In terms of business management, there are lawyers thinking of ways to spend the money they have earned and there are ones struggling to save money and make profits. Managing your financials better could be one of the keys to success in law practice. In our limited space, we would like to indicate some important points as to how law firm accountants and law firm bookkeeping could help lawyers to run their businesses more efficiently.
Accounting uncomfortable
Law and accounting, one thing in common is they are both sophisticated in their own field. You cannot expect lawyers to deal with accounting issues or law firm accountants to debate in court. So, each is only good at their law firm bookkeeping expertise. Same as accounting for law firms or lawyers. Legal bookkeepers or accountants for lawyers help lawyers to manage their business better with their expertise directed to cash flow, attorney compensation, or staff efficiency. No more worry about client profitability or compliance with the state’s bar association when it comes to trust funds management. Or you can use outsourcing like accounting and bookkeeping services to help your firm with accounting.
Numbers do matter. Efficiency is the main part.
Numbers can tell a lot. When financial data is well-prepared in an organized manner, it can show good insights into your business operations. Many lawyers run their law practice by instinct. They assess their cash flow in real time based on their work progress and receivables. An accountant or law firm bookkeeping will present it in data. They maintain a proper record of financial transactions. They also ensure that required financial statements are prepared at regular intervals of time. In most cases, law firm bookkeeping and accountants will help to form the best accounting practices in place from which lawyers can rely on and shift their full energy to their law practice.
Lawyers and law firms have specific financial needs that are unique to their industry. They need to use legal accounting software that features legal-specific functions. Big names like QuickBooks, Xero, and FreshBooks are good tools as they help to solve common issues like time and expense capturing. Accountants or bookkeepers with experience in those tools will do huge ‘justice’ to the accounting issues for lawyers or law firms because they know 3 things:
They know the numbers
They know how to organize the numbers, and
They know how the software works around financial data.
A very simple example of efficiency is accountants or law firm bookkeeping can customize clients’ invoices to present the data in the most effective way. Then other useful functions can be added like electronic payments in QuickBooks Payment. The value added is that the more effective the client’s invoice, the more quickly the lawyer will receive payment. It’s a win-win situation for both the attorney and the client. In addition, law firm accountants and bookkeeper for lawyers could even help to adopt & develop best practices for lawyers to manage receivables. They keep lawyers informed of any discrepancies and irregularities and offer vital financial advice that is best for your business growth. Bookkeeping services for lawyers can give you better consultant finance with your firm development.
What differentiates a law firm's bookkeeping/accounting practice from others is the thinking beyond bookkeeping and accounting. They give advice and show best practices to stabilize and provide insights into the lawyer's and law firms’ practice. They understand the client’s needs because after all, their work is no different. Law firm bookkeeping service also relies on time tracking, professional service invoices, good/bad clients, etc.
Choosing and implementing the right tools
Law firm bookkeeping and accountants can help to choose the most suitable accounting software for the lawyers' needs and provide user training. They need to prove how those tools can satisfy the accounting requirements. Some of the following should be paid attention to:
The mechanics of how the accounting software works
Track time
Accommodate the billings
Hourly
Fixed-fee
Hybrid
Retainers
Contingency
In order to make the workflow operates smoothly, make sure:
The invoice generated by the software can be approved
Check its integration with the accounting: does it reflect real-time financials or it syncs on request or requires a manual update?
Trust Accounting
What does IOLTA stand for? IOLTA stands for Interest on Lawyers' Trust Accounts. It's a program that allows lawyers to place client funds, held in trust accounts, that are too small or held for too short a time to earn interest individually into a pooled account. The interest earned on these trust accounts is used to fund legal aid and public service programs. IOLTA programs help provide legal services to the poor and support initiatives that improve the justice system. By pooling these trust account funds, IOLTA programs generate significant resources to aid those in need of legal assistance, promoting equal access to justice.
Grasp basic rules for the state in which the lawyers practice
Make sure the accounting and invoicing tools will allow the firm to meet compliance requirements
Based on a client trust account, what will the workflow be?
Reporting
Besides P&L, Balance Sheet, or AR reports, lawyers need specific reports about
timekeeper
partner compensations
originating attorney reports
client profitability
Integration & Migration
Bookkeepers and accountants for law firms not only help attorneys to select the right tools for their practice, but also provide suggested plans for changes e.g. schedules, training, data migration, and best practices. This is where their core values are highlighted, establishing the foundation for a strong & mutually trusted relationship in the long run.
Checklist for Best Accounting Practices
Legal bookkeepers and accountants can help prepare a checklist of accounting practices in basic bookkeeping & other transactional activities. This checklist best serves the law firm in cash flow records. Workflows to be focused and systemized:
Invoice accounting
Accounts Payable
Reconciliation and reports
Financial Compliance
If you’re reaching the end of our blog, you now have known the importance of accounting , bookkeeping, and accounting software for your business. We do hope our above information is helpful for you and any decision-making related to this area you may have from now on. Thank you for your reading & see you again.
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Irvine Bookkeeping offers a full range of law firm bookkeeping services and promises that in 2-3 weeks, we clean up a whole book for you to prepare for tax season. We believe knowing your company's financial health is the key to maintaining control of your business.
As a business owner, if you see that you cannot handle accounting on your own, consider hiring an accountancy service for contractors to help you with it.
Call Irvine Bookkeeping now for a Free Quote!
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