Successful development of Integrated Accounting software that addresses the many distinctive needs of the legal profession is challenging. Software tools used by other industries fall short. The accounting aspects must meet all the basics, as well as address three additional areas that together are unique to the practice of law: client funds accounting, matter cost accounting and back office accounting.
Moreover, law firm billing tools must use integrated accounting in order to defeat some very common issues that typically apply with the use of separate accounting systems and tools: Adaptation, Data Entry Errors, Matter Costs Recovery, Inflated Revenue, Practice Area Income Tracking and a Financial Overview.
Adaptation and Data Entry Errors
As discussed in the first blog of this series, Ensuring Your Tools Meet all your Accounting Needs, law firms require specialized software to address multiple accounting needs. When this is missing, many law firms expose themselves to added work, time, expense and frustration attempting to apply general business accounting applications to the specific accounting needs of their practice. Converting or adapting these tools for use by the legal profession can be an exercise in futility. In addition to the additional challenges and extra time expended, these inadequate solutions can lead to very costly mistakes, both financially and professionally.
If you are using two or more methods or applications for practice and billing management and to oversee your trust accounting, you are setting yourself up for failure. Take a look at just a few of the things you need to accomplish across these areas:
- Track billable hours for each client and matter.
- Identify and track expenses.
- Pay your firm from a trust account.
- Move funds from the trust account into your firm’s operating account.
- Track this activity on the invoices.
- Maintain ongoing balance updates in your clients’ trust accounts and retainer limits.
General accounting tools are not designed to accommodate these and other needs of a successful law firm accounting system. Instead, you will find yourself spending fruitless hours attempting to make your various applications work for you, or paying a bookkeeper to function inefficiently with insufficient tools.
Higher Rate of Errors
Multiple methods of accounting necessitate multiple entries. In addition to the wasteful duplication of efforts, the possibility of billing and accounting errors increases. Even the most scrupulous worker will be hampered by these constraints. Additionally, what if more than one individual is responsible for these duties or has access to the software? There is then the added worry that changes will be made by one person in one application but not updated in another, resulting in costly errors and inaccurate data.
These and other problems can be most effectively addressed with integrated accounting software developed specifically for law firms. Next up is the issue of Matter Costs Recovery.