This week we’re looking at accounting and tax tips for lawyers. It’s one of those things that’s not fun, but it’s gotta get done. Hopefully some of our tips can make your life a bit easier.
Accounting and Taxes for Lawyers
via Lawyerist by Steven Chung
Curious whether you can deduct it? This article goes over the requirements for deductions – “ordinary and necessary” – as well as common deductions. The two big deductions for solos mentioned are expenses for meals and home office expenses to deduct part of the expenses related to your home. Favorite action point: Deduct part of your home. What percentage of your home is being used for office space? You can not only deduct part of your mortgage/rent, you can also deduct things like utilities as a business expense.
via Forbes by Kirk Simpson
A solid, concise list of tips from Forbes that shows staying on top of accounting in a small business is simpler than it might seem. Favorite Action Point: Set aside time to review your finances each week. This can give you a strategic edge on where you might be able to cut costs in one area, or make a sound investment in another.
via Vimeo by Clio / Kahuna Accounting
This video discusses optimizing the accounting system your practice uses. Overall, it’s a bit lengthy but worth checking out as there are a bunch of excellent points on how lawyers can become more efficient business managers. Favorite Action Point: Use specialized tools to do specific functions rather than one clunky system trying to do it all. Bonus points if they can integrate with each other. Thankfully, now many major cloud-based service providers can work with other providers.
via About Law by William Pfeifer
Trust accounting issues are some of the most common and serious ethical issues facing lawyers. And, these issues can be easily avoided if you know what you’re doing. If you deal with trust accounts, mismanagement can have disastrous consequences. Unfortunately, law school doesn’t address this in much detail as it should. Favorite Action Point: Keep client funds completely separate from your personal/business accounts. Ensure client-level cash flows are meticulously recorded before it’s too late. Additionally, be aware of which fees you are entitled to immediately and which must be held in trust (e.g. Filing Fee).
Traditional desktop accounting software has its limits. It’s not easy to share data. Every year there’s a required upgrade. You have to often be at the 1 computer that has access to your books to review them. With cloud accounting, all of these problems are gone. Favorite action point: Use online / cloud-based accounting because it will get you paid faster. Typically people take 41 days to get paid for invoices. Xero did a study and found that their clients’ invoices were paid on average 12 days faster.
And now just for fun…