It’s the Messy File Time of Year!

In the past few weeks, we have been doing some repeats of popular videos from my archives. For my first post of 2020, I was going to dig into a law firm client with messy books. As we navigate through the settings, you may notice that I have the feature “Bookkeeping Review” screen in my QuickBooks file. It’s pretty exciting to have this new feature that was rolled out and announced to us at QuickBooks connect to San Jose. I love it! It automates some of the things that, in the past, were manual processes and put it all on one screen. I’m able to see the common problem areas on a client’s file. 

Law Firm Client Hires You to Fix the Mess…

Here is the scenario, on this particular situation. I’ve already provided a scope of work to my “Law Firm” client, and a bookkeeping review. They have hired me to do the job. Here are the steps I would choose to process this file:

1. 1Review and clean up the chart of accounts
2. 2Tie books to tax return
3. 3Make adjustments as necessary so that you can reconcile
4. 4Reclassify transactions
5. 5Clean up trust accounting, so the 3-way reconciliation is perfect

The trick is to remove and redo any transactions that were not appropriately processed in LeanLaw and make sure you re-enter them, so the trust accounting stays on point. Start to drill down on anywhere that the balances don’t match up. Remember, with law firm accounting, you need the three-way reconciliation. The three-way reconciliation is the bank statement balance must match the trust bank balance and the total of the balances in the liability trust accounts. That’s your three ways.

Reviewing the balance sheet and looking at all of the liability and asset accounts and other accounts that are essential in keeping the clients’ books accurate. Be sure to look at any prepaid accounts.  If cash basis, run the reports that way and clean up the unapplied cash payment income account and unapplied cash bill payment expense.One often overlooked area is a reconciliation of the advanced client costs account. It’s a place you might find some items that need to be moved down and expensed. Perhaps the law firm paid for some expenses that will never be invoiced back to their client. These advanced costs must be moved out of the asset account with a simple reconciliation.

I also take a look at the payroll liability account. Depending on the client, if they’re using a payroll service, it’s usually okay. If they use a service other than QuickBooks payroll, I will see payroll transactions mapped to the wrong accounts. If they’re using an outside service like Gusto or Paychex or ADP, proper mapping is vital. The opening balance equity account is another place I see improper entries. I also dive into the equity accounts that the client has set up on their books. You need to know how the businesses set up. What type of entity is it? It would be best if you made sure that the equity accounts are named for the entity type. I see many a messy file with incorrect or improperly named equity accounts.

The Solution:

You can watch the video below and see the steps that I take to navigate through a messy file in the initial stage. Next week we’re going to talk about budgets, and then we’ll come back to working on cleaning up the messy file. I hope this video and accompanying post is helpful. Of course, if your books are messy and you need our help, please feel free to reach out. Our phone number is

239-349-2004.

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