Should Law Firms Outsource Accounting?
February 1st, 2023 | 8 min. read
What do legal work and accounting have to do with each other? There's probably more overlap than most people would think - it's important to work with an accountant with experience in your industry. You know that law firms have unique accounting needs that can take a good amount of time to handle each month.
A lack of accounting knowledge means that bookkeeping, bank reconciliation, financial statement creation, tax activities, and legal industry-related accounting needs will take even longer. You’re in the business of navigating the law for your clients, not accounting. Law firm accounting activities should never interfere with your primary responsibilities to the firm. What happens when you don't have the time to spare?
At CSI Accounting & Payroll, we've worked with plenty of law practices in our more than 50 years of service. That means we know the ins and outs of law firm accounting, as well as some of the top benefits of outsourcing it monthly:
- Save Time and Increase Productivity
- Stay in Compliance
- Receive Custom, Timely Advice
- Save Money
Accounting Options for Law Firms
Outsourcing accounting is a cost-effective, efficient, and proactive solution for law firms. Rather than hiring a part-time or full-time employee to handle all of the financial responsibilities of your business, consider an additional layer of security by using a team of seasoned professionals with experience in your industry - whether you're involved in labor, criminal, family, business, bankruptcy, or environmental law.
If you, like many other law firms, outsource your annual taxes, then you already receive the basics in tax preparation and filing. You may even use an outsourced bookkeeping service as well. Otherwise, you may be seeking an in-house accountant but are finding that solution to be very expensive. Regardless, it takes more than standard accounting to get your books taken care of.
Outsourcing monthly accounting means that your bookkeeping and taxes are handled, plus you receive year-round strategies based on monthly financial statements to:
- Minimize your tax liability
- Make more informed business decisions
- Increase your profitability
That way, you can stay focused on your clients and grow your business.
The Top Benefits of Outsourcing Monthly Law Firm Accounting
Save Time and Increase Productivity
Working long hours in a high-stress industry is difficult enough. Why would you want to spend extra time on performing or managing frequent operations that could be outsourced, such as accounting?
With the right monthly accounting service for law firms, you can reallocate the time spent on recurring accounting activities to either spend more time with loved ones outside of work or to move the needle in other aspects of your business. You work best when you're doing the things that you're skilled at.
In the past, CSI has worked with a criminal law firm that used to only focus on one type of case. Since they came on board with us, they've found the time to expand to different and even more high-profile cases. More cases also mean money may be brought in faster.
Stay in Compliance
You work in the legal field, so of course the last thing you want is to be out of compliance in any way. You understand the importance of the law and know the consequences of violating it - even unintentionally.
Monthly accounting experts are up-to-date on all the latest regulatory requirements, especially when it comes to tax liability. Because they're in your books on a more frequent basis than annual accountants, they can point out any red flags or suspicious financial activity immediately to reduce the likelihood of fraud or government penalties.
Not to mention a major part of your industry: IOLTA accounts. The experts at CSI Accounting & Payroll are familiar with how they work and can handle the accounting for them accurately. We know that we need to balance this account each month to keep you in compliance with the Bar Association.
Receive Custom, Timely Advice
You give your clients legal advice, and a monthly accountant gives their clients financial advice. Both are considered to be the trusted experts in their respective fields.
By teaming up with a monthly accounting service, you can rest assured that only the most qualified experts are dealing with your finances in an unbiased and objective manner. Accounting services and business advice should be tailored to meet the needs of your firm to bring you the right information at the right time.
An example of something that's unique to your industry would be year-end bonuses (now an industry standard). This is critical to attract and retain good employees. A monthly accountant can discuss the parts of year-end bonuses that you may not have considered, such as the total cost (including payroll taxes you must match), what you can afford, and how it affects the profitability of your company.
When you're paid on a case-by-case basis, cash coming in isn't always guaranteed or consistent. That's why finding ways to save money is important to you.
Increasingly, law firms - both solo and group practices - are turning toward outsourcing monthly accounting as the preferred solution. It offers year-round opportunities for tax strategy and decision-making backed by data that annual accountants can't provide, while also being more affordable than an in-house accountant.
Outsourced accounting provides a unique opportunity to receive support from talented professionals without the added overhead required of in-house resources. Without an on-staff accountant, you don't have to worry about the costs associated with:
- Hiring and training
- Pay rates and bonuses
- Retention costs
Don't forget about all of the savings opportunities you receive when you follow a monthly accountant's advice! Plus, they can also touch on topics like what you should be paying your lawyers, paralegals, and yourself - including what should be salary and what should be a distribution of profits to get the most out of tax planning.
Choose a Service With Law Firm Accounting Experience
When your industry has unique accounting needs, you'll want to work with an accountant who understands those needs firsthand. Now that you know about the top benefits of working with a monthly accountant - as opposed to other accounting solutions - you should feel more confident in finding the right accounting service for you.
Can CSI Accounting & Payroll be a good fit for you? Let's find out. Click the button below to schedule a free consultation.
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Brian began working at CSI in 1996, and he purchased the business in 2002. As Owner, his primary role is in the management and growth of the firm. Since 2002, the firm has more than quadrupled in size. In 2009, Brian started CSI’s payroll service to complement CSI’s accounting and tax services. Brian received his Bachelor’s degree from the University of North Dakota, with a double major in Accounting and Financial Management. He’s a member of both the National Society for Tax Professionals and the National Society for Accountants, and he serves on the board of directors for the Professional Association of Small Business Accountants, where he was once president. Brian also serves on the business advisory council for Opportunity Partners, an organization that helps people with disabilities find employment. He’s also contributed to several business books, including Six Steps to Small Business Success and The Lean Mean Business Machine. Fun Fact: To help put himself through college, he used student loans, delivered pizzas, and worked summers in a salmon processing plant in Alaska.