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Better Business Intelligence Through Class Based Accounting

Better Business Intelligence Through Class-Based Accounting

Class-based accounting, or the ability to report on income, expenses, or net profit of a specific class (i.e. department, practice area, attorney, etc.), not only helps to keep track of your firm’s financials, but it is also a means of improving business intelligence. By pinpointing profit centers and drawing comparisons to inform future decisions, class-based accounting serves as an excellent management tool to review and evaluate the important financial elements of your practice. And while this approach is a must for midsize and larger firms, solo and small practices can also reap the benefits by segmenting their income and expenses by class.

In this post, we discuss how class-based accounting can improve your practice by empowering you to make intelligent business decisions based on clear data.

So, how can classified tracking improve your firm?


  • There are often multiple parties involved in a matter, such as originators, responsible attorney, and timekeepers. Fee distribution—a form of class reporting—allows you to track income that is brought in by a particular party in order to calculate distributions to the team.
  • Additionally, comparing total expenses versus income provides invaluable information about overall profitability per party.

Area of Practice

  • Whether you’re functioning as a general practice or trying something new, it is important to know which of your current work is the most profitable. Classified tracking can reveal if it’s time to get out of a failing area or to focus your marketing in a certain direction.


  • No matter the size of your firm, activities fall into certain categories, including marketing, sales, and services. When testing several different lead generation activities, you want to be able to see—in detail—the profit that came from each department.

Multiple Locations

  • Many firms with multiple offices or branches choose to view the financial breakdown for each one. By reviewing this hard data, you can make informed changes to other locations based on the successes/difficulties experienced by another.    

How to Get Started?


  1. Determine which criteria you would like to eventually report on, such as parties, practice area, etc.
  2. Ensure the legal accounting tools you use offer class reporting or GL subaccounts.
  3. Setup classes/subaccounts for main categories.
  4. Continue to assign matters, parties, etc. to their appropriate classes.
  5. Generate accounting reports by class.


Be Aware of the Billing & Accounting Gap


While class-based accounting provides many benefits, it’s important to keep in mind that if your firm handles its billing and accounting separately, data may be stored in different tools (e.g. matter and party association may be kept in one, while classes and reporting are held in another). Legal-specific software that manages both your billing and accounting needs in a single platform will allow your firm to take full advantage of these capabilities, while also streamlining processes and ensuring compliance.

To learn more about gaining next-level business intelligence through simple class-based accounting practices, tune into our webinar, Better Business Intelligence Through Class-Based Accounting.

Erica Birstler

Erica Birstler is the Director of Strategic Communications at CosmoLex -- developers of a fully-integrated, cloud-based legal practice management, billing & trust accounting system specifically designed for solo and small law firms. Erica's degree is in Business Administration and she has over 6 years of experience in the legal software industry, catering to the specialized technology needs of small to mid-sized law firms. Erica has given numerous presentations across the country on legal technologies such as law practice technology management, cloud computing, and legal billing & trust accounting compliance.