Law Firm Bookkeeping 101: Choosing The Best Accountant for Your Firm

how to do bookkeeping for law firm

Feel free to contact us anytime, Our Accounting experts will work with you to provide no obligation quote for our value for money accounting and bookkeeping services. Well kept books law firm bookkeeping for attorneys will aid accountants by giving them accurate financial data to work with. We will introduce the basics of accounting and bookkeeping as it pertains to law firms.

It’s called the “corporate veil,” and it protects business owners and their personal assets from legal action taken against the company. 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.

Common Bookkeeping Mistakes & How to Avoid Them

Keeping your billable expenses straight can be a bit of a nightmare. You have to train your paralegals to log the hours spent on each client separately. You must keep court briefs and filings billed separately even if you are filing more than one at a time. Improperly allocating client expenses can be a huge challenge for a small firm without the luxury of a billing department. Take out the inconvenience of properly billing clients by using cloud software.

  • Once you’ve chosen a bank to work with, you’ll want to open a business checking account, a savings account, and an IOLTA (Interest on Lawyers Trust Account).
  • By studying these reports, you will gain valuable insight into your firm’s operations and be able to make effective decisions for your firm.
  • A law firm accountant and bookkeeper typically work towards the same goal–they both want to track your firm’s financial performance and ensure that information is up-to-date and accurate.
  • For example, if a law firm were to use Xero for bookkeeping, they would be able to see real-time insights into their finances and integrate it with Clio.

Second, it can help to prevent personal funds from being used to pay for business expenses. A mileage tracker app can help you keep track of all your business miles, as well as plan for future expenses. A free time tracking software can be used until you get your legal accounting system set up. We’ll also show you how legal accounting software can make the whole process easier (and more effective).

The Difference Between Law Firm Bookkeeping and Accounting

They also face tax-compliance issues at the state and federal levels and municipal taxes. Below are a few ways to improve your finances and simplify your law firm tax accounting efforts. Law firm accounting can be a lengthy process, widely despised by attorneys and other legal professionals who’d instead be practicing law than crunching numbers. Everyone makes mistakes, including lawyers (and bookkeepers, and accountants). Your bookkeeper, accountant, and the IRS will thank you for holding onto documents proving your income, credits, and deductions. Cash accounting also gives you an easier way to see how much cash your business has at a glance.

Your best bet is likely to hire both a legal bookkeeper and a legal accountant. This is because a professional legal bookkeeper and accountant can help you manage your firm’s revenue and ensure your firm’s financial transactions are handled ethically and accurately. Just as your clients rely on your expertise with the law, there comes a point when you need to call in accounting professionals. Whether it means using legal accounting software to simplify and automate your accounting, hiring a professional legal accountant, or both—don’t be afraid to delegate when you need to. Perhaps one of the best long-term benefits of working with a CFO is the extra time you get to spend with clients.

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