As at the time this review was published, we had just helped a fast-growing Law Firm re-organized their accounts using QuickBooks Pro accounting software. You might ask, “Does a Law Firm really needs an accounting software?
To answer this question, we believe that as long as tracking cash flow remains a top priority for businesses in which Law Firms are one; then we say YES, Law Firms need an accounting software! Besides, our interaction with the firm’s account officer revealed so much about Law Firms that we decided to share some key points on how QuickBooks software brought in a new life in their Accounting Department, and consequently, leading to an overall financial growth of the firm.
Clients Receivables & Trust Accounts.
As at the beginning of 2018, they have a pool of individual and corporate clients with outstanding balances arising from professional services fee, litigation, retainer-ship fee, debt recoveries, etc. And at every point in time, the management would like to see their clients’ balance for cash flow projections on a real time.
Solution – we imported the names, addresses and receivable balances via excel into QuickBooks.
Another major concern was that they maintain a trust account on behalf of their clients and these funds are fully invested in call accounts with asset management firms.
What is a trust account? In simple terms, it is a fund account held by a professional (who is known as a trustee) on behalf of a client.
Our team assisted the account officer by creating a parent trust account under liability, since the fund is owned by clients and subject to their instructions. They also organized all the clients whose money are held in that account under a parent account head, and added a corresponding investment account (with the asset manager) on their chart of accounts, to track the funds that were invested in short-term securities with accrued income posted to an interest income account. One key feature of a call account is that you can request for your money at any point in time. For instance, whenever clients send instructions to the Law Firm as regards the purchase of a property (with the amount held in the trust fund) on their behalf, a call is immediately placed to the asset manager.
On the statement of financial position, you can view the Client Trust Account (categorized by clients’ name, for better reporting), while the interest earned on the call account is displayed as a line item on the profit or loss account.
Fixed Assets
In business, we reference PPE (Property, Plant and Equipment) as fixed assets which is to be tracked in your financial record. But for a Law Firm, you have additional assets which include Law Books (organized in the library for reference purposes). If you are not familiar with the industry, you might wonder why legal books, which ordinarily should be written off as expenses, are classified and recognized as assets. But a closer look at their real relevance and the conditions under which an item is classified as a fixed asset, qualifies them as assets in the statement of financial position.
These are the key specifics that make QuickBooks customization in a Law Firm different from other serviced businesses. Other workflows like invoicing, receiving payments, recording deposits, making payments, and month end reconciliations still remain the same.
For more details on how we can make your Law Firm’s Accounting Department organized and relevant, connect with us at info@accountingsoftware.com.ng or call 08105090001, 08084219399.