If you’re moving to a new legal billing or practice management software, it’s a good idea to understand all the possibilities of what can be imported. What can be transitioned over will be contingent upon the export capabilities of your current software as well as what import technology your new billing software includes.
In this post, I will detail everything you should be able to import along with some of the ‘gotchas’ that can result from what’s imported into your new legal billing software.
If you’re a midsize law firm that’s been in your current legal billing software for over 10 years, there’s a good chance you have more than 100 rate tables. You’ve accumulated this many rate tables because every time one timekeeper had a slightly different rate, you had to create a new table.
When you’re discussing how to bring your rates into the new software, it’s important that you understand holistically how the program handles rates. Some allow you to create rate tables system-wide and assign the rate tables to clients/matters, while others require you to set up your timekeeper’s rate every single matter.
If you don’t convert the rate tables properly, it can create a huge headache for your firm when you go to run your first round of bills out of the new legal billing software. When you’re scoping your conversion, make sure the vendor includes a line item detailing what the rate table conversion will look like.
This is important if you expect the attorneys initials to show up on the client’s bill. Make sure the vendor can import the initials for you and display the initials on the bill layout.
A lot of law firms use their legal billing software to track and calculate attorney compensation. This can include origination (an attorney earning a percentage of all fees received on a case for bringing in the client) and production (attorneys are compensated a percentage of the fees received on payments allocated to the attorney’s fees).
It’s more common for a cloud-based, legal billing software to track origination only, although some track origination and production. Make sure you understand what the legal billing software’s functionality includes and if they can import your originators and the compensation percentages, so you’re not stuck setting this up yourself.
Similar to origination, you want to make sure the new legal billing platform can import your fee arrangements so you don’t have to set them up manually.
This could include whether the matter requires eBilling files (LEDES 1998b, LSS, etc…) or is a flat fee matter (what is the agreed upon flat fee and when are the clients supposed to be billed), a subscription matter (how much does the client pay and how often), split billing matter (who are the involved clients and what percentage of the bill is each client paying), or contingent matter (are we billing expenses or not).
The vendor needs to import this information for you, so you’re not having to reenter it once you’re live in the new software program.
All of your fee WIP (work in progress), meaning it has not been placed on a pre-bill or posted bill, should be imported from your previous system. A good number of vendors will be able to import this data into your new system, but you’ll want to confirm this before purchasing.
Speak with the software vendor about how they can bring over expenses that have not been billed to the client. If your new and old billing software includes accounting, there is a good chance they won’t be able to tie hard costs back to the vendor bill or check in your conversion.
There are a few options when it comes to importing your clients’ billings. Some vendors won’t bring any billing into the system and others will provide you with different options.
This is the most basic of billing data imports. If you choose this option, your first bills out of the new system will include your client’s previous balance, but you will not be able to reproduce old bills because the full history wasn’t imported.
If you opt for and if the vendor can provide full history, you’ll be able to pick up right where you left off in your old system. This option will give you the ability to see previous client bills and run reports (including compensation reports). A full history import will include all client bills, with the individual fee and expense entries as they were in the previous software.
Typically, you’ll only import payments into your new software if you’re importing full billing history. If you import payments, you’ll get the individual payments and payment distributions for compensation reports.
In my experience, the majority of law firms decided to bring over a trust balance. Although, some family law firms want to see full history. This decision is typically based on whether or not law firm clients’ need to see a full history of trust transactions on their bill.
We hope this article will help you in asking the right questions to your potential software provider. If you have questions for us, feel free to reach out.
Answering the most common questions around your firm’s finances and expenses are heavily tied to – yes, you guessed it – bookkeeping. One should never overlook the importance of accurate bookkeeping, especially since that’s the very lifeline to how your business keeps the lights on and your employees working. As a managing partner for a smaller firm, it may seem more economical to do the books yourself, but bookkeeping functions as a solid foundation for all your other expenses, trust accounts, and taxes that come later on in the year knocking.
You probably have questions as to what you need to know about law firm bookkeeping and ways to get ahead of those pesky, end-of-year shuffling for those receipts and expenses that may have gotten lost. With proper records of revenue, you’ll have all the itemized data needed to move forward with important business decisions so you can stay in business and, possibly most importantly of all, stay profitable when you want to expand or sell your business later on down the line.
Now let’s dive in further to understand what law firm bookkeeping is and how you can build a solid foundation for your business.
While this may be spoken in tandem with accounting, bookkeeping is considered the baseline for how accountants and CPAs operate. After all, you need to know multiplication before you can advance into algebra. If the sums are incorrect, the rest will fall apart by proxy.
Think of bookkeeping as recording everyday business expenses, including:
If you save it or spend it, bookkeeping must track it. Aggregating all of this data lets you move one step forward to making strategic business decisions, which is where accounting comes in.
If bookkeeping can be described as multiplication, then accounting is when you move into algebraic formulas and beyond. Far more than just helping you file tax returns, knowing accounting processes and how CPAs operate is invaluable to having accurate, profitable financials in a law firm.
Accounting includes:
Having a CPA helps you make the right choices for your firm’s future, including the best way to manage trust accounts and avoid common costly mistakes when taxes come around.
Both bookkeeping and accounting build on each other to become a powerful force of data for your firm. Not many attorneys go into business with the intent to be a numbers guy or girl.
When thinking of how bookkeeping and accounting work together, understand these key differences:
Both cannot function without the other, so be sure to have a dedicated bookkeeper ready to have everything organized for you not just tax season, but every season.
All funds meant to go to clients must absolutely go into a trust account separate from everyday funds. Often referred to as “interest on lawyers trust accounts,” or IOLTA, these must abide by certain compliance standards – which going against can mean disbarment in severe circumstances. Taking any money out to pay for other fees or day-to-day operations is known as borrowing and can be very problematic if mishandled.
Here are some integral pieces you need to know about IOLTA accounts:
The value of accurate bookkeeping lets you gain insights to know your inflow and outflow of cash at any given time. Since things have been extra turbulent with COVID-19, having as much transparency as possible to the cash flow in your firm is essential now more than ever.
Working with a CPA and the power of applicable legal accounting software lets you pull data and spend history from any time period that’s been entered. From there, you can print checks and even sync with your current point of sale (POS) system easily, accounting for every dollar going out and in.
Many times, law firm bookkeeping has a monthly overview going over firm revenue, payroll, and other operational costs and ledgers to keep you informed.
These financial results and forecasts are shared as a way to make informed decisions without any detail left out. The great thing with software? There’s a free CPA login option on most legal billing and accounting software programs, giving them all that’s needed for reporting and state-specific compliance for your area of law.
To help your bookkeeper, here are some best practices:
Choosing between the two methods of accounting – cash accounting or accrual accounting – sets the stage for all your financial documents and impact cash flow.
The cash accounting method records funds whenever they’re moved regardless of the time they were received, while the accrual accounting method records as it happens, no matter what. As you may already realize, the cash accounting method is more popular, as it isn’t as time-sensitive or dependent on accounts receivable and payable.
As a law firm bookkeeper or CPA, the main pulse of profitability is evaluating whether a firm’s time is spent on revenue-generating activities or being stuck in the mud of administrative tasks. Staff productivity can be a common roadblock for law firms being profitable, even if many cases are successful and money’s coming in. Proper reporting on billable time vs non-billed hours can easily provide data to managing partners to help cut down on those tasks and get their legal billing in a better place – before it gets out of hand.
Law firms are constantly dealing with revenue and funds that are transferred, disbursed, and deposited. Being knowledgeable with all the taxes for firms to be aware of can help meet all the sales tax obligations before growing, hiring, or buying a new office.
Types of taxes include:
It can all pile up and be very overwhelming to keep track of. Couple that with unique state taxes based on your property, location, and structure… well, you see it’s very complex, and not something attorneys have time to keep track of. The right CPA can sort all of the pieces with you to ensure reporting is tracked and necessary taxes are paid to stay in business.
Since there are so many things that can get lost – receipts and other transactions such as new office equipment or training – automating billing can ease a lot of the burden on retroactively finding this information. What does this mean, exactly? Having a software system that tracks recurring expenses can help bookkeepers better forecast spend and cash flow. Plus, electronic pre-bill approval lets attorneys make edits to bills without back-and-forth emails. Notate right on the bill; it gets fixed, and sent out quicker than ever (up to 30% faster we’ve found, in fact).
Knowing your money in real-time, and giving employees the ability to log anything spent on a case from any mobile device can be a powerful tool to give you accuracy at any given moment. Plus, electronic billing is also easier to keep track of – for money coming in and going out.
To help keep a pulse on your firm’s funds, law firm bookkeeping is an essential way to ensure bills are paid and clients’ trust funds are tracked accordingly. With practice management software, you can sync with any accounting software such as QuickBooks, so your CPA has a quick view of funds whenever they need it. Less stress on you, and more forecasting for them.
Want to learn more about staying agile in a technology-driven world? Centerbase offers many of the automated billing features mentioned in this article, and we’d be happy to help see what you need for real-time reporting and insights to stay profitable. Feel free to contact us for more information, or subscribe to our blog for the latest updates in the legal world.
