WE'RE SOLVING tax and ACCOUNTING CHALLENGES FOR ATTORNEYS
When managed correctly, retainers minimize the risk of non-payment by clients. However, suppose a firm does not monitor Work in Progress (WIP) versus the amount of funds available for each matter. In that case, it may need to solicit additional funds should the retainer deplete before the completion of work.
Not only does the bar association have rules for reporting IOLTAs, but there are also mandates on keeping a detailed balance sheet for each client's deposits and disbursements. If lawyers do not adequately track these items, the ethics board can cite a violation and revoke an attorney's law license.
Practice Management Software
An optimized practice management platform is required to simplify risk management, compliance efforts, financial reporting and provide your clients with a highly functional, easy-to-use way to collaborate with your firm.
The cash method of accounting could let a firm defer tax liability by mismatching income and related expenses, typically by strategically timing when invoices go out and when expenses are paid and recorded. We will evaluate your law firm's accounting method (cash versus accrual/specifically regarding revenue recognition).
Most practice management software does not integrate with the firm's accounting system. It's important to develop internal controls and procedures to reconcile and validate data between practice management software and accounting system.