How to Choose the Best Legal Accounting Software
By Sophia Lee
Legal professionals face unique challenges when managing their finances and bookkeeping. Between trust accounting, diverse billing structures, and strict compliance regulations, it’s easy to get overwhelmed (and have valuable billable hours slip through the cracks.)
That’s where legal accounting software comes to the rescue.
This time-saving tool helps you perform and track your firm’s financial operations and stay compliant each step of the way. But with no shortage of options, how do you know which one to choose?
In this guide, we’ll help you understand what to look for when choosing the best legal accounting software for your firm.
What is Legal Accounting Software?
Legal accounting software is a tool designed to support law firms in managing their financial operations. It streamlines various general accounting tasks, like billing, expense tracking, and financial reporting. It also provides industry-specific features like trust accounting and billable hour time-tracking.
What to Look for in Law Firm Accounting Software
When choosing a law firm accounting software, you’ll want to look for these 4 key features:
- Trust Accounting
- Legal Billing
- Time Tracking
- Financial Reporting
Let’s look at each accounting feature in detail to understand its impact on your firm’s financial health and operations.
1. Trust Accounting
It’s critical for legal accounting software to handle client trust funds accurately. Trust accounting features help you segregate client funds and perform trust account reconciliation. You can also generate reports for compliance auditing and peace of mind.
Take MyCase Accounting, for example. This cloud-based accounting software puts all your client’s trust transactions and reconciliations in one place. It also delivers a robust three-way trust reconciliation to keep your firm compliant with State Bar regulations.
2. Legal Billing
In your search for law firm accounting software, pay special attention to the presence of billing features. Legal billing tools are indispensable for optimizing critical billing, invoicing, and payment workflows. The software should allow you to create professional invoices, import client billing information, and collect payments.
MyCase helps thousands of firms with legal billing. On average, MyCase customers have seen the following positive cash flow and productivity results:
- 46% increase in legal payment collection
- 37% increase in average caseloads
- 38% increase in revenue
3. Time Tracking
Another key feature of legal accounting software is time tracking. The software should allow you to track billable hours, expenses, and disbursements for precise client billing. It should also allow you to do this all in real time. By reporting billable time as it occurs, lawyers don’t have to rely on memory when it’s time to invoice, ensuring accurate compensation.
MyCase’s legal time-tracking software reduces the margin for error by automatically connecting time entries to the relevant case. These records are then seamlessly consolidated into invoices, making client billing a breeze.
This feature also prompts your team to log time when they perform actions like making a call, sending an email, saving a note, or uploading a document. These tasks might seem minor but can significantly impact profitability over time.
Read how you can boost time tracking efficiency with a billable hours chart for more information.
4. Financial Reporting
Look for software that provides customizable financial reports and real-time data analytics. These reports enable you to gain deeper insights into your firm’s financial health.
The best law firm accounting software will also provide a financial dashboard. This feature allows you to see data from bank balances, reconciliation information, outstanding invoices, budgets, and more.
With MyCase’s legal financial insights, you’ll know exactly where your firm’s finances stand at all times.
Below are a few types of reports you can generate using this tool:
- Fee allocation reports: Provide a clear and accurate picture of each employee’s financial contribution for every matter at your firm.
- Electronic payment reports: Provide a quick summary of all online payment activity at your firm, which is helpful for tax time.
- Aging invoice reports: Show a complete overview of outstanding balances owed to the firm.
- Time and expense reports: Show all billable and non-billable time, expenses, and line item invoice status for all cases and employees at your firm.
- Trust account reports: Track trust balances to reconcile trust retainer accounts and stay in compliance with state laws.
- Accounts receivable reports: Show your firm’s total receivables so you can understand the exact status of invoices and take prompt action toward collecting and reconciling accounts.
Below is an example of one of the many reports you can view with MyCase’s financial insights.
3 Steps for Choosing the Best Legal Software for Your Firm
Now that you know what to look for in law firm accounting software, it’s time to learn how to pick. Not all options will be the right fit for your firm. It’s important to choose the solution that meets the unique needs of your team and practice.
Here’s how to select the best one:
Step 1. Assess Your Needs
We recommend taking a two-pronged approach to assessing your law firm’s accounting needs.
First, ask yourself what you need from the attorney accounting software today. What are your most pressing pain points? What tool will make an immediate, noticeable difference in your business? These are your must-haves.
Second, think about what you might need in the future. What type of features would help your law firm scale? These are your nice-to-haves.
When vetting potential law firm accounting software solutions, you want to make sure the one you choose checks all your must-haves and, if possible, has a handful of your nice-to-haves.
Step 2. Pick a Legal-Specific Solution
Technically, you can use any general accounting software. However, this isn’t necessarily the best route for law firms. We recommend using a solution designed specifically for the legal industry. These tools will have features customized to lawyers’ unique needs.
For instance, MyCase’s invoicing feature integrates UTBMS codes and LEDES billing. This is a benefit that generic accounting software wouldn’t offer.
Step 3. Estimate Your Budget
Finally, you want to take your budget and firm size into consideration. Some solutions may be out of your desired price range, while others may not be built for smaller businesses—if you manage a boutique firm. Try to look for law firm accounting software that meets both these needs.
At MyCase, we offer solutions that are built for every budget and firm size.
Benefits of Accounting Software for Law Firms
Implementing legal accounting software brings many advantages to your practice. Here are some key benefits for law firms:
Provides Financial Insights
Regular financial reporting provides valuable insights into your business. The best reporting features can give you a holistic view of your firm, its growth, and its performance—allowing you to make strategic, data-driven decisions.
Let’s say you pull an aging invoices report for a complete overview of outstanding balances owed to the firm. You notice that many unpaid invoices belong to the clients of one lawyer at this firm. With this information, you can reach out to that person to understand what’s blocking them from receiving payments.
This article discusses how law firm financial benchmarks can help you identify opportunity gaps and maximize revenue.
Automates Key Processes
The best law firm accounting software should automate processes at your firm.
- Time savings
- Cost savings
- Reduced stress for lawyers
- Increased profitability for the firm
- Greater client satisfaction
For example, with some software, you can set up automatic payment reminders. This speeds up the payment process without adding more work to your lawyers’ plates or sacrificing billable hours.
Every business needs to follow specific regulations when it comes to accounting. This is even more true for law firms where unintentional errors can cost you your business.
For instance, you likely have a client trust account (CTA). These accounts come with specific trust account requirements—such as not withdrawing unearned funds or depositing the firm’s funds until the case’s conclusion. However, if your legal accounting process is disorganized, you may inadvertently break the rules.
That’s why it’s critical for your firm’s financial records to be as accurate as possible. Using the appropriate attorney accounting software will help you organize, process, and track your money correctly so that your firm stays trust compliant and avoids penalties.
MyCase: The Best Legal Accounting Software for Your Firm
Selecting the right legal accounting software for your firm can make a world of difference to your financial operations and overall success.
MyCase Accounting is an innovative solution designed specifically for law firms. It can save your lawyers’ time, improve your firm’s profitability, and keep your finances compliant. We also offer affordable monthly and yearly subscriptions, accommodating the budgets of firms of all sizes.
Try MyCase today with a 10-day free trial. No commitment or credit card is required, and you can cancel anytime.