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Level 1

Advanced Client Costs Account

I'm using QuickBooks for my law firm, which works on a contingency fee basis and advances expenses for clients that are reimbursed only if we obtain a recovery for the client. First, I entered in all of the expenses that we have already paid for our clients and I assigned all of them to the Advanced Client Costs account which is an Other Current Asset account. Then, I created a Customer for each one of my clients and I created an invoice for each Customer/client which reflects the costs that we have advanced for each one. When I look in the Chart of Accounts, the balance of the Advanced Client Costs account is negative. When I open the Advanced Client Costs account, it shows all of the costs I've paid from my operating account and my credit card, which are increasing the Advanced Client Costs account's balance. And, it also shows all of the invoices I created as Accounts Receivable, which are decreasing my Advanced Client Costs account's balance.  I believe that the Advanced Client Costs account is showing a negative balance because of the "soft" costs (e.g., copying, postage, etc.) that I manually entered into the invoices. Does this sound correct? Should my invoices be offsetting the client costs I've paid such that my Advanced Client Costs account reflects a negative balance?  As you can probably tell, this is my first time using QuickBooks for a law firm's bookkeeping.

1 Comment
Level 2

Advanced Client Costs Account



A couple of questions for you:

I see you are putting these into Advanced costs as an "other asset" and you only bill the client if you obtain a recovery.  If you do not obtain a recovery for the client, are you reclassifying these other asset costs as "expenses"?  Second, you indicate that you are manually entering the soft costs.  Did you set up a different "item" for postage, etc or are you using the same item.  Technically, if you enter all costs and invoice clients then your advanced client costs should not be zero.  At some point it should zero out given that costs not billed are removed from the asset account.   A negative would indicate you have invoiced for "more" costs than you applied to the advanced client cost account as expenses you already paid for.

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