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How Attorneys Can Fix a Broken Accounting System

By September 17, 20142 Comments

I’ve spent a lot of time reading blogs focused on educating and serving solo and small firms. Of all I’ve read, the one I’ve learned from the most is Lee Rosen’s Divorce Discourse.

Whether you are a lawyer or not, his stories and insight provide great tips to make you a better entrepreneur and more productive in general.

Seriously, go read this post right now and I guarantee you’ll have a better day.

Knowing that, it’s extremely exciting to see Rosen dive into the topic of accounting on his blog. He wrote about it a while ago and basically lays out the exact reason why Kahuna Accounting exists, and why we’ve found a very happy home serving entrepreneurial law firms.

In this article, Rosen describes the accounting challenge facing law firms in basically three sections that we couldn’t agree more with.

1. You have a bookkeeping mess
2. That’s a serious problem and unacceptable
3. There is a solution


Let’s dive into all three.

You Have a Bookkeeping Mess

Here’s what Rosen says:

“Your bookkeeping is a mess.

How do I know? Because I’m increasingly doing consulting for small- and medium-sized law firms, and the first thing I ask for when we get started is basic financial data. I ask first for a profit and loss statement.
Firm after firm, especially solos, can’t give me an up-to-date P&L. In situation after situation, I’m immediately realizing that the accounting system (can I call it a “system”?) is a disaster.”

This point is probably true for 90 percent of small and solo firms and it’s easy to check right now if this applies to you.

If I asked you to provide a profit and loss statement, what would you do?

If you can’t produce this, you probably have a mess and even if you wouldn’t consider it a mess – you have to admit you don’t have a very clear picture of the financial picture in your firm.

So, let’s say it is a mess. Does that matter?

Yes, That is a Problem

More from Rosen:
“I’m seeing this mess in firms that are making money. I’m seeing it in profitable law practices. That’s crazy. You can’t afford this kind of mess. You need to get the accounting situation under control.

More significantly, it’s not possible to run a business without basic financial data. It’s like playing a game without knowing the score. How can you tell how you’re doing if you don’t have the numbers? It’s not good enough to run your business based on whether there are funds in your bank account. You need to know what’s happening.”

If you are succeeding and adding clients it can be easy to dismiss some of the core business functions, because “everything is OK.”

But as Rosen points out, how can you even know if you are succeeding? How do you know how to measure the activity within the firm?

He doesn’t even go into the ethical issues of tracking client matters, trust accounting, and most importantly – making sure you are getting paid by those who owe you!

When you have a law firm, you are a business and a business has to have systems in place to track their finances and look forward – not backward.

At Kahuna Accounting, these are the types of law firms we have been working with. They have realized it’s a problem and have outgrown what they can keep up with themselves. They have done the right thing and admitted it’s an issue and have taken a step to remedy the situation.

Which brings us to the third point.

There is a Solution

From Rosen:
“There is no business function more easily outsourced than bookkeeping and accounting. Historically, most law practices have used an outside accountant to prepare tax returns. Many firms use bookkeeping services. I’ve outsourced the entire function for years, and you can too. If you’re playing the game without knowing the score, it’s time to pack up your receipts and checks and everything else and deliver them to someone who can help.”

This is why Kahuna Accounting exists. Going back to the first point. The “Wow moment” with our clients often comes when they first see their reports, including a profit and loss statement.

When a client turns over a mess, we’ll turn that mess into a clean, easy to understand, working accounting system. And after the transition, we’ll provide you with those financial statements that not only provide you a picture of your numbers, but also say, “I’m taking my business seriously.”

Is your accounting a mess? That’s OK. It’s not hard to fix. Get in touch and we can help clean it up.


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