The Law Firm Book Keepers

If you sign up using the links on this page, you’ll get 20% off your first six months of bookkeeping with Bench. I’ve been so happy with the experience that I’m on the annual plan and my guess is that after six months of working with them, you’ll be on the annual plan too. Let’s schedule a discovery meeting so we can discuss your needs and confirm there’s a fit.

Bookkeepers record the financial transactions and balance the financial accounts for your firm. Legal bookkeeping takes place before any accounting can occur and is an important administrative task for any law firm. Legal bookkeepers and legal accountants work with your firm’s financials, with the shared goal of helping your firm financially grow and succeed. law firm bookkeeping When you take funds out of your business for personal use, it can either be classified as a capital withdrawal or as a payment for salary. These are two different types of transactions and need to be managed accordingly. Having a bookkeeping and accounting system in place will ensure that the payments to yourself are recorded appropriately as salary.

Accounting for Attorneys and Law Firms

When tax season comes around, you could forget to claim it and miss out on those deductions. It doesn’t belong to you, and if you claim it as such, you could face the consequences from regulators and have a more challenging tax season. To do so, you’d first need to transfer that money into your business account. We don’t recommend building your business off the back of your credit card.

Poor management of trust accounts can lead to penalties, suspension, or even losing the right to practice law. A trust account is a special bank account where client funds are kept safe and in a separate account from law firm operating funds. As an attorney, you’re aware that when you receive money that belongs to a client, you must place those funds in a trust account separate from your own money. These funds are stored in IOLTA or “interest on lawyers trust accounts” accounts. Beyond knowing how to assign billable hours and ensuring that invoices are sent and paid on time, take advantage of budgeting and financial analysis services. Supporting Strategies can evaluate your day-to-day operations and suggest improvements that have the potential to transform the financial management of your law firm.

Do lawyers need accounting?

Do your due diligence and make sure every dollar going into the trust account is supposed to be there. We’ve seen firms using these accounts to hide assets or as a savings account. The reality is that there is no scenario where it’s okay to use your IOLTA in this way.

A bookkeeper creates financial statements for your accountant to use to file your taxes, provides suggestions on improving your firm’s financial health, and more. 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. A legal accountant and bookkeeper will work towards the same goal — they both want to keep your law firm financially healthy and built for the future.

Ignoring Professional Help

If you’re not sure what tax deductions you should be watching for, our post covering the top tax deductions for lawyers and law firms is a good place to start. Both general accounting and trust accounting are necessary for your firm’s success—and integrations seamlessly tie the two areas together. So, with double-entry accounting, every financial transaction gets sorted into a specific category (assets, liabilities, or equity). Once those transactions are sorted, the two sides should match.