How To Automatically Create Custom Documents With Clio Templates

Simple Document Automation with Clio

One great feature about Clio – but often underutilized – is Clio’s simple and easy document automation process.  This article will show you, step-by-step, how to do simple and easy document automation in Clio.  I highly recommend you open up Clio and walk through this tutorial yourself in real-time.  If you don’t already have a Clio account, you can register for a free trial here.

Step 1: Figure Out What Custom Data (“Fields”) You’ll Be Using.

First, you’ll need to understand what data you plan to use in your document.  A piece of data is called a “field,” and you fill in “fields” every time you create a new matter or contact; all that information you enter into Clio becomes a field.  Frequently used fields include client names, client addresses, matter numbers, and the like.  It can also include insurance claim numbers, bail bond amounts, spouse’s names, and more.  To see what fields already exist in your Clio database, go to Settings > Documents.  You can view the complete list of available fields there.

Clio Settings data-srcset= Documents for checking list of template fields” width=”720″ height=”479″>

Clio Template Fields

Now, compare that list to the custom data you’ll need for your document automation.  Use Ctrl + F (Windows) or Command + F (Mac) to search the list for any fields you plan to use.  If they’re all there, you can skip Step 2.  But, if you need any custom fields, make those in Step 2.

Step 2: Set Up Clio Custom Fields.

Custom fields are one of the tools that make Clio’s document automation extremely powerful.  You can automatically drop any data you like into a Clio-generated document.  If the data isn’t already in your fields list (which we checked in Step 1 above) – such as an executor or personal representative – you’ll create a custom field.  For each custom field that you’ll need, do the following.

In Clio, click Settings > Custom Fields:

Clio Settings - Custom Fields

Now, click the green “Add” button in the upper right.

Clio Custom Fields - Add

Enter the name of your custom field, and the type of information that will go there.  For example, if you are adding the field Personal Representative, the “Type” will be “Contact Select,” because you’ll be selecting the Personal Representative from your Clio contacts.

How To Add Clio Custom Fields

There are a few additional options:

  • Default: Use this if you want this field to appear in every new matter you create.
  • Required: Use this if you also want it to be required for every matter.  Note that, if you check this box, you should also check “Default,” or else you may get errors when trying to create matters.

Repeat this step for each custom field you’ll need.

Step 3: Prepare Your Document Template.

Now that we have all the custom data we’ll need, it’s time to prepare our template.  To do this, go back to your list of document fields in Settings > Documents.  Keep that window open.

Now, move into Word (or Excel or PowerPoint for the appropriate document type), and open the document that will be your template.  Type out your letter, cover sheet, contact form, or whatever the particular document is.

Now, click back to Clio.  Find the field you want to insert, and click the little clipboard icon next to it to copy that field to your computer’s clipboard.  Pro tip: Having trouble finding the filed you need in that long list?  In Clio, type Ctrl + F (Windows) or Command + F (Mac) to search the list.

 

Using Clio Custom Fields In Word Templates

Go back to your Word doc. Place your cursor where you want the field data to appear in your letter, and click Ctrl + V (Windows) or Command + V (Mac) to paste the field’s placeholder.

Clio Document Automation With Word - Where To Click

Repeat this process for each piece of custom information in your document.

Clio Custom Automated Document in Word

Now, save your document as a Word document (.doc or .docx – do not save as a template, .dot or .dotx).

Step 4: Upload Your Template To Clio

Once you’ve inserted all your form fields using the process above, upload the doc back to Clio.  To do this, click back over to Clio, and click Documents > Templates.  Then click the green “Add” button.

Upload automated document template from Word to Clio

Choose your file, and select your document category.  Click Save.

Upload automated document template to Clio

You document is ready for future use!

Step 5: Automatically Generate Custom Documents In Clio!

Despite the number of steps above, when you walk through it, you’ll find that the document preparation process is pretty efficient, and goes pretty quickly.  Which is good, because it means it won’t be long until you’re using your custom documents.  To do so:

Click Documents > Clio.  Click the little arrow next to “New,” and click “Document from template.”

How to create a new automated custom document in Clio

Select your template, matter, and output format (PDF, Word, or both).  Click “Create.”

How to create an automated custom Word or PDF in Clio

When the document is ready, Clio will tell you to refresh your browser. You can do that, but it’s usually easier to go straight to the matter for which you just generated the document. To go straight there, type the first few letters/numbers of the matter number into the search box at the top, then click the matter when it appears.

It's easiest to access automated Clio Word and PDF documents from the specific matter

In the matter, click Documents > Clio.  Click the folder that matches the document category you selected above.

How to access custom automated work and pdf documents in Clio

Click the name of the document to download a copy and review or edit.  Or, if it’s ready to go, click “Share” to send the document straight to the client via Clio’s secure portal, or by email.

How do you use document automation in Clio?  Engagement letters, wills, powers of attorney, corporate resolutions, articles of incorporation, operating agreements, contracts, licenses…. Pretty much anything you re-generate based on old documents is a great candidate for document automation in Clio.

Want to give Clio a free spin?  Get your free trial account here.

How To Choose Software & Services For Your Firm

Beating Analysis Paralysis: How To Choose New Software & Services For Your Firm

A lot of my bookkeeping clients come to me for advice about software and services for their firm.  “Can I afford it?” they ask me.  “Is it worth the cost?”  I’m always happy to help my bookkeeping clients figure this out, and happy to share my analysis and advice here, because you can take the same analysis and apply it to your firm, too.  And it’s a pretty simple process:

  1. What’s one hour of your time worth?  For most attorneys, this is your hourly rate.  But, if you’re an overworked partner or solo, be sure to also factor in the value of getting home to your family an hour earlier each night; that may be worth even more than your hourly rate.
  2. What does the proposed software/service/tool cost?  If there are different options for pricing plans, be sure to consider all of your options, and have the pricing plans and different features handy so you can compare.
  3. How much time would the proposed software/service/tool save you?  How much time do you expect to save with this tool?  How much *more* time would you save if you upgraded to the mid-tier, or top-tier, plan?
  4. If time > cost, then invest.  Now, run the numbers.  If the value of your time saved is greater than the cost of the software, that’s a good investment for your firm and your sanity.  If the cost is greater than the time you could save, you should keep looking for other solutions.

With this simple analysis, you’ll be able to make informed decisions about all kinds of firm matters.  Let’s put it into action by walking through an example.

Example: Is Clio Manage Worth It?

Let’s assume your solo law firm is evaluating Clio Manage. You’ve heard it’s a great tool for managing a busy caseload, and you’ve looked into some of the features and contacted Skepsis for a demo.  But, you’re hesitant to add one more monthly expense, and even if you did, how would you know which plan is right for you?  So you ask: Is Clio Manage worth it?

Step 1: What’s One Hour Of Your Time Worth?  Let’s assume you typically bill $350/hour.  Sure, some of that may be contingency fees, so it’s not an exact science, but even on con fees you hope to make at least $350/hour at the end of the case.  So, one hour of your time is worth $350.

Step 2: What Does Clio Manage Cost?  For your solo firm, the Starter plan will be $39/month.  The Boutique plan is $59/month, and the Elite plan is $99/month.  Each one has different features, with the Boutique plan adding integrations to Dropbox, your calendar, and your bookkeeping software, as well as contingency fee billing, trust accounting, and document automation.  The Elite plan adds origination reports, court calendaring, and instant on-demand chat support.

Step 3 & 4: How Much Time Would Clio Manage Save You, And Does That Cost Exceed The Time Savings?  I confess, I like to combine Steps 3 and 4 because it usually makes for an easier analysis. Here’s how to think about it:

In this case, we start by examining the Starter plan at $39/month.  $39 divided by the value of your time – $350/hour – is 0.11 hours.  Convert that to minutes (here’s a handy tool you can use), and you get 7 minutes.  Will the Starter plan save you at least 7 minutes each month?  I haven’t yet met an attorney who can honestly answer that question in the negative.  Unless you’re a true technophobe (which I confess some attorneys are), and the learning curve of almost any software is just too steep for you, then the ease of tracking time and issuing bills alone will save well over 7 minutes.

But maybe we need the Boutique plan?  Well, let’s take a look: Ad $59/month, that plan is an additional $20/month.  $20 divided by $350/hour  = .06 hours, or 4 minutes.  So, do the additional features of the Boutique plan save you an extra 4 minutes each month?  If you do con fees, then there’s no question you’ll reap the benefits of the Boutique plan, because you’ll get built-in contingent fee billing.  If you like storing documents locally on your computer – in Dropbox, OneDrive, Google Drive, or the like, and you don’t want to have to download your documents each time you open them, then re-upload them when you’re done – then again, there’s pretty much no question that you’ll increase profits and free time by upgrading.  Or, if the calendar integration will make schedule management a breeze for you, and save you more than 4 minutes each month, then definitely spring for the Boutique plan.

But what about the Elite plan?  That’s an additional $50/month over the Boutique plan.  $50 divided by $350/hour = .14 hours, or 8 minutes.  Can we save 8 minutes/month with the Boutique plan? In our hypothetical, you’re a solo, so the origination reporting won’t save you 8 minutes each month, so it’s not worth it just for that.  But, if you don’t enjoy learning new software, then that magic little “instant help chat” feature of the Elite plan really is likely to save you 8 minutes each month, so the Elite plan is great for you, and you can always downgrade after the first year, when you’ve learned the software.  Or, maybe you don’t have a foolproof court calendaring system in place, and that auto-calendaring will save you 8 minutes in rules research and calendaring time each month.  All you have to do to break even is free up 8 minutes each month!  Any time beyond those 8 minutes – that’s 24 seconds per work day, by the way – that you’re able to free up is profit in your pocket.  So, this solo chose the Elite plan.

Make Sound Financial Decisions For Your Firm.

This analysis is informative not only for solos, but for all kinds of small and medium firms;  simply adjust the values accordingly.  Maybe the decision is whether to hire a bookkeeper, and doing so would free up your assistant’s time; what’s that worth?  Or maybe the decision is whether to hire another attorney, which would allow you to make it home by dinnertime each night.  Whatever the decision, remember: your firm is a business.  Approach your firm business decisions from a business perspective.

 

Bookkeeping Calendar for Law Firms

Sample Bookkeeping Calendar for Law Firms

It’s a new year!  Time to make your law firm bookkeeping processes a breeze.  To do that, here’s one tool for you to add to your arsenal in the fight against the administrative beast: a calendar!  After checklists, calendars are one of our favorite beast-taming measures, and we’ve prepared this one just for you.

  • January 5: Run depreciation for prior year. Enter & reconcile December transactions.  Review P&L. Review Balance Sheet.
  • January 6: Prepare 3-Way Trust Reconciliation for prior month. Prepare quarterly trust statements and send to clients.
  • January 10: Clean up stale A/R and A/P transactions. Review annual P&L and Balance Sheet.  Finalize budget for the year.
  • January 31: Issue and file prior year’s 1099s.
  • January 31: Close your firm books for the prior year and send them to your CPA to begin preparing taxes.

 

  • February 5: Enter & reconcile January transactions. Review P&L.  Review Balance Sheet.
  • February 6: Prepare 3-Way Trust Reconciliation for prior month.

 

  • March 5: Enter & reconcile February transactions. Review P&L.  Review Balance Sheet.
  • March 6: Prepare 3-Way Trust Reconciliation for prior month.

 

  • April 5: Enter & Reconcile March Transactions. Review P&L.  Review Balance Sheet.
  • April 6: Prepare 3-Way Trust Reconciliation for prior month. Prepare quarterly trust statements and send to clients.

 

  • May 5: Enter & Reconcile April Transactions. Review P&L.  Review Balance Sheet.
  • May 6: Prepare 3-Way Trust Reconciliation for prior month.

 

  • June 5: Enter & Reconcile May Transactions. Review P&L.  Review Balance Sheet.
  • June 6: Prepare 3-Way Trust Reconciliation for prior month.

 

  • July 5: Enter & Reconcile June Transactions. Review P&L.  Review Balance Sheet.
  • July 6: Prepare 3-Way Trust Reconciliation for prior month. Prepare quarterly trust statements and send to clients.

 

  • August 5: Enter & Reconcile July Transactions. Review P&L.  Review Balance Sheet.
  • August 6: Prepare 3-Way Trust Reconciliation for prior month.

 

  • September 5: Enter & Reconcile August Transactions. Review P&L.  Review Balance Sheet.
  • September 6: Prepare 3-Way Trust Reconciliation for prior month.

 

  • October 5: Enter & Reconcile September Transactions. Review P&L.  Review Balance Sheet.
  • October 6: Prepare 3-Way Trust Reconciliation for prior month. Prepare quarterly trust statements and send to clients.

 

  • November 5: Enter & Reconcile October Transactions. Review P&L.  Review Balance Sheet.
  • November 30: Prepare draft list of 1099 recipients; send Forms W-9 to 1099 recipients.

 

  • December 5: Enter & Reconcile November Transactions. Review P&L.  Review Balance Sheet.
  • December 6: Prepare draft budget for upcoming year.
  • December 29: Deadline for W-9 recipients to return completed W-9 forms.
Checklist: Year-End Bookkeeping for Law Firms

Checklist: Are Your Law Firm Books Ready For Year-End?

Getting your books ready for year-end doesn’t have to be a beast.  Here’s a simple checklist to help you walk through the steps.  For a more detailed step-by-step walkthrough, see: A Step-By-Step Guide To Preparing Your Law Firm’s Books For Year End.

  • Reconcile Operating Accounts
  • Reconcile Trust Accounts
  • Confirm Year-End Bank Statement Balance Matches Year-End Books Balance for All Operating Accounts
  • Confirm Year-End Bank Statement Balance Matches Year-End Books Balance for All Trust Accounts
  • Determine 1099 Recipients & Obtain W-9s
  • Run Depreciation
  • Clear Stale A/R transactions
  • Clear Stale A/P transactions
  • Clear Unreconciled Operating Transactions
  • Clear Unreconciled Trust Transactions (& Ensure Those Unreconciled Trust Transactions Aren’t A Sign Of A Trust Mistake)
  • Review P&L For Mistakes & Aberrations
  • Review Balance Sheets For Mistakes & Aberrations

Click here to print out our checklist in PDF format.

A Step-By-Step Guide To Preparing Your Law Firm’s Books For Year End

How to prepare your law firm books for year end

Bookkeeping is an activity that, even under normal circumstances, can drive fear and panic into the heart of any attorney.  When it comes time for year-end and tax prep, the bookkeeping work can bury even the most hard-working practitioner.  But, it doesn’t have to – with a few tips and tricks, you can close our your firm’s books this year quickly and efficiently, and have more time for billable work, family, and celebrating the holidays.

Step 1. Complete Monthly Reconciliations.  Entering transactions in your bookkeeping software (psst, we highly recommend Xero for law firms!), and reconciling them with your monthly bank statements, is the basis of all of your year-end work.  You won’t be able to move forward with any other year-end tasks until your monthly reconciliations are complete.  Ideally, you’ve been reconciling your books after the end of each month, so this won’t be a mountain of work.  If you haven’t been, hire a bookkeeper to do it for you; doing 12 months’ worth of work all at once will take significant time away from your clients and your billings, and a bookkeeper will be able to do it more efficiently and cost-effectively.

Pro Tip: Bookkeepers are typically less expensive than CPAs, and more efficient at day-to-day bookkeeping tasks.  Spend your money smartly: hire a bookkeeper to help out with reconciliations and other day-to-day work at affordable rates, and save those more expensive hourly fees for your CPA at tax time.  Not only will you get the bookkeeping work done cheaper, but your CPA will also be able to work more efficiently and cost-effectively when handed a polished set of books from a bookkeeping pro.

This step applies to not only your day-to-day accounts, like checking accounts, savings accounts, lines of credit, and credit cards, but also to your IOLTA and other trust accounts.  And don’t forget to perform (and review and record) your three-way IOLTA reconciliations at least quarterly!

Pro Tip: If you haven’t kept up on your reconciliations each month, don’t try to turn this step into an annual reconciliation.  An annual reconciliation – where you reconcile all your transactions and then try and match it up with your November or year-end balance – leaves too much room for error.  If you do make an error, it will be difficult to tell in which month the error occurred.  Save yourself stress and break your reconciliation down into monthly chunks.

Step 2. Prepare To Send 1099s.  1099s are tax forms that almost all small business owners have to send, and file with the IRS.  1099s are like W-2s that you give to your employees, except they’re for individuals and companies who are not employees.

1099s are due for any person or company to whom your firm paid $600 or more for:

  • Rent
  • Services
  • Legal Services
  • Settlements/Fee Awards Paid To Attorneys
  • Any payments for which federal taxes were withheld
  • Other categories not typically relevant to law firms

Of course, it wouldn’t be an IRS rule if there weren’t exceptions to the rule.  Even if you paid a person or entity over $600 in any of the above categories, you do not need to issue a 1099 for a person or entity if:

  • It is a corporation (including LLCs taxed as corps); and
  • You paid the corporation for something other than legal services or settlements/fee awards (e.g., rent, non-legal services)

Of course, there are nuances to this rule, and you should consult with your bookkeeper or CPA for questions specific to your situation.

Pro Tip: Most bookkeeping software has tools to automate your 1099 process.  First, your software can help you automatically figure out who needs to receive 1099s, and then it can issue and file the 1099s for you with the click of a button.  Ask your bookkeeper how to set this up. 

Now that you know who to send 1099s to, you’ll need their tax information.  You get this using IRS Form W-9.  A copy of the current Form W-9 accompanies these materials, and can also be downloaded from the web.  Note: The blank W-9 form is free to download from the IRS, and you should never pay for it.

Send each one of your soon-to-be 1099 recipients a W-9 to complete and return.  If your vendor fails to return the W-9, you must begin backup withholding.  You must also begin backup withholding if your vendor crosses out Part II Line 2 on the W-9.  A detailed discussion of backup withholding is outside the scope of this presentation, and you can receive more information about backup withholdings on our blog at www.skepsistech.com/articles or by signing up for our newsletter at www.skepsistech.com.

Finally, once you receive W-9s from the vendors you’ll be preparing 1099s for, ensure that information is accurately entered into your bookkeeping system.  With this prep work done, your 1099s will be simple to send in January.

Click here for more information from the IRS about 1099s.

Step 3.  Ensure all payments from clients are entered.  Any client payments you receive should be entered timely; at least once per month.  But sometimes, things fall through the cracks, and year-end is the time to find those missing pieces.

Step 4.  Make Your Books Sparkle!  Over time, we all end up with accounts payable and accounts receivable that are old or out-of-sync and need to be cleaned up.  When you clean up your accounts payable and accounts receivable, you not only improve your financial data so you can make better decisions about your business, but you also ensure your books are accurate at tax time.

Accounts payable (A/P for shorthand) are bills your firm needs to pay.  Sometimes, a bill gets inadvertently entered twice, and so even though it’s already been paid, your financial statements show that you still owe them.  Other times, a bill slips through the cracks and you forget to pay it.  In your bookkeeping software, pull up a list of all you’re A/Ps, and clear out everything you can by removing invoices that may be duplicates or for other reasons no longer need to be paid, and paying any old bills that are still due.

Now go through a similar process with accounts receivable.  Accounts receivable (A/R for short) refers to money that your clients owe to you.  First, check all the past due bills to be sure that the bills really are due.  Like A/Ps, maybe Client X paid that invoice, but it still shows up on your list because the invoice was a duplicate or the payment was mis-recorded; figure out what the issue is, and resolve it to remove those stale invoices.  Next, also like A/P, you may have some clients who haven’t paid for a month or more, and their invoices are legitimately past due.  To resolve these invoices, you can contact the client to request payment, or write the invoice off.  The method you use to write off uncollectible invoices depends on whether you file your taxes on a cash or accrual basis, so be sure to work with your CPA or bookkeeper to properly write off uncollectible client debts.

Finally, go through the register for each one of your bank accounts and clear out any stale, unreconciled transactions.  In Step 1 above, we reconciled, which means we matched real bank transactions to what we recorded in our books.  But sometimes, we also end up with transactions in the books that don’t match with any real bank transactions, and we need to clear those out of our books.  So, we find any transactions that haven’t been reconciled, and figure out why they haven’t cleared the bank account to resolve them.  Sometimes the issue is a check that was never cashed, and we can contact the payee and ask them to cash it before year-end.  Other times it’s a simple matter of clearing a duplicate transaction.  Whatever the reason, your financials may be inaccurate if you don’t remove stale, unreconciled transactions from your books. 

Step 5. Review Profit & Loss Statements.  Once your transactions are reconciled, you’ll be able to review your profit and loss statements.  These are referred to as “P&L statements” for short, are also called “income statements.”  P&L statements tell you a lot about your firm’s overall performance, including large expenses, firm profit, and more.

Pro Tip:  Prepare and review your P&L monthly.  This allows you to catch mistakes and irregularities as they happen, before they’re compounded and confused and obfuscated by other mistakes and irregularities.

Sample Law Firm Income Statement

Sample Law Firm Income Statement

What To Look For In P&L Statements.  Start by looking at the header in the P&L Statement.  What period does it cover?  Does this show your firm’s profit in a single month? A single year?  Something else?

Next, look at the bottom line.  How much money did you make (or lose)?  How does this compare to prior months or years?  Why are these numbers changing?  Are there patters – for example, seasonal changes, or changes that correspond to particular advertising efforts – that you can use to help plan your business going forward?

The next step is to consider what goes into that bottom line: income and expenses.  First, look at your sources of income.  How much of your income is legal fees versus clients reimbursing out-of-pocket expenses?  Can you reduce your income (and therefore your Washington B&O tax burden) by reducing your client-reimbursement income?

Then, in the expense section of your P&L, look for any large expenses or aberrations.  For example, you may discover that all those networking coffee and lunch dates were adding up far more than you expected, and so you may decide to take a more measured and budgeted approach to networking going forward.  This step will also help you identify mistakes – such as $4,000 in tax-deductible malpractice insurance that was accidentally recorded as a non-deductible tax penalty.  Or maybe you’ll notice you’re still paying interest on that old line of credit you used to start your firm, and now it’s time to save some interest expenses by paying it off.

Don’t worry if you feel like you’re not getting a lot out of your first P&L review.  If you take just 5 minutes to review your P&L each month, it will take only a few months to begin developing a deeper level of understanding that you can use to make informed business decisions, and increase firm profitability.

Step 6.  Review Your Balance Sheet.  A balance sheet shows you one interpretation of your business’s current value.  Be sure to include prior periods in your balance sheet, so you can see how the firm’s value changes over time.

Sample Law Firm Balance Sheet

Sample Law Firm Balance Sheet

What To Look For In Balance Sheets.  The first thing to do with your balance sheet each month is the most important thing, and the thing that can get you in a professional reprimand if you don’t do it: check your client trust liabilities.  The balance shown in your IOLTA account should match your Client Trust Liabilities account at all times, to the penny.  If not, you have a trust irregularity, and you’ll need to work through your trust transactions to resolve the problem.

Pro Tip: Make it simple to ensure that your IOLTA and Client Trust Liabilities account always balance out to zero.  Customize your balance sheet to show those two accounts in a separate section.

Next, confirm that the net profit (the “bottom line”) shown on your P&L matches the current year earnings on your balance sheet.  If they don’t, you have a mistake somewhere.

Next, look for irregularities on your balance sheet.  For example, what is Rounding, and where did that balance come from?  How might it affect your taxes if not resolved?  Same question for the suspense account.  Do you payroll liabilities look correct, or are they unusually high?  (Our favorite payroll software?  Gusto, of course!)

Finally, check your balance sheet for negative balances.  Typically, all of your accounts should have a positive balance.  If there is a negative balance, figure out the reason for that negative balance – does it make sense, such as in the case of a “Less Depreciation On…” account?  Or, could it be that a transaction was recorded incorrectly somewhere?

Pro Tip: Customize your balance sheet to show your balance not only for the current period, but also for prior periods.  This way, you can see if your firm’s value is generally going up or down, and you can also easily catch numbers that don’t fit with the trend, which could indicate mistakes, fraud, or opportunities for savings.

Like the P&L, you’ll get much more information out of your balance sheet if you take just five minutes to review it each month.  You’ll begin to notice trends and patterns that will help you run your firm more effectively and more profitably.

A final note on balance sheets: as mentioned above, balance sheets provide a snapshot of one version of your firm’s value.  What most balance sheets to not include is the value of returning clients and your firm’s goodwill, which is a large part of firm value when it comes time to merge or sell.

Last Step: Budget for Success Next Year!  At this point, your books are clean and up-to-date; you’re beginning to understand your firm’s financials; and you’re prepared to send out tax forms.

The next step is to prepare next year’s budget.  A great budget is one that is realistic, so you can stick to it; cuts costs smartly, so you can save money without crippling your business; and get reviewed and adjusted monthly throughout the year.  Reviewing your P&L each month, and keeping your books up-to-date monthly, will go a long way in helping you prepare a budget you can use to increase profitability and make strategic decisions about how to spend your time in the upcoming year.

What Your Solo/Small Law Firm Needs To Know About Washington’s New Paid Family & Medical Leave Law

In 2017, Washington passed a paid family and medical leave law, becoming the fifth state in the nation to provide such benefits.  The new law goes into effect on January 1, 2019.  Here’s what your solo/small law firm needs to know to be prepared.

Effective January 1, 2019, Washington State will begin collecting premiums for the new leave program.  Employers, including solo and small law firms, must collect these premiums as withholdings from their employees’ paychecks – similar to federal tax withholdings.

How The New Law Affects Solo Practitioners and Self-Employed Partners

First, let’s deal with you solos and partners out there: If you are self-employed, then you are exempt from the tax on your own paycheck.  You may choose to opt in and receive benefits for yourself, and you must commit to doing so for four years.  If you do opt in, you’ll have to withhold the employee portion of the tax from your paycheck, and report and remit to the state on schedule.  The flipside, of course, is that you’ll be eligible for the same family and medical leave benefits that other employees have.

Update: The state has finally ruled on treatment of PLLCs!  If your PLLC is taxed as a sole prop, joint venture, or the like, then members of the LLC are exempt from the new tax (but you may opt in, as discussed below).  If you are taxed as a corporation (either S- or C-corp), then anyone taking a salary from the LLC/corporation is subject to the tax.

How The New Law Affects All Other Employees

If you have even one other employee – even a part-time employee – you must begin premium collections on January 1, 2019, and then report to the state on schedule.  Note that “employee” is not the same as an independent contractor, and the new law does not apply to independent contractors.

How Much Is The Tax?

The tax is 0.4% of the employee’s pay.  So, for an employee who makes $50,000 in a year, the total tax is $200 for the year, or $8.33 per paycheck (assuming payday is twice per month).

There is an employee and an employer portion of the tax.  The employee pays 63.33% of the tax, and the employer pays 36.67%.  For our employee above, this means that the employee will pay $126.66 of the total $200 in a year (or $5.28 per paycheck), and the employer will pay $73.34 of the total $200 in a year (or $3.06 per paycheck).

If you’d like to run real numbers but don’t enjoy math, the state has developed a handy premium calculatorSkepsis staff are also available to help anytime.

Here’s What Solo & Small Law Firms Need To Know

If your firm averages fewer than 50 employees – which solo and small firms do by definition – then you are exempt from paying the employer portion of the tax.  So, you’re off the hook for paying $3.06 per paycheck for our example employee above.  But, you still have to withhold the employee portion of the tax from your employees’ paychecks, or pay it out of your own pocket, and remit those withholdings to the state.  You’re also required to report employee wages and hours to the state, even if your employees do not qualify for coverage under the new law.

How Will I Collect And Pay The Tax?

Gusto Law Practice Bliss from SkepsisAs payroll becomes increasingly complex every year, we always recommend that law firms use professional payroll software.  Our favorite is Gusto, because they are the most affordable, fully-featured, and reliable full-service payroll provider that we’ve worked with.  We spoke with Gusto to confirm that they will handle all of the new tax collection, payment, and reporting seamlessly, and they will.  At $39/month plus $5/month per employee, Gusto’s service, features, and pricing can’t be beat.

We also checked with another popular payroll provider, QuickBooks Payroll, to see if they would also be handling these new taxes seamlessly.  What we discovered was that only “Full-Service” customers – those paying $80/month plus $4/month/employee – would have their taxes collected, paid, and reported for them.  Any customers on the self-service plan (billed at $35/month plus $4/employee/month) will have the significant burden of collecting, paying, and reporting the new tax on their own.

Can I Opt Out?

As mentioned above, self-employed people don’t have to pay the tax if they don’t wish to receive benefits.  But, there is a way to opt out of the tax entirely – although it will be neither practical nor economical for many solo and small firms.  Rather than paying the tax, employers can provide, administer, and pay for private leave policies that satisfy the state requirements.  These private policies, called “voluntary plans,” must be approved in advance by the state.  Because these private plans are employer-paid and employer-administered, the cost of these plans for small business is generally much higher than the state plan, where the employees pay the majority of the premiums.

What Happens When My Employee Goes On Leave?

Even though employers and employees must start paying into the system in 2019, paid leave benefits do not become available until January 1, 2020.  If an employee wishes to take leave, the employee must first meet all of the following eligibility requirements:

  • The employee must have worked 820 hours in the first four of the last five calendar quarters from the date the leave starts.  In other words, if the employee intends to start leave in Q1 2020, count back five calendar quarters: Q4 2018, Q3, Q2, Q1, and then Q4 2017.  Now, how many hours did the employee work in the first 4 of those quarters?  (Q4 2017, Q1 2018, Q2 2018, and Q3 2018.)
  • If it’s more than 820 hours, leave may be available if there’s a “qualifying event.”  A “qualifying event” can be any one of the following:
    • Care and bonding after the birth of a baby, or placement of a child under 18
    • Care of a family member experiencing an illness or medical event
    • Certain military events
    • Care of the employee’s self in relation to an illness or medical event.

If the employee meets the above requirements, the employee generally qualifies for paid leave for up to 12 weeks (or 18, in extenuating circumstances).  The state, and not the employer, pays the employee during leave.

Of course, all small business owners know that the work still needs to get done, even when an employee is on leave.  So, employers will still have to invest in hiring and training temporary staff.  There are options for cash assistance for employers, but those are limited to employers who pay the employer portion of the tax even when they’re not required to.  So, this benefit won’t be available to most small businesses.

We’re Here To Help

Navigating the ever-changing employment landscape, and complying with payroll and reporting requirements, is a huge administrative burden for solo and small law firms.  Save yourself headaches and frustration, and free up more time for what’s important, by offloading these time syncs to a company that can handle it all for you efficiently, effectively, and fully RPC-compliant.  Contact Skepsis today.

Finally, don’t forget to sign up for our newsletter, where you’ll receive updates on new laws and issues affecting solo and small firms, including Washington’s new Family & Medical Leave law.

 

It’s Good To Be Back!

Big news from Skepsis!  After taking a year off to travel, we’re back at it – back to helping our clients, particularly law firms, with their bookkeeping.  This means that you, my fellow solo/small firm practitioner, again have a bookkeeper you know you can rely on – and who can handle the unique ethical and technical aspects of your trust accounting.  I can’t tell you how much fun, and how exhilarating, it has been to be back in the saddle, helping law firms with their bookkeeping and trust accounting.

If you haven’t yet had a chance to try out our bookkeeping services, now is the perfect time, as we’ll be offering discounts for new clients between now and the end of the year.

What’s so unique about Skepsis?  

I’m, Devon, the owner of Skepsis, and a licensed attorney, just like you.  That means I know trust accounting like other bookkeepers don’t.  I supervise our small team of bookkeepers very closely, including personally managing and reviewing your trust accounting each month, so you can be confident that Skepsis’ bookkeeping services meet or exceed the standards your bar card requires you to maintain.  I have presented on the topics of ethics and trust accounting at numerous CLEs across the country, including national webcasts, and authored dozens of articles that have helped attorneys across the country go mobile and manage their firms better.  I am licensed in Washington, Oregon, and California, although I provide bookkeeping services for firms nationwide.

More About Devon.  I was an attorney and partner in a national, complex commercial litigation firm for over 11 years.  During that time, I succeeded in not only resolving numerous complex commercial cases, but also, during my time as Managing Partner, I grew our firm from two attorneys to five; increased firm profitability; and implemented a paperless office.  That, in turn, allowed me and my employees to improve our work-life balance, and work effectively whether we were in the office, in court, at a client’s office, or on the beach in Tahiti.  Now, in addition to Skepsis, I continue to run my own law firm focusing on serving small to medium businesses and insurance matters.

What Can Skepsis Do To Improve Your Practice, And Improve Your Life?

If you have any questions about how to grow your practice, or how to manage your existing practice more efficiently and effectively, Skepsis can help.  Some of the services we offer for law firms include:

  • Bookkeeping, including client trust accounting and compliance
  • Solutions for paperless and mobile offices
  • Website design and management
  • Solutions and strategies customized for your practice to work more efficiently and increase profitability
  • Private in-house CLEs, including ethics credits, regarding practice management and work/life balance
  • Flat fee solutions for bookkeeping, trust accounting, and more, so you can manage your expenses better, and more profitably.

Would you like to find out more about what Skepsis can do for you, and what our services cost?  Set up a call today.

Devon Thurtle Anderson Named Top Attorney By Super Lawyers

We are pleased to announce that Skepsis’ own Law Firm Specialist, Devon Thurtle Anderson, has been named a top Washington attorney by Super Lawyers magazine.  This is the sixth year in a row that Devon has been named as a Rising Star by Super Lawyers magazine, and recognized as one of the top 2.5% of attorneys under 40 in the state.

Super Lawyers selects attorneys using a patented multiphase selection process. The process includes peer nominations and evaluations, along with independent research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement. Selections are made on an annual, state-by-state basis. The objective is to create a credible, comprehensive, and diverse listing of outstanding attorneys that can be used as a resource for attorneys and consumers searching for legal counsel.

At Skepsis, Devon helps law firms make their practices more effective, efficient, and profitable through strategic use of cloud-based practice management solutions.  Devon also assists law firms with trust accounting, including audits and compliance.  For more information, or to schedule a meeting, contact Devon today.

ALERT: Email Scam & Fake DocuSign

There’s a very convincing  email scam circulating at the moment, and it’s luring many professionals to give away their email passwords with fake DocuSign requests.  If you receive it, DELETE IMMEDIATELY, and call the sender to let them know their email has been hacked.

The scam states that someone you know has sent a PDF, and the email appears to be a DocuSign document.  Here are two examples of how the email might look:

Fake DocuSign Email Scam

Fake DocuSign Email Scam

If you’re savvy enough to check the email headers, the headers will confirm that this email really was sent from a legitimate email address.  So, there’s no clear evidence that it’s a fake DocuSign request.

If you click the link in the email, it takes you to a “log in” window, that also looks quite legitimate:

Fake DocuSign Email Scam - Phishing "Login" Page There, you enter your email credentials, and voila!  The scammer has everything they need to have free and easy access to your email account.  From there, they can sell your email credentials, use your address to send fake DocuSign requests to others, and even gain access to your other online accounts (including bank accounts) by searching for other passwords, and utilizing websites’ forgot password features.

The scam doesn’t end there.  Once the scammers have access to your email, their software goes in and starts sending fake DocuSign requests to everyone in your address book with the same phishing scam.  But, it then covers its tracks by automatically deleting all the emails it sent.  (But for most mail providers, you can still find these sent messages in the deleted folder.)  To add insult to injury, if a person replies to the fake DocuSign email sent from your account, the software has set up an automatic email reply confirming that the email is legitimate!

If your email becomes infected, the first thing to do is change your email password.  Be sure to use a strong password, that’s not a password you use anywhere else, and that includes numbers, letters, symbols, uppercase and lowercase, and that isn’t a real word.  Then, feel free to contact Skepsis for additional help managing the fallout and securing your email going forward.

Setting Up Washington Payroll In Xero

One great thing about Xero is that its payroll services are included in most plans at no additional cost.  And using Xero’s wizard, setting up payroll is fairly simple and straightforward.  But Washington, like many other states, has some payroll nuances that you’ll need to be prepared for as you run through payroll setup in Xero.

Step 1: Set Up Your Chart of Accounts For WA Payroll.

First, make sure you have at least the following accounts already set up in your chart of accounts:

Liability Accounts

  • Payroll: Wages Payable
  • Payroll: Federal Employment Tax Payable
  • Payroll: FUTA Payable
  • Payroll: WA UI Payable
  • Payroll: WA Workers Comp Payable

Expense Accounts

  • Payroll: Wages Expense
  • Payroll: Federal Employment Tax Expense
  • Payroll: FUTA Expense
  • Payroll: WA UI Expense
  • Payroll: WA Workers Comp Expense

Step 2: Set Up WA Unemployment Tax.

There are two places you’ll need to set up Washington-specific aspects of your payroll.  The first is in Settings > Payroll, and then on the “Taxes” tab.  Scroll down below the heading for “Federal (FED)” and click the down arrow next to “Washington (WA)”.  (If you don’t see Washington, that means you have not yet added a work location in Washington.  Do this on the “Work Locations” tab.)

screen-shot-2016-12-18-at-2-47-22-pm

After you click the arrow, the Washington panel will open.  Scroll down to view the entire panel:

screen-shot-2016-12-18-at-2-50-53-pm

Enter your “WA ES Reference Number.”  This is the ESD number shown in the upper right corner of your letter from the Employment Security Department setting up your ESD account:

img_3ee1c1960e35-1

Next, enter your WA UI Rate.  This is something the Employment Security Department will send you annually.  Here’s an example notice, with the WA UI Rate circled:

scan

The next field is the WA EAF rate.  That’s found on your same tax notice, here:

scan

Finally, choose your liability and expense accounts.  If you used the list we set up at the top of this post, your WA UI & Surtax Liability account will be Payroll: WA UI Payable; and your WA UI & Surtax Expense account will be Payroll: WA UI Expense.

Click save, and the UI component of your payroll is all set up!

Step 3: Set Up WA Workers Comp Deductions.

Next you’ll have to set up the second Washington-specific component of your payroll, which is the WA Workers Comp deduction.  In Washington, there are two components to the state-provided workers compensation program: (1) an employer-paid portion; and (2) an employee-paid portion.  The employer portion is not natively supported in Xero payroll, so it will require an extra calculation each time you run payroll.  The employee portion will be set up as a deduction.

To create that deduction, select the “Pay Items” tab in your Payroll Settings screen.  On the left, click “Deductions:”

screen-shot-2016-12-18-at-3-09-58-pm

To the right, click “Add,” and select “After Tax Deduction.”  A window will pop up – fill in the following:

Deduction Name: WA LNI

Standard Amount: [Leave Blank]

Company Max: [Leave Blank]

Liability Account: Payroll: WA Workers Comp Payable.

Click Add.

You’ve now set up your WA Workers Comp tax withholdings, and your Washington-specific payroll setup is complete.

Would you like help setting up your payroll?  Contact us today!

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