Most small businesses, including law firms, go out of business in the first five years due to poor cash flow management.[1] One method law firms can implement to manage their cash flow better is to perform a cash-flow analysis. In a cash-flow analysis, your firm determines how much cash it had on hand during a […]

It is possible for a law firm to use general accounting tools to keep its business and trust accounts, but can take a considerable amount of customization to make a non-legal specific tool work properly.[1] The following changes must occur in order for a law firm to use a general accounting program: Customization of the […]

Law firms, like all businesses, need to produce [simple_tooltip content=’Financial statements are reports prepared by a company management to present the financial performance and position at a point in time. A general-purpose set of financial statements usually includes a balance sheet, income statements, statement of owners equity, and statement of cash flows.’]financial statements[/simple_tooltip] in order […]

A law firm is like any other business in that it must have a system for recording its financial transactions in order to generate the reports that the owners and officers can use to evaluate the company’s financial health. General accounting programs meet most companies’ needs because they allow the business to record financial transactions […]

Most specialized and general accounting programs are able to allocate partial payments between cost advances and fees shown on the invoice. Some state ethical rules, however, require law firms to allocate partial payments to reimbursed cost advances first and attorney fees second. General accounting programs like Quickbooks® automatically allocate partial payments proportionally between each line […]

[simple_tooltip content=’A single entry system records each accounting transaction with a single entry to the accounting records, rather than the vastly more widespread double entry system.’]Single-entry[/simple_tooltip] bookkeeping is a simple type of financial recordkeeping used by individuals and businesses that don’t carry unpaid client balances, have only a few employees, and don’t owe people money.[1] […]

Accountants use your law firm’s [simple_tooltip content=’A statement of all debits and credits in a double-entry account book, with any disagreement indicating an error.’]trial balance[/simple_tooltip], to generate the balance sheet and profit & loss (income) statement. The trial balance contains all general ledger accounts and shows the balances in those accounts. Debits appear on the […]

Most general accounting and billing programs do not have the ability to apply complex rate structures and non-traditional fee arrangements when creating invoices. Quickbooks, for example, will allow your law firm to set up different billing rates for each employee or for specific matters or tasks, but only in the Professional or Accountant versions of […]

Law firms use standard accounting methods and rely on [simple_tooltip content=’Double-entry bookkeeping, in accounting, is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account.’]double-entry[/simple_tooltip] bookkeeping to ensure the accuracy of their financial records.[1] Double-entry bookkeeping systems use journal entries that contain at […]

There are two types of reimbursable costs, [simple_tooltip content=’Soft costs typically are associated with nontangible items, such as project management, taxes and legal fees.’]soft costs[/simple_tooltip] and [simple_tooltip content=’Hard costs is a disbursement you pay directly to a vendor on behalf of a client. A hard cost would be for items such as filing fees, court […]