How to Easily Set up Your Attorney Bookkeeping Software to Figure Payroll Commission

October 17, 2016

You have more business than you can handle, and you want to bring on another attorney. You have more business than you can handle, but you aren’t really sure if you have enough for two people. You are afraid to hire another attorney full-time because what if it doesn’t work out, or what if you don’t have enough business coming in to pay the other person? To fix this problem, you set up a plan where you are going to pay them 70% of what they collect. This way, they are encouraged to find new clients, take on cases, and collect payments.

Everything is going great! Both of you are bringing in clients. You don’t feel bad turning down business anymore. The new attorney is working their tail off, and you know that you are making more money because your bank balance is increasing. Then it comes time to pay them, and you are lost. Neither one of you have been keeping track of who paid.

You start by looking at all the deposits made and going line by line to figure out who you collected money from, and then you look each one up to see if they were your client of the new attorney’s client. It takes you several hours just to figure out how much you are going to pay this person. Now, you might be thinking that this seems easy enough with one person. You know who all your clients are, so that makes it easy to determine which payments belong to clients that aren’t yours, but what about when you hire another new attorney and you have two people taking on clients? This can become a huge pain!

The solution is simple: Turn on locations or classes in your QuickBooks software and make each attorney in your firm a location.

After you turn on locations, every time you make a deposit, you do it just like you normally would, but you also enter a location. For example, you collected three checks totaling $3,000. Each one is $1,000, and two are Bob’s clients and one is Susan’s client. When you make your deposit, you split the transaction so each check has its own line, and then you enter the attorney’s name in the location field.

You can now run the Profit and Loss report by location for any given period and see how much income each attorney brought in, and then easily figure the amount of commission to pay on the new attorney’s payroll. This is a great start, but if it were up to me, I would want to see the expenses, as well make sure my 30% cut was enough to not only cover the expenses associated with this new attorney but also put dollars in my pocket.

This is easy enough to do after you already have locations turned on. Just mark each expense as a specific attorney. Then you can really look at your profit and loss report by location and see an accurate picture of how much this new attorney is bringing in and how much you are profiting off this adventure. It can help you to see whether or not you made a good business decision hiring this new attorney and if you should go out and hire more.

If you would like to find out more ways to implement this strategy in your law practice bookkeeping, I can help. Once you become a client of Legal Ease Bookkeeping, LLC, I can set up your QuickBooks to track this information and help you analyze the reports so you can easily see how much commission you need to pay and whether or not hiring a new attorney was a good business decision. Click here to schedule a free 30-minute consultation to see how I can help you.

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