Paul W. Carlson, CPA (00:01):
Hi, this is Paul Carlson, CPA with Law Firm Velocity. In this video we're going to walk through best practices and workflows for firms that have high volumes of advanced client costs. So that can be personal injury firms that have hundreds of advanced client costs each month, or for social security disability firms and just other types of contingency based firms that have a high volume of costs that need to be coded directly to the correct matter. And once you get to this volume, reporting individual costs to the central bookkeeper to post just takes too much time and is too slow because you lose so much time in communicating the costs. That we want to shift to a process where the individual case managers, the people pulling medical records, the people spending money on behalf of clients, are actually posting those transactions into the system directly. And then the firm office manager will print checks and manage IOLTA. And then the firm controller or some of the tasks that my firm will take care of is the financial reporting and ensuring that everything is done correctly.
So some of the key concepts here is from when I was teaching business process re-engineering is you want to capture information once and at the source. And so the best example of this is if a case manager buys a $20 medical record, that we want the case manager to go into the accounting system and record the $20 charge on their credit card and assign that to the correct matter because the person who ordered the record knows exactly which matter the record should be charged to. They know the exact information, they can enter it in real time. That if the case manager has to write a note or do some sort of request to the office manager, that this back and forth is just so time-consuming and creates so many errors. So, we want to capture the information as fast as we can.
We want all matter information, all matter financial information in one system. The trouble we see with a lot of practice management systems, so this would be Filevine, CASEpeer, Needles, is those systems can't print checks. There's no bank account reconciliations within those systems. So there's no way to accurately or confirm that the systems have all the advanced costs. So what we do is we enter all the costs into a law firm accounting system where all the transactions are tied out to bank statements, which confirms all the transactions are recorded. So all the costs go through the accounting system. When a matter starts to settle, the users can quickly log into the accounting system and pull the cost details from that system.
And then what has long been the big block to this is we need to keep private information private. So when we let the case manager and even the office manager into the accounting system, we don't want them to see the owner's draws. We don't want them to see payroll detail. We don't want them to have access to the general ledger or basically the list of all the transactions on the operating account. Because once you have that access, you can manually create an income statement. So this is best practices, what we've been waiting for a long time is an accounting system that can actually facilitate that. So what we're going to do is we're going to jump over into Soluno and walk through a couple examples.
So I have Soluno open in two different logins, so this is limited. So this is what a case manager would see. And this is a full admin system. This is full controller access. So here we can see we're looking at the operating account transaction history. And once you have this access, you can see all kinds of great stuff that you can go through and manually add up all the deposits and withdrawals. And you can make an income statement. Here we can see that the owner paid himself half a million dollars. And here we have the payroll entry. So if you click into this, you can see payroll detail. The other problem with this login is if we go to the contact manager, so here's the owner again, we can go to their vendor record and here we can see all the draws that the owner has made. This access is great for the firm controller. We want to prevent other users from seeing this detail.
So within Soluno we do two things. So one, we create a special bank account, we create two operating bank accounts. And so I am looking for the bank reporting. We create two operating accounts. So one is a primary operating account. This account has all the transactions that case managers are going to see. This is going to show deposits from clients, and this account is also going to show advanced costs. The users already know that information. Then we're going to have the second account, we're calling it the owner access account. This bank account has all of the payroll information, this has all of the owner draws, it has all of the other overhead pieces that firm controller can take care of that the other users don't need to see.
So we set up those two accounts and then we change permissions to where we can block access to vendor records. So let's go over and look at what Soluno looks like for a case manager or firm paralegal. Here we have the contact manager and we're looking up, this is the silly vendor I created to track owner draws, we go into the vendor view, we say we want to see all transactions for owner draws, and it comes back blank. If you run Soluno enough that you realize that this just means we're not getting any information so the users cannot see that private information. We would hope at some point that Soluno would change the permissions a little bit, that this user could see vendor transactions on bank accounts they have access to. So maybe the owner got reimbursed 20 bucks for parking out of the operating account that that would show up here, but it would block access to the bank accounts they don't have access to.
And then if we go over to the bank report. Let's see here. So banking, operating bank, and we want to try to run a report of the activity on that private owner account, that it's not even listed as an option, that they just can't see the report. And so again, that information is held private. And so with these permissions that we can facilitate this type of process where case managers can safely go into the system and post their own hard costs without seeing private firm information.
And with that quick overview of security permissions and best practice workflow for firms with high volumes of advanced client costs. Thanks.