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Law Firm Legal Bookkeeping Challenges and Ways to Overcome Them
Want to know why your law firm's financial stability is having a hard time maintaining consistency? It is likely due to the legal bookkeeping challenges that your law firm is facing. Poor bookkeeping can result in unprecedented financial loss and even the closure of the firm. Here are the top 5 challenges that a law firm may encounter, along with the legal bookkeeping best practices that will help you evade negative effects and ensure the return of stability and success to your law firm.
- Expert Trust Account Management
Apart from tracking their clients’ day-to-day transactions, law firm attorneys are required to keep track of funds deposited into clients’ trust accounts as well. This demanding task requires immaculate bookkeeping and is very sensitive to any unintentional accounting mistakes. The law firm will take a blow to its credibility, and affect the fiscal balance, not to mention the many legal risks that a petty accounting mistake might carry.
Legal bookkeeping best practice would be to hire a credible bookkeeper with expertise and the proper resources to assist the law firm with.
- Awareness Regarding Personal and Business Transactions
A transaction made with a business credit card while paying for grocery shopping calls for a nightmare for the law firm. The law firm will be paying for those groceries, which is not good practice.
It is always advisable that you draw a line and avoid using any business means to pay off your personal expenses, even if it means that you are going to miss completing a convenient transaction. That is going to help in easing up the bookkeeping duties.
- Keeping Track of Account Receivables (AR)
A poorly managed accounts receivable system might be the primary cause for the financial instability that a law firm might be facing. Attorneys get paid depending on the cases that they take up - hourly or conditionally.
To avoid any client disputes, law firms are asked to encourage attorneys to attain billing information before a case is underway, so that the fund is secured. The transactions are later expected to be taken care of through invoices. With the help of automated legal accounting softwares with cloud capabilities, legal practice financial management is made much easier.
- Risk of Data Loss or Data Theft
Client data entered by hand has the possibility of containing human errors. To cut down on that possibility, bookkeepers use legal accounting softwares, such as Quickbook and Leap, which are credible, safe and well-maintained.
Cloud accounting for legal practices, that comes with the accounting softwares, eliminates any risk of loss of data, since the data is constantly being synced with the cloud as backup. And the softwares’ highly secure anti-data theft protocols are relied upon and praised by every bookkeeper worldwide.
- Hiring Professional Bookkeepers
Accounting and record-keeping can become a daunting task for a lawyer taking care of the day-to-day demands of a client, and it soon turns into a challenge for them to keep up. Hiring a proficient and credible bookkeeper with a good reputation can be a means to this end. The extra assistance can take half the burden off of the shoulders of the law firm.
If a law firm practices with the solutions that we have provided, hopefully the firm is going to take a turn for the better. And with the assistance of an expert bookkeeper and cloud technology, the only way a law firm can go, in business, is forwards.
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