Taking stock of your accounting isn’t just an end-of-year task—it’s a vital process that provides valuable insights into the health of your law firm. 

To run profitable practices, you need to be aware of your law firm’s year-round financial standing. Engaging in a mid-year accounting check enables you to have a solid understanding of exactly where your firm stands, so you can make any necessary course corrections. 

While you could hire an accountant to handle this kind of project for you, you may end up paying a premium for their services. Instead, consider handling a mid-year check-in yourself. (It’s easier than you might think!) 

Questions you should be asking to evaluate your financial health 

To run a mid-year financial check-in, start by asking yourself three key questions: 

1. Are you staying compliant with your trust accounting records? 
2. Does your firm have enough funds to weather a significant downturn?  
3. Which practice area(s) do the majority of your profits come from?  

Four best practices for legal accounting 

You’ve raised the right questions, now it’s time to answer them. Here are four things you can do to address any mid-year accounting issues and stay on top of your firm’s finances. 

1. Keep up with general accounting 

While it’s true that law firms have unique accounting requirements, there are several industry-agnostic general accounting processes to keep in mind, too. 

For example, you’ll want to make sure that your invoicing is up to date by invoicing your clients through June 30th. Without an invoice, you’re not going to get paid—which can make it difficult to keep up with paying your staff (and your own bills).  

You should also be running regular reconciliations of all your bank accounts through June 30th. Match all your transactions between bank statements and your books, and keep an eye out for uncleared transactions, as they may require action on your part.  

Depending on your jurisdiction, you may also need to determine where to send unclaimed assets. 

You’ll also need to reconcile your credit card statement. Not only should everything be entered and matched, but you should also make sure that all client costs are linked to transactions.  

Note that you should never simply enter an adjustment into your accounting software and call it a day. Accuracy in accounting is vital, and your license to practice law depends on it. If you’re having difficulty with a conflict, then it’s time to bring in an accountant for help.  

2. Monitor trust accounts 

Trust accounting requires consistent monitoring at your firm, not just a yearly or mid-year check. That said, completing a mid-year check provides you with the opportunity to validate your processes and address any issues before they become a headache (or worse, trigger a red flag during an audit.) 

Check client retainer balances and invoice amounts, issued payments, refunds, and invoices in situations where it’s necessary (and you’re permitted to do so). Be certain that all your three-way reconciliations are complete, then print and archive them to ensure you’re audit-ready. 

One way to prevent any issues from taking place with your trust accounting? Using a legal-specific accounting solution that’s designed to run three-way reconciliation for law firms—which can save you time with accounting and keep you compliant with trust accounting safeguards. 

3. Run reports 

Having a quality reporting system isn’t just good for maintaining accurate accounting records. It also ensures that you have the finger on the pulse of your firm’s financial health at all times. Without running and assessing regular reports, you could end up dealing with major issues that could have been easily handled before too much time had passed. 

Staying up to date with your reports can also help you look at all of your practice areas and assets that are bringing in the most and the least money, and adjust your strategies as needed. For example, your reports may indicate that you should increase your marketing spend, or reduce the amount of time you allocate to practice areas that aren’t generating revenue. 

 Some reports you should be running are: 

• Balance sheet reports (liabilities, assets, long and short-term items) 
• Equity and owner’s draw 
• Profit and loss statement reports (income accounts and expense accounts) 
• Accounts receivable and collections 
• Client retainer balances 

You don’t have to try to gather all this information on your own, though. Legal-specific accounting software provides you with actionable data that helps you streamline your firm’s processes. 

4. Utilize online billing 

Many law firms still accept payments the old-fashioned way, but a great alternative to checks, credit cards, and in-person payment is an online billing and payment system.  

By accepting online payments for your services with legal-specific payment solutions, you not only make things more convenient for your clients, but you also make your accounting and reporting processes easier. That’s because all of your payment data can be accessible with a few clicks of a button.  

The right online billing solution will also provide an online portal that allows you to run reports by item, sales, deposits, reconciliations, and more. These reports should provide data that includes: 

• Scheduled invoices  
• How much money you’ve taken during a specific time frame  
• Advanced metrics and analytics 

Keep your firm’s financials healthy with CosmoLex 

Keeping up with all the ins and outs of law firm accounting can be a challenging and time-consuming process that can leave even the most seasoned legal professionals feeling frazzled.  

When you use a legal-specific practice management software like CosmoLex, you can rest easy knowing that you’re staying compliant with trust accounting regulations and able to access all your essential accounting data from one convenient location.  

You can also integrate CosmoLexPay to streamline your payment processes. This means that you get paid faster, clients enjoy greater convenience when working with you, and you’re guaranteed to have accurate records of all your transactions when it’s time to check in on your firm’s financial health. 

Ready to keep your firm’s financials healthy? Make the switch to CosmoLex today. Take the first step when you sign up for a demo or a free 10-day trial.