The complete guide: Bookkeeping for attorneys and paralegals

This gives you the best of both worlds while making your law firm’s comprehensive accounting situation easier to manage. At Your Bookkeeping Department, we specialize in convenient and virtual bookkeeping services for law firms and private medical practices. We have tools and processes to specifically handle the legal industry’s needs such as cloud-based retrieval that allows attorneys to access their financial information 24/7 law firm bookkeeping on any device from a laptop to mobile. From payroll to expense reports to tax payments, all the data is securely hosted on a cloud and ready for consumption. So with busy days being a common thing in the legal world, an attorney can verify expenses during a lunch break, right from their phone. The cloud-based retrieval allows for multi-tasking and efficiency, which is part the day-to-day for people in the legal industry.

There are rare occasions where a firm will make a business payment on
behalf of a client, for example, in a property transaction where rates
must be paid urgently and the money has not been received from the
client. Where trust monies are paid to a third party on behalf of the client, a
trust payment is posted against the matter. LawPracticeZA provides several posting modules to make it easy to
capture the various types of transactions that apply to South African law
firm’s. The
lawyer must safeguard and segregate those assets from the lawyer’s personal,
business or other assets. Some firms will even use accrual for their monthly reports but then submit their year-end tax return as the cash method.

Bookkeeping solutions

However, if a firm fails to separate revenue that covers incurred costs from actual revenue, their records will be off. By keeping your money separate at all times from your clients’ and strictly following trust administration rules and guidelines, you’ll sidestep a whole host of problems down the line. Even with your busy schedule of cases https://www.bookstime.com/ and clients, you can master law firm accounting and financial management. Bookkeepers should be up to speed on the rules and regulations of the jurisdictions they work in and have accounting software experience. In the books of the law firm, a payment received from a client is considered a receipt, and
posted as a Matter Receipt.

If you use E4 in your conveyancing department for property transfers, this integration
allows you to automatically open Clients and Matters and post fees from E4 into LawPracticeZA. In the body of the email sent is a summary of the statement, with hyper-links to
invoices and receipts, which enable the client to load the PDF invoice or receipt direct
from the email. Produces a report of ALL unbilled fees and disbursements (i.e. all the firms WIP), which can be
exported to a PDF report or spreadsheet. Click on a Fee earner to drill down into the detail of their fees written, including
what has been invoiced and credited. Provides a report of all transactions for the selected period by supplier. Various types of transactions can be viewed; by default, all accounting
transactions are displayed.

Not asking professionals for help

During that time, you likely did not learn anything about legal accounting or bookkeeping. So the thought of legal bookkeeping and law firm accounting can sound intimidating to even the most experienced attorneys. As a lawyer, when you receive cash that belongs to a client, you are obligated to hold those funds in a client trust account separate from your own money. These are commonly known as IOLTA accounts (interest on lawyers trust accounts) and vary by state  (and also check with your local bar association). Accrual accounting is a more sophisticated method that records revenue and expenses at the time they are earned or incurred, regardless of when you receive the money.

And you can’t do that if you’re not gathering and sorting it on a regular basis. In most cases, a legal professional specialises in a particular field of law, but not in finances. That is why it is often best to hire a professional, which will without a doubt save your firm’s time and money in the long run.

Automatic Bank Feeds via Banking APIs

A trust account is a special bank account where client funds are kept safe and in a separate account from law firm operating funds. A chart of accounts is a list of all your firm’s financial accounts, usually used by an accountant and available for bookkeepers. Account numbers of the chart of accounts are structured to suit the needs of your law firm, the jurisdiction, and the practice area. Typically, there are 5 core categories consisting of assets, liabilities, owner’s equity, revenue, and expenses.

• With this picture, you can see opportunities for growth and see options before less organized competitors.
• Law firms need to keep these records up to date, create invoices, and administer the employee payroll.
• The only time a bookkeeper is prompted for the account to debit and credit is when posting
  journals.
• Bookkeeping is an important aspect of any business, especially a law firm.
• Recent programs include Leveraging Technology in Your Practice, Technology, Tools and Ethics Rules, Powerpoint 101 for Lawyers, Maximizing the Use of Your iPad in Your Law Practice and many more.
• When receiving a payment from a client, the receipt can be deposited
  into either the business or trust bank account, updating the Matters
  business or trust balance accordingly.

Law Practice Management resources provide lawyers, law firm managers and legal professionals with information on practice management trends, marketing, client development, legal technology and finance. Whether you’re a solo practitioner or a managing partner at a national law firm, you’ll find law practice management resources to meet your day-to-day practice needs. Checklists, best practices, publications and continuing legal education programs provide up-to-date information and practical tips to help you better manage your law practice. Quickbooks is still the leader in accounting software, making it a reasonable first choice for lawyers.

TRUST CASH BOOK & TRUST LEDGER:

Whenever they say ‘give full account to client’ in question must draw this statement up! Once the matter ends, pay client outstanding monies given as cover in the matter/due to client as recovered
debt. Most importantly, you must find a plan that works well for you and stick with it.

• IOLTA, accounts are bank accounts where interest gets earned from the account and is collected and sent to the state bar.
• The chart of accounts for law firms should include the IOLTA or trust account, as well as a trust liability account (to offset and show that the funds in the IOLTA account are not the law firm’s).
• Legal accounting and attorney bookkeeping mistakes have catastrophic consequences for your business, income taxes, and license.
• Trust accounting mistakes can lead to penalties, suspension, or even losing the right to practice law.
• With the accrual method, you record revenue when it’s earned and expenses when they’re incurred—whether they’re paid right away or not.