Client Account Surplus

Trust Bank Account transactions in PCLaw can only be associated to matters and not to any G/L accounts. This is probably due to the Trust Bank Account regulations in US/Canada for which PCLaw was primarily designed for. This means that any receipt or payment from Trust Account cannot be associated directly with any G/L account – the system will only accept matter allocations.

The above may present problems for new firms wishing to adopt the PCLaw system in jurisdictions in which banks have no Law Society rules they need to comply as far as Law Firm Trust Accounts go. Such firms may ponder with Trust accounting issues such as how to maintain minimum balances, how to account for non-matter related interest income and bank charges arising from Trust accounts.

The following is involved to get round this:

o   Opening of a Client Surplus Asset account (this can be a General Bank account or simply a current asset G/L account)

o   Opening of a client called “Client A/c Surplus”

o   Opening of “Client A/c Surplus” matters for each Trust Bank Account

Every time a non-matter entry is to be made from Trust you would use the Client Surplus matter for that Trust account. Then and opposite entry is done via the Client A/c Surplus Asset account.

Example:  Interest from Trust A/c needs to be accounted from Trust A/c 1 for 1,000.00. First one would do a Trust receipt against client surplus matter 0000-001 for 1.000.00. Then one would debit Client A/c  Surplus Asset A/c and credit Interest Income G/l account with 1,000.00. This is achieved via Firm Receipt (if the Client Surplus Asset account is opened as a General Bank account) or a journal entry (if the Client Surplus Account is opened as a G/L account).

At all times the balance in the Client A/c  Surplus Asset account must be equal and opposite to the total of Trust balances in all the Client A/c  Surplus matters. One would have to keep a tab on this manually.

I know in the past for different reasons PCLaw had a version for firms in Scotland to enable the association and tracking of the Client Surplus Asset and matter accounts. Firms in Scotland can have a substantial Client A/c Surplus and they can then overdraw the Trust Account for normal client matters provided the amounts overdrawn do not exceed the  balance in the Client A/c  Surplus. PCLaw had a feature to automatically track this. I am not sure if the Trust regulations for law firms in Scotland have changed or if Lexis still supports this version of PCLaw.

Should you move PCLaw from C-TREE to SQL?

In my prior blog post I compared effects of two offices of a firm running PCLaw C-TREE vs PCLaw SQL. The question is then should a firm implement / upgrade to the SQL or C-TREE version of PCLaw.

Whilst I am not a techy I have some experience working with a few CICs on PCLaw SQL set of issues and can give my view based on my own experience and requirements I have seen firms need.

CICs will give you conflicting answers and reasons for moving (or not moving) to SQL. One might then wonder: who is right and who is not? The short answer as one CIC put it is “there is no right or wrong answer..”. What works for one firm may not work for another.

Here is my take on it: As stated in my previous post, PCLaw just is not designed to work on SQL and can have devastating effects. There are however success stories of mid size firms using it well but my take is that if a firm feels it needs to move to SQL to get the benefits of SQL then it probably has reached a size it needs to take a holistic approach and assess its requirements. It may be that it has outgrown PCLaw. However if merely integrating with another software is the sole reason for upgrading to SQL version then it needs to explore other avenues.

My experience is that the C-TREE is better than SQL multiple times over because with C-TREE you have the following advantages (that are disadvantages of SQL):

·         Speed: C-TREE reports and routines are much faster than SQL.

·         Quick to implement and cost friendly: No techy /CIC needed and no additional cost outlay in terms of hardware/software.

·         Portability: PCLaw C-TREE database is easy to back up into a pla file and hence carry whenever and wherever one needs to and set-up. This has a number of benefits for a busy Accountant as stated below. SQL database on the other hand requires your Network Administrator or contracted / in-house IT staff to perform backups.

·         Creating a local set of books on a laptop or PC: For someone like me I carry a number of historic sets of books for different firms on my local drive. This allows access to historic or standalone set of books when needed. This historic data-sets has the following advantages: run and analyze historic reports via Excel, etc, trouble shoot problems, design new/edit existing reports/templates for later installation on a live system, test Security groups and restrictions before implementing on a live environment, test new functions & features using real firm data, review work performed by Accounts staff, etc.

·         Run VDI on a standalone: Sometimes running the Verify Data Integrity (VDI) routine on the live server may present problems. Quickly making a copy of the live dataset, locking it and installing on a standalone enables one to quickly run the VDI, perform a backup and restore the backup on to the live set.

I have always carried the data sets of firms that are on C-TREE whenever I have had to travel away. I ensure that the datasets I carry are most recent (a day old). One case I vividly recall was when I had to travel to a far away place where I could only get intermittent internet and email access. I was still able at my free time to generate all the Year End reports properly analyzed and email back to the auditors. All this without the need to remote in to the firm’s database (which would have been the case had the firm been on SQL). All I had to ensure was that I had a copy of the dataset with all the period and Year End adjustments complete. It was like carrying a brief case of accounts. The pla file was all I ever needed!.

I personally therefore would never touch a SQL database for the above reasons and also because of the inherent issues that the PCLaw SQL system is know for - data corruption, slowness etc. My mantra then; stick to the strengths of PCLaw and better the Devil you know.

A PCLaw SQL Horror Story

In the past I have seen two incidences when a firm decided to migrate the PCLaw database to SQL. Both related to the same firm, with the first being for one branch and the second for the other. Different databases for different offices; different reasons to migrate to SQL; and all for the same firm.

The reason for the first office was to enable better data mining, extraction of reports for business intelligence, ensure data integrity and minimize data corruption issues. The upgrade was a disaster, crippling the Accounts office and within two days the database was reverted back to C-TREE.  All happy going from then on.

The database at the second office was faced with a forced upgrade situation imposed upon by the consultants who were engaged in implementing a DMS (Interwoven Worksite). Without upgrade of PCLaw to SQL they were not going to touch anything. And that was after the firm had signed off the purchase (of Worksite)! In a nutshell there was a complete disregard of the Accounting system for the sake of PCLaw integration with Worksite. Despite the risks presented in a “crystal ball” fashion and despite earlier warnings, the firm upgraded to SQL.

Fast forward two years later: The Accounts office on the C-TREE database continued with greater speed and efficiency whilst the other office on SQL began getting issues that got from bad to worse. To put things into perspective the branch on C-TREE database was consistent in finalizing its year end accounts & audit by  February while the other office had the worst year as it took 9-10 months in finalizing its Audit/Accounts.

So, what went wrong? The cause is “Interwoven” – yes as the DMS name suggests all issues interweaved from slowness in report generation, data corruption, errors prone balances which the Accounts team relied, to finalizing periodic and Year-End accounts and audit. The domino effect had disastrous consequences.

A short horror story and simply because unlike more mature programs (Worksite in this case)  PCLaw was not designed to operate on SQL. So, should a firm upgrade to SQL or stick to C-TREE? That is probably a topic for next discussion.

PCLaw Security changes - when to update

In a prior post I mentioned by Security and how it works or is supposed to work and about user groups and rights.

The challenge I often have with the Security feature is when to constantly update. In a small firm the requirements might be very basic and user base constant. However for a larger or growing firm there are a number of issues to consider such as changes in timekeepers and support staff, changing roles, new features or functions required in PCLaw for staff to perform their tasks, etc.

So, once Security has been set and is working when should the Security features be revisited? The following scenarios according to me warrant updating Security rights:

·         Changes in Timekeepers – if new timekeepers are added, users who use the time recording function may need restricted access to the newly added timekeepers (under Advanced Security)  if they are not supposed to have access to new timekeepers’ rates, time reports, etc

·         Addition of new Bank Accounts – if support staff have restricted access to certain bank accounts and they should have access to the newly opened bank accounts, their Advanced security needs to be reset.

·         New features/functions – if the requirement of a firm changes such as new reports, new tasks, etc that users need access, security groups needs to be revisited.

·         New Upgrades/Updates – PCLaw releases new updates/upgrades and it is a time to test the Security again to ensure the latest features are available and also to ensure that the existing settings are working fine.

Other than the above, Security for matters can be done at Matter Manager level without accessing the actual Security feature. Firms must therefore have protocols to set security at matter level at time of file opening.

The Security feature therefore needs to be constantly refreshed after a firm defines how its going to use PCLaw.

About Reasons for Trust Overdraws and How to monitor progress of correction of Negative Trust Balances

Most firms operate Trust accounts and the operation of these Trust funds are governed by strict local bar and law society rules. However there are also firms that operate in jurisdictions with non existent or lax Trust Accounting rules and do not pay attention to trust account management. Worse things have happened to firms that also operate without due diligence and controls exercised by firm partners and management. The result is inadvertent or fraudulent Trust overdraws. Reasons for inadvertent Trust overdraws include:

 Accounting for trust transactions on incorrect matters: Writing trust cheques against wrong matters when there are sufficient funds at the time only comes to light towards the end of the matter .When time comes to dispose balance of the trust funds it is determined that the balance should be more that what is available. This anomaly can be caused by a) pure mis-postings by accounts staff or b) incorrect/distorted matter details availed to accounts staff by lawyers/legal staff. At the time of disbursing balance of trust funds, some lawyers, because of time constraints, will approve payments with instructions “to sort out later”. This is very true for instance, for real estate (property) transactions when there are completion dates that need to be adhered to and the firm is acting for the buyer and vendor and somewhere along the line disbursements for the buyer were incurred utilizing trust funds belonging to the vendor.

Multi Currency trust transactions: Firms who choose to handle foreign currency trust transactions do so by processing trust entries in their local currency whilst keeping a manual record for the value of foreign currency trust balance for each matter. This is a primitive method because one can track the foreign currency value as well as the reporting currency value of the trust balances in PCLaw (this is a topic for another day). Because of fluctuating exchange rates negative trust balances can occur although in reality the forex value of the trust funds is not negative.

Disbursing uncleared trust funds: Again some firms flaunt rules because ‘urgent’ payments need to be made and accounts staffs are instructed to process payments on matters before funds for that purpose have cleared the bank. When Trust receipts result in NSF trust balances go into negative.

Allowing Negative Trust Balances: Most firms restrict the occurrence of negative trust balances. This can be set under: Options>System Settings>Data Entry tab. However, this is sometimes left unchecked and subsequent trust overdraws warnings during data entry go unheeded.

PCLaw has a great tool to identify and manage the correction of negative trust balances. The Trust Listing report can be run for negative balances only. The report gives last trust entry date for every matter that has a negative trust balance. The Last Trust entry date signifies:

·         The last date of the Trust cheque that resulted in the matter going into Trust Overdraft

·         The last date of the Trust receipt on a matter that already had a Trust Overdraft but the receipt was not enough to move the matter out of Trust Overdraft

Once negative trust balances have been identified and are determined as genuine, the resultant Trust Listing report can be exported to Excel and sorted by Last Trust date. This Excel report will give the earliest and latest date and can act as a starting or ‘base’ report. Once the latest date is known on this base report, subsequent trust listing reports can be run for negative balances with advance search filter (that can be saved in the system) for dates greater than the latest date as per the original report. For example if the last Trust date per base report was 18/Jul/2012, under Advance filter of the Negative Trust Listing report, the date can be set as greater than 18/Jul/2012. By so doing you can identify if any subsequent dated trust entries have taken place on matters that have negative balances and is useful for tracking progress on correction and more importantly help prevent matters from aggravating further!

Of course on every report the total of negative Trust balances need to be checked and compared to prior reports to determine overall improvements/replenishment efforts!

Issue in Hidden Rates & Amounts in Security

The PCLaw Security for time recording was very open prior to release of Version 6. Anybody entering Time could see lawyers and rates and edit the rates as well on timesheets. It seems that a lot of customers raised concerns with this and hence the introduction of Time/fee enhancements.

With the raising of the bar on the security options on time recording and reporting, PCLaw Administrators have now the ability to restrict users from accessing selected lawyers, their rates, and also whether the rates and amounts are visible, open to editing or hidden. These enhancements are a good thing since some firms have policies of not allowing their attorneys to know their or other lawyers’ rates, edit the rates, etc.

In version 9 the loophole was that even if a user had no access to view rates on the timesheet, the user could still know the rate he/she is billing at by printing the report from the Time sheet window. The printed Time sheet report would show up the rates. This in essence rubbished the Advanced security settings on Time.

Move on to Version 10: This issue was fixed and if a user has hidden access to the rates/amounts, the report produced from the Time sheet window would not show up the rates/amounts. All security restrictions would be properly enforced in all areas of the program.

However, the problem with Version 10 is that if a higher user or Admin user logs on to PCLaw he/she will only see the hours entered by the low level/restricted user in the Matter Manager and Client Summary report (the amount will appear as 0.00). The Client Ledger and Client WIP reports will however reflect the correct values (Hrs X Rate). The integrity of the data is not compromised in any way since the values are still present – it’s only that the Matter Manager and Client Summary reports are not pulling the values - they are only pulling the hours.

To get round the above one has to run Reset Matter Balances under Verify Data Integrity. Once this is done the Matter Manager and Client Summary reports properly displays the values of time entered by the low level user.

It is not practical to run the Reset Matter Balances routine on a transaction basis and as the Matter Manager is the central dashboard for knowing client balances, this is a nuisance in PCLaw and creates needless additional work for ADMIN users in order to comply with company confidentiality policy.

How to identify Unbilled Expense Recoveries to be removed

A lot of firms have a policy to bill soft costs (i.e. expense recoveries – courier, printing, photocopies, stationery, phones, etc) at point of billing. The following are some of the reasons for doing this:

·    Indiscriminately tracking expense recoveries on matters hypes up the income statement before even the matters have been billed and this distorts the financials of the company.

·    Tax implications – expense recoveries increase the overall revenue and this may increase the tax liability in some jurisdictions before even clients have been billed for the recoveries.

·    VAT Implications – there could be breach of VAT regulations. Some VAT jurisdictions state that VAT is payable at the earlier of a) delivery of goods/services, b) receipt of money or c) issuance of an invoice. VAT only crystallizes at time of billing in PCLaw. By recording recoveries before billing a firm has met the criteria of “delivery of goods/services” even though there is no Output VAT and the client may be billed many months later.

One of the challenges as part of the monthly exercise is to determine if there have been any Expense Recovery items charged on matters that have not yet been billed in the same month. The following reports are not worth running for this purpose:

·    Client Costs Journal: It will give all the expense recoveries entered in the month but it is not possible to determine the billing status.

·    Client Disbursement Analysis and Interest: This can give a list of unbilled soft costs but it is very clogged up and cannot be analyzed.

I have discovered the efficient way to do this is by running the client ledger for the month with the following advanced filters:

Ø  Field: Received From/Paid To

Ø  Comparison: Is Equal To

Ø  Compare To: “Expense Recovery”

The resultant report will give all expense recoveries for the month with the invoice numbers tagged to it for all relevant matters. This report can be exported to Excel for analysis and sorting by invoice number, etc. One can quickly identify whether there have been expense recoveries that should be removed. Once this task is complete, other month end tasks can be completed and accounting restriction date re-set.

Another quicker way is through the Register>Expense tab which can be filtered for all unbilled entries. However for this the user needs access to the Register under Security.

My wish would be for PCLaw to have an option of having a Memorandum account for recording soft recoveries while recognizing the income/expense recoveries (G/L) at point of billing.