Law Firm Accounting and Bookkeeping 101

We recommend you hire a legal bookkeeper and accountant to help keep you and your firm on track. You now have all of the information and tools needed to get your law firm’s accounting where it ought to be. There are many reasons for this, one of which is poor accounting practices. Inadequately tracking your billable https://www.digitalconnectmag.com/a-deep-dive-into-law-firm-bookkeeping/ hours and mismanaging your invoices can cause you to lose track of what money is owed, and what’s going out. Thankfully, there are a lot of tools available to help you manage your trust accounts, so you don’t have to go at it alone. Remember that your trust account is your client’s money, not yours.

• FreeAgent is not the most well-known accounting program, but those who use it love it.
• Once the account is open, it is important to manage it carefully by regularly reconciling accounts, tracking expenses, and paying bills on time.
• You pick up coffee for the office staff before work and use the corporate card.
• Your client trust accounts are required to keep separate from your business accounts.
• These are commonly known as IOLTA accounts (interest on lawyers trust accounts) and vary by state (and also check with your local bar association).

Without proper attorney bookkeeping, it’s impossible to track what money is coming (and leaving your firm). This can cause serious issues and stunt your firm’s growth (more on that later). With expertise in every accounting software and platform, our team of highly skilled professionals offer fast learning curves and swift implementation of solutions. Many lawyers have no idea how much money they are making or how the firm is doing. (Really!) At best, they have financial information but it’s too late to do anything. Bookkeepers track your finances so you can view at a glance how much money is entering and leaving your business.

Accounts Payable

Let’s face it, the legal pad did not get named by office supply stores! Have access to CPA-level insight into your bookkeeping practices. Track and code credit card transactions to the GL and ensure statements agree to GL. Handling bookkeeping by yourself can be both expensive and potentially damaging for your firm.

This will make it easier to find what you’re looking for and will help you avoid any mistakes. For example, if a law firm has multiple partners, each with their own areas of focus and billable hours, the bookkeeper will need to be able to track this information correctly. A well-organized budget should include both personal and business goals and be tracked with reliable software such as Deskera. Having a clear budget will help you track expenses, revenue, and goals so that you can make sure that you have the necessary resources available for major expenses. Now you cross off law bookkeeping out of your to-do list and feel stress-free about the financial aspect. As a result, you take comfort in allowing yourself to offload financial tasks and turn your attention exclusively to business development and legal cases.

Step 5: Double-Entry Accounting

When it comes to accounting for law firms, there’s no one “right” method (though you may be required to take on the accrual method). Some software platforms allow you to use accrual-based books for monthly management of the firm while also creating cash-basis statements for preparing tax returns. Look into the pros and cons of both methods for your firm, then be consistent going forward to ensure your records are accurate and easy to track. If your law firm doesn’t already have business bank accounts, it’s time to open them. Most firms will need three business bank accounts at a minimum—checking, savings, and a separate IOLTA or trust account. Without the proper business bank accounts, you risk inaccurate bookkeeping, messy records, and potential compliance violations regarding trust funds.

If any of these three balances do not match, it could indicate errors in your financial record keeping and should be investigated immediately. 2) The accrual method is more complex than the cash method and can therefore be more difficult to law firm bookkeeping keep track of. Learn more about the legal chart of accounts and view examples of formatting. Using our technology, accounting solutions & hardware leads to cost savings, reducing your team’s time spent on buying, implementation & upkeep.