Here is an article based on the seminar we ran at various venues in Cape Town this week on the subject of legal tech.
Legal Tech Seminar 2017-11-10
Here is an article based on the seminar we ran at various venues in Cape Town this week on the subject of legal tech.
LawPracticeZA recent enhancements 2017-10-12
LawPracticeZA recent enhancements as at 12 October 2017
The main search (magnifying glass at the top of your screen) includes a number of new options (other than just searching for a Matter).
Enter a question mark (?) and a list of options, with examples, will be displayed.
For example, enter the word client, followed by part of the clients name, and select the client to load the client details. From here you can, for example, select statement (grid icon, second icon from right).
Client Statements offer a new option, namely no page breaks between Matters (default is separate page per Matter per Client). Click on the PDF and select the option you want from the drop-list.
Then there is Quick Fee Capture. This is to accommodate fee earners who want (or prefer) to capture a batch of fees, as opposed to capturing fees as and when they occur. Select the option from the Fee Earner menu.
New LawPracticeZA interface fully implemented 2017-08-22
The new LawPracticeZA interface was launched last month, incorporating many improvements and enhancements. Since the launch there have been ongoing enhancements and improvements.
Two of the most exciting enhancements for Fee Earners are the dashboard and diarising.
A Pie Chart shows the number of your Matters that are Due (diarised for today), overdue or due in future. Click on a segment and you are taken to a list of the Matters, with diary dates and notes, where you can drill-down into the Matter. Here you can view the Client and Matter details, diarise the Matter, update the Matter or Client details, view the transactions details or perform a number of other operations relating to the Matter, such as capturing fees, producing a proforma invoice or generating an invoice and optionally emailing your client, and more.
We are busy adding a new graph, to the right of the Pie Char. This chart will show the value of fees captured (ex VAT) for this month, against last month, and against your target for the month.
Scroll down the dashboard and you will see how much is held in trust by the firm, the number of invoices that have been generated but not emailed to your clients by LawPracticeZA and the number of draft invoices.
Click on unsent invoices and you will be presented with a list (checked by default), with an option to Send (in bulk). You can also click on an individual invoice (number) to view the invoice, where you will be given various options relating to the selected invoice.
Click on Draft Invoices to take you to a list of invoices containing unbilled fees and/or pending disbursements, with options to either send proformas or generate and send invoices for the selected items. You can also drill down into a Matter.
At the bottom of the dashboard are some useful resources; an Overview of LawPracticeZA (a brief description of the functionality provided by LawPracticeZA), the Knowledge base, where you can find answers to specific questions relating to the operation of LawPracticeZA and News, which contains articles such as this, and others relating to law firms.
The diarising function has been greatly enhanced. Use to manage all Client's Matters in your law firm extremely efficiently and effectively. To summarise, the functionality you should be aware of: -
You can make multiple diary entries for a Matter, which can be assigned to either yourself, your assistant or a colleague, and which can contain attachments (documents, voice recordings, etc).
Because there can be multiple diary entries, an entry must be deleted when complete. This can be done  In the Matter, by clicking the Bin (remove / delete entry),  In the calendar, by clicking the tick in the circle. It will change to two ticks (to indicate complete); click again to revive (single tick). Note that completed diary entries remain in the Calendar, as a history of what was diarised and noted.
In the Calendar, hover over the note to pop up the full note. In a Matter, you can edit an existing diary entry; change date, note, etc. In the Calendar monthly view  You can change a diary date by dragging the Matter to a different date,  Click in a date outside of a Matter to change to daily view for that day (can also select Monthly, Weekly or Daily view from menu).
In daily view, you can drag and drop to a different time, also drag the bottom of the block to expand / contract time.
In your diary, you will see diary entries assigned to yourself as well as diary entries you have assigned to your assistant (obviously also in your assistants diary).
You can view your assistants diary in the Calendar.
There have been many enhancements to the bookkeeping modules, including, but not limited to
- The inclusion of 'As at' and date ranges for reports, where appropriate. This enables the bookkeeper to extract reports from previous financial periods at any time.
- Trust Transfers now also has an 'As at' date option, where the module will evaluate the status of all accounts as at the date, and transfer accordingly. All transfer reports are saved by date, and can be individually recalled (option in Reports).
- The search has been standardised and introduced for all Matter, Supplier or General Ledger account searches. After typing any 2 characters, all matching accounts will be shown instantly.
- Because there are a lot of Bookkeeper menu options, use the menu filter to quickly find the one you are looking for. For example, type 'jou' for Journal Entries.
- Additional posting modules have been added to simplify posting and make it more efficient.
- Improved options for automatically reversing transactions, where LawPracticeZA generates valid accounting entries to maintain the integrity of your accounting data. Remember that every accounting transaction recorded by LawPracticeZA appears in the Audit Trail, which can be viewed within a date range and has a filter to quickly find any transaction posted (you can enter an amount or any text that is part of the transaction, such as an invoice number, 'receipt' or 'vat').
New LawPracticeZA interface 2017-05-01
UPDATE: The new interface has now been fully implemented.
To accommodate continual enhancements to LawPracticeZA, and to keep up to date with advances in technology, a new interface for LawPracticeZA is under development.
The new LawPracticeZA interface will be compatible with the existing one. We are phasing in the new interface over time, which provides improved functionality.
Where there is an urgent need for a change, the new interface for the relevant module will be introduced.
For example, the Bookkeeper ➤ Record Accounting Transactions ➤ Journal Entries module is confusing when posting journals between Matters or Suppliers (where you have to select DEBTORSCONTROL or CREDITORSCONTROL respectively, then the Matter or Supplier accounts). The new interface is simpler, with a choice between General Ledger, Matters or Suppliers.
So when ‘Journal Entries’ is selected, the new interface version is loaded. Once you have completed entering the journal (or a number of journals), you will return to the ‘old’ interface (click here in blue bar at top of screen).
Over the next several months more new options will be added, until the entire system is converted.
The new interface is mapped as closely as possible to the old interface, with new functionality added.
A new incremental manual will also become available on the website, continually updated as new features are added.
Corporate lawyers and LawPracticeZA 2017-04-25
Although LawPracticeZA was designed for law firms, there is increasingly interest from corporate lawyers, to use LawPracticeZA to help manage their matters as well as get a costing on how much their service would had cost, had they used a legal firms services.
Many corporate lawyers have previously practised privately, so would use LP much as they did in their legal practice.
Subsidiaries or other entities within the group for whom they are acting are opened as ‘Clients’. Matters are opened in the usual way, linked to the appropriate ‘client’.
Matters are assigned an ‘owner’. Matter owners can assign access to other users (Fee Earners).
Fees and/or disbursements can be posted to Matters; time-based (different hourly rates per lawyer to accommodate seniority), unitary fees and disbursements.
Fees can be analysed by Customer (division), Matter, lawyer, period and fee amount - or a number of other metrics. Using a spreadsheet pivot table, the figures can be viewed from different perspectives and converted into a chart of choice, in seconds.
Accounting Controls 2017-03-13
All accounting systems, and especially legal accounting systems, have certain non-negotiable controls.
A most basic control is: the sum of all debit balances must always equal the sum of all credit balances. A control in a legal system is that all monies held on behalf of clients must be reflected in the client's trust balance and equally represented in the trust bank account. Similarly, all investments made on behalf of client’s must reflect on the client’s investment balance as well as individually in a Section 78(2A) investment account.
Sometimes bookkeepers get confused by these controls, so this article explains some of the more obscure ones, and how they are handled by LawPracticeZA.
Suppliers invoices and paying expenses
We have been asked by bookkeepers “Why can’t I post a payment for this expense directly, using a journal entry, rather than processing an invoice?” The correct sequence is:
Incur the expense: invoice from supplier. Process the invoice against the supplier (the creditors control account in the General Ledger updated), the expense and VAT (if applicable).
Pay the supplier (Business Bank and Supplier).
Where an expense such as a telephone account is paid directly from invoice, bookkeepers often want to post one set of entries: -
Debit the Expense account with the cost (ex VAT)
Debit VAT In
Credit the Bank
LawPracticeZA achieves the same result, but by posting the suppliers invoice and selecting the Paid option. The system, behind the scenes, generates all the correct postings, namely
Invoice: Credit the Supplier with the full invoice amount (including VAT if applicable).
Invoice: Debit the Expense account with the amount ex VAT
Invoice: Debit the VAT In account
Invoice: Credit the Creditor's Control with the full invoice amount (including VAT if applicable).
Payment: Credit the Bank with amount owing to the supplier.
Payment: Debit the Supplier with amount owing to the supplier.
Payment: Debit the Creditor's Control account with amount owing to the supplier.
So although the end result is the same, with LawPracticeZA there is a full audit trail of the CORRECT accounting transactions, which are important especially if VAT is involved. Because many of these entries are automated by LawPracticeZA, there is minimal effort in doing the right thing.
Business Trust and Investment
It is critical not to mix business, trust and investments. LawPracticeZA restricts any entries that would violate this rule.
Where there is movement between business and trust and between trust and investments; these are catered for in LawPracticeZA by specific posting modules.
Automatic Trust Transfers: identifies what is available for transfer, modifies Matter balances accordingly, updates a clearing account which is updated with the payment from the trust bank to business and the receipt into business bank from trust (see Trust Transfers).
Section 78(2A) investments, withdrawals and interest earned. Automatically updates the client Matter trust and Investment balances, the Trust Bank account and the individual Investment account.
Bookkeeping and accounting fundamentals and LawPracticeZA 2017-02-07
To explain how LawPracticeZA can help manage the books in a legal practice, let's start with the basics.
Double-sided bookkeeping provides a necessary record and useful information of the financial transactions of a firm.
For example, raise an invoice on a client's matter and the following transactions are posted by LawPracticeZA: -
Debit the client's matter (including VAT if applicable) and the General Ledger debtors control is automatically debited. The debtors control represents the current status of all Matter in the General Ledger.
Credit income (ex VAT) in the General Ledger.
The client pays their account (a receipt from the client):
Credit the client
Debit the bank in the General Ledger.
The firm pays salaries and other expenses: -
Credit the bank in the General Ledger.
Debit the expense in the General Ledger..
In practice there are many clients, invoices and receipts. At any point there will be clients who owe the firm money; i.e. have been invoiced but not yet paid, or not paid in full.
So from the above example it is possible, at any time, to establish how much still has to be collected from clients, how much money is in the bank and how much is owed to SARS for VAT.
The debits and credits are all posted to General Ledger accounts. To facilitate several clients and suppliers, it is common to introduce subsidiary ledgers for accounts receivable (debtors) and accounts payable (suppliers - creditors), reflected by a debtors and a creditors control account in the General Ledger.
Although fundamentally bookkeeping is based on this simple double-sided principle, as transactions become increasingly numerous and varied, there is a need for control. LawPracticeZA is a Matter management and Billing system with integrated bookkeeping and accounting modules, designed specifically for lawyers, that incorporates these controls, including very necessary controls for trust accounting.
To deal with trust accounting effectively, LawPracticeZA includes:
Three separate balances for each Matter; Business, Trust and Section 78(2A).
When a client makes a payment, if the amount received is not fully covered by a business debit (work or disbursement/s have been invoiced) the money received must be deposited into trust. If the client requests the money be placed in an interest-bearing account for their benefit, the money must be moved from trust into a Section 78(2A) account in the client's name.
Automatic trust transfer
Analyses Matters for available trust (trust credit less any reserve trust) against business debit. Where there is an amount available for transfer on a Matter, the automated transfer will
Credit the Matters Business balance and debit the system-generated Matter Trust Clearing account in Business.
Debit the Matters Trust balance and credit the system-generated Trust Clearing Matter account in Trust.
When the Trust Transfer payment (sum of all transferable amounts) is made from the trust bank account, Credit the Trust bank account and debit the system-generated Matter Trust Clearing account in Trust.
When the Trust Transfer payment is deposited into the business bank account, Debit the Business bank account and credit the system-generated Matter Trust Clearing account in Business.
The controls built into LawPracticeZA ensure that for every trust receipt or payment, there are corresponding accounting entries to ensure the commitment to trust equals the investment in trust. The Trust commitment / investment report provides a spreadsheet with 3 tabs: -
A list of all client's matters with either a trust and/or investment (Section 78(2A)) balance, with totals for each.
A list of trust bank account/s, where the balance totals equals the total of the client’s matter trust balances in the first tab.
A list of all Section 78(2A) accounts, where the balance totals equals the total of the client’s matters investment balances in the first tab.
LawPracticeZA also automates many of the double-sided entries, ensuring that they are done correctly. For example:
When an invoice is raised on a Matter, LawPracticeZA generates the following transactions
Debit the Matter (Debtor) in business with the full amount of the invoice (i.e. including VAT if applicable).
Credit Fees (Income) in the General Ledger with the amount ex VAT.
Credit VAT in the General Ledger with the vatable portion of the invoice.
Debit Debtors control account in the General Ledger with the full amount.
Some of the controls to be aware of in LawPracticeZA are
Postings to clients Matters (subsidiary ledger) in Business automatically updates the Debtors Control account in the General Ledger. The debtors control account therefore represents the sum of business balances of all Matters. The same principle applies to the Creditors (Suppliers) subsidiary ledger.
Posting to accounts are restricted in order to maintain control and the integrity of data. Apart from only business to business and trust to trust, only certain types of posting can be done under certain conditions. See ‘Offset a payment in kind from a client’ for an example.
Trust receipts can only be posted to a client’s matter in trust. Trust payments can only be against a client's matter (or the system-generated trust clearing account matter, as this is a proxy for clients Matters) in trust.
For more complete coverage of all fee earner and bookkeeper functionality provided by LawPracticeZA, read the manual.
Offset a payment in kind from a client 2017-01-04
A law firm does work for a client and invoices the client. The client provided the attorney with insurance and requested that his account is credited with the value of the insurance.
The way the law firm proposed dealing with this was to credit the client’s Matter account and debit the General Ledger Expense account ‘Insurance’ with the value of the insurance.
What is wrong with this?
If the client paid his account and invoiced the law firm, who in turn paid the supplier (also the law firm's client but now in the role of a supplier) and the law firm paid the supplier, this would be the end of the matter. But if the client requests an offset of the amount, the ‘receipt’ from the client does not involve a cash transaction, but must nevertheless be processed as a receipt.
Presuming you have generated the invoice to the client in the usual way, also post the invoice received from the client (who must also be registered as a supplier) in the usual way (this will credit the supplier and debit the expense account in the General Ledger - i.e. Insurance) and VAT, if applicable.
If it does not already exist, create a new business bank account called Clearing/Trade.
Post a receipt to the Matter, selecting the bank account created above. This will credit the Matter and debit the bank.
Post a payment to the supplier, selecting the bank created above. This will debit the supplier and credit the bank.
After these postings both the supplier and bank accounts will be zero, and the client's statement will reflect the credit.
Confusion over VAT on disbursements 2016-12-05
A number of law firms are confused about how to deal with VAT on disbursements. Getting it wrong could cause problems with SARS.
A disbursement is the cost of a service delivered by a third party on behalf of your client, for which you are billed by the service provider, and for which you then bill your client. VAT rules apply independently as these are two separate transactions.
The opposite side of the ‘sale’ of a disbursement to your client is the ‘purchase’ of the disbursement from your supplier.
For example, a VAT registered law firm was asked to post an Advocate's bill - a disbursement - as exempt, because the Advocate was not registered and therefore did not charge VAT. The law firm's client refused to pay their bill because the law firm charged the client VAT on the disbursement.
As a registered vendor, the law firm is obliged to charge VAT, whether the service or product supplied to them is from a registered vendor (including VAT) or an unregistered vendor (no VAT).
The law firm's client is therefore asking them to break the law.
The alternative would be for the service provider to invoice the client directly; i.e. the legal firm would then not invoice the client. This is seldom if ever done as it creates other problems.
If you are registered for VAT, when billing your client in LawPracticeZA: -
If your supplier (e.g. an Advocate) is registered, capture the disbursement as the amount ex VAT as when invoiced by LawPracticeZA, VAT is automatically added by the system. For example, if you receive a bill for R114 (R100 + R14 VAT) capture the disbursement as R100 and the invoice will reflect R100 + 14% VAT.
If your supplier is not registered, capture the disbursement amount as the supplier's invoice amount (e.g. R100) and the invoice to your client will reflect R100 + 14% VAT.
If you are not registered for VAT, when billing your client, capture the disbursement total. For example, in the above example R114 if your service provider is registered and their invoice to you includes VAT, R100 if they are not registered.
See here for expert opinion.
VAT Rounding 'Errors' 2016-10-14
In LawPracticeZA we store the VAT amount to 2 decimal places on each transaction. When dealing with a large number of line items this can lead to the situation where there is a discrepancy between the sum of the 2-decimal-place stored VAT amounts, and 14% of the sum of the ex-vat amounts.
Some systems store the actual VAT amount to 3 or 4 decimal places, so that when summing large numbers of line items the total is closer to 14% of the ex VAT totals, but this also leads to confusion when people sum the 2-decimal that they were presented with on an invoice or other document.
What Excel does is present you with a 2 decimal rounded value but "underneath" the amount is to much longer precision.
We made the choice to round at the transaction level thereby setting the VAT amount "in stone" as the value that has been presented on the invoice - on the basis that the amount you charged the client for VAT should be recorded exactly as it was presented to them. This is widely considered a best practice; read here:
So please use the sum of the VAT amounts rather than 14% of the total - this is safer anywhere for cases where you may have a mix of vatable and non-vatable line items.
The SARS VAT return requires that you apply a formula to the vatable sales to arrive at a VAT figure, which in all probability will differ from the sum of the individual amounts that you raised on each invoice. The discrepancy will be small, rounding differences, and expected.