When it comes to running a law firm, keeping accurate, clean records of your accounts is vital. Beyond the need to comply with various ethics rules around legal accounting, accurate financial records keep your law firm organized and positioned to plan for investments that might help it grow.
The problem is, between practicing law and managing your office, it can be difficult to keep meticulous financial records. It’s easy to make mistakes, and even if you do get everything right, it might be hard to see your financial information in ways that help you make smart business decisions.
Enter the cloud. Cloud-based technology is a boon for business owners everywhere, and it’s no different when it comes to legal accounting.
Online accounting software, in particular, has helped countless legal professionals grow their firms. These tools make it easy to keep accurate financial records, while giving unparalleled insight into your law firm’s financial data, quickly uncovering problem areas and opportunities so that you have more time to act.
How does it work? Here are three different ways that you can use online accounting software to make managing your law firm easier.
1. See exactly where your money is
As any seasoned entrepreneur would agree, cash flow is the lifeblood of any business. The same goes for law firms. You need clear insight into how much cash is due to come in and go out of your firm each month so that you can make strategic business decisions.
For example, can you afford to buy new office furniture right now, or should you wait until next month? Can you afford to hire someone to revamp your law firm website, or should you wait a little longer (or do it yourself)?
You can’t afford to waste time entering numbers line by line or fiddling with convoluted spreadsheets to get answers to these questions. You need them fast.
The beauty of online accounting software is that financial data flows into it in real-time. No data entry required.
With intuitive dashboards available in most online accounting platforms today, you can see, at a glance, how business for your firm is going, without even running a report.
Well-designed accounting dashboards show not only what cash is due to come in and out of your law firm each month, but bank balances, reconciliation information, outstanding invoices, budgets, and more. And, if your accounting software is cloud-based, you can view this information from anywhere.
2. Save time on payroll
Payroll processing is a big—and forgotten—overhead for many small law firms. It’s important that payroll is processed accurately, but it can be more complicated and time consuming than one might expect. If you’re a busy small firm owner, adding another administrative task to your plate is the last thing you want to do, but outsourcing payroll might not be cost-effective.
Online accounting software lets you automate your payroll, so that you can get the job done quickly and accurately. If you choose software that automatically syncs payroll functionality with time-tracking and expense apps, you can generate pay runs with the click of a button. For example, Xero lets you create pay runs quickly and easily.
On top of that, after you process your pay run, your accounts will be updated automatically—further contributing to the accuracy of the real-time cash flow insights you need to make business decisions for your firm.
3. Get the data insights you need
As we’ve seen in the Legal Trends Report, your instincts are biased. You need accurate data to make smart business decisions for your law firm.
Without regular financial reporting, there’s potential for missed opportunities and for smaller problems to escalate, but reports that give you what you need can be cumbersome to create.
With online accounting software, however, it’s easy to quickly produce reports that give you the insights you need. Many online accounting tools have options to create a variety of online reports on sales, expenses, taxes, and more. Some even have options to easily customize your reports to get a clear view of what you care about most. For example, Xero lets you easily edit the layouts of your financial reports, so you can prioritize what’s most relevant for your firm.
You can use reports to create budgets for your firm, track financial trends (which months are best for business?), and much more.
With the capability to create custom reports available in most online accounting platforms, the possibilities are almost endless—as long as the data is there, there’s a whole world of information about your firm’s’ performance at your fingertips.
Use the right tools to simplify your law firm management
Running a law firm can sometimes seem like a job that never ends. But with the right tools, you can save time on administrative tasks so that you can spend more time practicing law.
Accounting shouldn’t give you a headache. Using online accounting software, you can ensure important expenses like payroll are processed accurately while also monitoring your day-to-day cash flow and keeping an eye on the big picture.
The best online accounting software integrates directly with your practice management system, just like Xero does with Clio. When you enter an expense in Clio, it automatically syncs to Xero for even less data entry. Learn more about Xero and Clio today.
Amanda Aguillard decided to become a CPA when she was 16, and never looked back. She started Aguillard Accounting LLC in 2012, committed to running a cloud-based practice from anywhere in the world. Aguillard Accounting is a Xero Gold Partner and Cloud Integrator, and a Clio Certified Consultant. Amanda regularly teaches the Xero Partner Certification course. While she holds a Masters Degree in Taxation from the University of Denver, she would much rather craft and implement ecosystems for retailers, law firms and creatives. Amanda was the Xero Evangelist of the Year in 2016 and is a Co-Founder of elefant, a Xero training company.