Law Firm Accounting: The Ultimate Guide

what exactly is bookkeeping for a law firm

The good news is, we’ve made this guide to help you know the essentials of bookkeeping and accounting for law firms. Each aspect of law firm accounting is explained understandably and concisely. A bank account allows tracking all incoming and outgoing funds, which is necessary for accurate record-keeping.

  • Double-entry accounting can create a balance sheet made of equity, liabilities, and assets.
  • Bookkeepers can help with tasks such as billing clients and monitoring expenses.
  • To learn more about financial management and law firm growth, watch our podcast, where Sasha Berson and Ryan Kimler discuss increasing a law firm’s revenue by optimizing numbers.
  • If you sent your client an invoice, that is immediately counted as revenue if you don’t receive the money for weeks.
  • Help you process and send invoices, process your accounts payable, and run your payroll.

While not necessary, we recommend working with a bookkeeper who has experience working with law firms. Knowing the fundamentals will enable you to be aware of your overall financial health, but trained accountants can still provide peace of mind and offer invaluable help. 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. The bookkeeper should also be familiar with the firm’s billing cycle and invoicing procedures in order to ensure that all billable hours are accurately recorded and invoiced in a timely manner. There are a few key reasons why it’s important to have an easy expense reimbursement system in place for a law firm.

How do you catch up on years of bookkeeping?

We’ve listed some of the key differences when it comes to the requirements and job market for each. The primary purpose of bookkeeping is to record the financial effects of transactions. An important difference between a manual and an electronic accounting system is the former’s latency between the recording of a financial transaction and its posting in the relevant account. Not only are you entrusting your bookkeeper with sensitive data, you are relying on their accuracy to maintain the financial records for your business. A good bookkeeper never cuts corners, and they are indispensable to small business owners who want to spend time growing their business, instead of maintaining it. Depending on the stage of your small business, you may not need to hire a full-time professional bookkeeper.

Thereafter, an accountant can create financial reports from the information recorded by the bookkeeper. The bookkeeper brings the books to the trial balance stage, from which an accountant may prepare financial reports for the organisation, such as the income statement and balance sheet. If you chose to hire a dedicated team to bring your books up to date, then you’ll likely pay a monthly services contract or a flat fee per year. Catching up on your books can save you time and money down the road by preventing errors and ensuring that your finances are in order and business expenses are accounted for.

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The average wage for someone new to the business is $21.70 per hour. This is the equivalent of around $45,000 per year, assuming a 40-hour workweek. The advantage of hourly pay is you receive 1.5 times your average wage for hours worked more than 40 per week. In bookkeeping, extra hours are typical during the busy tax season of January to mid-April. As an accountant, you may have to crunch numbers, but those are not the only skills needed.

what exactly is bookkeeping for a law firm

For example, keeping track of invoices or monthly recurring expenses. Again, you should also be spending time daily recording your firm’s transactions. Managing your books via accounting software may get you started as a solo attorney. But, if you want to spend your time focused on law firm bookkeeping practicing law rather than deep in the weeds of your firm’s finances, you’ll likely want to consider hiring help. One (or more) of these professionals can greatly assist with your law firm accounting. The basis of good legal accounting always starts with a well-thought-out budget.