does your law firm get paid before you perform the services for the clients
well then you should watch this video how to record receiving clients payments
if you have any questions about this topic you can leave them in the comments section below and
i'll do my best to help you and of course if you feel the video helped you i hope you will
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law firms get paid a little differently from the average company payments are usually received
before services are rendered to the clients
each payment changes the balance in the chart of accounts and the balances of the individual client
and those are two separate sets of records in your quickbooks online for example
let's imagine on january one we received six thousand dollars from alan arby who gave you
check number six one six one for future services rendered and to make things easy
let's imagine that you immediately deposited the check into your operating bank account so what
would change in the trial balance at the moment that you record this very first transaction well
you have more money in your bank account so cash in chase bank would increase at the same moment
you owe money to the client in the form of future legal services and the amount owed to the client
in the future for legal services that you owe them would increase because if they pay you before you
do the service you owe them more services in the future at the moment that you received payment
you should also be aware that the customer's individual balance would change in the customer's
records aside from the trial balance and the chart of accounts so let's take a look at
this transaction we do receive payment now before i record this i'd like to click reports custom
reports and go to the trial balance so that the trial balance will show the results immediately
after we record this first payment to record any transaction you go to the top left where you have
the plus sign next to the word new click once and you see all of your client related transactions
are in this left column here we then click receive payment because you received the payment
from the client now you have to put each fields piece of data very carefully you have to choose
the correct client click the pull down click on the client uh this is just reminding you that you
that you're getting paid before you render the service and it's a warning because usually it's
the other way around and we can close this warning because we know the context of what we're doing
so we can go forward i'm going to use the year 2021 because i'm recording this now at the end of
2020 doesn't matter the payment method is check and it's check number now you must look very
carefully to make sure that you're recording it into the correct bank account cash in chase bank
is the operating bank account and the amount of money that you received was six thousand dollars
push tab now we've recorded every piece of data that we need to at the moment that we receive
payment from the client if we click you know click the pull down arrow and then go up to save and
close this is just again reminding you let's click don't show me again because normally you would
have an invoice before the payment but usually not if you're an attorney so we click save as a credit
and at the moment we look at the trial balance cash in chase bank shows up for the first time as
six thousand dollars and unearned legal fees shows up for the first time as six thousand dollars
now we have only checked the results in the chart of accounts we should also check the customer
records click reports and first we should go to transaction list by customer transaction list by
customer right here and basically it just lists one transaction for six thousand dollars but if
we click reports and open invoice we see that alan has a negative balance because he paid in advance
and quickbooks considers a customers who customers money who pays in advance as a negative number
because normally a positive balance in a normal business with a normal customer would mean that
the customer owes us but a negative balance for the customer means we owe the customer for future
services now let's take a look at example two on january 2nd we received 8 000 from betty
boop who gave you a transfer directly into your chase bank account transfer number one
two three four five so what will be the result well cash and chase bank will increase from 6000
going up by 8 000 and it will become 14 000 and unearned legal fees will also increase because
we now owe more future services as a result of getting paid before we perform the service
so let's go ahead and record this 8 000 from betty same thing we click new
receive payment change the date to the date that the money went into the bank account make sure
it goes into the correct bank account make sure you choose the correct customer betty she doesn't
have any invoices which is normal for a law firm but not a normal business so we close this out
the payment method was you know you can just leave it blank and just put the transaction number
and now the money amount that betty gave us
push tab 8 000 now that we have carefully put each piece of data for this
payment from betty we click save and close and you can see that the open invoice reflects
that we owe betty eight thousand dollars in future services we also still owe alan six thousand
dollars in future services so the total unearned that we owe to all clients is fourteen thousand
and if you click reports trial balance you will see that unearned legal fees
is equal to the total balance of all clients fourteen thousand dollars
our third example involves candy charles let's imagine on january third we received
eleven thousand dollars from candy charles who gave you a transfer to chase bank
number zero nine eight seven six and clearly this is for future services rendered so let's record
it the same way we did the others we click new receive payment we choose the correct customer
we know she does not have any invoices so let's close this we make sure the money is
being deposited to the correct bank account we make sure we put in the correct number
uh whatever and the most important thing is the money amount eleven thousand dollars push tab
on your keyboard to save one field without saving the entire window and closing it out
now that we put every important piece of data we click save and close and you can see
we now have candy charles in our list of customer transactions you can check the accumulated totals
by clicking reports and go to open invoice and you see that the current balance of all three clients
equals 25 000. that's the total that is currently unearned from clients so if we click reports
and we go trial balance unearned legal fees is properly stated at twenty five thousand
and so far what we've recorded as bank transactions equals twenty five thousand now
here's the beautiful thing you can open and change any transaction directly from the trial balance
you see right now these numbers are summary totals of all the transactions that have been recorded
in the accounts but if you are looking at a summary total
and you wish to see every transaction that adds up to that total all you have to do is
double click the number and you will get a list of every transaction that adds up to that total
it gets even better when you look at a list of transactions in a report you can click anywhere
on the line of any transaction double click and you will go right back to the very window
that that same transaction was recorded in once you go back to that window you can make whatever
change you want and if you change a money amount as soon as you click save and close the results
in the reports will change immediately this report came from the trial balance reports
trial balance double-click the summary number to get the detail of every transaction
double-click anywhere on the line to go back to the same window that you recorded that transaction
and change whatever you want you can also open these transactions by clicking reports transaction
list by customer and they're listed here the same way as long as they're listed one by one you can
click anywhere on the line of the transaction and go back to that same window and change anything
you need so fixing a mistake in quickbooks online is easier than erasing with a pencil
you