problem. We have a lot of money sitting in the wrong area and you've overpaid in taxes in prior periods and it's not being done correctly.

Mm-hmm.

There we have— there is IRS guidance on this. Whether we agree with the tax accountant or not, the firm can make their ultimate decision. We present all the facts and say, this is what it is. That's what we do. But again, it goes back to the costs that you're saying, Steve. Not every one person, if you're multitasking and doing multiple jobs, do you have the capacity to even begin doing the due diligence that needs to happen at a business level for, for the firm.

So— Okay, so I'm an attorney and I call you up and say, I see $300,000 in the bank this morning, but you're telling me that, that we've only got $210,000. How come I can't rely on the bank balance?

The bank balance in the bank account or the bank account?

I just dialed into my bank this morning and there's $300,000. Why can't I— I've got that $300,000. Why are you telling me $210,000?

What are the pending transactions that are leaving the bank that you don't— that haven't cleared?

That haven't cleared.

Exactly.

Exactly.

What do you not have?

Are you using their bill paying service and you've scheduled a bill to be paid 3 weeks from now, but they're holding The cash.

Yeah, your accounting ledger system, whether it be QuickBooks or Xero, let's say, is going to hold that information because we're going to record it accurately. But your actual cash in the bank— so if you're a cash in the bank balancer, you better get cozy with your accounting ledger system and learn how that works.

Absolutely. I mean, um, you know, so I pay you a check out of the bill pay— so your accounting department pays you a check out of the bill pay system at the bank. And it comes to you and you stick it in a drawer and it doesn't clear for 10 weeks, but— and we don't even know about that check. I mean, that can create—

Or better yet, what about an employee who doesn't cash a check? Yeah, we move on. Ultimately, you have liability to that record.

You have a good point.

As a firm. And so these are specialty things, not just in our industry in a general sense that we are supposed to know. And as business owners, we think with those— that mindset. We approach our staff with that supportive mindset. We ask to review the books, records of anyone that's working on anything that they do with us. So we have this high-level review. And it's true of a lot of firms. This is Honestly, this whole conversation, we could do a part 2 on that.

Oh, we could. I mean, I was sitting here thinking we can— this is a basic Accounting 101 that could go for weeks.

I mean, yeah, yeah, exactly.

Have a whole subset of deeper conversation. I think if anyone's out there that's interested, if you're a firm owner or if you're an accounting professional that is thinking about this and now you've frightened yourself after thinking about what we've said, you're like, am I doing the right thing? There are ways to engage with us. We have multiple ways that, you know, you could have a consult, a conversation, any of us, to be a supportive way to just check and balance yourself. I just think it's like a friend of mine who is an actual client too. Just is it pound foolish, penny short, or vice versa? How do you say that?

Pennywise, dollar foolish.

Pennywise. Yeah. Yeah.

They're not making pennies anymore. So now we have to go nickel-wise.

Okay, touche.

But anyways, if you do And it's like that. If Linda could talk to you about this, about marketing, you could throw thousands of dollars out the door, like literally throw it in the toilet and flush it down. But you're not being smart about it because why? You know, you haven't invested the time to find the right people to support you based on what it is that you need for your— your firm might look the same as one and it's totally different than the other. You may offer the same services, but you operate completely differently.

Yeah.

So yeah.

Awesome. Well, great conversation today, you guys.

Yeah.

I hope it's helping everybody out there that's listening and watching. If you're thinking about getting into this or you need refresher courses, just stop and stop, look, and listen to some of these things, and you'll have your aha moments, and you'll feel better about when you're talking with the attorneys about why you are doing what you're doing or why you're asking what you're asking. Go ahead, Linda.

Sorry. I say there's plenty of work out there for us, for you.

Yeah.

Lawyers working for— looking for accountants. So, you know, maybe take the course, come to the Law Lab, listen to the podcast, and we give a lot of great tips. You can learn this. And like we said, like Steve and I said, you want to get that— get a smaller firm to work with first and work with the attorney. I still am indebted to the one that I worked with the first time to kind of work my way through. He explained the trust accounting to me and It was all foreign to me. I didn't know a lot about it other than what I had searched. But there's a lot of stuff. We have a really good blog on our website too. There's a lot of free content there. Read it, read it. There's a lot of good resources and you don't have to even pay for it. It's free. So.

Great, great. Well, Tierra, take us away.

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Well, thanks everybody. I do too.

Bye-bye.

Take care.