Guest Blog by Katina Peters,
Peters, Johnson, Staley & Co. CPAs
At Peters, Johnson, Staley & Co. CPAs, we have the honor of working with various attorneys across the legal industry. As profitability, growth and ease of operations advisors we are often involved in working with the partners and their accounting teams in making determinations about best practices, procedures and accounting and management software selection. Through that experience, we are able to share some of the knowledge we have gained regarding the importance of industry-specific software for legal practices.
QuickBooks is the Backbone; Not the Be-All, End-All Solution
First, don’t misunderstand the title, we don’t knock QuickBooks on the whole. It is a very powerful and cost-effective software and a great solution for many small businesses. Additionally, it does have its’ place in the world of law firm management. What we are here to shine a light on is that using QuickBooks alone as a primary billing and accounting function for law firms is really not the ideal solution. QuickBooks can make a great backbone to integrate with industry-specific software, such as Sage Timeslips, PCLaw, Lean Law, Clio, etc. and should be used accordingly.
Why Do I Need an Industry-Specific Software?
Unfortunately, we have seen too many situations where accountants and/or advisors (who may not specialize in the management of a law firm), will recommend abandoning industry-specific software in favor of solely using QuickBooks.
This can be very problematic.
For all its accounting power, QuickBooks alone does not handle some of the nuances and complexities of the accounting and management needs of a law practice.
For example: Those of you familiar with legal practices and the heavily legislated and regulated requirements of trust fund accounting know how important this is. Messing up your trust funds can get you into hot water, fast! LexisNexis put together a great white paper discussing a 7-point plan for Trust Account Management. Having a good system that will help you manage and track these accounts appropriately goes hand-in-hand with trust accounting and QuickBooks does not have a good native solution for this. Additionally, QuickBooks lacks many of the management reports and data necessary to provide information to run a law firm efficiently and effectively.
So what do we recommend?
To assist partners in truly managing the business as well as producing meaningful financial and management reports, we recommend looking for industry-specific software designed to include the following components:
- Client Trust Fund Accounting
- Time & Billing
- Accounts Receivable Tracking and Reports
- Work-In-Process (WIP) Tracking and Reporting
- Team Utilization Reports
- Client Productivity Reports
- Team and Partner Compensation Structures
Additional considerations of components include:
- Case Management
- Document Management
- Online Payments
Crucial Insights to Grow Your Firm
We’ve already touched on the importance of client trust fund accounting, but the key to effectively growing a law firm is in the management of the firm. Knowledge is power and as a leader of a practice you need to be sure to arm yourself with the tools to gain this knowledge. Actively tracking your business through your systems and effective reports can leverage your time and decision-making for the firm.
Any truly successful business does not get there by chance. In order to see measurable results, it is crucial to have a solid strategic plan, key performance indicators (KPIs), and reporting functions in place. Effective processes and monitoring of this key data will keep the firm on track and allow management to quickly redirect when necessary. In the world of legal practices, having the appropriate software that provides these key reports and metrics at the touch of a button is equivalent to your GPS, giving you constant updates and feedback to let you know if you are following the correct path.
Consider How You Will Implement
Working with IT is an integral function when looking at any software considerations. Is the firm going to be 100% in the cloud? That is the way of the future and generally what we recommend to our clients for ease of operations, scalability, and many other reasons. Working with cloud hosting solutions, such as Uptime Legal , (Cloud Hosting & IT providers that work solely with law firms) can be a great option when looking to move to the Cloud. They offer Private Cloud hosting to law firms with unlimited IT support. Other options can include cloud-based apps that can integrate with accounting systems such as Xero or QuickBooks Online. Both strategies offer advantages and disadvantages that we won’t go into here but, as with any major business decision, we always recommend taking a strategic approach with your advisory and management team, working together to find the best solution unique to you and your firm.
So, are law firms and QuickBooks really equivalent to oil & water? If done incorrectly, most certainly.
About PJS & Co. CPAs
They are business growth, profitability and ease of operations advisors and CPAs, specializing in working with law firms. PJS & Co. CPAs is founded on the mission of growth and balance and is dedicated to delivering a results-driven approach, tailored around growth and lifestyle goals to clients, team members and the community. Visit pjscpas.com to learn more about the company and its commitment to nurturing growth and cultivating lifestyle in a cloud-based environment.