Law Firm Accounting

Law firm accounting requires specialized knowledge of law society regulations for specific procedures like trust accounting.

Whether you’re looking to get a more accurate financial picture of your law firm, update outdated technology and process, or create a plan to improve profitability, it’s important to work with a CPA who is experienced in the legal industry.

At ProFix Accounting and Strategy, we have over 10 years of experience providing high-level accounting and consulting for law firms. Anna DiBella, CPA, CGA, specializes in trust accounting for law firms, a service not found at many other accounting companies, in addition to legal accounting and bookkeeping.

The Role of Accountants at Law Firms

Many legal practices have both bookkeepers and accountants, whereas some have just one or the other. It’s important to know the distinction of what a bookkeeper and an accountant can do for your firm. As a result, you’ll be in a better position to reach your business goals.

Bookkeepers: The role of a bookkeeper is to record financial transactions in your bookkeeping software. These end up in your financial statements, so it’s critical to ensure that the numbers are correct.

This includes expenses, revenues, bill payments, and deposits. Experienced bookkeepers can help with payroll and GST/PST remittances.

Some may perform month-end procedures to verify your financial information is reliable, such as bank reconciliations and other month-end closing duties.

Accountants: Industry accountants who take on CFO or similar high-level accounting positions interpret and analyze financial statements to identify trends and risks for the business. They advise on partnership compensation including when cash balances are high enough for partners to take draws.

An important part of their role involves preparing budgets and projections, as well as measuring Key Performance Indicators to understand the health of a firm. They also supervise bookkeepers and junior accountants and provide advice to the firm’s owners.

In addition, accountants mentor staff and new lawyers on best practices in the business of law. A critical function of accountants is to manage billing and timekeeping processes to ensure that the firm’s cash flow is healthy and steady.

For many law firms, having both bookkeepers and accountants as full-time staff isn’t possible or feasible. ProFix Accounting and Strategy can take on both of these roles in a consultant capacity to ensure your firm has a clear understanding of your finances and a plan to help you realize your business vision.

How ProFix Helps You Meet Your Business Goals

Whether your firm is looking to hire additional lawyers, wants to open another office, or is planning to corner a new segment of your market, it’s vital to understand where your business stands financially. Regardless of your goal, ProFix founder Anna DiBella, CPA, CGA, can help you get the information you need to make the right decisions for the future of your firm.

Here’s what we focus on to help you reach your goals:

Cash Flow

If you want to grow your law firm, cash flow is critical. We advise on appropriate partners’ compensation and the amount of cash reserves that are needed for smooth operations.

Typically, law firm billing procedures result in cash flow delays. It can take between 90-120 days after the work has been performed to actually receive cash in the bank. ProFix can guide your law firm on how to speed up cash inflow by properly managing your billing and collections cycle.

This helps you predict cash flow through projections and plan your finances accordingly.

Accounts Payable

Accounts payable is all about receiving and paying the bills your firm owes to vendors. ProFix helps you manage the cash in the bank by ensuring your bills are paid on time — but not before they are needed.

This develops positive vendor relationships and builds trust in the industry. We also ensure proper internal accounting controls are in place to prevent and deter fraud.

Accounts Receivable

Managing what your clients owe you at any given time is the essence of accounts receivable. This number should be as low as possible relative to your income. ProFix manages it by collecting retainers from clients and applying them to bills as they come due.

As an experienced leader in law firm accounting, we also ensure your firm meets all trust accounting standards.

Your firm is directly affected by proper billing and collections procedures. Whether or not you’re able to open a new office or hire your new staff is dependent on how your accounts receivable and accounts payable are doing.

Shortening up billing turnaround time and paying attention to collections pays off. We send out all bills by the third day of the month, for example. 

Think outside of the box and bill your clients twice monthly or mid-month at the end of a project instead of waiting until the end of the month.

Making small changes like this, such as shortening payment terms from net 30 to net 15, can make a big difference to your cash flow.

Profit and Loss

Profit is the difference between your revenue and your expenses. However, in the legal world, no profit and loss statement is the same because it does not include partner compensation. 

Never compare your P&L to that of another firm because the more partners you have, the more profitable you will look. Partners’ draws are only reflected on the balance sheet as equity paid out to partners.

Partners’ draws come out of the profit of the business after they pay their overhead expenses and associate salaries.

With years of experience in law firm accounting, ProFix founder Anna DiBella, CPA, CGA, can advise your firm on how to maximize your profit and your partners’ compensation by aligning your P&L with industry standards.

Bank Reconciliation

Bank reconciliation is about matching your bank records with your accounting records, and making sure all purchases and deposits have been accounted for. This is a great control to ensure your bookkeeping is in order.

Be sure to complete bank reconciliation within 30 days of each month’s end. If your bank reconciliation is delayed or out of order, call ProFix to get your records up to date. We’ll ensure you’re caught up — and that you don't fall behind again.

Software Training offer:

TRUST ACCOUNTING IN CLIO and XERO

Is your law firm Law Society Compliant in Clio and Xero? If you aren't doing a 5-way trust bank reconciliation, you are not compliant.

Learn the proven method for keeping your financials clear and on track. We'll go through each step from set up to reconciliation, plus share tips for best practices and supporting apps.

In this 4-hour course, we outline our start to finish process for trust accounting in Clio, plus provide tips and best practices for working efficiently and staying organized. Learn more and see the course outline.

General Ledger

The general ledger is the roadmap of your business. It outlines every single penny that has been spent and on what. Without an accurate general ledger, you will not have an accurate picture of your firm’s finances.

As a result, you won’t be able to figure out how you can improve profitability, reduce your expenses, or hit a new financial milestone. 

The first thing we do at ProFix when we receive a new client is review their general ledger. This shows us how their bookkeeping workflow works, what they spend money on, and how they account for it. 

Typically, the general ledger needs to be adjusted to account for bookkeeping errors during the year, especially at year end. ProFix can work with your firm and complete your business year-end for you, so that everything is ready to go — and accurate — for your tax accountant.

Trust Accounts

All law firm bookkeepers and accountants must be familiar with trust accounting rules set forth by the Law Society of British Columbia.

As a leader in trust accounting, ProFix can manage all of your trust accounting practices, or review and implement procedures to keep you compliant with industry regulations.

Anna DiBella, CPA, CGA, also assists with completing quarterly Trust Administration Fee remittances and completion of annual trust reports, which is required by anyone with a law firm trust account.

Training and Support

It’s critical to provide your junior accounting staff and bookkeepers with the right training and support so that they are able to accurately manage your firm’s finances.

ProFix helps review and implement internal controls and accounting procedures to help with elements such as cash flow, accounts payable, accounts receivable, and more.

We assist with bringing on new accounting staff and getting them up to speed on legal software such as Clio and PC Law, in addition to trust accounting procedures.

If your accounting staff are on a leave or vacation, ProFix can also fill in the gaps. Anna DiBella, CPA, CGA, is ready to dive in when your team is behind or overwhelmed, or consult on a new complicated file using her settlement administration experience so that it remains accurate.

Video: Should I switch from PC Law to Clio?

Growth Strategy and Execution

Does your firm have a vision for the next ten years, but not sure how you’re going to achieve it? ProFix can work with your firm’s partners to develop a plan to get you to your goal.

This includes budgeting and planning, developing KPI identification and measurement procedures, and implementing financial and operational procedures at scale.

You’ll have a clear idea of whether your goal is realistic based on your current financial status.

You’ll also know the changes you need to make in order to attain your vision.

Getting a leader in law firm accounting on your team is easy

Contact our team to learn more about how ProFix can help your firm manage your finances more effectively. Click the button below and get started on the road to crystal-clear financial records, sound accounting and bookkeeping practices, and an aggressive growth strategy.

Call Profix Now