Why Nobody Cares About Law Firm Bookkeeping
October 3, 2016
You have your own law practice and you are busy doing a million things. You are the lead attorney, the HR Manager, the Marketing Guru, the Office Manager, the IT Department. You are everything. And you know that people have said that you should manage your books and stay on top of your monthly expenses so they don’t grow out of control. Not only that, but your accountant has asked you a couple of times to track your expenses instead of waiting until tax time to do it. You know you should do it but you don’t want to. Why?
Because you don’t see the value in it.
Why waste your time doing something that adds no value to your business? Why should you care about bookkeeping when you know that there is no value in it? I totally understand where you are coming from, but I also know that a great bookkeeper can invaluable as a trusted advisor. In order for a bookkeeping to add value to your law firm, there are a couple of characteristics that the system must include.
The first characteristic of a bookkeeping system that adds value is that it is timely and accurate. The bank accounts must be reconciled every month and probably more often than that. By making sure every account is reconciled, you will know that the information you are seeing in reports is accurate and the more often you do the more timely the information will be. You need to know when a deposit doesn’t hit your bank account the way it should or when a vendor charges your credit card twice as much as they should. The sooner you know this information the faster you can fix the problems which means it is much more likely to get corrected.
The second characteristic is that the financial reports must be analyzed regularly. The three main reports that can tell you almost everything you need to know are your Income Statement (or Profit and Loss), the Balance Sheet, and the Statement of Cash Flows. Without looking at monthly, quarterly and yearly reports, you will not get an accurate depiction of your financial picture. You may look at your balance sheet and see how much money you have in your bank accounts and feel safe, but what you don’t notice until further analysis is that every month your bank accounts are slowing shrinking. It isn’t enough to have accurate books. You must also regularly analyze your financial reports to see where and how your money is moving.
The last characteristic of a bookkeeping system that adds value is that it should help you grow your law practice. Your bookkeeper should be able to point out ways that you can reduce expenses and also point out opportunities for you to take advantage of that will help you grow. Maybe it is showing you that you can afford another employee. Maybe it is pointing out a cost that you can reduce so then you can afford that new marketing. Or it could be making you custom reports so you can analyze your marketing methods to see which ones are bringing in the most clients.
There are many ways in which great law firm bookkeeping can add value to your practice. If you would like more information on how Legal Ease Bookkeeping, LLC can add value for your, please click here to schedule a free 30-minute consultation. We can discuss what your exact needs are and what areas you feel might add value.