Law firm bookkeeping services

Updated

Law firm bookkeeping services usually mean a monthly close plus trust-account work: client funds kept separate from operating funds, balances tracked client by client, and a documented three-way reconciliation. Compare providers on IOLTA experience, reconciliation cadence, and the software they already use before you hire.

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Who this is for

Solo attorneys keeping their own books, small firms whose bookkeeper has never handled trust accounts, firms whose trust balance no longer agrees with client ledgers, and practices preparing for growth, a new partner, or a bar inquiry.

A monthly routine for law firm bookkeeping

Bookkeeping for law firms tends to stay manageable when the same steps happen in the same order each month. The sequence below is a common pattern, not a rule set; your jurisdiction's trust accounting rules decide what is required. Post the month's bank, card and practice-management activity, keeping trust and operating transactions in separate accounts. Reconcile operating bank and credit card accounts to their statements. Reconcile the trust account three ways (adjusted bank balance, trust ledger balance and the total of client ledgers) and save the dated report. Review client ledgers for negative balances, dormant balances and earned fees still sitting in trust. Record advanced client costs against each matter so recoverable amounts stay visible. Close the month and produce reports: profit and loss, balance sheet, aged receivables and a trust liability summary. Where staffing allows, have someone other than the preparer review the trust reconciliation.

What the workflow needs to handle

Separation of trust and operating funds, per-client trust ledgers that sum to the trust balance, documented reconciliation on a fixed cadence, advanced client costs, revenue recognition tied to billing data, partner draws and payroll, and monthly reporting a firm owner can act on. Bookkeeping is that monthly record. Accounting adds partner compensation, cash and accrual views, and the package a lender will read. Tax filing is usually a CPA engagement. Ask which of those jobs is in the written scope. Solo attorneys need the same separation of client money from firm money as a larger firm.

How to evaluate a law-firm bookkeeper

Ask three things before you treat any firm as a fit. First, trust experience: has the bookkeeper kept IOLTA or other client trust records, and can they describe how client funds stay out of operating income? Duties to safeguard client property are discussed in ABA Model Rule 1.15; the binding rule is the one from your own jurisdiction. California's client trust account program is one public example, not a national standard. Second, cadence: how often they complete a three-way reconciliation, who reviews it, and what dated report you receive. See IOLTA three-way reconciliation. Third, software: whether they already work in the stack you use. Firms commonly mention Clio, QuickBooks Online, or LeanLaw. Naming a tool is not a recommendation of that tool or of any bookkeeper. When the written scope matches, compare bookkeepers who work with law firms or use the matching quiz.

Questions before hiring

How many law firms do you serve? How do you keep trust activity out of operating income? Do you maintain per-client ledgers and how often are they reconciled? Which systems do you use? How are advanced client costs recorded? Who does the work, and how is the fee structured?

Jurisdiction note

Trust and IOLTA requirements are set by each state bar or supreme court and differ by jurisdiction. This page is general information, not legal, tax, or accounting advice.

Check your current bookkeeping setup

Not sure where your current books stand? Nine multiple-choice questions on trust account reconciliation, client ledgers, monthly close and reporting give you a plain-English list of areas to review. It is educational, not advice, and no contact details are required. Free law firm bookkeeping health check.

Frequently asked questions

Is law firm bookkeeping different from regular small-business bookkeeping?

The core monthly close is similar. The difference is client trust money: funds held for clients are generally not the firm's, must usually be tracked per client, and are subject to bar rules. Requirements vary by jurisdiction.

Do I need a bookkeeper who has worked with law firms specifically?

Not automatically, but a bookkeeper who has handled trust accounting is less likely to need training on it. If you hire a generalist, agree up front on who is responsible for trust reconciliation and documentation.

Does a bookkeeper replace my CPA?

Usually not. Bookkeeping covers ongoing recordkeeping and the close; tax filing and planning are typically CPA work. Many firms use both and expect them to coordinate.

How quickly can cleanup work be finished?

It depends on how many months are open, whether trust records exist, and how quickly bank and billing data can be gathered. Ask for a scoped cleanup estimate before committing to ongoing work.

What is the difference between bookkeeping and accounting for a law firm?

Bookkeeping records transactions and closes the month, including trust reconciliation. Accounting interprets those records for partner compensation, cash and accrual views, and decisions such as a loan or a new partner. Tax returns are usually prepared by a CPA. Trust-account rules vary by state.

What reports should a law firm get from its bookkeeper each month?

Commonly a profit and loss statement, a balance sheet, aged receivables and a trust reconciliation report showing the bank, book and client-ledger balances. Formats differ between providers, so ask for a sample before hiring.

How do I choose the best bookkeeper for law firms?

People asking for the best bookkeeper for law firms are comparing criteria, not a single winner. Ask whether the provider has handled IOLTA or other client trust accounts, how often they complete a three-way reconciliation and who reviews it, and which systems they already use, such as Clio, QuickBooks Online, or LeanLaw. Compare written scopes. A listing on this page is one option to review, not an endorsement.

Related law firm bookkeeping resources

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