When bookkeeping is done well, it does wonders for a company. Not only does it allow you to see your company’s (or in this case practice’s) performance, but you can also make well-informed, sound business decisions that will make your business grow and prosper. Bookkeeping for law firms is crucial, but yet can quickly become overwhelming for you to do on your own. Below you will read common mistakes that are made when firms are keeping their own books. This is where Sound Bookkeepers is here to help. With over five years of experience in accounting and finance combined we get your books cleaned up, and staying nice, fast! Running your own firm, you have a lot on your plate already, let us take care of your books.
Not only does the IRS greatly dislike it when businesses combine these two expenses together, but it also makes it extremely difficult, in fact almost impossible, to claim your expenses and track the financial well-being of your firm. For this reason it is vital to keep two separate accounts, one for your personal expenses and one for your business expenses. Failing to do this usually means you pay more in taxes than you need to.
Similarly, many attorneys lose track of their business expenses. It is crucial to not let your invoices and receipts snowball, but instead keep these constantly updated, and in correct form. In addition to this, it can be very helpful to keep detailed records of your expenses so that in case of an audit, you can prove your expenses. You have to know the person you paid, and the category. The main point of bookkeeping is to have accurate records of your finances to be able to evaluate where your business (or practice) stands as well as be able to deliver vital reports in the case of an audit or when taking on a new partner. When you have transactions missing, it results in inaccuracies which can cause you to overspend or even miss important transactions that affect your taxes.
Even being ten cents off is a big deal when you are balancing your books. Oftentimes this discrepancy is a result of being too quick in entering your numbers. This is why it is important to not rush or be overwhelmed with a pile of things that need to be entered. Bookkeeping is tedious, but it must be done with precision. Make sure to make entries correctly and double-check them as you go, in turn causing less hassle and time spent later on trying to undo the mess.
Hand in hand with the mistake above, many law firms procrastinate with their bookkeeping, which can often result in all of these mistakes and more.
Last but not least, the biggest mistake overall is not seeking the help you need! A lawyer who represents himself is as foolish as one who does their own books when it really needs to be done by a pro. As you can see, bookkeeping is timely and requires your attention and consistency. Not only that, but also as an owner of a firm, you have everything else you need to keep track of and take care of. At the end of the day, that is a lot, oftentimes a lot more than you can handle. Hiring a professional bookkeeper will help eliminate the most common mistakes law firms make with bookkeeping, put your mind at ease, and help your practice prosper! Call us today!