Accounting for Law Firms: A Guide Including Best Practices

And if you need law firm-specific accounting, TimeSolv will convert your Xero platform to powerful law firm software. TimeSolv is cloud-based, making it easy to track time and expenses from anywhere. It provides both the required trust accounting with three-way reconciliation as well as tools to help better manage your client matters. While bookkeeping is more transactional and administrative, accounting is more subjective, giving you insights into your law firm’s financial health based on legal bookkeeping information. One key part of the accounting process is analyzing financial reports that provide you with a better understanding of actual profitability and awareness of cash flow in your business.

  • Total assets are also required to equal total liabilities plus equity (net worth or capital) of a law firm).
  • Beyond just staying organized and compliant, following best practices for accounting for law firms will help you identify growth opportunities.
  • 3 components involved in the reconciliation process consist of the trust ledger, the client ledger, and the trust reconciliation.
  • The right legal accounting software helps you better manage and improve your law firm’s cash flow by providing a clear, real-time picture of the firm’s financial data.
  • While QuickBooks Online is extremely customizable, it has no legal-specific features that law firms need, such as trust accounting, legal billing, and legal-specific reports.

Suppose  you choose accounting software that automatically syncs payroll functionality with time-tracking and expense apps. In that case, you can also generate pay runs with the click of a button, for better efficiency. Capturing every minute of billable work is critical for accurate law firm billing and, ultimately, profitability. Lawyers can benefit from effective and easy-to-use time-tracking features—like multiple time-tracking capabilities from QuickBooks with Clio Manage.

Bank Reconciliations

For example, with the best accounting software for law firms, you can view your firm’s financial data in one place, including profit and loss, bills, client transactions, and cash flow. Keeping accurate records of your law firm’s accounts is a challenging yet vital part of running a legal practice. If you’re a QuickBooks Online user but need a legal accounting system that complies with trust accounting rules and will perform a three-way reconciliation, LeanLaw is the right integration for you. QuickBooks Online is already our overall best small business accounting software, but LeanLaw takes it one step further and converts it from general bookkeeping to a very capable legal billing and accounting system.

  • For example, with QuickBooks Online and Clio, manage your firm’s financial information, trust transactions and disbursements, and online payments in one integrated cloud-based solution.
  • They mustn’t deposit client funds in accounts that do not bear interests, or in their business accounts.
  • This results in wasted time, mismatched records, billing complications, and even compliance violations.
  • All the comprehensive adjusted owner’s information would help you make informed business decisions.
  • Online payment solutions like Clio Payments also streamlines your collections and accounting workflows.

It can manage financial transactions, track billable hours, generate invoices, and provide reports on a law firm’s financial health. Accounting for law firms has unique requirements for trust accounting, billing, and more. While general accounting software may work, choosing accounting software that’s designed for law firms will be vastly more useful. Look for legal-specific accounting tools or software that integrates with legal practice management software to create a solution that works for your law firm. Consider what you need, and seek out accounting software that fits those needs. Accounting software can streamline your accounting processes by helping you track your finances and free up time to focus on more important tasks.

Why do attorneys need legal accounting software?

Yes, you can—but it’s best that you integrate them with legal accounting solutions. For instance, you can integrate QuickBooks Online with LeanLaw to develop a powerful legal billing and accounting law firm bookkeeping solution. In addition, you’ll have access to other case management features, such as client intake forms, our legal CRM software, client communications, legal analytics, and law firm website design.

  • Double entry accounting is a helpful practice for lawyers to know about, as it provides an extra guard against errors.
  • This is why we recommend adding a LeanLaw integration, which is ideal for law firms with up to 30 attorneys.
  • Many lawyers go to one or the other extreme—they either claim everything (and possibly more than they’re allowed to), or they’re so afraid to overstep they miss out on tax deductions.