Can I use QuickBooks for my Law firm practice?
Articles,  Blog

Can I use QuickBooks for my Law firm practice?


Hi there, Lynda
Artesani Artesani bookkeeping, I’m
going in a pretty happy mood. And
great day yesterday was kind of funny,
silly day I get to teach quick yoga in
the morning teach QuickBooks. And
also, I got nominated to be one
of the top 100 Proadvisors. So you
still have to vote and it’s a partly a
popularity contest. But insightful
accountant does a good job with
setting up a bunch of criteria to see
if you can get into the group and I had
to get into this group of people but
it’s really humbling to be put on the
list with the likes of Hector Garcia,
Michelle long. And then of course, some
of my friends Matthew is on there.
Dan DeLong, a lot of lot of my
friends on that list and it’s to be put
in a group or a list of people who I not
only respect but I I follow and I learn
from and it’s just really very
humbling. So I will put a link in my
blog. If you’d like to vote for me, I
would really appreciate the vote.
Now getting to this week’s topic, last
week, I did a post all about how do you
choose the right quickbooks online
product for your client? I think it’s
a place where people sometimes can
struggle. And hopefully that post
was helpful to help you select the right
one, selecting the right ones
important, right? Being able to know
which product is the best for your
customer, where they’re not
overpaying. But sometimes, they may
want to move to a higher level product
to get all the features that they
might have to get from other apps.
Sometimes you gotta sit and look at how
much time am I creating in my life
doing these manual entries where maybe
the automation piece adding that little
bit more per month will get you. If
you move up to like QuickBooks Online
advanced. This week is about how do I
use QuickBooks exclusively, My only
app, to do my law firm work. It’s
definitely more labor intensive.
It’s a question I get asked a lot of
times by attorneys who reach out to me
that are maybe just moving off and
branching out on their own, they’ve
left a big firm, and they’re now starting
out their practice on their own. And
they want to keep their costs to a
minimum. I mean, that’s how we all
start off. They don’t want to spend
a lot of money on apps. And they want
to do a lot of things manually,
because they don’t have the revenue
coming in just yet. So that’s
understandable. And I’m going to share
with you my method of using QuickBooks
for just the steps to create a retainer
invoice, where the client comes in and
pays you the retainer and you’re
holding that money in a special account
to be used on a future future
billing when you’ve actually done the
work and the revenue is recognized. And
then I’ll just show you how to recognize
the revenue and show you the steps and
then I’ll just show you the steps in
LeanLaw so You can see the difference
because Leanlaw cost $39 per month and
sometimes that $39 per month could be
saved just in the fact that you will
have a timing tool, you’ll have a one
place stop, to really record the
time when the client comes in, keep your
calendar. And some of those features
alone. If you save one hour billing
that you forgot to do, because maybe
you were just tracking you know,
tracking on your phone, your hours,
when the client comes in, you hit
the timer and you start to track the
time that you’re working with a
client because most attorneys do still
bill for time. And then that savings
with paying for the app might be worth
it. Not only that, but the workflow is
smoother. Let me take you to my
screen and I’m going to show you how to
work in QuickBooks alone with attorneys
and law firms and how to receive a
retainer and how to recognize the
revenue. So let me share my screen.
Here we are in my law firm test file.
It’s just my playground, my
sandbox where I where I play around
the perimeter So the scenario, you’re the
attorney, the client possible client
comes in, they tell you their story,
they need to hire you, you accept that
and you let them come and be your
customer. Now you need to set them up
in your file as a customer, because
now you’ve asked for a retainer. they’ve
paid you the retainer. And now
we’re going to put this all in
QuickBooks. So this is how we’re going
to do it. First thing going to do is
come over to sales, we’re going to go to
customers. What we’re going to do
here is we’re going to pick new
customer. And I’m going to put their
name in. So let’s see how come up with
the name of Peter Johnson. That’s my
new client. And then of course, you fill
in all the details. And I’m not going to
go into that email, phone numbers, all
that stuff. They’re hiring you to do
estate planning documents. So we’re
going to go over here and go back
actually go back to customers that and
make another customer this
customer is going to be a sub customer of
Peter Johnson. So I’m going to have to
create Another customer and then
attach it and I’ll show you how to do
that. Attach that as a sub customer. So
the customers name is going to be
estate planning. And then the sub
customer, it’s gonna be a sub
customer under Peter Johnson. So Peter,
Peter Johnson. So when you look at the
customer list, you’ll see here’s
Peter Johnson, here’s the estate
planning. Now I’m all set up to
receive the retainer. So the
person came into my company, my law firm
and paid me money for this this type
of legal work, they paying on the spot.
So it’s not an accounts receivable
transaction. I don’t need to create an
invoice and create a payment because it’s
happening all at once. So what we’re
going to do is we’re going to create
sales receipt, it’s going to open a new
transaction, create a sales receipts,
it’s going to be an all in one receipt
of payment. And I’m going to put it
towards Peter Johnson estate
planning. I’m going to put it right at
the matter level I want to connect it
this transaction to the matter. I’ve
already created a product and service
I’ll do the service Date do as a Monday
service the service is going to be a
retainer, so should come up, I’ve got a
prepaid retainer and I will show you how
that looks in the back end that how I
built it out. And then I’m going to
say that that person gave me $4,000. And
I set up a class tracking in, in
location only because that’s how I
have my file setup to play around in
it. But we don’t need to do for
today’s purposes, we don’t need to touch
any of that. So I received the
retainer. How did I receive it, I
received a check person wrote me a
check. And you know, here’s the check
number and hit save. Now, that was a cool
feature in side of QuickBooks is that
you can go over the More button, you can
hit transaction journal and see what
happened behind the scenes in the
general ledger. how this actually hit
the general ledger. So here it is, it
hit the bank because I put it directly
into the bank account. And you
want to do that, especially if your
sole small practice of a single attorney
office. I highly recommend grab. Like
I said with the phone before grab a
bank account. Some states require you
to have the bank accounts they have
relationships with the Bar Association
is you might have be limited to who you
can pick for your trust account bank
holder, you might have to go to
specific bank, it’s usually the bigger
banks, the chase the Bank of America,
highly recommend using them. Not that
I’m a big fan of the big banks, but they
do have the better apps, and you’ll be
able to deposit with your phone, put the
payment right in at one time, not
holding the checks till Friday and
putting them all in together. If you do
have that scenario, you want to put it
to undeposited funds. And then of
course, group the payment. So here it
is, it went right into the trust
account, Trust Bank account. And then I
also put it in a category called
retainer liability. So it’s sitting
right there on the balance sheet. None
of this has been a transaction that
would ever hit my profit loss. None of
this money’s income. It’s money that’s
not been earned yet. So it’s a liability
I owe a service to this client. So that
is how you can look at the transaction
on the back end. Look at the journal
report. So that part’s done. Now
I’ve done the work I’ve done the will
will the trust or you know, the
whatever work has been done for this
client. Now I need to invoice him. I’m
going to come back to Mr. Johnson. Here he is, I’m
going to Bill him again at that same
level the matter level. I’m going to
use fact, let me take you to a window
so I can show you those two items that
I’ve set up. So I’m going to open I’m
going to pick this and open up a new
tab for the product and service. And
then I’m going to show you the
retainer received one, and I’m going
to show you what it looks like and how
he set it up. So retainer. Here’s
prepaid retainer. I’m going to edit it
so you can see what it looks like. And
in this particular instance, prepaid
retainers the name. I Write down the
words retainer received and it hits
the for the income account is not
actually income, it’s the retainer
liability account. That’s important.
You don’t want to hitting any income
account at this point. And now it’s
going to go into that that retainer
account. Now the other thing that you
want to look at is you want to look at
the income account. So I’m going to go
to my legal services, legal
income and take a look at that both of
these these are all going to be non
taxable right non taxable event. So
legal income I left the description
empty you could create items for
like specific words if you do the same
thing over and over and you can have a
legal income dash will prepare a will
and then you can put the words and you
can do legal income hours billed or
whatever you can have many of these
and you know you get a name it unique
name, but you’ll be able to track that
on an income on a on an invoice for your
client and more you can automate this
stuff, the better So making different
items will definitely help. Now
I’m going to go back, create an
invoice out the matter level for
work, but I’ve now done for this
client. So again, matter level, I’m
going to come down here I did the work
on the seventh, I did the legal legal
income and then you know, prepared will,
will that other words, and I’m going
to say because I took $4,000, I’m
gonna say that I thousand dollars
worth of services. Now this is invoice
is really I’m not this clients not
going to pay they already paid me
ahead of time remember? so what I
need to do is now show that money
coming on the retainer using that
same item. So the retainer, prepaid
retainer is now being applied. So
instead of saying received, retainer
applied, and then of course you want to
put a lot of notes in here, write the
check number and all that in here again,
and then I’m going to use a minus Here,
and I’m going to put $1,000 because I’m
taking $1,000 on retainer balance,
and then I’m going to put it in. So now
it’s a zero invoice. And over here, you
start to write the details, invoice,
you know, 1272 for legal services to
prepare will. And then I would do
$1,000. And this is what you’re going to
do. And then the next line down our
retainer applied, paid with check, you
know, you could put into your paid with
check, and then you could put that other
details and it was 8000. Something, you
know, you could do that. And then put
in here, minus $1,000. And I’m
sorry, the, the retainer, invoice,
original invoice the retainer one was
4000 and then memo and then on here
you’re going to write balance of
retainer. is now $3,000. So you just
put 3000. So there’s notes notes here
really important. And you want to make
sure that you type all this out, you’re
keeping a record of that. And I’m going
to hit Save again, I want you to see that
back end of the transaction, see the
transaction Journal of what happened in
this case. So here is my bill for
$1,000 going right into my income
account because I use the item and
it’s it’s the items what you invoice
what QuickBooks uses, and it behind
the scenes, you’ll see what accounts it
gets to and what accounts it applies
to, which is where you’ll find that
underneath the product and service.
Over here I’ve got $1,000 getting my
income account, and $1,000 coming off my
retainer liability account. So I’m
reducing the liability and paying
my musingly deposit to pay the invoice
which is now increasing my income
of my revenue. It’s pretty simple right?
One more step. We have one more step.
And what’s that step that’s missing,
haven’t moved the money out of iolta
account and into the income account and
into the operating accounts. So we need
to do that one more step. How do I do
that plus sign transfer. I’m going to
transfer the money out of trust into
operating for the money that I’ve
earned now, which is the $1,000. And then
in here, I would write that this is
I’d make notes write lots of notes
because this is not an automated
practice procedure here. I need to make
sure that I put down Peter Johnson
applied 1000 retainer to legal
income for services. You get you get the
idea, provided, you know, blah, blah,
blah, you just keep keep writing and
make a lot of notes. So that all these
all these things tie back Now let’s see
how this looks on the balance sheet.
So let’s go with the balance sheet. So
that’s the steps for receiving the
retainer, recording the income with the
invoice, receiving the payment, taking
another retainer, and then moving the
money physically moving the money out
of the trust account into the operating
account. Those are the steps and
QuickBooks. How does it look on my
reports, I’m going to do my report as
of this month, I think my date here
off when the report I’m going to go into
the bank account, I’m going to see
that thousand dollars coming out
of the bank account. And I’m transferring
it for Peter Johnson, it’s coming
out. I should see here where it went
in Peter Johnson gave me the money
took it back. Now I’m going to come
over here to my and I have this is kind
of messy in here because I’ve got
this setup for LeanLaw. So I have
to find that liability account,
which is retainer liability. This is
the manual way using only QuickBooks and
you’ll see here We’re I’ve got
$4,000 going into the retainer
account, where I’m holding the money
waiting for it to be be used in the
future. And then you’ll see here
Peter Johnson money coming out. I’d like
to show this report by grouping it by
the name. So if I group it by name,
this is the way I can track it. Some
attorneys like to track it in a
spreadsheet, you can obviously export
this to a spreadsheet, but
this way, I can see the money coming in
the money going out. See, you can see it
right there. And obviously, the dates
would be different, this probably would
have happened on maybe I thought I
saved it as 331. So the order would be
proper saving close. So I didn’t get it
quite right. But normally you’d
receive the retainer and then the invoice
would come in the future because
you’ve not done the legal work. So that
would look more like it should look 4000
in 1000, out balance 3000 and you might
even want to make a little copy of this
and attach that to your records. Really
important, the more you can document
this stuff, the better, because by
law, you’re going to have to show this
probably per month, maybe quarterly
depending on your state, you’re gonna
have to document all the money that flows
into the trust account bank
account, all the money that flows
out, and your balances have to tie
back the bank balance must equal
the balance of the entire trust
liability. In this case, it needs to
make sure that it balances back to
this retainer liability account.
So the total amount and the retainer
liability has to equal the sum of all
the retainers at the time period when
you’re reconciling the bank account. So
you do a three way reconciliation
really, really, really important. So
what if this was a case that I was
doing this matter? in LeanLaw instead?
How would I do it? So remember, LeanLaw
costs like $39 a month, and it’s not
that expensive, and it’s a time tracking
app. So in this case, if they were
doing the will, you had the meaning you
received the retainer now I’m
doing the will will work and have to
turn my phone on and start to time it and
remember to shut it off. off, where if
you’re doing this work and LeanLaw is
all built into one place, so the
chances of you forgetting to track
time or not build time, track
expenses, and we need to get into
expenses here. So there’s no expenses
on this, you’d have to do the billable
expenses and then pull the billable in
to your bill. So that’s another piece
that’s not I did not demonstrate that’s
extra that would be more involved in
tracking this. If this was my client,
and I was doing work in Leanlaw. Let me
take it a lien law and show you how
that is. So here I am in LeanLaw, I’m
just going to use Mary Rubio have
already set her up as a customer. And
to do that, it’s really simple. You
just come over here and add a client.
And then once you add the client, it
automatically has you add the matter.
So it’s just a couple of clicks.
It’s super simple. And the best part is
you can set the setting and LeanLaw
so that it automatically sends
all that into QuickBooks. So it’s
just one step, add the client add the
matter and boom, it’s done. Now I’m
going to have some time here mentoring
some time and I’m just going to you
know, right up will You could just write
whatever you need to in here. And this is
just some words that you’re going to put
in here for the attorney would track
this. And I’m going to make it be see
only get four hours billable time, and I
will create the entry. So that’s
$1,000. I’m billing Mary Rubio for this
estate planning, because that’s the
matter I had already set up. Now. That’s
all created, and I’m going to make the
bill so I am now billing my client
who has money and trust because all
you have to do to put the money in
trust is deposit to trust. That’s all
you have to do. Click that and go.
So now I’m going to go to Mary Rubio.
I’m going to invoice I’m going to come
back up here to invoice her. She
should be ready to bill here she is
Mary Rubio. I’m going to create a
draft invoice. Just have that
$1,000 and keep it really simple, very
similar to what we had before. It’s in
draft Mary Rubio Going to submit it
to QuickBooks. Really simple,
right? And have to go all that typing
and do all that memo line and all that.
And again, the reason why I don’t
have to do that, and I’ll show you is we
come into Mary Rubio. Here’s her
invoice. And if I wanted to view it in
QuickBooks it’s already got the
details in there about the where the
trust account money is and where
everything is. Here’s what remember
all that stuff. I typed that it was
kinda like manually typing in? current
client retainer, payment to be made
from retainer, retainer, balance
$700, all already done for me. So
here, I’m back in LA, I’m going to go
to her account. I’m just going to find
her Actually, she should be right here
on this page. Going to open her up here,
go to the matter. I’m going to record
the payment. And I’ve already preset
this at the payments, any money
received a retainer, boom automatically
in the trust account. And then
here any payment to invoice is going to
go into the operating account. I
do it singularly you can do again
undeposited funds and then put All
that in one place. So payment of
invoice, you can put any more details in
here you want record the payment. So here
we are, we’ve matched our trust
account, you can actually click this
trust report, it’s going to take me
right back into QuickBooks and show
me on the chart of accounts. That’s
subledger. So that’s how it works here.
You’ll see the money that money in money
out there’s my invoice and that’s
my check that’s going to go into the
bank, it’s moved into the bank
already, I don’t have to do the
deposit and I’ll do the transfer. Super,
super simple. and record the matter
like actually create the client, create
the matter, record the deposit three
clicks, then move the money from the
create the invoice by the time keeping
that part has to be done by the attorney
and expenses anything like that
will be pulled in and put into place
to be built. And then create the
invoice received the payment on the
invoice, declare the AR it all goes in
the bank. Beautiful Thing sweet workflow
super quick, super fast, less chance
for error, you probably will save
that money of the cost of the app,
just so the fact that you’re doing
your timing, time tracking and
LeanLaw, you do all your calendaring in
LeanLaw you’ll be so used to being in a
habit of going into LeanLaw to do the
work as an attorney, you’ll be less
likely to miss time. And you’ll be less
likely to make errors on your
account. Because you cannot make yourself
pay more than that retainer. I can’t go
in there with a $2,000 balance and
pay $4,000 bill, it won’t let me there’s
safety precautions in place. So that’s
another key component to using
this app. It will protect you from
maybe paying yourself more money
out of the trust than you actually
had. It’ll keep a better track of
everything. The automation piece
alone will help you with a sweet
workflow, how much you paying how much
you charging an hour, how much money
can you save, by using this workflow.
And that’s really the point of the app
cost a lot of times although all You
know, I start to look at what I’m
paying for apps. And a lot of times I
analyze that every year because I do
chase the little chase a little shiny
object going, Oh, there’s a new app.
But sometimes you have to really look
at is it really benefiting your
practice? Is it really something
that you need? In this case, LeanLaw
is definitely something that I
need. And I think it’s a great piece
in my workflow. I’ll ping you back on
that. And I hope that this was
helpful to see the steps and the pain
points and the workarounds to make
QuickBooks alone work. And then the
steps for LeanLaw which I did skip a
couple as far as setting up the
matter. But at least you can see that
it’s just the whole point of this app
was created by an attorney, great
people behind the app, and it really
keeps it makes the workflow so much
easier. time savings, chance for
arrows are reduced, and the chance you
will forget to bill or forget to shut
that timer off on your phone. It can
happen so knowing that it will pay for
itself. Now hope you have a wonderful
wonderful week and I’ll see you back
here next week. Bye now.

Leave a Reply

Your email address will not be published. Required fields are marked *