Often the go-to software for general accounting, QuickBooks offers tools that fulfill the needs of many small and medium-sized businesses. However, due to the compliance requirements unique the legal industry, it is important to recognize the program’s limitations – particularly when it comes to billing, trust accounting, and proper allocation – and consider utilizing a legal-specific solution, instead. Here, we’re discussing the top seven reasons to run a QuickBooks-free law firm to ensure that your practice’s accounting needs are fully met.
Reason #1: Lack of Flexibility in Setting Up Timekeeper Rates
Law firms often charge different rates based on a variety of factors, and although your practice may set a specific rate for each of your individual services, you cannot assign clients different rates for the same service using QuickBooks.
Reason #2: The Need to Include Unique Information on Client Invoices
The customization ability of invoices in QuickBooks is limited. While the software allows you to produce a summary showing balance forward, new charges, and the amount due, it is not possible to include who completed the work, to sort, or to easily include a timekeeper summary table.
Reason #3: Managing Evergreen Retainers
Often, law firms have an “evergreen retainer” policy in place — as a trust balance is reduced below a predetermined amount, a notice is sent to the client with a request for replenishment of funds. There is no way to do this automatically in QuickBooks, which means the firm must constantly run reports and manually correspond with their client to request funds.
Reason #4: Avoiding Overdrafts on Client Trust Accounts
Even if you properly include the client matter on every transaction, there is no way to prevent the overdraw of funds from a client’s account using QuickBooks. There are no safeguards in place to protect against this.
Reason #5: Trust-Specific Reports are Required
Because trust accounts are regulated separately from operating accounts, you must perform what is known as a “three-way reconciliation” regularly. While QuickBooks can produce a report that shows the activity and balance by matter, it does not have the ability to run a single summary report that compares the book balance, bank balance, and the sum of individual card balances (i.e. all accounting for funds in transit).
Reason #6: Allocating Revenue Should be a Streamlined Process
A general accounting program makes “generic allocations” when dealing with revenue, costs, and fee distributions, which does not conform to legal accounting rules.
Reason #7: Calculating Fee Distribution Should be Streamlined and Accurate
QuickBooks lacks the ability to generate automated Collections Reports, forcing firms to manually calculate fee distribution. This process is not only time-consuming, but it is also prone to error.
Considering this list of can’t-dos, maintaining an efficient and compliant accounting process may seem like a daunting task. However, a legal-specific solution checks all the boxes, as it is built to meet the particular needs of law firms. Here’s what to look for in a tool:
- Ability to input flexible rates
- Customizable invoices using client-specific templates and draft feature
- Automated evergreen retainer processes
- Safeguards against overdraft
- Summary report capability
- Streamlined revenue allocation process
- Automated generation of Collection Reports
While QuickBooks may be sufficient for some businesses, the truth of the matter is, law firms require more when it comes to accounting needs. Have questions about what may be right for your practice? Contact us for a free consultation or Try CosmoLex Today.
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