When you run a law firm, it is imperative that you pay close attention to the various aspects of legal costs accounting. Regardless of what size your firm is, maintaining compliance is essential to success and survival. Attorneys are highly susceptible to experiencing compliance issues, and the main reason fro this is because they are attorneys and not accountants. There are various aspects to legal costs accounting that isn’t associated with traditional accounting methods.
On a positive note, we have compiled a list of several tips to assist you.
Keep the Expenses of the Firm in Mind
You need to be familiar with all of the different costs associated with the firm itself. Even though you may have alot going on with client billing, you also have a number of overhead costs. This can include office lease, electricity, phone, internet, payroll, and a variety of other expenses. By understanding more about your overhead costs, it will be easier to determine the minimum costs that clients should be billed. You also need to treat different types of expenses appropriately, such as with direct and indirect matter costs.
Allocate Revenue Receipts Appropriately
Revenue receipts need to be organised and accounted for correctly. When invoices aren’t paid in full, it is important to allocate revenue receipts accordingly. Liabilities and costs need to be taken care of prior to applying funds to income. Legal accounting software can help to simplify the process to ensure that invoice payments will go into the proper general ledger accounts.
Track Income by Practice Area
If your law firm has different practice areas, you want to make sure that you are tracking income and expenses by case type. This will allow you to see which practice area generates more income than others, and can help you to determine where you want to focus your marketing efforts. You may also have different ways in which you bill for each practice area.
Maintain Accounts that are “Audit Ready”
There can be various financial complications from the use of retainers. They help in securing cash flow from clients, though the funds do not actually belong to you until they have been earned. This means that while they remain in your possession, you need to handle them correctly. You need to ensure that trust funds are not being commingled with others and not being used to pay any of your firm’s expenses. It is required that all trust accounts be reconciled monthly, as if an audit takes place, this is the first place auditors will look. By being “audit ready” at all times, you have less to worry about.
Avoid Double Data Entry
Many data entry errors occur because of having to enter the data to them multiple times. You need to ensure that you have one system that works for the entire firm, rather than using a management software program and then an accounting software programs separately. One of the main reasons is that the “money trail” can be lost, particularly if credit card payments are accepted, in a completely different system.
Use Legal Accounting Software
There is a difference between accounting software and more specifically, legal accounting software. A legal firm should ensure that you use the correct software. If you are using an out-of-the-box solution, it may not provide you with the customisation you require that ensures that funds are allocated properly. The software should produce the customised reports to meet the needs of your firm as well as remaining compliant with Irish regulations.
To learn more about legal costs accounting for your firm, contact Lowes Legal Costs Accountants for more information firstname.lastname@example.org or on +353 1 9012086.