The Gazette 1989

FEBRUARY 1989

GAZETTE

Computerised Accounting for Solicitors - Do you need it?

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.

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.

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

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

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

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