Clio and Bank Feed Matching
With training our new staff, we find a lot of times, there’s some confusion around the transactions in Clio that are pushed into QuickBooks and then matched at the bank level.
See the article last week about why you should be connecting Clio to your QuickBooks file so you don’t miss out on making what could be a manual job is quite automated. Nothing is worse than redundancy in a workflow. Connecting the software helps to make Clio align with QuickBooks.
How it works
I’m going to break this down into parts. Basically, so you understand how the system works behind the scenes. Clio works just like a lot of the other legal tech software.
When a retainer is entered into the system and the attorney creates the client’s name and matter. If the synchronization is working, QuickBooks will show the client's name and the matter. As the retainer is entered, we see it arrive inside the QuickBooks file as a deposit into undeposited funds or directly into the Trust bank account.
Where this can breakdown is when they’re using Clio payments or when they’re using Gravity Legal. Sometimes those transactions show up inside the merchant account, but they never make it into QuickBooks. You have to diligently check the merchant account for random payments that have no invoice. These do not port over in a sync. It’s important to reconcile those transactions when you do your bank reconciliation.
It’s always puzzling to me when I speak with a client or an Accountant's Law Lab member and they tell us that they don’t bother to reconcile the bank accounts because the bank feed matched everything. Reconciliation is an important step in the workflow process and should not be missed.
The next step will be when the attorney recognizes the revenue. They’ll create an invoice using the time that they’ve recorded for their billing or using fixed fees and any expenses that are being billed back to the client. That created invoice will show up in your QuickBooks file as well as on the Clio side. The workflow inside of Clio for the attorney is beautifully automated. It’s so simple to be able to create a professional invoice for the client.
If the attorney is now going to apply that retainer to the invoice, this will create a journal entry inside of QuickBooks. It is the journal entry that will match the bank feed as part of the entry in QuickBooks. The payment that’s recorded on the invoice will also show up inside of the bank feed in the operating account. That must be matched as well. Sometimes QuickBooks will make suggestions in the bank feed area that are not correct. I’ve seen people create expense items or a bank transfer because QuickBooks can see that you move money from Trust operating and it automatically assumes it’s a bank transfer. Do not fall into that trap of creating the bank feed transaction or a transfer. You must match the journal entry side in the trust bank account and the customer payment or deposit inside in the operating account. It’s as simple as that.
This is QuickBooks Bank Feed Suggestion: Which is wrong!!!!
View in Clio of funds in and out of a client account
Don’t forget the additional steps that were outlined in the previous article in regard to the reclassification of the payments out of the trust parent account into the client sub-ledgers. This is an extra step that’s very important. When you’re working on a three-way bank reconciliation report, it’s nice to have that complete visibility where you can export out the data from the trust liability account and sub-ledgers and see how they align with the report we’re about to run in Clio.
Report for a three-way
There are two reports in regard to Trust listed in Clio. One is a Trust ledger report and the other one is a Trust listing report. Make sure that you use the Trust ledger report, not the listing report. For some reason, these don’t align with each other, and it can really send you on a tailspin when you’re trying to balance the trust when you’re trying to match to the trust listing report. Logic would tell you that, that is the correct report as it would be your summary balance report. But it will not align. Use the trust ledger report be sure to run it without zero balances and run it for the months that you are reconciling showing the ins and outs of the trust matters.
Next, we send that report out as a CSV and then copy it over to our three-way bank reconciliation so that we have all of the matters lined up and we can compare what we have listed in QuickBooks on the balance sheet to see how it aligns with the trust side and Clio. This all should be done after you have reconciled your bank accounts. A best practice is to always start with reconciling the trust bank account and then reconcile the operating bank account.
In a perfect world, you would find no discrepancies, however, we don’t live in a perfect world. Some of the common mistakes that we see are:
- The attorney will make an entry inside a Clio moving the funds to pay out a trust but then at the bank level, they transfer a different amount.
- Bank error where the bank does not transfer the right amount.
- If an attorney is not processing a transfer per client or a one-for-one transfer per matter. They tally them together and make one total transfer of many matters. The bulk transfer can cause issues. Typically, they’re math issues. Nothing is more annoying when many accounts or matters are processed in the total amount transferred over is short .50. Accounting nightmare.
How do you fix these errors? This is why lawyers need a good accounting professional in their books to keep their records in compliance.
Since Clio does not give an accountant or bookkeeper a free login, it’s a common practice that the attorney will share their login details with the bookkeeper. Because of this fact, we never make changes in Clio. We instruct the attorney on how to fix the errors they made in their entries to match the bank.
As an example of that, imagine that Frederick Walker's matter had $257.37 earned by the attorney. The attorney creates an invoice for that amount and records the payment out of Trust to that invoice. When the banking send transaction comes in, you notice the transfer was for $257.73. How do you fix this?
You, as the bookkeeper, bring the entry up in a conversation with the attorney and let them know that the amount transferred is different than the amount entered in Clio. I like to provide a snapshot of the bank feed to show the attorney in black-and-white what transpired. Then we have the attorney make the correction in Clio so that the amounts align properly with what took place at the bank. In the case of the above transaction, they will need to transfer from operating back to trust to fix the overstatement on Frederick Walker‘s account. Even though it’s pennies it has to be corrected.
The next thing you need to watch out for is the duplicate transaction that will be entered into QuickBooks because the attorney changes the transaction they originally entered. This is how the Clio one-way sync works.
Remember the original transaction from Clio will not match the bank because the attorney booked it in with the wrong amount. But the changed transaction will match your bank feed entry. You must remove the original transaction to remove the duplicate.
I am sure this highlights the need for a good accounting professional adept in legal accounting for your firm. This is the work we love to do! If you are in need of some assistance with bookkeeping or your trust needs some loving care, reach out! Next week, as we finalize the topic for the month of June, we will look at the reports in Clio.