The majority of attorneys are not accountants. So, law firms need to have an accounting department regardless of their size. Although a lot of small businesses can take care of their books and hire a part-time bookkeeper, a law firm must use high-quality accounting software and effective legal accounting methods.
Importance of Legal Accounting
Trained accountants who specialize in accounting for law firms can manage a law firm’s expenses to cover and hold cash in trust. Also, they ensure the ethical and correct handling of transactions. The involvement of an accountant comes while a lawyer settles the case of a client. An accountant plays an important role in keeping the books balanced and directing payroll. A legal accountant can plan and execute systematic procedures, saving a firm thousands of dollars.
Moreover, an accountant can serve as an advisor to stakeholders, so they can understand major financial insights that can help them make important decisions. Their advisory can be used to handle outside communications such as with vendors, financial institutions, customers, and government agencies.
What a Legal Accountant Can Do
Here are reasons why law firms must hire a legal accountant:
- Handling financial transactions. Law firms deal with different financial transactions regularly, including processing employee payrolls, clearing vendor payments, and sending invoices to clients. An outsourced accountant can handle all these, easing the burden of the law firm. An accountant prepares financial statements regularly, letting the staff of a firm concentrate on core business.
- Choosing the right resources. Based on a law firm’s unique need, an accountant can help it pick the right accounting software, tools, and infrastructure. An accountant who works for an accounting firm is equipped with the right expertise to help a law firm embrace automation in its accounting processes.
- Giving sound advice. A legal accountant can advise on matters such as current revenue streams, expenditure trends, and credit cycle periods. Also, they can liaise work while a law firm needs loans. An experienced attorney can deal with any financial discrepancies and irregularities.
- Giving taxation advisory and services. Filing tax returns and calculating taxes are important functions of every law firm. These functions can be exhausting and if they are not managed properly, they can attract IRS penalties. An outsourced accountant can file a law firm’s tax return on time and ensure an attorney or law firm does not need to pay penalties or miss deductions.
- Handling payroll. Paying timely salaries for law firm staff is vital. An accountant can handle this process and make sure every employee of a law firm gets paid accurately and on time.