From time-to-time someone will email me asking if I am aware of any 'problems or issues' with an specific App, or if i would give my 'recommendation or opinion' about an App. In some cases I haven't reviewed the App, or might not have even seen the App. In other cases I feel like I need to at least give it a cursory 'once over' before I give the individual my comments. Sometimes I decide to turn such an overview into one of my 'App Aware' features, and this is one such case.
Years ago there were a very limited number of 'Legal' software packages and most of them were high-dollar. Now there were some cheaper timekeeping software programs that a lot of attorneys used, and some of them even worked with QuickBooks (Desktop) at the time, but most of them were clunky when it came to the critical aspects of accurately exchanging accounting information related to Client Trust funds. Then IOLTA (Interest on Lawyers' Trust Accounts) provisions came along, and the complexities of 'trust fund' accounting really became cumbersome. Not long thereafter, much of accounting software headed 'into the cloud' and the big focus of Intuit went from QuickBooks Desktop to QuickBooks Online. While very large law firms may have been using much bigger accounting systems, the vast majority of small firms were on QuickBooks, and they likely still are, but now they use QBO.
So, when it comes to accounting for a lot of small to mid-size law firms, the issue is how those firms deal with their Client Trust/IOLTA issues in relationship to their QuickBooks Online. You see, attorneys, and corporate law firms, must all follow the rules established within the state in which they practice law. This is especially true when it comes to the importance of trust accounting and IOLTA requirements, as well as other requirements imposed by the state bar association and/or state judiciary, as to how to do their accounting correctly. And because the requirements can vary from state-to-state, but many firms, even small firms, may practice across state lines, they may have multi-state jurisdictional issues related to trust and IOLTA accounting compliance.
Regardless of the state, there is one thing I do know... when it comes to client trust and IOLTA accounts, the quickest way for any lawyer to get themselves disbarred, and perhaps even thrown in jail, is to improperly handle the funds in these accounts.
That’s why, when you look at ‘software that is purportedly designed for law firms’ and is intended to work with QuickBooks, you need to make certain that it handles Client Trust funds and IOLTA accounting requirements properly. One such software is LeanLaw, a cloud-based App that integrates with QuickBooks Online. LeanLaw modernizes legal billing workflow with flexible timekeeping connected to simplified invoicing. Law personnel will enter time once and LeanLaw’s automation will do the rest, without the need for manual workarounds commonly seen with other law and accounting software integrations.
LeanLaw has a best-of-kind two-way, real-time sync with QuickBooks Online which means that both QuickBooks and the financial registers within LeanLaw are always up to date and perfectly 'in balance'. A lawyer's accounting personnel will have access to the most accurate information from the information posted in LeanLaw via QuickBooks Online, and the legal personnel will have precise information within LeanLaw based upon the current information within QuickBooks. Each clients information as a whole, and on a matter-by-matter basis, will be accurate 'to the penny'.
But the focus of this App Aware isn’t about all the features and functions of LeanLaw, so we aren't going to look at how to set-up a client, or how to record time, or how to configure a 'matter', or create tasks. This App Aware is geared toward the Client Trust accounting and IOLTA compliance feature of LeanLaw.
Now, managing Client Trust accounting and IOLTA compliance is actually handled in QuickBooks, although LeanLaw facilitates this through a series of tools and ledgers. So, when LeanLaw initially integrates with QuickBooks, it maps three accounts, the Operating Bank account, the Trust Bank account, and the Trust Liability account. When a deposit is made using LeanLaw’s Trust management tools, LeanLaw is just sending accounting instructions to QuickBooks to debit and credit the appropriate QuickBooks accounts.
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By the way, to facilitate trust payments, LeanLaw has a partnership with Gravity Legal that allows the firm to request IOLTA (trust) funds electronically and have them automatically deposited into the Trust account which of course is accounted for in QuickBooks Online.
The configuration of LeanLaw doesn’t actually manage your Client Trust in LeanLaw and reconcile in QuickBooks. LeanLaw simply sends instructions to QuickBooks based on the activity you record. The result ensures that your QuickBooks Balance Sheet is always correct since both the liabilities and the assets reside in QuickBooks.
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Making payments from Client Trust is a simple process from the LeanLaw Trust Account window Billing tab. Once you select the appropriate Client/Matter, you can easily identify any current invoices due, along with the option to record payments. Information related to the payment will be recorded along with details you wish to capture in the memo. Once paid, the Trust Balance will be updated to reflect the changes to the account.
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When it comes to compliance, there are four primary areas where LeanLaw focuses based on the regulations set by the American Bar Association and the various State Bar Associations. These areas include (1) existence of a specific trust ledger for each Client and Matter that tracks the flow of trust funds into and out of the client’s trust account; (2) an integration with QuickBooks Online that adheres to the security requirements which restrict the flow/exchange of data between the two applications to authorized transactions by authorized users; (3) monthly reconciliation facilitated by a three-way reconciliation using the integration afforded by QuickBooks within LeanLaw’s trust management structure; and (4) historical trust activity reporting and invoice specific statements produced within LeanLaw and QuickBooks Online that can coincide.
As a result of these compliance areas, LeanLaw certainly appears to meet the ‘essential requirement’ of properly handling Client Trust funds and IOLTA accounting that I spoke about at the start of this article. While it may not be the only 'legal' App out there to do so, you should also be aware that LeanLaw and Intuit entered into an agreement last year (2020) to collaborate and jointly market LeanLaw and QuickBooks Online-Advanced to Mid-sized Law Firms.
If you want more information, head over to the LeanLaw website, or schedule a Demo, or you can check out the LeanLaw landing page at the Intuit QuickBooks Online App Store.