Quickbook Case

For solo and small firm lawyers, handling finances can be a daunting task. Think about it. You just started your own firm. You have few, if any, clients, and you are using your savings and credit cards to finance the business. Sure, you may, like me, have an accountant who handles your taxes, but because accountants and other financial professionals charge for their time, just as we do, you tend to do anything you can to avoid incurring that expense until tax season rolls around. You could hire a bookkeeper to handle the financial aspects of your firm, but a secretary, paralegal, or even another attorney is more likely to be the first person hired when a solo or small firm attorney decides to take on employees. Few law schools offer any classes
on practice management, and virtually none of these focus on the financial aspects of running a firm. Consequently, many lawyers handle their finances using whatever they may have learned in a college accounting class or by reading magazines like this one. In other words, they handle their financial issues by the seat of their pants. Fortunately, many often use QuickBooks, which, according to many reports, has captured nearly 90 percent of the small business financial accounting software market. Opting for QuickBooks. What is QuickBooks? Intuit QuickBooks (quickbooks.com) is a double-entry accounting system in which all transactions are recorded as either debits or credits and organized into accounts. Every credit transaction must have a corresponding debit transaction, and every debit must have a corresponding credit. This way, the firm's books remain in balance. So how can QuickBooks help solo and small firm lawyers who want to have a better sense of how their firms are performing financially?
First, QuickBooks organizes your finances by putting all the information about your firm's income, expenses, and even your receivables in one place. Second, if you have employees, the QuickBooks payroll service is easy to use, inexpensive, and allows you to handle payroll far more efficiently and accurately than the traditional manual methods. Third, QuickBooks compiles the information your accountant needs to prepare your tax returns, so the process isn't a chore--and it costs less than providing only paper records. In our office, for example, all I have to do is create and provide to my accountant an "accountant's copy" of my firm's Quick-Books file, along with a few reports, and he has all the information he needs to prepare my taxes. As an added benefit, if you scan all your receipts, checks, and bills, your accountant's job is even easier because you can provide the accountant with that data on a CD or flash drive. Finally, the biggest benefit for law firms that don't regularly rely on an accountant may be QuickBooks' ability to generate reports allowing you to easily analyze your firm's financial status. What reports can do for
you. The reports are available from the Reports drop-down menu on the main toolbar in the program.
Clicking on that menu displays reports on a wide range of subjects. Lawyers will frequently use the Company Snapshot as well as reports available on the Company & Financial, Customers & Receivables, and Vendors & Payables submenus. Although there may be times when you need to create a custom report, most of the standard reports can be easily tweaked from the specific report screens. Profit &
Loss. Let's look at a few reports that are particularly helpful. First, there are the Profit & Loss (P&L) reports, including the Standard and Prev Year Comparison reports. Also called an "income statement," a P&L shows (1) the firm's revenues and expenses and (2) whether the firm made a profit or operated at a loss during a specific time period. All standard P&L reports display subtotals for each income or expense account in QuickBooks' Chart of Accounts. Consequently, a P&L is a critical report that a firm can use when making business decisions. Another helpful related report is the Profit & Loss Prev Year Comparison, which allows a firm to compare its current performance with its performance during a previous year. The last line shows the firm's net income or net loss for the current time period and for the same time period during the prior year. This helps you analyze how well the firm is doing and can be a great resource when planning for the future. Company Snapshot. The Company