Think of Clio as your revenue tool, and Xero as your expense tool. When you are paying expenses on behalf of your clients, you’ll track the initial cash payment in Xero. When you recover those expenses from your clients, you’ll be using Clio.
When you add expenses to Matters or Bills in Clio, these will be charged to the client and appear on any invoices generated:
When the Clio invoice syncs, these expenses will also be reflected in Xero:
Paying and Tracking Recoverable Client Expenses
To pay for a recoverable client expense from your firm's Operating Account and then reflect this in the IOLTA Account follow these steps:
- Decide how you want to code your recoverable client expenses. Some may prefer using a clearing account, while others might track the payment and recovery of these expenses in separate accounts. Make sure this is reflected in how you have your Xero sync set up - please review this article for steps on configuring the Xero sync settings.
- Process the payment from your Operating Account in Xero.
- Add this reimbursable expense to the client's Bill in Clio.
You also have the option to record the expense on the Bill or Matter prior to actually paying the expense. This workflow might make more sense if you’re on the go - using the Clio iPhone or Android Apps. Just remember, it will need to be paid in Xero at some point afterwards. Consider using a Task List Template to help you with these reminders.
Receiving Payment for Recoverable Client Expenses from the IOLTA Account
Payments received and recorded in Clio will sync to Xero and update the associated invoice. If this payment did not come from a Client Trust Account, then you’re done! However, you may need to update your IOLTA Account in Xero to reflect the drawdown of these funds. Here’s how:
- Apply the payment from the Client’s Trust Balance to the outstanding Bill in Clio that has the reimbursable expense. The payment will sync to Xero. We recommend all payments be synced to your Operating Account; however you should consult with your accountant to determine your preferred workflow.
- Create a journal entry in Xero to reflect the reduction of the IOLTA Account. The payment has already been recorded into your Operating Account, so this entry will simply reduce your Trust IOLTA Account and the associated Trust Account Liability. If you have multiple payments in a period, try using Clio’s Trust Ledger Report or Trust Listing Report to help you track how many payments have occurred.
You may alternately prefer to track all payments into an Undeposited Funds account, where you can individually track them through to the Operating Account and determine whether an IOLTA Account adjustment is required.