How would you add an Attorney's Retainer Fee?

Judycel Fritz

Hi all,


We are currently paying for Attorney's fees and the way they bill us is quite different from others, here's an example: we made the very first payment to the amount of $2500. This $2500 then acts as a retainer fee. When invoices are sent to us, they take it out from the $2500 we've paid for. Now, every time the retainers fee go below $2500, they'd like us to pay and keep that retainers fee.


How would you manage these invoices? We thought of creating a credit memo then applying it to the invoices later but with a credit memo we can't record the bank draft.


I wonder if anyone has done similar to this. If you don't mind sharing your experience, it would be really helpful to our organization! Thank you.


Judy

Paul Wu

If they are invoicing you for the amount of hours worked, and they are deducting it from the retainer fee, but want the retainer amount to remain $2,500.


I have setup the retainer fee as a prepaid expense. It is prepaid as the legal work has not been done, yet.

When I receive the legal bills, I just charge it to my legal fee expense. Then this is paid back to the Attorney based on what they bill us. My prepaid expense will remain at $2,500 as that is what the firm is looking for us to maintain.

Judycel Fritz

I am still new to FE NXT, so I'm not familiar with prepaid expense. Is this created thru Expense Management? And would you mind sharing the process to me? Thank you so much!!!

Paul Wu

I have not used expense management, so not sure how that process would work.


If you have already paid the legal retainer, I would assume it is sitting in your legal expense account.


As legal invoices come in, just pay them and charge to your legal expense account. This would be the simplest. At the end of each month your legal account will show how much you paid on legal fees. The first month where you paid the retainer will show an extra $2,500.


The accountant should journal entry the $2,500 out of legal fees and into a prepaid expense account which is a balance sheet account. Then your legal expense account will now just have the actual invoices paid.


The prepaid account will have the $2,500 as a balance, probably called retainer for lawyer.

The legal expense account will have all the paid invoices from the lawyer. Therefore the retainer of $2,500 will be maintained.