Legal accounting software is designed to help law firms with bookkeeping, allowing them to keep track of their finances in an efficient and compliant manner. This type of software provides a range of features and benefits, such as auto-generated reports, secure data storage, and access from any device. Automation can also reduce the time spent on manual data entry tasks, making it easier for accountants and bookkeepers to remain up-to-date with ethical rules and client information.

And without proper care, it’s easy to slip up and make a dangerous error. If you’re going to make an accounting error, it’ll likely be with your trust and IOLTA accounts. This data lets you pick and choose the best clients to work with, identify what expenses you have that might not be worth it, and make sure you handle client money appropriately. Whether you’re a solopreneur or run a firm with a hundred lawyers, knowing where every dollar is going will help you make better decisions for the firm’s health. You’ll also identify what areas of your firm (practice areas, types of clients, etc.) are most profitable. This way, you can focus on working with the kinds of clients that bring in the most money.

Accounting Clerk / Bookkeeper (FT)

Suppose you understand exactly what your firm is collecting and your firm’s expenses; you lower your chances of accidentally missing out on revenue. If billed hours are not recorded properly, or you miss out on tax deduction opportunities, you miss out on many opportunities. Legal law firm bookkeeping accounting will let you analyze and collect information to make decisions with data in mind. These numbers are based on money that is coming into your firm and leaving your firm. Bookkeeping is an ongoing process, so make sure to keep up with your records on a regular basis.

• You don’t necessarily need accounting software or a professional bookkeeper to handle your law firm bookkeeping.
• A professional legal accountant’s role will generally focus on interpreting, collecting, and utilizing financial data to help a firm stay compliant and grow.
• Many lawyers go to one or the other extreme—they either claim everything (and possibly more than they’re allowed to), or they’re so afraid to overstep they miss out on tax deductions.
• For example,
  If your law firm has multiple partners, you may want to consider hiring a bookkeeper to help keep track of the finances.

Either way, having a budget in place is key to ensuring that a law firm stays on track financially. Perform all data entry of cash receipts and client costs in billing and accounting systems. When it comes to our record-keeping, the handling of our Trust account was and continues to be most important. Now that we work with Lescault and Walderman, they are responsive to our needs. Clear financial data reporting and analysis provides confidence in operational decision, management, transparency, and partner trust. You can’t use Excel spreadsheets to maintain all of your financial books and records for an entire year.

Do lawyers need accounting?

If they don’t, you need to go over every single transaction to see where the error lies. We’ll dive more into the specifics of why you need a CPA later on in this piece, but trust us when we say hiring one will make your life much easier. With that said, here are the steps we recommend you follow, whether you’re a small or large firm. In our opinion, this is an oversight, as mismanaging these accounts can lead to serious consequences, even disbarment. These best practices all come back to one idea — staying organized.

Your bookkeeper, CPA, and the IRS all require you to keep documents proving your income, credits, and deductions. John W. Olmstead, MBA, Ph.D, CMC,() is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. As your budget year crawls on, you can adjust numbers to more accurately reflect reality and plan the rest of the year accordingly. See what strategic opportunities you have for reinvestment and plug those into your budget. If you’re trending behind, it is better to know sooner rather than later so you can react accordingly.

Accounting terms you need to know

Do your due diligence and make sure every dollar going into the trust account is supposed to be there. We’ve seen firms using these accounts to hide assets or as a savings account. The reality is that there is no scenario where it’s okay to use your IOLTA in this way. Just be sure to verify your exact responsibilities with the State Bar Association and/or a professional accountant.

It’s important for law firms to maintain a consistent schedule when it comes to bookkeeping activities in order to ensure accuracy in their accounting records. Additionally, an accountant or bookkeeper can provide valuable advice and tips on how best to manage the books for a law firm. By tracking their finances accurately, law firms are able to make more strategic decisions that lead to long-term success. Practice management software is an important tool for legal bookkeepers. It can streamline and automate processes, reducing the amount of time spent on bookkeeping and allowing law firms to focus on more pressing matters. Proper integration with other bookkeeping tools is essential in order to maximize the benefits of practice management software.