Accounting and Bookkeeping Services for Lawyers and Attorney USA 2023

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.

• It’ll keep you organized, ensuring you meet all of your financial obligations to your clients, your firm, your employees, and more.
• Typically, when a client sees the end result of our work, they realize that they can get accurate data points out to become a more profitable law firm.
• You should only ever charge your clients fees directly related to their account.
• Conversely, cash basis accounting recognizes revenue when you’re paid (i.e., when the cash is received) and expenses when they’re paid.
• Additionally, keep your financial records in check by syncing to a system for accounting for law firms like QuickBooks Online.
• With this information, lawyers can make informed decisions about pricing, cost management, and resource allocation.

If you have a debit in one account, it follows that there will be a credit in another account. In this system, all transactions are categorized as one or the other. In 1981, this money started being stored in an IOLTA, which is an interest-bearing account.

Set and stick to a budget

Do you have monthly financials that truly let you know how your law practice is doing? Are you certain that all of your advanced client costs are being billed back to clients? Do you have a “fire drill” at the beginning of each month when it’s time to prepare bills and some timekeepers don’t have their time in? If you cannot answer these questions to your own satisfaction, we can help.

• This allows you and your staff to concentrate on the core activities of your firm which make you money.
• When you allow us to keep track of your finances, you give yourself more time to do your work and please more clients.
• When a business expense gets lost in your personal account and you don’t claim it on your tax return, that’s a tax deduction you’re missing out on.
• This leaves you with the purchase of additional non-legal accounting software.
• As a business owner, you’re required to keep your law firm compliant.

Your financial strategy will help you plan, strategize, and shift as you need to, helping you grow a financially healthy law firm. Each month, take some time to reconcile your budget compared to your reality, making changes that benefit your bottom line. We know that lazy bookkeeping practices will cost you real money and time, result in sweaty nightmares, and put your license and firm at risk. Thankfully, good bookkeeping can also result in accurate reports on demand, make billing easier and improve the way you view your finances.

Accounting and Bookkeeping Best Practices for Law Firms

LawPay also ensures your law firm accepts payments that comply with your state bar’s regulations surrounding trust (IOLTA) accounts and the American Bar Association (ABA) guidelines. The terms bookkeeping and accounting can sometimes be used interchangeably. Legal bookkeepers and legal accountants work with your firm’s financials with the shared goal of helping your firm financially grow and succeed. As an attorney, you’ll spend a lot of your time invoicing your clients. Picking an invoicing solution that automates the legwork can save you time and money. Cloud services like FreshBooks let you set up recurring invoices and record project expenses while also letting your clients pay outstanding invoices online using their credit card.

Accounting for law firms may be new or challenging to you, but it doesn’t have to be scary. What’s most important is that you get the details right so that you can stay compliant with ethics rules and help your firm grow to its full potential. Entering numbers manually often leads to mistakes and duplicated data entry in the accounting process. This results in wasted time, mismatched records, billing complications, and even compliance violations.

How to Choose the Right Law Firm Accounting Software

Committing to accounting for law firms will allow you to be better equipped to identify growth opportunities. Effective accounting for law firms is critical to your firm’s success. To ensure your firm’s financial statements are accurate, complete, and up-to-date, you need to use sound bookkeeping for attorneys. Do not be misled, bookkeeping is more than just punching numbers into a software. When a bookkeeper is skilled (s)he will be able to take the reports that software produced and turn them into tools that can be very useful to you and your business.

Total assets are also required to equal total liabilities plus equity (net worth or capital) of a law firm). Setting up and recording the chart of accounts for law firms isn’t just suggestions, they are requirements. A chart of accounts is a list of all your firm’s financial accounts, usually used by an accountant and available for bookkeepers.

Poor accounting practices, such as struggling to track billable hours or sending out invoices late, can lead to money leakage. IOLTA accounts are designed to keep client funds separate from your typical business or operating account—where you are allowed to Running Law Firm Bookkeeping: Consider the Industry Specifics in the Detailed Guide accrue interest. Let’s face it, the legal pad did not get named by office supply stores! Software and systems continue to evolve and improve with time. Accounting is a Tactical tool to the overwhelming Strategic challenge you are facing as a Small Law Firm.