How to Effectively Do Bookkeeping for a Law Firm Tips from an Accountant and Bookkeeper

working at a law firm as bookkeeping

The “Big Four” is the nickname used to refer collectively to the four largest accounting firms in the U.S. Aside from auditing services, the Big Four offer tax law, strategy and management consulting, valuation, market research, assurance, and legal advisory services. Bringing in an expert will help you with accounting tasks, accounting processes, business decisions, bookkeeping tasks, and more.

  • For example, when you send an invoice to a client, you’ll mark it as revenue, even though you might not get paid for 30 days.
  • We understand the sensitive nature of law firms and the need to ensure the security of financial data, client information and contract details.
  • Keeping your firm’s accounts maintained and organized is important; however, it is not as easy as it seems, especially when it comes to handling them on your own.
  • This feature also eliminates duplicated data entry or the hassle of reconciling accounts.
  • While this primarily applies to new law firms, ensuring that the basics are determined and set up correctly is critical.

IOLTA, accounts are bank accounts where interest gets earned from the account and is collected and sent to the state bar. Lawyers cannot profit from a client’s money that they paid and held in trust. However, specifics can vary depending on the state, so it is essential to check for details within your jurisdiction. A, IOLTA, or trust account and a trust liability account, should also be included in the chart of accounts for the owner of a law practice. It is easy to get caught up in your practice as it is a law firm.

Step 3: Maintain Compliance with Client Funds

By establishing—and following—best practices for accounting for law firms like the examples below, you’ll be better able to help your firm stay on track. Bookkeepers record the financial transactions and balance the financial accounts for your firm. Legal bookkeeping takes place before any accounting can occur and is an important administrative task for any law firm. Learn about different accounting methods and find which one suits best for your law firm. You might need to consult a legal accounting expert before you make a decision.

  • When pressed for time, it’s tempting to let recordkeeping fall by the wayside.
  • Well kept books for attorneys will aid accountants by giving them accurate financial data to work with.
  • Lawyers spend years honing their legal skills, but they often have little knowledge of accounting practices.
  • That’s why we’ve put together everything you need to know about law firm accounting and bookkeeping.
  • Bookkeeping happens first and relates to the administrative side of tracking your cash.
  • Nevertheless, many attorneys fail to separate revenue that covers incurred costs from their actual income.

The benefits of bookkeeping for a law firm include having accurate financial data, staying compliant with regulations, and being able to track finances. An accountant or bookkeeper can help a law firm by providing experience with the WSBA and getting their bookkeeping in order. An admin as the bookkeeper is the number one area that I see accounting in a law firm fail. The partner or attorney doesn’t place the value on having an expert handle these records. They figure it’s just data entry and whoever has the best work ethic and is good at paperwork gets this job.


Becoming familiar with these terms will help you know your accountant and bring you up to date with accounting terminology in general. Gain a better understanding of your firm’s cash flow and ensure that every transaction is accurately recorded with proper supporting detail. Know that your firm’s day-to-day transactions are being accurately recorded to ensure smooth operation of your firm as a business. We strongly recommend that you contact Free Cash Flow (FCF) if you need assistance with Bookkeeping for the law firm. Having worked with law firms for years, FCF has a wealth of experience in this field.

working at a law firm as bookkeeping

However, for the sake of your firm’s finances and the accuracy of those finances, it is probably better to use someone with experience working in bookkeeping and accounting. When law firm bookkeeping, there is a simple way to avoid these errors. Recording financial transactions and balancing financial accounts for a law firm is done by bookkeeping. Before law firm bookkeeping any accounting, there needs to be legal bookkeeping performed as an administrative task for all law firms. However, every law firm owner needs to know what bookkeeping and legal accounting are for their business. Without the essentials, your firm might struggle to stay compliant with ethical rules, and you may inadvertently leave money on the table.

What are some tips for effective bookkeeping for a law firm?

The IRS won’t require you to use the specific rules necessary to implement the accrual method until you’re making $10 million a year. The cash basis accounting method is easier and more straightforward, which will free up your time to work on building your practice. Or maybe you’re just starting your firm and want to begin on the right foot. Either way, law firms succeed or fail on client trust, and accurate, thorough bookkeeping is essential to building a reputable, compliant, and trustworthy firm.

  • To obtain 150 semester hours of education, students do not necessarily have to get a master’s degree.
  • If you start implementing one, you need to stick to it for several years because it will have an impact on how you manage books, calculate and file taxes, etc.
  • The expenses are not income, so they need to get logged separately.
  • These professionals must be capable of assimilating into diverse corporate cultures.
  • Many business owners think that they will hire an accountant but not a bookkeeper.
  • Uses firm software to generate pipeline efficiency, employee performance, and hiring needs.

Similarly, if you entertain clients frequently, you will want to keep track of those expenses as well. By tracking these costs throughout the year, you can ensure that you maximize your tax deductions come tax time. In order to stay afloat financially, a well-thought-out budget is essential for a law firm. When creating a budget, it’s important to think about mandatory expenses, like employee salaries and office expenses, as well as potential surprises. For example, if the trust account statement balance does not match the trust ledger balance, it could mean that client funds have been misappropriated. For example, you can use the “Legal Billing” app to track your time, and then enter all of your billable hours into your accounting software.

Every business gets busy, and it is easy to get distracted by the work you are doing for your clients. However, your law practice is still a business, so you will need to treat it as a business. If proper attorney bookkeeping occurs, then the law firm can track what money is coming in and going out of your firm. It will be challenging to scale your growth without understanding the money coming in and out.

However, it’s easy to make attorney bookkeeping and data entry mistakes when you have to maintain and complete your day-to-day transactions manually. Only a small mistake or duplicated data entry may result in wasted time, mismatched records, billing complications, and even compliance violations. Double-entry bookkeeping or double-bookkeeping accounting is a method that keeps track of where your money comes from and where it’s going. Every financial transaction involves at least two accounts, including debit and credit.

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