Trust accounting can sometimes be difficult to set up, so our intention here was to simplify it as much as possible. If you are using QuickBooks as your accounting system, we hope that this feature will bring you value and make trust accounting efficient and easy.
Setting up Trust Accounting
To use Trust Accounting, first you need to connect your QuickBooks company to your Matter365 account. If you didn’t already do so, on your first visit of Accounting page, you’ll be asked to log in with you QuickBooks credentials. To set this up, use Add company button.
Matter365 Accounting page
The next step after connecting to QuickBooks is to Setup Trust accounting.
Trust Accounting page before being set up
In this step, you need to provide the three accounts that will be used for all transactions in regard to your trust accounting. As shown in the following picture, if you already have existing accounts of the required type on QuickBooks, you can select them from a list. Otherwise, you will see an appropriate button that will allow you to create a new account of the required type and give it a meaningful name.
The three accounts from the dropdown menus will read from your QuickBooks Online accounts. Matter365 will read account types and detail types from QuickBooks Online (detail type = subtype).
Trust bank account will show all accounts type Bank, detail type Trust account.
Trust liability account will show type Other current liabilities, detail type Trust accounts - Liabilities.
Operating account will show type Bank, detail type Checking.
Information icon can provide more info on certain account types, with a mouse hover over it.
Trust accounting setup dialog
After you select all three accounts that are required, you can confirm the dialog.
Trust accounting setup dialog, filled in and ready for confirmation
Creating a new Trust Account for a specific Matter
After you’ve set up Trust Accounting, you have two options of setting up a Trust Account for a specific Matter.
The first one is to use Setup new Trust button from Trust Accounting page.
Setting up a new Trust account from Trust Accounting page
Another way of doing it is to use Setup new Trust button on Matter dashboard.
Setting up a new Trust account from Matter dashboard
In both cases, you will see the dialog presented below, and you can select the Matter that you’re setting up the Trust account for, add a starting balance, choose opening balance date and add a description if you’d like.
Setup new Trust account dialog
By confirming this dialog:
- Your Trust Account balance on QuickBooks was increased,
- Your Trust Liabilities Account balance that offsets Trust Account was increased as well, and
- A subaccount of Trust Liabilities Account with the name of the Matter was created with the same balance.
This is done in respect to the double-entry bookkeeping system, so your books are audit-ready at all times.
Important thing for you to know is that we aren’t doing any calculations in our application, we are simply using QuickBooks APIs to display the data you have in QuickBooks and to simplify accounting workflows that would usually take you much time and effort. Doing this work manually on QuickBooks would require more accounting knowledge, more steps, and more knowledge of how QuickBooks works.
Trust accounting page after we created a new Trust account for a Matter
Depositing funds to an existing Trust Account
To deposit more funds to an existing Trust Account you can use Deposit Funds button that you can find both on Matter dashboard page, and on Trust Accounting page of Matter365.
Deposit Funds button on Trust Accounting page Deposit Funds button on Matter dashboard
In both cases, you will be asked to enter the amount of the deposit, as well as the deposit date. After doing so, you can confirm the dialog.
Deposit funds dialog
Same as with setting up a new Trust Account, this will trigger a change in three different places on QuickBooks:
- Trust Bank Account balance will be increased
- Trust Liabilities Account balance will be increased to offset Trust Bank Account
- Balance of the subaccount of Trust Liabilities with the name of the Matter you selected will increase accordingly
Paying for invoices from a Trust Account
Whenever you create a new invoice for a Matter with a Trust Account set up, this amount will be shown in Pending receivables column, on Trust Accounting page.
Note that at this point none of the Accounts’ balances are changed, the only thing that is new is that now there are some pending receivables for a Matter you worked on.
Pending receivables that appeared after invoice generation from the image above
In order to actually update the balances of your accounts to show that an invoice was paid for from a Trust, use Record payment button.
Record payment of an invoice from a Trust Account
In a dialog that will appear, you can select all of the unpaid invoices for that Matter (as long as their sum isn’t higher than your Trust Account balance) and by confirming the dialog:
- Trust Bank Account balance will be reduced for the amount of selected invoices
- Trust Liability Account and liability subaccount with Matter name will also be reduced for the same amount
- Your Operating Account balance will increase for the amount of selected invoices
Note that all of these changes are happening only in your books, keeping your accounting up-to-date. You will still need to actually move the real money accordingly.
Payment is recorded, and balances are updated both in Matter365 and QuickBooks