Bookkeeping for Law Firm Stay On Top of Your Books

While it’s essential to understand the fundamentals of accounting for law firms, you still aren’t an accountant or bookkeeper. Hiring professionals is common for law firms, and it’s an easy route to peace of mind. Yes, you can utilise accounting platforms like Quickbooks and Xero, and follow some of our tips above. However, we recommend getting help from a professional bookkeeper and accountant like what we have here at Pearl Lemon Accountants.

Take note of these tips, whether a small or large law firm, and you’ll be on your way to financial clarity and success. QuickBooks is a powerful asset for any criminal defense attorney running its own practice from a small office. It’s a specialized computer program that’s designed as a flexible, easy-to-use accounting solution. As a result, the program has become commonplace among small businesses and only continues to get more popular.

Get Clear On Trust Account Rules

Are you confident that your trust account is being managed properly? Do you have monthly financials that truly let you know how your law practice is doing? Are you certain that all of your advanced client costs are being billed back to clients? Do you have a “fire drill” at the beginning of each month when it’s time to prepare bills and some timekeepers don’t have their time in? If you cannot answer these questions to your own satisfaction, we can help.

You need to keep a pulse on your numbers to know if your business is healthy. Which method you choose will affect cash flow, law firm bookkeeping tax filing, and even how you do your bookkeeping. Make sure to consult with a CPA before settling on the method you’ll use.

Ignoring Professional Help

It also establishes credibility with existing and potential clients, showing that the law firm is taking its financial affairs seriously. “Money leakage” is a term used to refer to situations where the money that should have been collected as revenue is lost or not collected. This can occur when invoices are not sent out in a timely manner, resulting in missed opportunities to collect payments. Money leakage can be particularly damaging for law firms, which typically have an 85% collection rate, meaning that only 85% of what they bill gets paid. Trust accounts are one of the most common areas where legal accounting mistakes are made.

• When it comes to key accounting concepts, it’s really about organization.
• Most law firms accept electronic payments, like debit and credit.
• And when you commingle your personal and business finances, the following problems can arise.
• For example, if a law firm has a goal of saving money, they may choose to cut back on non-essential expenses like office parties or new office furniture.
• Despite the rise of online payments in the legal profession, some of the current Bar Association rules around law firm accounting were created back when everyone was still paid by check.

It is sad but true that some of the most troubling errors law firms face are simple data entry mistakes. Unfortunately, their consequences are not always so simple and can affect significant portions of law firm business. Xero is growing fast as an accounting management option for small and growing law firms. One of its most attractive features is no limit on the number of users allowed access. Another feature that makes it one of the top choices for law firms is its ease of use and intuitive interface.

Separate your personal and business finances

Whether it is handled in-house or outsourced to a professional, bookkeeping can help reduce the cost of operations. It’s important for law firms to maintain a consistent schedule when it comes to bookkeeping activities in order to ensure accuracy in their accounting records. Additionally, an accountant or bookkeeper can provide valuable advice and tips on how best to manage the books for a law firm. InvoiceSherpa is an automated accounts receivable system designed to help law firms collect payments from their clients quickly and efficiently.

• This will help you stay on top of your finances and make sure that you’re not overspending.
• He now writes articles on personal and corporate finance, accounting and tax matters, and entrepreneurship.
• Or, you might lose track of critical transactions that affect your taxes.
• Following these best practices will help law firms ensure that their bookkeeping activities are conducted ethically and in compliance with relevant regulations.
• Sage Accounting is most suitable for smaller law firms and sole proprietors.
• A well-organized budget should include both personal and business goals and be tracked with reliable software such as Deskera.