Who is Negative Nellie? It could be argued that many attorneys would know, especially while representing some rather over-the-top-disgruntled clientele. In addition to the attitude of that particular client, any who also has a negative balance on their trust account could be considered “negative” as well. LOL! 😉

According to Pedro Chopite, an English enthusiast and Quora contributor, Negative Nellie was derived in 1966 when, 

“President Johnson spoke of “Nervous Nellies” to refer to critics of his Vietnam policy, and the phrase caught on.  Nervous Nellie acquired the connotation of “naysayer” and gave rise to similar terms like Negative Nellie, Naysayer Nellie, Negative Ned, and Negative Nancy.”

Positivity can take some effort though….. Don’t you think?  

I’m not just talking about the thinking positive “mindset” part. Though I recommend that as a best practice.

Law Firm accounting requires that you pay close attention to the details in a trust account. IOLTA is one BIG reason for that, as I’ve explained in my prior post, IOLTA Interest on Lawyer Trust Accounts – Law Firm Accounting. Any client trust account with a negative balance must be investigated.  Remember, the trust retainer is a prepayment.  You cannot record a negative prepayment.  If the retainer has been exhausted, the client must be asked to replenish it. But it can NEVER be negative. A negative trust balance will require some investigation as to why the balance is showing incorrectly in LeanLaw or in QuickBooks.  Here are a couple of accounting errors that will cause this issue:

• Client bounces a check
• Payment is recorded but not deposited in the bank
• Disbursement on uncleared funds
• Multicurrency transactions

While you may be pretty good at figuring those exclusions, errors in your accounting can be time-consuming to correct and costly to sort out. Bookkeepers experienced in law firm accounting, specifically trust accounting, have a trained eye for examining the data to keep it nice and tidy and fix errors when things go sideways. 

Apart from dealing with errors efficiently, tracking negative balances on trust accounts can be extremely helpful to a law practice that’s seeking to grow. As I mentioned in the Work in Process – Law Firm Accounting article, being able to produce reports like WIP or  accounting of all unbilled tine can be of huge value. It’s reports like these that discern whether the attorney should be invoicing a client or perhaps changing the terms on an invoice.  Or better yet, collect on old outstanding invoices to improve cash flow. 

Your client may not be a Negative Nellie when it comes to attitude or mindset, but even if they are “negative” on the balance sheet you can feel good knowing that not all negatives are a bad thing! Visit me on Facebook in QB Community Live! It’s a public group, where you can find me and a lot of other genius accounting professionals too. QB Community Live! is fun and friendly. Use #trustnellie so I know it’s you, and please invite your bookkeeper to do the same!

If you are an attorney and know that your records are not compliant, it may be time to hire a professional.  We would love to work with you and keep the cash flow flowing and keep your records pristine!  Call us today at 239-349-2004.