Video Transcript:
To get a better handle on how entrepreneurs running law firms can manage their own trust accounting, we asked Kahuna Accounting’s CFO what it takes to do your own accounting. He gave insight that helped us come up four things that entrepreneurs need to handle their own books.
Here are the four things every attorney needs in order to manage their own trust accounting:
#1. A disciplined approach to capturing activity as it occurs
When you pay for something with a credit card, what is done with the receipt? Every time you provide a service to a client, how do you remember that activity so that it will be billed? This process can be very simple (keep a calendar, take pictures with a smart phone etc.), but it needs to be consistent and organized and lead directly to the next process.
#2. A bookkeeping system to process the above activity into.
Most practice management software does not include bookkeeping.
A system is needed to track and report the financials of the company to assist with business decisions and growth. This system can be a very simple accounting system, but it needs to have the basic components of financial reporting (Bank reconciliations, Income Statement, Balance Sheet, Accounts Receivable and Accounts Payable).
If you use Clio practice management software, you can use Xero cloud accounting software to integrate with your practice management tool, that is what we use here at Kahuna Accounting.
#3. A disciplined approach to load and enter items into your system
If you aren’t quickly and religiously putting activity into your accounting system, your books could be inaccurate, and when it comes to Trust Accounting, this information has to be accurate! This should be done daily, or weekly at the absolute latest. You need to know how these items are loading into your system. A simple mistake, say recording a transfer into your practice management software and not making the actual transfer from accounts, could result in misappropriation of funds.
#4. A working understanding of trust accounting and bar requirements
At Kahuna Accounting, we promote education to our clients because the best financials and accurate books only take a business so far. Founders and lawyers that understand their financials and can use them to grow the business are the ones that stand out from competitors and reach their goals.
For trust accounting, you want to know specifics of trust accounting, how your state different, and what are the most common mistakes and pitfalls so you can avoid them.
Recap:
The 4 Keys to Managing Your Own Trust Accounting are
#1. A disciplined approach to capturing activity as it occurs
#2. A bookkeeping system to process that activity
#3. A disciplined approach to load and enter items into your system
And #4, A strong understanding of trust accounting and bar requirements.
Now that you know the keys to be able to do your own trust accounting, this guide can help you put a system into place. Visit KahunaAccounting.Com/Trust-Accounting-for-small-law-firms/
We created this based on our experience working with hundreds of firms and if you do need help with your firm’s bookkeeping, you should definitely give KahunaAccounting.com a visit, we can help your firm and get the burden of accounting and bookkeeping off of your shoulders.
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