For busy law firms, staying on top of their accounts is essential for the smooth running of their business, and can help them not only continue to satisfy their clients, but to grow their business, too. Whether your law firm has an inhouse bookkeeper and legal accountant, or you choose to save money by outsourcing your requirements, you’ll only ever be able to make informed financial decisions for the benefit of your business, if you have an effective legal accounting system in place.
What type of accountant should law firms be using, and what will they do?
Whether they’re inhouse or remote, a legal accountant will work closely with a bookkeeper to use the data they’ve recorded as a foundation to build upon, and help your law firm grow. A legal accountant will analyze, interpret and summarize financial data, and prepare financial statements, financial forecasting and capture expenses.
Why is legal accounting so important for law firms?
To get a full and complete picture of your law firm’s finances, and meet all of your clients, firms and state bars obligations, you need to make sure that your financial statements are accurate, complete and up-to-date, and here’s why:
- Compliance is key
Being compliant with the ethics regulations specific to your jurisdiction, is paramount for every law firm, and while the rules differ from state to state, there are some accounting basics that all lawyers need to follow:
The ABAs Model Rules of Professional Conduct outlines key responsibilities for lawyers with respect to the holding of funds in trust, recordkeeping, and notifying clients of the receipt of funds or property.
There can be serious repercussions for any law firm found to be in violation of compliance regulations, such as mishandling client funds, whether intentional or accidental.
While the responsibilities you’re accountable for can vary according to the state you’re practicing in, the repercussions can be serious and not only affect your reputation as a law firm, but lose you clients. In some cases, violating legal accounting rules can lead to severe penalties, suspended licenses or even disbarment.
- Your business needs to grow
You might be a practicing law firm, but in essence, you’re running a business, and by hiring a legal accountant you can better collect and analyze information to make decisions for the future of your business that are driven by data, not guesswork. When you know exactly what is coming in and what’s going out, you can more responsibly allocate resources to stimulate future growth.
- Your reputation could be at risk
Any accounting mistakes you make within your law firm, are only ever going to reflect badly on you and your firm as a whole, and anyone involved in the industry knows that a lack of apparent professionalism can quickly lead to a loss of clients, referrals and opportunities for growth.
To ensure that your law firm is compliant at all times, and to give it the best chance of avoiding penalties while meeting all of your clients needs, hire a qualified legal accountant. To make the process even more convenient and affordable, consider outsourcing this service.