Why should I use a specialized legal accounting program?

Misbah Jalal Siddiqui

Why should I use a specialized legal accounting program?

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Legal Accounting Program

A law firm is like any other business in that it must have a system for recording its financial transactions in order to generate the reports that the owners and officers can use to evaluate the company’s financial health. General accounting programs meet most companies’ needs because they allow the business to record financial transactions and generate the balance sheet, profit and loss (income) statement and cash flow analysis at the push of a button.

Attorneys and law firms, however, are not like most businesses because they hold client funds in trust to be used to pay for future services, which imposes additional financial reporting duties on them. The ethical rules in most states have very strict requirements for attorneys regarding what client trust fund records they must keep, and which reports they must prepare. For example, in Canada and in some states in the United States, the lawyer must prepare three-way reconciliations for client trust accounts.[1] Some states also require attorneys to show the client’s trust fund balance on the invoices for services provided, and almost all discipline an attorney who has withdrawn more funds than the client has in trust.

Trust Account Reporting

General accounting programs are not set up to prepare these specialized trust account reports or to show the trust account balance on the client’s invoices.[2] They also do not have any mechanism to notify an attorney when a trust fund transaction will result in the client’s trust account having a negative balance. Specialized legal accounting programs are designed to address these issues and allow you to be “audit ready” at the push of a button.[2]

Legal Billing

In addition to having robust trust accounting features, specialized legal accounting programs allow you to track attorneys fees and client cost advances, generate bills, and record payments received. These programs also allocate payments received to costs first (something that general accounting programs cannot do) and can allocate the payments among the attorneys who generated the fees. This makes it easier for attorneys and law firms to train legal assistants and paralegals to accurately enter data into the specialized legal accounting program, even though they are not trained bookkeepers or accountants.

For these reasons, it is better for a law firm to use a specialized legal accounting program than a general program.


1. Attorney Trust 3-Way Account Reconciliation Rules and Your Practice
2. Six Legal Accounting Tips for Your Firm

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