In the first quarter of 2019, Intuit chose to use the chart of accounts as a metric of usage, meaning, if you have more than 250, you must purchase the more expensive (and feature-filled) option, QuickBooks Online, Advanced. LeanLaw does not favor this as the most effective measurement of size and activity. Some smaller entities will have financial consequences as a result.
As LeanLaw assessed alternative methods that would not leverage the chart of accounts, we always ended up back to our core beliefs on trust management as it relates to QuickBooks Online.
Here's how we approached understanding the problem:
What if LeanLaw moved to a single liability ledger in QuickBooks Online?
We would have to store the ledgers in LeanLaw, thus breaking from our belief that QuickBooks Online is the source of Truth.
Technically, it would be very difficult with the QuickBooks Online API, to represent client/matter trust accounts in LeanLaw. Our clients need a simple ledger as to what they're holding on behalf of their clients.
What does LeanLaw’s current user’s chart of accounts look like? How are the liability ledgers a burden?
When we looked at our client base and assessed their charts of accounts, we found that many of the folks had a rather sloppy chart of accounts with many inactive items and lots of expenses. Thus, we felt that cleaning the chart might alleviate some of the burdens.
What do the Bar Associations suggest relative to compliance?
If you dig into the compliance rules, you will see specific mentions to the handling and reconciliation of the trust money. This would be a burden and somewhat inefficient if you were trying to manage this in QuickBooks Online by simply tagging an entry to a client with a top level trust liability. Reports would be custom and very difficult for the lay user. We are concerned about the 3rd step of the 3-way trust reconciliation, making sure the money went into the right client/matter accounts. Would that be executed? If we don't have the money in and out in specific ledgers, how do you validate that you accounted for the money in an accurate way? Most folks would go back to Excel and not have the information in one place. This defeats the benefits of LeanLaw.
Our decision not to change our approach is rooted in the importance of accuracy, data completeness, compliance. Yes, technically there are ways to achieve all of these without the use of trust ledgers, but for the majority of law firms not using our model would result in manual work with a high chance of inaccuracy. Compliance and accountability to their clients are worth the extra cost. Some lawyers focus on the increased cost, but we would rather err on the side of compliance. Poor handling of trust money is far costlier than the upgraded QuickBooks Online Advanced pricing.
As part of our technical roadmap, LeanLaw will be putting better tools in place to automatically close trust matters and make inactive the liability accounts. This will not only make your chart of accounts tidier, but it will also alleviate usage metrics relative to your QuickBooks Online account.