Law school prepares lawyers for many challenges, but managing a law firm's finances is not typically one of them. Managing the firm's books and ensuring financial accuracy and compliance fall outside the traditional legal curriculum.
Because of this gap, lawyers often need expert help navigating the complex world of financial management. Accountants step in to fill this role, providing critical support in maintaining accurate records and helping to ensure compliance with jurisdictional regulations. Their expertise allows lawyers to focus on their core legal work without worrying about the intricacies of financial administration.
Therefore, law firms greatly value accountants, whose primary goal is to save the business time, hassle, and money.
Below, we explore the collaborative partnership between lawyers and their accountants and how legal accounting software empowers both parties for success!
Whether you're a larger firm with dedicated bookkeepers and accountants or a small firm that manages its own finances, there is one secret weapon that allows firms to ensure that their finances are in order: legal-specific accounting technology.
Below are some common legal accounting challenges that lawyers (and their accountants) face daily, quarterly, and annually. While these challenges are unavoidable, there are ways–with legal technology–to streamline and improve accounting efficiencies.
Managing trust accounts in compliance with jurisdictional regulations is a key challenge for law firms. They must separate unearned client funds from operating funds, maintain meticulous records, and regularly reconcile trust accounts. Doing this manually can be burdensome and increase the risk of audits, fines, or disbarment.
However, a specialized legal accounting tool (such as Clio Accounting) simplifies trust accounting. It enables firms to track deposits, transfers, disbursements, withdrawals, and refunds in one place and easily reconcile bank transactions with their books for accurate three-way reconciliation.
Each year, law firm accountants dedicate significant time to preparing a firm's tax filings, from gathering documents to compiling reports and financial information. When going between bank statements, a case management system, and accounting software, this task can be daunting and make firms vulnerable to mistakes and errors.
With legal accounting software solo lawyers, small firms, and firms with dedicated accountants can record and organize every financial transaction related to running their law firms in one centralized location.
Legal accounting tools simplify the tax filing process by quickly generating financial and reconciliation reports that can be easily exported, printed, or filed.
One of the most important parts of running any business is understanding the flow of cash. How much money is going out, and how much is coming back in. If you're keeping track of expenses and outstanding invoices in an Excel sheet, understanding cash flow would take a lot of manual calculation.
Legal accounting software allows lawyers and their accountants to see how money is moving across the firm.
To best understand the profitability of your firm, you need to have visibility on all cases, client intake, payments, and eliminate non-billable work wherever possible.
Having your case management software solution, client intake and relationship management tool, payment processing software, legal accounting software, and financial reporting all in one place, you'll be able to eliminate the risk of error that can come with working with separate solutions and vendors.
Better yet, compliance and accuracy will be simpler than ever for your accountant, and your firm.
To steer your firm effectively, it's crucial to clearly understand its financial position. Switching between case management and accounting tools often requires tedious cross-referencing and manual report creation, which can be time-consuming and prone to errors. Fortunately, financial reporting can be streamlined, enabling quick and accurate insights with just a few clicks.
Legal accounting software allows a firm to review all entered financial data (reporting), recuperate client costs paid upfront, ensure trust accounts are being reconciled, review and approve draft bills (firm-dependent), get the documents required for quarterly or annual tax assessments, share various receipts with the correct person or team, and account for their own clients' or cases' bills and payments.
By simplifying complex tasks and reducing manual errors, legal accounting software sets accountants and bookkeepers up for success, ultimately enhancing their productivity and ability to deliver exceptional service and compliance.
To get your firm's financials up to the gold standard, discover to streamline processes, ensure accuracy, and enhance overall productivity with Clio Accounting.
