It can be difficult to get a group of attorneys to agree on any one subject but their dislike of accounting might be nearly universal. In most cases they would prefer to avoid thinking about bookkeeping, accounting and taxes at all costs. While the desire to avoid these tasks is understandable it can lead to increased costs for them and their firms. Far too often we see firms relying on a receptionist, legal assistant or other team member to keep the financial records for the firm. Generally these team members are not trained in accounting and are not particularly well suited for the job. Other firms might hire an outside bookkeeper to handle the financial record keeping. This likely results in more accurate financials but the hassle and timing may not be ideal.
Does completing accounting tasks take you or other critical team members away from your client work or management of the firm? These are all costs to you that you need to pay attention to. It is hard to say what the best solution is for you until you can accurately identify the true cost of accounting for you and your firm.
As accountants we think that the answer is in the numbers. In order to find the best accounting solution for your firm it is important to first understand the cost of your current arrangement. Evaluating these factors will shed some light on how your current situation can be improved.
The out of pocket costs are the easiest and most obvious. Take a minute and consider what you paid for the previous year.
- Wages, payroll taxes and benefits paid to in house accountant or other employee handling the firm’s accounting
- Contract Bookkeeper
- Cost of CPA to prepare your tax returns
- Accounting Software
The indirect, or soft costs are equally important and may actually be the larger drain on your firm’s resources. You might think “I’m paying this employee already, so why not have them assume the bookkeeping responsibilities,” or “I can do this on my own and save some money.” Although those thoughts are reasonable they don’t account for the real costs to the firm. Anytime you have an employee spending time on the finances you are pulling them away from the work that they are trained to do and efficient at performing. If you are doing it yourself, are you giving up valuable time that is better spent on billable client work, marketing your firm, meeting with potential clients, time with friends, your kids’ activities, or enjoying much needed downtime? Whatever your answer the cost is very real.
To understand these real costs, consider working through the following, simplified exercise:
How many hours a week do you or another attorney in your firm spend compiling and recording financial information?
What is the value of that time? At a minimum those hours would be valued at your billing rate but may be worth even more to you if you are giving up time developing business or missing family events.
Add the value you place on those hours to the hard costs you compiled above. If you are like most firms the combination of these costs is significant and impacting your business.
In addition to these costs there are other important questions to ask yourself:
- How long does it take to get useful financial information?
- Do you receive information in a format that is beneficial to understanding the financial health of the firm?
- Do you know the individual attorneys or practice areas that generate the most profit for your firm?
- Do you know where to focus your marketing efforts to maximize your profits?
- Do you worry about having enough cash to cover ordinary expenses of the firm?
- Do you miss out on business opportunities or client work because you are spending too much time on the accounting?
Accounting can be a burden and something you dread, or it can provide what you need to drive profits and guide your firm. You have more than enough tasks that you have to do in managing your firm. Let Elevate KPIs take the burden of accounting off your list and make management easier. Free yourself to spend your time in more productive ways and get the necessary financial information in an easy to use format so you can increase profits and turn your practice into a business.