Most small businesses, including law firms, go out of business in the first five years due to poor cash flow management.[1] One method law firms can implement to manage their cash flow better is to perform a cash-flow analysis. In a cash-flow analysis, your firm determines how much cash it had on hand during a specific time period and then … Read More
Can general accounting tools be used for law firms?
It is possible for a law firm to use general accounting tools to keep its business and trust accounts, but can take a considerable amount of customization to make a non-legal specific tool work properly.[1] The following changes must occur in order for a law firm to use a general accounting program: Customization of the chart of accounts[2] Set up … Read More
How is law firm accounting different from other types of business accounting?
Law firms, like all businesses, need to produce in order to evaluate their operations, financial position, and cash flows.[1] All general and many legal-specific accounting programs can produce these statements provided the business enters all financial transactions into the software. Because law firms receive retainers and advanced fee deposits from clients and must hold these funds in trust until earned, … Read More
Why should I use a specialized legal accounting program?
A law firm is like any other business in that it must have a system for recording its financial transactions in order to generate the reports that the owners and officers can use to evaluate the company’s financial health. General accounting programs meet most companies’ needs because they allow the business to record financial transactions and generate the , profit … Read More
Can general accounting programs like QuickBooks allocate legal payments?
Most specialized and general accounting programs are able to allocate partial payments between cost advances and fees shown on the invoice. Some state ethical rules, however, require law firms to allocate partial payments to reimbursed cost advances first and attorney fees second. General accounting programs like Quickbooks® automatically allocate partial payments proportionally between each line item shown on an invoice, … Read More
Does my accounting program use double-entry bookkeeping?
bookkeeping is a simple type of financial recordkeeping used by individuals and businesses that don’t carry unpaid client balances, have only a few employees, and don’t owe people money.[1] Generally businesses that 1) have less than $5 million in annual gross sales or less than $1 million in gross receipts for inventory sales, 2) are not a C Corporation, 3) … Read More
How does double-entry bookkeeping work?
Accountants use your law firm’s , to generate the balance sheet and profit & loss (income) statement. The trial balance contains all general ledger accounts and shows the balances in those accounts. Debits appear on the left side of the trial balance and Credits appear on the left side of the trial balance.[1] Assets and expenses increase with a debit … Read More
Can general accounting program like QuickBooks apply complex rate structures and non-traditional fee arrangements to invoices?
Most general accounting and billing programs do not have the ability to apply complex rate structures and non-traditional fee arrangements when creating invoices. Quickbooks, for example, will allow your law firm to set up different billing rates for each employee or for specific matters or tasks, but only in the Professional or Accountant versions of the software. In the lower … Read More
When do you use a “debit” vs. a “credit”?
Law firms use standard accounting methods and rely on bookkeeping to ensure the accuracy of their financial records.[1] Double-entry bookkeeping systems use journal entries that contain at least one debit and one credit to record a business transaction onto the firm’s books.[2][3] The accuracy of each journal entry depends upon your bookkeeper’s ability to determine which part of the transaction … Read More
Can I use a general accounting program like QuickBooks to track reimbursable costs?
There are two types of reimbursable costs, and . Soft costs are those costs that the client’s fee agreement allows your firm to bill for even though your law firm doesn’t write a physical check to a vendor for the item. These include items such as copies, general postage, facsimiles, etc.[1] Hard costs are those costs attributable to a specific … Read More