In the course of doing legal work for clients, many law firms end up covering hard costs and soft costs for their clients. It’s common to ask for reimbursement of hard costs, but approaches to soft costs differ. Whichever approach your firm chooses must be addressed in the client agreement. To make sure you have every base covered, it’s essential … Read More
What Are the Three Bank Accounts Every Law Firm Should Have?
Lawyers go to law school—and graduate to find themselves running businesses. Yet whether you’re starting a solo practice or growing an existing firm, the same accounting rules apply. Every law firm should have three basic bank accounts: an operating account, a savings account, and a trust or IOLTA account. And despite trust laws varying state-by-state, there are also a few … Read More
When should my law firm outsource bookkeeping?
Bookkeeping means recording financial transactions—and it’s distinct from accounting, or the active keeping of financial accounts. So, how do you know if your law firm should outsource your bookkeeping? Below, we’ve shared a few common scenarios that indicate you should consider outsourcing. If you’re putting off tasks If your bookkeeping falls behind, it can be really hard to get back … Read More
What expenses are tax-deductible for law firms?
As we approach tax season, it’s time to start thinking about—and gathering the paperwork for—expenses that are tax-deductible. We’ll review some of the most common deductions for law firms. Convenience fees For lawyers who accept online payments, including via credit cards, the convenience fees are tax-deductible. While this used to be a rarity, accepting online payments has become increasingly common … Read More
How Should I Pay Myself from My Law Firm?
When it comes to paying yourself from your law firm, your options are determined by how you choose to structure your business. Draw payments Some law firm owners pay themselves with draw payments. This means you’re choosing to pay yourself a portion of your firm’s profits. How much you pay yourself and how often is up to you. Sole proprietors … Read More
Does my law firm have to pay sales tax?
Many states charge sales tax on tangible personal property, but increasingly, some states are also charging sales tax on professional services. And others don’t charge sales tax at all. Are there all kinds of weird rules and exceptions? You bet. Know your state laws First, you need to know your state laws. At present, Hawaii, New Mexico, and South Dakota … Read More
How much should our law firm be spending on staff and general overhead?
Running a business requires frequent tinkering with the balance between expenses and income. And yes, a law firm is a business. So, how much should your firm be spending on staffing and general overhead? Understanding overhead costs Among law firms, overhead generally refers to expenses minus attorney salaries, and sometimes minus paralegal salaries. Overhead can include everything from the office … Read More
How Can Our Law Firm Create a Budget?
Creating a budget doesn’t just help you better understand your firm’s finances — it helps you plan ahead. A well-considered budget lets a firm make informed decisions for the year to come and relieves some stress around when money can or can’t be spent. Follow these steps below to create a budget for your law firm. Decide on your expenses … Read More
What financial red flags should law firms look out for?
We all want financial security – and to keep our firm’s financial house in order. After all, a law firm’s money troubles frequently lead to team stress, which can mean a lower quality service for clients. And stress can cause employees and partners to make poor decisions that worsen the situation or lead to professional repercussions. It can also mean … Read More
How can our law firm fix our cash flow?
Clear communication goes a long way, from first meeting your client through the billing and payment process. If your client has a good understanding of how they will be billed, it can help you avoid some bumps when it comes time to collect. Be sure to have them sign a written fee agreement so that everyone is (literally) on the … Read More