As there is the growing significance of accounting law firms, it is beneficial to know where companies commonly make mistakes.
Before deciding what law firm accounting services are best for your legal systems and policies, it’s necessary to look for the five common accounting mistakes.
1. Reconciliations on time
Settling the accounts on the balance sheet, like debit and credit card accounts is necessary for the success of small law firms.
Reconciliation is the method of examining whether the balance of the account as mentioned in the books is right or not.
This technique helps in identifying issues before they get out of control. There are several benefits of reconciliation mentioned below:
- Understanding how much credit or cash is available
- Making sure that there was no deceitful action
- Gathering bank mistakes
2. Data Entry Mistakes
A manual error by human beings when recording information in the system is the most widely observed reason for excessive loss of money.
Though you can’t avoid all the data entry mistakes.
You can put methods in place to endure entries that are known and revised on time.
Some of the best ways to help reduce the data entry mistakes consist of:
- Avoid overfilling the team: There is a restriction of data entry work that an individual can perform daily. Be real with the aims, goals, and targets of your team.
- Re-evaluate the work: Whether your legal firm applies quality checks and everyday reconciliations or not, make sure to review it twice and thrice including you as well.
- As the manager or owner of a legal firm, know how to get into your own accounting systems to reassess the work. As questioned by your team, what will motivate them to cross-check their own work when they have an idea that someone will reevaluate it again.
- Train well and regularly: we usually see small legal firms who have one lawyer performing the role of ten people, with less or no training in those roles. When it comes to bookkeeping and accounting, there is a need to have someone trained and experienced. Therefore, it is suggested to spend time in your company’s financial system by training your team regarding the accounting concepts and methods used by the company.
3. Absence of documentation process
Your legal firm could misplace valuable tax reductions and you fail to record the business transactions in the documented form.
The IRS does not consider these expenses legal unless complemented by secondary documentation.
It’s simple to ignore bookkeeping when a company decides on different options, but neglecting the bookkeeping can become harmful to the businesses’ success.
We usually get calls from accountants for lawyers, mainly at the year-end, asking us if we can help them in their bookkeeping.
Once we reach their office there’s usually a large box.
Full of receipts from the complete year that they never checked.
While we admire these people, it can come at a cost to them rather than managing frequent practices to remain on top of their bookkeeping.
Some useful titbits for all procrastinators out there:
- Set time on your calendar to work on your books, if you don’t plan it, time will go away from you and things will be out of your control.
- Do a little bit at a time, if you don’t decide to give a complete day on bookkeeping, divide the time like an hour or two daily. It releases the stress to get it all complete at once.
- Hire support means running a business is not a one-man show. Therefore understanding your limits is very essential. If bookkeeping is your responsibility, do ask for assistance instead of making any mistakes.
5. Not looking for assistance when required
You are handling and controlling a developing law firm, which you cannot manage yourself. So seek guidance where you know that you will need it.
Perhaps you like doing the bookkeeping for your small firm.
But need assistance and guidance in answering the phone calls or handling the workforce.
Understand your strong points and ignore your weaknesses.
If you neglect to look for help when you want it, things will cost you a huge expense to get rid of the created chaos.
These 5 accounting mistakes are certain to occur, but a business’ plans and ways to recognize and avoid those mistakes will ensure the company’s positive financial health in the future.