A common point of confusion are the different types of law firm accounting software. The term “law firm accounting” tends to be thrown around pretty liberally, and is often (inaccurately, in our view) used to describe billing and trust features, but lac the core/traditional accounting software fundamentals (like a Chart of Accounts, P&L, Balance Sheet).
Many Law Practice Management or Legal Billing software provides some, but not all, of the usual list of accounting functions. For instance, many popular case management applications will manage your firm’s time-keeping, billing, but stop there. Others provide billing and Trust Accounting, but don’t have the fundamentals of accounting like a Chart of Accounts, P&L statement and balance sheets.
With this ambiguity in capabilities and (often) overlap in features, let’s start by trying to draw a clear line between Law Practice Management software and accounting software.
Accounting vs. Practice Management Software
Law Practice Management, Billing, and Accounting are three related, but discreet functions. And each can be managed with different software (or, all in one software suite). This is where the fuzzy terminology makes understanding what any given software package does confusing.
Broadly speaking, Law Practice Management software manages a firm’s clients, contacts, calendars, cases, time and expense tracking, billing and other “front-office” functionality.
Some Practice Management applications include complete accounting (including everything you see above), and some practice management applications provide time tracking, billing, and expense tracking… but leave the actual accounting to separate software (which it may integrate with).
Law Practice Management applications like Clio, Practice Panther and Time Matters do provide time tracking, billing and even reporting on billings… but they do not provide the “rest of accounting,” and instead integrate with applications like QuickBooks to complete the picture.
This is not to say one method is better than the other; rather it makes defining and understanding the classes of law firm accounting software important.
QuickBooks, by Intuit, is long-running and almost undeniably the most well-known small/midsize business accounting software.
QuickBooks is industry-neutral accounting software, which means it can be (and is) used by many different industries, including law firms. QuickBooks has two product-lines, it’s Professional product, which runs as an installed application on your PC or within a Virtual Desktop (more on this shortly), and their Online product, which is the web-based version of the QuickBooks software.
QuickBooks Online is the web-based version of QuickBooks. The advantages of QuickBooks Online are that it runs in your web browser, no software installation (or updates) required. The disadvantage is that QuickBooks online doesn’t provide as many features as its older, desktop counterpart (Professional).
Broadly speaking, QuickBooks Online is a good fit for law firms that:
Are Solo or Very Small Practices
Have Very Simple Accounting Needs
Prefer Accounting in a Web Browser
QuickBooks Professional (sometimes also referred to as QuickBooks Desktop) is the traditional, desktop-installed version of QuickBooks. The advantages of QuickBooks are a more robust, more developed set of features.
Broadly speaking, QuickBooks Professional is a good fit for law firms that:
Have 5 or More Employees
You Need More Sophisticated Financial Management Tools
Your Firm Has Years of Historical Data in QuickBooks Professional
Some of the more advanced functionality available in QuickBooks Professional, but not QuickBooks Online, include:
Robust Budgeting / Budget vs. Actual
Sophisticated Custom Reporting
Loan Manager / Amortization Table Management
Another important consideration is your Practice Management solution. Yours may integrate with only Online, Professional, or both.
If your firm needs the sophistication of QuickBooks Professional but prefers to work in the cloud–fear not, we’ll explore the various cloud options for all editions of QuickBooks next.
QuickBooks is the flagship product of Intuit, Inc, the makers of QuickBooks, TurboTax, Mint personal finance software, and Lacerte and ProConnect tax software.
Using QuickBooks: Desktop, Hosted or Online
As described above, QuickBooks comes in one of two families: Professional (Desktop) or Online, with the former being more developed and robust.
There are effectively three ways you can use QuickBooks:
QuickBooks Professional installed locally on your firm’s desktops/server (On-Premise).
QuickBooks Professional run within a Private Cloud / Virtual Desktop (Cloud).
QuickBooks Online (Cloud).
QuickBooks Professional Installed Locally
Your first option is to simply install QuickBooks on your law firm’s local desktops and server(s). This involves installing the QuickBooks server component on your firm’s on-premise server, setting up a shared folder to hold your QuickBooks company file, installing the QuickBooks software on the appropriate users’ desktops, and connecting the desktops to your server.
This is probably the least desirable option, as it requires managing and maintaining in-house IT infrastructure, and limits your team’s ability to work from anywhere.
QuickBooks Professional in a Private Cloud / Virtual Desktop
Your second option is to run QuickBooks professional (the desktop edition) in a hosted Private Cloud, or Virtual Desktop. (We use these terms interchangeably here.) This involves hiring a Cloud Service Provider to host QuickBooks professional (likely along with your other software, documents and data) in a completely hosted environment, and providing a Virtual Desktop for everyone if your firm to work in (from anywhere).
This is probably the most desirable option, as you get the robust feature-set of the Professional version of QuickBooks, and all the benefits of the Cloud (no servers to manage, increased data security, the ability to work from anywhere).
Your third option is to simply use of the editions of QuickBooks Online, which is web-based and lightweight. This involves simply signing up for a QuickBooks Online account (pricing information is below), and creating logins for each person in your firm that needs it.
This option is probably best suited for solo and very small law firms (5 total people or less). If your law firm needs quick-and-dirty accounting, and doesn’t need the richer feature set and capabilities of QuickBooks Professional, QuickBooks online may be a great option.
See QuickBooks in Use
QuickBooks Professional and Online have similar fundamentals, but slightly different interfaces. QuickBooks Online arguably has a simpler, cleaner interface, while QuickBooks Professional has more in the way of features and capabilities.
Complete Feature List
QuickBooks does an excellent job of managing the core of business accounting, but lacks certain law-firm-specific features.
Time & Expense Tracking Track billable hours and related expenses for a particular client or matter. However, time tracking is very limited, and best managed in dedicated Law Practice Management software.
Invoicing Generation of invoices, including for billable hours, contingency work, and fixed-fee matters.
Chart of Accounts, P&L, Balance Sheet QuickBooks includes the fundamentals of accounting, including a complete Chart of Accounts, P&L accounts and Balance Sheet accounts.
Bank Accounts and Credit Cards QuickBooks includes registers for managing bank accounts (operating accounts) as well as for credit cards and lines of credit.
Financial Reporting QuickBooks includes fundamental reports (Income Statement, Balance Sheet, Cashflow Statement) as well as many other canned reports, as well as the ability to create your own custom reports.
Budgeting Create a monthly firm budget, and compare each month's actual finances to your budget (Budget vs. Actual).
Client & Vendor Management QuickBooks includes basic management of Clients and Vendors, including the ability to store contact information and see transactions for any given client or vendor.
Access for Your Accountant Both QuickBooks Professional and Online provide capabilities to give your accountant access to your books.
Trust Accounting Trust/IOLTA accounting for management of trust funds, including trust account reporting.
Split Billing QuickBooks does not include split billing, or the ability to attribute invoices across different attorneys.
Legal Billing Reports Report billing/revenue by Matter, Client, Originator and other metrics.
As described, QuickBooks is a strong accounting platform, but lacks certain law firm-specific capabilities, namely around time tracking, legal billing and trust accounting. Fortunately, QuickBooks integrates with many Law Practice Management products. These include:
Pricing information provided is made up of intel from customers, consultants, and in some cases the software publisher.
As outlined here, QuickBooks Professional is more developed, and a better fit than QuickBooks Online for most law firms.
Running QuickBooks Professional in secure Private Cloud, via a Virtual Desktop platform, gives your law firm the advantages of the cloud, without having to maintain servers and deal with IT headaches.
Advantages of QuickBooks Professional in the Cloud
The Best of Both Worlds Keep the robust legal software that you're firm is committed to and relies on, while enjoying the advantages of the Cloud.
Work From Anywhere Unchain your self from the office, ditch clunky VPN and remote-computer-login "solutions." A Private Cloud provides a secure, easy-to-use Virtual Desktop that gives you access to your legal software, documents and email from anywhere.
Data Security & Compliance Secure Private Cloud platforms, like Uptime Practice, keeps your software and data secure. End-to-end data encryption, Multi-Factor Authentication, Geographic Data Redundancy (Backups), Virus Protection and Ransomware Protection will keep your data secure and your firm compliant.
Eliminate Servers & IT Headaches Maintaining servers and managing IT is a pain, even with a capable local IT support firm. A Private Cloud like Uptime Practice provides all necessary server infrastructure, managed, backed up and ready-to-go: So you can focus on your firm and your clients.
Minimize Downtime Capable Private Cloud platforms like Uptime Practice are built with enterprise-grade infrastructures, and managed round-the-clock by professionals. This minimizes downtime for your firm, and maximizes productivity.
Flexible & Scalable Stay flexible: Cloud-based solutions allow you to scale users, software, storage and options up or down as needed.
About the Author: Dennis Dimka Dennis Dimka is the CEO and founder of Uptime Legal Systems, North America's leading provider of technology, cloud and marketing services to law firms. Under Dennis’ leadership, Uptime Legal has grown organically and through acquisitions to become the nationally-recognized legal technology company it is today. Uptime Legal continues to innovate and disrupt the legal technology space, and has been named to the Inc. 5000 list of fastest-growing private for the past six consecutive years. Dennis was also an Ernst & Young Entrepreneur of the Year finalist.
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