Optimizing Legal Bookkeeping: Choosing Between Customer and Sub-Liability Methods for Clio Users
Jun 12, 2023A debate often arises among legal bookkeepers regarding using sub-liability accounts for clients who utilize Clio software. As part of the Accountants Law Lab group, we aim to shed light on this topic and provide recommendations to bookkeepers learning legal bookkeeping. This article explores the benefits and considerations of both the customer and sub-liability methods, taking into account the software used and the number of matters handled by the client.
The Importance of Sub-Liability Accounts
Our recommendation leans towards implementing sub-liability accounts, although their suitability depends on the client's software and the volume of matters involved. For instance, adopting the sub-liability method is advised if an estate planning lawyer manages over 200 matters and uses QuickBooks Online because they tend to have lengthy matters that go on for years. In the accompanying video, we demonstrate how this approach functions, but let's delve into the multiple reasons supporting its implementation:
- Ledger Accuracy: By creating sub-liability accounts, you can accurately represent and report them on the balance sheet, ensuring financial transparency and compliance.
- Effective Tracking: Maintaining a comprehensive and well-organized client ledger is crucial, and sub-liability accounts facilitate efficient tracking and monitoring of various matters.
- Managing Multiple Matters: When dealing with numerous matters or a significant volume of cases, utilizing sub-liability accounts simplifies their tracking and activation upon matter closure.
Alternative Approach with Xero
However, if your client employs Xero as their accounting software and handles a substantial number of matters, the software's inner workings make it unnecessary to use the sub-liability method. Xero provides a sub-liability view much like the QuickBooks Online sub-liability method while employing the customer method instead. So this will save you time and provide the necessary view for compliance.
Considerations for Clio Users
When using Clio, particularly as a one-way sync, it is crucial to exercise diligence due to potential disruptions caused by client-initiated transaction changes. These modifications may result in duplicate transactions, often found in the undeposited funds account. Vigilance and meticulousness in monitoring such occurrences are vital aspects of your workflow when using Clio. Yes, this is a weekly or monthly task we implement with clients using Clio. If you don't track this more frequently, it will save you the painstaking task of locating many duplicates.
Customer Method and Solo Firms
Employing the customer method with Clio is a viable option for solo firms or cases with a manageable number of matters. The customer method may suffice in these scenarios and can streamline bookkeeping processes. I can honestly say that I have tried it and often revert right back to the sub-liability method as it saves me so much time tracking and understanding where the trust went awry. Seeing balances displayed on that balance sheet and aligning it with the client trust ledger report will quickly reveal any differences in the trust balances.
Professional Opinion and Conclusion
While differing opinions exist within legal bookkeeping, our experience working with attorneys and utilizing Clio software has shown that tracking client matters through sub-liability accounts proves more efficient. Notably, the re-class tool simplifies the creation of sub-liability accounts without significant time investment. It is important to note that implementing this method may require using QuickBooks Online Advanced rather than QuickBooks Plus. However, the additional features offered by the advanced product, particularly the workflow feature, make it worthwhile both in terms of bookkeeping accuracy and efficiency.
In summary, the choice between the customer and sub-liability methods for Clio users in legal bookkeeping depends on factors such as the software used, the number of matters handled, and the desired level of accuracy and organization. By considering these factors and following the recommended approach, bookkeepers can maintain a well-structured and error-free set of books for their legal clients.
I would love to hear your thoughts on this topic! What works for you, and how do you approach this lively debate? If you enjoyed this article and want to "debate" with us some more, join us at the Accountant's Law Lab. This is our mastermind group, where we have discussions and demonstrations on Clio. We would love to have you as a new member. And don't forget to join our Facebook group too! Accountants Law Lab Facebook
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