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Know The Numbers in Law With Our Accountants for Lawyers
There is a great deal of information you should know as a budding lawyer. You may be well-versed in torts, laws, human rights, and trade agreements, but have you ever considered accounting?
Being concerned with dry and tedious accounting may seem like the last thing on your mind as a lawyer.
Their line of work necessitates meticulous record-keeping of all financial transactions; call it accounting if you like. Financial responsibility should be a consideration for any lawyer who defends a client’s case before the courts.
After all, lawyers are also on close watch for any anomalies in their accounts. As part of the society who studies and uses the law to defend people or corporations, you know that clean financial accounts are important.
Even for seasoned attorneys, law firm accounting may be a daunting prospect. You may have spent years perfecting your abilities as an attorney, but you probably didn’t learn anything useful about accounting or bookkeeping for lawyers in law school.
Good news: we’ve already done much of the groundwork for you.
Our expert specialist accountants can help with your finances and bookkeeping without even breaking a sweat.
Give us a call, and let’s discuss.
Lawyers Need Professional Accountants Too
Books and records must be kept in accordance with the law.
This is a remark that is both self-evident and vague. You should worry about the accounting practices of your legal company, but do you know why or how much?
This leads us to the conclusion that Accounting for legal companies and bookkeeping are essential to you as a lawyer.
A successful legal practice cannot function without sound financial practices. Using proper bookkeeping for lawyers will result in more reliable financial accounts for your practice.
Your business requires a transparent and reliable accounting system so that you can receive a complete view of your finances and fulfil your duties to your clients, the state bar, and your own company. Here are more specific reasons:
You must maintain compliance at all times.
Your legal firm is not exempt from the obligation to adhere to applicable ethical standards. Though local professional requirements may differ, all legal firms share a few essentials in bookkeeping.
The Solicitors Regulation Authority has a set of rules, solicitors accounts rules, that must be complied with to ensure the legality of your practice.
Violations of compliance requirements, such as improper customer cash management, can have severe consequences.
Legal accounting standards may differ by jurisdiction; therefore, it’s important to familiarise yourself with the specifics of the rules in your area of practice.
- Significant financial penalties.
- Licence suspension.
- Disbarment.
You need to grow your business.
Remember that your business is both a law firm and a business. Accounting for lawyers lets you collect and analyse information and make decisions based on what money comes into and goes out of your firm, so it’s important to pay attention.
Knowing exactly how much money is coming in (through collections) and going out (through expenses) for your business makes it less likely that you’ll miss out on sales by accident (i.e., due to billable hours not being recorded or missing out on tax deduction opportunities).
You can also use this data to determine which parts of your practice work best and which don’t. This will help you decide how to use your resources in the future to help your business grow.
You could be harming your reputation.
As in life, reputation is everything in the law. If you make mistakes in your accounting, you look unprofessional. You may be known as the “lawyer that doesn’t follow SRA accounts rules” and you do not really want that.
Such negligence of your wealth management and accountancy may warrant you an SRA audit, a big scandal for someone working as a legal professional.
Things You Can Do For Accounting
Starting off structured increases the likelihood that you will maintain that order. Help yourself stay on track by instituting and adhering to industry-standard accounting procedures, such as those demonstrated in the following examples.
Keep up with trust accounting.
Mistakes in law firms’ trust and IOLTA accounts are among the most prevalent and potentially catastrophic in all of accounting. You or your employees (if you have any) might quickly put your business in danger by commingling cash if you don’t strictly stick to standard procedures. If you want your trust accounting to be accurate and up to date, you need to
- Be very careful with your documentation. While specific standards may differ from state to state, most state bar associations require law firms to retain and maintain thorough records for client trust accounts,
- Always use a separate bank account. Many guidelines require lawyers to maintain two bank accounts: one for regular business expenses and another for IOLTA funds (again, check the specific requirements for your area).
- Make use of useful technological tools. Trust accounting facilitates compliance with rules governing the handling of client assets in trust accounts:
Put together a financial plan.
You can’t hope for financial success if you don’t have a budget that includes these items.
- Figure up some targets for your income.
- Plan out your budget and your financial flow.
- Make it less difficult to save up for expensive outlays like yearly bar dues.
Despite the plethora of resources available to you, the single most crucial aspect of budget creation is a well-thought-out plan. Here are some broad suggestions:
- Think about the money and supplies that you need to operate, and write it all down.
- Make plans for the future, both professionally and personally (how many trips do you hope to take next year?). and commercial (at what rate do you anticipate your company’s earnings expanding?).
- Give an (honest) estimate of your expected profits.
- Some programmes may be used to keep tabs on billed hours, money spent, and income earned. Connecting to a law practice accounting solution, such as QuickBooks Online, will help you stay on top of your money.
Opportunities can be found in the numbers.
If you follow the accepted standards for accounting for lawyers, you’ll be able to spot expansion prospects while still maintaining efficiency and legal compliance.
Good accounting practises in the legal industry naturally yield insightful information about the health of your practice. The data found in financial statements may be used to guide decisions that will have a beneficial effect on your business.
Continue using the same approach.
When we look at the necessity of sound accounting, we are actually talking about periodically looking at financial data. And we can’t accomplish that if we aren’t consistently collecting and organising it.
Just consider: Most attorneys know the significance of accounting at year’s end and the necessity of being ready for tax season; nonetheless, it is usual for them to put off organising their books until the last minute.
You may get a clear image of your company’s financial health by adhering to best practices in bookkeeping and reviewing the financial statements regularly (at least once a month, if not more frequently).
Our Award-Winning Services
Additional to the financial advice and SRA guidance, here are also some of our professional services that may be available to you:
Tax Planning
Our tax experts can help you get the most out of tax allowances, reliefs, and perks that are specific to your industry. Our professional tax advisors make sure that all corporate tax returns follow the rules set by HM Revenue and Customs and are filed correctly so that we don’t get fined.
International Tax Planning
Whether you run a business abroad or want to move abroad, our international tax experts can help you save money on both UK taxes and taxes in other countries.
The amount of tax you have to pay in another country depends on how you set up your personal and business affairs there. We’ll help you come up with a sound tax plan that will help you pay less in taxes.
Whether you’re doing business in the UK or abroad, we ensure that you and your company follow all the rules and save you money on tax.
Personal Tax Services
Our tax experts will advise you on every part of your tax situation to ensure you are following the law.
We offer a specialised service for filing UK taxes that is simple and straightforward. We hope that with these tax services, we can help you, your spouse, your civil partner, and your family with your taxes.
Accounting for VAT
VAT accountants make sure that your business pays the right amount of VAT to HMRC and follows all the steps for VAT registration for the best VAT scheme. VAT accountants will need to look at your company’s records to make sure that their reports to HMRC are correct.
These can help you a lot during the tax year and answer all your questions, saving you time and trouble with complicated VAT procedures. Because VAT is needed for so many goods and services, it’s best to hire a VAT accountant to make things easier (and save you a lot of money).
VAT is complicated and takes time to understand. A chartered accountant can help because they know how to do these things quickly and right.
Tax Probes by the HRMC
Tax audits and inspections can be annoying, so if you’re unsure what to do, talk to a professional.
Investigations often lead to big tax bills, bankruptcy, the need for a time-to-pay plan, a voluntary company arrangement, or a voluntary liquidation by creditors.
HM Revenue and Customs will discuss the investigation or send you a letter. A “letter of information notice” is the first step in investigating a tax bill. During an audit, the tax office will want to look at your records.
HMRC nearly always calls your accountant if they have the authorisation to do so. You could get in trouble if you don’t respond to an information request or refuse a visit.
For many reasons, especially during a tax investigation, having a tax expert represent you makes perfect sense.
These are just some of the things we can do for you. Is there something you want that isn’t on the list? Feel free to contact us.
FAQs
Do lawyers need accounting?
If you run a modestly sized legal practice, you should know the basics of legal accounting. Thus, your business may follow the norms of ethics and make sure it isn’t losing money.
What's the difference between bookkeeping and accounting?
The purpose of both the legal bookkeeper and the legal accountant working on your firm’s finances is the same: to ensure the firm’s continued financial health and growth. The data is collected in a similar fashion, but what they do with it and when they do it are two distinct things. Both are essential to the success of your business.
Bookkeeping
Bookkeepers keep track of monetary transactions and ensure that your company’s books are in order.
Legal bookkeeping is an essential administrative duty for every legal company, occurring before actual accounting can occur. Without accurate bookkeeping, attorneys cannot know how much money is coming in or going out (and leaving your firm). This might lead to significant problems and slow the development of your business (more on that later).
Accurate financial data is essential for legal accountants, who may use it to do their jobs, and reliable bookkeeping for lawyers is a must.
Accounting
A CPA’s job is to look at financial records and figure out what they mean. An organisation’s legal accountants might utilise bookkeeping information as a jumping-off point for further analysis and planning. For legal practises, they handle accounting duties, including creating financial statements and forecasts and documenting costs.
Why is accounting important for lawyers?
A company’s financial transactions, including its income, expenses, and other factors, must be recorded accurately and quickly.
There are two primary reasons why attorneys need thorough and well-organised financial records:
- To always act with the utmost integrity.
- To establish a fair price for their labour.
Ethically, attorneys have a duty to their clients to provide a full accounting of all money received from and spent on their behalf. Legal representation comes at a hefty price for clients, who must also cover the cost of professional and court costs. Transparency in all financial dealings is essential for meeting internationally accepted ethical standards.
Instead of only getting an invoice for a certain amount, your clients will have a clear understanding of the costs they are obligated to pay. That way, no one is overcharged, and everybody knows exactly what they’re paying for.
In addition, attorneys can assess the whole worth of their services by carefully maintaining records. By keeping meticulous books, attorneys may track every cent they earn, every dollar they spend, and every cent they keep for themselves.
It is only with this knowledge that they can charge a price that is both reasonable and lucrative.
When you allow us to keep track of your finances, you give yourself more time to do your work and please more clients.
It's a win-win situation for everyone.
Aside from that, you'll also gain financial stability because your assets and liabilities are managed well enough not to cause any trouble for you in the future.
So let our experts work for you, and you won't regret it even a bit.
Book a call today to get started.