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Trust Accounting Program HELP

I left a small firm and started my own last month. Thirty clients (read cases) came with me. I have no flat fee clients because I solely practice litigation which does not lend itself to flat fee payments. Ok, so thirty clients (cases), all of which are on retainer fee. All client fees have been dumped in my IOLTA. I've been keeping track of everything by hand because I am at a loss when it comes to finding a good accounting program. My old firm used QuickBooks...which I have decided I will need to take a class at a community college to understand how to use. There has to be an easier way...RIGHT? An updated way? A more user friendly way? I've checked out lots of other programs. Xero, LawTrust, LegalBilling, PCLaw (hella expensive), Abacus (pricey), BillingTracker, etc...

Just to save folks time...Freshbooks is out. It's cute and pretty but it doesn't get the job done.

I need a program that can handle 30+ client trust accounts, money coming and going, frequently. Many of my cases involve not only paying for filing fees but also, paying experts, transcripts, appellate fees, daily expenses for elderly clients, maintenance fees for abandon properties, etc...

I don't need a billing program ( It seems some attorneys get the two confused).

My fear is that QB will be the right fit for my practice (not for me) even though I am in denial.

Any other attorneys out there who deal with a very active IOLTA account? What accounting program do you recommend?

Oh and just in case someone is tempted, I cannot just keep track of the deposits and expenses by looking at my checking account. The Bar will surely scream, "off with her head!" Just thought I'd add that as I've seen a response to that effect in another thread. comical and scary.

Thanks so much for any recommendations.

Also, please do not respond in tech-y language. Computer-illiterate language only please. Much appreciated.

Comments

  • samgloversamglover Minneapolis, MN Admin
    edited July 2014

    @humphreylaw said:
    Also, please do not respond in tech-y language. Computer-illiterate language only please. Much appreciated.

    I'll try not to speak geek, but computer literacy is something you've got to work on. You can't be a Luddite in this profession, especially when you have your own firm.

    I mean to write a how-to guide at some point, with the help of my bookkeeper, but here's a quick-and-dirty.

    Using Paper or Spreadsheets

    First, it's perfectly fine to keep trust account ledgers on paper or in a spreadsheet separate from your accounting software. Lots of lawyers do it, and there's nothing wrong with that. Plus, when you reconcile your ledgers or spreadsheets with your bank account balance, it's an opportunity to double-check all your numbers, which is always a good idea with trust accounts, anyway.

    If you want to keep doing that, just create two accounts in QuickBooks: an asset account for your actual IOLTA account at the bank, and a liability account for the client funds in that account.

    If you are in a state where you cannot keep any extra money in the account (for NSF fees or check charges when the bank screws up), these accounts should always have the same balance. If you do keep some of your own money in your trust account, then the asset account balance should be that much more than your liability account. That's because you do have an asset in your money in that account.

    When you deposit money in your trust account, deposit it to the bank account/asset, use your client's name in the Received From field, select the client funds/liability account in the Account field, and it should work out. When writing a check, do the same thing.

    I other words, all you will be doing in QuickBooks is tracking the total amount of client funds in your trust account, not the client-specific ledgers.

    Using QuickBooks for Trust Accounting

    If you want to get rid of those ledgers, then it's just a little bit more tricky. Instead of creating just one liability account, you should create a liability account for each client. That way, each client's liability account replaces the ledger you used to keep for that client. And it makes it pretty easy to satisfy your state's trust accounting requirements using your QuickBooks reports (although you will have to build a custom report each month to run your trial balance).

    Either Way, Talk to a Bookkeeper

    You really should get professional help when setting all this up. Get someone to walk you through this. I've made it sound simple above, and it mostly is, but sometimes you'll have a more complex transaction and you won't be sure how to do it. Make sure you have someone you can call.

    As you may have noticed, there's nothing special about QuickBooks. You can do this in any double-entry accounting software. It works fine in Xero or Peachtree or whatever. But you do need a basic grasp of accounting.

    For that, get Bookkeeping for Dummies. It will be a big help.

  • I use Quickbooks Online. Love it. Probably simpler than Quickbooks proper

  • chadmurraychadmurray Decatur, IL

    I use MyCase to bill and invoice along with trust account tracking. I also keep a separate paper ledger as a duplicate record. It fits my needs so far, as will most other similar cloud management platforms. You might want to look at Cosmolex. I think they have a free trial and focus heavily on trust accounting. Not cheap, but if it works as advertised it might save some headaches. I haven't used it personally though.

  • chadmurraychadmurray Decatur, IL

    I should add - my state doesn't have any special reporting or record-keeping requirements for trust accounts other than to keep a ledger and not to screw it up. If your state does, software like MyCase and others might not be viable.

  • We have some pretty intense record keeping requirements but quickbooks handles them well with a small amount of tweaking (ie. creating a few custom journal entries)

  • paulspitzpaulspitz Cincinnati, OH ✭✭

    I think that if you are juggling at least 30 clients at a time, you would be well-served using a bookkeeping service. Ask some other solos if they recommend anyone with experience handling trust accounts. The complexities are sufficient that it will take too much time away from serving your clients, and if you don't know what you are doing, you run a serious risk of doing it wrong.

  • samgloversamglover Minneapolis, MN Admin
    edited July 2014

    I think a bookkeeper is a great idea, but I've found that bookkeepers often need to be "trained" on what is required to comply with ethics requirements. I think you need to know the basics so you can understand what is happening in your books. After all, it's your license on the line if your bookkeeper screws up.

    Edit: Hiring a bookkeeper is a great idea, if that wasn't clear. Do it. But you should learn what needs doing (maybe even from your bookkeeper) so you can make independent judgments about whether your books are in order.

  • Make the book keeper study your law society's rules. They're worth a bit of a premium once they know it.

  • These are great tips. Most solos in the same practice area as mine do it themselves. I think they'd rather have a hands on approach. However, one of them did recommend a bookkeeper who can give me some one on one lessons on QB. I called her today. Might as well get it over with. So....it looks like it's going to be the dreaded QB after all.

    Thanks everyone.

  • paulspitzpaulspitz Cincinnati, OH ✭✭

    The Minnesota Bar Association has some great free materials you can download on handling trust accounting on common software programs like Quickbooks. I'm in Ohio, and I use the MBA download because the Cincinnati Bar Association's booklet provides absolutely nothing of practical value. Go to mnbar.org and type trust accounting in the search box.

  • I use a product called EasyTrust, it used to be sold by EasySoft, though they seem to have split it off to another company. I like to keep my trust accounting out of quickbooks and using a program that does not permit overdrafts of any ledger is very useful.

  • Sam is right when he says that you have to have at least some computer skills when out as a solo. Additionally, you are also going to need at least some basic accounting skills to go with it. We use QB for our firm and I find with very little setup QB works very easily for trust accounting. We do only one custom entry a month and that is to record the IOLTA interest transfers.

    Similar to Sam's setup we have one bank account, the IOLTA Fund. We then similarly use a master IOLTA Liability (a current liability). This represents the total liabilities of the firm.

    We add more detail at this point. For each client, we add a new subaccount of the IOLTA Liability (each a current liability account). This way each client's specific transactions are clear as a bell.

    We are permitted to keep a small amount for bank fees in the account. To track that we also add "Firm Funds" as a peer account to the client liabilities. I believe that Firm Funds has never gone over $20, as an estimate of what we would be charged if we didn't keep a high enough balance. We have the usual prohibitions against keeping firm monies in the acocunt.

    To record client deposits, we deposit money into the IOLTA Fund selecting the account of that specific client (instant recording into the client's liability account). To record a client payment of costs or for fees, we write a check from the IOLTA Fund selecting the client liability account which is then debited. Each transaction takes about seconds.

    Since QB records the transactions against the client subaccounts, you have an instant audit trail specific for each client. You also have the ledger account for the entire fund as well (the beauty of QB).

    We are required to report periodically or on demand for each client's trust assets. That's as simple as selecting the client's account and printing their ledger. At the end of the representation the balance left in the account is already up to date for that client and takes no deciphering. When we close the representation, we tell QB that the account is inactive. It doesn't display in the chart of accounts but can be made visible at any time.

    Balancing against the monthly statements is done against the IOLTA Fund. We then print the required detail and summary reports QB automatically generates to meet our reporting requirement.

    We record the new months interest into an IOLTA Interest current liability, which is a peer to the client liability accounts. This means that the current interest is part of the IOLTA Fund's balance, as it should be.

    We record the bank's transfer of the previous month's interest as a debit out of the IOLTA Interest liability and therefore out of the Fund. It matches the transaction the bank did automatically.

    You don't actually need to use a journal entry for the IOLTA interest transactions but I like to pair these together in one entry to keep them together.

    Make sure that you match all of your state's requirements to your process before you start. There are some great basic bookkeeping courses available online and at the local community colleges if you need some background. My accounting background was one class in basic accounting in my undergrad program about 17 years ago.

    As an aside, we carry about 47 accounts at the moment and they take very little work to keep it all together. We hand write our checks for economy and because my partner prefers it. As a simple crosscheck we record the running ledger on the checkstub and compare it to the QB on week-close.

  • It is with a heavy heart that I agree that QB is really your best option. It is the best I've found at tracking trust accounts properly.

    I would recommend a bookkeeper. Ask solos around town who they use so you find someone who understands trust accounting.

    And if you plan to stay a solo or run your own firm, give up your quest to go through life without a pretty decent understanding of technology. It just won't fly.

    The hardest thing about transitioning from a lawyer in a firm to a solo or lawyer with your own firm is the desire to continue to think of yourself as a "lawyer." That is simply no longer the case. You are now a businessperson whose product is providing quality legal services. I know it may sound bananas and I've had many a lawyer scoff and ask me "What's the difference?" But its no joke. And its a big difference.

  • rkabrarkabra NJ
    edited March 2015

    Happy to add my 2cents. Full disclosure: I am the CEO of CosmoLex.

    When it comes to proper IOLTA accounting, 2 things are most critical:

    1) Use a system which provides safeguards out of the box. Generic accounting software will not make it easy for you to prevent commingling, or overdraft protections.

    2) Use a system which can provide required reports such as individual ledger balance or 3-way reconciliations out of the box. Again, generic accounting software will require constant customization.

    Another important consideration which often gets overlooked is that it is much better to keep trust accounting FULLY integrated with your practice management system. Reason for this is retainers are constantly being used for billing purpose and keeping data at two places often leads to mistakes and mistakes are costly when it comes to trust accounting.

    Post edited by samglover on
  • via Email
    Thanks for your email. I actually still use Easy Trust for my trust accounting. I don't use my trust account for retainers, so integration with my practice management is unnecessary. I agree with you on not using QuickBooks for trust accounting. I see no reason to move from my fully licenses Easy Trust program to a monthly cloud Subscription.


    Avi






    Avi Frisch
    Frischa@msn.com
    201-289-5352
    Sent from Surface





    From: rkabra
    Sent: ‎Saturday‎, ‎March‎ ‎21‎, ‎2015 ‎7‎:‎51‎ ‎AM
    To: avifrischlaw





    Happy to add my 2cents. I am the CEO of CosmoLex and I specialize in trust accounting having given over 100 seminars on the topic.

    When it comes to proper IOLTA accounting, 2 things are most critical:

    1) Use a system which provides safeguards out of the box. Generic accounting software will not make it easy for you to prevent commingling, or overdraft protections.

    2) Use a system which can provide required reports such as individual ledger balance or 3-way reconciliations out of the box. Again, generic accounting software will require constant customization.

    Another important consideration which often gets overlooked is that it is much better to keep trust accounting FULLY integrated with your practice management system. Reason for this is retainers are constantly being used for billing purpose and keeping data at two places often leads to mistakes and mistakes are costly when it comes to trust accounting.

    If you want to learn more about trust accounting check out following pages:

    https://www.cosmolex.com/
    https://www.cosmolex.com/resources/videos/
    https://www.cosmolex.com/resources/articles

    --
    Rick Kabra
    CEO | CosmoLex
  • AFFAFF United States

    Check out kahuna accounting plus xero. I'm happy. With 30+ clients, you're going to be spending 2-4 hours a week in Quickbooks just to stay on top of it, if you're anything like me.

  • weboyleweboyle Raleigh, NC

    TrustBooks is a relatively new software option that is designed specifically for trust accounting. (In full disclosure, my brother, Tom Boyle, is one of the founders of this product.) My firm started using TrustBooks about a year ago, and we really like it. Prior to the transition, we were using QuickBooks and paper ledgers for trust accounting which we found cumbersome. I share the frustrations found in many of the previous comments. TrustBooks is easy to use. It’s features are designed to meet the North Carolina State Bar requirements for trust accounting, which I believe is one of the more stringent standards around the country. It is my understanding that TrustBooks meets most, if not all, of the various state bars’ requirements for trust accounting. I recommend TrustBooks as a superior alternative to QuickBooks or Excel, and certainly to a handwritten ledger. Here is the website for TrustBooks: www.trustbooks.com.

  • TheoRandTheoRand Burbank, CA

    I would not frame this as a technology issue: It sounds as if this is simply work you would prefer not to do. Nothing wrong with that. QB (and any other tool) is only dreaded if you simply prefer not to engage with it at all, and the fact that most solos do it themselves is not a reason that you should. Someone said, the secret to success is knowing how and when to delegate. This might be one of those times.

  • Since starting my practice in 2010, I've been using Clio and QuickBooks. I have two separate bank accounts in QB, one trust and one operating, and it allows me to keep client trust ledgers for all clients and client/matters. I can run reports on the entire trust account, each client and by client and matter in QuickBooks. I recall that I set up the categories in QB with the help of a MN state bar primer on QB and trust accounts. It works great.

    With Clio, I can keep client and matter ledgers as well. In CT, lawyers can be randomly audited by the Statewide Grievance Committee for trust account compliance. Between Clio and QB and the bank statements, I can (and have) easily produce the three point reconciliation necessary for compliance. CT requires quarterly reconciliation.

    I should add that I do two additional things in Clio that keep me up to date with the trust account. The time investment is minimal.

    First, I have my law firm as a client in Clio and I create a matter for each year called "201X Trust Accounting." Each time I make a trust deposit, I scan the deposited item(s) and the deposit tickets(s) and upload them to the trust account matter. When it is end of quarter, I perform the three point reconciliation for all clients/matters with trust balances. When those reports are complete, they are uploaded as well. This way if I am ever audited again in the future, I need only share the completed documents and the report.

    Second, each matter also gets the deposited item and ticket PDF's and uploaded to the documents folder. Along with a copy of that client/matter trust ledger.

    When I was randomly audited, it was a handful of mouseclicks and share to my client portal to the auditor. And I passed with flying colors1

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