There are plenty of accounting software packages around that record and organize data. The problem is that a fair few of them still require manual data entry (by hand). Unfortunately, this takes a considerable amount of time and people, being human, are prone to the odd error or two. Cutting edge outsourced accounting services, on the other hand, use the best, most up to date cloud-based software that includes automated systems and AI technology that saves time and eliminates human error.
If you’re still using outdated software, chances are good you’re costing your law firm a lot of money. The time it takes alone eats into your billable hours and then you have to add the costs of a full-time employee, including recruitment, training, equipment, salaries, etc. Moreover, modern employment trends favor job hopping or “churn.” This can have significant benefits for employers, but having to replace employees every two to three years gets expensive.
The beauty of outsourcing financial services is the continuity. You don’t have to deal with any chopping and changing. Your records and reports are always accurate and on time. You always know your firm’s financial health and concomitant analysis provides insights that enable you to make good financial decisions to the benefit of your business.
Disadvantages of On-Premise Software and Manual Data Entry
Perhaps the biggest problem with manual data entry is the risk of error. Some mistakes aren’t immediately obvious and the longer they go undetected the bigger the impact they have on essential financial information.
A simple mistake like switching a number can also have knock-on effects on various elements, like invoicing and payroll. It can have a snowballing effect as it travels through the system, incurring penalties as it goes along.
Automated, AI-powered solutions eliminate the risk. You can always rely on the accuracy of the reports. What’s more, you can trust the software to ensure all data is recorded, stored, and used according to strict state and federal industry regulations. Non-compliance is simply not a problem.
Another disadvantage of on-premise software is its lack of flexibility and scalability. The package includes X features. You might not need all of the features, but that’s too bad. One product, one price. This is also not a problem with automated cloud-based law firm bookkeeping software. The service is flexible and scalable to fit your firm’s needs wherever it is on its path. You can add features if you grow and you can shed features if you’re winding down.
Common causes of manual accounting data entry errors
Data entry error. It’s considered one of the most common types of errors and refers to an accidental error when data is recorded or captured. It can have severe consequences for your law firm.
Omission error. This is when whoever is responsible intentionally or unintentionally fails to enter a transaction completely – or at all. In accounting terms this tends to mean a transaction wasn’t recorded (or only partially recorded) on either the debit or credit side.
Duplication error. The opposite of an omission error, this occurs when a transaction is entered twice as either a debit or credit.
Transposition error. This occurs when two or more sequential numbers are substituted; for example, instead of recording 1704, the numbers are switched around to read 1740.
Compensation error. Two wrongs almost make a right. An error in one entry is offset by the same error in another entry which results in balanced accounts that are nonetheless, incorrect.
Principle error. When the correct amounts are entered into the wrong account.
Entry reversal error. The amounts are recorded the wrong way around. A debit is recorded as a credit or a credit is recorded as a debit.
Closing error. Closing dates differ but all the required information has been correctly entered.
Reconciliation error. A recon error is the result of an error elsewhere in the records; for example, duplication or transposition.
There are several ways in which you can prevent accounting errors. The easiest by far is to outsource law firm accounting services to companies that use automated accounting software like Sage Intacct ERP. Sage cloud-based software has all the features you want from an outsourcing company; scalability, compliance assurance, accuracy, analysis, management, and reporting that enables you to develop a structured plan to drive growth.
If you haven’t yet made the switch to automated systems then you can use the following to prevent errors.
- Always double-check entries, preferably using fresh eyes to prevent autocorect – when whoever goes over data automatically compensates for error. This can be common in transposition errors.
- Emphasize accuracy over speed. This is sometimes easier said than done when there’s a backlog of work.
- Password protect financial books and records to prevent additional entries with the potential to throw the figures out of whack.
LWI is an accounting outsourcing specialist that uses high-tech cloud-based accounting software to provide a range of benefits, including reduced expenses for small businesses. This enables law firms to focus on their core functions and improve service delivery for their clients. Ultimately, performance is improved across the board.
We also ensure that automated systems lowers the likelihood of fraud.
How do we achieve this?
We take pride in the quality and accuracy of our services, which is one reason we assign at least two of our experts work with each client. You’re assured of virtually flawless accounting records and financial management. You can find us in 18 states across America, where we ensure all of our clients benefit from our expertise in industry-specific financial services, like trust accounting for law firms.
Our software solution
We use Sage Intacct to provide customizable features, including billable and non-billable hour tracking, user-friendly dashboards, data automation, and revenue recognition. You even get an easy-to-follow audit trail. Contact us to find out more about our other top-notch services which include software selection, integration with existing systems, and account management, as well as our specialist. Bookkeepers, Controllers, and CFOs.
Read more about our Law Firm accounting services.