For most law firms, the client balance should be in the Trust Account. To refund from the trust account, click here.
The following are three different situations related to issuing credits back to the client if the funds are currently located within an operating account i.e. the Payments tab:
- The Client Underpays an Invoice – Credit the Unpaid Amount
The work is completed and the total invoice amount is $10,000. However, for whatever reason the client remits a payment of only $9,500, which is entered in Timesolv as Credit Type = Payment and Payment Method = Check.
How is the difference of $500 handled? In this situation, enter a new payment as Credit Type = Credit Memo and Payment Method = Internal in the amount of $500. Once this new payment has been saved in Timesolv, allocate it against the remainder of the original $10,000 invoice that was not paid in full by the client.
In the next two scenarios, the client has overpaid by $500 for a total of $10,500.
- The Client Overpays an Invoice – Apply Payment to Future Invoices
This is similar to scenario I above, except it is agreed that a $500 credit should be applied toward the next month’s bill or a future bill. In that case, there is no need to do anything different or special in Timesolv: the $500 will show as unallocated credit when the next invoice is generated and will be subtracted from the total amount owed by the client. A $500 credit can be allocated against the new invoice at any time after the invoice has been sent (i.e., an invoice number exists).
- The Client Overpays an Invoice – Issue and Track a Client Refund
This is the scenario when a client has overpaid and must be issued a credit. This can happen, for example, when a client has paid a retainer in the amount of $10,500 but the total amount of billable work completed is only $10,000. If you expect to do additional work for this client in the future, simply apply the credit against any future bill (similar to scenario II above). However there may be times, such as when the project is complete, when the client needs to be issued a refund via check, wire-transfer or some other method.
In those cases, create a new Expense type called “Refund” or “Client Credit” or any other appropriate term. Then, create an expense entry in the amount of $500 for the client-project in question, generate an invoice and then allocate it against the outstanding unallocated credit. In essence, treat this as your expense while the proper adjustments are made through the accounting program.