Updated: Aug 31
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 bookkeepers could help lawyers to run their business more efficiently.
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 accountants to debate in court. So, each is only good at their expertise. Same as accounting for law firms or lawyers. Legal bookkeepers or accountants 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.
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 bookkeeper will present it in data. They maintain a proper record of financial transactions. They also ensure required financial statements are prepared at regular intervals of time. In most cases, they will help to form 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, 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 bookkeepers 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 add 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, accountants and legal bookkeepers could even help to adopt & develop best practices for lawyers to manage receivables. They keep lawyers informed of any discrepancies and irregularities, offer vital financial advice that is best for your business growth.
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 lawyers and law firms’ practice. They understand the clients’ 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 bookkeepers and accountants can help to choose the most suitable accounting tools 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 software works
Accommodate the billings
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?
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?
Besides P&L, Balance Sheet, or AR reports, lawyers need specific reports about
originating attorney reports
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, best practices. This is where their core values are highlighted, establishing the foundation for a strong & mutual trusted relation in the long run.
Checklist for Best Accounting Practices
Legal bookkeepers and accountants can help prepare a checklist of accounting practice in basic bookkeeping & other transactional activities. This checklist best serves the law firm in cash flow records. Workflows to be focused and systemized:
Reconciliation and reports
If you’re reaching the end of our blog, you now have known the importance of accounting and bookkeeping 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.
Irvine Bookkeeping offers a full range of bookkeeping services and promises that in 2-3 weeks, we clean up a whole book for you to prepare for tax seasons. 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!