Law firms may not be thought of the same way as many businesses, but the truth remains that a law firm is a business. With that being said, in order to be a successful business in this day and age, it is important to take advantage of the technological advancements that are constantly taking place.
When it comes to legal accounting it is important to understand that not all funds are the same. Attorneys deal with two major types of bank accounts: operating accounts and trust accounts. In most situations operating accounts contain funds that belong to the firm. This means all of the funds in this operating account have been earned by the firm in some fashion, and recognized as income after all other liabilities have been paid and accounted for.
An unfortunate reality of practicing law is that you will have disputes with your clients. No firm or lawyer ever wants to be at odds with their clients, but in some cases it’s inevitable. No matter what business you’re in, handling fees and expectations like deadlines will always cause trouble between the service provider and the client, and being a lawyer is no different.
More so than in any other industry, the legal industry faces the most extreme levels of scrutiny and penalization associated with accounting. Legal accounting errors and inaccuracies go far beyond a misrepresentation of a firm’s bottom line. These errors can be so devastating to a firm that they could even result in disbarment.
What does your firm think of email? Both inside and outside of the legal industry we’ve started to see many detractors of the use of email. It’s gotten to the point where some of the most powerful professionals in the world are abandoning the practice of using email altogether.
In the legal accounting world, firms are migrating from one accounting solution to another quite often. There are a number of reasons firms migrate from one solution to another and that may be why it happens so often.
For many attorneys, managing their own firm is a dream come true. They spend years in law school, to one day pass the bar. Then hours upon hours inside and outside of the courtroom perfecting their craft to build an impeccable reputation.
Law firms across the United States know and understand that there are a plethora of different solutions that can be used when it comes to practice management. Many firms employ a number of different solutions to fully manage their front and back office chores.
When handling a law firm’s accounting, you will encounter two classifications of costs. It is imperative that a law firm is able to differentiate between Direct and Indirect costs.
Mention accounting in front of a lawyer, then take a step back and appreciate the look of terror that comes across their face. You can trust me or try it for yourself, but just mentioning the word almost always strikes fear in attorneys’ hearts everywhere.
On the surface credit card acceptance for law firms seems like an open and shut case. It’s a true no brainer with many benefits. Law firms who accept credit cards see a 30-40% improvement in their cash flow. Clients enjoy the ease in which they can submit payments. With rewards available from multiple vendors, many clients absolutely prefer to use credit cards.
If you are an attorney who is involved in the real estate settlement industry it may be in your best interest to mark October 3, 2015 on your calendar. On this day the Consumer Financial Protection Bureau will begin to require new closing disclosure forms as they begin to enforce new compliance requirements associated with those closing disclosure forms.
Legal accounting is significantly more complicated than standard small business accounting. In addition to dealing with the basics such as profit and loss, cash flow, and account reconciliation, a law practice must also deal with three unique areas: client funds accounting, matter cost accounting and back office accounting.
A practice management system skeptic, I published an article in this newsletter’s predecessor almost five years ago entitled “How Your Law Firm Can Build Its Own (DIY) Practice Management System Using Off-The-Shelf Software.”
Your firm has a roster of dozens of clients. You pack your week with billable hours. You have all the work you can possibly handle. And you can’t pay your bills. Why? Because you don’t have cash.
You had all those years of law school and yet they never taught you important things like billing, case organization and practice management. New attorneys, and even experienced lawyers striking out on their own, are surprised by the administrative hassle associated with running a legal practice.
Your legal education probably didn’t include a lot of business management courses, and that’s too bad. Small law firms often struggle with practice management and that can sink the business completely. Your success as an attorney has at least as much to do with how well you run your office as it does with your knowledge of the law.
Could your practice afford to misplace $145,000, and not know about the loss for 18 months? According to the Association of Certified Check Fraud Examiners 2014 Report to the Nations, that’s exactly what a typical victim of check fraud goes through.
Attorneys must always act in the best interests of their clients. If the attorney has a conflict of interest, the attorney must at least admit the conflict and might want to refer the client to a colleague. Unfortunately finding those conflicts isn’t always easy.
Attorneys tend to be conservative towards adopting new technology. That is understandable because they want to ensure that a change in practice won’t undermine their ethical responsibilities.
If you administer trust accounts, and most law offices do in one way or another, then you need to know how to generate three-way reconciliation reports. Standard bank reconciliations compare two balances: the book balance and the adjusted bank balance.
Law firms have billing needs that are unlike any other service industry. Law firm billing software meets these needs in ways general software can’t.
Software enhances nearly any business, and a law office is no exception.
Family law attorneys already have their hands full with emotional clients, children in need and complicated, ever-evolving divorce laws. They also face their own unique set of practice management issues that take time better spent in court or consulting with new clients and affects firm’s profitability.
Cloud technologies offer the flexibility, mobility and even the security that a modern law firm requires. Attorneys were rightfully skeptical about the technology when it first appeared, but it has been around long enough to have established itself as a viable option for any law office.
If you’ve shopped for legal billing software you have found that there are many options out there. How do you figure out which solution is the right legal billing program for your firm? This software buyer’s guide will offer advice on how to make that decision for your practice.
The legal industry has been slower than other fields to adopt new technology. For example only 1/3 of practices use legal billing software. Attorneys often prefer to be conservative regarding new technology because of concerns about protecting client information, but if taken too far this reluctance can hurt a practice’s ability to stay competitive.
The health of any business, including a law firm, depends on good cash flow. The success of your firm may have less to do with anyone’s skill as an attorney or firm administrator and more to do with how you run your office. Avoid these common billing mistakes and you can thrive while other practices are struggling.
Trust account regulations may vary from state to state, but they all have one thing on common: get it wrong and you could lose your practice. In fact trust account violations are one of the leading sources of attorney ethics charges and disbarment proceedings.
Every lawyer understands the importance of tracking billable hours and the impact an automated legal time and billing software can make. Like any service business, billing related activities can make or break a law firm’s financial viability.
A large percentage of disbarments and disciplinary actions arise out of client trust fund mismanagement. With the key concepts of trust accounting in mind and a few practical tips that you can put into practice immediately, you’ll be in compliance and be prepared even for a random audit.
Trust account rules vary from state to state, but one constant for attorneys or anyone working in a fiduciary capacity is the over-riding fear of running afoul of strict requirements. Take the following steps and you won’t lose sleep worrying about your responsibility to comply with complicated trust account regulations.
Tracking billable hours, a variety of fee arrangements, restrictions posed by state ethics rules, and clients who dispute bills can mire your firm in billing issues and affect your bottom line. It is nearly impossible to run an efficient law firm without legal billing software.
Unlike dealing with your firm’s operating accounts, trust bookkeeping involves additional fiduciary responsibility. You’ll need a trust accounting system to help you do the job and a strategy to switch from one system to another.
Technology is a powerful tool for any business. It is a great equalizer, allowing small organizations to provide services and capabilities that used to be offered only by large companies. However, an inappropriate or incomplete tool is not only useless, but can actually make things worse. Law firms have unique needs that generic time and billing software can’t provide, which is why they need a billing solution designed for the legal industry.