As tax season approaches, law firms face a familiar set of challenges — organizing records, compiling deductions, and ensuring compliance with complex tax rules. Whether your firm maintains meticulous records year-round or tackles tax prep closer to the deadline, understanding the latest regulations for the 2024 tax year is essential for smooth filing.

This guide highlights key deductions, important deadlines, and strategies to help law firms successfully navigate tax season.

Understanding 2024 Tax Responsibilities for Law Firms

Before preparing your law firm's taxes, you must understand your firm's responsibilities based on its business structure, as different entity types have different tax requirements. You'll also need to account for different employee and contractor classifications.

You must also classify your firm's workers correctly. Employees require W-2 forms, while independent contractors must receive 1099-NEC forms.

With this foundational understanding of your firm's tax responsibilities, you're ready to start preparing your taxes.

Step 1: Know your deadlines

For calendar year firms, 2024 tax deadlines are:

Step 2: Organize your law firm's records

The next step is organization. If you've maintained accurate financial records throughout the year, this step should be straightforward. But other firms may have to put in extra work to get their records in order. Documents like previous tax returns, payroll records, expense receipts, income statements, and balance sheets need to be compiled and organized into a system before being handed over to your firm's accountant. Disorganized and incomplete files can lead to filing errors, so organized accounting operations followed throughout the year are essential.

Step 3: Maximize tax deductions for law firms

At the bare minimum, business expenses must be both ordinary and necessary for a legal practice in order to be claimed. Let’s take a look at some of the most commonly used law firm deductions, along with precautions to consider before claiming them as business expenses.

Credit card transaction fees

An increasing number of law firms accept credit card payments from clients, and many credit card processing companies charge firms a per transaction or monthly flat fee in exchange for transferring those payments. The IRS has determined that the fees associated with these transactions may be deducted as businesses expenses.

Office expenses

The rules around deducting office expenses can be somewhat confusing, so it’s important to consult a tax professional before filing. However, some of the most common tax deductions related to law office expenses include:

Marketing and advertising costs

Most law firm marketing expenses can be deducted, including website costs and print advertisements. For firms that include networking within their marketing strategies, a percentage of meal and entertainment expenses may also be deductible as long as the event was primarily related to firm business.

Continuing legal education (CLE)

Legal professionals can typically deduct education expenses that are deemed necessary to the profession.

Under some circumstances, legal conferences may also be eligible deductions if they are targeted towards improving the law practice in some way. It’s best to notify the firm accountant about all educational expenses so they can determine which are appropriate deductions.

Professional Dues

Dues paid by law firms to professional associations on behalf of firm members may also be deductible as business expenses. This includes bar fees, trade association dues, and chamber of commerce fees. Public service organizations may also qualify as long as their main purpose is the provision of community services.

Insurance

Law firms may also be able to deduct a variety of insurance premiums. As stated by the IRS, this includes malpractice insurance covering personal liability for professional negligence. Premiums for property insurance to cover damage and liability for incidents inside the physical law office may also be fully deductible.

Legal research and subscriptions

In order to stay on top of legal industry trends and changes to the law, firms need to purchase a variety of resources for members to utilize. Online research platforms, legal publications, and industry memberships are deductible if they’re purchased by for the firm and used to support your legal work. There may be caveats based on subscription length and terms, so it’s always best to consult an accountant for clarity.

Travel expenses

Travel on behalf of a law firm may also be tax-deductible. That includes travel that occurs outside of a regular radius to handle a specific case or research a particular matter. Travel cost deductions may also include air travel and hotel accommodations to conferences or out-of-state meetings, as long as they are substantially related to the business of practicing law.

Step 4: Review eligibility for Qualified Business Income (QBI) deduction

Firms operating as partnerships, LLCs, or S-Corps may be eligible for a 20% deduction on qualified business income. This valuable deduction is still available for 2024 — but it begins to phase out for high-income firms, especially professional service firms like law firms.

Step 5: Prepare for the future

While your immediate focus is 2024, law firm leaders should be aware that many provisions from the Tax Cuts and Jobs Act (TCJA) — including the 199A pass-through deduction and bonus depreciation — are set to expire after 2025 unless Congress acts.

This makes 2024 and 2025 critical years for tax planning — particularly for firms considering large purchases, restructures, or succession planning.

The takeaway

The most important components of tax preparation for law firms are deadlines, organization, deductions, and documentation. By staying organized and proactive, your firm can reduce tax liability, avoid penalties, and ensure compliance — all while freeing up valuable time to focus on clients. The information outlined in this guide is purely informational and should not be used as advice. Law firms should consult a qualified tax professional who understands the legal industry to successfully prepare and file taxes.

Learn how Centerbase sets you up for success during tax season and beyond with streamlined accounting and banking software.

Every service-based business wants to get paid faster, and law firms are no different. Imagine getting paid 20 percent faster, for example. What kind of a difference would that make to your law firm’s cash flow, profitability, and ability to invest in growth?  

One of the best ways to ensure an efficient billing and payment cycle is to make it easy for clients to pay — and that requires having a modern legal billing solution with embedded payments processing in place.  

This allows your clients to pay directly from within their digital invoice and gives them options for payment types, such as credit and debit card payments, automated clearing house (ACH) and eChecks.  

Payments-related challenges law firms face today 

The ability to get paid on time requires efficient processes and software to support them —  timekeeping for billable hours, effective billing templates, accurate billing cycles, and the list goes on.  

But even if you have processes and systems in place, be aware of common bottlenecks that can slow down legal billing processes and negatively affect your clients’ on-time payment rates — and your firm’s profitability. 

1. Inefficient pre-billing process 

Your law practice’s monthly billing process likely begins with compiling billed time and related expenses for each client into a pre-bill. If your attorneys have tracked their time diligently, this part of the process should be smooth.  

Reviewing, revising and finalizing the pre-bills is where slowdowns occur. A lead attorney must review the pre-bill, add notes, and adjust costs as needed before the bill can be finalized and sent to the client.  

If you have electronic pre-bill functionality in your legal billing solution, you can speed up this process by automatically moving pre-bills through the approval chain. 

Jennifer Landrum, office manager at Griffith, Jay & Michel, LLP, estimates it used to take her about two weeks to complete her firm’s billing cycle. Using the pre-bill feature within Centerbase, she now saves a minimum of three days each month on billing alone. 

2. Complicated, multi-step billing processes 

Hopefully, your law firm’s billing software automates many of the routine billing and payment functions, such as calculating billing interest and tax, applying existing client funds to bills, and sending overdue bill reminders. If you conduct these manually, however, you’re missing out on significant efficiencies. 

Electronic legal billing and payments software can make your billing process more efficient by generating draft bills, taking your firm’s fee structure into account, and customizing the billing and payment process to your firm’s needs. 

Jane Corser, firm administrator at Latham, Luna, Eden & Beaudine, LLP, says that when her firm switched to the Centerbase platform, her billing cycle improved from 10 days to just three days. 

3. Lack of flexible and easy payment options for clients 

To get paid faster, use immediacy to your law firm’s advantage. The sooner a client receives an invoice after services are rendered, the sooner they’ll pay their bill because the services are fresh in their mind.  

Even if you send invoices soon after providing services, however, the likelihood of clients paying their bill on time drops significantly if you don’t make it easy for them to do so. 

For example, offering flexible payment options that meet clients' needs, such as billing arrangements, printed or digital bills, online payments and multi-payor functionality, increases on-time payments. And including a "Pay Now" link within digital bills and statements makes paying even easier.

How payments challenges are being solved in the legal industry 

When it comes to law firms’ billing and payments processes, efficiency and flexibility are key. The best way to achieve both is to have a legal billing solution with an embedded payments feature. Embedded payments can: 

What law firms should look for in a payment solution 

When researching legal billing and payments solutions for your law firm, consider these features to help you select the right solution: 

Manage the Business of Your Firm with Ease 

Embedding payments into your billing solution makes it easy for clients to do business with you and allows you to manage the business of your firm with automation and simplicity. Learn how you can accomplish this with Centerbase Payments, powered by Stripe and embedded in the Centerbase platform. Benefits you can expect include:

As the year’s end approaches, it’s time for law firms to close their books and start end-of-year audits. This annual task ensures that accounts are balanced and sets the stage for a financially sound start to the new year. However, this process can be stressful if your law firm doesn’t follow accounting best practices.

Here’s a step-by-step guide that will help your law firm sail through the audit process. (You can also download our handy end-of-year accounting checklist for law firms here.)

Step 1: Organize your financial records

Review and organize all financial records, including invoices, receipts, bank statements, and expense reports. Ensure that all transactions are accurately recorded and categorized throughout the year to maintain a real-time overview of your firm’s financial health.

Step 2: Tell timekeepers to enter their time

Check whether billable hours are up to date. Nudge your attorneys and other timekeepers to get their time in regularly as you head into the holidays. Automated time capture can make it easier for your timekeepers to stay on top of their billables.

Step 3: Update all client billing records

Run your accounts receivable reports to understand what amounts are outstanding. These reports can help you determine what amounts to chase down and what to write off.

Develop a comprehensive list of clients with unpaid invoices, including their name, matter number, amount owed, and date overdue. Prioritize invoices for action, starting with the most recent unpaid ones. The odds of collection decrease with time, especially when you’re trying to collect over the holidays. Start reaching out before Thanksgiving to clients who have been historically slow to pay outstanding balances.

We recommend starting the collection process by sending reminders to clients regarding their outstanding balances. If you aren’t already, accept online payments to make it easier for clients to pay you in just a few clicks.

For aged invoices, consider offering clients the opportunity to settle a portion of the debt in exchange for forgiveness of the remaining balance. You may also want to set up a payment plan for clients who might need another quarter or two to pay your law firm back in full.

Step 4: Review expenses

Review all expenses your firm incurred throughout the year. Verify that these expenses are accurately recorded, categorized, and supported by proper documentation. If you have any outstanding debts with vendors or contractors, settle them before you close your books.

Step 5: Update your fixed asset records

Update records of your firm’s fixed assets. These long-term assets have a usage life of longer than a fiscal year. Some examples of fixed assets are new laptop computers, software, and office furniture.

Run depreciation calculations for these assets using your accounting software. You may be able to write off this depreciation as a tax deduction.

Step 6: Verify your payroll tax

Review and verify all payroll tax withholdings and payments. Make sure you accurately report these taxes to federal and state authorities.

Step 7: Check your employee records

Verify and update employee and contractor records for W-2s and 1099s. Confirm that all necessary information is accurate.

Step 8: Study your financials

After you have finalized and entered all of your revenue, expenses, and data into your financial systems, run the following financial statements:

Step 9: Reconcile bank and trust accounts

After you record all revenue and expenses, perform bank reconciliations to ensure that all financial records line up with bank statements. Investigate any discrepancies thoroughly.

A best practice is to reconcile your statements monthly and as soon as bank statements arrive. Otherwise, your law firm will need to contend with 12 months of bank statements in a short period, making it more challenging to identify errors.

Additionally, many jurisdictions require law firms to reconcile client trust accounts at least quarterly, if not monthly. You should still complete year-end trust account and retainer reviews. Your annual review is an opportunity to double-check reconciliations done throughout the year and correct any mistakes. The ledger sheet for each client’s trust account should line up completely with the corresponding bank statements.

Also review client retainer balances to determine which retainers need to be replenished. Ensure that all earned funds have been appropriately transferred into operating accounts from retainers held in trust.

Step 10: Close your books and plan for the future

After you have finalized and studied your year-end financials, close your books. You may want to set a lock date to prevent future changes plus a password to limit access.

The next step is to review and adjust your billing and accounting practices based on what you learned. For example, your data will show whether you need to adjust your time tracking and billing practices to ensure that all timekeepers record their tasks and send out bills on time.

Every day is the right day to get your law firm’s books in order

The best way to prepare for the end-of-year audit is to stay on top of your firm’s accounting all year long. By following these best practices, your firm won’t build up problems over the year.

Stay tuned for our next blog, where we’ll explore how law firms can financially prepare for the new year. In the meantime, contact us to learn how we can help you close the books on this year.

Written by Robin Neill

Law firms, like any other business, need to have a firm grip on their finances to thrive and grow. Yet many law firms struggle with budgeting and other tasks that help their firm run like a well-oiled machine.  

In this article, the first in our new series on budgeting for law firms, we’ll explore the challenges that law firms face when it comes to their finances and the benefits of a law firm budget. 

Why do law firms struggle with budgeting? 

Budgeting has never been a favorite task of legal professionals. After all, attorneys don’t typically go to law school to earn a business degree. They’re trained to understand the intricacies of the law, not the detailed aspects of business planning.  

However, the business side of law is just as important as legal practice. The problem is, law schools don’t offer courses that teach business skills, such as how to manage law firm finances. This knowledge gap can hinder attorneys’ ability to feel confident about business financial decisions. 

Moreover, most attorneys don’t want to focus on the numbers. They want to practice law and provide legal counsel to their clients. There’s no extra time in the billable day to crunch the data and generate budgets. This can overshadow the importance of understanding a law firm’s financial health and lead to neglecting the practical business aspects of running a firm. 

Finally, many attorneys think they can set their firm’s budget once and forget it. Attorneys may struggle to balance client demands with long-term strategic planning for the firm. Law firms must recognize that budgeting is not a one-time event but rather an ongoing process that requires regular monitoring and adjustment. 

Fortunately, there’s a growing understanding within the legal industry that law firms are, at their core, businesses. While the law is the foundation of the work, the business side is equally critical for long-term firm sustainability and growth. 

Why budgeting matters for law firm success 

Why is budgeting so important for law firms? The answer lies in its direct impact on the firm’s financial sustainability. Here are three key reasons why law firms should prioritize budgeting. 

Where can law firms get help to improve their budgeting? 

Law firms don’t have to go it alone, muddling through the budgeting process. a variety of resources that can help. 

First, consider whether you need to bring in an outside expert, such as an accountant or financial manager. You need access to an expert who understands the intricacies and challenges specific to law firm budgeting.  

Podcasts and online resources can provide insights into financial management best practices. Attorneys may also seek advice from local or state bar associations, which may offer salary surveys and other useful financial data. 

Additionally, attorneys should embrace collaboration. The legal profession is filled with experts who love to share their experiences and provide feedback. Asking for referrals and engaging in dialogues with peers can lead to fresh perspectives and better financial management. 

And, of course, legal technology is a game-changer for financial management in law firms. Implementing a robust system that tracks expenditures and provides meaningful financial reports is essential. These tools should offer insights into cash flow, expenses, profitability and more. 

Budgeting leads to a stronger law firm bottom line 

Budgeting isn’t just about numbers; it’s about building a strong foundation for the future of a law firm. When attorneys recognize the importance of budgeting and seek the right expertise and tools, they can  positively transform their firm’s financial practices. 

Sign up for a free demo to learn more about how Centerbase can help you take the pain out of the budgeting process. 

Forecasting isn’t only for your local weatherman—it’s an essential legal process too. Fortunately, forecasting income and expenses isn’t as complex as predicting where the next hurricane will hit or when the first freeze of the year will occur. But, when you’re juggling all the tasks of running a law firm, the forecasting and budgeting process can seem both challenging and overwhelming.

Law school courses don’t teach you the practical aspects of running a business, even though they come up every day in real-life practice at a small firm, especially for solo practitioners.

Creating a solid budget and getting your law firm’s finances in order are imperative. This is the only way to stay competitive in the legal market.

The good news is that with the right strategy and management tools, your firm will be off and running. Let’s take a look at these critical processes and what steps you can take to create a budgeting plan.

What is budgeting?

A budget is an estimate of revenue and expenditures for a specific time period. Basically, it’s your law firm’s plan for sustainable financial success, and budgeting is the process of creating that plan.

Budgeting provides your law firm with a measuring stick for periodic review throughout the next year. If your law firm is hitting its goals, maybe it’s time for an office party! If it’s missing your desired milestones, it’s probably time to re-evaluate and adjust. Creating a comprehensive budget is the best way to proactively manage your law firm’s finances.

What do you need to consider before creating a budgeting plan?

A good budget is thoughtful and aligns anticipated revenue and expenses with goals.

What to include in your law firm budget will depend on the size of your firm, how long it’s been in operation, and what practice areas it specializes in. However, there are a few constants for all practices that you should consider when drafting your firm’s budget. Ask yourself these questions.

1. What are your firm’s expenses?

Don’t start your budget planning in a vacuum. Instead, start by thinking about your firm’s mandatory expenses.

·       What is required of the legal professionals at your firm?

·       What is the cost of bar association dues?

·       What do their CLE expenses look like for the year?

·       Does your firm maintain malpractice insurance?

·       What is the yearly premium?

·       What about subscriptions?

Additionally, think about staffing. If firm leadership is planning to add more employees to the firm, you’ll need to know whether your firm will have money to cash flow that addition. You’ll also want to consider the tangibles: the cost of office space, hardware, and legal and accounting software. What about upgrading to new technology? Or the cost of business cards? Note that some of these expenses will be incurred yearly, some monthly, and some only once.

2. What is your firm’s projected profitability?

Once expenses and other overhead costs have been itemized, your next step is to consider profitability (and to do so realistically).

Revenue is the money your firm receives from clients for legal services rendered. When you subtract expenses and overhead costs from revenue, you have net profit (otherwise known as the bottom line).

Think about net profitability in real terms: how many clients will your firm need to service over the next quarter (the next two quarters? the next year?) to bring in the desired level of revenue? Are your firm’s rates high enough to support the practice? What is the required cash flow to keep the lights on? Can improving your invoicing practices improve that cash flow? What about accepting alternative payment methods like credit cards?

If your law firm is hitting revenue milestones without increasing net profit, it means you might need to cut expenses and overhead costs. Be sure to consider seasonality when it comes to revenue. If you’re a tax firm, you’re likely booming in April and slow in July. With awareness, your firm can account for these patterns and set aside capital accordingly so that the necessary funds are still available during less profitable months.

3. How will you keep track of your budget?

Keeping track of your law firm budget can be time-consuming and stressful. Many new law firms will opt for Excel spreadsheets or budgeting templates to get started with tracking planned expenses and revenue. However, when your law firm grows and its workflow increases, keeping track of your law office budget on those tools might prove even more time-consuming and stressful. The right legal reporting software puts a host of budgeting and financial reports at your fingertips, each of which will help your law firm organize your finances, optimize your practice, and help you strengthen client relationships.

When it comes to how often to review your budgeting process, we recommend assessing your budget each month. This regularity will provide your law firm with a good idea of whether you need to make any adjustments. Additionally, your firm should review its budget yearly to adjust for goals, new practice areas, or unforeseen circumstances (like a market crash or, say, a global pandemic).

What are some tips and tricks for budgeting?

While budgeting will look different for each firm, we suggest a couple of tools of the trade to get you started on creating or rethinking your law firm budget.

Think short-, mid-, and long-term

Setting your law firm goals is one of the first steps in creating a workable budget. Goals are a benchmark to help you determine where to put capital and where to cut costs.

We recommend classifying your goals into the following categories: (1) short-term goals that you can reach in the first six months of your fiscal year, (2) mid-term goals that can be reached by the end of your fiscal year, and (3) long-term goals that will take your firm longer than a year to reach. Also make sure that each set of goals is specifically laid out, measurable, and realistic.

Work smarter, not harder

Using the right tools and legal tech can transform a firm’s profitability and law practice management. While it may seem like just another line item expense, technology can actually help keep your costs low through workflow and document automation, which frees up your lawyers and staff to work on billable matters (i.e., tasks that pay).

The right legal tech will help your firm simplify nonbillable tasks like client intake, practice management, billing and collections, and time tracking. With more time for billable work, your firm can raise its revenues. And with the right tech that offers a streamlined experience and integrations, your firm will minimize its use of subscription services and administrative time and thus minimize your overhead costs. The result is the perfect recipe for increased profitability.

Keep an eye on trends

We aren’t yet out of uncertain times, and keeping a pulse on what’s to come is important when setting your budget. If your law firm hasn’t yet undergone a full return to the office, your budget may need to include capital for the transition. Or, if your law firm has stayed committed to a hybrid workplace, you might still need to budget for increased tech costs and stipends to employees.

Additionally, many law firms are amplifying their marketing strategies. It’s likely worthwhile to consider how marketing efforts can fit into your budget and increase awareness and thus revenue.

What are the differences between forecasting and budgeting? How do they play into one another?

Budgeting and forecasting are both helpful tools that your law firm can and should use to establish a financial plan. As discussed throughout this article, budgeting is the game plan for where firm management wants to take the firm.

Essentially, your budget is an outline of financial expectations and goals. Forecasting, on the other hand, is interpreting whether that plan is working and whether the firm is moving in the right direction by estimating revenue, costs, and ultimately profit that will be achieved at a future date. Generally, forecasting looks at historical data (like last year’s or last quarter’s profits) and then anticipates future outcomes based on it. It’s like a crystal ball, but only better because it’s filled with cash.

Forecasting helps firm management make needed adjustments in practice areas by hiring in anticipation of a boom and, more generally, helps you develop an informed business plan. You can then take that informed business plan into consideration when developing a budget.

It’s time to start creating your law firm budget

With some critical thinking and the right tools, your firm will be ready for the coming year. Remember that no budget is perfect, but by having one in place and monitoring it regularly, your law firm can forecast big changes and adjust as needed.

“Bills, bills, bills.” They’re top of mind for law firms with associates and partners struggling to hit their billable hours requirements. But most legal professionals dread tracking their time down to the minute. And law school doesn’t prepare you for just how much of the day lawyers spend breaking down their work into six-minute increments.

Your law firm likely bills its clients by the hour. Therefore, you’re probably familiar with the usual roadblocks to hitting billable hours targets. Typical problems throughout the workday include projects that take up non-billable time such as client development, career development and mentoring for younger lawyers, billing and time spent on administrative tasks, and slowdowns associated with outdated software and inefficient processes.

But maximizing your law firm’s billable hours is good for everyone in your firm. The only question is, how can you achieve this goal? Fortunately, you don’t have to be in a New York law firm to solve this problem). The right legal tech can make sure that no billable time spent on legal services goes uncaptured and that you’re billing clients accurately — whether you’re working for a big law firm or a public interest shop.

We’ll explain how to make the most of the long hours that your timekeepers bill using technology. But first, let’s talk about what is and isn’t billable.

What are billable hours?

A billable hour is an hour spent serving the client. It includes all the time that attorneys and paralegals spend actually thinking about or working on a matter or case.

Examples of billable time include revising a purchase agreement; drafting an employment agreement or other contract; writing a brief or appeal; strategizing, researching, and corresponding with clients; and attending hearings or meetings. Put simply, it’s time you spend on professional tasks that your law firm can and should charge to its client at a previously agreed-upon rate.

The billable hour has been around for a long time. However, the legal industry has seen a movement toward a range of alternative billing structures. A few examples include flat-rate billing, subscription-based fees, contingency fees, limited scope representation, and sliding scale fees.

Regardless of what structure your law firm implements, the key is making sure that you’re tracking time accurately and getting paid promptly by clients for services you render.

What is the difference between billable and nonbillable hours?

Non-billable hours may be fun in the moment, but not when it comes to billing time. Associates don’t like recording them on their timesheets, and partners generally don’t enjoy seeing them either. But they’re essential work for the lifeblood of your law firm. The key is to minimize the time your associates have to spend on unnecessary non-billable work that doesn’t add value to your firm.

So, what is non-billable time? Non-billable hours are any hours that you can’t bill to a client. This includes time spent on administrative tasks (like billing and collections), wooing new clients and other business development activities, attending continuing legal education (CLE) seminars, participating in ABA and other bar association meetings, and schmoozing at networking events.

Non-billable work is important to your law firm. It keeps it organized, running, and growing. Issues arise, however, when lawyers spend needless amounts of time on administrative tasks that they could automate or delegate. By automating administrative workflows with legal technology, your law firm can decrease the time that its lawyers and paralegals spend on non-billable tasks and improve billing productivity.

How are billable hours typically tracked and calculated?

Billable hours are tracked in different increments depending on your law firm’s preference. The usual suspects are the six-minute increment and the fifteen-minute increment (rounded up or down). Timekeepers must track their time accurately to bill clients properly. Accurate timekeeping also helps law firms set proper pricing strategies and billing metrics.

Most of the time, calculating your billable time is straightforward. You simply multiply the number of billable hours you worked by your hourly rate.

However, calculating the number of billable hours can get complicated if your law firm charges different fees to different clients, if it bills certain practice areas out at higher or lower rates, or if the rate you charge changes later in the fiscal year. All of these changes mean that manual spreadsheets just don’t cut it when it comes to tracking properly and getting paid.

To calculate your billable hours, we recommend the following best practices.

1. Set hourly rates for billable hours

This requires forethought and analysis of your law firm’s finances (reporting is your best friend here). Questions to ask yourself when setting hourly rates include: What is the seniority level of the attorney being billed out? How specialized are the services being offered? What is the quality of the client relationship? What is the market saying? When determining hourly rates, we recommend that your law firm also consider and account for other expenses such as overhead costs, non-billable tasks associated with the matter, and other employee-related costs like vacation time.

2. Track, record, and add up billable and non-billable hours

You rely on your firm’s attorneys to accurately track and record their time. As discussed in more detail below, tech can help your attorneys both track and maximize their billable hours. We recommend tracking both billable and non-billable time spent on client matters. This will give your firm valuable data and help with project management. It will also help your firm evaluate whether the hourly rate charged is sufficient. When the billing cycle ends (usually monthly), your accounting department will add up all billable time and create an itemized list of services rendered.

3. Multiply billable hours by the hourly rate and add any additional fees or taxes to the invoice

This is the part where your law firm gets paid! But the billing process can become tricky if your firm charges different rates based upon the client, firm practice group, or lawyer seniority. Your firm will need to create a set of rate tables and apply those to different clients or matters.

We highly recommend using tech to ensure that your calculations and billing are correct. There are few things more embarrassing or worrying than a client questioning the accuracy or integrity of a bill.

How can my law firm maximize billable time?

Simplifying the time-tracking process and offering integrations is the best way to maximize billable time. Essentially, it helps your lawyers cut through administrative frustration and gives them more daylight hours to work on actual billable work. Other legal software can also save your lawyers and firm non-billable hours by automating routine tasks, such as billing and collections.

We recommend both encouraging your legal staff to record tasks as they are completed and setting an office-wide policy for when time-entry is past due. We understand how tough simultaneous tracking can be, especially when your attorneys are working on multiple matters for multiple clients and are in and out of the office all day for hearings and client meetings.

Mobile tracking (as discussed below) can help even your firm’s most forgetful attorneys track time throughout the day. Tracking and entering daily is just best practice. It ensures that you’re billing clients completely and accurately.

A firmwide policy for billing descriptions should also be a part of your policy governing time recording. No client wants to see a bill for something vague, like “attended meeting.” Training your lawyers on the front end will save your law firm endless time when revising client bills and invoices.

As you know, technology can help streamline your billing processes, and it can also help your lawyers draft templates with descriptions of tasks completed and billed that they can use for certain clients and matters.

Training lawyers on how to delegate non-billable tasks to support staff is another way to maximize billable time. Your law firm has support staff for a reason. To the extent possible, lawyers at your firm should be spending most of their day working on billable tasks. As we’ll discuss below, technology can help your law firm get there.

How can technology help track billable hours?

Legal tech can upgrade the way your firm’s lawyers track time, and a comprehensive, integrated tracking system is the best way to do it. An organized system will help to ensure that no billable hour goes untracked. What’s even better is that productivity tools remove the tedium out of billing, so your lawyers can spend less time writing descriptions and more time writing briefs.

Consider the following tools and features courtesy of tech.

An integrated system

Capturing time automatically through system integration will transform time tracking for your firm’s attorneys.

Mobile apps

Mobile applications for tracking and entering time, which are available for iOS and Android mobile devices, provide enhanced flexibility for your legal team. Your firm’s lawyers can enter their time from the courthouse or at the opposing counsel’s office. The fewer barriers there are to time entry, the more accurate the timekeeping. The time-tracking features in this type of legal billing tool have also become increasingly invaluable during the pandemic to those who work from home.

Improved timesheets

If you’ve learned anything from this article, it’s that everyone hates tracking and entering time. Help your firm’s lawyers get to the important stuff by providing convenient, easy-to-use timesheet templates. No one should be using an Excel spreadsheet or handwritten diary (or law practice management, case management, or document management for that matter!).

Timers

Timers are a game-changer. They help your attorneys better track multiple clients and multiple matters. Providing software where your firm’s lawyers can create client-specific templates and prewritten narrative entries for larger matters will save everyone time and headaches.

It’s time to bill better

By getting high-quality legal time management software in place, your lawyers will have more time for actual legal work. Your firm will reap the rewards of enhanced efficiency and optimization. And, not to mention, your lawyers and staff will be happier.

When evaluating new technology, you should start with thinking more about your firm’s day-to-day operations and how those procedures lend themselves to your requirements.

You’re probably constantly in the process of putting together a requirements list to include certain solutions, but let’s dig a little deeper into the questions you should be asking to ensure you’re getting the features you want from your legal practice management software solution.

Timekeeping

Legal software should make timekeeping as easy as possible, so make sure that any software you’re considering has an intuitive interface. Next, you need to think about whether the new system meets your rounding requirements. Some firms bill in quarter-hour increments, while others bill by every one-tenth of an hour. These details need to be communicated and understood prior to diving into the rest of your timekeeping requirements.

Let’s start with the basic questions:

Some systems make you manually enter in everyone’s rates at the start of a new matter, while others let you create and assign those rate tables as you go. With that in mind, additional questions to consider include:

Billing and Accounting

Billing

It’s not a secret that no two clients are alike; the same is true for their billing needs. Being able to accommodate clients’ finances doesn’t just help your firm stand out, it also increases the likelihood of you getting paid on time. The key to determining billing requirements is to ask yourself the right initial questions, like:

How you choose to bill your clients, or how they request to be billed, will play a huge role in whether a client wants to retain you from the start. Do not take these considerations lightly as you build out your requirements!

If you don’t care to track the productivity of your allocation in compensation, then you are opening your door to a lot of software options. But, if you do care about details like this, you need to look deeper into how your software options handle flat fee billing.

As your firm grows, the one surefire thing your management will need is reports. Off-the-shelf reports may work for you in the immediate term, but the ability to produce reports on any metric on the fly is invaluable.

For your reporting requirements on billing, you need to address some specific questions:

The more intricate your billing needs get, the more advanced and granular your software needs to be. If you need to generate flat-fee bills and statements, complete trust accounting, and perform trust replenishments, you’ll need to consider additional key accounting details when evaluating legal practice management software.

Accounting

With billing comes accounting needs. When you’re evaluating a software’s accounting system, the first thing you should ask is if you want integrated accounting or a system that can integrate with QuickBooks.

Fully integrated accounting enables you to be more efficient and prevents the common mistakes that occur as a byproduct of inputting manual entries into multiple systems. If the system is fully integrated, think about whether or not you use cash-based or accrual-based accounting.

When you’re evaluating individual vendors, consider:

We get it-you're sick of the games. The guessing game of law firm financial reports, that is. It’s hard to know what reports your firm should be running and even harder to interpret the data from those reports and connect the dots into a useful strategy. And most bookkeeping or accounting software, like QuickBooks, is just too hard to understand and too complex for your needs.

But it doesn’t have to be that difficult.

Your firm might be brand new to data analytics, or maybe it’s dipped a toe into the waters and has the basics down. Either way, keeping close, regular tabs on certain metrics and understanding financial reports will increase the effectiveness and efficiency of your firm and lawyers and, in turn, your law firm’s profitability. Technology can streamline this process and make collecting and interpreting your firm’s data easy.

This guide will provide a basic overview of legal reporting and analytics and tell you why they’re important and how they can help you intelligently run your firm. Then we’ll go in-depth into the different kinds of financial reports your firm should be running to help you understand your bottom line.

A basic overview of legal analytics and reporting

Legal analytics is the process of collecting, organizing, and applying data to the practice of law. If that sounds overwhelming, think of it as paying close attention to the heartbeat of your law firm’s finances and making adjustments as needed.

The goal of legal analytics is to use the collected data and subsequent reports to make informed choices for your firm. Is one practice area soaring? It might be time to hire another associate. Is your cash flow tighter in January right after the holiday season? You can prepare for that by increasing your savings in December.

With the right tools in place, your firm can review its information and create reports on all aspects of its business model. You can then use those reports to inform actionable steps that will best serve the health of your firm.

Let’s get a bit more specific.

Why are law firm analytics and reporting important?

It’s simple: law firm analytics and reporting go beyond simple financial forecasting, giving your firm a competitive edge. With legal analytics and reporting, your firm can dive deep into its functioning and gain valuable insights into its daily, weekly, monthly, and yearly net income and operations. Then you can use that information to implement workable solutions targeting both short-term and long-term goals.

Legal analytics can help you forecast with facts. You’ll be able to view data represented in charts and graphs to make sense fast of things like billable hours by attorney, money spent last week (last month, last year), and invoices. Analytics tools translate raw data into knowledge, and knowledge translates into power.

Legal reporting software offers your firm real-time reports that can be pulled daily, hourly, or even faster. This means you can quickly get your hands around potential problems before they become threats to your law firm. Basic data points for legal reporting include law firm accounting, billing, compensation, and productivity—all vital aspects of your firm’s day-to-day operations.

What kinds of nonfinancial reports should my law firm be running?

Below is a shortlist of the types of reports your firm should consider when building out its reporting structure. We highly recommend using practice management software with a built-in reporting tool — it’s simply the best practice. We’ve also got you covered with more detailed information regarding what these reports include and how regularly to run them with our legal analytics and reporting guide.

Productivity - Billable hours matter, and tracking them is important both for individual bonus payments and overall firm vitality. Analytics and reporting can help your firm track straight billable hours, nonbillable time, billable processes, profitability per attorney, and matter origination credit.

Practice area performance - If your law firm has multiple practice groups, keeping track of performance is important for both staffing and resource allocation. You should review the performance of your firm’s practice areas at least annually (and ideally quarterly).

Marketing and business development - Reporting and analytics can take your law firm’s marketing and business development to another level. Don’t spend money on marketing and campaigns without analyzing the effectiveness of those efforts. The following market performance indicators should be part of your law firm’s regular reporting processes: source of clients, client retention and referrals, website conversion and hits, return on investment, and production and origination.

With certain reporting and analytics tools, your firm can identify which clients always pay on time (and those that don’t), which attorneys are developing a specialty based on time billed to certain matters, which months are busiest, and which are slowest. Raw data points can be turned into complex spreadsheets and pivot tables that are easily viewable, accessible, and actionable.

What this means for you and your firm is that you can determine appropriate billable rates, monitor, and adjust financial performance targets, hire when you need, and generally make informed business decisions to improve your firm’s financial position. And you don’t have to wait till year-end to get all of the data. No matter whether you’re a small law firm or a megafirm, this data is available at the touch of a button all year long, without having to call your CPA.

What kind of financial reports should my firm be running?

1. Balance sheet report

A balance sheet is like a doctor’s report — a financial statement of your firm’s health. The classic balance sheet report provides your firm with simple insights into its current assets, and liabilities including accounts payable, and capital. It helps your law firm plan for both the short-term and long-term.

2. Rolling 12-month profit and loss statement

This income statement is a backward-looking report that your firm can use to look forward intelligently. It details the past 12 months of earned revenue and expenses paid (e.g., operating expenses like office space, tech, marketing, malpractice insurance, and legal database subscriptions). A profit and loss statement will help your law firm evaluate its most recent annualized figures, reducing the impact of seasonality and helping you visualize your firm’s health on a rolling yearly basis.

With this report, you can view a full year of financials at any time. (For example, if you run a profit and loss statement on May 20, 2022, you’ll use financials from May 1, 2021, to April 30, 2022). This allows for continuous planning for the future performance of your firm.

3. Monthly revenue report

The monthly revenue report helps your firm better understand the flow of capital in and out. It takes into consideration time billed and the collection of funds for that billed time and can be narrowed in scope to reflect your firm’s revenue on a weekly basis as well.

This report gives your law firm tangible knowledge of how to best prepare for short-term fluctuations such as the pending conclusion of a matter or late payment by a client. In short, the monthly revenue report helps your law firm plan for the current moment while also considering trends to help it prepare for the long haul.

4. Accounts receivable report

An accounts receivable report shows the money that clients or other parties owe your law firm. Tracking this amount is key to making sure your law firm is both getting paid for time billed and getting paid on time. These reports track receivables for each client account and matter, whether currently due or past due, and help you forecast your firm’s cash flow (and know when there is a big payday just around the corner). You can monitor accounts receivable on a firmwide basis, per-client basis, and practice group basis.

5. Statement of cash flows

A statement of cash flows helps your firm track and manage cash on hand. It details your net income, adjustments in reconciled net income, cash from operating activities, and depreciation. The statement provides valuable insights that can help you predict when your firm might need more cash and when it can safely stow it away for a rainy day. You can customize the statement to your needs, which may fluctuate over a period of time.

6. Billable professionals’ performance/revenue report

This report provides your law firm with in-depth knowledge of its actual versus target revenue and allows your firm to track performance metrics like utilization, collection, and actualization rates. With this information, your firm can figure out where improvements can be made (and where it’s doing great). The leaders of your firm will get an overview of both the aggregate and individual performance of their various teams, giving them insights into employee performance.

7. Work in progress (WIP) or pipeline reports

Legal work in progress or pipeline reports are project management tools that show the financial health of a project relative to its progress by tracking the amount of time an attorney has worked, the value of such time and expenses executed but not yet invoiced. These reports look at more than expected billing and take into consideration the totality of relevant revenue and expenses.

Pipeline reports help law firms identify red flags early on and track real-time information about where capital is, where it’s coming from, and where it’s headed.

8. Budget variance

This report shows where your expectations did not sync with reality, whether good or bad. Its value is in showing where your firm might have been off for budgeting purposes. Perhaps your firm brought in additional revenue from a marketing campaign. Maybe a big client needs more time to pay a bill. These reports deliver the information that your firm needs to make useful adjustments.

How can legal practice management software enhance reporting?

Good legal practice management software can transform your firm’s reporting practices and increase its optimization and efficiency to boot. Legal practice management software makes tracking and obtaining data easier. And with better, more accessible data, your firm can compile more useful reports.

The best practice management software offers reporting tools for standard and custom reports that use a single source of data that doesn’t need to be copied from system to system, saving your firm time and money and reducing the possibility of human error. 

Think faucet, not ocean. When you think about your law firm’s cash flow, it shouldn’t ebb and flow like the tide. It should be a constant, steady stream.

But if your law firm is like many others, you may have been struggling to ensure your cash flow stays consistent — especially in the aftermath of the pandemic. This can really hurt your firm’s bottom line.

Most small law firms and midsize law firms have past due accounts, which can kill your cash flow and make it possible to pay your employees and bills. And it’s often uncomfortable to ask your clients for money!

Some practice areas may be doing better than others. But no matter the current state of your law practice’s financial health, you’ll always find that there are opportunities to reduce costs, improve lawyer productivity, and get more cash in the door.

How can I improve my law firm’s cash flow management?

If you’re struggling to keep your firm’s cash flow consistent, here are 10 steps that you can take to improve your law firm’s current cash flow.

1. Assess your law firm’s financial health.

If you haven’t yet taken the time to do a deep dive into the status of your law firm’s finances, start there. One place to start is by projecting your firm’s cash flow by month, quarter, and year.

Begin by understanding your fixed expenses, such as your rent and utilities. Then add in fluctuating costs such as payroll. Consider whether there are any opportunities to reduce your costs by negotiating with your service providers, such as your phone or internet companies, or to set up a fixed payment structure for your utilities so you can better predict your expenses.

Once you’ve pinned down your costs, it’s time to estimate how much client revenue you expect to receive. This will give you a sense of whether you’ve got a negative or positive cash flow.

2. Establish a cash flow forecast.

Once you get a handle on your law firm’s current finances, you’ll be able to create an accurate cash flow forecast. And with the right practice management software, you’ll be able to quickly generate billing and accounting reports so you can understand your incoming receivables, study where you’re making and losing money, and compare your firm’s cash flow over time.

3. Make it easier for lawyers to bill their time.

When legal professionals are busy and stressed, they’re less likely to focus on keeping accurate accounts of where they spend all of their billable hours. If the lawyers in your firm aren’t keeping up to date with the hours they bill, you’re likely suffering from billing leakage. They may be losing up to 30% of their billable time!

This is especially true if you’re working on fixed-fee projects. It’s all too easy for projects to creep in scope and for lawyers to provide work that they don’t charge their clients for. To make it easier for your lawyers to capture every billable minute, implement technology that automatically captures their time throughout the day for calls, texts, emails, appointments, and more.

4. Make it easier for clients to pay you.

If you’re struggling to get your clients to pay on time, it may be because there’s friction in your payment processes. Set up a system that accepts different payment options, including online payments, to streamline your invoicing and collection processes. If you aren’t already sending your clients bills by email, now is the time to start.

Typically, accepting credit cards will expedite your payment cycle and make it easier to track incoming cash. It may be worth paying a small convenience fee to a processor to get payments in the door more quickly.

5. Unlock cash that’s locked up in your firm.

Speeding up payment requires firms to lower the time between completion of work and billing. Make sure your lawyers are invoicing for their billable hours as soon as possible — either when work is completed or at a reasonable point in the interim.

If your attorneys take too long to review their bills, send them reminders and set a policy that bills must be reviewed within a set number of days. Clients don’t like it when they receive bills months after work is completed. And it’s often helpful for clients to receive a bill at the beginning of the month, which is often right after their payday.

You may also entice clients to pay faster if you offer a discount for earlier payment, such as within 15 or 30 days of your invoice. Typical discounts are between 3 and 5 percent of the bill.

6. Follow up with clients about unpaid invoices.

The longer an invoice remains open, the less likely it is to be paid, so review your accounts receivable regularly and set a cadence for following up.

It can be uncomfortable to ask clients for payments. But it’s necessary to have these conversations and offer your clients a solution, if necessary. Instead of asking clients when they can pay you and how much, it’s often more effective to present payment plans to your clients. Consider proposing a 60-day plan with installment payments, which may make the overdue amount more palatable. Another effective strategy is offering clients a brief email reminder with a link to pay online.

Because lawyers in your firm may worry about jeopardizing client relationships, it may make sense to have a billing or accounting professional manage the collections process; you may also want to consider outsourcing collections to a third-party provider.

7. Avoid surprises on your bills.

If your client retainers are running low, increase them before you run out to avoid shelling out cash that won’t be replenished immediately.

You should also avoid surprising clients with billing for items they don’t expect. Make sure your agreements spell out upfront what new clients should anticipate. If you have an unexpected expense or if you have a large bill, prepare the client with a short call to make sure they fully understand the cost before they get your invoice. This way, you’re more likely to avoid the need for write-offs.

8. Pay your firm’s bills on time.

Make sure that you are paying your bills when they’re due. If you pay them after their due dates, you’re likely exposing your firm to late fees. And if you pay too early, you’re tying up cash that you could use for other purposes.

9. Set aside a cash reserve.

You should have enough cash saved up to cover all of your law firm’s expenses in case of a rainy day (or, say, a global pandemic). Use your cash flow analysis to predict your expenses and set aside an amount sufficient to pay your firm’s bills for three months. That way, you won’t have to panic in case you experience a seasonal slump or another temporary downturn.

Some law firms also establish a line of credit to ensure they have an additional financial cushion in the event of a shortfall. If you don’t use it, you won’t incur any interest, and it will be there for you when, and if, your firm needs it.

10. Establish metrics that enable you to measure your cash flow.

Setting reasonable key performance indicators will help you keep your firm on the right path. For example, you might track the number of days that bills remain outstanding and measure whether that number drops over time. Or you might study the change in your working capital over time, which is a ratio of your current assets divided by your current liabilities.

You can also account for variances that may account for any changes in your forecasts. The possibilities are almost limitless, especially if you have access to reporting features in your billing or practice management platform.

How can technology improve my law firm’s cash flow?

The most successful law firms integrate their accounting processes with a cloud-based practice management software platform that helps them improve their firm’s efficiency, productivity, and profitability.

When your firm chooses the right technology, you help your timekeepers eliminate countless minutes that they would otherwise spend on administrative tasks — including timekeeping, invoicing, and collecting on overdue invoices — that take away from your revenue. And you can more accurately (and quickly) project your firm’s finances and study your historical and projected cash flow so you can plan more accurately and set realistic goals for the months and years to come.

Innovations in legal practice management software have changed the way that law firms do business. Technology is an incredible tool for law firms looking to streamline workflows and increase productivity, but how do you know which one to choose? While some software is fully integrated, others can only perform one function, like billing and accounting, client management, tracking metrics, or generating reports.

Sometimes the options can feel overwhelming, and many law firms find that their workflows end up fragmented across multiple platforms.

This fragmentation defeats the purpose of using practice management software, which is to make your life easier by managing all areas of your law practice. Law firms that use multiple platforms to manage distinct parts of their business end up creating more work for employees. For example, lawyers may be required to enter data multiple times in different systems, so you fail to reap the full benefits of the technology.

While QuickBooks is a popular option for managing legal accounting and timekeeping, it isn’t the most efficient option for exactly that reason: it doesn’t always play nice with other technology designed specifically to address the needs of the legal industry.

What are the most important features that legal accounting and billing software should have?

There’s no point in using legal accounting and billing software if it makes your work harder. It needs to have enough features to streamline your workflows and simplify your workload. You don’t need to invest in software that only functions as a glorified clock that tracks time.

Fortunately, legal accounting and billing platforms have a variety of features that can help your law firm manage finances, even for small law firms that may grow and change significantly over time. Sometimes this means that the software includes features you never knew you needed or those you thought you could live without until you tried it.

Organize the chart of accounts and trust accounting

Given the number of financial accounts in a law firm’s financial ledger and the potential number of firm clients, it can be daunting to track them all in a standard bookkeeping system. Law firms must track assets, retainers, receivables, revenue, equity, expenses, and much more. A centralized repository that puts all of your bank accounts, operating accounts, and related information at your fingertips in real-time is essential.

Every lawyer knows that closely managing client trust accounts is an integral part of ethical (and legal) law firm billing. Billing and accounting software must be able to effectively manage lawyer trust accounts that hold clients’ funds before they are earned. This includes tracking interest-bearing accounts (IOLTA) and three-way reconciliation with the asset sheet, trust asset account, and trust liability account.

Facilitate timekeeping and billable hours

Legal accounting and billing software must be able to accurately track billable hours and support LEDES e-billing practices. It’s even better if the software has features to automatically detect timekeepers’ billable hours, such as the ability to capture time for appointments or communications sent through the same platform.

Support flexible fee arrangements

Some law offices use flexible fee arrangements, depending on the client or type of case. To be effective, the accounting software should recognize various fee arrangements like fixed fees, contingent fees, and subscription-based payments.

Generate automatic invoices and payment collection

Generating invoices and collecting payments is one of the most time-consuming parts of legal billing. Software that can generate and send automatic invoices to clients, facilitate edits and changes to bills directly within the system, and collect credit card payments through a secure system will cut down on the time that administrative staff spends on billing.

Prepare Billing and Accounting Reports

It’s important for billing and accounting software to synthesize data and generate reports that give law firm management insights into the efficacy of billing procedures. These reports may include billable and nonbillable hours per timekeeper, client, or case as well as measures of attorney profitability.

Track expenses

Law firm billing and accounting are important because they tie directly to the financial success of the business. Legal practice management software must be able to track metrics related to big-picture finances like expenses, overhead, and cash flow so that management can pinpoint areas of success and opportunities for improvement.

Provide customizable features

Perhaps the most important feature of legal billing software is that it can be customized to support your unique business goals. For example, a legal billing solution might offer add-ons like billing templates, a customizable dashboard to track relevant billing and accounting metrics, or the ability to create one-of-a-kind financial reports.

Should my legal practice management software include billing and accounting features?

There’s no doubt that your legal practice management software should include billing and accounting features within the larger platform. In fact, this is one of the most common reasons that law firms choose to implement cloud-based software.

Law firm employees spend time tracking billables and nonbillables. Management spends time reviewing revenue statements, budgets, and law firm expenses. Billing administrators spend time generating invoices and following up on delinquent accounts. By having legal practice management software that includes billing and accounting features, you can streamline some of the most time-intensive, manual processes at your law practice. This software also lets management review billing and accounting data within the larger context of other law firm metrics.

Legal practice management software without any billing or accounting features leaves a gaping hole that management usually needs to fill with multiple platforms. This can confuse the data and your employees, and it typically creates more work for everyone. Plus, it usually results in an added expense for the law firm.

What is QuickBooks?

QuickBooks is billing and accounting software from Intuit. It’s primarily marketed toward small businesses, including small and mid-sized law firms.

Intuit has developed two different versions of its subscription-based software package: QuickBooks Online and QuickBooks Desktop. Depending on the subscription and version of QuickBooks that you choose, it may include features like automated invoicing, expense tracking for mileage and receipts, payment collection, and payroll tax management.

QuickBooks wasn’t designed to be accounting and billing software purely for law firms. Because of this, it must be integrated with other cloud-based legal management platforms. This means paying for more subscriptions and integrating multiple systems just to manage what should be run-of-the-mill billing workflows.

Why should I use legal practice management software as opposed to QuickBooks for my law firm’s billing accounting needs?

There’s no reason to use QuickBooks for law firms when you can have legal practice management software that streamlines more than just billing and accounting processes.

Law-focused software does more than just track finances. It also lets you integrate your billing and finance data into a larger system. This means you can use the platform for billing processes and better understand your data as it relates to other parts of the business. You’ll get a leg up in increasing productivity and your bottom line when you have one system that can do it all.

Legal practice management software is a better choice for law firms than QuickBooks for many reasons, but the principal reason is that it’s designed for lawyers. That means you won’t need to worry about facilitating integrations with other legal platforms or pay extra money for multiple subscriptions. It also means that there are features specifically designed for law practices, like supporting alternative fee arrangements and pricing models. Instead of generating an invoice that is designed for any type of business, you can create a custom invoice and incorporate legal-specific best practices, like LEDES coding and an attorney-review process, that increase efficiency.

With legal practice management software that includes billing within the larger system, your data is also stored conveniently in one place. This cuts down on the need to double enter data or cross-reference information in multiple platforms. It also makes comprehensive financial reporting easier since one system can pull data from different areas to make useful reports that go beyond the basics of billing and accounting.

While QuickBooks has a dashboard feature, it’s limited to billing and accounting metrics. It isn’t as comprehensive as the dashboards included in fully integrated systems that can track billing as it relates to other areas of the business. This means that you can make more progress on achieving your key performance indicators, even if they aren’t purely related to financials. For example, it might be helpful for law firms to track what attorneys regularly have clients who aren’t paying their bills or the amount of time that timekeepers spend on particular clients or matters.

The Takeaway

At the end of the day, legal practice management software is superior to QuickBooks because it’s full-service technology with heightened functionality. It doesn’t fragment your processes and create more confusion. Instead, it streamlines workflows and incorporates billing and law firm accounting data to give unparalleled insights into your law firm’s overall health.