How many times have you wished that your clients would ask you for advice before they do something? Before you have to pull them out of the ditch? Lawyers all believe their clients benefit from an ounce of prevention, but will they apply the same principle to their own practices?
Hiring a legal-focused accounting/tax team is a potent ounce of prevention and in alignment with how you advise your clients. If you set up a good tax/bookkeeping advisory workflow, you will save your law firm time and money during the year. It will also save you from the worst kind of financial surprises. If you take on this task, you will always come out ahead because when you understand the real-time staff utilization, client WIP to trust, and profitability of your law firm, you don’t have to react with fear.
I spoke with an accounting team comprised of an enrolled agent/tax professional with an eye towards planning/strategy when it comes to entity formation/tax ramifications (Rebecca McAllister) and a legal bookkeeping and accounting/app integration specialist (Sarah Prevost). When Rebecca and Sarah begin work with a law firm, they find it essential to advise on practical modifications while understanding key elements of workflow, billing, compliance, trust accounts, and more. They believe that their individual expertise and collaboration greatly benefits the client in the end: if Rebecca isn’t getting the data she needs for tax purposes, she can rely on Sarah’s knowledge of the day-to-day workflows within the law firm to make it happen.
Automation is an opportunity to make repetitive tasks less burdensome. When implementing a process that supports the flow of information, you begin to reap benefits for the firm and your bottom line. When you have a workflow that is streamlined and information that is reported in real-time—everyone on the team (tax professional/accountant/financial planner/client) knows where financials stand and can make decisions based on that information.
You need to complement your bookkeeping and tax team with the right software. Sarah and Rebecca are fans of QuickBooks Online, the leading small business accounting software. For QuickBooks to serve your law firm well, you need to pair it with legal-focused timekeeping and invoicing tool, which you can find in the QuickBooks app store at apps.intuit.com. A good app will offer the customized legal features you need for your practice like professional timekeeping, trust accounting, expense management, and legal-specific reporting to complement the power of QuickBooks Online. Full disclosure: I run a company that offers an app just like that.
Law firms seeking solutions need to be prepared for the entire accounting process.
When you have trusted advisors working with your law firm, you’ll find that their work goes beyond reconciliation of your books. They become people that you rely on to help your law firm succeed and become a profitable operation.
Setting up a tax/bookkeeping advisory workflow will save law firms time and money during the year while giving them confidence in transparency. The end result is for the attorneys to be less focused on accounting/financials and to shift to what they are paid to do and enjoy: lawyering. You can plan for taxes—end of year financial surprises are avoidable. With an eye towards planning, accounting experts can take the fear out of financials.
For example, Rebecca and Sarah have a law firm client that has a complex setup and the bookkeeping was falling short for tax planning and overall transparency for the owners.
Working together, Rebecca can tell Sarah what data is necessary for tax prep and Sarah, knowing the workflows of legal accounting, can establish them and plan for the year—no surprises as well as monitoring for expected outcomes and intervening early if something goes awry.
Repeat: Not having this data would cost the law firm money when the tax bill came due, in addition to the time spent sorting it out, worrying about how to sort it out and ensuring accuracy. When looking at applications such as QuickBooks and LeanLaw, lawyers need to look beyond price moments and value what software and experts can provide in terms of peace of mind, transparent expense tracking, and realtime trust account balances.
Even though the law practice spent time with Rebecca and Sarah upfront, the flow for the rest of the year was easy. And when there was a bump in projected earnings, they could plan for that as well, since they were not only paying attention in real-time but also because they had a plan.
Every law firm is different and having a small team on your side to guide you in financial workflows and tax—a team with a bookkeeper and tax accountant that works together—will propel your business forward and give you the freedom to make decisions based on abundance, rather than scarcity. It’s important to make small changes that have a big impact for growth and opportunity.