ACCOUNTING SETUP

Author:                   Cindy Kruger

Date:                      August 2008

Audience:               Agents/Trainers

Summary:                          The Accounting setup in LegalSuite

CONTENTS:

· Introduction

· Accounting TAB

· Double Entry TAB

· VAT TAB

· Receipts/Payments TAB

· Fees/Disbursement TAB

· Periods TAB

Introduction:

Even if you are not using the Accounting Module, please setup the Accounting Defaults and it is imperative that the Accounting defaults are correct before you start capturing and posting your accounting transactions.

If this has not been set up correctly your accounts will be affected and your system will not be in balance. Examples of this are, VAT getting calculated incorrectly or transactions reflecting in wrong periods etc.  Maintaining the integrity of accounting data is very important, and with your setups correct half the battle is won!

The Accounting settings must be completed or checked before capturing information in the Accounting Module commences.

This document points out the important things to remember when setting up the LegalSuite Accounting Program.

The Accounting setup is found under SETUP – PROGRAM SETTINGS

Accounting TAB

Under the “Setup” pulldown menu, select “Program Settings” and then click on the “Accounting” TAB. The information displayed in this TAB is important, the settings here will create the firms financial years as well as set restrictions on the postings in the system as per the firm’s requirements. See below the layout of the Accounting TAB (FIG 1):

Fig 1 : Accounting TAB

· In the “This Financial Year” block  you need to fill in the “Last Year End” date.  This is the date when you closed your books for last year. Most firms financial year end is the last day of February. In this example it was the 29 of February 2008 as it was a leap year. The “Current Period” will be the period that you wish to start capturing for. In this example it will be August which is period 6. The “Last Audit No:” fields gets updated automatically by LegalSuite and should not be changed.

· Under “Last”, the last “Remittance No” from their previous accounting system can be filled in.   LegalSuite will allocate the next available sequential number when creating remittances.

· The Posting section can be setup as per each firm’s requirements. If the firm only wants the users to post in the current period then the “Allow posting to Current period Only” option must    be ticked. If a firm wants to be able to post into periods where the bank reconciliation has    already been completed then the “Allow Posting to Reconciled periods” must be ticked. A    common problem on LegalSuite is that users post to future periods which should not be allowed because the control accounts will not balance to the current periods transactions. If a firm wants to be able to post to future periods/Dates then the last option must be ticked.

· Credit Notes - If the firm would like to use credit Notes then this check box must be ticked. Most firms handle credit notes by posting negative fees which reduces their invoice for the month but some want to produce separate credit notes from their invoices.

· The other fields should not be touched.

Double Entry TAB:

The next step is to check the “Double Entry” TAB settings. These are very important and you need to make sure all the settings are setup correctly. If the Ledger accounts do not exist you need to create them in the Ledger accounts in the Business ledger. Below is the layout of the Double Entry TAB (FIG 2):

Fig 2: Double Entry TAB

This part of the setup is probably the most important and you must make sure that the correct accounts are selected on each and every one of these options. The accounts are as follows:

· Business Creditors – Current Liability

· Business Creditors (Trust) – Trust Creditor

· Debtors Control – Current Asset

· Trust Creditors – Trust Creditor

· Distributable Reserves – Current Liability

· Gross Profit – Owners Equity

· Profit/Loss On Sale Of Asset – Income / Expense

· Depreciation – Expense

· Fee Income – Income

· Admin Expense – Expense

· Trust Bank Account – Trust Bank

· Business Bank Account – Business Bank

· Petty Cash – Petty Cash

· Revenue Stamps Account – Revenue Stamps

· Business Suspense – Current Liability

· Trust Bank Account – Trust Bank

In order to select the relevant double entry account, click on the  Ellipse button at the end of each line. A list of appropriate Ledger accounts will appear (Fig 3). Highlight the correct Ledger and click on select.

Fig 3: Selecting a ledger Account

VAT  TAB:

The next TAB to check is the “VAT” TAB. It is vital that you setup the VAT correctly from the beginning. Below is the layout of the VAT TAB (Fig 4):

Fig 4: Vat TAB

If the firm is registered for VAT ensure that the correct VAT registration number is filled in.  This is the VAT registration number that will print on your Tax invoices.

Under “VAT Method” select one of the VAT Methods None, Payment or Invoice depending on if and how the firm is registered for VAT. 

If the firm is not registered for VAT select None - the “Vat Control Account” and “Vat Provision Account” fields will then disappear.

If the firm is registered for VAT on the Payment basis select “Payment” and make sure to fill in both the “VAT Control Account” (Current Liability) and “VAT Provision Account” (Current Liability).

If the firm is registered for VAT on the Invoice basis select “Invoice” and make sure to fill in the VAT Control Account.  The “VAT Provision Account” field will disappear.

The Disbursement Recovery section is also important – Please make sure that you select the “Disbursement Recovery” (Expense) account in the Business Ledger. If the Disbursement Recovery Account does not appear in the business ledger you have to open an Account in the Business Ledger. This is used to balance the VAT come Audit time. In LegalSuite creditor disbursements are both Input and Output VAT and this account is used to both debit the expense when you pay the creditor and credit the expense when you charge the client for the disbursement. In real terms this zero’s the expense allocation but it reflects the VAT portion of the expense as Input VAT when you pay for the service or fee and as Output VAT when you charge the client for the recovery.

The three default VAT Rates must reflect the current options from the receiver of revenue.

Receipts/Payments TAB:

The next TAB under program settings is the “Receipts/ Payments” TAB. These settings are very specific  for each firm. Below is the layout of the Receipts/Payments TAB (Fig 5):

Fig 5: Receipts/ Payments TAB

If the firm wishes to use the LegalSuite receipts, it must be set up here. 

The options are:

None                                        -           Receipts will not be printed. This option is commonly

selected if the firm uses a hand written receipt book to

issue receipts.

Pre-printed (Dot Matrix)            -           Receipts will be printed on pre-printed Stationery to a dot

matrix printer.

Standard (Laser)                       -           Receipts will be printed on blank A4 paper to a                                                                           laser printer.

If the options “Print Individual Trust Receipts” and “Print Individual Business Receipts” are ticked LegalSuite will print a separate receipt for each matter plus a receipt reflecting the total receipted when multiple receipts are used. 

If you would like separate batches to be created for Trust and Business transactions, tick the last option on the Left hand side. If this is not selected then you could make one batch that has trust and business transactions mixed together.

LegalSuite has an option to print your firm logo on the LegalSuite Laser Invoices. Select the logo file that will be printed on the invoice. This Logo needs to be saved as a .bmp and make sure that the X, Y, Width and Height settings are set correctly.

Fees/Disbursements TAB:

The next TAB is the “Fees/Disb” TAB. This TAB is used to setup the Fees and Disbursement automatic setting. Below is the layout of the Fees/Disbursements TAB (Fig 6):

Fig 6: Fees/Disbursements TAB

These are the default settings for Admin Fee, Collection Commission, Investment Fee, Agents Allowance and Interest for the system but each matter must have the appropriate options selected in order for these defaults to apply.

· Admin Fee - If the client wishes to charge an “Admin Fee” the amount (exclusive of VAT) must be allocated here.  The range (i.e. R20.00) means that it will not charge an administration fee if the matters balance is between minus R 20.00 and positive R 20.00.  An administration fee will be charged once on each matter that has had movement during the period, and only if the matter was opened to charge an administration fee.

· Collection Commission - The Collection Commission is the default setting for the system. Select the percentage – usually set to 10%. The Limit is the maximum amount of collection commission you will take on each receipt. The limit is set by the Law Society for your area.

· Investment Fee –The Investment Fee settings is normally recommended by the Law Society but has flexibility.

· Distribution Fee - The Distribution Fee setting only applies to those firms using LegalSuite   Administration Orders module. This percentage is usually set to 12.5%.

· Agents Allowance - This is the percentage (usually one third) of the fees charged to matters that is paid as a referral fee to attorneys that have asked your firm to collect debts on their clients behalf. This is not compulsory and some firms have alternate arrangements with each other.

· Interest - The Interest settings determine the basis upon which interest is charged to clients for their overdue debit amounts (i.e. moneys owed to you in arrears). The From field determines from what age interest must is charged. The rate is the percentage at which interest is charged and is calculated on the outstanding balance. This is an annual rate.

The “Override” option on each “Fee Type” allows for all fee transactions to be allocated to a specific income account selected. If it is not flagged the fee transactions income will go to the same income account that is allocated to the matter.

Disbursement Recovery

The Disbursement Recovery section allows you to specify whether your client would like all Disbursement recovery transactions to be allocated against a specific Cost Centre and Employee instead of the default Cost Centre and Employee that are indicated on the Matter.

Even though these transactions are debited and credited at the same time and don’t affect the balances of the Cost Centres or Employees the transaction reports will include these transactions.  This can confuse some users when analyzing their Cost Centres and Employees but in real terms it does not make a difference to the balances. Some users don’t like the fact that these transactions are included in the reports and therefore we have included this override feature in the setup.  The Disbursement Recovery transactions can be allocated to a specific Cost Centre and Employee for analysis.

Override the matter settings by ticking the Cost Centre and Employee option and type in the name of the Cost Centre and Employee you want the disbursement recovery transactions to be allocated to.

TIP: Open a separate Cost Centre for the Disbursement Recovery or allocate the transactions to a Default Cost Centre

Allocate Transactions

Income transactions can be assigned to the Business Ledger in various ways depending on the options set out here but most of our firms allocate them per Cost Centre. The options under the “Income Account” are:

· “Program Settings” - the Income transactions will be allocated to the account that you have selected under the “Income Account” in the “Double Entry” TAB.

· “Employee” – the Income transactions will be allocated to the Default Income Account selected on the Employee that this transaction is allocated to.

· “Cost Centre” - the Income transactions will be allocated to the Default Income Account selected on the Cost Centre that this transaction is allocated to.

· “Matter Type” - the Income transactions will be allocated to the Default Income Account set on the Matter Type of the Matter that this transaction is allocated to.

Allocating Expenditure transactions to the correct Cost Centre and Employee are managed by the “Expenditure” allocation you choose.  Most firms usually select “Automatic Allocation”. The options under the “Expenditure” are:

· “Display Allocation” – the Cost Centre and Employee can be manually selected when capturing transactions by choosing this option.

· “Automatic Allocation” - the Cost Centre and Employee will be automatically allocated when capturing transactions by choosing this option but can be changed manually if you wish.

· “Do Not Display Allocation” - the Cost Centre and Employee will be automatically allocated when capturing transactions by choosing this option and cannot be changed, in fact it won’t even be displayed.

Periods TAB

The last TAB for the accounting setup under program settings is the Periods TAB. The Periods TAB reflects the date ranges for periods for the financial year that you have highlighted in the yellow section on the left of the window. The yellow section is the list of past and present financial years that exist on the system and the right hand side of the screen are the period names and date ranges. Below is the layout of the periods TAB (Fig 7):

Fig 7: Periods TAB

The Start date of period one is automatically inserted as one day after the Last Financial Year date under the Accounting TAB. LegalSuite is not date specific, i.e. the date of the transaction is not as important as the period. If you try and post a transaction that does not fall within the current period, the program will warn you, but will still allow you to post the transaction. The transaction, however, will be allocated to the current period (unless you override the period), regardless of what date was entered.

The end date for the period will be automatically adjusted to the date on which you post your period-end and the start date for the new period will be one day after your period-end.

Conclusion:

Once you have setup the Accounting Settings correctly the client can now proceed with using the Accounting Module. We have found that most problems that occur and most accounting queries arise from the Accounting Setup not been completed correctly.

Please use this whitepaper to ensure that your new clients are setup correctly even if they have not initially purchased the Accounting Module and you will have a trouble free environment.