Reporting is an integral part of maintaining any business’s financial health.
Running financial reports helps businesses determine whether they’re pricing goods and services accurately and gives them insights into which future business decisions could be most profitable. Detailed reports are often required for businesses to prepare for an audit or when taxes are due. And for law firms, producing specific financial reports is an essential component of remaining in compliance and avoiding fines or censure from the state bar.
While reporting is a necessary function at every law firm, it can quickly become a time-consuming and error-prone process, particularly for small firms or mid-sized firms without dedicated accounting teams. Fortunately, many software solutions on the market today, including Microsoft QuickBooks and CosmoLex, offer built-in reporting solutions.
In this blog, we’ll walk you through the reporting options available through QuickBooks and CosmoLex to help you determine which software solution best supports your business goals and helps you keep tabs on your overall business health.
QuickBooks vs. CosmoLex: What’s the difference?
If you’re not currently using QuickBooks or CosmoLex at your law firm, you may be wondering, what’s the difference?
QuickBooks is a popular general accounting software used by businesses across the globe. It offers solutions including QuickBooks Accounting, QuickBooks Payments, QuickBooks Payroll, and QuickBooks Time. To access the full functionality of QuickBooks products, law firms must purchase subscriptions to multiple services at a monthly fee that rises with each product addition.
For additional features like practice management tools, users must sync QuickBooks with a separate application, which entails an additional fee.
CosmoLex is a fully integrated law practice management solution that combines:
- Project management
- Legal billing and payments
- Trust accounting
- Time tracking
- Document management
All of this is included under one monthly subscription fee in CosmoLex. And because CosmoLex is designed specifically for law firms, unlike QuickBooks, it has built-in compliance features to help prevent firms from legal or ethical violations.
Time tracking and billing
Time tracking and billing reports are essential for helping legal practices understand where their money comes from, how it’s being spent, and how they can best invest in growth and development. Both QuickBooks and CosmoLex offer time-tracking and billing reporting features.
QuickBooks Time contains built-in reports for projects and payroll that can help firms predict expenses and understand how time and money are being spent. The payroll reports include data on:
- Labor costs
- Employee time tracked
- Vacation and sick leave used
- Payroll taxes and liability
QuickBooks also tracks any time card edits to help prepare firms in case of an audit. These features help firms analyze their current practices and set smart, actionable goals for business growth.
On the other hand, CosmoLex supports invoicing with a built-in automatic time tracker. By using this time tracker to record time billed and expenses, firms can access performance analytics for individual employees, matters, or even specific tasks. Because time tracking, billing, and accounting data is generated from one central data set, law firms can create detailed, itemized expense reports for clients in just a few clicks. This functionality helps clients to understand the work completed on their matter each billing cycle, minimizing client complaints and building trust.
Accounting can be a complex and time-consuming process, and it requires an expert eye to ensure tasks are done correctly.
QuickBooks offers two general accounting programs: QuickBooks Accounting and QuickBooks Advanced Accounting.
QuickBooks Accounting allows firms to run limited financial reports based on completed balance sheets, profit and loss statements, cash flow statements, or tagged items like projects or specific team members. To trust that these statements are correct, attorneys must manually verify that all payments are posted correctly to the right account.
QuickBooks does not automatically apply payments to invoices, though QuickBooks Advanced Accounting can help firms achieve this task with customized reporting. However, neither QuickBooks program runs automatic bank reconciliations to ensure that books are balanced.
CosmoLex automatically tracks dozens of metrics, including write-offs, expenses, and accounts payable. CosmoLex also simplifies bank reconciliations with an automated reconciliation process that only takes moments. Like QuickBooks, CosmoLex allows users to access a comprehensive set of management and financial reports, but unlike QuickBooks, CosmoLex doesn’t require that attorneys proactively tag information in order to get insights.
Additionally, because CosmoLex’s accounting feature works off the same dataset as their practice management and billing tools, there’s no need to double-check data—all expenses and hours are automatically correlated to the correct matter instantly.
If your firm handles trust accounts, understanding three-way reconciliation reports is essential. Unfortunately for QuickBooks users, three-way reconciliation reports are not a built-in feature. This means that attorneys must manually compile reconciliation reports by combining multiple different reports each month.
CosmoLex’s trust accounting feature for law firms simplifies the process with three-way reconciliation reports that are accessible in one click. Firms using CosmoLex enjoy the peace of mind that they’re handling IOLTA accounts compliantly while also saving valuable time and effort.
In addition, CosmoLex users can access a comprehensive suite of trust recordkeeping reports, including:
- Trust Ledger Balance
- Trust Ledger Activity Summary
- Trust Ledger Transactions
- Trust Client Balance
- Trust Balance by Matter Name
- Trust Journal
- Trust Receipts Journal
- Trust Disbursements Journal
- Trust Transfer Record
- Three-way Reconciliations
- Client cost tracking
If firms don’t understand which cases are profitable (and which aren’t!) they won’t be able to intelligently scale their business growth. Client cost tracking reports help firms determine which work is cost effective and whether hourly charges and fixed-fee contracts are appropriately priced.
QuickBooks users often have trouble accurately determining their firm’s revenue. That’s because QuickBooks software doesn’t differentiate between income and recovered costs. As such, firms using QuickBooks may overinflate their revenue, skewing their financial reports.
Additionally, in order to fully analyze profitability data and obtain actionable insights, firms must combine multiple QuickBooks tools, namely QuickBooks Online, QuickBooks Payroll, and QuickBooks Time. Users that don’t take advantage of each of these tools won’t be able to analyze client cost tracking data.
CosmoLex’s system requires that each new expense be attached to the appropriate matter before it’s logged, keeping firms in compliance and matter expenses organized. When firms want to analyze profitability reports, the data is already organized and prepared, so reporting is simpler. Time and expenses can be easily reviewed for each matter, helping firms understand what moves to make to improve profitability.
CosmoLex: More data, less hassle
If you’re looking for comprehensive reports to support your business goals and keep you safe from audits and compliance breaches, there’s an easy solution: partner with CosmoLex. Our fully integrated software provides large and small law firms alike with the tools they need to scale and succeed, all at one low monthly price.