Linda Artesani shows solo lawyers how to track hard costs (direct expenses) and soft costs (stamps, mileage) in QuickBooks and LeanLaw, then invoice clients for them. She walks through linking expenses via Hubdoc, setting up cost categories, creating invoices, and choosing payment processors like LawPay that comply with trust-account rules.
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Hi there, Linda Artesani, Artesani Bookkeeping. So for today's video and accompanying blog post, which I have to warn you is a little tongue-in-cheek, I wanted to discuss a bit of conversations that I have with attorneys. And if you're a solo practitioner and you can't afford an accountant or a bookkeeper, how do you understand the different accounting speak that we like to do and understand how to really analyze your own books? It's really important. Right? Especially if you're starting off and you are wanting to know the accounting piece because you just don't have the funds for it right now. It's important to know how to figure out what's working and what's not working. So let me take you to my sample company law firm file and we'll go through some of that. So there's a couple of ways of looking at costs. So you can look at overhead, you can look at costs that are soft costs and hard costs. So the best way to understand hard costs is they're costs that you physically have to write a check to pay for. Soft costs are more costs that you're paying for collectively, but you wouldn't parse out. So if you think of buying a roll of stamps, you're not going to divide the stamps by, you know, the roll and 1/50th or however many you buy in the stamp roll, it goes to this case or that case. You just kind of add that in. Because you really can't divide it. You're not gonna divide that out. You're going to divide it out in, in a software, maybe like LeanLaw, that we can actually add that bit of expense. Or maybe you created some copies and you want to bill back the copies to the client. Perfect example of there's really not a finite number that you can put in there. So you just say every copy's $0.10 each, and then however many copies, you bill that back to the client. So then there's a hard cost. Things like a court fee, we had to go in and pay the court fee right on the spot for one particular client, that might be a client advanced cost. So I'm just going to take you through that a little bit, but if you can start to wrap, wrap your brain around that concept. And of course overhead is just like overhead can be, you know, your rent, your utilities, all those things. And sometimes you may have like mileage and mileage just tends to be like a soft cost. You might be billing that back because it's a You're maybe driving to a few places and you're going to bill back mileage to the client. That's the typical soft cost. So how you would enter that. So I'm going to take you into my— actually, I already created it. So let's go back to the expense. So I just created an expense. So this is connected to my lien law account. And so I had to write a check as the attorney, wrote a check to the Court of Middlefield. It's a court fee that we had to pay for this particular client, Shane Hamby. $75. So I entered this into QuickBooks. And typically in my law— in my accounting practice, I would have the client connect to Hubdoc and they would just push these fees into Hubdoc for me, into their account in Hubdoc, and then I would code them over and they would push this into QuickBooks. That's kind of the workflow that I use. So this would be a hard cost that we're going to bill back to the clients and you put it in advanced client fees because that is now connected to my LeanLaw account. Let's go to LeanLaw here. This is a place that you're going to do the settings. So all the settings that attach to QuickBooks are here under QuickBooks integrations, where you would connect the file in LeanLaw to QuickBooks. And also you can go through and there's a lot in settings and we're going to be doing some videos. Sarah and I have used some videos to go through all the settings. But basically when you come into the expense configuration, I want it to go to client advanced costs. You can also make subcategories under the client advanced costs if you want to break it out. all will roll back up into that, into that asset account in, in the books. But if you want to break it out, that's— you can break it out there. And then you can separate all these here and create your settings. So I'm not going to go through all that right now, but it will be in a subsequent video. Now let's say you have some of those soft costs. So let's go to expenses. And we're going to add a soft cost. So here, let's just add one. So I'm going to click Add an Expense. So let's just say copies, we had to create copies for this client. So I'm going to select my copy, which is Shane, My copy, my client, Shane Hamby. I'm going to click the matter that he is— he's got a couple of matters with me. And typically, this is a sample file that I kind of threw information into. Typically, you would have like estate planning file or, or name the file whatever you're happy to do. If it's workers' comp case, if it's, you know, you're going to court on behalf of the client, maybe they committed a crime, you'd want to put all that information into the name and not just client matter 14. Expense template. I've got one for copying. So we're just gonna say copies and, you know, copies at— you can, and you can actually put this on the template. So it's there, $0.10 each, you know, 10 times the 0.10 equals, you know, your dollar. So you could put all that in. So it's going to show you want as much information as you want in here because this is going to now be transferred to when we create an invoice for this client. So dollar Hit Save. So now you'll see that we've got some copies in here. And you can see there's some more words in here. You can see the court fees that I added that into the actual expense. And because it was created in QuickBooks, I can actually dial right back to it from LeanLaw, which is really cool. It's going to bring me right to the page in that specific transaction. And if I was using Hubdoc, it would be attached here. So that's why I like Hubdoc. It actually attaches the copy of the expense to the To the file, and that's nice to have because when I can click back, I can see what it is. So now if we were going to bill Mr. Hanby for his, his, the time he's ready to bill, so we're going to come in here and I've already got the matter up here. All he's got is these few expenses that haven't been billed out, and the only thing that's showing here is just the 2, so I'm just going to click here. And I'm going to create a draft. So I'm going to create the draft invoice. And I don't have any billable time for the— from the attorneys, but normally the billable time would show here as well. Come into the draft and it's going to show me the draft invoice. I can take a peek at it. I'm just really billing back. You can see how important, important writing all the information is here, right? So you want that in here so you can show that to the client in the invoice. You want to be as specific as possible because that's going to help when you send this invoice out to the client, you want it to be able to see that information populate on the invoice. And then obviously it gets approved. And then once it's approved, I can make it into an invoice. It's just the approval process. And if you don't need all these features, you can actually bypass this and set it up in settings not to. If you're a sole, solo practitioner, you might not want to have all these, these restrictions in place. They're in place for working with an actual bookkeeper or an accounting firm that you can have The process put in place, just kind of like with bill.com. If you— the bookkeeper puts the bills in and then it goes to whoever has to approve them, and maybe one person approves and then one person is the signer. So you've got this system in place that there's a lot of checks and balances, and that's basically what this is. And then once it's approved, you can submit it to QuickBooks, pick it out, submit it, and then it will become an invoice in QuickBooks. Which is nice because now I can go to open. I can find my invoice and happily I can actually click on it and view it in QuickBooks because it all ties back. It's that linked. So that is the short story on how to do soft costs, hard costs, and typically in analyzing the books. I'm going to deep dive into more specific reports that would help, maybe a cash flow report. A lot of attorneys and law firms, in my experience, have been— they're not the greatest at keeping up with their AR, and you want to get that money flowing in. Highly recommend, if you're not a law firm that has to do trust account matter billing and it's just straight up legal services, you can use QuickBooks Online's merchant services account. If you're interested, I can get you that information. If that's not going to work, I highly recommend LawPay. LawPay is another company that works with matter billing, so they do the fees differently so that you're only bringing in the amount that's billed, because it's really important to stay compliant when you bill out for anything that has to go through an IOLTA or a trust account. So I hope that's helpful. I know it's the short version, kind of mini version, mini accounting, accounting lesson. Of course, if you really want to hire a professional to do this for you and take it off your plate, you might find that we're pretty affordable. And we can work hand in hand. We love working with startups and people who are just going out on their own because it's helpful that we can guide you through. We have plans in place that we can just be your support person. We have plans in place that we can actually help as you go along and we kind of build your way in. So my whole goal is that you start out small with me and we can build in so that we end up doing most of the services for you, because that means you are a success and you're so busy you don't have time for the accounting. So I hope that's helpful. I hope you have a wonderful day and thank you for watching. Bye now. Bye.
