What is law firm bookkeeping?

It's the day-to-day recording of a law firm's financial transactions, including fees, expenses, payroll, client costs and client funds held in trust.

How is law firm bookkeeping different from regular small business bookkeeping?

A law firm holds client money in trust, tracks costs by matter, and has to follow bar rules on trust accounting. A regular small business doesn't do any of these.

Who should handle bookkeeping at a mid-sized law firm?

Usually a bookkeeper enters transactions and the firm administrator reviews and approves them. A partner signs off on trust disbursements, and an outside CPA handles taxes. Splitting the work protects the firm.

How often should a law firm reconcile its trust account?

At least monthly, using a three-way reconciliation. Some states require it more often.

How do you record advanced client costs?

Code each cost to the client and matter when it's paid. Many firms hold these costs in an asset account until they're billed and collected. Confirm the method with your CPA.

Should a law firm use cash or accrual accounting?

Cash is simpler. Accrual gives a clearer picture of receivables and unbilled work. Many firms use accrual for internal reports and cash for taxes. Ask your CPA what fits your firm.

What bookkeeping tasks should a firm administrator do every month?

Reconcile the operating and trust accounts, review client ledgers, check receivables and unbilled time, run the financial reports, and close the period.

What's the difference between a legal bookkeeper and a law firm accountant?

A legal bookkeeper records transactions and prepares reconciliations. A law firm accountant, often a CPA, uses those records for financial statements, tax returns and planning.

Law Firm Bookkeeping: A Practical Guide for Firm Administrators

A practical law firm bookkeeping guide for firm administrators, covering trust accounts, client costs, monthly reconciliation and a month-end checklist.