Firm Finances: Bookkeeping, Accounting, and KPIs 2026

A regular bookkeeping routine helps your law firm maintain financial accuracy, compliance, and cash flow stability. Breaking it down into daily, weekly, and monthly tasks ensures your records stay organized and up to date, reducing last-minute stress. Your accounting method determines when and how your law firm records income and expenses. The IRS requires businesses to choose a method before filing their first tax return, and switching later can be complicated and time-consuming. From managing client cases to navigating complex legal matters, your attorneys have enough to juggle. Entrust your financial records to How Bookkeeping for Law Firms Strengthens Their Finances a dedicated team of certified bookkeepers through QuickBooks Live Experts, ensuring accuracy and compliance.

Sample Billing Language for Attorneys: Ultimate Guide

• Handling client funds is a significant responsibility, and you must remember a large number of rules to conduct your role ethically and responsibly.
• From IOLTA trust accounting to internal controls, our services are fully compliant, so you can practice law without compliance worries.
• At Lawyerist, we firmly believe in the benefits of automation for accounting and bookkeeping.
• Bookkeeping is the process of recording all financial transactions and the balance of all financial accounts in a business.

Many business owners think that they will hire an accountant but not a bookkeeper. However, for the sake of your firm’s finances and the accuracy of those finances, it is probably better to use someone with experience working in bookkeeping and accounting. Understanding what goes into accounting is essential; you still are not an accountant or a bookkeeper. Bringing in an expert will give you peace of mind knowing that your business will get tax seasons done right.

Apply the Law

Need help setting up your legal chart of accounts or automating your legal bookkeeping workflow? Reach out to a legal bookkeeping expert or explore legal accounting integrations that keep your law firm on track and audit-proof. Finding the right legal bookkeeper or bookkeeping services is key for your firm’s accounting.

Bookkeeping vs. accounting

• It’s easy to record all deposits to bank accounts as income, but deposits made to IOLTA accounts aren’t income for your law firm—they belong to your client.
• They should also have a proven track record of accurate recordkeeping, trust account management, and generating comprehensive legal industry financial reports.
• For example, you might think you have plenty of money in the bank and buy a new computer before realizing you forgot to record that check to the court reporter.
• Your business’s accounting method will affect cash flow, tax filing, how you manage your law firm’s chart of accounts, and even how you do your bookkeeping.
• But, if you want to spend your time focused on practicing law rather than deep in the weeds of your law firm’s accounting and financial management, you may want to consider hiring help.
• From payroll taxes to client reimbursements, every transaction must be recorded with precision to maintain trust and uphold legal ethics.

Legal accounting and bookkeeping for law firms mistakes have catastrophic consequences for your business, income taxes, and license. Below we’ll show you the most commonly fall short in accounting practice. When pressed for time, it’s tempting to let recordkeeping fall by the wayside. But if your law firm bookkeeping isn’t up to date, it’s tough to stay on top of cash flow and ensure client funds are handled properly. Or maybe you’re just starting your firm and want to begin on the right foot. Either way, law firms succeed or fail on client trust, and accurate, thorough bookkeeping is essential to building a reputable, compliant, and trustworthy firm.

• Effective bookkeeping allows you to get an in-depth understanding of your law firm’s finances.
• Essentially, double-entry accounting is an excellent safeguard against errors.
• Most small businesses, including small law firms, choose the cash basis of accounting, as this method allows the firm to delay paying taxes on income until the payment comes in the door.
• If billed hours are not recorded properly, or you miss out on tax deduction opportunities, you miss out on many opportunities.
• There will come a point when you need to call in professionals for legal accounting, so don’t be afraid to delegate when you need help.

• And without accounting, your law firm wouldn’t have the financial insights needed to make informed decisions.
• Owner compensation tracking Properly categorizing draws, distributions, and salary.
• Both options offer various features, but cloud-based options often integrate better with other business tools.
• Bookkeeping is an essential part of any business, especially for law firms.
• IOLTA, accounts are formed to store your clients’ funds apart from your primary business or operating account.
• To avoid unintentional commingling, you must keep meticulous records, separate trust accounts, and regularly reconcile accounts.

Recording financial transactions and balancing financial accounts for a law firm is done by bookkeeping. Before any accounting, there needs to be legal bookkeeping performed as an administrative task for all law firms. We will introduce the basics of accounting and bookkeeping as it pertains to law firms. We will cover the best practices to follow and common mistakes you should avoid.