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The 4 Strategic Options in Software for Law Firm Accounting

The 4 Strategic Options in Software for Law Firm Accounting

For new law firms, processes, procedures and infrastructure are important decisions.   These are important for future plans – choosing systems that can support a firm as it grows.

Accounting systems are a good example, because a law firm that outgrows it existing accounting tool will force a change precisely during a growth spurt.  In the worst cases, making a dramatic change can put the brakes on cash flow even as more new clients are walking in the door.

These are the conclusions drawn in a new LexisNexis white paper published today titled The Law Firm Guidebook to Accounting Systems (reg. req.) Authors Steve Fetters, MBA and attorney Christopher T. Anderson combined first-hand experience, countless conversations with customers and interviews with CPAs with law firm experience to develop the paper.

“An investment in time and money is required whenever a law firm changes their [a law firm’s] back-office billing and accounting system,” says Deborah J. Schaefer a CPA. “Therefore, it’s best to invest in a solution that can grow with the practice.”

 Download a comprehensive white paper on legal accounting software:
The Law Firm Guidebook to Accounting Systems

Four Choices in Law Firm Accounting Software

The paper identifies four primary options in law firm accounting software and spells out the pros and cons of each strategy in significant detail.  A summary of those four options include:

1.  Manual Record Keeping.  Can a solo firm operate on a checkbook or general ledger?  Absolutely, however it’s usually advisable to have a good bookkeeper or source of accounting advice.  Other than a basic understanding of accounting, no special skills are required.  There are of course drawbacks in access to easy analysis, tax preparation and in financing, should a firm every desire a small business loan.

2.  Small Business Accounting Software. Small business software is often easy to use and inexpensive, but it’s important to remember this software is designed for businesses that sell things.  The business of law does have some unique processes general business software typically does not support, such as trust accounting. Be sure to look for software that supports both billing and accounting to avoid classic errors like double entries.

3.  Legal-Specific Accounting Software.  Designed specifically for law firms, legal-specific software provides the tools for the nuances of trust accounting and typically has extra benefits.  These include detailed reporting for the metrics every law firm should measure.

4. Legal-Specific Software with Professional Accounting Consultant.  Michael Wasco who is also a CPA, says that when small law firms hit a certain threshold, the need for expert accounting knowledge grows.  He says law firms with 10-20 attorneys are in an especially daunting position because these firms “have enough revenues to support that kind of expert knowledge, but not enough to really justify it.”  He also noted financial thresholds as a time to start considering professional accounting advice.  “The bottom line is that once a law firm has $5M in revenues, the nature of the practice changes.”

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The complete white paper is packed with sound and jargon-free advice and would benefit any legal professional considering legal accounting software.  It can be downloaded for free with registration.

Photo credit:  Pixabay, Creative Commons, CC0 1.0

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About Frank Strong

Frank Strong
Frank Strong is the communications director with the LexisNexis software division located on NC State’s Centennial Campus in Raleigh. In this capacity he leads communications efforts in support of software products for law practice and law department management and also litigation tools – across large law, small law and corporate counsel segments. With more than 15 years of experience in the high-tech sector, Strong previously served as director of public relations for Vocus, which developed marketing, PR and media monitoring software. He has held multiple roles both in-house with corporations, ranging from startups to global organizations, and has also endured the rigors of billable hours, having completed gigs at PR firms including the top 10 global firm Hill & Knowlton. A veteran of two year-long deployments, Strong has concurrently served in uniform in reserve components of the military for more than 20 years, initially as an enlisted Marine and currently as an infantry officer in the Army National Guard. Strong holds a BA in Film and TV production from Worcester State University, an M.A. in Public Communication from American University, and an M.B.A. from Marymount University.
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