Where Law Firms Go Wrong When Getting Started

Posted by | June 03, 2016 | Accounting | No Comments

Part of the nature of Kahuna Accounting helping law firms and entrepreneurs take care of their bookkeeping and accounting is that most of the people who come to us are quite stressed when we first meet.

Those who have things humming along smoothly rarely reach out for help. The ones who come have reached their breaking point.

They are finally done with dealing with a messy system that tells nothing about the business and makes tax season brutal and painful every year.

This happens to a huge number of law firms. You start the practice and usually handle your own bookkeeping, but eventually you hit growth and all of a sudden you have a disaster on your hands. It’s stressful, anxiety inducing and not healthy for the business.

This brings up two questions:

  1. Is this moment of pain/anxiety/reaching a breaking point unavoidable?
  2. How does it happen?

Let’s start with the second question and it may help us with the first.

How does the accounting breaking point happen?

FrustratedThe most common situation we’ve seen at Kahuna Accounting is when a law firm is between year 2 and 3 of their firm’s life. Up until this point, they have done their best to manage the books in order to keep costs down.

Then after a bit of growth, bookkeeping was always the task pushed to the side. And as the business grew, and employees were added, the bookkeeping became even more of a burden. Now all of a sudden, the books are 6 months behind, no systems integrate together and nothing makes sense. It’s a mess!

It’s all so gradual, it can be tempting to wonder how this could happen, but the answer is quite simple.

It’s all about how you start.

The reality is, for a firm like this, the system was wrong from day 1. It just felt OK, because when you are small and activity is minimal, it’s easy enough to cover up for a poor system.

But as your grow, the mistakes are magnified and a poor system becomes more painful.

As a lawyer when you start your own law firm, the accounting is one of the last things on your mind. You are interested in getting clients and serving those clients.

So when you start, you neglect many of the fundamentals. You don’t pour time and energy into the business essentials like finance, productivity and branding.

That’s because you are thinking about survival – not about details. But unfortunately, when you ignore the details, they don’t just take care of themselves. And in a few years, as the business grows, you’re going to reach a point of severe pain and anxiety.

So, how does it happen? Because it never gets started properly in the first place. So that brings us to the other question.

Is this accounting breaking point unavoidable?

It may seem like an unavoidable situation. After all – you are in survival mode in the early days and you simply don’t have time for all the details.

Wrong! A healthy business gets the details right from day one. But you have to get help. How do you do it?

Hopscratch is a business we highly recommend for law firms and all entrepreneurs getting started. It’s a platform, designed to help you get started right with all the business essentials.

When you start a law firm with Hopscratch, you hit the ground running without diverting focus from your core efforts of getting clients and serving them.

On the accounting side, we’ve seen clients who have set the proper chart of accounts, setup a system like Xero and taken a bit of time to understand how to track transactions from the beginning. Start a law firm with Hopscratch and this is exactly what happens as you’ll start in Xero and work with a business advocate who will ensure success.

This small investment pays off in a huge way – as you are feel more in control and confident as a business owner, and as you grow the next stage of business will come seamlessly without a point of anxious breakdown.

In serving our 200+ clients, one of the most common comments we’ve heard at Kahuna Accounting is, “Wow, I wish I would have had this from the beginning. It would have saved me so much pain and heartache.”

If you are getting started now, take the steps with a tool like Hopscratch and by getting the fundamentals in place so you can scale smoothly to the next level and avoid the pain and heartache from day one.

Want to Learn More About How to Start A Law Firm?

Check out this free guide by Hopscratch on how to start a law firm

 

 

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