However, annual financial statements may not be enough to help you keep tabs on your business. Poor financial management is one of the leading reasons that businesses fail. In many cases, failure could have been avoided if the owners had applied sound financial principles to all their dealings and decisions.
Follow these rules and keep track of client funds every day to ensure you don’t cross any lines that can cause your firm serious problems. Speaking of expenses, one of the most common mistakes attorneys make is losing track of business expenses. It’s best to capture and record your business expenses on the daily, so you don’t lose those receipts or invoices. Then, set aside a time each week to make sure they are coded properly in your books. Many lawyers assume their bookkeeper can or should help them with their financial analysis and get frustrated when they don’t.
Chart of accounts
And while an online presence won’t guarantee an increase in exposure, not having one can have a negative impact and can discredit you to a potential client. In many cases, website and social media become an augmentation to your word of mouth referrals. Most people won’t simply call a number without the opportunity to do some basic online research. Your location and your goals will determine cost in several ways, including whether you want to start a traditional brick and mortar firm or are looking to create a virtual office environment.
Data entry errors lead to wasted time, as you comb through records to figure out what the error is, as well as billing complications and compliance violations in the worst cases. That is, you spend money to handle a client case, doing things like hiring experts. Trust accounting (including IOLTAs) isn’t a part of standard business accounting. Because it’s an industry-specific account, it’s a common area to make mistakes.
Understanding where money is coming from (and where it’s going)
By keeping up with your records and hiring a professional, you can avoid any potential problems and keep your finances in order. Maintaining your books on a regular basis ensures that all of your financial transactions are accurately recorded and organized. This makes it much easier for your accountant law firm bookkeeping to prepare financial statements and tax returns. For example, in order to ensure that client funds are not comingled with operating funds, attorneys must maintain a separate bank account for these funds. This is just one of the many compliance regulations that law firms must adhere to.
You can find more information on which transactions require supporting documents on the IRS website. As your budget year crawls on, you can adjust numbers to more accurately reflect reality and plan the rest of the year accordingly. See what strategic opportunities you have for reinvestment and plug those into your budget. If you’re trending behind, it is better to know sooner rather than later so you can react accordingly. With all the options available, we know it’s difficult to choose which software is the best choice for your firm. After all, you have to sift through the options alone, convince your partners to agree, and pray that it works as it should.
Hire better, hire faster with Workable
Now, you can dedicate your valuable time to growing your business. Putting time and effort into your accounting and bookkeeping will help you keep track of what money is coming in, how you’re spending it, and who it belongs to. It’ll keep you organized, ensuring you meet all of your financial obligations to your clients, your firm, your employees, and more. It would be best if you chose your legal accountant for their experience working with law firms, specifically those in your practice area and jurisdiction.