Articles

4 Bookkeeping Mistakes You Might Be Committing For Your Legal Practice Firm

by Whiz Consulting Accounting and Bookkeeping Service

When you bring up bookkeeping in front of a lawyer, you cannot help but look at their terrorized face. Just the mention of the term nearly always instils anxiety in the minds of  lawyers. The reason is straightforward - lawyers are not bookkeepers, but legal bookkeeping is essential for running a law company. The issue is that, as critical as bookkeeping is to a law company, it can also be challenging. That is why many law firms hire bookkeeping services to keep their records up-to-date. 

 

Compliance is crucial in the legal field, and the bookkeeping of the law business is no exception. Failure to comply could result in heavy penalties for legal firms, as well as the disbarment of their lawyers. Considering the significance of bookkeeping to law firms, it is vital to know where they fall short in their bookkeeping processes. The four most typical legal bookkeeping errors that one might make are - 


  1. Record Keeping of Costs 

 

Costs are generated from the beginning of every case when practicing law. All of these expenses are eventually billed to the client. All expenses must be fully accounted for. This appears simple until you realize that not all charges can be treated equally. 

 

This is where law firms can get themselves into a lot of trouble. Law companies must ensure that any costs incurred—whether by cash, cheque, or credit card—are immediately allocated to the right matter, or they will not be billed, leading to a net loss to the company. In addition, failing to categorize a client's costs correctly and regularly might lead to ATO compliance issues. 
 

  1. Client Trust Fund  

 

Legal firms commonly use retainers to secure financial flow from clients. This means that while money may be in the firm's control, it does not belong to it until it has been earned. 

 

Law firms face challenges since they must monitor client ledgers separately while holding all trust funds in one bank trust account. Law companies must ensure that one client's money is not mixed with that of another and that the funds are not used to cover the firm's costs. Bookkeeping services for legal practice can be the best approach for businesses to avoid client's trust funds complications. 

 

  1. Categorizing Income & Revenue 

 

A percentage of the revenue must be assigned to incurred expenditures before an invoice is paid. This amount must be documented separately and is not included in the income calculation. Firms that struggle to distinguish income & revenue will have inaccurate data in their chart of accounts. 

 

 

  1. Understanding the Money Source 

 

Being a lawyer has never been simple, but it becomes even more challenging when a lawyer decides to run a firm. There's a lot more to consider than a client case's workload. Making judgments regarding your company's business without reliable data can lead to costly mistakes and revenue losses. When firms can measure their revenue by type of legal case, they can open up new business prospects by gaining valuable business knowledge about different case kinds, allowing them to allocate their marketing money and resources better. 

 

 
 


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About Whiz Consulting Innovator   Accounting and Bookkeeping Service

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Joined APSense since, July 26th, 2021, From Noida, India.

Created on Aug 17th 2021 00:47. Viewed 328 times.

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