law firm survival skills: business accounting basics
TRANSCRIPT
www.cosmolex.com
Law Firm AccountingThe Basics
What all Law Firms Need to KnowTo Maintain Your Books
www.cosmolex.com
Using GoToWebinar
slide 2
www.cosmolex.com
Disclaimer
slide 3
www.cosmolex.com
Warning: Deep Waters
▪ We will be taking a deep dive into Law Firm Accounting▪ Not for the faint of heart
slide 4
www.cosmolex.com
▪ Law Firm Accounting requires both Legal Accounting and Business Accounting
▪ What is the difference?
slide 5
A Tale of Two Firms: An Accounting Perspective
www.cosmolex.comslide 6
Legal Billing & Legal Accounting: Classic Gap
www.cosmolex.comslide 7
Law Firm Chart of Accounts
www.cosmolex.com
▪ Client Trust Funds (Liability)
▪ Client General Retainer - Trust (Liability)
▪ Client General Retainer - Operating (Liability)
▪ Advanced Client Costs (Asset)
▪ Reimbursed Client Expenses (Direct) (Income)
▪ Inhouse Reimbursed Expenses (Indirect)
(Income)
slide 8
▪ Fee Income (Income)
▪ Discount (Income)
▪ Reimbursable Client Costs (Expense)
▪ Non-Reimbursable Client Costs (Expense)
▪ Unrecovered Client Expenses (Expense)
Legal Specific General Ledger Accts Examples
www.cosmolex.comslide 9
General Ledger
www.cosmolex.comslide 10
Journal Entries
www.cosmolex.com
▪ Active use of Income and Expense Accounts▪ Generate revenue by providing service to clients▪ Disburse payment associated with matters ▪ Collect compensation for “overhead” or “in house” expenses▪ Pay expenses for firm’s activities
slide 11
Law Firm Accounting
www.cosmolex.comslide 12
Law Firm Accounting
www.cosmolex.com
▪ Active use of Balance Sheet Accounts▪ Bank and Credit Card Accounts
▪ Trust Activities *
▪ Advanced Client Costs *
▪ Partner Draws and Equity
slide 13
Law Firm Accounting
www.cosmolex.comslide 14
Law Firm Accounting
www.cosmolex.com
▪ Types of Matter Costs
slide 15
Managing Matter Financials
www.cosmolex.comslide 16
Managing Matter Financials
▪ Booking Matter Costs – Options▪ Advanced Client Costs
www.cosmolex.comslide 17
Managing Matter Financials
▪ Booking Matter Costs – Options▪ Reimbursable Client Costs
www.cosmolex.com
▪ Booking reimbursement of Matter Costs▪ Advanced Client Costs▪ Reimbursable Client Costs – Hard/Direct Costs▪ Reimbursable Client Costs – Soft/Indirect (In-house) Costs
slide 18
Managing Matter Financials
www.cosmolex.com
▪ Allocation of Payments from Clients▪ Sales Tax payables▪ ACC▪ RCC – hard costs▪ RCC – soft costs▪ Finance charges and late fees▪ Fee Income
slide 19
Managing Matter Financials
www.cosmolex.com
▪ Credit Card transactions
slide 20
Managing Matter Financials
www.cosmolex.com
▪ Operating Retainers ▪ Balance sheet account -- liability of the firm▪ Revenue not yet earned
slide 21
Managing Matter Financials
www.cosmolex.com
▪ Trust Accounts▪ Balance sheet account -- liability of the firm▪ Monies held on behalf of clients▪ Revenue not yet earned▪ Funds for the benefit of clients, e.g. real estate escrow, estate
probate funds
slide 22
Managing Matter Financials
www.cosmolex.comslide 23
▪ General Operations of the firm
Business Accounting
www.cosmolex.comslide 24
▪ Assets, Liabilities, Equity
Business Accounting
www.cosmolex.comslide 25
▪ Assets
Business Accounting
www.cosmolex.comslide 26
▪ Liabilities
Business Accounting
www.cosmolex.comslide 27
Law Firm AccountingManagement Report - Balance Sheet
www.cosmolex.comslide 28
Law Firm AccountingManagement Reports - Profit & Loss
www.cosmolex.comslide 29
▪ Other Management Reports ▪ Statement of Cash Flows
▪ Collection Reports
▪ Revenue by Timekeeper Report
Business Accounting
www.cosmolex.com
▪ Separate bank accounts
▪ Other Costs▪ Merchant credit card fees
▪ ACH, Wire transfer fees
▪ Check printing
slide 30
Tidbits of Extras
www.cosmolex.com
▪ All transactions have impact on financial position of firm▪ Legal obligations are met within one General Ledger
system▪ “Unique” nature of law firm activities are recognized and
managed▪ Mitigate issues relevant to firm’s bottom line
slide 31
Integrated Law Practice Management, Billing AND Accounting System
www.cosmolex.comslide 32
All The Gears Can Work Together
www.cosmolex.comslide 33
Total Practice Management
www.cosmolex.comslide 34
For Today’s Attendees Only
▪ Only 10 Appointments Available With Our Consultant
▪ Email Request to [email protected]
▪ Include Specific Date & Time
Free 1:1 Analysis of Your Setup
www.cosmolex.comslide 35
Rick Kabra, Ph.D.CEO, CosmoLex Cloud, LLC
Erica BirstlerManager of Customer Success,
CosmoLex Cloud, [email protected]
Thank you for Joining us!Try CosmoLex Free For The First Month
www.cosmolex.com/register