As a lawyer, you know the importance of attention to detail. You are probably well-organized, with every billable minute accounted for, but are your accounts managed with this same precision? As you focus on helping your clients, finances often become muddled. You likely have so many different expenses and charges that they can be hard to keep track of in an orderly manner. In addition, if you can’t provide backup for an expense, your client might refuse to pay or you could even jeopardize your license.
While many lawyers choose to manage their own books on top of their already heavy workload, bookkeeping software and support can alleviate some of the pressure to ensure that all expenses, profits, and financial assets are accounted for simply and accurately.
Challenges to Bookkeeping for Lawyers
When managing Interest on Lawyer Trust Accounts, or IOLTA accounts, it is vital that you can demonstrate to your client that you’ve put in the work. They may ask to see your expenses for various services offered throughout the case, for which you need to provide evidence. If you haven’t tracked all hours worked and expenses clearly and accurately, you run the risk of losing the fee being held through the IOLTA system. Effectively, through good bookkeeping you need to prove that you have earned your fee for the funds to be legitimately released and used.
In addition to this, at any time a client can request a full accounting of how you have used their funds. If you have not kept your books up to date, this is a tricky request to handle.
Time Tracking & Billing
Despite its importance, client billing can also be time-consuming and confusing. According to a 2020 Legal Trends Report many lawyers only bill for an average of 2.5 hours per day, due to the time spent replying to emails, managing accounts, creating and sending invoices, processing payments, and updating trust ledgers. An effective time-tracking strategy and software system are essential to maintain your firm’s profitability.
Paying Court Fees
If you pay court or any other legal fees on behalf of your clients, then you know how difficult it can be to keep track of all of the receipts and payments. Missed payments can incur late fees or lead to delays. Keeping a filing cabinet or a pile of receipts on your desk is not an effective strategy for keeping track of these payments.
Your Bookkeeping Solution
We recommend that most law firms we work with use QuickBooks Online for their bookkeeping. QuickBooks Online provides the tools necessary to make sure your books are balanced at tax time and year round. You can bill clients, track time, and manage costs all in one place. The software allows you to run your business in a smarter way by simply and accurately tracking your transactions on any device. This means that you can input an expense or update an invoice on the spot, instead of letting receipts build up and create a confusing mess.
QuickBooks has specific tools available for law firms, meaning that it caters to your needs. You can create and send invoices directly to clients through the software. And clients can easily pay by credit, debit, and ACH bank transfer on the go, on any device. You can also see any pending or completed payments by clients, making them easier to track and manage.
If using QuickBooks on your own seems daunting, then we’re here to help. Why not set up a free consultation with us today to understand how you can simply and accurately manage your company’s accounts?