Best Practice: Job description for a law firm bookkeeper Illinois State Bar Association

While it’s essential to understand the fundamentals of accounting for law firms, you still aren’t an accountant or bookkeeper. Hiring professionals is common for law firms, and it’s an easy route to peace of mind. Whenever a client pays an invoice, you must allocate the payment to the incurred costs of a matter first. However, if a firm fails to separate revenue that https://www.bookstime.com/articles/purchase-discounts covers incurred costs from actual revenue, their records will be off. The chart of accounts for law firms should include the IOLTA or trust account, as well as a trust liability account (to offset and show that the funds in the IOLTA account are not the law firm’s). Bookkeepers record the financial transactions and balance the financial accounts for your firm.

The primary function of this position is to perform the billing, bookkeeping and accounting functions of the firm. This position requires an experienced and accomplished person with a strong bookkeeping and computer background. The position requires skills and experience in bookkeeping, accounting, law firm billing and QuickBooks software as well as Microsoft Office Products. The position requires experience in a law or other professional service firm environment. Irvine bookkeeping offers you comprehensive, cost-effective, and long-term law firm bookkeeping solutions. With our dedicated and experienced bookkeepers, you potentially transform the financial management of your law firm.

Start by Hiring a Bookkeeper

Reviewing your finances is not an annual event completed at tax time! You need to keep a pulse on your numbers to know if your business is healthy. The Trust ledger provides a summary of all the transactions involved in a trust account. 3 components involved in the reconciliation process legal bookkeeping services consist of the trust ledger, the client ledger, and the trust reconciliation. Lawyers are required to deposit all short-term and nominal client funds in an IOLTA account. They mustn’t deposit client funds in accounts that do not bear interests, or in their business accounts.

• The good news is, we’ve made this guide to help you know the essentials of bookkeeping and accounting for law firms.
• You can add as many accounts to your chart of accounts as you need to prepare accurate and informative financial statements, but don’t let your chart of accounts get too unwieldy.
• The tax implications of this method also allow your firm to pay tax on income once it’s received and in the bank.
• An IOLTA account is a pool, interest-bearing business checking account for the deposit of client funds which interest earned belongs to the Lawyer Trust Fund.
• Request a free assessment and talk with our Managing Director to discover how your firm benefit from Practice Alchemy’s law firm specific bookkeeping and accounting services.

Bookkeeping requires dedication and attention just like everything else in your firm. We understand what it’s like to have everything fall on your shoulders. That’s also why we recommend eventually hiring a professional bookkeeper to ensure nothing falls through the cracks. It’s also a great practice to record the details of each expense. For example, if you’re expensing a meal, you might record who you were with and what you discussed. After all, if the IRS audits you (shudder), you’ll want these records to prove your expenses were for business purposes.

Double-Entry Accounting

By establishing—and following—best practices for accounting for law firms like the examples below, you’ll be better able to help your firm stay on track. It’s also a good idea to reconcile trust accounts at least once a month and prepare monthly reports for each client, listing all of the activity in and out of the account and the ending balance. You can add as many accounts to your chart of accounts as you need to prepare accurate and informative financial statements, but don’t let your chart of accounts get too unwieldy.

Poor accounting practices, such as struggling to track billable hours or sending out invoices late, can lead to money leakage. The firm could face compliance issues, and their books will be inaccurate (skewing the value of any accounting data derived from them). When looking at the importance of solid accounting, you’re really talking about looking at financial data on a regular basis.

Law Firm Bookkeeping Services

Within each of those categories, you may have dozens of general ledger accounts. For example, you might have an operating account, lawyers trust accounts, accounts receivables, and fixed assets within the assets category. In cash basis accounting, you record income and expenses when money changes hands. In accrual accounting, you record revenue when earned and expenses when incurred, regardless of when cash changes hands. This guide will provide an overview of law firm bookkeeping, some best practices to follow, mistakes to watch out for, and tools to make the whole process easier. Practice Alchemyʼs approach to law firm bookkeeping includes a thorough understanding of your practice and the management of your books with a solution that works specifically for your firm.

If you’re not sure what tax deductions you should be watching for, our post covering the top tax deductions for lawyers and law firms is a good place to start. Accounting for law firms becomes so much easier when you work with an accounting professional from the beginning. Double-entry accounting is a system of bookkeeping where every entry to an account (i.e., every financial transaction) requires a corresponding and opposite entry to a different account. A double entry system, therefore, has two equal and corresponding sides—or debits and credits—and creates a balance sheet consisting of assets, liabilities, and equity. Accounting for law firms lets you collect and analyze information, and make data-driven decisions based on what money comes in and leaves your firm, so it’s worth it to pay attention.