Six Legal Practice Accounting Tips
Far too many solo and small legal practices utilise outdated and ineffective software for their law accounting needs. If you are one of them, you could be putting your firm at a significant disadvantage. Inadequate legal accounting software can lead to excessive amounts of time spent on accounting tasks, as well as the potential for increased billing errors. Whether you are stuck in the stone-age of paper systems or using accounting software that is not tailored to the practice of law, it is time you make the change to effective legal accounting methods and here are six reasons why:
You cannot have a successful law practice without detailed knowledge of where money is being spent. From your firm’s overhead costs to expenses incurred on behalf of a client, you need to constantly maintain an accurate record of these costs. When there is no adequate legal accounting software in place, your solicitors and staff may attempt to track expenses by saving receipts or writing payments in a ledger.
This type of practice is potentially problematic for a number of reasons:
- Receipts and pieces of paper can go missing, leaving you with unaccounted for expenses.
- The memory is unreliable. You or your staff may forget to enter an expense into the ledger or enter it incorrectly.
- This type of data can disappear. A ledger or envelope of receipts can be lost or even destroyed.
Accurate trust accounting
Trust accounting is a major responsibility for solicitors, as clients rely on their lawyers to hold and keep their funds in trust. But trust accounting comes along with a lot of rules and responsibilities, so it is vitally important to keep accurate records and follow your industry guidelines. Failing to comply with trust account regulations can lead to serious problems with your clients and the approved regulators.
The right legal accounting software takes these specific rules into consideration, allowing you to collect, track, and reconcile all money going into and out of your client trust accounts. It may provide safeguards to ensure that funds are earned before they are withdrawn and help you in the prevention of overdrawn accounts.
QuickBooks is one of the most widely used accounting software packages among businesses across the board, and that includes the legal profession. Many lawyers choose to use this software to handle their firm accounting needs. While QuickBooks offers many benefits, it is not customised for law firm usage and the specific needs of a legal practice. For example:
- To segregate client trust accounts from firm operating accounts in QuickBooks, you need to establish a separate company profile within the program. Moving funds from a client’s trust account for invoice payment also requires extra steps, which can be particularly cumbersome for firms making 10 or 20 of these transactions each month.
- QuickBooks also requires you to manually review trust account balances and send out replenishment requests to clients.
- QuickBooks does not offer the mobile time tracking services that busy, modern law offices need.
Find out why many practices have chosen to move away from QuickBooks to Sage Intacct by reading this Case Study from Legal Monkeys. By switching software Legal Monkey freed up 6 days/month from tedious accounting and reporting tasks and shortened monthly financial close by 5 days.
Law firm invoicing can be extremely time-consuming and tedious without the right legal accounting software. Your solicitors may have to look back and review client matter tasks in order to submit their times to support staff. Your support staff may have to go around the office trying to round up time tracking records from the attorneys. Then, once all of that is completed, your staff has to sit down with an outdated, inefficient accounting system to create invoices and manually send them out to clients. The entire process can be unreasonably time-consuming and filled with opportunities for inaccuracies.
When it comes to subscriptions, specialised contracts, and recurring billing services–and the added complexities of revenue recognition compliance–Sage Intacct is the cloud financials solution finance trusts. We provide the automated workflows, smart revenue recognition, and seamless data flows that streamline the revenue cycle across your organisation.
A large part of accounting is the ability to review your firm’s financial position on a regular basis, identifying areas for potential improvements. Solicitors need accounting software that allows them to run numerous reports about the firm’s billing practices, realisation, accounts receivable, and expenses.
With Sage Intacct, financial reporting and analysis options are almost limitless. Compare operational statistics with financial metrics. Check summary roll-up figures for multiple entities—even if it’s only mid-month. Drill down to source transactions for granular transparency instantly. Flag trends and spot exceptions with powerful report visualisations.
With Sage Intacct dashboards and reporting, you can compare performance across any business driver that matters to you. You get 150 built-in financial reports as well as the ability to easily create custom reports. Forget Excel reporting, waiting for customised projects, or relying on external tools.
Accurate and timely time tracking is crucial to the success of your legal practice, so it is also a top reason why you need the right legal accounting software. Gone are the days of jotting down times and tasks on the corners of legal pads or sticky notes. This type of time tracking is unreliable and often inaccurate, leading to the overbilling or underbilling of clients. You are either going to damage your clients and reputation by overcharging clients or damage your firm’s bottom line by undercharging for your valuable services.
Sage Intacct makes it painless to manage time and expenses. Your employees can enter time and expense data anytime, anywhere. Managers get instant alerts to review and approve reports. Employees receive prompt reimbursement in the right currency.
Your legal practice has specific accounting needs, and you need a legal accounting software that adequately meets those needs. X3 Consulting takes pride in providing solicitors and law firms with comprehensive and useful accounting tools. Click here to register to watch a 20 minute demo of Sage Intacct to find out more.