This article is part of a six part section on finance. The pages in this section will take you through the basics of trust and general accounting, including a sample Chart of Accounts for a solo or small law firm, some comments about buying accounting software and some accounting tips.
Generic vs. law-specific accounting packages
Although most generic accounting packages can, with some effort, be adapted for use in a Canadian law office, most small law firms prefer to buy an accounting program that is specifically designed for a law office because the vendors of these programs have made sure their program complies with the relevant law society accounting rules.
Although the law-specific programs are somewhat more expensive to buy and maintain, the cost difference is more than made up by the time savings resulting from not having to tweak the software to make it work in a law setting.
Shopping for an accounting package
Here's what you should keep in mind when shopping for a law office accounting package:
Bookkeeping
- Trust done the way your law society requires
- Disbursements done as painlessly as possible, with the option to treat them as recoverable expenses or as assets
- Timekeeping that is easy and that allows work to be posted on either an hourly rate or a block fee basis and allows multiple billing rates
- Multiple, flexible account formats that draw together the trust, timekeeping and disbursements information for easy review, editing and posting
- Easy, intuitive posting of both simple and complex trust and general entries
- Automatic GST calculation and reports
- Clear and understandable trust ledgers, client ledgers and statements of account that can be sent to clients without being retyped
Accounting
- Full range of general ledger accounts (assets, liabilities, proprietor/partnership capital, revenue and expenses), with complete flexibility to customize account numbers and names.
- Year end posting.
- Ability to generate trial balance, balance sheet and P&L.
Management Information
- Quick, easy-to-access client/matter summary showing time, disbursements and trust information.
- Budget function
- Reports as mentioned elsewhere
- Control over which reports will be printed and when
Additional features
- Easy to learn and use
- Rapid entry codes to facilitate posting
- Understandable documentation
- Good support (especially when you are converting to the new program)
- Networkable
- Limitations and deadlines
- Automatic conflicts checking
- Integration with spreadsheet to produce graphs and charts
- Client information that integrates with other programs
- Multi-level password security
- A large base of satisfied users
- Value commensurate with price.
The transition
It takes a while to get a computerized accounting system working well. You will probably make some mistakes in the initial set-up because it will all be so new, so don't go cold turkey. I recommend that you run your old manual system in parallel with the new computerized system for at least two months to allow you to make a step-by-step transition. When you have a good handle on the new system, dump all the information out of it and start over.