Just like other businesses a lawyers office or firm needs to keep its financial numbers in order. No matter you run a small to mid-sized law firm or operating as an independent lawyer, the challenges for keeping a track of your money are pretty much similar.
Some attorneys are worried about tax penalties, others may lose track of how much and to whom they owe. At the same time losing track of receivables. So, you can avoid all this if you follow 5 tips to keep your books in order. This is another aspect where accountants for lawyers can join hands together.
Keep Records of your Expenses
A successful law firm may not succeed without knowing where its money is spent. This may be your increasing overheads, the expense for and on behalf of clients, or other statutory expenses. This becomes more complex in absence of a legal accounting system. Your attorney and staff members may spend hours saving and filing the vouchers, invoices, and receipts to keep track of money.
This practice may have many flaws.
- Papers, receipts, the ledger can get misplaced
- Your accountant or designated accountant may not enter an expense in the ledger, correctly
- There’s no internal audit to verify and cross-check the entries in the ledger so, you should track your expenses, not only to ensure their right disbursement but to keep a lid on money leakage.
This will be easy if you get a legal account system and an accountant for lawyers.
Upgrade to a Legal Accounting System
Most law firms are using general accounting software. For making it compliant for a law firm you should do a lot of input. The output can still be far from the desired results. This can result in a loss for both, time and money.
A law firm may appoint someone from the management or paralegal side as their makeshift accountant.
To overcome the difficulty for rightful entry of expenses, have a proper legal accounting system in place. This will ensure none of the expenses and financial activities go unnoticed and generate reports descriptively.
Legal account software has various advantages, the best ones are:
- It’s designed for trust accounting
- Ensures auto-posting in sub-ledgers, and
- Generate financial reports
Accurate Trust Accounting System
It must be maintained most transparently and accurately. In absence of a legal accounting system, the firm’s accountant may mix an entry or funds and put the firm at risk? To avoid such an event from occurring, you must:
- Ensure error-free entry without comingling the funds of your company with trust account money. The governing laws regarding trust account vary from state to state.
- Maintain separate accounts for your law firm and trust account.
- Use the latest software with an option for handling trust account or get legal account software to ensure correct numbers.
- Make invoices for showing which funds were received from the trust and what is the balance?
Identify Areas of Revenues
Law firms after several years of practice, create a niche for handling a certain area. However law firm keeps on dealing with other areas as well. In either case, the revenue keeps pouring in. This is where most of the firms find it hard to segregate their areas of income.
By doing this, the law firm comes to know what area of interest is giving them more revenue. Second, they will try to offer better services in other areas of practice. Once the firm invests in legal account software, this will eventually help them make data-driven decisions to improve their financial health.
The number of hours spent on a case will get revenues and the profits finally. Time used maybe for discussion with client, research, referring to old case studies, etc.
The common practice for recording the time is on sticky notes, the flip side of a paper, the case papers, or your table diary. You may lose a sticky note or forget where you marked the hours? This may lead to under or over-invoicing.
Therefore, to avoid any loss for several hours, legal accounting software is the right answer. This software will give you all the key input methods to identify how much time actually you spent on a case. Keep your revenues growing without a blink?
Keeping your numbers in order is of prime importance. Following these tips may help you methodically improve your accounting system. You can upgrade your software, get the right accounting system, and monitor audits and expenses. You can make it more convenient by engaging or employing an accountant for lawyers.