CAN ANY BOOKKEEPER BE A “LAW FIRM” BOOKKEEPER?
I have no doubt you are scratching your head right now thinking, “what kind of question is that”? Indeed - what kind of question is that - one to which the short answer is NO.
Bookkeeping, which in a law firm includes client billing, management of trust funds and updating ledgers is not something that can be done by “any” bookkeeper. If you want to hire someone to pay the firm’s bills, do payroll and reconcile the operating account you can hire a bookkeeper.
But in a law firm that bills clients by the hour, receives retainers (whether refundable or not) and client costs, bookkeeping involves a little more than just balancing the operating account and receiving payments.
I will make the assumption that billing protocols are in place that require all attorneys to have their billable hours for the previous month in the billing program so that prebills can be prepared. A bookkeeper familiar with law firm billing and collections knows to review the prebills for grammar and typographical errors. A bookkeeper who has a legal background can even catch billing mistakes, such as billing a client 24.25 hours for reviewing an email. The prebills are reviewed and edits made by the attorney and returned for finalization. This would be where the abilities of a regular bookkeeper would come to an end.
A law firm bookkeeper knows enough to look at the balance of funds on retainer and check the calendar to see what is out on the horizon on a particular case in the next 30 days. If there is a mediation or deposition scheduled, and the client has $250 in retainer funds, a replenishment retainer will be required. Either the bookkeeper will know based on past experience how much of a replenishment to request or bring it to the attention of the attorney. This ensures that the firm will be compensated for upcoming time spent on mediation or deposition. In addition, if the client does not have a cost retainer, it would be prudent to request a cost retainer to cover either the mediator’s fee or the court reporter’s fee for a deposition. Vendors do not want to wait for payment and it is of no consequence to them that the client has not paid the costs. Vendors want to get paid when they bill. Several attorneys have had to front costs because clients did not pay cost retainers. Law firms should not finance the costs of their client’s case.
Even if there is nothing on the horizon on a case and retainer funds are running low, a law firm bookkeeper knows to request additional funds to be paid by the client towards replenishment. Generally, firms can set up flags or tasks in their billing program to notify the person doing the billing that the retainer has fallen below a specific amount. For most of my clients, that amount is $1,000.00.
Law firm bookkeeping and billing includes creating payment plans with clients who owe large balances and suddenly cannot pay. When making a payment arrangement, have a client sign a promissory note for the amount owed and the payments to be made. In this way, if you have to sue the client, the suit is brought on the note and not the bill. Be sure to have the client renew the promissory note every month if the firm continues to do work for the client because the promissory note needs to be as up to date as possible.
Finally, trust ledgers need to be updated. Either fund withdrawals need to be deducted from client balances, retainer payments need to be added to client balances, costs billed and the trust account reconciled to the total amount in the bank versus the total amount in trust.
As you can see, there is a lot more to being a law firm bookkeeper than just a bookkeeper. If you don’t hire a bookkeeper with this specific experience, make sure that someone in your firm is responsible for keeping the client retainer balances, client costs, payments and receipts up to date and that what is in your trust account (your books) balances to the penny with what the IOLTA account at the bank shows.
If you need law bookkeeping/billing assistance, please call me at 813-340-9569 or email me at: