Law Firm Software 101: Practice Management, Document Management, Accounting

The Three Legged Stool of Law Firm Software

Here at Uptime Legal, I spend the better part of every week working with law firms that are looking to improve their technology in some way. Often the conversation starts with the firm sharing with me that they’re looking for new or different law firm software to manage some aspect of their practice.

The following anecdote is a real, recent conversation I had with one such law firm, though by no means is it the first time I’ve had this kind of conversation.

The law firm reached out to us because, as they described it: their practice management software “wasn’t meeting their needs.” They were using a popular practice/case management system that generally has a good reputation.

I asked what they didn’t like about their current practice management software (expecting to hear about some deficiency in the systems billing, or calendaring). After some explanation, the firm shared that they were unhappy with the software’s lack of of document version management, document tagging and check-out/in. They found their practice management software “lacking” without these functions.

It dawned on me, that what they really needed was document management software, to complement their practice management software. I explained the difference (which, until that point, they didn’t know).

Related: Practice Management vs. Document Management Software

I explained that document management software is a completely different category of law firm software, and that practice management software, for the most part, isn’t meant to accomplish the functions they’re looking for. (It’s a bit like saying that your car isn’t meeting your needs because of its serious lack of wings and a propeller.)

Yes, some practice management software has some rudimentary functions of document management software–but only a true Document Management System brings all of the functions that this firm, like so many other firms, needs.

Similarly, most (though not all) practice management applications don’t do accounting. I’ve had very similar discussions with law firms that go like this:

I’ll ask a law firm what software they’re planning to use to manage their firm’s accounting. The firm will tell me: “Clio.” Now, Clio is a good practice management application, but it does not include accounting. Another misunderstanding and incorrect assumption.

All of these conversations prompt me to take a big step back, and describe to each firm what I call: the three legged stool of law firm software.

The Three-Legged Stool of Law Firm Software

Practice Management

  • Matter Management
  • Client/Contact Management
  • Calendaring
  • Docketing
  • Form Assembly
  • Time Tracking
  • Billing

Document Management

  • Document Storage
  • Version Management
  • Index & Search
  • Document Tagging
  • Document Metadata
  • OCR
  • Document Check-Out/In
  • Email Management

Accounting

  • Business Accounting
  • Trust/IOLTA Accounting
  • General Ledger
  • Accounts Payable
  • Accounts Receivable
  • Financial Reporting

I’ll explain here what I describe in many of these conversations with law firms.

Generally speaking, law firm software falls into three main categories: Practice Management, Document Management and Accounting. Now, as you’ll see later, there is definitely some overlap (software from one category that does some or all of another category); and there is also more niche, narrow software that does one or two things only (such as software that only does time tracking and billing.)

Let’s dive in.

Practice Management Software

Practice Management software is often the hub of a law firm’s technology toolbox. It lives at the epicenter: It’s the firm’s contact database, it manages the firm’s matters, calendars, time-tracking (where applicable) and billing. There are many companies and applications in this category, each have their own strengths and focal points.

Some practice management applications provide comprehensive docketing, or rules-based calendaring. Others provide much in the way of document assembly, which is the automatic generation of forms based on a particular client or matter. Others pride themselves on their sheer ability to be customized, letting a law firm truly shape their software to the way their firm operates.

Related: Best Legal Practice Management Software

Now, some practice management applications go beyond the bullets in the diagram above. Some do more, and even reach into the other boxes in some way.

For instance, some practice management software does some limited document management. They may, for instance, allow you to save documents and files to a matter (like attaching a file to an email), and may even provide one or two traditional document management functions, such a document version management.

Similarly, some practice management applications, such as PCLaw and CosmoLex, offer complete integrated accounting (the first and the third boxes from the diagram above), so you can manage your practice/cases and your accounting in a single application.

And ProLaw (which, as of the writing of this article, starts at a 10-user license package), offers a modular platform that includes practice management, document management and accounting, if your law firm needs all three.

Document Management Software

Document Management software helps law firms bring law and order to their documents and email (and other types of content.)

Generally speaking, a Document Management System (abbreviated as DMS because we in technology love our acronyms) provides:

  1. Centralized storage for a law firms documents, email, data and notes, and:
  2. Sophisticated tools for a law firm to help organize and manage those documents and data.

Document management software comes in both server-based and cloud-based flavors. In the case of the latter, the DMS will provide a central, secure place to store all of your firm’s matter-related data. But Document management software is so much more than simply a place to store documents (after all: if that’s all you needed, you could use a basic file server or Dropbox).

Document management software typically comes packed with features and functions to manage documents and email, and (usually) in a matter-centric way. Functions like version management (automatically keeping track of each iteration of a document). And document tagging / profiling, allowing you to tag and categorize documents by type (or other classifications.) And stamping important information to the footer of documents, such as the document’s ID, version number and location. And automatic OCR, which automatically converts scanned files to text-enabled documents.

And perhaps most importantly: Document management software provides index and search. Document management software will scan the contents of every page of every document you store within it, so that you can quickly search for and find what you’re looking for. (Think: Your own personal Google search engine for your documents and email.)

Most document management applications also provide email management. With email management, each person in your firm can save important, matter-related email to a matter, just like a document. Good document management software will allow you to drag-and-drop emails to a matter right from Microsoft Outlook, which keeps matter-related email chains centrally stored, alongside documents for that matter.

As I mentioned earlier, some practice management software provides some rudimentary document management functions (one or two features form the list above). And that may be all the document management your firm needs. But if you find yourself needing more sophistication, you’ll likely want to add a full-fledged Document Management System to your legal technology toolbox.

Related: Best Legal Document Management Software

Accounting Software

Accounting software is just that: Software that manages the books and accounting (all of it) for your law firm.

Many (if not most) legal practice management applications will handle billing for your law firm (along with some mechanism to record payments, so you can see which invoices have been paid)… but stop there.

Accounting software handles everything else: From managing your check registers (operating account), to (potentially) trust/IOLTA accounts, you balance sheet (assets and liabilities), vendors/bills/expenses, payroll and more.

Some law firms I talk to say “we bill from our case management software… and our outside accountant handles everything else.” (What they’re really saying is: “I don’t bother thinking about my firm’s accounting.”) Even though you have a CPA, a law firm partner is a business owner, and every business owner should have at least a basic understanding of their firm’s accounting and financial picture.

So if your practice management software doesn’t also include full-fledged accounting, you’ll need seperate accounting software. This could be the desktop version of QuickBooks, or cloud-based accounting like QuickBooks Online or Xero. (Note that many cloud-based practice management solutions integrate with the most popular accounting packages).

I’ll share the same advice I give to law firms during these conversations:

  1. Take the time to understand and regularly review your firm’s accounting and financial picture (review your P&L and balance sheet at least monthly), and:
  2. If you’re evaluating legal case management software, don’t automatically assume that accounting is built in.

Closing the Loop

So what’s the take-away to all this?

First: When it comes to “practice management software,” and “document management software…” don’t worry too much about labels or semantics. Instead, identify what exact functions you need in your over-arching legal software suite.

Following this process will help you avoid misfires (that is: getting law firm software that you thought did or included something that it does not).

In the example conversation that I started this article with: the law firm almost abandoned the practice management software that they otherwise liked, and that actually did meet their needs in the realm of practice management software… because it didn’t have the document management capabilities that (unbeknownst to them at the time), isn’t traditionally part of that kind of software. (The solution in their case: Keep the practice management software that did what it was meant to do, and add document management software.)

I recommend that you print this chart, and circle the functions you think your firm will require. This will give you a lot of guidance and direction in terms of what application, or applications, are best suited to meet all of your firms needs.

Give us a Call

Still unsure as to what law firm software your firm needs? Give us a call, and we can help your firm narrow down the options for your law firm.

Onward and upward!