Costly Challenges of Using the Wrong Practice Management Software for Your Law Firm: Ineffective Income Tracking Obscures the Big Picture
Successful development of Integrated Accounting software that addresses the many distinctive needs of the legal profession is challenging. Software tools used by other industries fall short. The accounting aspects must meet all the basics, as well as address three additional areas that together are unique to the practice of law: client funds accounting, matter cost accounting and back office accounting.
Moreover, law firm billing tools must use integrated accounting in order to defeat some very common issues that typically apply with the use of separate accounting systems and tools: Adaptation, Data Entry Errors, Matter Costs Recovery, Inflated Revenue, Practice Area Income Tracking and a Financial Overview.
Ineffective Income Tracking and a Muddied Financial Overview
The previous blog, Inaccurate Expense Tracking is Costly and Misleading, focused on matter expenses and costs. In this final blog, the emphasis is on income and your overall financials. Though clearly, it is necessary to accurately detail and track both costs and income to obtain a comprehensive financial picture.
Tracking Income from Multiple Practice Areas
Unless you are an extremely focused boutique firm, chances are good that you practice in more than one area of law. Because of this, you may have more than one billing method, as well. For instance, if you provide family law services by way of a flat fee, DWI and criminal defense via hourly fees, and personal injury law on a contingency fee basis, you’re dealing with some fairly challenging accounting issues.
The beauty of a flexible, integrated accounting system is the ability to set up your separate billing methods tied in with each practice area in the software and then allow it to integrate the practice management side with the accounting side. The result is an easy-to-use system that provided useful information about the profitability of each of your practice areas. Your attorneys and legal staff will still be able to track their time on an hourly basis, and you can then use this information to determine how lucrative each practice area is. This is vital analysis provided with a minimum of time and effort.
A High-Level Financial Overview
To help you run a successful law firm, you need to know how you’re doing financially at all times. The use of various accounting and management systems makes this a near-impossibility. And even if you are able to cobble together an overview, it will typically take a lot of time and effort that you can ill-afford. Instead of struggling with inadequate accounting tools, you should be working with clients and generating revenue. Integrated accounting software allows you to do that.
You can always access the big picture and easily track individual matters as desired. Reports offer invaluable information about your law firm’s operation, profitability and much more. You can offer your clients detailed, accurate comprehensive information about their cases, and meet the requests of any auditor with no stress. From practice management to business accounting and everything in between, an integrated accounting system is tailored to successfully overcome the challenges of operating a solo practice or small law firm.