The Law Firm Book Keepers

So, many lawyers go into the field without knowing the best practice surrounding trust accounts and how to manage them. That’s why we’ve put together everything you need to know about law firm accounting and bookkeeping. If you’re not dealing with trust accounts, and just want to accept payments online or in-person, we recommend using Square. It’s intuitive, reliable, and the industry standard for accepting payments online. The act of “bookkeeping” produces financial statements, which your CPA then uses to file your taxes. But they also have all the information you need to understand your firm’s financial health month-to-month.

These are funds you must keep separate from your firm’s operating funds. 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.

Law Firm Accounting Guide: How to Master the Language of Legal Business

Cash accounting is also beneficial because you can look at your bank balance at any time to understand the amount of money available. Since revenue isn’t recognized until the cash is paid, there are no income taxes until the money is in your bank account. 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.

Quickbooks is still the leader in accounting software, making it a reasonable first choice for lawyers. Quickbooks is also the leading software for integrating with practice management software, so I can see why many lawyers would choose it. The Quickbooks pricing model is still a “software as a service” though, so you can expect to pay a monthly fee.

Master the art of recordkeeping

Accounting, on the other hand, deals with interpreting and presenting this financial information to relevant parties. Most bar associations require law firms to comply with regular three-way reconciliation. Reconciliation protects against financial issues and uncertainty for both clients and law firms. Three-way reconciliation requires bank account balances and book balances to match.

• View your financial data, banking transactions, and case information side-by-side, and gain a clear understanding of your firm’s overall health and outlook.
• Without a professional accountant, you risk mixing up revenue and income, two different types of proceeds.
• A chart of accounts is a list of all your firm’s financial accounts, usually used by an accountant and available for bookkeepers.
• It is sad but true that some of the most troubling errors law firms face are simple data entry mistakes.
• See what strategic opportunities you have for reinvestment and plug those into your budget.

As you know, the only way to avoid running afoul of laws and regulations is to have strong legal accounting and bookkeeping practices. Most law firms accept electronic payments, like debit and credit. The more methods of payment you have, the higher the odds are of a client working with you.

Law Firm Accounting and Bookkeeping 101

We’ll give you a free consultation and come up with recommendations specific to your firm’s needs. As a fully customizable legal accounting software platform, QuickBooks lets you manage retainers based on your state’s specific IOTLA programs rules. Easily track all money held in trust retainers and general retainers. The Less Accounting approach is law firm bookkeeping more of a hybrid between the do-it-yourself approach and true outsourcing. For their initial plan, you can pay a monthly fee to access their software and manage your books yourself. As your business grows, you can bring on an outsourced bookkeeper who will provide traditional bookkeeping services such as categorizing and reconciling transactions.