Within the practice of law, terms like “accounting” and “bookkeeping” refer to much more than the typical financial aspects of running a business. While assets, losses, and profits are extremely important to maintaining a successful legal practice, attorneys have an additional duty to keep detailed and accurate records for induvial client accounts. This means ensuring that the billing and collection of every matter is handled accurately every single time. It can be a lot to manage, especially in a hectic law office environment.
This series will take you through the basics of legal accounting and bookkeeping from start to finish. From the completion of a task to full payment of the client invoice, this course will explore the ins and outs of law firm accounting and offer insight into all of the ways that TimeSolv helps law firms navigate these extremely important waters.
A Brief Introduction to TimeSolv
With so much at stake, law firm leaders need accounting systems in place that can handle all things related to client billing, trust accounts, and invoice payment collections. TimeSolv has been providing attorneys with a comprehensive web-based billing solution for more than two decades. Ranked the #1 legal billing software for usability, it has been a solution to the billing roadblocks that so many law firms encounter.
TimeSolv offers much more than simple legal billing. With a variety of innovative legal tech features, it helps law firms handle their accounting and bookkeeping needs with better efficiency and accuracy. From time tracking to innovative collections processes, users benefit from a system proven to save valuable time and promote firm profitability.
Why Accounting and Bookkeeping Matter
Poor bookkeeping and accounting can harm even the most profitable law firm in a variety of ways. Not only can firms lose out on valuable growth opportunities, but they can also experience substantial financial losses and legal consequences.
Here are some of the problems that law firms may experience with inadequate bookkeeping:
- Poor bookkeeping and accounting can cause firms to pay their debts late, which can lead to increased interest rates, loss of credit opportunities, and less-than-favorable payment terms with vendors. With the right tools, firm bookkeepers can properly track cash flow and stay on top of financial responsibilities.
- Nonpayment of bills can strain vendor relationships, which can ultimately affect a firm’s ability to provide quality legal services. Even a temporary interruption to resources and processes can cause long-term damage to a law firm’s reputation.
- Inaccurate bookkeeping can be especially detrimental to a law firm when those mistakes affect client funds. Law firms routinely hold client funds in trust, which comes with a host of regulations and requirements. If the accounting of these delicate accounts is improperly handled, a firm can phase sanctions from the state bar.
- Without accurate accounting, firm leaders face decreased decision-making opportunities. Updated financial reports provide the data needed to get a real-time view of a firm’s financial performance, so that the most appropriate decisions, forecasting, and planning can be made. Without accurate legal bookkeeping and accounting, law firms lack the vital information they need for success.
Time Tracking: The First Step to Accurate Accounting
Particularly within a law firm environment, client accounting begins when work on a task ends. To ensure that clients are being accurately billed, and records are being accurately kept, firms need comprehensive time tracking solutions.
Here are the basics that every attorney needs to know about time tracking and its connection to legal accounting and bookkeeping:
- Manual time tracking wastes valuable time and cuts into billable hours. A single attorney who bills at $300 per hour could waste as much as $40,000 in lost annual revenue by spending 30 minutes per day manually recording client tasks. TimeSolv has developed a time tracking system that is quick, highly accessible, and easy for all users. It only takes a few seconds for timekeepers to start and stop tracking tasks as they occur. There’s no need for random time tracking notes or trusting unreliable memories.
- Manual time tracking opens the door for errors. Law offices are busy environments with constant interruptions. It’s no surprise that timekeepers may find themselves trying to remember the accurate start and stop times. TimeSolv offers simultaneous tracking options, so users can easily move between matters, without missing a minute of time. The practice of law is all about multitasking and law firms need a time tracking system that can multitask just as well.
- Automated time tracking promotes accurate bookkeeping. Let’s say that a firm’s legal clerk misreads an attorney’s handwritten note and generates a client invoice that bills for 3.5 hours of work instead of the 2.5 hours that the attorney actually spent completing the task. Not only has the firm inadvertently overcharged a client, but the situation has also introduced an inaccuracy into the firm’s accounting records.TimeSolv’s time tracking benefits extend to the billing stage of legal practice. The system removes the guesswork from the invoicing process by automatically inputting tracked time into the accounting and billing system, promoting accurate accounting records.
- Law firms need consistency. Accurate accounting and bookkeeping need to occur whether every member of the firm works within the same physical office or every member works remotely from various locations. Without the right resources, virtual office arrangements can frustrate the billing process. With TimeSolv’s mobile app, time tracking can happen right from a smartphone.
Episode Two Coming Soon
Time tracking is the first step of several steps in establishing an effective system of legal accounting and bookkeeping within a law firm. To learn more, stay tuned for episode two of this accounting and bookkeeping series.