The Best Law Firm Accounting Software

Prompt data entry ensures your QuickBooks balances are always up to date, which reduces the chance of an overdraft or error. For example, if your bank charges a $25 monthly fee and it isn’t waived for IOLTA accounts, the Bar might allow you to deposit $100 of firm money into the IOLTA as a cushion for those fees. Check your state’s rule on the maximum amount (often a few hundred dollars at most). Any other use of the trust funds for the firm’s benefit is strictly forbidden. Using one client’s money to pay for anything unrelated to that client is considered commingling or conversion, and that’s a big ethics violation. QuickBooks helps avoid commingling by clearly separating the accounts – just be sure you and your staff always select the correct accounts when entering data.

• You can also quickly and securely take photos of receipts to ensure no expense goes untracked.
• With CaseFox and Quickbooks, attorneys can find insight on timekeeper details, client, attorney productivity, and other such details.
• LeanLaw, on the other hand, is specifically built for the legal industry.
• Whether you’re using a PC or a Mac for your legal billing, with Clio and QuickBooks, lawyers have multiple time-tracking capabilities that they can use on both mobile and web apps.
• When done inaccurately, the consequences of bad trust accounting can be severe.

Common Challenges (and Solutions) in IOLTA Bookkeeping with QuickBooks Online

Though QuickBooks Online was not designed specifically to be the type of accounting and billing software that law firms must implement, it works perfectly when another software platform is put into place. I recorded the gross recovery we received on behalf of our client as a trust liability. I think I’m going to just have to write checks to the clients and use a tag to identify it.

Connect to apps that simplify your legal work

When you know how much is your time worth, the decision will be clear. Yes, most versions of QuickBooks Online let you create unique user IDs and customize access levels for anyone on your team so they can work in your legal accounting software with their own login. Next, you will need to add your trust liability account in QuickBooks Online. For the trust liability account, the account type is Other Current Liabilities, and the account detail type is Trust Accounts – Liabilities. If the detail type is not set up as Trust Accounts – Liabilities, you will not see the account in the Clio sync screen. The section below goes over the following steps you need to take to set up a trust account in QuickBooks Online and Clio.

Q1: Why is legal bookkeeping specialized?

The software can prompt you for required details (client name, matter, etc.) whenever you handle trust money, ensuring your records are always detailed. It’s like having a built-in checklist every time you touch the trust account. Created by and for lawyers and their staff, LeanLaw addresses the unique needs of law firms, such as trust account management. It offers specialized features like matter-based accounting, client fund management, automated ledger entries, and compliant trust account management. Properly tracking billable hours and expenses is necessary for law firms to accurately record law firm revenue, issue correct invoices, and maintain financial records. Errors in tracking can lead to client disputes, lengthy collections processes, and lost revenue.

You need to update manually the memo field to correctly reflect what the trust account balance is. You need to check with your state to find out if this is required. Here is an example of the letter that the State of Florida uses (PDF) or (Word). You can also take a look at some of the other trust accounting & IOLTA documents that we have on our resources page for download.

• While these two terms are often used interchangeably, accounting and bookkeeping for lawyers are technically different things.
• Either method, as long as it’s executed correctly, can work – just don’t mix methods without understanding it, or you could double-count.
• Fortunately, QuickBooks Online has the tools to help you stay on top of trust accounting, as long as you set things up correctly and follow disciplined workflows.
• QuickBooks tracks every dollar coming in and going out of the firm.
• For the latter, one method is to run a Transaction Detail by Account report, filter it to the “Client Trust Liabilities” parent account, and group by Account to see each sub-account’s total.

Nebraska IOLTA & Trust Accounting Compliance for Law Firms

While some law firms may have dedicated accounting staff or legal accounting software to lessen the burden of accounting, that doesn’t mean that lawyers can ignore all things accounting. Some law firms get in trouble because they didn’t keep individual client ledgers or documentation. If you only tracked the trust account in total, you might lose sight of whose money is whose. QBO sub-accounts solve that, but only if every transaction is labeled correctly. Another common record-keeping issue is not retaining documents or explanations for transfers. Usually, the bank handles sending the interest out to the Bar foundation.

If you’re contemplating adopting accounting software for your firm, you may consider alternatives to QuickBooks Online. With CaseFox and Quickbooks, attorneys can find insight on timekeeper details, client, attorney productivity, and other such quickbooks trust accounting for lawyers details. With CaseFox and QuickBooks, reports can show important details such as what and when a billing entry was made. And, using a software tool like Clio that has safeguards in place to give you peace of mind over trust transactions will help your firm as you scale. As mistakes may come with serious repercussions, lawyers need to be aware of all laws and rules when dealing with these accounts. When it comes to pooled trust accounts, one of the most well-known ones is IOLTA.

Legal Trust Accounting in QuickBooks Online – The Easy Way and the Hard Way

Of course, software is only as good as the user – you still need to understand the basics (which, if you’ve read this far, you do!) and use the tools properly. But when combined with sound internal practices, technology can turn trust accounting from a potential minefield into a routine administrative task. Because of this requirement, New Mexico attorneys must use approved financial institutions for their trust accounts. An approved institution is one that has entered into the agreement with the State Bar to provide the required overdraft notices and to offer IOLTA accounts that pay interest to the Bar. The State Bar’s IOLTA program maintains a list of eligible financial institutions (practically, this includes most banks operating in New Mexico). If a bank doesn’t agree to the reporting requirement, you cannot use that bank for your trust account.

While there are many different methods and software programs that you can use to track client trust accounts, we recommend leveraging the power of QuickBooks® to handle all of your accounting and reporting needs. While QuickBooks® is not specifically written for Attorneys, we have developed a system that can help you do everything that you need to do. To avoid this situation when using QuickBooks only as a standalone solution, one suggestion is to create the invoice but then delete it. By doing this, the client won’t be aware of the deleted invoice and won’t affect the trust liability account. When the money is received from the bank, you can simply record that amount in the trust liability account. Begin by creating a liability account to track the amount of the retainer you received from your client.

What is a client trust account?

If your business prefers to invoice the customer for their deposit rather than receiving it then and there, you can do that as well. The steps are the same as above except that you’ll make an invoice instead, and you won’t select a  Deposit To account right away. Instead, you’ll make that choice when you receive payment against this invoice. While good legal professionals must possess an in-depth understanding of the law, accounting principles and practices are very likely not their area of expertise. Trust accounts must be treated carefully, and lawyers must ensure that they adhere to the regulations for their jurisdiction to stay compliant and avoid negative consequences.

Crucially, a trust account is not your firm’s operating account; it holds client funds, which by rule must be kept segregated from the firm’s own money at all times. One game-changer is using software that integrates your trust account management with your general accounting system. For example, LeanLaw’s trust accounting feature is tightly integrated with QuickBooks Online (QBO). Every trust transaction you enter in LeanLaw (like recording a client deposit or paying an invoice from trust funds) is automatically mirrored in QuickBooks in real time.

For example, if Client A’s trust balance is $1,000, you cannot “borrow” from it to cover Client B’s court filing or to pay your office rent, even if you plan to replace it later. Using client funds for any purpose other than that client’s matter is theft in the eyes of the Bar. The safest practice is to treat the trust account as sacrosanct – funds in it are not yours until earned, and you should almost mentally “forget” the money is there except for the client’s purposes.

This creates an imbalance because the money hasn’t been received yet, and the bank account will reflect a lower amount than the trust liability account. Although QuickBooks trust accounting for lawyers makes life easier, several trust accounting features are built into Clio that do not exist in QuickBooks Online. These features are designed to keep you compliant with state bar rules and regulations. For example, when used with Clio, QuickBooks Online ensures you keep your trust funds in balance. Finally, technology aids in compliance by standardizing processes. If you and your staff follow the software’s workflow for trust transactions, you’re less likely to skip a step (like forgetting to get a deposit slip copy, or failing to update a ledger).