QuickBooks Online for Lawyers

Hi there, Linda Artesani, Artesani Bookkeeping. I'm going to continue with reviewing apps and apps specifically for attorneys. And this week is going to be about using QuickBooks as a standalone app for the accounting and the law firm side. The only time I really recommend this is if you are a personal injury attorney because You are taking— you're paying for upfront costs. So if I came into your office and I had a slip and fall at Target and I want to sue Target and get my money back for my medical and be covered, you're going to come into my office and hire me and I'm going to start to pay as the attorney. I'm going to pay for the expenses. I might be paying for medical, physical therapy, any Obviously any court costs that are there. Those are upfront costs that the law firm's going to pay. So when you're a PI attorney, it can end up being that you've got a lot of money spent on the matter before the matter even comes to court, before you either win or lose the case. And then there's a little bit of accounting to be done in that manner. This is why it works well for personal injury attorneys. You don't need to track time. You get that 1/3 of whatever's left over after the costs have been Consumed off of the settlement check. So you don't have to— you can track costs, obviously, but you don't have to in this case when it comes to the legal aspect of the amount of money that you win off the case if you win the matter. Let me take you to my screen. I'm going to show you a little bit of the setup that's involved, a little bit of the workarounds that are part of working with a PI firm as the accountant or bookkeeper and tracking this. So here we are in my law firm test file, an actual file that I bring clients in if I want them to see the workflow with LeanLaw and QuickBooks. So this is a little bit of a junky file. It's a little disclaimer here. There are a few setup pieces that are important when you're working in QuickBooks. Anytime you do invoicing, you need to create a product or service so that way you can be able to put them on invoices. You don't just straight book it to legal income, you have to do a little bit of setup behind the scenes. So I've opened up the tab here, created just a little grouping here for retainer, retainer applied, and retainer prepaid, retainer received. Some law firms do— PI firms do take some money up front. Not all, most don't. But if you're working with different aspects of different types of law, different— if your attorney does not only PI attorney, but does— a lot of them do multiple practice areas, you'll want to have Some setup here. I definitely don't recommend just using QuickBooks Online alone as your product alone. If you're going to be tracking time, you're going to be tracking trust accounting where you're taking the retainer in upfront. I think it's best to have an app that will track that stuff for you, especially because of the compliance piece that's so important when working with attorneys. But this is a little bit of setup and I do actually create these 2 and they hit the same account, they stay hit the same trust level line. But I use 2 of them because I want to be able to track the ones with the words prepaid retainer, retainer, and then retainer applied if I'm going to be taking it off the invoice. So that's my reasoning behind that. Also create some reports. So this is a report that I created, basically took a balance sheet, found the advanced client costs. So important to note, when you work with attorneys, there's a specific set in the chart of accounts a little bit different than other industries. Client advanced cost is one of those, one of those categories that you're going to have to have and track. And this is where the expenses, upfront expenses are going to be booked to. It gets booked into an asset account on the balance sheet. And it will stay there. A lot of the PI, PI matters will last, personal injury matters will last more than 2 years, and you need to track them and track these expenses. And I'll show you, I did a slip and fall at Target. For a client named Abram Williams. And you can see here I paid some medical expenses. So what I did was I tracked it in this asset account for now. We haven't closed the matter. And we paid $1,700 on his behalf. And you can see I tagged the client. You want to tag the client so you can track them. Really important to track, track all of these. So, and then here I can put in the Abram Williams. you know, Williams Matter, matter settlement check. And then I'll put in the $10,000 here. I want to be able to tag the client here. And it came from Target, but I want to tag this matter. So I want this to be attached in a way. So did I just write $100,000? Wouldn't that be great to win on that case? Let me go back. I think I did add one too many zeros. So it's like, did I put $100,000? Be great to have a $100,000 matter on a, on an $1,850 in fees, right? Be a good little thing to settle up on. So now I've taken that money and I put it in my bank account. So I've debited the trust account and I've credited the trust liability account that is sitting in the parent. We don't do sub or a hierarchical view of the matters underneath the client with client names like LeanLaw lays it out. Because you want to be sure that if you're going to be in QuickBooks, you don't want to go over the $250 unless you're already in Advanced, then you could do that and separate it, makes it a lot easier to track. It's in this one right here. So the $10,000 is here. If I do all dates, I can actually save this report just like the other one and run it. And you can see the ins and the outs. So you're going to see the money in, money out, you always want this to zero out. And then I would also group this by— and I'm not sure if I've Have this, but I'd be grouping this by the name. And then that will put it together. You'll see that the $10,000 is in this liability account. It's waiting to be disbursed. So now I have to take my money out of the advanced client costs, that $1,850, and I need to apply that out of this check. I need to pay myself out of this check, and I need to pay the client. I need to zero this out. How do you do that? In QuickBooks? Not real easily. But let me take you through the steps. And this is going to be a repeatable process. And you can memorize some of the transactions to get there. So here is the entry that I'm going to make to show the settlement check coming in. I already deposited the settlement check into my bank account, into my trust account. I've made a trust account for this. Now I'm showing the money here. It's the costs that I had upfronted to my client. I'm now moving them out of that asset account. I'm I'm crediting them. I had debited them earlier. I'm crediting, crediting them to get them off my balance sheet. And then I didn't— they had no effect on my books at all because the insurance company paid for those expenses. They reimbursed me for it. So it's really money in, money out at this point. Legal fee income, I've earned it. You're going to take the $10,000 that you received in the settlement check. And you're going to show that of that I subtracted those expenses that I upfronted, I've now been reimbursed for. And now I'm going to get my 1/3 as legal fee income. So I'm booking it to legal fee income. There's also going to be another transaction to move that 10 grand into my operating account, and then the money will come out for the amount that goes to my client. As you can see here, I've got this $5,400. This is the money going back to my client. We won the case. Now he's going to get his pain and suffering or money, money here that he won on this case that's left over after the expenses have been recouped. And then here you can see that the $10,000 is now going to be zeroing out of my trust account. We close out of here. I'm in the clearing account now, and I've got this $5,000 that I need to actually remove and move out of the— I'm just going to copy the number here. I'm going to write a check now to my client. What I'm going to do to get this out, because I have to hit this account, I can't really write a check off of a journal entry. So I'm just going to come over here. I'm going to write the check to my client, Abram Williams. And I should actually tag it to the matter and hit No. And then over here, I'm going to put my category, I'm just going to do the clearing account, I'm clearing it out. And this is to send funds, to send settlement funds, close matter. And then I'm gonna put the amount in here. So that's going to get that money out of my operating account, out of my clearing account, it's coming out of my operating, right? So the money's coming out of operating, but it's hitting the clearing account is the only way I can do it. And of course, I'll do the slip and fall over here too, to tag that. Now I also need to move the $10,000, right? I need to move that $10,000 out of trust account, bank account and move it to my operating. So you can do that as a transfer. I need to move that out and move it over. So it's coming out of trust, which is right Here, and I'm going to move it into operating and move the $10,000. Because I've already dispersed some of the funds out and the rest of the funds are recouping what I've already spent on the actual payment of the upfront costs. And then I'm getting my legal fee income and I've already hit that. So now if I were to look at a profit and loss report, I'm going to see that I made some money here on this matter. And that money will be my law firm income, which will be in— I think I hit this account somewhere. Maybe not that one. I've got 2. Like I said, this is a demo file. So this is definitely a little on the junky side when you start to look at all the things that are in here. Like cash basis. Let me try one more time. I thought I hit legal services. Let's see. Nope, must have been the other account. So as you can see here, and like I said, this is a file that's not exactly clean. Legal fee income. And if you look, you'll see my settlement check. This is my payment on Abram Williams, and you'll see that it's here. And the name didn't populate because it's a journal entry. Maybe I didn't hit that line. Let's see if I hit that line. Yeah, I did. I'm not sure why it didn't hit there, but it didn't. So that's my transaction. You can see my legal income has now hit My legal income account. My bank account now has the $10,000, and I'm going to be writing a check to the client. So it's gonna be $10,000 minus some money that I sent to the client, and then I recoup my costs. And that's it. It's a simple, simple transaction. You can memorize that journal entry and use it repeatedly. Maybe put like $1 or zeros in it, memorize it with zeros so you make sure that you don't copy something else. Always go back and check all those accounts to make sure that they've cleared each other off. If you don't win the case, those advanced client costs have to go on the books for the law firm as expenses. So you're going to need to make a transaction, a journal entry to move those and book those down because it's now money that you've paid out that you're no longer going to get if you lost the case. That's it in a nutshell, working with a PI firm and using QuickBooks alone. So the only one I recommend if you're going to do it that way. I hope this was helpful. And if you have any questions or comments, feel free to reach out. I would love to help you. And on that note, have a wonderful, wonderful week. Bye now.