Juris Bookkeeping was founded by Annette Fadness, a former law firm administrator turned bookkeeper who saw a need for specialized attorney bookkeeping. The business will need to look at the firm’s finances and see what makes the most sense for your business structure. Once you choose a type, you cannot change it in the coming years. You are choosing to impact how you carry out your bookkeeping, tax filings, and more. Choosing an accounting method is another piece of the financial puzzle for a new company.
If you want your firm to be financially healthy and thrive well into the future, you need to pay attention to your finances. Make sure your trust account and/or IOLTA are included in your COA. At a glance, the COA should communicate all the financial transactions that your firm engaged in during a specific period.
Set up your firm’s bank accounts
With these tips, you can ensure that your law firm’s bookkeeping is effective and efficient. 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 to prepare financial statements and tax returns. The double-entry accounting system is the most effective way to do bookkeeping for a law firm. This system sorts all transactions into two categories, assets and liabilities.
- There are many different accounting software programs available, so find one that works best for you and your firm.
- If you want your firm to stay compliant, be financially successful, and grow, you need to have an accurate and clear bookkeeping system for your law firm to follow.
- You should budget for an accountant and bookkeeper to assist you with managing your firm’s finances and ensuring you’re compliant with ethics regulations.
- Legal bookkeeping takes place before any accounting can occur and is an important administrative task for any law firm.
- With all the options available, we know it’s difficult to choose which software is the best choice for your firm.
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. But every payment provider has a different fee structure (for example, credit card payments often come with a fee) so look into that beforehand. If you commingle your personal and business funds, law firm bookkeeping you’re “piercing the veil,” and courts will ignore the legal protection that comes with incorporating. Plus, the more time and effort your accountant has to put into organizing your transactions, the more you pay them. It’s similar to two-way reconciliation, where you compare your bank account balance to your company’s books to make sure it matches.
Avoiding professional help
Trust accounting is the bookkeeping of clients’ income and expenses that are held in trust. This type of accounting may include assets from settlements or retainers fees. These funds held in a trust are not the law firm’s property but are individuals or institutions known as trustees. For a more in-depth look into trust accounting, read this article or download our law firm accounting guide on properly managing trust accounts.
A bookkeeper, on the other hand, focuses on recording financial transactions. Bookkeepers use accounting software to record transactions, such as invoices, bills, and receipts. Lawyers and law firms are eligible for a range of tax deductions. A mileage tracker app can help you keep track of all your business miles, as well as plan for future expenses. A free time tracking software can be used until you get your legal accounting system set up.
Learn More About Law Firm Bookkeeping From the Supporting Strategies Team
Having worked with law firms for years, FCF has a wealth of experience in this field. Make sure to keep all of your records organized and in one place. This will make it easier to find what you’re looking for and will help you avoid any mistakes.