Accounting is a Tactical tool to the overwhelming Strategic challenge you are facing as a Small Law Firm. When organized as a business system – accounting can provide strategic clarity and confidence for decision making and planning as you build. There are many benefits to outsourcing your accounts to a professional company specializing in legal accounts. First, you’ll deposit all retainer checks and similar money that belongs to a client in an IOLTA account. Apply for financing, track your business cashflow, and more with a single lendio account. When it comes to Trust/IOLTA accounting, we adhere to a careful process that eliminates errors and establishes strict procedures for handling client retainers and subsequent disbursements.

It’s a lot like businesses that engage a law firm for their needs instead of hiring an in-house lawyer. Just be sure to choose a CPA experienced in providing law firm accounting services. For businesses like law firms whose operations revolve around clearly distinct jobs, it’s one of the best ways to organize expenses. It’s especially beneficial when you employ other lawyers, as it can help you set a profitable hourly rate when billing your clients. A law firm accountant and bookkeeper typically work towards the same goal–they both want to track your firm’s financial performance and ensure that information is up-to-date and accurate. But, they support your business in different stages of the financial cycle.

Commingle operating and Client Trust Account funds

Anyone wanting to run a legit business should never combine personal and business expenses. Intermingling the two makes it nearly impossible to claim your expenses, not to mention track the financial wellness of your firm. Your financial strategy will help you plan, strategize, and shift as you need to, helping you grow a financially healthy law firm.

Because it’s the easiest to implement, lawyers often prefer this method. If you need to go back at the end of the year and sort your financial data into all three categories, it’ll be a nightmare. As a result, you should open a separate checking account and credit card for your legal practice before you start taking on clients. Time is the most precious asset a lawyer possesses, and we’re here to ensure you have the tools to maximize your law firm accounting efficiency. And the security in your ability to satisfy Trust/IOLTA compliance, along with the financial reporting to make informed decisions. You need an accounting partner with industry expertise and applied knowledge, and at Lescault and Walderman, your satisfaction is our benchmark for success.

Interest in Lawyers Trust Accounts (IOLTA)

Also, many outsourced companies are now offering a team approach where you get the benefit of their bookkeeper, controller, and outsourced CFO for higher-level financial analysis. 3 components involved in the reconciliation process consist of the trust ledger, the client ledger, and the trust reconciliation. https://www.bookstime.com/ Learn more about the legal chart of accounts and view examples of formatting. Whether intentional or through neglect, violations of compliance regulations—like mishandling client funds—can lead to serious repercussions. Let us reduce your overhead so you have the time to do what you do best – practice law.

As your business grows, you can bring on an outsourced bookkeeper who will provide traditional bookkeeping services such as categorizing and reconciling transactions. As much as I love spreadsheets and numbers, bookkeeping is an unavoidable task that takes law firm bookkeeping services time and energy. Someone needs to reconcile the accounts, record the entries and prepare the year-end financial reports. While I could easily do the financial reporting myself, I’m confident that my time is better spent in legal practice and legal billing.

Why bookkeeping and accounting matter for law firms

Keeping accurate records of your law firm’s accounts is a challenging yet vital part of running a legal practice. This gives you the best of both worlds while making your law firm’s comprehensive accounting situation easier to manage. All law firms require bookkeeping and accounting services as their accounts are regulated by the SRA Accounts Rules. It is important to find a professional company who understand the way these rules should be interpreted. Their bookkeepers will deal with the accounts on a day to day basis and refer to external accounting services for preparation of year end tax returns and other financial management. Trust accounts are one of the most common areas where legal accounting mistakes are made.

If you commingle your personal and business funds, you’re “piercing the veil,” and courts will ignore the legal protection that comes with incorporating. It’s similar to two-way reconciliation, where you compare your bank account balance to your company’s books to make sure it matches. To do so, you’d first need to transfer that money into your business account. Law firms are expected to have a separate but essential trust account, typically called an IOLTA. Plus, if you want to outsource to accountants or legal bookkeepers, having a solid foundation will make it 10x easier. Whether you’re a solopreneur or run a firm with a hundred lawyers, knowing where every dollar is going will help you make better decisions for the firm’s health.