Accounting is the systematic compilation of a business’s transactions. Businesses hire accountants to record, compile and interpret daily transactions into meaningful reports. These financial reports then assist the entrepreneurs to make wise and profitable business decisions. The main purpose of all business accounting is the same but, its methodology differs among various industries.
Let us consider an example of a restaurant manager who is managing all cash flows himself. First of all, a manager is not an experienced accountant or an expert bookkeeper. He might be making wrong cash entries and it might be taking more time to record each transaction. Therefore, hiring an expert accountant will ease all of his stress. The expert accountant will record, manage and present all business transactions most efficiently to help the restaurant manager make the right growth decisions.
Similarly, lawyers practicing in small law firms might be confident enough to manage all business accounts. However, they might not have the time and the qualification to handle all client trust accounts and funds. This is when hiring an expert law firm accountant will benefit the small law firm practice.
There are a lot of other reasons and benefits associated with hiring a professional accountant. Tax laws and legal complications keep rising with time. Every state has its own rules and regulation that all businesses need to understand fully. In case of any wrong entry, mismanagement or incorrect statement, the officials may charge big penalties to the small entrepreneurs. Hence, the need to recruit an accounting expert most suitable for your business niche is tremendously important.
Lawyers should search for professional accountants who are skilled at offering law firm accounting services. Law firm accounting is not complete the same as general business accounting.
Here are some major differences that all lawyers should be aware of
· Separating the company funds from the client funds
· Recording all client trust fund details individually
· Reporting each client on their trust accounts
· Clarifying formalities before withdrawals
· Preparing monthly bank reconciliations
· Training the company staff who deal with the trust accounts
Client trust fund accounting is the most integral part of law firm accounting. Not all business accountants are experts in handling trust accounts. Therefore, lawyers should always seek professionals trained to manage trust accounts proficiently.
The practice states that the client’s fund might be in possession of the law firm but, they are not eligible to use it until earned properly. Furthermore, the legal accountants should keep track of all client funds separately. It is extremely important to manage different client trust funds individually but in the same one bank trust account. The company accountants are not allowed to use these funds to pay the firm’s expenses.
Moreover, like all businesses, legal accountants are also supposed to prepare monthly bank reconciliations to show the accurate financial position of the firm. Law firm accountants are supposed to clarify all legal formalities before making any withdrawals from the trust accounts. They are required to train all other staff handling the trust accounts for any other purposes.
How lawyers can avoid such accounting issues?
One way to avoid such complexities is to hire professional accounting services for lawyers. Hiring a well-reputed and accredited accounting firm will ease up all tension from the legal experts. Whether it be general bookkeeping, payroll management, client trust accounting or even tax filing, a recognized accounting firm will provide all services at once. They will also maintain your business accounts free from any flaws and fully audited. This way you will not have to worry about the CRA audits.
Most accounting firms are now offering online accounting and bookkeeping services. This means that most businesses do not have to hire a full-time accountant to monitor their accounts. It can all be done virtually within a few clicks. Such accounting firms have a cloud-based accounting set up to facilitate each client of varying needs. In the case of a law firm, the company will use legal accounting programs that will meet all of the lawyer’s requirements without any hassle. Therefore, it is recommended to hire a law firm accountant.
So, it can be concluded that accounting is essential for all businesses but the account management system differs according to the business niche. For lawyers, it is best to consult a qualified law firm accountant.
Lawyers should hire fully trained law firm accountants to handle all client trust funds and business accounts efficiently. They can hire law firm accounting services for more services.