Keeping An Eye On Your Practice’s Finances
You are an attorney not an accountant, and yet if you don’t pay attention to where the money goes then your state’s bar association may not let you be an attorney for long. Today’s law practices use attorney time and billing software to maintain a 360-degree view of the firm’s finances, maximize profits and minimize liability.
- Finances At A Glance – Generic business software breaks down expenses by account, but that doesn’t work for law practices. Dedicated billing software for lawyers separates expenses by matter. You have to be able to separate the expenses for a client’s divorce from the expenses for the same client’s will review. You can see at a glance which expenses haven’t been billed, have been billed but not paid, or have been paid in full.
- Retainer Management – Clients are reluctant to pay their attorneys, especially after a case is over, so many practices work on retainer. However you can’t just stop when the retainer is gone so you need proactive retainer management to keep the fund balance from falling to zero. Automatic reminders let you know when a retainer balance gets low so you can request additional funds before the well goes dry. Expenses are automatically taken from retainer funds, and retainer balances are included on invoices that go to the client.
- Automatic Past Due Notices – You went to law school to practice law not to be a bill collector, but without cash flow you can’t stay in business. Too many law firms treat bookkeeping as an afterthought, letting overdue client accounts languish for months rather than aggressively pursuing collection. Studies show that gentle but firm prompting greatly increases collection rates. Automatic reminder notices can be generated and sent through email to encourage clients to keep their accounts current.
- Electronic Billing – Have you noticed that everything from your office lease payment to your home cable bill has gone electronic? Paper billing is slow, disorganized and expensive. In addition, many organizations such as insurance companies require electronic billing. Legal billing and accounting software can send electronic invoices by email, or transmit electronic bills in standard LEDES98B format. And, yes, they can still generate paper invoices for clients that prefer them.
- Trust Account Integration – Most law firms handle some kind of trust funds. If your practice is one of those firms then you need a trust accounting solution that integrates with your billing software. Trust management is one of the leading causes of disbarment charges, and in most cases it’s carelessness rather than malicious action. Integrating trust management into billing lets you keep funds from different sources separate and minimizes the possibility of trust violations.
- Paperless Paper Trail – If it isn’t written down then it didn’t happen, but keeping a running manual record of financial transactions is tedious. The legal profession takes financial ethics violations very seriously, to the point that attorneys are often considered guilty until proven innocent, so you better have the documentation to prove it. Lawyer billing software automatically generates a record of all transactions so you are ready for your next audit.
Whether you are a small office that can’t afford a separate bookkeeper or a major firm with a large financial staff, invest in legal practice management software to run an efficient and profitable practice.