Managing Deposit Records

By at 9 October, 2006, 10:44 am

There is no worse feeling than looking back and trying to determine what an entry or deposit was for especially if there is any question whether it should be treated as income or expense. Solutions don't have to be high-tech or require a lot of work to be effective; in fact, keeping things simple is oftentimes the best solution and the easiest to use.

Keeping track of information can be difficult in a law office whether large or small. Nowhere is this truer than when trying to insure proper tracking of funds received on behalf of clients to be held in trust, expenses or to pay your bills. I spoke with an accountant over the weekend who was relating to me how some of his clients had difficulty at tax time determining how way a deposit or a portion of a deposit was to be applied i.e. income, expense or something else.

This can be especially trying at tax time even if the information is been kept in QuickBooks, Quicken or another accounting program if full details of not been provided in the computer record. Often times an entry may be something cryptic which made sense at the time it was placed in the accounting program, but at a later date exactly no sense. I discussed with him a simple method that I used from the very beginning of starting my own practice and served me extremely well over the years: I photocopied all items in a deposit including the deposit slip and attached the deposit receipt to this copy after the deposit was made. This provided me with full details on the deposit as will as proof of the deposit in one easily locatable location. I also photocopied a yellow sticky note detailing any cache included in the deposit which provided which client it was received from as well as any other pertinent information. All copies were punched at the top and placed on a two prong fastener. At the end of the year, the copies replaced with the other accounting information and the process was started over again for the new year. This way, whatever question arose I could simply go to the year in question and go through my deposits to the date in question and look at all checks or cash that were included and resolve any questions. I did this not only for my business checking account but also my client trust account and have maintained those records. This is been an extremely valuable asset and one I strongly recommend to all lawyers.

For those offices looking to reduce the amount of paper they keep, this process can also be done by scanning the same information and keeping it either in a separate folder with your other banking information on your computer or computer network or using a product such as PaperPort to organize the deposits.

If you're going to use paper to keep these records, you can also use different color paper for the copies to differentiate between your business and trust accounts. For example, your business checking could be kept on white paper and trust account copies could be done on yellow paper. The exact system you use is up to you, but it should be easy to remember and to follow.

Categories : Practice Management


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