If you ask most business owners, “what software do you use to run your business”, the answer will be QuickBooks. The Desktop Version of QuickBooks is currently being used by thousands of small law firms. QuickBooks offers a Professional Services version of this popular software.
Law firms require special handling of Client Trust Funds and Retainers, as well as tracking client expenses.
Accounting for Client Trust Accounts/IOLTA Accounts requires the following accounts must be set-up in the chart of accounts. A bank account must be created, such as Client Trust ABC Checking. This account will track all client deposits and costs. A separate account must be set-up for each Client Trust Account that you maintain. In addition you also must set-up an offsetting liability account, such as Client ABC Trust Liability. It is important when setting up this account that you set the account type as an Other Current Liability. If the law firm is using the Bill Payment feature in QuickBooks, an accounts payable type account must also be set-up. The accounts payable account should be set-up for each Client Trust Account, such as Trust ABC Accounts Payable.
The firm needs to determine how it wishes to track revenue. Some firms prefer to track all fee income in a single income account, while other firms prefer tracking fee income according to each timekeeper. If the decision is made to track income according to each timekeeper, a separate revenue account or sub-account should be set-up. Billing rate levels can be set in the Items List. The timekeeping module within QuickBooks will track the time spent on each client or specific case file. This time will automatically populate at the time a client invoice is generated. The Items Set-up feature will be used to establish these tracking items.
The law firm may also set up a Current Asset Type Account on the balance sheet, as a way of tracking expenditures made on behalf of the client, such as filing fees and other reimbursable costs. At the time these payments are being made, the payment can be allocated to a specific client’s case. These expenditures will also automatically populate at the time a client invoice is generated. The client will be invoiced, not only for the hours spent on the case, but also for any expenses advanced by the law firm.
Once the QuickBooks file has been properly configured, the law firm will be able to generate timely and accurate records, not only on tracking revenue and expenditures, but also tracking client related Trust Funds, Retainers and Advanced Expenses.
If you would like assistance in setting-up and customizing your QuickBooks file, please contact our office at (908) 782-7900 for assistance or email email@example.com. One of our QuickBooks experts will be available to assist you.
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