The Best Law Firm Accounting and Bookkeeping Software
Law firms have always faced an uphill battle when it comes to managing their finances. In addition to keeping accurate records, preparing invoices, tracking time, and other financial tasks that most businesses have to deal with, lawyers also have to ensure their accounts are in compliance with IOLTA trust rules. Unsurprisingly, having to deal with a combination of all these factors can eat away at precious time that would better be spent on clients.
For independent or small practices, inefficient law firm accounting processes can eventually lead to decreased revenue, increased compliance risk, and client satisfaction issues. But even for legal offices large enough to employ a dedicated accounting team, manual tasks or out-of-date financial software can barely keep up with the complexity of today’s legal accounting needs. Add to that the rapidly-changing landscape of digital payments and it’s no surprise that a growing number of law firms are looking for updated ways to accept and track payments.
Leveraging the right accounting software can give law firms exciting opportunities to streamline their accounting processes, decrease compliance risk, and improve client experiences. But finding the best law firm accounting software can be a challenge, especially with so many seemingly similar options out there. Here are the most important things you need to keep in mind when choosing legal accounting software for your practice.
What is Law Firm Accounting Software?
First things first: what makes law firm accounting software different from other accounting software on the market? It’s a common question that frequently comes up when legal professionals start their search for an accounting solution.
Like accounting solutions, legal accounting software gives businesses secure digital tools to manage and track client payments, expenses, revenue, and more. Additionally, many accounting solutions integrate with payment providers and include other features that help streamline financial processes. But unlike software used for retail or other types of businesses, accounting software for attorneys is designed from the ground up to address the financial challenges that are unique to legal professionals. Attorney accounting software has specific capabilities to handle things like maintaining client trust accounts, case management, time tracking, and ensuring IOLTA compliance - to name just a few.
What Are the Key Features of Good Law Firm Accounting Software?
One thing that makes evaluating accounting solutions so tricky is that there is an abundance of software that classify themselves as “legal accounting software”. Added to that, many of these solutions have similar functionality, at least on paper. But there are a few differences to be aware of. Firstly, many common, industry-agnostic accounting solutions seem perfectly fine for use in an attorney’s office because they feature legal use cases on their websites or sales material. However, that software is frequently not purpose-built to integrate with legal processes or follow financial rules set by state bar associations. Without careful oversight, general accounting solutions may ultimately add complexity to record keeping and maintaining compliance.
There are also dedicated practice management solutions. Practice management solutions sometimes share many functions in common with legal accounting solutions, such as time tracking and payment integrations, but do not always include built-in billing or account management features. Finally, there are also comprehensive solutions that incorporate both practice management and legal accounting features.
If that seems confusing, we don’t blame you. Instead of looking for what “type” of software something is classified is, it can be infinitely more helpful to look for the specific features that legal offices need. Here are some of the key features to look out for in a great legal accounting solution:
Relying on memory is never a good way to keep track of your billable hours. Leading legal accounting software include convenient time tracking features to keep track of your firm’s workload and progress. It also ensures that billable hours are logged correctly against the client’s retainer for simplified invoicing.
Integrations with Online Payments
Today’s clients don’t just want to pay for invoices online, they want a variety of ways to do it. Modern payment solutions give you multiple ways to accept payments, including by credit card, third-party financing providers, and ACH payment. Integrating payments with your accounting software helps to reduce operational complexity by automating the reconciliation and record-tracking processes for accounting.
Trust Account Management
To maintain IOLTA compliance, law firms have to be extremely vigilant against commingling unearned and earned funds. Built-in payment management features ensure that any unearned client payments are automatically put in a client trust and that the fees to maintain that account are handled correctly. Top solutions also offer helpful automation capabilities, such as the ability to perform a three-way trust reconciliation process at the press of a button. Having an accurate, and quick method to check that your current bank balance, book balance, and balance by matter all match is an easy way to ensure that all client payments stay compliant with the IOLTA rules of your state.
Billing and A/R Management
Manually preparing invoices and following up on payments is time-consuming, inefficient, and sometimes detrimental to healthy client relationships. Features like automated accounts receivable management and invoicing take the stress out of billing. Not only do these features help you get paid faster but can drastically improve the client experience as well.
Financial Reporting Tools
Without a fully-integrated accounting solution, it can be hard to get a clear picture of your firm’s financial performance. Comprehensive reporting tools give you an accurate view of client deposits, transactions, and other expenses in real-time. This not only simplifies deposit reconciliation but gives you a strategic way to evaluate your budgets, cash flow, and financial forecasts.
Client and/or Case Management
Many best-in-class law firm accounting software come with additional functions to handle case and client management. This can help streamline a wide variety of tasks from intake, documentation, data entry, collections, communication, and more. Even if your firm is already using other practice management software, robust integrations ensure that you can gain the benefits of legal accounting software without having to abandon your existing workflows.
Why Should Law Firms Use Accounting Software?
Using digital tools to manage accounts was once seen as a convenient, but ultimately unnecessary, part of law firm operations. But times have changed. For starters, using manual processes for things like accounts receivable management, invoicing, and record-keeping (to name a few) both ties accounting to a physical location and is quickly put under strain if the business grows. Cloud-based solutions allow attorneys more flexibility by giving them the ability to access complex, business-critical accounting features from anywhere. All that combined with clients who increasingly expect to consult and pay attorneys remotely results in manual, on-premises accounting solutions simply struggling to keep up.
Part of the reason attorneys prefer using specialized accounting software is the high return on investment due to the numerous benefits.
Improves Cash Flow Modernizing how your firm accepts, tracks, manages payments is essential to boosting your law firm’s cash flow. Accounting software helps optimize your billing processes, bookkeeping, and client communication in ways that make your firm more efficient and ensure more consistent payment overall.
Boosts Productivity Relying on spreadsheets and manual data entry tasks are tedious and prone to human error. A comprehensive legal accounting solution can help significantly boost your operational efficiency by streamlining bookkeeping, taxes, payroll, and more - without sacrificing accuracy. By eliminating the lion’s share of manual tasks from the firm’s day-to-day, attorneys will be free to focus more on clients or pursue more strategic goals.
Lowers Compliance Risk Handling paper checks and manually handling IOLTA accounts exponentially increases your compliance risk. The consequences of making even an innocent mistake that results in commingling funds can have dire consequences. While some accounting software can handle invoicing and bookkeeping, only dedicated legal accounting solutions come with trust management features out of the box to ensure that your client’s money is always handled correctly.
Improves Client Relationships Sending out paper invoices and requiring physical checks can not only make your firm appear outdated, but it can put a damper on the client experience as well. Integrating self-serve payment options with legal accounting software is an easy way to create better relationships and stay relevant against competitors. However, beyond making the payment and reconciliation process easier, the ability to easily create customized invoices and flexible payment schedules can also lower the chances of non-payment. Legal accounting solutions that support digital payment integration can even help eliminate uncomfortable conversations by automating follow ups and other parts of the A/R process.
Drives Better Decision-Making It’s impossible to accurately evaluate your firm’s strengths and weaknesses without real-time data. Customizable dashboards and reports let you visualize and hone in on the areas that matter most to you. A clear and comprehensive view of your firm’s performance is vital to making meaningful long-term decisions.
How to Choose the Best Law Firm Accounting Software For You
Every legal practice is a little different, and the reasons why you might be looking for an accounting solution will vary drastically from another firm. So it goes without saying that there isn’t necessarily a one-size-fits-all answer when it comes to what solution will work best for you. However, here are a few aspects you should consider when evaluating law firm accounting software:
Your Firm’s Financial Goals
Optimizing a law firm’s finances can mean a lot of different things to different people. Do you want to boost cash flow? Do you need a way to better maintain IOLTA compliance? Or, do you simply want to move away from spreadsheets and manual data entry? No matter what your specific needs are, it’s important to take stock of the features that are most important to achieving your goals. That said, when considering features, it’s also important to think of your goals both in the short and long term. A cheaper solution might offer a quick fix for one problem, but you’ll be back to the drawing board when the business experiences unexpected changes or growth.
It is imperative that law firms keep their client’s sensitive information secure. While there is a lot of accounting software on the market, not all are equipped to handle the unique security and compliance requirements needed by law firms. Make sure that any solution you consider has multiple layers of security and encryption to keep transaction history and other account information safe.
The most advanced accounting solution is worth next to nothing if it’s not convenient to use. The potential benefits of incorporating a modern solution are quickly outweighed by the disruption to your daily processes if your accounting software isn’t user-friendly, requires a huge overhaul of your current workflows, or has an unusually steep learning curve. Make sure when looking at attorney accounting software to not only look at the list of features but to actually see and demo them in action.
Accurate data is an invaluable starting point for growing law firms or legal professionals looking to optimize their accounting processes. How useful that data will be depends a lot on what capabilities your accounting software supports, how it integrates with your other legal software, and what reporting features it has. Generally speaking, a combined billing, case management and accounting solution will give you the most flexibility since it can utilize a wider variety of data for reporting purposes.
Ongoing Support and Updates
The honest truth is that, just like everyone else, no technology provider can predict the future. This is why it’s essential to partner with legal tech providers that are cloud-based and offer ongoing support. Cloud-based software (as opposed to on premises) means you can use your solution from anywhere, and that you are always getting updates for the latest features. And while some technology providers help with setup, ongoing support ensures that if any problems do arise, you’ll be up and running again quickly.
Incorporating a new legal accounting solution does not necessarily mean you have to throw out what’s already working for you. Great legal accounting software should enhance your existing operations with minimal disruption. Beyond that, integrations give your firm more flexibility to make changes or embrace new technologies without having to tear things down and start from scratch. So when evaluating different options, make sure to find a legal accounting provider that supports integration with your existing software.
Start Using the Best Law Firm Accounting Software with LawPay + MyCase
Modernizing your accounting processes is an important step to meeting today’s client expectations and future-proofing your business as things change. While there is a lot of accounting software for attorneys on the market, there are only a few that are purpose-built with lawyers’ specific needs in mind. For a comprehensive solution with billing, payments, accounting and case management, look no further.
Together, LawPay and MyCase bring a holistic billing and case management platform, equipped with built-in legal accounting features, that are trusted by thousands of law firms and legal professionals across the country. Powerful accounting software combined with best-in-class payment processing and case management features, LawPay and MyCase can help legal professionals drive efficiency, increase revenue, and create superior client experiences like never before.
Contact us today to see how LawPay and MyCase can power the way you get paid.