When setting up your accounting, You must go to Setup > Firm Settings > Accounting Settings
Here you must designate if you wish to allocate expenses as Reimbursable Client Costs or Advanced Client Costs.
We HIGHLY recommend you seek accounting advice to make these decisions as they do affect your tax filings.
Here is a brief description of each.
- Both Advanced Client Costs and Reimbursable Client Costs are expenses the firm has advanced on the matter. The amounts are considered loans to the client.
- 1700: Advanced Client Costs is a balance sheet account. Expenses for contingency cases are booked to this account and reimbursement is done at settlement. Many firms use Advanced Client Costs for all matter expenses, even those that are contemporaneously billed and reimbursed. As cost is recovered, it gets allocated back to 1700: Advanced Client Costs.
- 6610: Reimbursable Client Costs is an expense account on the Profit and Loss statement. Typically, firms use this type of account for expenses that are being invoiced to the client contemporaneously, with the expectation that payments will remain current. As cost is recovered, it gets allocated 4200: Reimbursed Client Costs (Direct).
- 6620: Non-Reimbursable Client Costs is used to enter matter cost which is unbillable or no charge. This cost will never be recovered as it can never be part of an invoice due to being unbillable or no charge. [This option is available when posting an RCC expense]
- Please discuss your firm's options with your accountant. You may find the following article useful:
I’m using Advanced Client Costs (Asset Account) and now want to use Reimbursable Client Costs (Expense Account), how do I do this?
- These settings are done globally at Firm Setup by the Administrator and impacts all future costs. You cannot change the account to which your costs are assigned on the matter level.
To change previously categorized matter costs, after the change:
Unbilled Expense Cards
- Edit each expense card. Only the new account will be available.
- Edit each expense card from within the Edit Invoice Screen. Only the new account will be available.
- Delete payment
- Edit invoice as per above
- Apply Payment back to the invoice