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hey in today's video i'm going to talk about an intro to bookkeeping for attorneys so i'm going to talk about trust accounts and client advances as well as commissions for attorney salaries i'm morgan from finepoints.biz and my goal is to help you get organized you might know that this month i'm doing a series on different types of clients for bookkeepers so i had an overarching video of the 30 best clients that you can have starting out as a bookkeeper the thumbnail looks like this and then i'm also talking about different niches that you can do that are quite a bit more specialized and you can charge a higher rate for those if you know those really well and you just get really into that industry so i did win on non-profits and then let me know in the comments if there's any other subjects or specialties that you would like to see as a bookkeeper all right so for lawyers the biggest thing that bookkeepers will think of with lawyers is trust accounts and what this is is it's like a retainer that a lawyer will require money up front from a client before they do the work so maybe you you have hired an attorney and it's gonna cost five thousand dollars so they will want three thousand dollars before they start working and that's just kind of like an insurance to the lawyer so that they are not doing all this work without getting paid so that's pretty standard in this industry as well as a couple other industries so from a bookkeeping perspective this becomes kind of interesting because so from an income standpoint it looks like that three thousand dollars is in the trust account is in the bank accounts for the attorneys but that attorney has not actually earned that money yet so it doesn't belong to the business it doesn't belong to the law firm until the lawyer actually does the work that you know correlates with that money the money still belongs to the client so the system that is devised is that there is like a holding account called a trust account and there are specific rules from the irs about how what like what you can do with a trust account and the records you have to keep you can't just have a lawyer that willy nilly like mixes money with their regular money or anything it has to be very specialized and very separate so i could spend days going into the details of this but this is kind of meant to be an overview so this is a niche that i personally am working towards becoming really specialized in um right now i'm in a networking group run by linda ardasani i'll leave the information for that group down below if you are interested in that let her know that i sent you but basically for trust accounts the way that i'm learning it is um from linda artasani is that you should put your trust account as a liability account in your client's quickbooks file so it's a separate like bank account but it is within the same quickbooks file as the rest of their transactions the rest of their income and all their money and then she teaches that you go into the chart of accounts and you make a new account for each client and then each matter which is like the case like the law case that they would be earning money for so you'll find in bookkeeping there are often different schools of thought you know across book human circles some people want to do it one way some people want to do it another way so another school of thought would be to keep a totally separate quickbooks file for the trust account and then some people i think use um customers for the you know each client and the matter versus using accounts so again this is just an overview so make sure if you want to specialize in this you do some research and just so you're aware that there are different schools of thought for how to manage trust accounts and with both of those versions the attorneys do have to be very regulated and careful with how they deal with their money and then at the appropriate times they need to transfer money into their income account once they earn that money and then they need to make sure they have the correct documentation and that all the accounts will reconcile at the end of the month so this is something that lawyers can get in trouble for if they don't manage these funds correctly um there's usually a bar association like a state bar that can audit that and monitor it because they just want to make sure that it's very clear who owns that money is it the lawyer's client who's hiring them or has the lawyer earned that money already all right and the second thing you'll deal with with law firms is client advances and we call these in the firm that i work for client cost advance so i might use those terms interchangeably but basically this kind of is along the similar idea of the trust account but it's kind of like almost the opposite it's like you're giving your client a very short loan to pay for something so say the lawyer is working on a case and there comes up a couple expenses so maybe they need to do a filing fee to file something and in the court maybe they need to do a records request to pull some medical records or pull some like footage from something or maybe they need to hire a private investigator so these are all costs that might come up as an attorney is working on the case but instead of going to your client right then and being okay okay i need 50 bucks for this okay i need 100 for this the law firm just pays for those expenses and then they bill the client later and again it's a little tricky but from the irs perspective this isn't actually an expense incurred by the attorney's business it's an expense that the attorney's client should have to pay so it's like you're giving them a little loan a little iou that they are going to pay back later so as a booker you might imagine this is going to be a lot to track so you are going to need to partner with your law firm your client and um figure out how they track these expenses so you need to figure out you know what is being spent and then how the client is paying that back so as a bookkeeper you might be the one actually sending out invoices to the client and there may be a tracking system it might be tracked in the attorney's like case management system there's a lot of different case management systems that attorneys might use the biggest one that i know of is cli it's called clio there's also like practice panther and time matters and a few others that is the system that the attorney is using to keep track of all their cases and how much money everyone owes them this is a slight tangent but it is most common for attorneys not to do their billing through quickbooks i don't think just because it doesn't have quite the capabilities so in most of the instances that i have seen a law firm uses a different client management system i think that's what you call it but like clio so they're tracking all of their clients and all their data and maybe they have write-ups for each court case or things like that in a different system other than quickbooks and then quickbooks is used just for their bookkeeping their accounting to track their income and expenses and then usually those two will link together so you can feed back and forth between the two systems so me personally i've even thought of like micro niching in like a certain software so like quickbooks online and clio for example would be like a very very specialized like i'm a bookkeeper a bookkeeper for attorneys and then i specialize in these two softwares and again that just makes me marketable to a very specific client base and i know those really well i can speak to them really well i don't have to learn a new program every time i get a new attorney client so that's just something to think about as a bookkeeper all right so we talked about trust accounts client advances and then the other thing i just want to touch on briefly is attorneys commission so i have i've kind of gathered that it's pretty common that um an attorney working for a firm might get like a percentage of the private work they do and of course it depends on the law firm and how they're structured or what kind of law they do but i just want to touch on this as well because this is something i do currently so how my attorney client is set up is they the all the attorneys in the firm get a base salary and then they get a percentage of any work that they do on top of the base salary so like they have a base amount of stuff they're supposed to do and then they can get extra so what i do as a bookkeeper is all of the money comes into my quickbooks style it feeds in and then i categorize it all i what i tend to do is from the bank feeds i just put it in one lump area that's like income for all so it's all sitting there waiting for me usually there's like maybe 20 transactions per month of those deposits that they make so a couple per week and then they have a different tracking system that shows me how much each attorney made so this deposit was a thousand dollars and then they can check in their tracking system and be like okay this is the attorney's name that made that and i have separate accounts in the chart of accounts for each attorney's income and then sometimes they are split because of course you can make a deposit with multiple checks multiple sources of income so maybe you want to bring like three checks to the bank at once so then you can split those out in quickbooks just you put them on each line so i have like fred and one george and the next and sally in the next one and then you can just put the amounts that each of those people made and then it will total the total deposit all right so then in my quickbooks file i have these accounts with like the five or ten attorneys listed and eat how much each one made and then again they just get a percentage of that because they work for this overarching law firm so some of it goes to like you know staff expenses or rent or all these things so say they get like 50 the fastest way that i have found at this point let me know if you have a different suggestion in the comments is i just pull that report from quickbooks and then i have an excel spreadsheet that kind of totals up each person's amount and then divides it in half basically and then sometimes there's a few other like funky things that i have to tweak depending on the person or if there was expenses in the mix but basically that's kind of the general idea so then i know you know this person thousand dollars at the bank they earned 500 and then i'm able to add that to their commission in gusto which is our payroll system so i'll leave gus a link below i think that i have a code where you can get a discount and i get a discount also if you sign up a certain amount of clients or something but anyways gusto is one of the most popular payroll systems i would say and then within gusto there's just a little you know it has their main salary information and then it has a little box that you can just like type in commission and adds it to it so it's really easy in that program all right i feel that was a lot of information in a short time but let me know in the comments what questions you have and what other things you're interested in learning about bookkeeping thank you so much take care bye