Law Firm Accounting 101 Bench Accounting

Leaders must track specific metrics to review attorney performance, practice area profits, and firm health. Firms make strategic decisions with incomplete information when they lack advanced reporting capabilities. The right moment to bring in remote CFO expertise will substantially affect a law firm’s financial health. Law practices reach critical turning points when simple bookkeeping no longer meets their expanding financial needs. Our bookkeepers are trained in IOLTA regulations and perform daily three-way reconciliations to keep your trust accounts compliant with state bar requirements. They maintain audit-ready records and flag any discrepancies immediately.

Understanding the Importance of Trust Accounts

• Their structured protocols help collect payments faster, which solves many financial challenges law practices face.
• Law firms that hit financial plateaus or plan major growth find virtual CFOs especially valuable.
• It helps you track trust and operating accounts, automate reconciliation, manage expenses, and generate financial reports—all within the same system you use to manage your cases.
• They’ll be those whose leaders understand their specific rates and discounting configuration well enough to adapt when needed.
• However, it may not provide an accurate long-term financial picture since it doesn’t account for outstanding invoices or upcoming expenses.

Outsourcing a law firm’s accounting to an external Bookkeeping for Law Firms company provides compliance with the law, oversight of every transaction, and business scalability. As businesses expand, hire additional staff, and open branches, law firms’ accounting becomes increasingly complex. It may cover more operations and different types of activities while maintaining maximum accuracy.

Core responsibilities of a fractional law firm CFO

Managing financial records can be time-consuming, taking you away from your core legal responsibilities. A bookkeeper can take over these tasks, allowing you to dedicate more time to your clients and legal practice. As your firm expands, so does your volume of financial records and transactions. Hiring a bookkeeper can help manage this influx and ensure everything stays organized and accurate.

Be prepared to perform a three-way trust reconciliation

Lawyers must make sure that every credit card payment, bank deposit, and financial report is right. Using careful record-keeping and trust accounting can help avoid problems like disbarment which happens when lawyers do not follow rules about money. When clients trust a firm with their legal issues, they also expect that their money will be handled correctly. A single mistake in handling finances can damage the trust clients have in a lawyer or the whole law firm.

Corporate credit card account

We’ll also share tips, resources, and details about how law firm accounting software can help you manage accounting tasks more easily while boosting productivity and maintaining compliance. These provide a record of all transactions in the firm’s bank accounts, including operating and trust accounts. Regular reconciliation of these statements with the firm’s internal records helps ensure accuracy and identify any discrepancies. Commingling is when a law firm mixes client funds with firm funds, either intentionally or by mistake. It’s a serious ethical violation that can result in bar sanctions, fines, and even disbarment. To avoid unintentional commingling, you must keep meticulous records, separate trust accounts, and regularly reconcile accounts.