Accounting for Law Firms: How To NOT Be Struck From The Roll

Suspension is a severe consequence of malpractice as a law practitioner. 

Accounting malpractice within law firms offers the same dire consequence. This is why adhering to stringent accounting practices is so important.

This article aims to guide law firms and legal practitioners in maintaining these accounting practices. We will focus on general tips for South African legal practices and speak to how Quantim Legal Solutions, an all-in-one practice management software, is a helpful tool to consider implementing.

1. Be Accurate, Like Your Life Depends On It

Accurate accounting ensures transparency, builds client trust, and supports your law firm’s operations.

As previously mentioned, poor accounting practices can result in legal and financial repercussions, including fines, lawsuits, and suspension.

In South Africa, the Legal Practice Council (LPC) mandates strict adherence to accounting standards to protect clients and uphold the integrity of the legal profession.

This is where legal software steps in, ensuring the day-to-day, year-end-to-year financials are accurately captured for your firm’s convenience. Tailoring financial management through implementing legal accounting software can contribute to your firm’s success, as it can help capture, manage and overcome the unique financial challenges within your legal practice. 

Quantim’s Solution:

• Ensures that all financial activities are documented, making it easier to track and audit financial transactions. 
• Simplifies the creation of financial documents, which is useful in maintaining up-to-date and accurate records of client transactions and outstanding balances. 
• The Work in Progress (WIP) feature offers detailed tracking to ensure that all billable work is accurately recorded and billed, preventing revenue loss due to untracked services.

2. Enforce Strict Boundaries with Your Trust Account Funds

Managing client trust accounts means that your firm needs to maintain a clear separation between client funds and the firm’s operational funds. 

This practice is not only ethical but also a legal requirement under the Legal Practice Act and LPC rules. Mismanagement of these accounts can lead to severe penalties and loss of license.

Quantim’s Solution:

• Legal accounting software allows for easy management of client and business details, ensuring all financial transactions are correctly associated with the right entities. 
• With an efficient document management system that automatically saves every action, Law Firms can extract a comprehensive record of all transactions.

3. Don’t Fall Victim To These Common Mistakes

We’ve listed a few mistakes law firm accounting frequently encounters:

• Mismanagement of Trust Accounts: As our previous point states, you must avoid commingling funds. Failing to reconcile accounts regularly can lead to accusations of fraud and severe disciplinary actions.
• Incomplete or Inaccurate Record-Keeping: Accurate records are essential for compliance and financial integrity. Incomplete or inaccurate records can create discrepancies during audits and raise red flags about the firm’s financial practices.
• Messy Billing Practices: Billing errors, such as overbilling, double-billing, or billing for undelivered services, can damage client trust and lead to legal actions against the firm, opening the firm up for investigation.

Quantim’s Solution:

• Luckily, Quantim Legal’s financial management features, such as invoice templates and statement generation, ensure accuracy and transparency in billing. 
• Our Work in Progress (WIP) tab allows for detailed tracking of ongoing work, including time tracking and VAT applicability.

4. Keep A Finger On Your Firm’s Pulse

Know what’s happening in your firm through implementing internal controls, especially in your accounting and bookkeeping tasks. From a legal bookkeeping perspective, it is important that your records be up-to-date, accurate and ethically captured.

Internal Controls You Can Implement At Your Law Firm:

1. Separate Accounting Duties: this internal control mechanism best prevents fraud and errors as different individuals handle different accounting tasks to minimise the risk.
2. Regular Audits: Both internal and external audits help maintain your firm’s financial integrity by identifying discrepancies and ensuring compliance with legal standards.
3. Astute Record-Keeping: maintaining detailed and organised records of all financial transactions increases the chance of accurate financial reporting.

Quantim’s Solution:

• Beyond Quantim’s documentation storage mentioned previously, the general ledger and bank reconciliation features offer full financial insights and facilitate easy reconciliation. 
• Quantim allows users to import bank statements using a specific template. Once the account number is added, our software can automatically match transactions.

5. Implement Tech Solutions For Faster, More Accurate Practice Management

Implement an all-in-one legal accounting and practice management software that automates many financial processes for your law firm, reducing human error and ensuring compliance with legal standards. 

Not to be biased or anything ;), Quantim Legal Solutions offers all these features and more for South African law firms. It offers legal software tailored to South African legal practices at competitive, affordable pricing.

Book a demo and see.

Quantim’s Solution:

• Quantim is a cloud-based system that provides users with secure, unique login credentials to ensure secure access. Its security and permissions features allow firms to control user access to sensitive financial information.

6. Follow The Rules Set By South African Legal Regulations

Legal Practice Act

The Legal Practice Act outlines specific requirements for managing client funds, maintaining accurate records, and ensuring financial transparency. Law firms need to familiarise themselves with these provisions to avoid legal repercussions.

Legal Practice Council (LPC) Guidelines

The LPC provides guidelines on ethical accounting practices, trust account management, and financial reporting. Adhering to these guidelines is essential for maintaining the firm’s license and reputation.

Tax Compliance

Ensuring compliance with the South African Revenue Service (SARS) is crucial for avoiding fines and legal actions. Law firms must stay updated on tax regulations and ensure timely and accurate tax filings.

Quantim’s Solution:

• Quantim’s comprehensive reporting and auditing tools allow for detailed financial insights and ensure compliance with all regulatory requirements. 
• The software and support team can help you obtain specific financial insights that can be effective in financial management.

7. Stay Up To Date With What’s New

Continuous Professional Development (CPD) is crucial for keeping up with the latest accounting and legal practices that can significantly impact your business. CPD programs help professionals stay informed about regulation changes and best practices in accounting and financial management.

Workshops and seminars in industry-specific training programs can enhance the firm’s financial management skills through up-to-date professional training.

Quantim’s Solution:

• One of Quantim Legal Solutions’s most notable perks is its continuous support. Master the software and feature intricacies you get to work with. 
• Quantim’s involvement turns practice management and bookkeeping for a law firm into an ongoing professional development tool.

8. You Can Always Seek Professional Help

Hiring Qualified Accountants with expertise in legal accounting can ensure accurate financial management, compliance with legal standards, and efficient handling of complex financial matters.

Consulting with Specialised Legal Accounting Firms offers services tailored to the needs of law firms. They can assist in maintaining compliance, conducting audits, and providing financial advice for you to safeguard the firm’s operations.

Quantim’s Solution:

• A huge bonus of working with Quantim’s user-friendly interface and features is that you will reduce the need for extensive external assistance. 
• Quantim’s software allows firms to manage their finances in-house effectively. However, it also facilitates collaboration with external accountants and auditors through an additional login when necessary. Either way, it simplifies the process.

Use Quantim, Don’t Get Suspended

By implementing the outlined practices and leveraging Quantim Legal Solutions’s legal software, we’re confident you won’t be struck from the roll because of poor accounting practice in your law firm. Build trust with your clients and ensure your firm’s long-term success and credibility with Quantim Legal Solutions.