Like all businesses, law firms are required by law to pay taxes. There are many ways for law firms to reduce their tax liability. Understanding how tax rules apply to law firms can help save money. Choice of entity considerations. A law firm can be a sole-proprietorship, partnership, LLC, LLP, or a Corporation. Firms should consider the number of employees, … Read More
What financial KPIs should my law firm be tracking and evaluating?
Key Performance Indicators, or KPIs, are critical metrics for evaluating company performance. They inform decision making and draw attention to areas that need improvement. For law firms, KPIs: Monitor firm health Simplify decision making Record successes Highlight problems Law firms can monitor KPIs to evaluate firm operations, business development and intake, performance and efficiency, and client satisfaction.[1] Of course, one … Read More
What type of bank accounts should our law firm have?
Whether a firm is a new solo practice or an established AmLaw 100 firm, a law firm needs to have at least three bank accounts. These bank accounts should include: A business operating account. This account(s) are designated for practice income and expenses. If you’re audited, you would provide records for this bank account. A business savings account. Set aside … Read More
Can our law firm write off bad debts?
Bad debt is when a customer won’t pay their bill and you can’t collect it. It’s frustrating but you don’t have to take a total loss on bad debt. You may be able to take a deduction for them. However, there are caveats to this. To write off bad debt, it must meet several requirements. First and foremost, the debt … Read More
Does my law firm need a bookkeeper if we have an accountant?
When it comes to handling your law firm’s finances, your practice benefits from hiring experienced financial professionals. But while you’ve likely considered – or already hired – an accountant, you may wonder if you also need a bookkeeper. “Bookkeeper” and “accountant” are terms that are often used interchangeably. But while there is overlap in their skill-set, they are two separate … Read More
How should law firms approach clients about past due accounts?
When your clients have invoices that have gone unpaid, even after a couple of reminders, it’s important to set a consistent internal policy when it comes to how these past due accounts should be handled. Having consistent expectations makes this difficult job a little easier. When resolving past due bills, remember that there may be a number of reasons behind … Read More
When should our law firm’s client accounts be sent to a collections agency?
When clients repeatedly fail to address an outstanding invoice, you have to evaluate all your options for collecting the debt. First, you’ll want to be familiar with the laws and ethics rules in your jurisdiction. You want to have the client settle their account, not run afoul of the law yourself. The scope of some state laws on debt collection … Read More
What tax deductions can my law firm claim?
To reduce their tax liability, law firms should seek deductions where possible. Business tax is determined based on the profits of a company, with the actual tax rate determined by the entity type. While there are additional considerations for lawyers as to what can be deducted depending on their entity structure (sole proprietorship, partnership, limited liability company or s-corporation), law … Read More
5 Ways to Run a Compliant Law Firm
Maintaining compliance is a must for any firm that wants to keep their clients happy, avoid issues with their bar association, and run an ethical, efficient practice. The stakes are high in the legal industry, where violations can result in disciplinary actions, including sanctions and even disbarment. To avoid this, law firms must be dedicated to setting up processes and … Read More
What year-end financial reports should my law firm have?
At the end of each year there are various financial reports law firms should have to be in compliance and have the data they need to make strategic decisions for the following year. Accounts Receivable and Collections Reports Make sure all time and billing is up to date. For invoices that are past due, create a full list of any … Read More