As the owner of a small or solo law firm, you’ve got plenty on your to-do list. Between handling cases and clients and managing your employees, the days fill up quickly. As with any small business, prioritizing and delegating is always necessary. But when it comes to your law firm’s financial management, the inevitable question arises— ‘Do I handle this myself using accounting software or do I hire an accounting firm?’
This is an important question to answer, and the sooner you make a decision about your law firm’s accounting needs, the better. It’s probably not hard to imagine how messy tax season can be if you delay organizing your law firm’s finances and budget. Knowing when the use of accounting software will cut it, and when it won’t, is key. Below you’ll find some essential points to consider when trying to choose between a professional accounting firm that specializes in small and solo law firms, and accounting software programs you can use to manage accounting tasks on your own.
When to Use Accounting Software
If you’re going to handle your firm’s accounting with just the use of accounting software, most experts recommend having previous experience in accounting.
When exactly is it appropriate to simply use accounting software for your small or solo law firm? If you’re going to handle your firm’s accounting with just the use of accounting software, most experts recommend having previous experience in accounting. For instance, if you have a strong background in law firm accounting, you’re well-versed in tax laws, and you’re considered an expert in money management, then accounting software may be a solid option for you. Accounting software can help you budget, stay organized, and it can offer a glimpse into the financial future of your law firm.
Accounting software may also be appropriate if you’ve just launched your own law firm and you’re in the building phase of your business. Purchasing accounting software programs with integrated budgeting tools can help you throughout these initial stages and create some structure for your finances, such as knowing how much you can spend each quarter and what you’ll likely spend annually.
To summarize, accounting software programs are suitable for small law firms when they’re in the early building stages and when lawyers have strong backgrounds in accounting, tax laws, budgeting, payroll, and bookkeeping. However, if you don’t necessarily qualify as an accounting expert and managing your finances is distracting you from other daily tasks, like practicing law, you may need to consider the alternative — hiring a professional accounting firm that specializes in small and solo law firms.
Benefits of Accounting Firms
First, it’s important to note that even if you have a strong background in accounting and you’re in the building stages of your private law firm business, it’s still beneficial to work with an accounting firm. While using accounting software may be sufficient, it isn’t necessarily the best option. The best option will always be working with an accounting firm. Even lawyers who consider themselves accounting mavens are still taking time away from their law practice to handle accounting tasks. And for those who are just building their practice, an accountant can act as a financial advisor and help you set goals for growth, which accounting software can’t do. In other words, while accounting software may be convenient, it can’t provide the human touch that an accounting firm offers. That is it, pretty simple! Do not over complicate it, just do one of the options mentioned and move on making sure you have everything documented.
- Time Management
We can’t stress enough the importance of having a professional handle your accounting needs so you can handle everything else. Developing a tax strategy, managing your bookkeeping, handling payroll, and setting a budget aren’t small feats. In fact, these actions create the financial backbone of your small or solo law firm. They’re not only important tasks, but they’re also time-consuming. Hiring an accounting firm allows you to dedicate your valuable time to your clients and your cases.
- Tax Management
If you find yourself sleeping less and stressing more during tax season, you’re not alone. Preparing and filing taxes is an infamous chore for a reason. It’s often described as time-consuming, complicated, and risky to complete independently. We already know that hiring an accounting firm for your small or solo law practice saves you time, but it also helps you avoid errors on your tax forms. Utilizing the help of a professional accountant can help you discover tax deductions and credits, avoid overpaying in taxes, and complete all of your necessary tax forms accurately.
- Ultimately Saves You Money
One reason why some law firm owners will choose accounting software over an accounting firm is that they believe it will save them money. This can be an expensive mistake. Yes, it may initially be cheaper to register for accounting software, but on average, small and solo law firms end up saving more money by working with professional accountants. While your Quickbooks program might help you keep your budget organized, it’s not going to do the heavy lifting for you. An accounting firm is going to dedicate time and energy to researching the best possible paths for your law firm to thrive, maintain a healthy budget, and discover significant tax credits and deductions.
- Growth Plans and Financial Guidance
When you’re running your own private law firm, words like growth, development, building clientele, increasing profits may be constantly running through your head. Growth is something that often remains on the back burner because you either don’t have the time to address it or you lack a concrete path to achieve it. Developing a plan to help your law firm grow is both necessary and challenging. This is when a trustworthy accounting firm comes into play. An experienced accountant can help you visualize where you see your law firm going in the future and help you design the necessary steps to bring this dream to fruition.
When asking yourself if accounting software or an accounting firm is right for you, the answer is clear. The benefits of working with professional accountants who specialize in small or solo law firms overwhelmingly outweigh the benefits of accounting software.
For more details on this along with additional training and tax strategies to ensure you are paying the least amount in taxes as legally possible, check out our Tax Minimization Program!
If you don’t have an accounting or tax advisor (or you need assistance with anything discussed), click here to book your complimentary strategy session with JETRO.