In this tutorial, Linda Artesani walks viewers through the process of tracking, maintaining, and reconciling client advanced cost (asset) accounts in QuickBooks. She demonstrates how to locate the account via the balance sheet report, group transactions by client to see inflows and outflows, and perform monthly reconciliations using the QuickBooks reconciliation tool. The video shows how to customize a "Client Advanced Cost Reconciliation Report" to filter cleared versus uncleared items, and how to save the report for repeated use. Artesani explains how to handle unreimbursed expenses by creating journal entries that move amounts from the client advanced cost account to firm expense accounts, emphasizing proper class coding, memos, and audit trails—especially important for trust/IOLTA accounting. She warns about the "sticky" nature of the account when syncing with LeanLaw and recommends best‑practice workflows to keep records clean. The tutorial concludes with an invitation to join a QB Community Live Facebook group and offers free consultations for attorneys with problematic books.
Chapters
Hi there, Linda Artesani, Artesani Bookkeeping. I'm going to continue with the trajectory from last week. We talked about indirect costs and direct costs, or hard costs and soft costs, and the client advanced cost account or advanced client cost accounts. It's got a few names. So we're going to continue with speaking about that. But basically, today's video is going to be about how do we track it? How do we maintain it? How do we keep it in good order so that we don't miss anything that we populate up there that ends up hanging there forever and not be put down into the client or firm's expenses because maybe you don't rebill it out and you've booked it up there, then you just don't ever book it back to the client. And we need to be maintaining those records accurately. Let me share my screen and I'm going to show you what I mean by that. So here we are in QuickBooks. This is how you track this specific client advanced cost account. So the only way to find it is really to go to the balance sheet because it's a balance sheet account. It's an asset. So you're going to go to your reports, you're going to go to your balance sheet. You're going to run this on an accrual basis. But the trick is you want to show all dates, you want to show from the beginning of time, you want to grab that advanced client cost account. And you want to total it or group it by the client. That's important. So we're going to group it by client, that's going to show you the ins and the outs, right, which is really cool. Here's Manhattan Court Reporting. It's in as a bill, we're increasing it. Here it is when we invoiced it back to the client, it's out. It's an in and out transaction. It never really affects the profit or loss account at all for the firm, which is what we want to see. How do we track this is we're going to reconcile this account. So let's go to reconciliation. So it's right here in the accountant toolbar, toolbar. But if you are not in the accountant's version, you will find your reconciliation over here in the right-hand side under Tools. So you have your own set of tools, but we have a special tool or briefcase for the accountant. You're going to grab this account. Now this might not be there, it might be if you did the checking account. So you just have to kind of scroll and find it, right? You have to find it in the list here. So here it is. The beginning balance is going to be zero, the ending balance is going to be zero. And then we're just going to do it as of each month, every single month, this is going to be a task for you to do. What we're going to do next is we're going to come over here and grab— I'm just going to grab a couple. So you can see here, Manhattan Court Reporting for $75 is under the Mary Smith Estate Planning. So I'm going to find the $75 under the Mary Smith Estate Planning amount here. So that was a payment. And I want to find the specific transaction. So it was a bill. And it was for $75 for Mary Smith. So I want to find the bill. And that would be on this side because it's opposite of what you think. So it is just a bill for Mary Smith, $75. I said $75, but it's $67, which is why I'm not finding it. So here it is, bill Manhattan Court Reporting. So we're going to find the bill for Manhattan Court Reporting, $67. There it is. We're going to check it off, just like you do with your bank reconciliation. And then I need to find the other side of it, right? I need to find the invoice side. And there it is, invoice 1239, $67. And you're going to click back and forth and find all these transactions that are in this list that are all here, and we're going to reconcile it. So we're going to pretend we did all that. I'm just going to hit Finish Now. And then it's done. So we come back here and you're probably thinking that should be gone, but there they are, right? And even if I hit refresh, which I'm not going to do because it's going to remove all my settings, it would be gone and it's not. So what you can also do here to kind of track this— this is a kind of cool thing you can do— is you can come in here to the settings and pick cleared. And what that's going to do if we hit run report is you're going to see here's those 2 transactions that are reconciled. They're off of this report, right, that the The clearing has happened with the in and the out, but it's still here. So how do I get rid of it? I'm going to come up here and customize my report. I'm going to click Filter. I'm going to come down to where it says Cleared. I'm going to check that box, but I don't want to see all. I only want to see the uncleared. So this is how you create this report. I'm going to save one of these too as well to that Saved Shared Report thing so everybody can have this and not have to do the build out. So now you can see that they're gone, right? All that's left is the in and out of the $125, which would also be gone if I had completed the entire reconciliation. And then I would just rename this, you know, Client Advanced Cost Reconciliation Report, if you want to show the logo, and save it. So once you save it, as I'll show you, to come back to reports— I've already created this— go to my custom reports. Client Advanced Cost Report. And now I've saved it with all those settings. And you can see it's my Client Advanced Cost Report. So this is my report where I've saved the settings and I can check to see what's left over and what's not. That's how you do it. Now let's just say that there's something left behind. Let's just say that this bill for the Jonathan— actually not the Jonathan Fishman account. Michael Bennett account is just— the attorney says, you know what, I'm not going to bill it. The matter's closed. I'm not going to bother. We need to get that out of this account and we need to move it down into the firm's expenses because they're never going to get repaid for that. How do we do that? The best way to do it is with a journal entry to actually clear it out on this bill would be to actually go in and not just change it, but go in here and make a journal entry to move it. So you want to make sure it comes out of the right account. So, you know, it's Michael Bennett. So I'm going to come over here. I'm going to make a journal entry. And I'm basically just moving it out of client advanced costs. So you're going to be able to reconcile this later. So you really want to make sure you can reconcile it. And then you want to make sure you grab the right client advanced cost account. Like I said, this is just a file with my test stuff in it. So it's not really an account that, that is going to be showing you— whoops, I want to make that a credit. So I'm crediting it because it's an asset. I'm crediting it, crediting it. It's a debit when you increase it. I'm going to be reducing it with a credit. And to clear expense, you know, not on a closed matter. And then you put Michael Bennett in here. And then this is what you'd be picking the matter. And then on this side, what you're going to do is you're going to book it into the billable expense category. So billable expense to offset income. And again, Michael Bennett. You get the idea. And then of course, if you're class coding, class coding and save it. And then that's going to remove it. And it's actually going to be the in and the out will be here. So it will, it will show the in and the out on the, on this, on this expense account. So we're going to need to do that work to, to kind of clear those out. So I don't think I exactly created the right thing. And here now it says custom dates. You're going to make sure— see, these reports get a little sticky. And you want to make sure that all the dates are showing so you can show the in and the out. The best practice is to do that journal entry to show the in and the out. Changing the account Once it's been entered to client advanced costs, remember, it's sticky. It's sticky, even though there's a 2-way sync with LeanLaw, it's sticky. So you really want to make sure that you book it to client advanced costs. If you go and change it to billable expense, it's still going to be seen up in LeanLaw as an expense that needs to be billed. It's not going to be pulled down. So a better practice to keep that cleaned out, you could go up and change it and change it in LeanLaw. And then, you know, go to an expense in LeanLaw and just pick it and then you can edit it and say delete and take it off. But I think a better workflow is to make that journal entry and then reconcile it off. That way you've got a pattern of what happened. You've got memo, you've got notes. It's just a better way of doing your workflow. You want to track everything, especially when you're working with IOLTA accounts and working with trust accounting. You want a really good pattern and going back and deleting and moving things around. It's just better to have the workflow where you show the journal entry, you show why you're, why you're removing it. And then you've got better kept records. Of course, anytime you have any questions, please reach out. We have a great Facebook group that it's called QB Community Live, where we help one another. I would love to have you join that. You'll see that link to that in the post. And also, if you're an attorney and you have messed up books, please reach out. I'd love to help. And just give me a call and let me take a look and we give you a free consult and just kind of have a little conversation. and talk about your books and see what your issues are, and then we'll dive in and take a look and give you a full, a full scope file review. On that note, I hope you all have a wonderful, wonderful week. Bye now. Bye.
