From the LSUC Bookkeeping Guide:
“Any credit card agreement that licensees enter into must provide that all service charges, discounts and other fees payable by the licensee to the financial institution are to be deducted from the licensee’s general account and that no such charges are to be deducted from the trust account.”The Bookkeeping Guide later states:
“The procedures of some credit card companies place licensees in conflict with provisions in By-Law 9. Some credit card companies require merchants (including lawyers) to designate only one account into which credit card payments are to be deposited. Additionally, the discount charged by the company is automatically debited from this account.
This process will not permit licensees to receive by credit card both retainers and payments for billed fees and/or disbursements. Subsection 2(1) [sic. - 7(1)] of By-Law 9 requires licensees to deposit funds received in trust (e.g. retainers) into an account designated as a trust account. Meanwhile, subsection 8(2) of By-Law 9 prohibits the deposit into trust, funds that are “received by the licensee on account of fees for which a billing has been delivered...” "The Bookkeeping Guide reaches this conclusion:
“Consequently the use of one account for both purposes is not permissible.”However, that is not what By-law 9 actually says. In the second paragraph of this section on credit cards, The Bookkeeping Guide correctly states:
“The definition of “money” in By-Law 9 includes “credit card sales slips” and provides that credit card sales slips like other money received into trust, must be deposited to the licensee’s trust account not later than the following banking day.”With any credit card company, the soonest that funds will be deposited is the next banking day. If you process the client’s credit card for deposit into your general account, and then IMMEDIATELY transfer the same amount to your trust account, you have complied with By-law 9 - “must be deposited to the licensee’s trust account not later than the following banking day.”
Since you have not actually received the credit card funds yet, you are advancing (loan) the funds to your client’s trust ledger. By transferring the funds from general, you have created a general disbursement that will be offset by an equal general receipt when the credit card funds are finally deposited by the bank. If you prefer, you can bill out the general receipt and disbursement on a separate invoice (net $0.00), to avoid confusion on the invoice submitted to the client.
As always, I invite your comments and suggestions for future post topics. Next Posting – Flat Fee Billing vs. PCLaw Disbursements Recovery.