Let me be clear, QuickBooks is a wonderful software package. It services many people, in many businesses, and there are a plethora of people who know how to use it throughout the world. And, many accountants and CPAs advocate strongly that their clients use QuickBooks because they know how to run it and manipulate it to their benefit.
Despite these great reasons to use QuickBooks, there are five (5) key reasons that my colleagues and I at Affinity Consulting Group often recommend that lawyers and law firms *not* use QuickBooks to run their firms.
-
Better Options:
Again, please don’t read this article and conclude that my colleagues and I don’t like QuickBooks. We all very much think it’s a great software product. But in the legal profession, we have better options. There are many, many products on the market, both web-based and traditional, that are built and made for our industry. With QuickBooks, law firms must twist, turn, customize and find workarounds to make QuickBooks function well in a law firm environment.
-
Billing:
Whether you bill by the hour, work on a flat-fee basis, or provide legal services in exchange for a contingency fee, QuickBooks, again, without a lot of customization and workarounds, does not produce bills that work well in the legal profession. Further, software made for our profession permits us to produce nice-looking and high-quality bills, flat-fee or contingency-fee settlement statements, but also includes reports that glean productivity and efficiency data from our billing, collection, and write-up/down tasks.
-
Trust:
Software made for our profession is also made to properly handle lawyer trust accounts. Trust accounts must be fastidiously maintained, and all transactions must be cross-referenced to client/matters, the trust bank journal, and the trust ledger. Reconciliations in trust are three way (client/matter to the trust bank journal, trust bank journal to the bank’s monthly statement, and the bank statement back to the client trust ledger). QuickBooks doesn’t natively do this for us and, again, lots of workarounds are required to stay in compliance with state and provincial Bar rules/regulations.
-
Reporting:
QuickBooks does a great job with financial reporting (balance sheet, income statement, trial balance, general ledger detail), but we also need to glean relevant data to analyze our practices and make reasonable business decisions as we navigate our future growth goals. Financial statements are a part of that, but also we need things like client ledgers, lawyer billing and collection summaries, billing realization reports, cash flow analyses, and matter and staff productivity models.
-
Linking Databases:
QuickBooks does lack in one key area that is vital for law firms, and that is practice management. In a nutshell, practice management software should be employed at all law firms to be a central nervous system of sorts. Practice management software centralizes key data such as appointments, tasks, notes, documents, emails, and journals to the files or matters upon which we work. Many practice management packages “link” to QuickBooks, but we recommend practice management software that includes all QuickBooks functionality built in. No data link is needed as the software handles all of the above as well as the total of what many firms rely upon with QuickBooks—time entry, expense entry, billing, accounting, and trust
Bottom line, QuickBooks is great, but simply isn’t made for our profession. With so many quality options available, your best money should be spent on software (web-based or computer/server-based) built to manage a law practice both from a practice management perspective and time/billing/trust and general accounting perspective.
