MLBKS Ontario PCLaw Bookkeeping

PCLaw and Credit Card Purchases

2013-10-29T08:35:00.000-07:00

How you enter credit card purchases made on behalf of your firm, depends on some variables:

Is this a personal card or a business credit card, where most, if not all, purchases are business related?
Do you make a lot of business purchases each month, or only a few?
Will you pay the credit card company directly? Or, will you be reimbursed, and you will pay your personal credit card?

For a just a few purchases, you can write a general cheque for the total amount, account for the HST, and itemized the expenses and G/L accounts in the lower portion. Post any personal amounts to Draw. Make the cheque payable to yourself or the credit card company as is applicable.

If you make a lot of purchases each month, you can download a csv (comma separated values) (Excel) from most credit card websites. You can then calculate the total purchases for each expense category, then enter a general cheque as above. Save your worksheet with your bank records, as the purchases are itemized here, with only the category totals being used for the cheque. Do not forget to calculate for HST too.

If the majority of purchases are business related, it is usually easier to post personal items to the drawings account, and the pay the entire credit card bill with one firm cheque.

I like to add a credit card general bank account for those clients that are higher volume purchasers. I post the Excel sheet on the statement date. I then do a General Bank to Bank transfer on the payment date.

As always, I invite your comments and suggestions for future post topics. Next Posting – How To Account For Change Made From Petty Cash For PCLaw Receipts.

Clyde

PCLaw and Petty Cash Purchases

2013-08-09T10:23:00.000-07:00

How you enter Petty cash purchases made on behalf of your firm, depends on:

Do you have an actual petty cash fund or are these purchases paid out of your own pocket?
Do you want to be reimbursed or do you want to offset these purchases against your drawings or equity?

If you have a petty cash fund, you reconcile the fund by totalling up the receipts, which should equal the missing funds. You then replace the funds by writing a general cheque for the total amount, account for the HST, and itemized the expenses and G/L accounts in the lower portion. Post any personal amounts to Draw. Make the cheque payable to yourself or Cash. Cash the cheque at the bank, and return the funds to the petty cash box.

For out of pocket expenses, I prefer to let PCLaw do the adding work for me. Gather up all the receipts. In Options - Systems Setting, change the default bank to petty cash. In Options - Workstation Settings, remove the checkmark from “Close data entry windows on OK”. You can now quickly write a series of petty cash cheques to post the expenses and HST. When you have finished the pile of receipts, change the default bank and “Close data entry”settings above back to the way they were before you started.

To reimburse yourself for petty cash, to a General Bank to Bank Transfer for the total amount that petty cash account is overdrawn.

To invest the funds in the business, post a Firm Receipt to the petty cash account for the total amount that petty cash account is overdrawn, and credit drawings or equity.

As always, I invite your comments and suggestions for future post topics. Next Posting – PCLaw And Credit Card Purchases.

Clyde

Post-dated Cheques And Monthly Entries In PCLaw

2013-07-02T10:32:00.001-07:00

Did you know you can make post-dated entries in PCLaw?

There are actually a few ways to handle repetitive entries in PCLaw.

You can simply enter the individual entries, like a series of post-dated cheques given to your landlord. Simply do the cheque entry with the future date, print the cheque, and save the entry. You can do the same for pre-authorized withdrawals without printing the cheque. Replace the cheque number with Lease or Copier, Car, LSUC, etc. You can complete a years’ worth of entries in one short session,

You can also save the information by creating a Recurring Entry. These can be created from any cheque or receipt window, including accounts payable and accounts receivable. Complete the first entry, but instead of clicking OK, click Create, and name your entry, and whether or not you wish to be reminded. OK to save the Recurring and OK to save the original entry.

For pre-authorized withdrawals, you can have PCLaw remind you to enter the payment when it is due each month (weekly, bi-weekly, semi-monthly, monthly, quarterly or semi-annually).

If the entry is the same amount but random, you can recall the entry with the Use button. For example, you may have a client that always pays $50, but never on the same day each month. The amount and matter number are already saved for you – just open Receive Payment – click Use – change the date – OK.

These reminders not only help you complete the entries, but can also act as a tickler system:

to follow up with a client for payment
to retrieve and deposit a post-dated cheque you already have in your possession
to insure sufficient funds are on deposit for your own post-dated or pre-authorized payments

As always, I invite your comments and suggestions for future post topics. Next Posting – PCLaw and Petty Cash Purchases.

Clyde

PCLaw And LSUC Spot Audits – Prepare Ahead

2013-05-23T10:11:00.005-07:00

Last time I gave an overview of what to expect on during the LSUC Spot Audit. What can you do to prepare ahead of time?

In addition to the required banking photocopies (typically the most recent month and the prior December 31st), have the rest of the audit period (1year) ready for photocopying. For each month, have your bank statement, together with your trust bank reconciliation, client trust listing, and your trust bank journal. Keeping these copies together is always good practice, but whichever month the auditor selects at random, you are ready to begin photocopying.

Review each bank statement during the audit period. Make sure you have completed the applicable Form 9 a, b, or c, if you do electronic banking for trust transactions. Add a copy of each to the pile of monthly banking records you have just prepared.

You will need to provide a Client Trust Listing as at the audit date, with detailed explanations for all inactive trust ledger account balances. If you have inactive matters, prepare your answers ahead of time.

Have photocopies prepared of your most recent Levy filing and your most recent 4 months of Teranet reports.

Prior to the audit, run the Client Summary, selecting for general retainers and negative unbilled disbursements. If matters are listed on the reports, transfer the funds to trust. Keep a copy of the report and your deposit slip to show the auditor.

Private Mortgage matters – for the files the auditor has selected, have copies of:
Form 9D
Form 9E
Registered Mortgage and any Assignments
Abstract/Search confirming ownership and mortgage priority (if the title search is a lengthy registry search, please contact the auditor for direction)
Client ledger
Any client ledger(s) where funds have been transferred to or from the mortgage ledger
Registered Discharge (if applicable)

Power of Attorney and Estate matters – for the files selected by the auditor, have copies of:

The Will and any Codicils
Certificate of Appointment of Estate Trustee
List of Original Assets
Client Trust Ledger or Equivalent Record Keeping
Support for Current Value of Assets (investment statements etc.)
Billings for Executor Compensation and/or Legal Fees
Calculation for Executor Compensation Claimed and/or paid

The all of these reports and photocopies will be need on audit day, so why not prepare them ahead of time. Spot audits are already stressful events. The more you do prior to audit day, the more you can do to relieve some of this pressure.

As always, I invite your comments and suggestions for future post topics. Next Posting – Post-dated Cheques And Monthly entries in PClaw.

Clyde

PCLaw And LSUC Spot Audits

2013-04-25T08:51:00.005-07:00

Prior to your LSUC Spot Audit, you will receive a letter outlining the period of the audit, typically from the audit date back 1 year - to the nearest month end. If you have them, you will be required to email a detailed list of Private Mortgages, and a detailed list of Power of Attorney and Estate matters. If you have a lot of these types of files, the auditor will advise you which files have been selected for auditing.

During the audit, you will be required to provide photocopies of bank statements, bank reconciliations, and Client Trust Listings – typically the most recent month and the prior December 31st. If you do electronic banking for any trust transactions, you will need to provide photocopies of the applicable Form 9 a, b, or c.

The auditor will usually have you run the Bank Journal report for a randomly selected month, and all of the matters with transactions appearing on this report will form the basis of the audit. All of the files and paperwork to support the transactions will be examined. If anything is unclear, you will need to be able to satisfy any of the auditor’s questions.

The Private Mortgage, Power of Attorney, and Estate files previously selected by the auditor will also be examined, even if they have no transactions in the randomly selected month. The auditor will likely ask for additional PCLaw reports related to these matters.

The auditor will also want you to run Client Summary reports, selecting for general retainers and negative unbilled disbursements. These represent client funds on deposit in your general account, which is not allowed. On audit day, these reports should show $0.00 balances.

As always, I invite your comments and suggestions for future post topics. Next Posting – PCLaw And LSUC Audits – Prepare Ahead.

Clyde

What to look for when hiring a PCLaw Bookkeeper

2013-04-11T12:11:00.000-07:00

Hiring a bookkeeper for your law firm is one of the most important decisions you will make in your practice. After all, this is your livelihood we are talking about. As previously discussed, poor bookkeeping can have dire consequences, up to and including disbarment.

Education vs. Experience

In my opinion, both are equally important. You are hiring a bookkeeper, not an accountant. The level of education should therefore be appropriate. Hiring a chartered accountant to do your regular bookkeeping is both overkill and extremely expensive. Nor would you want someone with their brand new accounting degree, but no real world experience. The key is to find the right balance between adequate education and practical experience. I strongly recommend hiring an accountant to do your taxes and provide basic oversight of your bookkeeper.

PCLaw

PCLaw handles all aspect of legal bookkeeping: general bank, trust bank, accounts receivable, accounts payable, expense recovery, invoices, and HST / Payroll taxes. It is a very complex program, and using the wrong methods when doing entries can create errors. Your bookkeeper should be familiar with how to fix problems created by other staff as they occur. Your bookkeeper should also be able to assist staff with ongoing training and
be available to answer questions as they arise from time to time.

Other Considerations

Hopefully your prospective bookkeeper possesses a strong aptitude for numbers, which drew him/her to a career that they find enjoyable and satisfying. Some hobbies to look for include any kind of logic puzzles: Challenger, Kakuro, Sudoku, Sticklers – but not crossword puzzles. Crosswords are good for building your vocabulary, but logic puzzles use the same part of your brain that will help figure out why your bank account will not reconcile. A good puzzle solver will will be much more efficient with your bookkeeping.

Is your prospective bookkeeper accessible: easy to talk to, available to answer questions, available to assist your staff? Doing the monthly reports/reconciliations if fine, but oftentimes you will want to answers or advise throughout the month.

As always, I invite your comments and suggestions for future post topics. Next Posting – PCLaw And LSUC Audits.

Clyde

Adjusting A Period HST Report In PCLaw

2013-03-14T07:02:00.000-07:00

Many bookkeepers for small law firms work part-time or on contract basis, and are not in the office every day. They do the bank reconciliations, and calculated the HST remittance, and payroll remittance all on one day. They then pass on the reports to the lawyer for payment.

The lawyer may wait till the end of the month when the HST when due, but many remit right away or by the 15th (same date as payroll).

The banks need to be reconciled by 25th. If the HST was remitted on the 15th, there is a gap of time from the HST payment and the prior month being closed. Examples of things that could affect the HST report are invoice write-offs and prior month expense invoices. A lot of law firms use The Conveyancer for their real estate closings, but may not enter their invoice into PCLaw until well after the closing date.

For example, I have a client that likes to pay his HST immediately after the 1st. His credit card statement is issued at the end of the month and arrives early in the following month, I usually do the entries during the 1st week of the month, but the HST has already been paid by this point in time. Posting the entries on the Statement Date in the prior month results in new HST input tax credits (ITC).

When I run the HST report for the next period, I will want to capture these ITC from the previous period. This is why it is important to run two HST reports:

one for the current reporting period (change both the start and end date)
one for all dates ending on the period ending date (change only the end date)

If you are submitting the report to someone else to remit the payment (eg my client remits online), you will want the current period report to display the amount owing, including the HST adjustments from the prior period. To do this, you make a G/L adjustment on the last day of the prior period and a reverse the entry on the 1st as follows:

First create a HST Adjustments G/L account (G/L 2401)

If your current report shows more HST is owing than the G/L balance, run the report for the prior period. It should show a refund balance.

to capture the refund, increase (credit) the HST owing (G/L 2400) by the refund amount for the prior period end date, and debit HST Adjustments (G/L 2401)
on the 1st of the month, decrease (debit) the HST owing by the same amount, and credit HST Adjustments
for your explanations, refer to the other date (eg HST adjustment – see July 1st, and HST adjustment – see June 30th)
remember to checkmark the box “Show journal entry on HST journal”

To check your work, refresh the prior period HST report, and the refund should disappear (balance $0.00). On your current report, the report balance and the G/L balance should now be the same amount.

Of course, if your current report shows less HST is owing than the G/L balance, run the report for the prior period. It should show a balance owing. Follow the above instructions but reverse the debits and credits.

As always, I invite your comments and suggestions for future post topics. Next Posting – What To Look For When Hiring a PCLaw Bookkeeper.

Clyde

PCLaw Errors – Why They Happen

2013-01-30T07:01:00.002-08:00

I have written many times about PCLaw errors, including the types of errors, how to locate them, and how to correct them. I have not really discussed how the errors occurred in the first place. This may give the wrong impression about PCLaw, which in my humble opinion is the best legal accounting program available.

On my December 18, 2011 posting, I provided a list of the 7 most common PCLaw errors:

User Errors

Simple posting error
Trust errors (multiple matters/trust accounts)
Accounts Receivable errors (method/multiple invoices/matters)

PCLaw Errors

Posting error (PCLaw generated)
Partial posting error
Read/write error
Hidden error

The 3 User Errors are simply a matter of proper training in how to use the software properly. If you follow PCLaw methods in the user manual, you should not have any errors. LexisNexis University also offers online teaching covering a wide variety of topics; some free and some that cost. In-person training is also available at a cost, providing hands-on experience in a classroom setting (Toronto & Vancouver). I offer virtual one-on-one training for new users, which will help you learn the basics for daily use, and I am always available to answer questions.

In my experience, the 4 PCLaw Errors listed above can occur for 1 of 3 reasons:

Electrical fluctuations
Network/server fluctuations
Bank reconciliation window

Why They Happen:

Electrical fluctuations - While our power grid appears stable, imperceptible variations in voltage and power surges do occur regularly. If one hits at the same time you click OK, one of the PCLaw errors above can occur.
Network/server fluctuations - Errors are virtually non-existent when PCLaw is running on one computer. While that may not be practical, it is important to realize that these errors are network errors, not PCLaw errors. Essentially, the same as the issue of power surges and voltage fluctuations, only just localized to your internal network.
Bank reconciliation window - The bank reconciliation window has an option “Auto save every ‘5’ minutes”. When you are doing your bank reconciliation, you may be adding entries as you progress, while leaving the reconciliation window open. If you click OK at the same time the Auto Save function runs, there is a high probability that an error will occur. If you are correcting an entry and Auto Save runs, you often get an error message “Unable to link to previous entry”. When you return to the reconciliation window, you will see 2 entries instead of 1.

As you can see, PCLaw is not actually causing most of the errors. And, with regards to the bank reconciliation errors, you can avoid them by simply closing the reconciliation window.

As always, I invite your comments and suggestions for future post topics. Next Posting – Adjusting A Period HST Report In PCLaw.

Clyde

LawPRO Issues A Warning

2013-01-14T08:04:00.001-08:00

LawPro issues warning after law firm lost six figures from trust account.

A common scam, but first time for an Ontario law practice.

http://www.lawtimesnews.com/201301079535/Headline-News/Law-firms-trust-account-hacked-large-six-figure-taken

Do you have a robust antivirus program installed?
Do you have additional antispyware protection?
Does your firm have policies and Windows settings to prevent staff from installing new programs / screensavers, etc.?
Do you scan suspect attachments? Hackers can highjack the email account of someone you know and trust. If you are not expecting anything, scan before opening.

Most email attachments are nowadays automatically scanned. Downloading a less common business program usually issues a warning from antivirus programs that do not recognize the name. Most malware attachments are triggered upon opening the attachment. Manually check any suspect file before opening by saving to your desktop, right click, and scan with your antivirus program.

Clyde

Flat Fee Billing vs PCLaw Disbursements

2012-12-19T06:51:00.000-08:00

First, what is flat fee billing. You quote the client an all inclusive price, and that is what the person pays. No extras, no disbursements. Many lawyers are already quoting flat fees for uncontested divorces, incorporations, wills, etc.

Why quote flat fees? Two reasons:

It is a great marketing tool. Clients really do want to know what a service is going to cost them. If you can offer them a set price right from the start, you are more likely land a new client.
It cuts down on your bookkeeping costs. Tracking disbursements and assigning them to the right client takes time. Just calculate your overhead and costs for everything, and give one price.

Other than the simplified services mentioned above, this is not something a novice lawyer should consider doing. You really do need to have a few years of practicing law to be able to establish your overhead and other costs. This billing practice also tends to be used only for simple uncontested matters.

A variation that can be used by almost any area of practice is block fee billing. For example:

One set price to prepare, issue, and serve a statement of claim, including the court costs and process server.
One set price for a full day of court, including travel, parking, etc.
One set price to prepare a motion, affidavit, court costs to issue, and service on opposing counsel.

Of course, you will want solid addresses for service, etc. before quoting a price. And, of course, the full day of court will cost the client more if it is in a different location. You might have one price for Toronto, another price for the GTA, and a substantially higher price for the attending the Supreme Court in Ottawa.

You may think that preparing claims, motions, and affidavits is too varied to quote a set price. But, you charge the same amount for boilerplate claims, motions, etc. The key is to make sure the pluses and minuses average out, to allow you to make approximately the same income. Therefore, you need to have the necessary experience in order to be able to predict these pluses and minuses.

From the bookkeeping side, you just pay your expenses as they are incurred, without any regard to whether it is a general office expense or a client expense. Your income in the form of these all inclusive flat fees will be considerably higher on your income statement. However, since you are no longer recovering any of your costs from clients, your expenses will also be higher. The goal is to reduce the amount of labour needed to complete your firm’s bookkeeping.

As always, I invite your comments and suggestions for future post topics. Next Posting – PCLaw Errors – Why they happen.

Clyde

LSUC and Credit Card Receipts

2012-11-25T07:36:00.003-08:00

From the LSUC Bookkeeping Guide:

“Any credit card agreement that licensees enter into must provide that all service charges, discounts and other fees payable by the licensee to the financial institution are to be deducted from the licensee’s general account and that no such charges are to be deducted from the trust account.”

The Bookkeeping Guide later states:

“The procedures of some credit card companies place licensees in conflict with provisions in By-Law 9. Some credit card companies require merchants (including lawyers) to designate only one account into which credit card payments are to be deposited. Additionally, the discount charged by the company is automatically debited from this account.

This process will not permit licensees to receive by credit card both retainers and payments for billed fees and/or disbursements. Subsection 2(1) [sic. - 7(1)] of By-Law 9 requires licensees to deposit funds received in trust (e.g. retainers) into an account designated as a trust account. Meanwhile, subsection 8(2) of By-Law 9 prohibits the deposit into trust, funds that are “received by the licensee on account of fees for which a billing has been delivered...” "

The Bookkeeping Guide reaches this conclusion:

“Consequently the use of one account for both purposes is not permissible.”

However, that is not what By-law 9 actually says. In the second paragraph of this section on credit cards, The Bookkeeping Guide correctly states:

“The definition of “money” in By-Law 9 includes “credit card sales slips” and provides that credit card sales slips like other money received into trust, must be deposited to the licensee’s trust account not later than the following banking day.”

With any credit card company, the soonest that funds will be deposited is the next banking day. If you process the client’s credit card for deposit into your general account, and then IMMEDIATELY transfer the same amount to your trust account, you have complied with By-law 9 - “must be deposited to the licensee’s trust account not later than the following banking day.”

Since you have not actually received the credit card funds yet, you are advancing (loan) the funds to your client’s trust ledger. By transferring the funds from general, you have created a general disbursement that will be offset by an equal general receipt when the credit card funds are finally deposited by the bank. If you prefer, you can bill out the general receipt and disbursement on a separate invoice (net $0.00), to avoid confusion on the invoice submitted to the client.

As always, I invite your comments and suggestions for future post topics. Next Posting – Flat Fee Billing vs. PCLaw Disbursements Recovery.

Clyde

PCLaw and The Conveyancer – Part 2

2012-11-09T11:36:00.001-08:00

Part 1 of this article (May 22, 2011) explained how to manually transfer your invoice from Do Process LP’s The Conveyancer® software into LexisNexis Canada’s PCLaw® software in order to complete your bookkeeping records in PCLaw and reconcile your bank accounts.

Part 2 focuses on the new PCLaw Export feature for The Conveyancer, which Do Process released on November 9, 2012.

Setup

To use The Conveyancer / PCLaw Export feature, complete the following one-time setup:

1. Tell The Conveyancer where your PCLaw data is stored by entering the path or browsing to the “statdata” directory.

2. Create a directory in which to temporarily store the export data and enter the path to this directory into The Conveyancer. Note: You should set up this directory on your local Desktop or in your My Documents directory. If you set up this directory on a server or a shared directory, your data may be overwritten by another user.

3. Now that The Conveyancer has access to the data in the PCLaw directory, simply match The Conveyancer disbursements with your PCLaw explanation codes and G/L accounts, and define whether these disbursements are subject to HST.

Once you have completed these three steps, your setup is done. Note: If you change your PCLaw codes at a future date, be sure to amend The Conveyancer setup.

Usage

To use the PCLaw Export feature, follow these easy steps:

1. Open a new real estate matter in PCLaw.

2. Open a new file in The Conveyancer.

3. Copy and paste the PCLaw matter number into The Conveyancer file.

4. On Tab A, assign the responsible lawyer.

5. Complete the real estate transaction in The Conveyancer.

6. Enter one-off expenses on the fly by adding a new row. Note: Be sure to assign a PCLaw G/L account.

7. Export the fee and disbursement data from The Conveyancer.

8. Import the disbursement data into PCLaw.

9. Import the fee data into PCLaw.

10. Enter a transaction levy in PCLaw if it’s required for this matter.

11. Complete your PCLaw billing and transfer funds from trust to pay your invoice.

The removal of manual entries from this process eliminates any possibility for errors and saves you a great deal of time.

If you wish to complete the paper trail, staple the PCLaw invoice to The Conveyancer invoice.

As always, I invite your comments and suggestions for future post topics. Next Posting – LSUC and Credit Card Receipts.

Clyde

Bank Errors and PCLaw – Part 2

2012-10-22T09:23:00.000-07:00

On April 1st, 2012, we discussed the uses of the PCLaw Bank Error feature when doing the monthly bank reconciliations. This feature should only be used for actual bank/teller errors, but it is often misused to record bookkeeping mistakes.

I recently had a rather lengthy discussion with a LSUC auditor over this very subject. In this case, my client had mistakenly taken more trust funds than were on deposit for a particular matter (prior to PCLaw being used). Therefore, the funds needed to be paid back, requiring a General to Trust transfer. The auditor was of the opinion that the entry was self corrected by the deposit of new trust funds by my client’s client the following month.

That may be true as far as the LSUC (or this individual auditor) is concerned, but it has there are other things to consider. For example:

Revenue Canada considers deposits from clients into your general account as income. If, in the above example, you do not record the General to Trust transfer as a disbursement, and amend your billing, CRA will consider the whole deposit as fees, and assess you income taxes the whole amount.
LSUC – if you leave the client’s trust ledger in an overdrawn state for more than a month, you will have to report this on your Lawyer Annual Report. Instead, you can just have an outstanding receipt for the General to Trust Transfer.

As always, I invite your comments and suggestions for future post topics. Next Posting – PCLaw and Conveyancer – Part 2.

Clyde

PCLaw and Fraud Prevention

2012-10-09T08:31:00.000-07:00

The following is not meant to be an exhaustive list, but rather a starting point, which you should adapt to the specific needs of your own law practice.

First and foremost, prepare (or have prepared for you) a monthly trust comparison report. These reports should be completed by the 25th day of the following month. Take some time to thoroughly review the report, and ask your bookkeeper questions if you find things do not appear to be as you believe they should be.

Office Practices:

ensure each incoming cheque is stamped with a “deposit only” endorsement
issue pre-numbered receipts to clients for cash or cheques received
clients should be asked to sign cash receipts, to avoid later disputes over amount received
ensure cash/cheques are deposited by the end of the next banking day
if deposits are not made immediately, are they are locked in a safe location?

Staff – separation of duties

one person opens the mail and a separate person deposits funds
one person deposits the cash/cheques, another person enters the receipts in the accounting records

Review

ensure deposit slips match accounting records
verify sequence of numbered receipts – ensure they match accounting records
scrutinize your trust and general bank account statements, looking for:
- returned cheques
- any unusual transactions
- compare trust bank account balance(s) with client trust listing

review the monthly bank reconciliations, looking for:

outstanding items and follow up on them
stale-dated cheques over six months old
review the client trust listing for overdrawn and inactive accounts

DISBURSEMENTS

Cheque Preparation Policies

Many times, staff prepare cheques for signing by the lawyer

stamp original copies of invoices "paid" to prevent being paid more than once
only original invoices, and not photocopies, required when signing cheques
confirm the service was indeed provided, or the disbursement is proper
trust account cheques clearly marked “trust”
general account cheques clearly marked “general”
trust cheques and general cheques different colours to avoid confusion

Trust cheques

review reasonableness:
- Minister of Finance – trust cheque trust should accompany the claim/defense/motion/ etc. to be filed
- other disbursements should have the original invoice
- payable to your firm, should have your own invoice prepared

confirm client has adequate trust funds

PCLaw

The data in accounting programs can be changed, to cover up / hide fraudulent activities. PCLaw can be used for fraud prevention by reviewing audit trail reports – Reports - Audit trail reports. You primary interest would be the general and trust bank journals, and the general journal – deselect the others. You will want to include corrected entries. Review the corrections, to see if any attempts are being made to deliberately manipulate the data.

As always, I invite your comments and suggestions for future post topics. Next Posting – Bank Errors and PCLaw - Part 2.

Clyde

LSUC Audits and Accounting Programs like PCLaw

2012-09-10T07:46:00.001-07:00

(I’m back! I have been fighting a nasty virus all summer. I have been just trying to keep up with my daily workload, with no time or energy for writing. Feeling much better now!)

In the past 3 months I have been retained by 3 solo lawyers who unable to complete their LSUC audits. In one case, the lawyer was the subject of a LSUC initiated Disciplinary Complaint for poor bookkeeping.

In each case, the lawyer was using Word tables or Excel sheets to create client ledgers. In most cases, the client ledgers were detailed in the handling of the individual client’s funds, but there was no method being employed to track the overall picture. There was also no method being used to create the journals required for proper record keeping.

Minimum Requirements (LSUC)

Trust receipts / disbursements (trust bank journal)
Client ledgers
Trust transfers record
Receipts / disbursement not trust (general bank journal)
Record by date of fees / disbursements charged to clients (billing fees journal)
Monthly trust bank reconciliations and trust listings

The Word/Excel client ledgers only met one of the minimum requirements. It is possible to maintain all of these records in Word or Excel, but it is not an easy task. The problem is that these manual entries are not linked. You have to manually update the clients ledger for your invoice and payment. Then manually update the trust disbursement, the general receipt, and the billing fees record. With all these manual entries being made, it is easy for numbers to get transposed or other errors to be made. It is also a very labour intensive process.

The reason accounting programs were invented was to make record keeping easier. If you do not have a trust account, buy yourself a program like Quickbooks or Simply Accounting. If you have a trust account, PCLaw is the most comprehensive legal accounting program available. Purchase a program and make your life a whole lot easier. And the next time an auditor comes to visit you can be confident in the status of your records.

As always, I invite your comments and suggestions for future post topics. Next Week – PCLaw and Fraud Prevention.

Clyde

PCLaw and LSUC Audits – Next Steps

2012-07-15T19:09:00.001-07:00

At the end of the audit, you will be given an audit report, itemizing any issues that need your attention. Seventy percent of audits uncover only minor issues, which the auditor will discuss with you. You must take steps to correct your bookkeeping practices as per the auditor’s instructions.

The auditor can return a few months later to check on your progress, and failing to correct your bookkeeping practices can have dire consequences.

If more serious problems are found, the auditor can immediately issue a compliance order and you may be prevented from using your trust account. The compliance order will direct you to correct deficiencies and impose a short deadline for the work to be completed.

If you fail to comply with the auditor’s instructions, your file can be turned over to the LSUC’s Discipline Committee. You are still given every opportunity to correct deficiencies, and can avoid a full hearing if you can satisfy the investigator that you have brought you records up to LSUC standards.

If you still do not correct your bookkeeping, you can ultimately be disbarred by the LSUC.

As always, I invite your comments and suggestions for future post topics. Next Week – LSUC Audits and Accounting Programs Like PCLaw.

Clyde

PCLaw and LSUC Audits – What to Expect

2012-06-19T07:17:00.001-07:00

Pursuant to s. 49.2(1) of The Law Society Act:

“The Society may conduct an audit of the financial records of a licensee or group of licensees for the purpose of determining whether the financial records comply with the requirements of the by-laws.”

The purpose of audits is to fulfill the LSUC’s mandate of protecting the public. The primary focus of the audits is therefore concentrated on your trust account. The auditor does also review your general account, to ensure payments are applied properly to client receivables.

Each year, you have about a 1 in 14 chance of being audited (about every 5 years). If you are a new practice, you will be audited about 1 year after you open. Ideally, the audit process should be viewed as an opportunity to learn what you should be doing. Auditors are usually happy to explain any problems found and what needs to be done in the future.

I have already discussed the most common spot audit problems, in the blog postings of November 2010 to January 2011. These older postings can be viewed at any time in the archived section of the blog website.

You will receive notification of the audit approximately 2 weeks before the scheduled date. You will be asked to prepare some photocopies ahead of time, for use on the audit date. If you have Private Mortgage or Power of Attorney matters, you will be asked to provide some additional information to the auditor 1 week prior to the audit date.

The balance of the documentation will be requested “on demand” during the course of the auditor’s site visit. You, or your staff/bookkeeper, must be able to immediately generate the various accounting reports from PCLaw, as/when requested. You must be able to answer any questions posed by the auditor, as to why certain bookkeeping entries were made. This is why the LSUC suggests that you may wish to have your bookkeeper attend the audit, if you are uncomfortable with bookkeeping and/or a newer PCLaw user.

You must be able to produce copies of any supporting documentation, like invoices, trust ledgers, mortgages, receipt books, cancelled cheques, bank statements, etc. You need to provide a copy of your latest filing for your LawPro transaction levies, or your exemption.

Prior to the audit, make sure your records are current, and any issues on your current bank reconciliation reports have been corrected. If you have outstanding bank errors on the report, have the bank reverse the entry or otherwise fix the error. Obtain copies of these transactions, to show the auditor the errors were fixed. Clean-up any outstanding deposits, and place stop payments/reissue any stale cheques.

As always, I invite your comments and suggestions for future post topics. Next Week – PCLaw and LSUC Audits – Next Steps.

Clyde

Transaction Levies and PCLaw

2012-06-11T20:01:00.001-07:00

Pursuant to By-law 6, a lawyer or law firm that acts for one or more parties on a real estate transaction must pay the Law Society a real estate transaction levy surcharge of $65.00 per transaction inclusive of all taxes.

Some additional information on real estate transaction levies:

http://www.lsuc.on.ca/newsarchives.aspx?id=2147485737&cid=2147487113

Likewise, a lawyer or law firm that acts for one or more parties on a civil litigation matter must pay the Law Society a civil litigation transaction levy surcharge of $50.00 per transaction inclusive of all taxes.

Some additional information on civil litigation levies:

http://www.practicepro.ca/LAWPROMag/LawPROmagazine4.pdf

Enabling The Transaction Levy Feature In PCLaw

Before using the Transaction Levy feature in PCLaw, the feature must be enabled on the System Settings - Provincial Tab. Newer versions of PCLaw have noted the January 1, 2010 rate change for real estate transactions in Ontario.

Setting Up Transaction Levies

To charge a transaction levy, the lawyer must have a valid LSUC number. This number is entered in PCLaw on the Lawyer and Rates - Provincial tab.

Posting A Transaction Levy

Transaction levy charges are posted to matters via Data Entry – Transaction Levy. For real estate, you select who you are acting for and the documents filed. If acting for both sides in a real estate transaction, you can enter the levy for both matters with one entry. For civil litigation, you select the type of claim/defence filed with the court.

If you have a busy practice, you can add a Transaction Levy button to your Quickstep menu.

As always, I invite your comments and suggestions for future post topics. I missed publishing last week because I was helping a new client, who came to me after he failed to pass his LSUC audit. It has occurred to me that I should write something about the subject. Next Week – PCLaw and LSUC Audits – What to Expect.

Clyde

PCLaw and Payroll Entries

2012-05-28T18:54:00.001-07:00

Larger firms may use payroll services, but small firms usually handle all the payroll entries themselves.
The CRA website contains all the information you need to calculate payroll deductions and employer remittances.

Payroll deductions calculator: https://apps.cra-arc.gc.ca/ebci/rhpd/startLanguage.do?lang=English
Payroll deduction tables: http://www.cra-arc.gc.ca/E/pub/tg/t4032on/README.html
Payroll deduction formulas: http://www.cra-arc.gc.ca/E/pub/tg/t4127-jan/README.html

I use the formulas in Excel sheets to calculate deductions, employer remittances, and vacation pay. The totals are calculated throughout, and the final information can easily be transferred for completing T4 slips. I customize each Excel file for each client, as everyone has different needs.

The easiest way to enter payroll is through a general cheque entry, and ideally entering all the information at once. For example:

enter the employee’s name, the date, etc.
the cheque amount is for the net payroll amount
explanation code pay, sal, etc. – set the code to the Payroll/Salaries G/L expense account
for the expense G/L amount use the gross pay
next line - etd explanation code – set to the ETD payable G/L liability account
enter the amount (-) you have deducted from the employee’s pay
eie expense code – set to EI expense G/L account or Payroll/Salaries G/L expense account
enter the employer EI amount
cpp expense code – set to CPP expense G/L account or Payroll/Salaries G/L expense account
enter the employer CPP amount
etd explanation code – enter the total (-) of the employer EI and CPP amounts

All the expenses have been recorded in one entry, and the ETD payable account contains the total amount that needs to be remitted to CRA. Repeat for each employee and each pay period. When time to remit (monthly or quarterly), issue a cheque to CRA for the balance of the funds in the ETD payable G/L account at the end of the period.
As always, I invite your comments and suggestions for future post topics. Next Week – PCLaw and Transaction Levies.
Clyde

PCLaw and Can. Deposit Insurance Corporation

2012-05-20T12:04:00.001-07:00

If you have a trust account, by now you have no doubt received a notice from your bank requesting information on the clients’ trust account balances. Why are they doing this? Your account is covered by deposit insurance, but only up to $100,000. If your practice involves estates or real estate, your trust account probably contains an amount much larger than this. Listing the trust beneficiaries separately allows for $100,000 in coverage for each of your clients.

The banks give you the option of reporting client name and address, or you can maintain your clients’ privacy by providing only a client code (in PCLaw it is known as client nickname).

Reports – Client – Trust listing – date April 30, 2012 – select Totals only – This will produce a list showing the client, their address, and their trust balance.

To get a list with only client codes - Reports – Client – Trust listing – date April 30, 2012 – select Totals only – then select Change to modify the report template. Change the report name at the top – for example “banklist”. In the right-hand box, highlight the client name – click remove – highlight client address – remove – then OK to save the template – change banklist to default – NO – then OK to generate the trust listing.

As always, I invite your comments and suggestions for future post topics. Next Week – PCLaw and Payroll Entries.

Clyde

PCLaw and Work In Progress Disbursements From Trust

2012-05-10T12:13:00.001-07:00

Pursuant to By-law 9, s.9.:

9. (1) A licensee may withdraw from a trust account only the following money:

1. Money properly required for payment to a client or to a person on behalf of a client.

2. Money required to reimburse the licensee for money properly expended on behalf of a client or for expenses properly incurred on behalf of a client.

3. Money properly required for or toward payment of fees for services performed by the licensee for which a billing has been delivered.

4. Money that is directly transferred into another trust account and held on behalf of a client.

5. Money that under this Part should not have been paid into a trust account but was through inadvertence paid into a trust account.

This week we are discussing number 2 on the above list. PCLaw can be set to “Allow Trust transfers for WIP” in Options - System Settings – Banking tab.

For example, when you pay the Minister of Finance for a court cost with a general cheque, you are permitted to transfer this amount from trust to reimburse the general account.

When you review the client ledger, you should find the disbursement and a general retainer for the same amount.

Billing – be sure retainers are selected on “Other” tab, so that the general retainer receipt and the disbursement cancel each other out.

Be aware that expense recovery items are sometimes not true disbursements. For example, photocopies may cost you 2 cents but you bill the client 10 cents. This mark-up represents income, and should not be paid from trust until billed.

As always, I invite your comments and suggestions for future post topics. Next Week – PCLaw and Can. Deposit Insurance Corporation.

Clyde

PCLaw and an Error Correction Riddle

2012-04-29T08:45:00.001-07:00

Every once in a while I come into contact with hands on lawyers, who are very knowledgeable of bookkeeping procedures. The reason they are calling me is because their previous bookkeeper left, or they have been struggling to do the work themselves, and things are not balancing.

The Setup

With deference to the LSUC, Leslie Lawyer has been in practice for 15 years, and opened her own firm 5 years ago. The rate she bills out at is $350 per hour. She has an intimate knowledge of all of her clients and matters. This is to be expected; after all, it is her business we are talking about. She has a good understanding of basic bookkeeping, including bank reconciliations. Her working knowledge of PCLaw is limited to the minimal on-the-job training she received to complete daily tasks. She has received no extra training, and has no advanced knowledge of error correction procedures. She has not been able to balance her books, but if she set aside the time, she could probably work through all of the problems. She does not know how to correct the errors, but could do some work-around adjusting entries to balance. The work-arounds’ may not be to LSUC standards, and even with her intimate knowledge of individual matters, it will still take her 30 hours to finish this project.

Bobbie Bookkeeper is a self-employed bookkeeper who works for many different lawyers. She charges $35 per hour. She has received extra PCLaw training, and has advanced knowledge of error correction procedures. She has no knowledge of Leslie’s clients or the individual matters. She will need to ask lots of questions to gain the required information, but these could be directed to a member of Leslie’s staff. She has reviewed the status of Leslie’s books and advised that properly removing the past 5 years’ of errors and balancing the books to LSUC standards could take up to 100 hours of her time.

The Riddle

How much money does Leslie lose by doing the work herself?

As always, I invite your comments and suggestions for future post topics. Next Week – PCLaw and Work-In-Progress Disbursements From Trust.

Clyde

PCLaw and Excel

2012-04-22T10:07:00.001-07:00

When you run reports in PCLaw, the normal practice is to print them and/or save them. The report toolbar at the top also displays an icon for Excel, which allows you to convert the static report information into a spreadsheet.

PCLaw reports already have a lot of variables available to you, especially if you select the advanced options. But exporting the report into a spreadsheet allows you to manipulate the data in ways limited only by your imagination.

To get the most out of this feature, you need to have a good understanding of how to write formulas. The “Help” in Excel is very good, and there are many online forums that can assist you even further. The idea is to develop standard formulas for the results you want. You can then copy this formula from your old spreadsheet into a new one, thereby instantly obtaining the new information that you want.

I use these worksheets often for error correction. If you want to know what is different on two reports, export both of them into spreadsheets. I usually delete the columns I do not need, keeping only those columns will help me.

For example, try comparing the trust bank journal with the trust bank general ledger. Doing a True or False comparison with the “Entries” numbers in both reports will quickly locate the missing or extra entry. You can also sort the entries from largest to smallest, thereby allowing you to quickly locate a number that only appears on only one report.

As always, I invite your comments and suggestions for future post topics. Next Week – PCLaw and an Error Correction Riddle.

Clyde

Year-end Review and PCLaw

2012-04-15T07:16:00.001-07:00

Last week, our concern was getting your books cleaned-up for your accountant. Typically, you will want to meet with you accountant after your taxes have been prepared. After reviewing your financials, your accountant will be in a much better position to offer you advice. However, for you to get the best advice, you need to come to the meeting fully prepared.

Print off a copy of your financials. Make a list of any questions you have. Is there any specific area you need advice on? Do you have an issue that you are concerned about?

The goal is to seek ways to reduce your expenses and increase your sales, and thereby increase your net income. Year-end is also a time to review your fee structure. Rising costs can mean that you need to raise your hourly rate just to maintain the same income as last year.

Besides the obvious financial statements, PCLaw can also generate other useful reports to help you improve your business. By selecting different options on standard reports, you can learn a great deal. For example:

You can run you billing fees journal and select to sort matters by type of law. This type of information is useful for planning your marketing efforts. Do you need to increase your marketing in some areas where you want to grow? Did your marketing decisions from last year pay off in increased billings in the area of law you were targeting with your advertising dollars?

Run an Client Costs journal report, on the “Other” tab select the expense code for photocopies. Typically, your fax machine is now part of an all-in-one printer, so you need to add this result to the photocopies amount. Compare this with your photocopy expenses for the machine, toner, paper, etc. Do you need to adjust the amount you are charging?

Can you reduce your telephone expenses by bundling into one invoice?

Are your staffing levels appropriate to the volume of work you do? Virtual assistants can provide additional support without the overhead of an on-site employee. It can be as simple as differentiating work that has to be done in the office. Filing, faxing, photocopying, etc. has to be done where the documents are physically present. Documents – letters, pleadings, etc. – can be typed anywhere.

These are just a few of suggestions. The point is, all the data has already been entered into your PCLaw program, There is a wealth of information contained within this data which is freely available to you. Your bookkeeper can assist you with mining this data and running comparative reports.

As always, I invite your comments and suggestions for future post topics. Next Week – PCLaw and Excel.

Clyde

Year-end Clean-up in PCLaw

2012-04-08T07:38:00.001-07:00

It is tax season – time to get your financial statements cleaned-up, so that you can forward them to your accountant.

First, make sure all of your reconciliations have been completed. Your December bank accounts should have already be reconciled by January 25th.

Run “Verify Data Integrity”. This should correct most hidden or imbalance errors.

Then run a G/L Reconciliation report, and correct any errors found on here.

Your accountant can offer you great advise, but you are the person with the most knowledge of your own business. Prepare and review draft financial statements. Look for:

- Items posted in the wrong G/L accounts.
- Multiple accounts of a similar nature - consolidate into one?
- Are there negative expense or income accounts?
- Missing any purchases made with petty cash or credit card?

Now that everything has been entered, and you have confirmed your ledgers have no errors, you can run your HST report and remit it or post it as a payable.

You are now ready to forward your financials to your accountant.

You can close out any open months, up to and including November. Now is also a good time to archive matters that have been completed.

While your accountant is working, you have time to take a second look at your financials - Next week’s topic.

As always, I invite your comments and suggestions for future post topics.

Clyde