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Law Firm Accounting: 3 Ways Law Firms Can Avoid Unplea$ant Surprises

Posted by Ann Irons, CPA

Dec 11, 2014 10:11:00 AM

law-firm-financesAs an accounting professional servicing real estate law practices based in Holliston, MA, CPA Ann Irons has learned a great deal about what works and what doesn’t in her clients’ day-to-day financial functions. She has also worked with clients who learned the hard way the challenges of managing changes in accounting requirements and performing reconciliations of trust accounts. Outsourcing payroll, accounts receivable, and accounting functions to a professional accountant is one of the most effective ways to make daily operations more manageable. Otherwise, consider these pointers.

Managing Your Budget

Neglecting to create and revisit your budget is one of the easiest way to find yourself caught unawares with a shortage of cash. It’s always a good idea to maintain an awareness of the true cost of things—supplies and other variable expenses—by periodically verifying their costs. Ann adds that it can never hurt to take a look at fixed expenses—rent or insurance, for example—on a period basis, usually per calendar year. Your budget should be reviewed monthly, especially if you have recently added new expenses. This does require a few hours of your time, but it is helpful nonetheless. It also helps you gauge whether an investment opportunity is financially feasible should one come along.

Analyze Cash Flow Regularly

The key to keeping your cash flow under control is to perform regular analyses. It may be tempting to put it off for a day or a week, but this tends to create a vicious cycle. Feeling as if you need to rush through your expense reports, accounts payable, and accounts receivable increases you risk of missing something important, transposing a number incorrectly, or incorrectly categorizing your expenses and payments. When you perform these reviews in the middle of the month, you give yourself the chance to quickly address issues and identify discrepancies before they cause you grief at year’s end.

Accounts Receivables

Even lawyers with the wealthiest, most devoted clients often face challenges in collecting their fees. It is not so much a reflection on the quality of work you provide as a simple fact of doing business. To encourage timely payment, begin by issuing an engagement letter for each new client. Make clear the payment terms and scope of services to be rendered. Take note of the date on which an invoice is issued, then re-issue 30 days later. Send another at 60, then 90 days. If a client continues to make late payments, it may be best to terminate the relationship.

Interested in Outsourcing Your Accounting?

Need help sorting out your payroll and account reconciliation? To learn more about our accounting, tax, and payroll services for law firms, or to arrange a meeting with Ann Irons, CPA, LLC, contact us at (508) 966-0700. We welcome law offices, businesses, and individuals based in Holliston, Woonsocket, Milford, Medway, and the surrounding areas.

Topics: Accounting for Lawyers

About Ann M. Irons, CPA LLC

ann_irons_head_shotAnn spent over 25 years in the financial service industry, gaining knowledge and experience that allows her to provide an array of tax, bookkeeping, and accounting services for her clients. Relying on a stringent code of ethics and a dedication to maintaining the highest industry standards, Ann works hard to ensure her clients receive the quality service they’ve come to expect. A member of AICPA and MSCPA, Ann has also had an article featured in the renowned publication, Banker and Tradesman. 

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