Tips For Accountants Serving Law Firms

Trust Accounting

Most of our blog posts are directed towards attorneys who either manage their own firms or are looking to manage their own practice.

In this post I’d like to speak to the accountants that serve law firms. Too often accountants take on a legal client and don’t realize that they simply cannot treat them like any other client. When dealing with law firms there is a very unique set of regulations and accounting requirements. This doesn’t mean lawyers shouldn’t hire accountants, you accountants are great, and lawyers need you. They just need you to realize they’re a different type of client.

Here are some tips to help accountants better serve attorneys and law firms.

Tips For Legal Accountants

  1. Brush up on clients funds accounting– Attorneys and law firms often use retainers. It’s important that a legal accountant understands that those funds are not actually the attorney’s until they have actually earned it. In addition to this it is extremely important that one client’s funds are never commingled with another client’s.
  2. Understand the difference between direct & indirect costs– For accountants serving attorneys it is important to differentiate between direct and indirect costs. If this isn’t done accurately, you’ll be in for a nightmare come tax season.
  3. Take the time to understand how your client firm bills across different practice areas– While many law firms have a case type that they specialize in, it is commonplace to practice multiple case types and bill differently across all of them.
  4. Not all invoice payments represent income– Before your client firm can recognize any income on their invoice payments, you must make sure that the client costs are accounted for in that payment. After those costs are covered the balance of the payment can be recognized as income.
  5. Ask for access to your client’s practice management system– By accessing your client’s practice management system, you as an accountant can easily access a wealth of information about the firm. If your client utilizes an integrated practice management system like CosmoLex, even better. By integrating legal billing and accounting systems you can always be assured that these two systems are in lockstep with each other- cutting down on errors and time spent entering the same data into multiple systems.

Accountants, don’t be afraid to take on legal clients. It is undeniable that legal accounting regulations and penalties are going to be more strict than most if not all of your other clients, but we’re here to help.

Talk To CosmoLex About Becoming A CosmoLex Accounting Partner

In an effort to better serve our clients we train independent professionals who specialize in the legal billing, bookkeeping and accounting needs of law firms to get the best use of our practice management system for their clients. Contact us for more information.

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