Six Best Bookkeeping Practices for Law Firms

Law firms can take care of a lot of things every day. From meeting with clients to making decisions, something is always happening. But time is valuable. Rather than concentrating on financial matters, it’s best to let a bookkeeper handle the job for them. Efficient bookkeeping for law firms allows firms to manage their cash flow efficiently. A professional bookkeeper streamlines a firm’s financial matters, allowing for smooth record-keeping. Through the following best bookkeeping practices, law firms can monitor their expenses and revenue as well as grow their practice. 

Creating a Budget

Generally, law firms should spend less than their monthly earnings. This way, major expenses won’t take up too much money at once or have big sums of money left over that they wish to use. Also, this helps project major costs and investments, ensuring a firm can make smart financial decisions and allocate resources for improvement. 

Taking Advantage of Technology

Leveraging technology helps law firms make the most out of bookkeeping. Soft programs can digitize functions and allow for balanced finances, eliminating the need to cross-check data. By incorporating technology into bookkeeping systems, law firms reduce their efforts in creating invoices and recording tax data. 

Keeping Track of Finances

When discrepancies are identified as they occur, law firms can keep their records consistent and reconciled. As a result, they will not be stuck with huge imbalances at the end of every month. All payments must be processed within deadlines, so costs won’t be delayed. Delaying costs can harm a law firm’s cash flow and lead to insufficient funds. 

Hiring the Right Bookkeeper

Outsourcing the financial matters of a law firm can simplify the process, eliminate errors, and minimize stress. A professional bookkeeper understands the unique needs of a law firm and creates a process that best serves a firm. 

Recording and Storing Financial Records

Documents such as receipts, invoices, bills, credit card statements, work-time sheets, and checking account statements must be kept for a minimum of two years. This allows for easier access and timely reporting.

Ensuring Monthly or Quarterly Reconciliation

A lawyer’s trust bank statement must be reconciled with the individual balance of their clients every month or quarter. Account reconciliation compares monthly transactions of a law firm’s financial accounts with bank statements, ensuring everything is in check. This process helps firms avoid account-related surprises, ensure the correctness of business deposits, keep the bills paid, and save money.