Owning and operating a Personal Injury practice can be immensely fulfilling, but it also takes lots of work. When deadlines pile up, saving specific accounting tasks for later can be tempting. But doing so creates bad habits and can lead to ethical issues. Here are five mistakes to avoid in law firm accounting.
CloudLex understands the trials and tribulations experienced by today’s personal injury attorneys. Our case management software was designed explicitly for PI firms to help them manage the unique challenges they face and to help streamline their accounting processes.
1. Not consistently tracking your expenses
We get it. You are busy handling your cases, returning calls from opposing counsel, and preparing for the trial. It is easy to forget to log an expense here or there or end up with a pile of receipts at the end of the month (or quarter) and have to put on your detective hat to find out what cases they belong to. But not implementing and using an expense tracking system prevents you from seeing where your firm’s money is going.
In a contingency-based legal practice, keeping a pulse on your income and expenses is essential. Expense management for law firms can have a domino effect on your firm’s finances, potentially leading to the inability to keep up with your other financial obligations. But by consistently tracking your expenses, you can take control of your firm’s financial health and ensure that you are productive and efficient.
2. Not using an accurate time tracker
If you take cases on contingency, you may not think tracking time has anything to do with you. But you would be incorrect. In many respects, tracking your time is even more critical when clients pay you on contingency than in any other financial arrangement.
As you know, you do not get paid until and unless you win your client’s case and they get compensation. If you fail to track the time you spent on the case, you will not be able to adequately grasp whether that type of case is making or wasting your firm’s resources.
Further, there are situations where you may need to justify your contingency arrangement, or the court may instead reduce your legal fees to the time you spent on the case. Guessing how long you spent handling that complex product liability case is sure to lead to errors, which may, in turn, cost you money and potential clients. Do it right the first time by using a time tracker.
3. Not backing up your firm’s data
When it comes to technology, nothing is ever completely secure. But there are steps you can take to safeguard your and your client’s data. Regularly create backups (preferably automatically) to ensure you always have access to the accounting data you need to run your firm.
Furthermore, if data goes missing or, worse, is stolen, this can lead to ethical violations. Give yourself peace of mind by creating secure backups of your firm’s systems. Or go a step further and switch to HIPAA-compliant, cloud-based personal injury case management software like CloudLex.
4. Not utilizing modern legal accounting software
If you or someone on your team uses outdated software or pulls out a pen and paper to balance the firm’s checkbook, it is time to modernize your system. As nostalgic as it is to perform legal accounting manually, it can lead to costly errors.
Many personal injury attorneys take cases on contingency, so every second, every dollar spent counts. Your team does not know if you will get paid or when, so every payment you make is money you potentially will not see again. For this reason, your accounting method must be as accurate as possible, so you make sure you spend your dollars and cents wisely.
Modern legal accounting software seamlessly tracks, manages, and calculates your expenditures and income, providing you with avenues to generate powerful reports. Systems like CloudLex empower you to track and manage your expenses with ease. You can even book case-related Uber rides for you or your client through the CloudLex app and attach the fee to the related matter.
5. Not properly explaining how and when clients pay you
Unfortunately, many people have a negative perception of attorneys. This likely comes from sensational news stories, television shows, or even bad experiences. Because of this perception, good lawyers may not get the benefit of the doubt if there is a misunderstanding about how and when the client is to pay them. Moreover, the ethical accounting rules about fee arrangements tend to err on the client’s side regarding disputes about money going to the attorney.
Save yourself the headache by implementing fool-proof client intake and onboarding processes to ensure your clients know exactly how you will be paid. By using a client portal and allowing electronic signatures, you can ensure your client has access to the fee and representation agreements whenever they have questions instead of requiring them to hunt down the paper copy.
CloudLex: Changing the game in Personal Injury case management software
Helping you stay on top of your legal accounting obligations is just one of the many ways that CloudLex supports you. Our made-for-PI-attorneys platform utilizes robust and secure cloud-based software, including our powerful Personal Injury Settlement Calculator, secure client communication software, comprehensive Expense Manager, and more.
Contact our team today to discover more about CloudLex and what it can do for you.