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Getting intimate (with QuickBooks)

Posted by T. Greg Doucette on May 31, 2014 in The After-3L Life

I hit a point a couple months ago where I had more work at TGD Law than I could handle on my own. Like cleaning out flagged email from my inbox, I had a sense of accomplishment when my active caseload shrunk from 100+ down to a more manageable 75ish.1

More work than I can handle also meant money-making cases were sitting idle, so I started making plans to bring in more personnel. That in turn prompted me to look at things like my firm’s balance sheet statement and my profit & loss statement — things I knew existed from my 2L Business Associations class, but that I never had much actual reason to review while I was busy chasing new clients.

And that, in turn, led me to spend the past 4 hours dabbling in QuickBooks as I discovered I’d done a few things totally wrong since I started 20 months ago :beatup:

I’ve been a QuickBooks user since 2005 when I was hired to be a lobbyist for a small firm in downtown Raleigh.2 While my boss originally hired me for my political acumen (and the ability to break bread with the then-minority Republicans as he schmoozed the Democrats), I offered to also use my financial skills on the company’s behalf in exchange for an early pay raise. QuickBooks became my go-to app for managing my own checkbook from there.

So when I started TGD Law, naturally QB was the only accounting software I considered. And having already run one company with it, getting things set up for the law firm was straightforward. But since I had requested an extension on my 2013 tax returns, and didn’t have that much activity to go through for my 2012 taxes last year, I never noticed before now that my books weren’t quite as clean as they should be :(

For example: an accountant told me that when I use my personal funds on behalf of the law firm, I should record it in QuickBooks as a loan to the firm — but subsequent accountants have told me that’s a no-no, and should instead be recorded as a capital contribution to the firm (to which I discovered I’ve somehow contributed $36K over not-quite-two years :surprised: ).

Conversely, when I’d pay myself I would mark it down as a payroll expense; the same subsequent accountants tell me that too is a no-no, and that as a single-member LLC I should instead mark them down as capital distributions.

Then there were my insurance expenses (malpractice insurance and health insurance are treated differently for tax purposes) and a handful of other small items.

Hence spending what was going to be a productive Saturday instead cleaning up several dozen accounting entries :beatup:

There’s no real overarching “moral of the story” to this post (except maybe to hire a competent accountant early in your practice). Just consider yourself forewarned if you decide to go the solo/small practice route that you’ll want to get your accounting stuff squared away sooner rather than later :)

Have a great night y’all! :D

  1. It took awhile to sink into my brain that 1 civil litigation case is (typically) more involved than 1 criminal case. I’d been benchmarking myself against classmates routinely handling 200+ cases at a time, before discovering most of them were traffic tickets :beatup: []
  2. Where they apparently still haven’t removed me from the “About Us” section of their website 8 years later… :crack: []

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