Law firms have additional accounting compliance issues compared to many other businesses, including accounting for client trust funds. Whether your law firm is large or small, here are our Top 5 accounting tips.
Tip 1: Invest in Tailored Accounting Software
Investing in accounting software that has been designed specifically for the needs of law firms will help to ensure your legal compliance. It will also save you time and money by allowing you to focus on what you do best – legal work, rather than accounting work.
Tailored accounting software can help you to do a range of accounting tasks for your law firm, such as:
- reconciling client trust accounts,
- billing client time and expenses, and
- paying staff.
Avoid using general accounting software that doesn’t have the functionality that you need for your law firm.
Tip 2: Avoid Having Separate Practice Management and Accounting Systems
Your accounting software should integrate with your law firm’s practice management system. This reduces the need to enter records twice in two separate systems, such as:
- client case and financial records, and
- client appointments
Entering records once not only saves data entry time, it reduces the chances of data entry errors being made.
Tip 3: Ensure your client trust accounts are audit ready
Law firms are subject to additional compliance and audit scrutiny when managing client trust funds. It’s crucial that the funds of each client are maintained separately and reconciled at the end of each month to ensure legal compliance. Trust accounts must also be externally audited annually. Keeping your accounting records up to date will help to ensure that these processes are as smooth as possible.
Tip 4: Pay liabilities and expenses before allocating revenue as income
Tailored legal accounting software will help to ensure this allocation of funds happens automatically. It is especially important when client invoices are not paid in full.
However, if you use general business accounting software, the allocation of revenue between liabilities, expenses, and income will need to be done manually.
Tip 5: Understand your overhead costs
Client billing should take both direct and indirect client expenses into account. Indirect expenses include overhead costs for your law firm, such as your office lease, electricity, and telecommunications payments. A portion of these overhead expenses should be allocated to your clients in your billing to help cover these expenses.
Tip 6: Track your revenue sources if you have more than one legal service
If your law firm has more than one practice area, it’s important to track revenue separately for each area. This will help you to identify which areas of your legal practice are the most profitable so you can make better business decisions.
How we can help
Our experienced team at Wilson Pateras in Richmond provides specialist accounting, tax, and financial services for law firms and individual lawyers, barristers, solicitors, and attorneys.
Contact us today to find out how we can help your firm. We would be happy to answer any questions you have.