Concepts

This section explains concepts such as trust accounting, recording fees (WIP) and billing clients.

Trust accounting and trust transfers

Trust funds refer to funds held by an attorney on behalf of a client: -

  1. As a deposit for work to be done. Once invoiced, a trust transfer can release the trust funds, allowing the law firm to move the funds from the trust to the business bank account.
  2. To be used by the law firm to pay a third party on behalf of the client; e.g. SARS in a property transaction.

Trust funds can only move between Clients (Matters) and a trust bank account; i.e. the sum of all monies held in trust per client must equal the sum of monies in the trust banks. LawPracticeZA includes accounting controls to ensure that this is always the case. Importantly, LawPracticeZA takes care of the debits and credits, automating wherever possible to provide a simpler solution that both reduces errors and is more efficient.

The Trust Commitment / Investment report, which can be generated on demand as at any date, provides a list of trust creditors, with the corresponding trust banks investments. The report includes Section 86(4) investments, where a clients trust funds are invested, on written request by the client, in an individual interest bearing account, for the clients benefit.

When a trust payment is received from a client, it is posted as a Matter Receipt - Trust. LawPracticeZA will

  1. Debit the Trust Bank account
  2. Credit the clients matter in trust

Captured fees and disbursements (WIP), when invoiced, can affect the trust transfer (i.e. if there is available trust - trust less any reserved trust - in the Matter). When an invoice is produced from unbilled fees and/or disbursements, LawPracticeZA automatically generates the following accounting entries: -

  1. Debit the Clients Matter in Business with the invoice amount. If there is trust available on the Matter, this Matter becomes eligible for a trust transfer.
  2. Debit Debtors control in the General Ledger with the invoice amount.
  3. Credit Fees / Disbursements with the ex VAT amount (if registered)
  4. Credit VAT (if registered).

The Automatic Transfers interrogates each Matter to establish whether there are funds to transfer; i.e. a business debit (typically the client has been invoiced) and available trust (a trust receipt from a client, taking into account any reserve, e.g. for payment to a third party).

If a Matter has a trust debit balance (trust money paid against the Matter where no trust was available) and/or a business credit (a payment received into business where there was no prior business debit, or a credit note generated where money was previous transferred as a result of the invoice), a negative transfer will be generated.

A list of Matters that qualify for a trust transfer is displayed, all selected by default. Processing a transfer will

  1. For each selected Matter:
    1. Credit the Matter in Business and
    2. Debit the Matter in Trust, with the transferable amount, which is the lessor of the business or trust balance if different, else the balance amount.
  2. For the sum of the transferable amounts for all Matters
    1. Debit the system ‘Trust Transfer Clearing’ Matter in business and
    2. Credit the system ‘Trust Transfer Clearing’ Matter in trust.

The transfer clearing matter subsequently contains the balances that have been transferred from trust to business.

Note

If the transfer has been run (and individual matters updated) but the payment from trust of the transferable amount has not been made, the system ‘Trust Transfer Clearing’ Matter will show a credit trust balance, and also feature in the trust investment / commitment report, until the payment is made. The business balance on the clearing matter will similarly remain, until the payment had been posted as received into the business bank account (posted against the clearing matter).

To complete the trust transfer, after the transferable amount (obtained from the Trust Transfer Report) has been paid from the trust bank/s to the firms bank account, the two accounting entries must be posted: -

  1. Matter payment - Trust, paid against the ‘Trust Transfer Clearing’ Matter. This will clear the Trust balance in the ‘Trust Transfer Clearing’ Matter.
  2. Matter Receipt - Business, receipted against the ‘Trust Transfer Clearing’ Matter. This will clear the Business balance in the ‘Trust Transfer Clearing’ Matter.

Billing a client for work done

To bill a client, you first need a Matter to bill (an instruction from a client), and a Matter must be linked to a Client.

So you will need to add a client account, and a Matter, if they do not already exist. If a new matter for an existing client, add a matter linked to the existing client (a client can have one or more matters).

All fees and disbursements are initially captured as unbilled (WIP), and subsequently converted into an invoice (at which stage they become an accounting entry).

Unbilled fees are not accounting transactions, and can therefore be modified or deleted.

Once converted to an invoice, an invoice cannot be modified or deleted, as an invoice is an accounting entry. If an invoice is in error (e.g. for the wrong client or matter) a credit note must be generated,  which can be done automatically from the invoice, and which generates accounting transactions, reversing all the invoiced accounting entries. All an invoices line items (from previous unbilled) can be returned as unbilled, with the option to move them to a different account (or modify or delete). As unbilled, they can be subsequently invoiced.

See Trust Transfers for the impact invoices have on trust transfers.

Period end (Month and year end)

LawPracticeZA does not ‘roll balances’ like many legacy systems, but maintains all transactions and calculates balances as required, based on the transaction date, using a ‘freeze’ date to mark both month and year end.

Note

There are two major benefits to using a freeze date, made possible by the increased power and capacity of computer technology: firstly, there is no month or year-end delay and secondly, because all balances are calculated ‘on the fly’, reports can be extracted for any period or as at any date.

Month end

The following example illustrates how month-ends are managed in LawPracticeZA

  1. During January, transaction are posted dated January, they fall into the January financial period.
  2. If during the beginning of February,
    1. Fee Earners produce invoices, the accounting entries produced fall into the February financial period.
    2. If the Bookkeeper posts transactions
      1. dated January, the accounting entries produced fall into the January financial period.
      2. dated February, the accounting entries produced fall into the February financial period.
  3. When the bookkeeper has completed all posting relating to the January period, he or she sets the Period end - month to the 1st February, and no more transactions can be posted into January.

Year end

Once the month-end postings have been completed and the month end ‘freeze-date’ set, if the last month in the financial year, the year-end ‘freeze-date’ is also set.

Setting Year-end identifies the financial year for report purposes, e.g. the Income and Expense report.

Note

To accommodate exceptions were it is necessary to post into a previous financial period (for example, to capture auditor adjustments, which could be received months after a financial year end) a special setting is provided to release the ‘freeze’ date. To change this setting requires Auditor privileges.

Take on from legacy system

Many who decide to change to LawPracticeZA are operational Law Firms that have existing systems.

LawPracticeZA includes a number of import modules, to cater for importing Clients and Matters, Suppliers, and General Ledger accounts.

  1. Some firms elect to ‘start with a blank slate’. This would also apply to new firms. In this instance, LawPracticeZA is set up with no Clients, Matters or accounts loaded - just the default settings, including a standard chart of GL accounts.
  2. Start with existing Clients and Matters, and possibly Suppliers loaded, but no General Ledger (as it sometimes takes time for the legacy system to produce a balanced trial balance). LawPracticeZA provides options for importing Clients and Matters, with or without balances, from a spreadsheet. Instructions, including the spreadsheet format, are provided by the function. A similar option is provided for Suppliers.
  3. Finally, for an entire, balanced system, Matters, Clients, Suppliers and General Ledger can be imported into LawPracticeZA. This can be done in one of two ways
    1. Via spreadsheets, formatted as per the import modules specifications.
    2. For some legacy systems we can import directly from a dump of the system (currently AJS - although more will be added).

When we import data from a legacy system, we do not import historical transactions, only balances. So it is important to retain access (whether printed or online) to historical data, prior to the conversion to LawPracticeZA.

Reports using Pivot Tables

Pivot tables in spreadsheets provide an extremely flexible and powerful yet simple reporting tool.

Because reporting requirements vary between law firms, LawPracticeZA has optimised a number of reports for Pivot Tables, the most common being Unbilled Fees and Pending Disbursements and Invoiced Fees and Disbursements.

In both the above, fees can be analysed by Client, Matter, Fee Earner, accounting period and more, with a simple drag and drop.

LawPracticeZA exports these (and other) reports in a spreadsheet format, which can be opened with either Microsoft Excel or the open source Libre Office.

Note

There are many excellent tutorials on YouTube for both Excel and Libre Office Pivot Tables. Also worth investigation Excel Tables and Libre Office Filter for other report formats.

VAT on the Invoice basis

Where a firm is required to be registered for VAT, LawPracticeZA applies VAT on the Invoice Basis. LawPracticeZA does not accommodate VAT on the Payment basis, as it is inappropriate for lawyers (mainly because of trust transfers).

Cash flow is often raised as a reason for selecting the payment over the invoice basis, where this choice is available.

Proforma invoices can alleviate the potential impact that VAT can have on cash flow. By presenting clients with proforma invoices, arrangement can be made for settlement prior to invoicing the client, at which time the liability for VAT arises.

Taking deposits, where possible, can also mitigate the problem, although in some cases this is not possible. Deposits for work to be done are deposited in Trust (and to the trust balance of the clients Matter) and once an invoice is generated, can be released from trust.

Auditors

This section explains where to find the reports that the auditors typically require.

Note

Where a report includes transactions, you can select a ‘from - to’ date (e.g. Account Enquiry), and where a report contains accounts with only balances (e.g. Financial Reports), an ‘as at’ date.

In LawPracticeZA, all transactions are maintained and balances calculated on the fly (as opposed to legacy systems where transactions are generally rolled up into a brought forward balance at month and year end). This has the sigficant advantage that reports can be drawn for any period, without restoring backups.

Reports include an option to extract to PDF or a spreadsheet (e.g. Exel). In a spreadsheet, data is more easily analysed, especially by using tables and pivot tables.

The following are typically the reports required by auditors, and where to find them in the bookkeepers menu. Tip: type part of the report name in ‘Filter menu…”

  1. Trust Investments / Commitments; List of all trust creditors (commitments) and trust and investment bank accounts (investments). Produces a spreadsheet or pdf document, with three tabs
    1. All clients matters that have a trust and/or investment balance, with totals.
    2. Trust Bank/s, with the total balance/s equal to the total of the trust balance in the first tab.
    3. Individual Section 86 (4) investments, with the total equal to the total of investments in the first tab.
  2. Trust Transfers, under Reports. For each trust transfer there is a PDF report, listed in date sequence.
  3. Client Statement. A selected Matter or all Matters for the selected client, with an option to include matters with zero balances (as at the ‘to’ date). If this option is not selected, an account where the balance has become zero (e.g. an invoice paid) will not been included. The statement shows all accounting transaction, in separate sections for Business, Trust and Investments.
  4. Statement of Account(s): General Ledger accounts with transactions for selected period. This report extracts all general ledger accounts for the selected period, with any transactions preceding the ‘from’ date represented as an Opening balance. To analyse accounts, it is recommended to extract to a spreadsheet and convert to table (Excel) or Filter (LibreOffice) where columns provide filtering (e.g. of one or more account and/or a particular transaction type), sorting, etc.
  5. Audit Trail. Includes all accounting entries posted, both automatic (e.g. Invoices) and captured (e.g. Receipts and Payments) for the selected period. The Audit Trail include a filter.
  6. A Bank Recon can be run for any period, showing the LawPracticeZA opening balance, any unreconciled transactions at the time, with a calculated closing balance, which should equal the Bank Statement balance of the same date.
  7. Matter Movement shows all business, trust and investment transactions for all matters for the selected period.
  8. Debtors Age Analysis lists all Clients Matters with a business balance, with aging to 120 days. The trust and investments balances are also shown, for information purposes.
  9. Suppliers Age Analysis lists all creditors with a balance, aged to 120 days.
  10. Invoiced fees and disbursements. This report has been optimised for a spreadsheet Pivot table, where the fees and disbursements can be analysed in a variety of ways; e.g. by Period, by Fee earner, by Client and/or Matter, with or without VAT, etc.
  11. VAT Report. Can be extracted for any period. A VAT 201 is produced for the period, with the transactions making up the totals in an accompanying spreadsheet.
  12. Financial Reports. These are produced as a PDF document or Spreadsheet, with tabs for
    1. Trial Balance. A list of all General Ledger accounts (including the system Debtors Control, representing all Clients Matters Business Balances, and Creditors Control, representing all suppliers balances). Separate columns are included for Trust and Investment balances.
    2. Income and Expense report. All income and expense accounts, with the difference between the two the profit or loss.
    3. Balance Sheet. All assets and liabilities (including owners equity), including the calculated profit or loss (from Income and Expense).

Note

Account categories and sub categories can be configured. See GL Account categories and option ARRANGE.

Frequently asked questions (FAQ’s)

Questions asked by LawPracticeZA users, with answers.

Where has my Matter gone? (archived Matters)

To retrieve an acrhived Matter,

  1. Select Matters in the bookkeeper menu.
  2. Click on Expired for a list of all archived Matters.
  3. If you need to search for a Matter, enter part of the Matter description, or code, in the search field.
  4. Click on the Matter description, and the Matter is loaded.
  5. Top right corner is the unarchive icon (sun): click and the Matter will be returned to ‘live’.

How do I correct an incorrect posting?

Mistakes do happen.

LawPracticeZA provides the option to reverse entries; i.e. LawPracticeZA will post accounting transactions opposite to the original entry, thereby reversing the entry.

Accounting entries cannot simply be modified to correct a mistake. To protect the accounting data integrity, an adjusting accounting transaction is required, which will appear on the audit trail. This is why it is also advisable to include a clear explanation for the reversal - one that both the client (on the Client Statement) can understand, as well as the auditor - perhaps six months after the reversal.

Note that unbilled fees and pending disbursements can be amended or even deleted. This is because they are not accounting entries. When invoiced, they are converted.

Because invoices are generated by the system, special functionality is provided - as described below.

Reversing invoices: generating Credit Notes

With invoices, as with all accounting records, once generated, the details cannot be changed. To cancel an invoice, you need to create a Credit Note and, if necessary, re-invoice.

LawPracticeZA provides a number of options to automate what would otherwise be a laborious process.

If you, for example, invoiced a client, but with the incorrect address,

  1. Select the invoice (tip! for invoice INV1005, for example, in the Search bar type invoice INV1005 and select - or select from Account Transactions ) and with the invoice selected, click the icon for ‘Copy to unbilled’ (icons in top right of screen). This will reinstate all the unbilled fees and/or disbursements. Then click the back-arrow icon to generate the Credit Note. You can enter a reason: e.g. incorrect address.
  2. Update the client address (and name if applicable); change to the correct invoice name and address and (re) invoice.

If you invoiced the incorrect client, after step 1 select the Matter and under unbilled, click MOVE SELECTED to move the unbilled fees and/or disbursements to the correct Matter, then invoice the correct Matter.

Remember that unbilled fees and pending disbursements (WIP) can be edited or deleted, as until invoiced, they are not accounting records.

Does LawPracticeZA have short-cuts?

There are a number of short-cuts in LawPracticeZA that will save you time.

  1. Enter / to load the search (same as clicking the magnifying glass). To find a Matter, enter any part of the client or matter details or code. For other options, press ?. There are options for finding suppliers, or specific transactions such as invoices or receipts, and more.
  2. Enter \ for the menu filter (where you can enter any part of a menu item name - for example
    1. au will display the Audit Trail option for selection.
    2. com the Trust Investments / Commitments option.
    3. 86 both the Section 86(4) Investment Withdrawal  and the Section 86(4) Interest / Charges options.

Time-based fee calculations appears incorrect. How can this be?

We sometimes received a communication along these lines: “My hourly rate is R1,000 per hour for Consulting but if I charge for 45mins, the system bills R800, not R750.”

This is not an error. The local and international standard is for lawyers to charge per 6 minutes, or tenths of an hour (accountants per 15 minutes).

So the system calculates up to 6 minutes as 0.10 of the hourly rate, from 7 to 12 minutes as 0.20, etc.

What most attorneys do is include this in their terms of engagement with their clients, together with their hourly rate and other terms and conditions.

There is also an option (in Firm details) to show fractions of an hour as a unit on the invoice, as opposed to the number of minutes, for time-based attendances.

Invoices: can I include my own message at the bottom of an invoice?

You can add a message to invoices sent to clients. Go to Firm details (you must have Administrator privileges) and add the message under banking details. An example of a message is “payment must be made 30 days from date of invoice”. Note that this message will appear on all invoices. It can be changed (e.g. for December you could include an addition message). Messages can be on separate lines. Before invoicing check messages with a proforma invoice.

Note

If you are sending an individual invoice, you can send a message with the email. When you click send, you get a prompt to add a message to the email.

Matter Receipts: can I show outstanding invoices when capturing?

To view outstanding transactions on a matter, you need to view them under transactions, on the Matter. You could produce a Proforma, which you could tab to in the browser when doing the receipt.

How do I print a Matter Receipt?

The automatic production of a Matter Receipt was removed, at the request of users. The option to print a receipt is still there, but needs to be selected from the receipt transaction, which can be accessed from Matter Transactions, or searching for the receipt. Also note that your client can generate a receipt from the statement of account that you send them (also invoices and credit notes, directly from the statement details in the email).

In the Cash Book, how can I see to which matter the funds are allocated?

We do not show the opposite entry in the Bank Account enquiry. We have adopted the approach that everything can be exported to a spreadsheet (e.g. Excel), in order to provide flexibility in reporting. This has been done to accommodate the varied requirements of many different law firms.

You will see in the manual that some reports are well suited to being rendered as a Pivot Table. For these, we have optimised the reports accordingly.

Others are well suited to be analysed as tables, where you can filter the report using a standard and flexible filter that can be assigned to every column at the click of a button. In this instance I would use the Matter Movement where you can, for example, filter the reference column to include only transactions that start with TP (Trust Payment). This will produce a list of all Trust Payment per client’s matter, with full details. You can have multiple filters, sort data, etc.

Note

There are many short YouTube videos that will show you how to create tables in Excel. If you are using the free and open source LibreOffice Calc, simply select AutoFilter.

Remember that reports can be for selected time periods, even after month and year ends.

Why did LawPracticeZA send a client multiple emails for the same invoice?

The user requested the system to send a set of unsent invoices, but 1 of them had a faulty email address (e.g. should not include quotation marks). So the entire batch was reported to be rejected to the user, while actually some of the invoices were successfully sent. The user then tried to resubmit the entire batch a few times, resulting in multiple invoices being sent to some clients.

As a result of this, we are looking at making some modifications to LawPracticeZA

  1. Improve email validation, using a live email validation tool that we have created.
  2. Remove bad characters (such as quotation marks) from email addresses automatically.
  3. Change the sending of invoices to be batched. They’ll still go out asap, but will be done 1 at a time, which will allow only the offending invoice to ‘bounce’ back to the user as an issue.

How do I account for VAT when I capture an expense with VAT directly into the business cashbook?

You do not capture directly into the Cash Book. Input VAT can only be derived from a suppliers tax invoice (even if an alternatively accepted invoice such as an insurance premium).

To follow correct procedure without introducing additional work, LawPracticeZA has introduced the option of immediate payment on Suppliers Invoices.

Note

Tip: Open a COD Supplier to be used for these type of postings.

This means that posting one entry will generate the correct accounting entries to accommodate VAT. We have also provided an automatic one-click feature for posting bank charges (and interest) directly from an imported bank statement (Reconzilla). You can also post Receipts and Payments from the bank statement, where all information is automatically entered - you only have to select the Matter or GL account, as appropriate, in the receipts or payments module. So you should look at including bank statement imports in future.

Can I integrate LawPracticeZA with some of our other systems?

From our website, under Developers: LawPracticeZA has been built with an API-first approach. All business logic operations and data IO can be performed securely over our secure RESTful JSON API mounted at /api. This means that developers are free to integrate LawPracticeZA with other systems such as document generation, business management, customer relationship management, etc.

Note

For larger firms with internal IT expertise, this functionality can prove extremely useful. We have also used the API to enable integration with e4 transfers, for example.

What if I receive an error message?

This calls for an explanation of how LawPracticeZA deals with errors.

Error messages can be ugly and annoying: so we’ve put furry animals on them. We call them Error Animals. It helps our users understand different kinds of errors.

For example, a bunny usually indicates that there is something invalid about the data. For example, a matter cannot be opened for a client that didn’t yet exist.

Another kind of animal that might appear is the Llama. Llama’s are the most vague, and often indicates there is a bug in the system, or we’ve encountered a situation that the system wasn’t expecting at all. If you do see a llama, it’s time to contact support. (Although all llama errors do get automatically sent to our central ‘Sentry’ system for us to analyse and resolve, so we might already know about it. But all additional information is helpful.)

The border collie occurs when the address (URL) is incorrect - this could be due to a broken link or incorrect parameters or perhaps a link getting garbled or cut off in an email - or partically cut-and-paste. If you followed a link from within LawPracticeZA please contact our support so we can fix it. If you followed a link from another website please tell them so they can fix it.