how to do bookkeeping for law firm

You can’t use Excel spreadsheets to maintain all of your financial books and records for an entire year. When used for that much data, Excel becomes clunky and lacks features you could use to improve your reporting. There are plenty of tools available that can help get you started. But setting up your finances properly won’t just make it easier to file your taxes each year—it’ll save you time, money, stress, and potentially legal trouble (yes, really!). If you’re not dealing with trust accounts, and just want to accept payments online or in-person, we recommend using Square.

There are far too many regulations and opportunities for error for an active firm not to have quality methods of handling its legal and financial accounting needs. Borrowing from IOLTA is not only a mistake but also against the rules. The bar will do everything possible to make sure client funds are safe. Borrowing is also a red flag for potential insolvency or other financial problems a law firm may be going through.

QuickBooks Online: For streamlined legal accounting

A minor accounting error could result in significant reputational damage, hindering future growth opportunities and client referrals. Law firm accounting is fairly subjective compared to law firm bookkeeping. A critical part of the legal accounting process focuses on analyzing financial reports and KPIs to uncover critical insights and  make informed business decisions. This allows you to determine which cases are the most profitable, which ones drain the most resources, and where money is being spent but not made. Most lawyers do so with the help of law firm accounting software.

how to do bookkeeping for law firm

Once you grasp these basic methods, we recommend bringing in an expert bookkeeper to help you keep the most accurate books. Hire a tax professional like A Deep Dive into Law Firm Bookkeeping a CPA to help you with your business taxes. Bring in a legal accountant to help you strategize how to help run your business through financial reports.

Specify Your Accounting Methods

One of its most attractive features is no limit on the number of users allowed access. Another feature that makes it one of the top choices for law firms is its ease of use and intuitive interface. Three-way reconciliation is generally conducted every 30 to 60 days, depending on the state. You can do it manually or by using powerful accounting software to assist law firms in meeting this requirement.

Xero is designed to provide small businesses and their advisors with an easy-to-use platform that offers real-time insights into a firm’s finances. Furthermore, Xero integrates with Clio which makes bookkeeping and reconciliation tasks simpler. If you’re not comfortable doing https://goodmenproject.com/business-ethics-2/navigating-law-firm-bookkeeping-exploring-industry-specific-insights/ your own bookkeeping, consider hiring a professional. A bookkeeper or accountant can help you keep track of your finances and make sure that everything is in order. There are a few key things that lawyers need to keep in mind when it comes to bookkeeping for their law firms.

Final thoughts on accounting and bookkeeping best practices

Or add something like – and don’t worry its free and everything you discuss is confidential. A retainer agreement helps establish terms for your services and payment. Learn how to set up your own retainer agreements and improve stability for your practice. Learn more about what billable hours are, how to track them, and what kinds of time you can and can’t charge. Track and analyze cases or clients that drive the most revenue to capitalize with better planning and resource allocation.

  • For example, keeping track of invoices or monthly recurring expenses.
  • PCLaw has made its name a one-stop shop that works well in any situation, especially with large law firms.
  • When you have a trust account, you’re required (by the State Bar) to perform a three-way trust reconciliation every 30 to 90 days.
  • It is recommended that bookkeeping for a law firm should be done on a regular basis, depending on the needs of the firm.

My team and I take care of your books for you, so you can get back to doing what you really love, practicing law. As a solo practitioner or small law firm owner, you have more important things to do with your time than manage your books. The business will need to look at the firm’s finances and see what makes the most sense for your business structure.