Back to Basics: (Part 2) Improving Your Law Firm’s Financials

This post is part two of a two-part series that focuses on getting Back to Basics in your law practice. Please read part 1 here, Fine-tuning Your Legal Practice Management.

Like most businesses, the factors that contribute to a law firm’s financials run the gamut from the relatively straightforward—are you getting reimbursed for hard costs?—to the complex—what’s your five-year plan?

It can be tempting to focus more on future goals and how you want to grow your firm, but that doesn’t mean the importance of attending to daily details goes away. 

In this back-to-basics piece, we’ll review ways to improve your law firm’s daily approach to accounting and billing financials through fully integrated platforms and automating repetitive tasks.

Accounting

Law firm accounting generally breaks down into three areas: the business, individual matters, and compliance reporting, which is often folded into business and matter accounting tasks.

Business

With tasks like managing the firm’s expenses, compliance reporting such as client trust and tax reporting, business analysis, reconciling bank accounts, and more, business accounting often means you have to grow adept at keeping several balls in the air at once.

However, these tasks don’t need to take up as much time and energy as they often do. If you use a legal-specific practice management system, you can leverage legal accounting tools to reduce the time you and your team spend on repetitive tasks. For instance, automated reconciliation and trust accounting safeguards make it easier to stay compliant and reduce the time you devote to cross-checking numbers.

Matters

A good practice management system can also help improve your matter accounting processes.

For starters, it’s common for firms not to get all their matter costs onto an invoice. When broken down into individual expenses, they seem like small fry. But they do add up. 

Instead of entering costs as they’re remembered, firms can use a tool that offers fully integrated billing and accounting. They can also import bank statements to catch firm credit card expenses for items that need to be reimbursed.

Likewise, it’s helpful to know where matter balances stand. If your accounting and billing tools are separate, this can mean frequent back-and-forth referencing and reconciliation.

To save time and improve accuracy, firms can also leverage accounting tools to have a firm grasp of where individual matter balances are. Once again, a tool with fully integrated billing and accounting can streamline the process of verifying accurate, running balances for all client matters.

Billing

Firm finances don’t stop with accounting. Lawyers can also improve their billing processes by upping the accuracy and efficiency of repetitive billing tasks.

Tracking billable hours

The only way to ensure you’re capturing all your billable hours on an invoice is to track time as you go. Use a program that offers a mobile app for on-the-go and remote working convenience.

If you really struggle with tracking your hours, consider using a passive tracking tool. If tasks are auto-tracked for you, you can sort through them later and determine what should wind up on an invoice and what shouldn’t.

Invoicing

For invoices, look to save time through batch processing of invoices. For example, if you draft your invoices in bulk and then engage in electronic pre-bill review, you can streamline your invoicing significantly.

Likewise, speed up your invoice delivery by using email or a secure client portal. Online bills arrive instantly and can be sent in a few clicks—versus hours of stuffing envelopes. Electronic delivery also lets you confirm when invoices have been received, opened, and read. 

Payments

It pays to be proactive with your collections. Get your billing system to work for you by notifying you when retainer balances get low and even sending out automated reminders for replenishment. This approach is often far easier than trying to collect for work after a retainer has been depleted.

Likewise, give your clients payment options by accepting eChecks and credit cards. Convenient, instantaneous payments save clients time and hassle—and make them more likely to pay on the spot. Just be sure to use a legal-specific merchant, so you don’t land yourself in hot water with an unintended compliance issue.

A full-picture system

When it comes to your law firm’s finances, you can make improvements through your daily approach to accounting and billing.

To start, look for a practice management system with fully integrated billing and accounting. This reduces the number of steps needed to complete a task and helps reduce the likelihood of error from additional data entry. Bringing your billing and accounting into a single system also gives you a clearer view of your firm’s complete financial picture.

Additionally, take advantage of the possibilities of automation and streamline repetitive tasks. Improving the consistency, flow, and speed of your billing process through automation lessens the burden on your team and ups the level of client experience you can offer.

Check out our webinars for a deeper dive into how to improve the basics of your firm’s financials: Back to Basics: Getting Paid & Back to Basics: Managing Your Law Firm Financials

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