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GAZETTE
FEBRUARY 1989
Computerised Accounting for
Solicitors - Do you need it?
Several months ago I discussed the question of Account
Systems wi th the Principal of a " two -man" practice. He
informed me that wi th two hours work, one Friday afternoon
per month, he could extract a satisfactory management
report accurately advising him of his Profit & Loss position
for the month and year to date.
He knows whether or not there
is oil in the well, and he did not
need a computer to tell him.
Whether you are a big, medium or
small office, that is the first and
most critical test for your accounts.
Let us disregard the size of the
firm for the present, then, and keep
the analysis of our respective
accounting systems as basic as
possible by asking ourselves three
questions:-
1. Is the firm in profit or loss? With-
out diverting too much staff
time, or our own time, can we
establish the profitability of our
practice?
2. Are the Client Accounts entirely
up to date? (Can we pick up any
one client account ledger any
day and find that it accurately
reflects the state of the financial
transactions for the client?)
3. Are the P.A.Y.E. and VAT returns
completely up to date?
If all the above questions cannot
be answered affirmatively, (or if any
one is achieved at the expense of
the other), then the accounting
system is not fullfilling its role in the
practice, irrespective of whether it
is a computer or manual system.
The argument "Fo r ":
Frequently, as a firm expands, or
the requirements imposed on its
accounts increase (the introduction
of VAT, or Witholding Tax), the
above targets may not be realised.
Sometimes they are still achieved
but with increasing difficulty, with
extra staff engaged in book-
keeping, time delays in delivery, or
increased auditing costs. It is time
then to consider if a computer
accounting system will serve
better.
The efficiency of the computer-
ised accounting system is very
much analagous to the efficiency
achieved by the Kalamazoo and/or
Safeguard systems when they
arrived on the market. At that stage
many Solicitors had three-part
books and, with the arrival of the
more efficient manual Kalamazoo
or Safeguard Accounting system,
the necessity to write up the third
part of the books was removed by
by
Frederic J. Binchy
Solicitor
accurately overlaying account
ledgers onto the third set of records
and carbonising the third entry.
With the arrival of computerised
accounting records the work of
book-keeping has again been very
significantly reduced. The book-
keeper only makes the financial
entry once through the Client's
Ledger Account and all other rele-
vant accounts are automatically
written up to date, whether it be
the fee account, the VAT records,
the bank record or the Client
Control account, and so on.
The best example, and the one
dearest to the solicitor's heart, is
when he comes to bill the Client!
Where the manual book-keeper will
have subsequently to write up the
fee account and VAT record, etc.,
the computerised book-keeper has
the entry done once the bill is
posted to the Client Ledger Account.
The Client is billed for a Convey-
ancing fee - the fee is posted to
his account by the Bookkeeper, the
fee element is automatically
recorded on the conveyancing
Nominal Account and the VAT
element is automatically posted to
the VAT Account.
When you have agreed the
transfer from the current Account
to pay this bill, the computerised
book-keeper posts the debit once
to the Clients Account, and
automatically the credit for
payment of the bill is posted to the
office section of the Client record,
and this system goes on to post a
separate record of the Bank
Transfer to the Control Account for
transfers, to the Client Account
recording the debit, to the Office
Bank Account recording the credit.
All this is done with one entry.
Subsequently, when preparing
the VAT report, the computerised
book-keeper will simply ask for the
VAT Return for the period and a full
report will be compiled showing all
the input VAT liabilities against fees
earned, and the output VAT credits
against the Firm's bills paid or
received and, most importantly, the
system produces the net figure to
be recorded on the VAT return.
The argument becomes pro-
gressively more important as you
move into the realms of the bigger
practice. Frequently, as a practice
evolves, its accounting section
creaks under the strain of increas-
ing demand and the partners come
to realise that the prime targets
mentioned are not being achieved.
All too often the Management
Accounting Reports, the Profit &
Loss statement, etc., or the VAT or
PAYE returns suffer at the expense
of keeping the information in the
Client Ledger Accounts totally up to
date. If, therefore, the posting to the
relevant account ledgers for these
areas is automated as outlined
above, then a considerable part of
the battle has been won in getting
these targets back within daily
reach.
This practice, then, has one of
two choices; either employ more
accounting staff using a manual
system, or upgrade to a com-
puterised accounting system and
see if you can achieve your three
targets with the one book-keeper
as before. In practical terms, one
computerised book-keeper should
be able to service satisfactorily
three to five fee earners (varying)
and achieve the above three targets.
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