Do you want to get your law firm’s accounting under control? Or perhaps you’re starting a law firm and want to get off to a good start?
But you’re not an accountant; you’re a lawyer. And, while law school taught you the ins and outs of the legal system, it did not teach you about law firm accounting and bookkeeping.
Legal accounting and bookkeeping fundamentals are important regardless of the size of your legal firm – even if you’re a solopreneur. Though, learning these can be overwhelming, especially for lawyers like you. Good thing you can get outside help from a professional regarding this matter. Reach out to a reputable and trusted agency-Pearl Lemon Accountants.
As your bookkeeper, we’ll ensure that you’ll stay on top of your books while you can continue providing outstanding services to your clients. Book a call today!
You didn’t go into law to be an accountant. You will not only have an easier time filing your taxes each year if you organise your finances properly. You will save time, money, stress, and possibly legal trouble. You’ll have up-to-date financial statements showing you how your legal practice is doing at any given time. If you decide to sell the business, working with bookkeepers, accountants, new partners, and buyers will be much easier.
Take note of these tips, whether a small or large law firm, and you’ll be on your way to financial clarity and success.
Most firms are required to keep client funds in a separate account from a law firm, commonly referred to as an “IOLTA.”
IOLTA accounts are difficult to manage because they have very specific rules governing what you can and cannot do with them. Breaching these rules can result in severe penalties, including disbarment.
Every state has an IOLTA program, and the bank where you opened your regular business bank account is likely to have IOLTA accounts as well. However, because rules vary by state, consult your State Bar Association and a professional accountant before finalising your accounting setup.
While mismanaging an IOLTA account carries severe penalties, many law schools provide little to no training in trust account management. As a result, attorneys frequently find themselves repeating several common errors.
Accounting entails analysing financial data. Your legal accountant will be unable to do their job effectively if your data is not kept up to date.
Collecting and organising your financial data regularly is critical, rather than just at the end of the year.
Your legal bookkeeper will keep accurate records and be able to review and update your books weekly or monthly. You can use this information to understand your company’s financial health better and plan for the coming months.
Just as your clients rely on your legal practice, you will need to hire accounting professionals at some point. When using legal accounting software to simplify and automate your cash accounting, hiring a professional legal accountant, or both, don’t be afraid to delegate. When you work with an accountant from the beginning, accounting for law firms becomes much easier.
Accounting for law firms is critical to your firm’s success. To ensure that your firm’s financial statements are accurate, complete, and up to date, you must use sound bookkeeping for attorneys. To obtain a rich and accurate financial picture and meet your obligations to your firm, clients, and the state bar, your firm requires a clear, accurate accounting system.
Client billings are the lifeblood of a law firm. If you do not have a streamlined, professional method of keeping track of invoicing and collections, your practice may lose a significant amount of money.
According to the 2018 Legal Trends Report, the loss of income due to inaccurate bookkeeping, billings or failure to collect can amount to up to 15% of actual billable hours. That’s a lot of money to write off as a loss! An accounting firm can work with you to develop a system that allows you to keep track of your billable hours and ensure that your invoices reach your clients on time.
An accountant or bookkeeper can also assist you in distinguishing between your actual cash receipts and any uncollected invoices that may be reported as revenue even though you have not received the funds.
Clients rely on their lawyers to hold and keep their funds in trust, so trust accounting is a major responsibility for attorneys. However, trust accounting entails many rules and responsibilities, so it is critical to keep accurate records and adhere to your state’s regulations. Failure to follow trust account regulations can result in serious issues with your clients and the state bar.
The right legal accounting software considers these specific rules, allowing you to collect, track, and reconcile all money entering and leaving your client trust accounts. It may offer safety to ensure that law firm operating funds are earned before being withdrawn and assist you in avoiding overdrawn accounts.
Every law firm is responsible for staying compliant with ethical rules, and your firm is no exception. The rules of ethics vary by jurisdiction, but there are some fundamental similarities when accounting for law firms.
For example, Rule 1.15 of the American Bar Association’s Model Rules of Professional Conduct outlines key responsibilities for lawyers in terms of holding funds in trust, keeping records, and notifying clients of the receipt of funds or property.
Violations of accounting compliance regulations, intentional or unintentional, such as mishandling client funds, can have serious consequences.
It is difficult to expand your business. Handling trust accounting is more difficult. Let Pearl Lemon Accountants’ bookkeeping services make it a lot easier.
You can now cross law firm bookkeeping off your to-do list and relax about the financial aspect. As a result, you take comfort in being able to delegate financial tasks and focus solely on business development and legal matters.
Pearl Lemon Accountants provide law firm bookkeeping services that are comprehensive, cost-effective, and long-term. With our dedicated and experienced bookkeepers, you have the potential to transform your law firm’s financial management.
Book a call today and start staying on top of your accounting.
The hourly rate for freelance bookkeepers ranges from $29.21 to $43.40 per hour. Depending on where you live, this figure will be higher or lower than the national average of $37 per hour.
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. Most of our experts have experience working with law firms and know accounting best practices.
Legal bookkeeping will benefit your firm in various ways, one of which is that it will allow you to track how much money is coming in and going out and from where. It allows you to analyse your financial data to make data-driven decisions in the future. When making financial decisions saves time and money.
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.