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Accounting for Law Firm: 5 Common Legal Accounting and Bookkeeping Mistakes

Updated: Mar 19

Lawyers are not accountants and they often make the same common mistakes when it comes to accounting for law firms. Legal accounting and law firm bookkeeping mistakes have catastrophic consequences for your business, income taxes, and license. The good news is you can identify these mistakes at the first stage and avoid them. Below we’ll show you the most commonly fall short in accounting practice.


Common Legal Accounting and Bookkeeping Mistakes - diy bookkeeping mistakes


Mismanaging trust accounts

As an attorney, you may be aware of state bar requirements for trust accounts, but that doesn’t prevent you make diy bookkeeping mistakes. It’s true. The most common mistakes in law firm bookkeeping are putting funds in the wrong account, accidentally or intentionally withdrawing funds, or fail to report monthly, and so on. Poor management of trust accounts can lead to penalties, suspension, or even losing the right to practice law.

Commingle operating and Client Trust Account funds

In other industries, it is allowed to keep clients’ prepayments in your operating account and use the money to fund client projects. But accounting in law firms is different than for other businesses. If you are running a law firm, don’t make that severe mistake. Your client trust accounts are required to keep separate from your business accounts.

Incorrectly differentiating income and revenue

When an invoice is paid, you must first allocate the payment to the incurred cost. This portion is not income, so you must record it separately. Nevertheless, many attorneys fail to separate revenue that covers incurred costs from their actual income. Failure to allocate appropriately can lead to having inaccurate books, and battle compliance issues. It’s a nightmare.

Making Data Entry Mistakes

Handling client funds is a significant responsibility and you must remember a large number of rules to conduct your role ethically and responsibly. However, sometimes the diy bookkeeping mistakes can occur. It’s easy to make law firm bookkeeping or data entry mistakes when you have to maintain and complete your day-to-day transactions manually. duplicated data entry. Only a small mistake or duplicated data entry may result in wasted time, mismatched records, billing complications, and even compliance violations.

Not asking professional for help

While you spent most of your life becoming a seasoned lawyer, accounting is a different area and not your expertise. Although you now understand the common diy bookkeeping mistakes in accounting for law firms, you’re still an accountant or bookkeeper. There will come the point when you need to call in professionals for legal accounting, so don’t be afraid to delegate when you need help.



Making the jump from an attorney to running a law firm can bring a ton of new intimidating challenges. Legal accounting and law firm bookkeeping are surely one of the largest you face. That’s why we recommend you should hire a professional legal account or law firm bookkeeping services. Now, you can dedicate your valuable time to growing your business.



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