For so many small and medium sized law firms, legal accounting is a major challenge. Lawyers certainly aren’t accountants and accountants rarely have the specific expertise needed to successfully navigate the legal accounting landscape. Unfortunately, this creates the perfect storm for legal accounting errors to occur at many small and medium-sized firms. We all know that legal accounting errors can lead to ethics violations, and ethics violations can lead to disbarment for your firm.
Here are 5 ways you can prevent legal accounting errors at your firm:
- Ensure that trust retainers are only posted to the correct client funds liability accounts. Many times firms will post retainers as fee income. This is incorrect and will result in inaccurate numbers and possible penalties to your firm. CosmoLex prohibits your firm from making this costly error.
- Automate legal accounting allocations. Any time your firm counts on manual processes it opens itself up to the possibility of costly errors being made. After all, we’re all human. By automating the accounting allocation process your firm will ensure that trust payments used to pay client bills are handled appropriately.
- Accurately post matter costs. A mistake many firms tend to make is in how they post matter costs. It is extremely important that your firm only posts matter costs to Advanced Client Costs or Reimbursable Client Costs. Too many firms end up posting matter costs as office rent or other inappropriate office expenses. Utilizing a good legal practice management system will prohibit members of your firm from doing this.
- Automatically allocate invoice payments. Legal invoicing can be tricky, clients often pay full invoices in multiple payments. This can create trouble in where the payments and partial payments are allocated. Employing all-in-one practice management software, will ensure that all invoice payments are appropriately allocated, avoiding any potential ethics violations.
- Rely on CosmoLex to do the heavy lifting when it comes to your firm’s legal accounting. The truth is many firms don’t have a legal accounting expert on staff. Bringing in a bookkeeper part time won’t sufficiently manage your firm’s accounting. And finding an accountant that understands all of the specific requirements of legal accounting can be tough. CosmoLex delivers a legal-specific accounting solution to your firm that has safeguards in place to ensure that your firm avoids the costly accounting errors that could take you down. If you’re ready to see what CosmoLex can do for you, sign up now for a free trial.