Bookkeeping can be a daunting and complicated task for any business, but for law firms in particular, the job of keeping the books is involved, meticulous, and integral to staying in compliance. In addition, the ramifications of improper bookkeeping practices can lead to serious consequences. Regardless of the size of your firm, having sound bookkeeping practices is integral to the success of your business. These six bookkeeping tips for law firms will give you valuable tools to help you run your business.
1. Keep careful track of Client Trust Accounts
Each state has its own rules and laws for Client Trust Accounts and how they need to be kept and tracked. These accounts must be carefully separated and monitored for so you do not get into trouble.
2. Track billable hours and expenses for clients
Many of your business’s expenses need to be tracked for reimbursement. Keeping receipts and carefully documenting your purchases for each client is necessary to know what you are earning at the end of the case versus what is just reimbursement.
3. Track general firm expenses to know what you should be charging clients
Knowing what your business spends day-to-day on necessities such as utilities, internal programs, and employees can help give you an idea of what to charge clients. Knowing the baseline cost of running your business will make you more profitable as you grow.
4. Track different types of income based on services provided
If your firm offers more than one service, tracking those separately allows you to know what is most profitable and adapt your business accordingly.
5. Track revenue as it comes in properly (deferred revenue)
When you look at the financial reports for your business, it is important to know what you have actually earned as opposed to what is deferred revenue. Not keeping this separate can give you a false sense of how much money you have earned and how much money is available to the business.
6. Hire a bookkeeper that specializes in Law Firms
The attention to detail required to keep accurate and current books for a law firm is not to be ignored. Use a bookkeeper that specializes in law firms so you have peace of mind knowing that your books are in competent hands.
If you have questions, contact Thrive Bookkeeping (585) 364-167