money matters for law firms
TRANSCRIPT
MONEY MATTERS FOR LAW FIRMS
Micky DemingKahunaAccounting
4WaystoSecureYourFinancesin2016
JoshuaLenonClio
#ClioWeb
Instructor
Joshua Lenon
• Lawyer in Residence at Clio• Attorney Admitted in New
York• @JoshuaLenon
#ClioWeb
Whatwe’llcover1. FinancialSystemsandOrganization
2. TaxSeasonPreparation
3. TrustAccountingBestPractices
4. MaximizingTime
#ClioWeb
AboutKahunaAccounting• 20yearsinbusiness• 10yearsofoutsourcedaccounting• 3yearsdoingnation-widebookkeepingwith
Xero• Haveworkedwithhundredsoflawfirms
acrossthecountry
#ClioWeb
TheAccountingChallenge• SourceofAnxietynotclarity
• Pooruseoftime
• “Keepsmeupatnight”
• Aneutralexperienceatbest
#ClioWeb
DoesitHavetoBethisWay?• SourceofAnxietynotclarity
• Pooruseoftime
• “Keepsmeupatnight”
• Aneutralexperienceatbest
#ClioWeb
OurGoalTakeaccountingandfinancesfromaplaceofanxietytoaplaceofclarity
GoodNews!Itdoesn’thavetobethisway.Thetoolandinfrastructureareinplacetoautomateandsimplifyaccounting.
#ClioWeb
Howtotakeaccountingfromanxietytoclarity
1. Makeitapriority
2. Usetechnologytoincreaseefficiency
3. Makeitateameffort
STEP1:GETTINGORGANIZEDANDSYSTEMATIZED
#ClioWeb
Biggestsourcesofanxiety• TrustAccounting• TaxSeason• Notunderstandingviabilityofbusiness• Invoices/trackinginvoices• Wastingtime
#ClioWeb
Identifythesourceoftheanxiety
• Allfinancialproblemscomefromnevergettingintoaworkingsystem
#ClioWeb
Aworkingsystemprovides:
● Stress-freetax-time
● Confidenceintrustaccounting
● Ascoreboardforyourbusiness
● Getinvoicespaidfaster
● Saveatonoftime
#ClioWeb
Howdoyougetthere?
• Technologythatworks
• Makeitateameffort
• Makeitapriority
#ClioWeb
TechnologyThatWorks
• PracticeManagementsystemyouarecomfortablewith• Trackclients
• Createinvoices
• Ismobileandeasytouse
#ClioWeb
Track Trust Accounts
#ClioWeb
Transactions
#ClioWeb
Trust Ledgers
#ClioWeb
Statement of Accounts
#ClioWeb
TechnologythatWorks
Alotoflawyershaveapracticemanagementsystemtheyrelyonandunderstand.
Ex:Clio
Butnotmanyhaveanythingsimilarfortheiraccounting
#ClioWeb
AccountingTechnology
• LawPay orClioPaymentstoacceptpayments
• Cloudaccountingtotracktransactions
• Shouldbeabletodo100%ofyouraccountingwithoutdataentry
• Example:Clio>LawPay >Xero >GustoforPayroll+LiveBankFeeds
#ClioWeb
Technologycanaddtotheanxiety
Allthistalkabouttechnologycanbeintimidatingandoverwhelming.
Thisoverwhelmpreventsaction
#ClioWeb
MakeitaTeamEffort
• Wouldyouadviseoneofyourclientstodoasmuchoftheirlegalworkontheirownbeforeaskingaprofessionalforhelp?
• Accountingissimilar– Youshouldhaveaprofessionaleitherdoingitforyouorprovidingyouwithguidelines
#ClioWeb
MakeitaTeamEffort
• Companieshaveaccountingdepartmentsforareason
• Whataresomewaysyoucangethelpandsurroundyourselfwithpeoplewhounderstandit?
• Bonus:Yourfinancialteamshouldunderstandthetechnologyforaworkingsystem=lowerstheanxiety
#ClioWeb
MakeitaPriorityToomanylawfirmstreatfinancialsasanecessaryevilanddon’tprioritizeit.
That’sacriticalmistakeandaddsatonofstress
Whenyoumakeitapriority,youcangetintoasystemthatworksandstopplayingcatch-up
#ClioWeb
MakeitaPriority
What is the ROI of reducing anxiety and increasing clarity?
#ClioWeb
Gettingintoaworkingsystem1. Technology
2. Team
3. Priority
Nothingelsewillmatterifthesedon’thappen
STEP2:THESIMPLIFIEDTAXSEASON
#ClioWeb
TaxSeasonforMostPeople1. Overwhelming
2. Frustrating
3. Notvaluable
4. Wasteoftime
5. Tryingtosaveliability
#ClioWeb
Reframetheobjective• Whatifhavingahealthybusinesswasthe
ultimategoal?• Taxseasonisanecessity,butshouldn’t
interferewithstrategicgoals• Cashismoreimportantthattaxsavings• Yourtimeismoreimportantthantaxsavings
#ClioWeb
Abettergameplan• Professionaladvisor
• Workingsystemthroughouttheyear
• Regularadvice
• Strategic,notreactive
Systems>Team>Priority
#ClioWeb
ProducingReportsonDemand• Ifyoucandothis,youhavewhatyouneed• Shouldbeabletoimmediatelyproduce
BalanceSheetandProfitandLoss• Allowsyoutoworkcollaboratively,andkeepa
fingeronthepulseofthebusiness
#ClioWeb
HowtoProduceReportsonDemand
1. ProperAccountingSystem2. Setupchartofaccounts3. Reconcileaccountsregularly(orfindsomeone
todoit)Systems>Team>Priority
PART3:TAKETHEANXIETYOUTOFTRUSTACCOUNTING
#ClioWeb
TrustAccounting• Makeitapriority
• UseTechnology
• Makeitateameffort
#ClioWeb
Lawyerstypicallyprioritizetrustaccounting
• It’sapriority,butit’sasourceofanxietybecauseyoudon’tknowforsure!
• Youwanttoknowit’sright
#ClioWeb
Theessentials• Keepclientfundsseparatefromyourfunds• Moneyintrustisnotyetearned• Transfermoneyasit’searnedanddocument
movement• Trackclientstatementsandproducereports
onwhat’sbeenearnedandthecurrentbalance
#ClioWeb
Youprioritizeit,youunderstanditsowheredoesitgowrong?
1. Terriblesystemfortracking
2. Depositinoperating
3. RecordinCliobutdon’ttransfer
4. Maketransferbutdon’trecord
5. Markthedepositasincome
#ClioWeb
ExampleofWorkingSystemforTrustAccounting
• Clioaspracticemanagement
• Xeroasaccountingsoftware
• Teammemberwhounderstandsbothandiscomparingtobank
Priority>Technology>Team
#ClioWeb
1.ReceiveRetainerPayment• Depositintotrustaccount• AdddepositinClio(selecttrustaccount)• Whenfundshittrustaccount,Xeroseesit
happenatthebank• Enteraspre-paymentinXero,soit’snot
income,butaliabilityaccount(oweduntilit’searned)
#ClioWeb
Recording Trust Deposits1. Account: The ledger account to apply the funds to;2. Amount: Enter the amount received. (If needing to
return unused funds to the client enter the amount with a negative symbol ie: -500)
3. Date: When you received the funds4. Source/Recipient: (optional) Who you received
the funds from (source) or who are you giving them to (recipient).
5. Type*: (optional) How the funds were received or how you are sending the funds (ie: check, credit card, cash, money order, Paypal, etc.).
6. Currency: (optional) When receiving funds other than your current default currency (ie: euros, pesos, pounds, etc).
7. Exchange rate: (optional) Goes with Currency, enter the exchange rate
8. Description*: (optional) The reason you received the funds. You can be as brief or detailed as you like.
9. Check or Reference: (optional) Helpful to track when consolidating with your bank statements
#ClioWeb
2.BillingYourTimeGenerateBillinClioforyourworkandnowthebillis“AwaitingPayment”Click“ReceivePayment”andseeaprompttorecordtransferoffunds.ChooseTrustfortheSourceandOperatingfortheDestinationandclick“ReceivePayment.”NOTE:ThismarksthebillpaidinClio,butthefundshaven’tactuallymoved.
#ClioWeb
Receiving Payment1. Choose the proper bills from the dropdown (if
the client has more than one).2. Choose the proper Source Account (where the
funds are coming from). If the bill has multiple Matters, then you will only be able to select funds in an account (i.e. Trust) that are at the client level and not linked to a specific Matter.
3. Choose an operating account for the destination of the payment funds.
4. The amount of the bill will populate into the "Payment" field. If the client has less funds in their Source account you will need to adjust the amount of the payment accordingly.
OR5. If the bill contains charges for multiple Matters,
you can click the "Expand" link to allocate payments to specific Matters on the bill.
#ClioWeb
Receiving Payment
#ClioWeb
2.BillingYourTime
Afterrecordingthetransfer,makesureyoumakethetransferatthebank.
Onceyou’vecreatedthebillinClioitwillsynctoXeroandshowit’sawaitingpayment.
#ClioWeb
3.ReconcilingtheTransferReconcilingfundsprovidesathirdcheck.
OpenyouroriginalPre-PaymentinvoiceinXeroClick“Creditthisinvoice”toallocatecreditfortheinvoice.Thiswillreducetheamountinyourpre-paymentanddisplaythetransferfromtrusttooperating
#ClioWeb
ThreeLevelsofTrustAccounting1. ReviewTrustAccountLedger
2. ComparetoBankAccountTotals
3. ComparetoCurrentAccountsinXero
Allthreeshouldmatch.Ifnot,atransferwasmissedorasomethingwasn’tmarked.
Ifit’sonlyyourpracticemanagementandbank,youcan’tfindwhatwasmissed.
PART4:GETTINGYOURTIMEBACK
#ClioWeb
GettingintoaSystemProvides
1. Peaceofmind
2. Simpletaxseason
3. Greaterbusinessinsight
#ClioWeb
OneLastCriticalBenefit
Gettingbacksometime!
#ClioWeb
Timeisyourmostvaluableresource
Lawyersinbigfirmsspend80-90%oftimeonbillablework
Inasoloorsmallfirmthatgoesdowntoabout40-45%
#ClioWeb
Time
Inasmalllawfirm,youhavetobeabsolutelyrelentlessinhowyouuseyourtime.
Youalreadydon’thaveenough
#ClioWeb
YouarePartofaRevolutionBy2020,40%oftheworkforcewillbeself-employed
Tools,systemsandinfrastructurearebeingcreatedtosupportthisneweconomy
Don’tmaketheshiftandbringoveroldparadigms
#ClioWeb
Accountingisamajorwasteoftime
1. Taxes
2. Trustaccountingworries
3. Dataentry
4. Reconciliations
5. Papermovingfromplacetoplace
#ClioWeb
Theultimatevictory
Youhaveconfidenceinyourfinancialsandareabletospendyourtimewhereyouaremostvaluable.
Doingwhatyouloveandaregreatat,anddoingwhatbringsinbusinessandrevenue.
#ClioWeb
Addingupthetollofapooraccountingsystem
1. Wastestimeandtakesyouawayfrommeaningfulactivity
2. Addstoanxietyandstress
3. Putsyouatriskwithtrustaccounting
4. Providesnoinsightintothehealthofyourbusiness
#ClioWeb
ThePerfectAccountingSystem
1. Peaceofmind
2. Simpletaxseason
3. Greaterbusinessinsight
4. Investyourtimeinmeaningfulactivity
5. Haveprofessionalsyoucandependon
#ClioWeb
HowtoMoveForward1. Makethisapriority
- Financialsareapriority-Yourtimeisapriority- Reducingyourstressisapriority
2. Findateamyoucantrust- Understandslawfirms,accountingandtechnology
3. Gettherighttools- Streamlineyourfinancialsandmakeiteasy
#ClioWeb
QUESTIONS
