Firm Finances: Bookkeeping, Accounting, and KPIs 2026

Posted by MTC April 24, 2020

To do this, you’ll first compare the bank statement with the trust account ledger to ensure all entries match. Then, compare the bank statement with each client ledger to ensure they also match. You must regularly reconcile accounts to comply with IOLTA requirements and maintain an accurate picture of your law firm’s finances.

Master three-way reconciliation

To avoid these mistakes, you will need to adhere to a process of best practices since it will become too easy for you to accidentally mix funds and put your business’s law firm bookkeeping reputation on the line. At Atif CPA, we’re committed to being the trusted financial partner for law firms of all sizes. Whether you’re a solo practitioner or managing a large practice, our tailored accounting services help you maintain compliance and achieve your goals with confidence. Bookkeeping is essential for accounting, as accountants use the records of bookkeepers to perform their analysis. This analysis can assist your law firm’s growth, by making business decisions that are backed by data. It also allows you to identify which aspects of your law firm are most and least succesful.

Client costs

Staying up-to-date with new and shifting regulations related to trust accounting, recordkeeping, and financial reporting takes time and effort. As a law firm, adhering to trust account rules is one of your fundamental responsibilities. Regular training and oversight help ensure compliance with these important ethical and financial obligations.

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When it comes to organization, getting off on the right foot should help you stay more organized now and into the future. To keep your firm on the right track, it is helpful to have a list of best practices to follow. The bookkeeping system that every entry to an account requires corresponding opposite access to a different accounting. This is a double-entry system, so there are two equal corresponding sides at all times. Double-entry accounting can create a balance sheet made of equity, liabilities, and assets. By addressing these areas proactively, firms not only avoid problems but also build financial stability and credibility with clients.

• Before the firm files its first tax return, it must select its method of accounting.
• Then, compare the bank statement with each client ledger to ensure they also match.
• Implementing automated workflows and effective time management techniques are key to enhancing productivity.
• Our team understands the unique aspects of legal accounting and is here to guide you through setting up a system that suits your practice.
• Before any accounting, there needs to be legal bookkeeping performed as an administrative task for all law firms.

Leveraging QuickBooks for Law Firms (and Its Ecosystem)

When your data is in one place, you can quickly complete three-way trust account reconciliation without toggling between different platforms and spreadsheets. In addition, they may help you create and send invoices, process your accounts payable, manage payroll, and run routine financial reports. By partnering with a CPA experienced in law firm accounting, legal professionals can ensure compliance, streamline operations, and unlock long-term financial success.

Every business gets busy, and it is easy to get distracted by the work you are doing for your clients. However, your law practice is still a business, so you will need to treat it as a business. Law firms will hire legal accountants to prepare financial statements, provide financial forecasting, and capture expenses to give your business a clearer picture. When bookkeeping falls behind, firms lose visibility into cash flow and profitability.

Bookkeeping for Law firms is distinct from other types of business accounting because of specific requirements around trust accounts, client billing, and compliance with legal standards. Unlike typical businesses, law firms handle retainers and trust accounts, which must be closely tracked to avoid ethical issues and legal repercussions. Every dollar received on behalf of a client must be recorded separately from the firm’s operating funds, and compliance is not optional. While this checklist provides a comprehensive framework for law firm bookkeeping, managing every detail on your own requires expertise that you might not have. Plus, it is time-consuming, and your time is better spent advocating for clients and growing your firm—not struggling with trust reconciliations, tax filings, or financial tracking. At CoCountant, we specialize in bookkeeping for law firms so you can focus on your practice without worrying about the intricacies of legal bookkeeping.

They suggest you can “probably handle trust accounting yourself” Professional law firm bookkeepers know trust accounting is high-risk and recommend proper oversight. They don’t mention trust accounts in the first conversation If they’re not immediately focused on IOLTA compliance, they don’t understand law firm work. General ledger maintenance Recording all financial transactions – revenue, expenses, payroll, owner distributions – in your chart of accounts.