Bookkeeping and accounting are essential to the success of any business, and that is no different when it comes to law firms. Unfortunately, attorneys often attempt to manage their law firm bookkeeping needs alone, or ask their office manager to step in to handle the books. Particularly in smaller practices, this causes firms to waste billable hours dealing with administrative-heavy accounting tasks. According to a recent survey, lawyers spend a whopping 48 percent of their time on administrative tasks. Think about the opportunity cost.
Let’s breakdown four of the biggest indicators that your firm should consider working with an outsourced law firm bookkeeping partner.
1. You Are Wasting Time Chasing Down Payments and Managing Your Firm’s Collections
Managing collections is a challenge for any business, but law firms often use specialized case management software that does not always integrate smoothly with their accounting software. When these systems are not “talking” to one another, it can be difficult to keep track of outstanding payments and follow up with clients. As a result, partners waste valuable time chasing down clients in order to collect the money they are owed.
Working with an outsourced law firm bookkeeping provider will drastically ease this burden. Rather than manually keeping track of collections, a team of legal bookkeeping professionals can jump in and ensure that your accounting and case management platforms are aligned so your invoices flow directly into your software.
Beyond the technical aspect, your outsourced law firm bookkeeping team can manage collections and actively chase down payments on your behalf. This will streamline your business process and help you gain back hours in your day.
2. Tax Season Brings on a Wave of Panic for You Firm
One of the most obvious indicators that your law firm could benefit from outsourced bookkeeping is when tax season is a dreaded, stressful time for you every year. If sifting through your finances to meet your tax accountant’s demands is an anxiety-inducing and time-consuming burden, it’s probably also leading to errors.
When partners have too much on their plate, they can unknowingly compromise their firm’s compliance standards. An outsourced legal bookkeeping team can deliver the necessary materials directly to your tax accountant or CPA, eliminating the stress and wasted time. Working with experts will provide your firm with improved financial cleanliness and visibility year round, so you can rest easy during tax season and focus on providing top notch services to your clients.
3. You Worry That You Are Not Paying Your Staff the Right Amount of Money
Partners at many law firms struggle to know if they are getting the most bang for their buck from their employees. Operational budget questions like this can be tough to answer if you don’t invest a significant amount of internal time and resources into tracking key metrics and understanding what areas of your practice are driving revenue growth.
When you outsource your law firm bookkeeping, their team can help you keep track of your firm’s working capital, invoices, revenue, and other transactional activity to provide insight into your law firm’s day-to-day operations. With this visibility into where your firm is successful (and where you struggle) they can deliver actionable insights and strategic recommendations for operational decisions (like staffing) based on employee output.
4. You Don’t Have Visibility into Your Firm’s Finances
The reality is that most law firms do not have a firm grasp on their day to day financials and working capital management. As a business, a law firm needs to know exactly what their firm has coming in (collections) and going out (expenses) in order to make informed business decisions that ultimately drive firm growth. Just as clients come to you for legal expertise, every firm reaches a point when they need to turn their accounting needs over to the professionals.
With an outsourced law firm bookkeeping partner you can take advantage of real time dashboards that help you understand your firm’s financial needs everyday, not just once a month when the books are closed. Your outsourced bookkeeping partner should help you by tracking expenses, optimizing cash flow, and producing informative statements on a regular basis. This allows you to more thoughtfully allocate your firm’s resources to fuel growth without losing focus on your main priority, serving your existing clients well.
If your firm is experiencing any of these four symptoms, it may be time to consider outsourcing your law firm bookkeeping functions. R&D Legal Bookkeeping offers comprehensive legal bookkeeping and accounting solutions that help our clients gain full financial transparency and make informed business decisions.
If you’re interested in learning how R&D Legal Bookkeeping can help your firm with your bookkeeping needs, request a free consultation with our team.