9 Key Law Firm Accounting Tips and Best Practices

Although tax deductions are advantageous when used right, many attorneys and law firms could not use them efficiently due to not being aware of tax rules. As a result, they either claim all deductions or they miss out on important deductions due to lack of knowledge. The sheer objective of regular accounts monitoring is to make data-driven decisions to minimize loss and maximize profits, leading to your law firm’s overall growth. Without properly differentiating these accounts, your law firm is at risk of inaccurate bookkeeping, unorganized records, and failing to meet compliance requirements. Insights on running a successful law firm with case management, client intake, billing and payments, tech innovation, and more.

The leading law firm accounting software will even help you manage clients’ trust accounts, monitor expenses and time spent on cases, and maintain records so that you can bill clients accurately. There are a ton of legal accounting software offerings available, but not all of them are created equal.

Bookkeeping Services for Lawyers

Putting time and effort into your accounting and bookkeeping will help you keep track of what money is coming in, how you’re spending it, and who it belongs to. It’ll keep you organized, ensuring you meet all of your financial obligations to your clients, your firm, your employees, and more. If a bookkeeper performs day-to-day tasks like data entry, a legal accountant looks at the big picture. They collect, analyze, and use financial information to plan for the future. With a legal accountant, you can be certain that your firm is compliant and is set to grow. These funds are stored in IOLTA or “interest on lawyers trust accounts” accounts. To avoid this type of situation, use accounting software that allows you to automate these processes.

• Know that your firm’s day-to-day transactions are being accurately recorded to ensure smooth operation of your firm as a business.
• Tim is a Certified QuickBooks Time Pro, QuickBooks ProAdvisor, and CPA with 25 years of experience.
• For example, if you were using LawPay to collect payments and invoice clients, you could easily sync all your transactions into QuickBooks for easy reporting and reconciliation.
• With an all-contained law firm bookkeeping and accounting system, users can enjoy having all their financial data in one place—reducing the risk of critical errors.
• Here are some reasons why accounting is key to your firm’s success.
• There may be some trust transactions in the ledger at the end of the period, which will appear as outstanding items on your reconciliation.

For instance, in Ohio, funds must be held for at least five years, and after that time they must be donated to a legal assistance foundation that increases access to justice. Supporting Strategies offers a range of outsourced bookkeeping and controller services that will transform the financial management of your law firm. As much as I love spreadsheets and numbers, bookkeeping is an unavoidable task that takes time and energy. Someone needs to reconcile the accounts, record the entries and prepare the year-end financial reports. While I could easily do the financial reporting myself, I’m confident that my time is better spent in legal practice and legal billing. Our recommendation is Bench for lawyers looking to grow their practice and spend more time on revenue-generating activities such as client development or billing.

Do lawyers need accounting?

We provide 3-way reconciliation for trust accounts, consulting, and tax ready financials from our centralized office in Denver, Colorado. While you might already be having a system to prepare budgets, you need to have a strong strategy in place to prepare an effective one. Keeping your firm’s accounts maintained and organized is important; however, it is not as easy as it seems, especially when it comes to handling them on your own. Hence, here we will discuss some of the best ways to improve the financial accounting process of your law firm; read through this piece to get valuable insights on the same. Request a free assessment and talk with our Managing Director to discover how your firm benefit from Practice Alchemy’s law firm specific bookkeeping and accounting services. Practice Alchemyʼs approach to law firm bookkeeping includes a thorough understanding of your practice and the management of your books with a solution that works specifically for your firm. You’ll likely need software alongside your legal account solution to manage your law firm’s pricing.

First, let’s differentiate between accounting and bookkeeping — two terms that are often used interchangeably but really shouldn’t be. Danielle Bauter is a writer for the Accounting division of Fit Small Business. She has owned Check Yourself, a bookkeeping and payroll service that specializes in small business, for over twenty years. She holds a Bachelor’s degree from UCLA and has served on the Board of the National Association of Women Business Owners. She also regularly writes about travel, food, and books for various lifestyle publications. Whether you need just a little bit of hand holding or more, we are here to help your law practice! First, let’s review typical accounting and bookkeeping functions that need to happen regularly so you can make sure you’ve got these covered.

What Is a Legal Assistant? Explaining Their Role in a Law Firm

Some states oblige law firms to use IOLTAs in certain situations, so check with your state bar association for rules for your firm. Remember that your trust account is your client’s money, not yours. Accountants rely on bookkeepers to keep accurate and timely financial statements. Whether you do the bookkeeping yourself or outsource it to a professional, it’s a crucial task. A chart of accounts is a list of law firm bookkeeping all the financial accounts in the general ledger of your law firm. A fundamental concept in accounting and bookkeeping, double-entry accounting states that all financial transactions have equal and opposite effects in two different accounts. The difference is, the interest earned in a lawyers’ trust account is directed to the state IOLTA board to be used toward advancing legal services and non-profits.