There is no point burying our heads in the sand and ignoring that times are tough – we can in-fact prepare and thrive in another recession. As well as previous recessions, the last few years have been pretty rough, but this means that law firms now have resilience and confidence they possibly did not have in the past.
Many of you may or may not know that Cashroom was born in the 2008 recession. Founder Catherine O’Day was asked to help law firms who wanted to ensure compliant legal accounting and that the only staff the employed were their fee earners. It was clear to many firms back then that having compliant accounting and good management information was something they needed but could outsource. Over 250 law firms now work alongside Cashroom accountants and legal bookkeepers to do this. During the turbulent times we now find ourselves in, law firms are thinking again about how to survive.
A lot can go badly wrong when it comes to accounting in law firms – especially if you put your accounting on the back burner even if you just plan to do it over a few months.
A lot of areas of the law are what could be called ‘recession-proof’ and some legal services will always be needed regardless of the economy. Some problems are multiplied, and work becomes even more plentiful for some during a recession, for example family and criminal attorneys are likely to be as busy as ever. Good financial data is just as important for these firms, to allow good planning for sustainable growth.
“I think the biggest problem is uncertainty and the fact that nobody really knows what will happen. Everybody expects residential property to crash – fixed term mortgage rates have more or less doubled, and the uncertainty will stop people making that move. But there will be a recession, and there will be spending cuts and it will take a while to get inflation under control. The big issue is whether this is temporary, or whether we are looking at 5 (or more!) years of stagnant growth, and high inflation. Nobody knows. However, the big thing that’s coming through in the calls I’m having is that a diverse practice is pretty resilient. People always need wills; they will continue to die and will continue to get divorced. If you are in those areas, or have a part of your firm who are, then things will be OK but, if you have 70% of your firm in residential conveyancing… maybe not so much!” – David Calder, CXO at Cashroom.
So, some areas of the law are not going to do as well but firms where there may be financial problems need good financial data more than ever – this is not the time to scrimp on good accounting. Firms must strategically allocate resources to be prepared e.g., marketing spend, staffing costs, overheads. A professional legal bookkeeper and accountant can help you manage your firm’s revenue and ensure your firm’s financial transactions are handled ethically and accurately.
If you are the owner of a law firm, you should care about accounting for law firms and legal bookkeeping—a lot. Why?
- You need to stay compliant – Legal accounting errors are the fastest and the most common way for an attorney to lose their practicing certificate and that’s whether intentional or through neglect
- Brand – Accounting errors to clients damages your brand. This lack of professionalism can lead to losing growth opportunities such as referrals and clients
- Visibility – To have a clear financial picture and meet your obligations to your firm and clients, your firm needs clear and accurate accounts
To ensure your firm’s financial statements are accurate, complete, and up to date, you need an excellent legal bookkeeper or bookkeeping team.
Your firm’s financials should be handled in your firm’s best interests. Keeping your firm’s accounts in order may not be glamorous. But having up-to-date and accurate records and professional accountants experienced in accounting for law firms is key to unlocking law firm growth and financial success for your practice.
Effective accounting for law firms is critical to your firm’s success. So be prepared, it’s likely going to be a bumpy journey ahead, but with the correct planning from good data your firm can ride out the rough road ahead.
To find out how we can provide accounting services for your law firm, please contact us.
