Running a law practice can be highly rewarding but also highly demanding as you juggle client work with managing your firm’s finances. You likely feel the stress if you are still trying to manage the bookkeeping yourself. The good news is you don’t have to wear every hat at once, nor do you have to hire a full-time in-house bookkeeper. Our specialized bookkeeping services for law firms let you focus on practicing law while we handle the numbers behind the scenes.
Top Bookkeeping Services for Law Firms
With extensive experience in legal accounting, we provide comprehensive bookkeeping support to small and mid-sized law firms across the country. We understand the particular financial needs of law practices, from trust account compliance to tracking billable time. We’re here to help you with the following:
- IOLTA Account Management & Reconciliation: Closely monitoring client trust funds to ensure that strict ethical rules are followed. We ensure that no client funds are ever commingled with operating funds, thus avoiding serious violations of professional conduct.
- Client Billing Support & Accounts Receivable: Manage invoicing, track payments, and keep your cash flow consistent. We record billable hours and client expenses correctly and integrate with your billing system to minimize errors.
- Expense Tracking & Matter Allocation: Recording and categorizing all firm expenses in a systemized manner (office overhead, court fees, travel, etc.) and allocating them to the right client matters. This will ensure that every cost is documented for billing or tax purposes and nothing slips through the cracks.
- Financial Reporting (Monthly & Year-End): On-time preparation of financial statements, including income statements, balance sheets, and cash flow reports, so that you are always aware of your firm’s financial position. Well-kept records provide great foundations for success in your firm in terms of making well-informed decisions and properly filing taxes.
- Bank and Credit Card Reconciliation: Regular reconciliation of your operating and trust accounts against bank statements for the earliest detection of discrepancies. This helps protect against errors and fraud, all while keeping your books prepared for any audits.
- Payroll and Vendor Payments: Full payroll management for your employees, payment processing for your vendors or contractors, and preparation of trust accounting for client expenses, ensuring attorney compensation is accounted for appropriately.
- Integration of Legal Practice Software: We can integrate industry-leading legal practice management and accounting tools, such as Clio, QuickBooks, and Xero, to streamline your bookkeeping. Automation and secure cloud-based recordkeeping keep your data organized and accessible.
Our Proven Approach to Law Firm Bookkeeping
Frequently Asked Questions
Accurate bookkeeping for a law firm is important on several counts:
Ethical and Legal Compliance
Practices are required to comply with state bar rules regarding financial records, especially when client money is involved. Proper bookkeeping supports compliance with regulations such as ABA Model Rule 1.15 governing trust accounts, recordkeeping, and notice to clients. Penalties for missteps range from reprimand to possible disbarment.
Financial Visibility and Decision-Making
Up-to-date books show whether your firm is profitable and where money is being spent. Without accurate records, issues like unprofitable practice areas or rising overhead can go unnoticed. Financial clarity allows you to identify and fix problems early.
Cash Flow Management
Law firm cash flow is often irregular due to contingency fees and long-term payment plans. Bookkeeping tracks receivables and upcoming expenses so you can manage cash flow effectively and avoid surprises.
Tax Preparation and Deductions
Well-maintained books ensure income and deductions are properly recorded and documented. This simplifies tax preparation, minimizes errors, reduces audit risk, and ensures you claim every deduction you’re entitled to.
Efficiency and Time Savings
Modern bookkeeping systems and legal accounting software automate reconciliations, billing, and reporting. This frees you and your staff to focus on billable work instead of spreadsheets and receipts.
Improved Client Trust
Transparent financial records build client confidence. If questions arise about retainers or trust balances, accurate books allow you to respond clearly and professionally, strengthening your firm’s reputation.
Law firm bookkeeping involves unique challenges that most other businesses do not face:
Client Trust Accounts (IOLTA)
Client funds must always be kept separate from firm funds. This requires detailed client ledgers and monthly three-way reconciliations between client ledgers, trust bank statements, and accounting records.
Time Tracking & Billing Integration
Billable hours tracked in practice management software must sync accurately with accounting records. Missing or incorrect time entries directly reduce revenue.
Expense Allocation to Matters
Client-related expenses such as court fees or expert costs must be assigned to specific matters. Shared costs must be carefully allocated, adding complexity beyond standard bookkeeping.
Record Retention
Most states require financial records related to client matters to be retained for several years after a case closes. Secure storage and regular backups are essential for compliance.
Regulatory Scrutiny
Law firm books are subject to audits by state bar authorities and tax agencies. Even small errors can escalate into serious compliance issues, making precision and oversight critical.
While the basics of bookkeeping are universal, law firm accounting adds layers of ethical responsibility and regulatory complexity. Our team specializes in these legal-specific requirements to ensure full compliance.
We help law firms avoid several common and costly mistakes:
Commingling Funds
Client trust funds must never be mixed with operating funds. Even temporary use of trust money is prohibited. We establish strict controls and reconciliation procedures to prevent this.
Inaccurate or Late Time Entry
Missed or incorrect time entries result in lost revenue and billing disputes. We implement effective time-tracking systems to ensure all billable work is captured.
Failure to Reconcile Accounts
Skipping monthly reconciliations allows errors or fraud to go undetected. We reconcile operating and trust accounts regularly to ensure accuracy.
Poor Expense Documentation
Missing receipts or vague expense records complicate tax filings and audits. We create processes to document every expense clearly and accurately.
Trying to Do Everything In-House
As firms grow, DIY bookkeeping increases the risk of errors and compliance violations. Working with professionals who specialize in law firm bookkeeping saves time, reduces stress, and prevents costly mistakes.
With expert support, your firm can maintain clean books, avoid surprises, and focus on what matters most—serving clients.
