How to Manage QuickBooks for Attorneys


Will: Okay, guys let’s just jump in. I’m going to share my screen here and we’ll get going. Then, remember, the Q and A part, I’m going to go through this first and then we’ll take any Q and A questions that we have, I’ll answer anything - I’ll answer items that are related to this topic or just anything that you’re having challenging with QuickBooks, even if it doesn’t relate to this topic. So, you can ask me anything you want in regards related to QuickBooks. So we will do that right after I go through How to Manage QuickBooks for Attorneys. Sylvia, just give me a thumbs up if you can see my screen.

Sylvia: Yes.

Will: Beautiful. All right, so today we’re going to talk about how to manage QuickBooks for attorneys. I want to talk specifically about the problems that attorneys have, which is their trust accounts, their IOLA accounts. So, how do we actually set them up? This gets really confusing to work with because it’s double-double sided accounting. I want to talk about how to bill efficiently if you’re an attorney, and then if you’re an attorney, there are either cases or there are matters that the attorney has. How do we track profitability by cases and matters? When I’m going through this, even if you’re not actually working on attorneys, it should be able to expand you to open you up to say, hey the functionality in QuickBooks. Some of this stuff is versatile. It can change with different industries. I’m going to talk about clients that I work with today and what we’ve done for them with QuickBooks that you may not know. Hopefully that will spark some ideas for you for what you can do with your clients, if you’re going after the attorneys market, or if you’re an attorney that’s on this call and have been struggling with QuickBooks. The whole purpose is to be able to share some of things we have seen over the last 20 years and hopefully that will help you run your practice more efficiently. So that is kind of the agenda here and then just going down here.

QuickBooks has the ability to integrate with different softwares, right? If you are an attorney or if you are someone that services an attorney, the first thing that you want to begin to talk about and the questions that you want to ask them, are they using some type of practice management system or some type of CRM software? Some of the ones that we work with are things like Clio, LEAP, Rocket Matter is a big one, Mycase. So what you are looking for is and the question that you want to ask - are they using one? Because if they are, what we want to think about, what will happen to the business and what will happen to the practice if they integrate their practice management software? You’ve got to be able to understand the workflow of that business if we’re really going to give them value. What do I mean by that? If any of you guys have worked with any practice management software, what they have the ability to do is actually bill their customers. If you have a client or you have an attorney that is using Clio, one of the things that they may be using that platform for is to create their invoices. If we’re going to come in and we’re going to be the bookkeeper or we’re going to support this client, if they’re doing their billing in Clio, we don’t want to really duplicate that in QuickBooks, right? The other thing that they might be doing in Clio when they send those bills out, they may be actually getting paid. They may have an integration that has a payment processor that they’re actually paying those invoices that go out in Clio as well. It’s a waste of time for them to do it in Clio and then you to support them and do that same thing again in QuickBooks. So how do we drive efficiency? We want to create it so that this practice management software that they’re using, that information is integrated in QuickBooks, it syncs to QuickBooks, and then QuickBooks has the functionality to sync some of that information back to Clio. So, that’s the first thing we need to ask whenever we’re going to work with an attorney, what practice management software are they using? What CRM are they using? Then go out - it’s easy as a Google search - go and look at that software and see does it integrate with QuickBooks? Then, if it does, finding out the components that integrate. This way, you can be more efficient and you can give this client real value, right? You don’t want to be that person that’s not thinking practically. You need to think practically about the business and how they work. We don’t want to just go in here and say, hey, this is how to use it. We want to understand what their workflow is, what their process is, and adopt that to make that efficient for them in QuickBooks. So, you need to ask that question if you’re going to add value to that client’s life. So, that’s the first thing you need to find out: Can their practice management software integrate with QuickBooks and, if it does, how does it integrate? Then, define what is the relationship going to be with you and the attorney to make sure this all works. The day and age is over that we want to do duplicate work. I see this over and over again. They’re doing their bills, you go in here and you put that bill in again. No. Let’s figure out how to integrate it to make that work. So that’s one of the first things that you want to do as you’re actually having the conversation with the client.

Then, trust accounts. Now I’m going to talk about this if there is no integration. My next part of this conversation is not talking about the integration. This is talking specifically they don’t have a practice management software, there’s nothing that they’re actually using, they do not want to integrate. So how do we actually begin to service them in QuickBooks to give them the information they need? Huge, right? Attorneys can possibly get audited. What are they getting audited from? Are their trust accounts accurate? Their trust accounts, they’re holding money on behalf of someone else. So, if I’m an attorney and I take $100,000 from someone and that money is supposed to actually sit in trust, I can’t actually use that money if I have not earned it. So, it’s very important that these funds - it’s a trust account - it means that these funds are in trust. These funds are not for my use. These guys can lose their license. They can get disbarred because they are not handling their trust accounts correctly. We need to make sure that we have a process to make sure that we can support them with their trust accounts. I’m going to tell you a real story, all right? When I first started with an attorney years ago, I screwed this up big time, because I did not understand how different reconciling trust accounts was from any other industry. There is nothing like it and when I go into QuickBooks, I’m going to show you under the hood how to do some of this today. But I need to make sure at all times my trust account that has my bank balance, my liability account that has that trust account is always the same. If I have $100,000 that I’m holding in my bank account in my trust account, I technically owe that money back to the client until I utilize it to service them or pay down for expenses for them. So, if I have $100,000 in my trust account, I need to have a report that shows whose $100,000 this is for. This is where a lot of people screw this up. It’s not like, hey, you say I’ve got $100,000, it’s just $100,000. No, you need to be able to segment these funds and say it’s $100,000 there, I’ve got $20,000 from Sylvia, there’s another $20,000 that’s out there that’s from Candace, there’s another $20,000 that’s out there from Julie that I’m holding. We need to make sure that we can actually create a report to do that.

There’s two ways to do that. One is in summary form and then one is in detail. That is just going to be a preference of how you want to keep that. The first thing you need to make sure if you’re going to protect this client and you are the person that is in charge of the books, that trust account, you need to be able to produce a report that shows the funds that you’re handling. If you get that wrong, you are causing a liability to your client. This is not like, hey, I do bookkeeping, I do accounting. No, this is like real deal. This is like real deal that I was under the impression that, hey, this client’s going to actually sue me because for them, what I was doing was really malpractice. Guess what? They’re an attorney, they know the law. We need to make sure that if we’re going to work with attorneys, we are clear, we’re getting clear here. You’re responsible for these trust accounts or we’re responsible for these trust accounts, and this is how we’re going to handle them, and we’re going to make sure that at the end of the day, we can produce a report that shows what’s in those trust accounts. I’ll show you how to set that up in QuickBooks. If you don’t get anything else, this is not Bookkeeping 101. This is really enhanced, I need to make that this is right, because someone can actually lose their license. So just keep that in mind. This is a big issue for attorneys, making sure they know what’s in their trust accounts. I can’t stress that more. If you don’t get anything else, don’t go down this path if you do not know how to do work with attorneys, if you do not know how to keep the books.

The second thing that we want to do here, we’re going to manage this business for attorneys. We want to make the process efficient for them. One of the things that attorneys do, they need to track their time. So you guys know some of the functionality of QuickBooks. Using QuickBooks Time will be really good for them for two reasons. One, no matter where they go, if they’re going to court, QuickBooks Time on the mobile app, they can put what client they’re working on. What’s so good about that, that time syncs back to QuickBooks and then they can actually bill that client from the time they put it in the mobile app. We want to attempt to use QuickBooks Time. Also if I’m using QuickBooks time and maybe I have associates or I have other attorneys that are on my team, I may actually pay them on payroll. So how good would it be for them to have one app that they can put their time in, their time goes into the matters or the case. I would actually be able to create an invoice to go to the client for their time and at the same time, I can pay that associate or that attorney that is on my team what I owe them for the time that they spent. So let’s try to use technology that’s out there to make their life easier. This way, also if they work on certain accounts and their client says show me a report that shows me everything that you worked on my business, that can be generated really easily. So if I’m going to manage this, let me manage it and say, hey, how do I decrease time? There are so many attorneys out there that have another app that they’re doing time for. Why? Have them get rid of that, throw that away if they’re using QuickBooks if they’re not using a practice management system, and do it all in here. We want to help them manage that process that they’re doing. If it fits, suggest to them using QuickBooks Time.

Then what we want to do, we want to use billable expenses and receipts. QuickBooks has the ability to set up an email address for these attorneys, whatever the email should be @qbodocs. So when these attorneys go out and they entertain people for lunch, that person can snap a picture or email that into QuickBooks. When that billable expense that they’re going to charge back to the client, inside QuickBooks we can actually capture that and put that on an invoice. So using QuickBooks for receipts and expenses and making those items billable is going to be great here. We want them to be in real time as they’re going out, as they’re entertaining people, take pictures of these receipts that they’re getting. They just took a taxi from here to there. What’s usually going to happen is that they’re going to lose that receipt and it’s going to be on their credit card, but if they really want to have a way to digitally capture all those things, attach them in QuickBooks, and then make sure they can charge it back, the best way to do that is to use the receipt functionality in QuickBooks to capture that information. So this is a way that we are going to get all of the costs that are related to the matter or the case or the client into QuickBooks efficiently. Think about using that as well.

Then we want to use Matters. Here is the thing about QuickBooks. QuickBooks talks about things and functionality a certain way. You’ve got to understand the functionality and say, okay this could be used for X. In QuickBooks, you don’t have anywhere that’s going to say “matters.” And when I say “matters,” what am I talking about? I’m talking about a case. I’m talking about something that they’re working on for a client. Maybe they have one client, but they have multiple cases or multiple matters. So what we can do here with QuickBooks is two things. We have sub-customers or we have projects. I can actually begin to say my sub-customers, which is called sub-customers if you don’t know the industry, all I’m doing is saying use sub-customers as matters. Or use projects as matters. This way, it’s just another way for you to segment the data. Let’s just say that Sylvia is one of my clients, but Sylvia has two matters with me. Sylvia has two lawsuits that she’s doing. Well, for me, I just don’t want to know overall how much money I’m making off of Sylvia, I want to know based upon each matter are those individual matters profitable or not. The way that I basically begin to do that is that I use projects or I use sub-customers as matters. So I want to do that.

Then lastly, what I’m doing here, if I put that data in by matters or by client, then I can run a report for profitability purposes to show me exactly how profitable I am on a matter. Any costs that went to that matter as well as any income that went to that matter, I can now say, okay, this is what we made and then see what we paid out all of our associates to do that. I want to be able to track profitability reports. If you can do that, you are really adding value to an attorney's life, because everything is going to be managed in one place into QuickBooks and then they’ll have information at their fingertips to be able to make better decisions of where their business is.