And even you have an overview of what is bookkeeping and accounting, you wouldn’t know what involve when it comes to bookkeeping and accounting for law firms. Law firm accounting is more complex than plain business accounting. When pressed for time, it’s tempting to let recordkeeping fall by the wayside.
And, use it as a competitive advantage when it comes to pricing your offerings. Smaller clients generate less revenue than medium or large clients. Therefore, you generally want to charge a small client less because they have fewer needs. For example, if you purchase law firm bookkeeping office supplies for your business, you should have an “Office Supplies Expense” account. But you don’t want to set up separate accounts for legal pads, pens, printer ink, etc. On top of this, it is also a bookkeeper’s job to keep everything organized.
What to look for in a legal bookkeeper
With six plans total, Zoho Books is easily the most scalable accounting software on our list. Brand-new businesses that currently make less than $50K USD in revenue per annum qualify for Zoho Books’ free plan, which is more fully featured than most other brands’ cheapest paid plans. Xero’s cheapest plan will likely work only for the smallest businesses (including freelancers) since it limits users to sending just 20 invoices or quotes per month.
- On top of this, it is also a bookkeeper’s job to keep everything organized.
- To ensure you don’t intermingle, keep separate accounts for your business and your personal finances.
- Do your due diligence to make sure you’re billing your clients fairly.
- Then, set aside a time each week to make sure they are coded properly in your books.
A simple mistake could send your firm into the red for the month. Or, you might lose track of critical transactions that affect your taxes. Have you ever tried to balance your checkbook, only to find you’re a quarter off somewhere? One number mistake on your law firm’s books can cause pandemonium.
Sort expenses, and see where your money is best spent
With all the options available, we know it’s difficult to choose which software is the best choice for your firm. After all, you have to sift through the options https://www.bookstime.com/ alone, convince your partners to agree, and pray that it works as it should. When it comes to key accounting concepts, it’s really about organization.
Accounts receivables, also known as A/R, are amounts owed to you by clients. Staying on top of receivables is essential to the financial health of your business. Having too many accounts creates headaches later on, as it takes more time to review the books and increases your chances of making mistakes. Lawyers spend years honing their legal skills, but they often have little knowledge of accounting practices.
Accounting for law firms: best practices
NJMH Bookkeeping Services provides remote bookkeeping services using Quickbooks Online and Wave along with further tech stack including LeanLaw, MyCase, Gravity Legal, Encyro, and Hubdoc. David Thomas reports on the business of law, including law firm strategy, hiring, mergers and litigation. Do your due diligence to make sure you’re billing your clients fairly.
Yet, if you own a small firm with multiple attorneys, employees, or contractors, hiring a bookkeeper is more than worth it. Make one mistake when recording your debits and credits, and your entire balance won’t add up. Accounting software where you download transactions can help avoid this error, as can double-checking entries as you go. The most powerful solution to this problem is taking the time to update your books frequently (or outsourcing your bookkeeping to a team that will reconcile the numbers for you). As a secondary layer of reconciliation, you’ll also need to make sure that each client’s IOLTA balance on your firm’s books adds up to the total balance of your IOLTA bank account.
They require the least amount of education and focus on recording transactions, whereas an accountant or CPA spends their time analyzing financial data and generating financial statements. Produce clean, detailed, and informative financial statements on a monthly basis, including the balance sheet, income statement, and statement of cash flows. QuickBooks tracks every dollar coming in and going out of the firm. You can instantly run financial statements to see how business is doing. Generate statements such as cash flow, profit and loss, balance sheets, etc.
Using key performance indicators will help you know sooner if you’re on track. You can go with an accrual or cash accounting method in the US, and the difference is mostly about timing. Best of all, as we like to do at the Biglaw Investor, we’ve negotiated a special deal for readers of the site. If you sign up using the links on this page, you’ll get 20% off your first six months of bookkeeping with Bench.