Does your law firm need a dedicated bookkeeping department, or should you outsource your bookkeeping? At the heart of any business is its financial health. If you don’t have a dedicated staff behind you, that understands your industry. However, without a team of qualified, competent, and experienced bookkeepers, it can be difficult for companies to meet their legal and regulatory obligations.

Why outsource?

I get this question often as a cloud accountant. The firm may have had someone sitting right in the office doing the work hand-in-hand with the administrative staff. Why would an attorney or law firm that is a good size want to hire a firm that’s not physically designed to be in-house? Number one reason is, do you want staff members to know how much each partner is making? Do you want a staff member to know the salaries of all the attorneys that work at the firm?

Typically, the answer is a resounding “NO.” I’ve seen some creative ways that attorneys have disguised their accounts for payroll in law firm books.  That creatively names them other or some other name or even made them the cost of goods sold accounts. This is an attempt not to let the staff member, who is typically an admin, be handed the bookkeeper role. I can give you 1000 reasons why this does not work. The admin usually will share with me that they don’t like doing the bookkeeping. They may be a paralegal or someone hired to do other work and then, by default, because they were good at their job, ended up having the bookkeeper role assigned.

Why a law firm admin usually doesn’t make a great bookkeeper

An admin as the bookkeeper is the number one area that I see accounting in a law firm fail. They don’t place the value on having an expert handle these records. They figure it’s just data entry and whoever has the best work ethic and is good at paperwork gets this job. They have no accounting background whatsoever. They don’t know a debit from a credit or cash basis from an accrual basis. They usually come to me with messy books.  Now it’s not fair to criticize a person who got handed a job they were not experienced for. They may understand some of the legal aspects of the workflow, but it’s a skill you develop over time when it comes to the accounting side.

Our natural progression is to let the admin know that we’re not a threat to their job, we are here to assist and support you while the books are cleaned up. And then we do our job. Typically, when a client sees the end result of our work, they realize that they can get accurate data points out to become a more profitable law firm. The majority of our clients who engage with us in this capacity keep us around to support that admin. With our help, the admin can do more of the work the legal assistant went to school for and enjoys doing. It’s a win-win.

Accounts receivable

Accounts Receivable is the last beneficial area that I want to touch upon in this article. Receivable tends to get out of control when a legal assistant is overworked and doesn’t have time to follow up. We step in and help manage that. We work hand-in-hand with the law staff, and we can be that outside source that is chasing the older outstanding accounts receivable. I can’t tell you how many times I’ve heard from the law firm admin/bookkeeper that they are so happy we handle this body of work. They don’t want to contact a client they may have met in the firm face-to-face. We can help collect and manage accounts receivable at a higher level of detail.  One of our firm’s goals is to be sure that we get you to that only under the 30-day column for open and outstanding accounts receivable.

I hope this article helps you understand why it’s a good idea to outsource your bookkeeping at your law firm.  We work with solo practitioners through the midmarket client and even some of the larger firms. We feel like we partner with them. They become part of our family.

If you are an attorney or law firm and think that this may be a weakness in your business, reach out. We are more than happy to help you!

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