The Most Important Financial Services for Lawyers
Attorneys make complicated judgment calls, analyze facts, and work hard to serve as the best counsel for their clients. However, amid the hard work of taking care of clients, someone must also tend to the financial stability of the business.
Lawyers face a unique business model with financial considerations that make things like cash flow management, paying taxes, and even keeping records a bit more complicated than usual. Therefore, bringing in key financial services as a lawyer is a wise move to support long-term financial growth and success. Below is a look at the most important financial services for lawyers.
Lawyers Have Unique Financial Needs
From tracking profitability to managing billable hours, the financials of operating a law firm can be unique compared to other businesses. Plus, the amount of money a lawyer can handle and oversee in a single month can be profound.
All the complexities of the financial side of being a lawyer mean these professionals may need help with:
- Ensuring trust account compliance
- Handling IOLTA (interest on lawyers’ trust accounts)
- Keeping appropriate records of a large volume of transactions
- Navigating complicated tax laws and liabilities
Handling other people’s funds is also common as a lawyer, whether it is settlement checks, fees paid for not-yet-performed services, or trust accounts. This is an even bigger reason why financial services for lawyers can be so important. A single attorney could easily be in charge of handling funds for hundreds of clients at any given time.
Valuable Financial Services for Lawyers – A Closer Look
Building the most efficient and supportive financial model within a firm, even a solo firm with only one lawyer, may require specific financial services for lawyers. Here is a look at the top three financial services to consider.
Bookkeeping and Accounting Services for Lawyers
Bookkeeping and accounting services are the most essential financial services for lawyers. These professionals handle the day-to-day financial tasks important to cash flow management, such as:
- Recording monetary transactions
- Balancing ledgers
- Reconciling statements
- Completing documents for billing purposes
- Preparing certain tax documents
While some attorneys start out with a basic bookkeeper, many forgo hiring an in-house professional and opt for outsourced services instead. In some ways, this makes more financial sense in the beginning when revenue is lower. However, even if a lawyer has an in-house accountant, there can be times when additional base-level financial services for lawyers are needed. For example, if the lawyer is facing an audit, reorganizing accounting practices, or simply has a single accountant or bookkeeper that’s overwhelmed, an outsourced professional helps.
Fractional CFO Services for Lawyers
As a lawyer’s client list grows or when that lawyer creates a multi-attorney firm, bringing in the help of a fractional CFO (chief financial officer) often becomes important. According to the American Bar Association, about 70 percent of the top 200 firms have their own CFO, and 85 percent of the top 100 have their own CFO. While solo firms don’t often hire a CFO, doing so supports that solo firm’s financial success significantly. Further, outsourcing a fractional CFO may offer desirable support without the overhead costs.
CFOs are executive-level professionals that oversee all accounting processes within a firm. The CFO may handle:
- Financial reporting through profit and loss statements
- Banking activities
- Cash flow management
- Capital allocation
- Evaluation of financial growth opportunities
- Financial data analysis
A fractional CFO also handles the development of tailor-made financial strategies to support the future growth of a firm. These are the types of objectives most attorneys don’t have time to target without compromising time available for billable hours.
Financial Technology Services for Lawyers
While highly underutilized, financial technology services for law firms bring a lot of value to the proverbial table. Financial services in the technological field may mean everything from accounting SaaS (Software as a Service) to custom-built tools for digital process automation for billing.
The right technology services free up time to focus on billable work, support streamlined accounting processes, and more. According to some of the latest research from Law Technology Today, an impressive 68 percent of law firms see larger profits by making use of technology.
The Right Financial Services for Lawyers Support Profitability and Growth
When the bulk of an attorney’s time is allocated to client cases, time for attention to finances can be lacking. Having the right financial services for lawyers in place supports the growth of the firm over the long term, but also immediate law firm profitability.
Looking to add in key financial support for your law firm? Reach out to The A Team where financial services are custom-built to cater to the needs of your firm.