Proper financial management is virtually impossible if you don’t have the know-how. And, to be frank, how many law firm owners know how to prepare their records for audit?
Find out more about the advantages of outsourcing your accounting needs, and free yourself to create your dream law firm.
The Complexities of Scaling Law Firms:
All law firms have humble beginnings. Some lawyers choose to keep their practice small, and that’s great. Others have their eye on the Fortune 500 and that’s also great, but that kind of growth needs strategic financial planning.
Scaling up is a bit more than intricate accounting. The size of your firm can affect the regulations to which you must comply, especially when it comes to employees. Permanent, temp, interns, apprenticeships, remote – there are rules and regulations for all of them.
Then there are the costs: recruitment, training, salaries, perks, etc. Outsourcing starts to look pretty good at this point.
Challenges in In-House Accounting:
In-house accounting has many benefits. You can quickly pop in for an update. You can chat strategy over coffee. You can take action as soon as it becomes necessary, for example, to mitigate risks or capitalize on time-sensitive opportunities.
The thing is, the more your firm grows, the higher the volume of transactions. Your accounting needs become increasingly complex and you’ll need to expand your financial department. That means more people, but also more advanced accounting systems.
This can lead to an interesting situation where your growth requires significant expenditure, but it’s not quite sufficient to cover the cost of new staff.
Outsourcing is looking better and better.
The Role of Outsourced Accounting:
When you outsource your accounting needs, you only pay for the services you require and because outsourcing is scalable, you can add services gradually. This suits law firms just beginning to grow that can’t rely on regular increases in revenue.
Arguably, the biggest benefit is access to financial experts who would ordinarily break your budget. Also, the increasing complexity of your needs requires greater specialization.
After all, payroll for five employees is very different to payroll for a CEO, CFO, three partners, and four paralegals.
Instead of upskilling existing staff or hiring specialists, you have a team of experts fully capable of matching your firm’s demanding needs.
Outsourcing Benefits for Scaling Law Firms:
There are three primary benefits. We’ve already mentioned expertise on demand where you have access to specialists with legal-specific knowledge to ensure regulatory compliance.
We’ve also covered cost savings because you don’t need to hire or train in-house accountants. Furthermore, you don’t need additional office space or pay to upgrade your accounting systems.
The third benefit is enhanced efficiency. Outsourcing frees time to focus on core legal functions, especially those billable hours. You can also afford to invest in advanced accounting software, like Sage Intacct, to automate tasks not worth outsourcing.
Sage also has functions that provide insight into your financial status without booking time with a consultant.
Risk Management and Compliance:
Outsourcing relieves you of several responsibilities, particularly the burden of regulatory compliance. Law has enough regulations, you don’t want to deal with legal accounting regulations too. When you outsource, you don’t have to.
9 Best Practices To Follow For Compliance In Law Firm Accounting with regulations governing trust accounts and client funds because you have expert advisors on call. This mitigates the risk of unintentional violations that could result in costly penalties, not only to your finances but also to your reputation.
There’s one more worry you can shrug off: Data security. Outsourcing companies have enhanced data security protocols, including bank-grade encryption. They also conduct regular security audits to ensure everything functions as it should.
Strategic Decision-Making with Real-Time Insights:
Accounting software like Sage Intacct provides accurate, real-time financial reporting so you always have access to current data that enables you to make informed decisions, on the spot if necessary.
Outsourcing also ensures accurate reports, but they’re backed by the experience and expertise of professionals who know how to analyze and interpret the data on a deeper level. Their understanding and insights are more comprehensive and play a pivotal role in strategic planning and decision-making.
You are free to focus on strategic growth initiatives to develop your firm, attract more clients, and maybe extend into different branches of law.
Choosing the Right Outsourced Partner:
A lot rides on outsourcing. You want to be very picky when choosing an outsourcing firm for your accounting services. Expertise is obviously very important. They’re going to manage your taxes, ensure compliance, and prepare your financial records in case auditors drop by.
However, don’t underestimate the importance of good communication. Their work could be exemplary, and your returns might never have been better, but the risk potential is huge if they don’t keep you in the loop. You could make a decision based on a false assumption that creates financial chaos.
Collaboration is also important. You want someone to work with you to improve your financial understanding, management, and planning.
Outsourcing Delivers Results:
If you want to grow your law firm or are already on an upward trajectory, outsourcing your accounting needs makes sense. You can focus on growth and development while your partner manages the finances that make growth possible.
However, here be monsters, so take the time to research your options before committing to an agreement.
