Managing a law firm requires accurate and organized financial records. Whether you’re tracking time, expenses, income statements or generating specialized reports for partners, a well-organized record-keeping system can enable data-driven financial decisions and help you stay on top of your tax filing obligations.
Uplinq uses AI to automate key bookkeeping workflows for legal firms and provides expert support from seasoned accounting specialists to ensure compliance. Learn how we can make your tax season less stressful.
Automate Your Bookkeeping
In accounting, workflow automation is the use of software and technology to reduce manual, time-consuming tasks, resulting in higher productivity and accuracy. This is particularly important for firms during tax season when a surge in client activity can create bottlenecks.
Streamlining tax preparation workflows with automation is an essential step to ensuring that your team members have sufficient bandwidth for their assigned responsibilities, and that you can meet client deadlines. With that in mind, let’s explore some primary tax workflow areas that are prime candidates for automation, as well as some practical suggestions for implementing it.
Bookkeeping automation can help you stay on top of recurring client invoices and payments without spending valuable resources tracking down documents. It can also help you save time by automatically categorizing expenses and preparing reports for each tax filing.
To start, it’s helpful to lay out your bookkeeping and tax preparation processes in a flowchart so that you can see what steps you need to take for each scenario. This way, you can make sure that all the pieces are in place and that everyone knows where to find information, what steps they need to take, and how to communicate with each other.
There are several different types of bookkeeping automation tools available, including software like DocuClipper, which helps you streamline the process by automatically categorizing transactions and preparing financial statements for tax filing. Another popular option is to link your accounting software with a payment processor to automate incoming payments. Using this type of automation, you can streamline the entire process from record-to-report. The key to success with this type of automation is to be mindful about which solutions you use and how to integrate them, so that your firm can take advantage of the best features.
Automate Your Time Tracking
Whether your law firm charges by the hour or on a flat fee basis, accurate time tracking is key to maximizing your revenue potential. Having the right legal time tracking software is essential to ensure that all of your attorneys’ billable hours are recorded. It also promotes accountability among your attorneys and legal support staff, which helps to increase productivity and efficiency across your firm.
Unlike general business tools like QuickBooks, legal time tracking software is designed specifically for the unique complexities of legal firms. This includes support for complex billing arrangements, precise trust account management that aligns with bar regulations, and advanced reporting capabilities for in-depth practice analysis.
Legal time tracking software can help to reduce the stress associated with the time-consuming process of manually compiling invoices and submitting them for client review. It can also provide detailed reports on matter profitability, resource allocation, and more for improved financial management.
A streamlined client portal allows lawyers to clock in and out of assignments with a single click, making time tracking effortless. It can also help attorneys avoid wasting time on non-billable activities by providing them with the option to mark tasks as either billable or not, which is particularly helpful when conducting legal consultations.
Enhanced transparency in legal time tracking improves communication between law firms and clients, which can help to build trust and strengthen relationships. Some software even integrates with project management apps, such as Asana, Planner, Trello, Monday, Notion, or Clickup, streamlining workflows by integrating all legal-related work in one place. Legal professionals can then access this data from anywhere with a secure Internet connection, regardless of where they are working.
Automate Your Billing
From conducting research to meeting with clients to drafting document after document, it’s no secret that lawyers have hectic schedules. Then add in time-consuming administrative tasks like billing, and it’s no wonder many legal professionals feel stretched thin. Automating these functions can help them focus more energy on what matters most: advocating for their clients.
While manually keeping track of hours leaves attorneys vulnerable to costly billing disputes, integrating a law firm practice management system makes it easy for staff to automatically compile the necessary data. Choose an application with a streamlined, user-friendly interface that’s designed for law firms and allows for simple customization to meet the needs of each practice. Look for an option that also provides reliable customer support and is recommended by other law firms or legal professionals.
In addition to eliminating manual data entry, automating billing helps you get paid faster. Identifying long-overdue balances and sending reminders are essential practices that should be done on an ongoing basis. Make it easier for clients to pay by accepting online payments through your accounting software and enabling them to pay from within their invoices. The 2021 Legal Trends Report shows that 81 percent of legal consumers prefer this method of payment.
It’s important to remember that process comes before technology, so it’s critical to ensure your team has a clear and consistent billing policy in place, achievable by using the services of thebottom-line.com. From identifying which staff members are responsible for what steps to ensuring all bills are vetted before being sent out, it’s essential that everyone is on the same page. This way, if any misunderstandings arise between attorneys and accounting staff, they can be resolved before they escalate.
Automate Your Reconciliations
It’s important to reconcile your law firm’s accounts on a regular basis. Failing to do so can lead to errors and confusion, especially at tax time. To avoid mistakes, it’s a good idea to use an automated reconciliation tool. These tools can help you eliminate manual data entry and ensure that your accounting records are accurate.
A law firm’s financials are complex. There are many different types of accounts and each must be accounted for accurately. This is why a legal accounting software system is so important for a law firm. It can simplify the accounting process and allow a law firm to focus on growing its business.
In addition to streamlining bookkeeping and invoicing, the use of legal technology can also make tax season less stressful for a law firm. Investing in a legal software platform will not only make the tax preparation process easier for you and your staff, but it will also help your accountant do his or her job better. It will enable your accountant to provide you with more valuable information and recommendations.
Before a law firm can file its taxes, it must pay quarterly estimated taxes, which are calculated based on the company’s previous year’s profit. At the end of the year, a law firm must file its actual taxes, which are based on its taxable income and other factors.
While the dreaded tax season is still months away, it’s crucial for law firms to take steps now to get their financial house in order. The best way to do this is by implementing a law firm accounting software and automating key tasks such as reconciling accounts, tracking time, and invoicing.
Automate Your Reporting
As part of your firm’s year-end tax preparation, you’ll need to collect all receipts from vendors who provide services or goods. If they are corporations, you’ll also need to obtain Forms 1099.
If you don’t have time to review each vendor’s statements, a law firm bookkeeping software system can automatically review and update vendor records. The system will then generate 1099s and W9s for you to distribute and file.
Another important aspect of year-end tax preparation is ensuring that your firm’s bank accounts are closed out. This includes your operating bank account and a separate account for Interest on Lawyer Trust Accounts (IOLTA). The closing process requires balancing each of your practice’s individual accounts to ensure they are zeroed out. This is a critical step for S-Corp and partnership law firms.
Taking steps to streamline your legal firm’s financial management processes will have a number of benefits. Standardized processes allow your team to work more efficiently and creates a level of accountability. Automation of billing and time tracking can increase the amount of billable hours your attorneys log, helping them meet their productivity targets and grow the firm.
When selecting legal bookkeeping software, look for a platform that integrates with existing legal software systems to avoid data silos and streamline workflows. Additionally, consider whether you want a single solution or a law firm accounting suite with tools that can address different aspects of your business. Once you select the best software for your firm, implement the new processes and evaluate the results for improvements to your operations. By following these steps, your law firm can transform from a stressful, last-minute approach to tax season into a smooth, manageable process.