QuickBooks is the ideal software for lawyers to spend less time on busywork, and more on real work. No – Xero is based in the cloud, so all you need is an internet connection. But you need a multi-factor authentication (MFA) app to log in to Xero. MFA adds an extra layer of security by checking that it’s really you when you log in. The FUTA tax rate is 6%, which taxes wages up to the first $7,000 earned by the employee during the year.
- This helps you meet firm expectations, minimize lost hours, and stay compliant with internal policies and client requirements.
- Accountants also help you with strategic tax planning, analyzing your business financial position, forecasting, and tax filling.
- It is highly recommended to trial 2-3 platforms before committing to ensure the chosen solution aligns with your firm’s specific workflows and client demands.
- We recommend setting a schedule to regularly reconcile accounts and check in on your financial health more frequently than what may be required.
Law Firm Accounting and Tax Planning:
To prevent misappropriating funds from other clients, remember to only charge your clients for fees directly relating to their trust account. Trust account management is an especially complex aspect of law firm accounting. Watch a replay of our webinar with Claude E. Ducloux to learn about the basics of trust accounting.
The 10 Best Accounting Software for Small Law Firms in 2025
- With clear trust ledgers and built-in safeguards, you can stay compliant and focus on your legal work instead of stressing over financial details.
- It anticipates the needs of freelancers and small businesses well—better than competitors in this class.
- Measuring ROI involves tracking time savings, error reduction, and improved client satisfaction.
- You are an Attorney, not an Accountant, and Law Firm Accounting can be very challenging.
- Our growth, both organic and through strategic acquisitions, has enabled us to offer a diverse range of services, tailored to the evolving needs of the legal industry.
We’ll go over the cash and accrual accounting along with the pros and cons of both below. If you’re required to open an IOLTA account, your local Bar Association may have a list of recommended financial institutions to work with. You must be logged in to a Google Account to make a copy of this sheet.
Cloud-Based Software
If your team does not have a clear time tracking policy or a clear agreement with the client, you may also have issues properly billing for that time. However, cash accounting may not accurately reflect your finances since it does not account for accounts receivable or payable. For example, you may appear to have more cash than you have if outstanding payments are owed to vendors. This contributes to why the general accounting principles (GAAP) does not find cash accounting acceptable. It can also be complicated to switch from cash accounting to accrual accounting. Cash accounting, or cash basis accounting, is when a firm reports transactions only when cash is received or paid out.
Bill4Time’s time tracking features provide timers and time entry functionalities across desktop and mobile, with support for law firm bookkeeping common billing increments like 0.1 or 0.25 hours. Each entry is linked to a matter and activity, so time is tracked consistently. You can also view reports on billable vs. non-billable time, see unsubmitted entries, and stay ahead of monthly billing cycles—all in one place.
A structured approach is essential for successful data migration and staff adoption. Sign up to receive the latest updates on industry news and LEAP’s all-in-one legal software solution. Make future-focused decisions to increase revenue with at-a-glance data. DocuSign is software that secure, legally-binding electronic signatures and contract workflows. Westlaw Edge is the gold standard in legal research, enhanced with generative AI.
By implementing good accounting processes and systems you now have the tools you need to run an effective and efficient law firm. Reports from your Accounting Software can provide a wealth of information regarding your profitability, cash flow needs and critical KPI indicators. It is a common error for a small law firm to establish one single organization in the accounting software that contains both Operating and Trust Accounts. You want to avoid the potential for your Trust Financials to end up commingling with your organization records. We highly suggest you use a tailored software like TrustBooks to manage your Trust Accounts. TrustBooks is easy to use yet powerful enough to easily reconcile your Trust Accounts.
