How to Choose Billing and Accounting Software for Your Law Firm - Guest Post

This is a guest post written by Loretta Ruppert, Senior Director of Community Management for LexisNexis’ practice management team, including law firm management and legal billing software. She has experience as a business owner, a technology and business consultant for law firms and other professional services firms and is an expert in developing back office software.

 

Many attorneys are finding themselves with a shingle open for business, some by choice and others for survival. Owning your own law firm can be exciting and scary at the same time. No matter how you got here, you now own your own business and need to be aware of what to consider when looking for a billing and accounting software. First, let’s start with the basics. 

Why do you need billing and accounting software? Why not use a word processor, spreadsheet and a manual checkbook? You can! But if you do, you end up recording your time on sheets of paper and when it’s time to prepare a bill for your client, you are re-typing the information to create the bill. Don’t forget about the risk of mis-typing the time worked or calculating the total bill due. 

Likewise, you can write checks to pay your bills using a checkbook. Once again, this information will get re-entered by you, your bookkeeper or accountant into some system. Why? Because at the end of the year, you’ll need to file your taxes and need to know how much you earned and where you spent your money.

If you have been convinced to go with technology for your billing and accounting needs, you are faced with a plethora of billing and accounting software options to choose from. You can buy some software at the big box stores and others from legal specific vendors. Is there a difference? And if there is, why should you care?

With off-the-shelf billing and accounting software, you might be able to track your expenses and bill your clients, just like you can cook food using your dishwasher. It can be done, but does it make sense and more importantly, how does it impact your ability to bill more time? Below are six reasons why you should select legal specific billing and accounting software programs for your law practice, rather than relying on generic options.

1. Time capture – Enter it once and it’s done!

As a practicing attorney, you get many interruptions throughout the day. You need a way to record what you are working on, not onlyso that you can accurately bill your client, but also so that you have detailed records of the work you performed for the client in case a dispute arises in the future. Look for legal specific software  with timers that can be started and stopped in the programs and platforms you use every day, like word processing, spreadsheets, email, calendar and yourweb browser . Most legal specific software provides a traditional timesheet also with timers to record your work. When you click done, the time entry is saved to a client and matter. You can choose whether you want to record the time by the minute or in increments of time, like 6 minutes or quarter hours, etc. 

2. Expense Capture – Out-of-pocket vs. Soft

For client related expenses, you need to differentiate out of pocket costs  such as recording and filing fees from soft costs, i.e. photocopy and postage charges. The IRS released audit guidelines that specify a law firm cannot count client reimbursable expenses against their income for a given year. Essentially, the IRS views advancing expenses on behalf of clients as providing your client with a loan. 

Legal specific software can track the difference between an out-of-pocket cost and a soft cost and can properly account for them on your financial statements.  (Note: the way expenses are accounted for in contingency cases may be different. See this article referencing Boccardo v. United States). 

3. Specific Billing Needs

Law firms must have billing and accounting software which allows for flexibility in billing arrangements beyond hourly billing, including flat fee, retainer or contingency billing. Legal specific software allows for this and more. 

Your bill is a representation of your law firm; it tells a story and should look professional. You don’t want to send your client’s a bill that looks like an auto part store invoice, which is what may result when you use some off-the-shelf software.  

4. Trust Accounting

In an effort to minimize risk of non-payment, more law firms are now requiring clients to provide trust funds to cover fees earned and expense disbursements. Having accurate trust accounting records, bank reconciliation reports and reports of trust account balances by client is a must-have if you are accepting trust money from clients. 

Trust accounting is not taken lightly by local bars – you cannot co-mingle funds or take funds before they are earned or you can face disciplinary action. Legal specific software has built-in safeguards which prevent this, including not allowing a firm to overdraw a trust account, and allowing you to set criteria so you can only apply trust funds to fees or expenses at the time of billing. Some software will print a check directly after billing for the fees owed to you from clients. 

5. Manage Who Owes You

Knowing who owes you money is critical. It’s also important to be able to take a payment and have it applied to the appropriate account and properly reflected as income for your firm. Legal specific billing and accounting software provides you with choices for how payments are applied. This feature is important in cases in which the bill on a matter is being paid by more than one party, or where a payment should be applied to expenses, rather than to the legal fee. 

6. Integrated Accounting – One System

Having a billing system that includes accounting is a plus. It decreases duplicate entry and reduces the potential for errors to occur, while eliminating the need for you to learn yet another software program. An integrated solution provides peace of mind – you know your bills won’t be missing any time or expense. When you write checks, the information will automatically be recorded on the correct reports and will appear on the client’s next bill.
Having all of your firm’s information in one system makes it easy to provide your accountant with the information they need.

Lawyers have unique needs and requirements that must be met in order for them to meet their professional and ethical responsibilities to their clients. These needs and requirements must be taken into account when selecting a billing and accounting solution for your law firm. Review your options and make an informed decision based on your firm’s – and your clients’ needs. 

 
What are you looking for in a legal billing and accounting software program? 

Comments

[Sean Carter]

we have found that updating our document composition not only makes things looks better and helps us present our information clearer, but that clients also really appreciate it. Always an option to look at when dealing with any sort of documentation

[Consumer Bankruptcy]

An excellent submit thanks for the details as well as great read.

[Musca Law]

Job well done guys, quality information. DUI attorney Sarasota

[Chris M]

Thanks Loretta. Time59 (www.time59.com) is web-based time and billing software for solo lawyers.

[recruitment software]

Accounting plays very important role in law firm. The information you have provided is really useful for choosing a good accounting software. I read your blog occasionally and the blog is absolutely informative.

[Legal interpreter]

I respect your well-written and thoughtful content. You've really hit the mark with your original and bold views here. I agree with your views. Your readers are fortunate to have such interesting material to read.

[customer relationship management]

Great info thanks for sharing it.

[Loretta Ruppert]

Hi Helen,
Affordable is a word that requires more definition. When you are selecting a solution you need to consider the full cost of ownership which can include investment in hardware, software, maintenance fees, IT support to install and upgrade your software and hardware infrastructure and your time to get up to speed. The defining moment of truth is when you actually reap the benefits of feeling organized and in control of your law firm.

A web based solution sounds like the right choice, however you mentioned you'd like have it installed on a desktop too. If you are not comfortable going with a solution in the cloud, there are products in the market that are installed at your site, but have accessibility to information from a web application. It sounds like that would be your best solution. For example, I can talk to the solutions I know best. At LexisNexis products such as PCLaw and Time Matters w/Billing Matters are installed solutions and offer a web application to access information from mobile devices, tablets, etc. Some other popular solutions might offer a mobile app at an additional charge or often aligns with a 3rd party vendor to build the mobile app that integrates with their system.

[HelenC]

sounds equally handy as http://www.thelegalassistant.com/ 's personal injury mgmt tool. could you please suggest an affordable tool including accessible from a mobile and also, can be installed on a desktop or a small system- laptop, notebook?

[Steven J Fromm]

Loretta: Do you have any suggestions for specific time and billing programs. I have and use and older Timeslips version, but their newer versions are not to my liking, too complicated and expensive. Any suggestions?

[Rajeev M]

Very informative information above. Thanks Loretta. Readers are invited to review CaseFox. CaseFox is a Web-based Time and Billing Software for tracking of your billable/non-billable hours and expenses, creating client invoices, recording payments, tracking case notes, managing case documents, monitoring unbilled hours, unbilled invoices and many other tasks.