Can I use QuickBooks for my Law firm practice?
When I chat with attorneys, especially with the single attorney type of practice, they ask me this question all the time. “Can I just use QuickBooks alone to run my firm to track my trust accounting?”
The simple answer is yes, it’s entirely possible to do that. But the real question is, how much time do you want to spend In this manual process? How much time do you want to spend tracking your law practice in software designed to be used by all types of businesses?
By now, if you’ve been reading my blog posts, you know my workflow. You know that I layer QuickBooks Advanced and LeanLaw as my app stack. Even for the smallest law firm, it’s still a viable solution to use QuickBooks Online and LeanLaw.
Quickbooks for your law practice
The number one reason is the time savings. You don’t have to do many workarounds to get the data into QuickBooks. The main compliance task of tracking trust accounts is the three-way reconciliation. Tracking trust accounting without the software is a very manual process. There’s a lot of steps and workarounds to make this work.
I’ve seen and used many of the time tracking programs for law firms. One of our specialties is helping firms migrate off of antiquated desktop law firm programs and moving them to the cloud. It is dazzling to see the amount of time we’re able to save most practices in these manual tasks.
What About Free Time Tracking Apps?
Many solo-attorneys in the one person practice try to use free time tracking software in QuickBooks. This will lead to the attorney forgetting to turn the software on forgetting to turn it off, and let’s face it, free tools are free for a reason. That adage, “ if it’s free it’s for me,” it’s not applicable when working with attorneys in law practices. There are places you can save money, but this is not one of them.
The most significant benefit of using law firm time tracking software is the restrictions to put in place to be sure you never draw more funds out of a trust and are actually in the account. That’s where the manual tracking of the trust account and can go a little awry. You never want to see a negative trust account.
What About Just Using Excel To Track The Client Ledgers?
Attorneys be creative and use excel and manually track the trust accounts in separate ledger spreadsheets. This manual process is ripe for errors. Not only that, any manual method is more time-consuming. What’s that other saying? "Penny wise and pound foolish? If you’re an attorney that charges $250+ an hour, is it worth your effort’s to manually track all the ins and outs of a trust ledger for a client in Excel? How long is that taking? There is a tremendous value when you can add an app like LeanLaw and track it within the software that built for attorneys by an attorney.
First Attorney Client? Here Are The Steps:
- Start with your local Bar Association. Familiarize yourself with the rules. In my home state of Florida, for example, you must keep a copy of both sides of any payment that flows into the trust bank account. You may also find that you need to keep a very detailed set of notes on any check payments that flow out of the trust bank account. These are some of the data that is automatically captured.
- Set up can be complicated. Sure, you know QuickBooks, but you need to understand in the hierarchy of the trust account ledgers. There’s a parent level and then the sub-level of trust account liability accounts. These are the mini ledgers you have to track and reconcile. That’s all part of the three-way reconciliation process.
- Compliance! Noncompliance of trust accounting can result in an audit or even worse, an attorney losing his or her license to practice—very, very serious consequences.
Working With Mid-Market Firms:
Now when you get into working with larger law firms, ones with multiple partners, it can get even more tricky. There are other things you want to track. Some of these can be done with the class feature in QuickBooks, but again It’s very tedious.
Tracking revenue by the attorney is simple using LeanLaw. Tracking various revenue sources for practice areas is simple using the app.
But the single main reason you would want to add the layer of an app, like LeanLaw, is reporting. The reports are amazing! These are not canned reports in QuickBooks. You will have to manipulate the data, and quite frankly, it will be hard to replicate these in QuickBooks alone.
If all of this has your head spinning, why not hire a professional? That’s money well invested. I just had a conversation this week with an attorney who is fully stressed out over the accounting. She had hired someone, and it didn’t work out, and she had a big mess to fix. Why not save yourself the mess and hire someone who knows law firm bookkeeping?
As I told his attorney, my job is to give you robust reporting to help you grow your business profitably. The best thing I can do is give you time back in your day to do what you do best.
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