Outsourced Law Firm Accounting & Bookkeeping Services LWI

Accountants rely on bookkeepers to keep accurate and timely financial statements. Whether you do the bookkeeping yourself or outsource it to a professional, it’s a crucial task. Accrual accounting gives you an idea of what income and expenses you have during a period of time, but doesn’t give a good picture of your actual cash flow. Cash accounting also gives you an easier way to see how much cash your business has at a glance.

Now, you can dedicate your valuable time to growing your business. As an attorney, you may be aware of state bar requirements for trust accounts, but that doesn’t prevent you make mistakes. The most common mistakes are putting funds in the wrong account, accidentally or intentionally withdrawing funds, fail to report monthly, and so on. Poor management of trust accounts can lead to law firm bookkeeping penalties, suspension, or even losing the right to practice law. Interestingly, tax deductions can ease the burden when used correctly—yet not all lawyers are up-to-date on their tax deductions. Many lawyers go to one or the other extreme—they either claim everything (and possibly more than they’re allowed to), or they’re so afraid to overstep they miss out on tax deductions.

Interest on Lawyers Trust Account (IOLTA)

To do so, you’d first need to transfer that money into your business account. We don’t recommend building your business off the back of your credit card. The interest rates are high, limits are often lower than other forms of credit, and they’re easily mismanaged. Plus, if you want to outsource to accountants or legal bookkeepers, having a solid foundation will make it 10x easier. You’re responsible for recording the receipt and disbursement of these funds and posting the transactions to the ledger accounts of clients.

With that said, there are some basic regulations that you’ll want to abide by regardless of where you’re practicing. These rules and regulations change with every jurisdiction, so it’s a good idea to become familiar with what’s expected of you before jumping in. You’re required to do this every 30 to 60 days depending on your state — be sure to check your state’s rules. The balance sheet will contain assets, liabilities, and equity. Whenever there’s a change in one category, there should be a corresponding and equal change in another in order to keep the sheet balanced. If you have a debit in one account, it follows that there will be a credit in another account.

Law Firm Bookkeeping and Accounting Terms

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. Below are a few ways to improve your finances and simplify your law firm tax accounting efforts. However, leaving the task to an office manager or assistant can result in inconsistent, error-ridden financial records. And legal professionals who take on the lawyer accounting duties themselves often end up dedicating hours to non-billable administrative work. While a bookkeeper keeps the day-to-day data accurate and updated, a Controller can help you set up and oversee your financial system and accounting infrastructure.

And with proper legal accounting and bookkeeping, it couldn’t be easier to get a big-picture overview at a glance. A chart of accounts (COA) is a list of all the financial accounts in the general ledger of your law firm. While not necessary, we recommend working with a bookkeeper who has experience working with law firms.

Double-Entry Accounting

This gives you the best of both worlds while making your law firm’s comprehensive accounting situation easier to manage. The Houston Group, CPA is experienced in all aspects of accounting for law firms including bookkeeping services, accounts payable, bank reconciliations, and tax planning. We’re a qualified and respected Monroe, GA CPA firm and we work hard to build an enduring relationship with each one of our clients in the legal industry. Accounting and bookkeeping happen at different stages while managing your small law firm’s finances. Bookkeeping is the process of tracking the cash coming into and out of your business, and it’s the foundation for proper legal accounting. Typical bookkeeping tasks are (1) recording financial transactions, (2) creating and sending invoices, and (3) running payroll.

Get in touch today to get started on building a financial strategy that helps you take your firm to the next level. The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. In fact, this card is so good that our experts even use it personally.