Struggles of a Law Firm With Bookkeeping
If you are a smaller-scale law firm, you know you have a lot to juggle from daily court cases to networking to dealing with clients and so forth. To add to all of this, you also need to deal with finances. We understand bookkeeping can be a challenge not only because it comes with so many rules and regulations (because you know your favorite word… compliance!), but also it is so tedious and time-consuming. When bookkeeping is not done properly, there are often major problems that surface. Believe it or not, the way your bookkeeping is done can actually affect your brand awareness so to speak, and influence your client relationships. How much confidence does a client have when their invoice is incorrect, or you can’t find their payment, or you can’t tell them how much they have in trust.
What Are Some Common Pitfalls?
#1: Ledgers and Trust Accounts
A lot of complications arise due to the fact that law firms must track the sub trust ledgers of their clients independently from each other, all while having all trust funds together in a single bank account.
#2: Concerns For Error and Fraud
This is a looming cloud so to speak. It is crucial for the billing and accounting systems your firm uses matching data sets, unique invoice numbers, and separate bank accounts, so that billing complications don’t arise.
#3: Recording Time and Expense
Keeping an accurate record of time that is billable is at the heart of your revenue production. Bookkeeping and then looking at the reporting allows you to know for certain if you’re heading in the right direction, yet so few small firms have a bookkeeper which leads to inefficacy, among other things.
How Can Bookkeeping Challenges Be Resolved?
You can resolve challenges in many ways. Here are 3 of them.
One way through which you can face these issues is by using time to hold discipline. As you are well aware, the nature of your work makes it complicated to keep daily track of revenue, and with the wide array of tasks that fall into your practice, bookkeeping becomes complex and difficult. That being said, what is constant is the fact that you do provide your time, as such, you can use this to help keep your books clean and well maintained. You do this by focusing on the time spent with each client and each task. When you do so, you’re not only able to calculate your profit based on the detailed ledgers of time spent on certain clients, but you can also make accurate forecasts for the future when working on similar cases.
Another way you can help keep your books clean is to make sure you reconcile every month as is required by the bar association for lawyers using an IOLTA. When you do this regularly and resolve your accounts, things go smoother, and if you do run into issues, they can be resolved more quickly because you can still remember. What was this Fred Meyer charge for $328.17 on February 14, 2021? Alas, most of your colleagues simply let everything pile up because of procrastination (or lack of time).
Yet a third, and sure way to avoid the struggles a law firm can face with bookkeeping is by doing yourself a favor and hiring a professional firm who knows what they are doing. When your bookkeeper is adept at working on tasks like these, things will be error-free and they will ensure you are in compliance with all of the bar association and IRS standards. Sound Bookkeepers has worked with many law firms, and several who were being audited by the WSBA. Our CEO used to work at the bar and also received one on one training directly from the lead auditor at the WSBA on how to keep trust records correctly, so your books will cleaned up quickly and will stay that way. We offer stand alone IOLTA account management, or entire practice management, bookkeeping reviews, annual reviews, filing DOR, and preparing and sending financials to your CPA or tax preparer, and so much more!