Keeping accurate, clean records of your law firm’s accounts is a challenging yet vital part of running a legal practice, but it doesn’t have to be a hassle. Law firm accounting software simplifies your firm’s accounting and bookkeeping workflows—making it easier to keep accurate records, stay compliant with ethics rules, protect sensitive client information, and effectively monitor your day-to-day cash flow.
The advantages of law firm accounting software multiply with today’s cloud-based solutions. While on-premise accounting software ties you to a physical location and requires high maintenance costs and time-consuming updates, you can access cloud-based accounting software from anywhere (even remotely). Cloud-based accounting software for law firms also gets updated and backed up automatically, and offers unparalleled, real-time insights into your law firm’s financial data.With that said, it’s not always a simple or easy decision to choose a new technology for your practice. Read on to learn more about your options for accounting software. From understanding what software features benefit your law firm, to how to select the best solution for your situation, to the best law firm accounting software for small law firms, we’re breaking down the essentials you need to know.
Best law firm accounting software for small law firms
At its core, the best accounting software for small law firms makes it easier for a firm to follow accounting and bookkeeping best practices. It should be user-friendly, designed for the unique needs of law firms, and easy-to-access when you need it. In most cases, this means cloud-based law firm accounting software that can integrate with your existing tech stack.
With this in mind, here are four small law firm accounting software options to consider—and their pros and cons:
One of the most popular accounting software solutions for small businesses, QuickBooks Online becomes a powerful law firm accounting software solution when used alongside Clio Manage.
Together, QuickBooks Online and Clio:
- Sync financial information (like contacts, invoices, financial information, trust transactions, and more) to eliminate duplicate data entry and manual check writing.
- Sync payments and credit notes applied to bills in Clio to QuickBooks Online.
- Manage amounts in Operating and Trust accounts (To learn more about legal trust accounting using QuickBooks and Clio, read this guide).
- Ensure that amounts in trust are reconciled between Clio, QuickBooks Online, and your associated bank accounts—via an automated trust workflow.
- Simplify time-tracking.
- Ensure simple and accurate data management and reporting.
- Easy to use. The user-friendly interface allows for easier navigation.
- Seamless integration. Working with Clio’s practice management software, QuickBooks Online creates a comprehensive, time-saving accounting solution for law firms.
- Remote access. You can access cloud-based software from anywhere you have internet access.
- Not designed specifically for law firms. On its own, QuickBooks Online is an accounting solution for all kinds of businesses.
- Tiered subscription levels. Multiple pricing levels allow users to choose a subscription plan that suits their budget, but lower-tier plans may not have the features of higher-cost plans.
Xero’s online accounting software is designed for small businesses, like law firms—helping to streamline and simplify your practice’s financial management.
Xero also integrates with Clio, which helps make this accounting software incredibly useful in the specific context of law firm accounting. Together with Clio Manage, you can use Xero to:
- Automatically connect client invoices and expenses in Clio Manage to Xero to create a seamless link between your accounting and billing process.
- Create customized online invoices—to help you get paid faster.
- Gain valuable business insights from real-time, flexible financial reporting and dashboards.
- Save time with automated bank feeds and reconcile accounts with ease.
- Simplify payroll and stay compliant by using Xero’s integrated payroll software.
- User friendly. Lawyers aren’t accountants, and Xero doesn’t expect you to be. Because it’s made specifically to simplify accounting for small businesses, Xero is easy to use.
- Connection with Clio. By linking Xero with your firm’s practice management software, you can streamline accounting and billin +g workflows to save time and reduce errors.
- On-the-go access. You can access Xero’s cloud-based software from anywhere you have internet access.
- Not designed specifically for law firms. While not exclusively made for law firms, Xero is made for small businesses—like small law firms. By using Xero with Clio, you can connect accounting with legal-specific functionality.
- Time-tracking is an add-on. Project and time tracking functionality, which is important for law firms, is an add-on to Xero’s Starter, Standard, and Premium plans.
Made exclusively for lawyers, TrustBooks’ legal accounting software makes it easier to manage your law firm’s accounting and meet state bar requirements. Key TrustBooks features include:
- Trust account management features—so your firm can stay compliant with your state bar.
- Auto-generated three-way reconciliation for trust accounts.
- Easy reporting for clients and trust ledgers.
- Automatic daily backups.
TrustBooks also integrates with Clio to eliminate the need for duplicate data entry, which saves you time and reduces the chance of error. The integration lets you import all bank activity from Clio to TrustBooks—so you don’t need to complete double entry with your accounting software
- Industry-specific design. Made for attorneys and law firm’s, TrustBooks is made to handle the needs of law firm accounting.
- Focus on trust accounts. Staying compliant and managing trust accounts correctly is essential for law firms, and TrustBooks is designed with features to make this easier.
- Cloud-based. Because it is cloud-based, TrustBooks is easy to access.
- Email-only support. TrustBooks offers support via email only, which may not be ideal for customers who need more immediate support.
FreshBooks’ cloud-based accounting software works for solo practitioners and law firms looking to streamline their bookkeeping needs. With FreshBooks, you can send professional invoices with ease, track and expenses on the go, and accept payments online.
- Cloud-based for on-the-go access. This can be useful for tracking things like expenses while you’re away from the office.
- Adds professionalism to invoicing and billing. FreshBooks makes it easy to create customized (for example, with your law firm’s logo), professional-looking invoices in minutes. FreshBooks’ recurring profiles makes it easy to automatically send out monthly billing invoices, and auto-bill functionality allows you to set up a billing schedule to automatically charge your client’s credit card.
- Lacks legal-specific accounting features. With more bookkeeping features than accounting features tailored to law firms, FreshBooks does not offer a solution for trust accounting or other legal-accounting-specific challenges.
Some key law firm accounting software features
Not sure what you should be looking for if you’re conducting a law firm accounting software comparison? Consider the following key law firm accounting software features:
It’s essential that your firm’s bookkeeping of financial transactions and accounts be meticulous and accurate. Law firm accounting software that syncs your firm’s financial activity (the Clio and Xero integration, for example, lets you automatically connect client invoices and expenses from Clio with Xero) helps take care of bookkeeping tasks automatically—creating more accurate records with less work for you.
Capturing every minute of billable work is critical for accurate law firm billing and, ultimately, profitability. Software with effective and easy-to-use time-tracking features—like the multiple time-tracking capabilities lawyers can access when they use QuickBooks with Clio Manage—are key to success.
Trust accounting can be complex, but it must be done correctly in order for law firms to stay compliant. Tools like Clio’s legal trust and accounting software features can help you create trust and operating accounts as required by legal industry regulators, generate invoices that comply with regulations, run reports required for trust accounting compliance, and easily reconcile accounts.
Law firm billing can be time-consuming. But law firm accounting software with billing features (such as the ability to create or track invoices) or that connects with your practice management software can simplify your workflows. Take Xero and Clio Manage: The integration lets your firm automatically connect your client invoices and expenses from your practice management software to your accounting software—streamlining the process.
As the 2021 Legal Trends Report found, the majority (66%) of consumers expect to pay for legal services via online payment. This data shows that clients find software that securely accepts online credit card payments is more convenient. Online payments solutions also streamline your collections and accounting workflows.
No matter how big or small your law firm is, accurate, timely payroll is essential—but it can be time-consuming to complete manually. Online law firm accounting software can help by automating your payroll. If you choose accounting software that automatically syncs payroll functionality with time-tracking and expense apps, you can also generate pay runs with the click of a button, for more efficiency.
Law firm accounting software can assist with taxes in multiple ways. Some accounting software can help you prepare your taxes, or—if your law firm hires an accountant to prepare your taxes—legal accounting software helps keep accurate records that are essential at tax time. Moreover, many online accounting tools have options to create useful online reports on taxes.
When applying taxes, accounting software can help as well. For example, the Clio Manage and Xero integration lets you apply a tax to an expense category in Clio, and that same tax amount will be applied to the client invoice in Xero.
The ability to view and evaluate your firm’s financial performance is key to its success and growth. But manually creating reports is time-consuming and impractical. With online law firm accounting software, however, it’s easy to quickly produce reports that give you the insights you need—whether you need reports on sales, expenses, taxes, or other metrics. Some even have report customization options to get a clear view of what you care about most. For example, in Xero, you can easily edit the layouts of your financial reports to prioritize what’s most relevant for your firm.
Features that help you balance your business accounts and simplify reconciliations (which can also include features for three-way trust account reconciliation) make it easier to verify your financial data, with less manual effort.
Accounting software with a robust client relationship management system (CRM) can save time and streamline your firm’s invoicing and billing workflows.
Benefits of using law firm accounting software
Running a law firm can sometimes seem like a job that never ends. But by leveraging tools like law firm accounting software, you can make the process of maintaining your practice’s accounts faster, easier, and more effective. Here are just a few of the key benefits of using law firm accounting software:
Improve your law firm’s cash flow
Healthy cash flow is key to any legal practice’s financial health. The right law firm accounting software can help you better manage and improve your law firm’s cash flow by providing a clear, real-time picture of the firm’s financial data.
Most modern online accounting platforms offer intuitive dashboards, so you can see how your firm’s business is going at a glance—without even running a report. These law firm accounting dashboards show what cash is due to come in and out of your law firm each month. These dashboards also show key financial data like bank balances, reconciliation information, outstanding invoices, budgets, and more. Additionally, if your law firm accounting software is cloud-based, you can access this information from anywhere, at any time.
The result? When you can see exactly where your law firm’s money is, you can more easily identify what parts of your firm are successful and where you’re struggling, so you can make more informed and strategic business decisions.
Save time on tedious data entry
Dealing with spreadsheets or manual accounting is time-consuming and leaves you at increased risk of human error. Law firm accounting software reduces manual data entry. QuickBooks Online, for instance, works with Clio’s practice management software to sync contacts, invoices, financial information, trust transactions and disbursements. When you use these tools together through their Clio integration, this eliminates repeat data entry—saving you time and effort.
Save time on payroll
Payroll processing is a significant—yet often forgotten—overhead for many small law firms. Payroll must be processed accurately, but it can be complicated and time-consuming. The best law firm accounting software lets you automate your payroll so that you can complete the job accurately and quickly.
Another time-saving benefit? After you process your pay run using law firm accounting software, your accounts will be updated automatically.
Keep accurate financial records
When it comes to financial records at your practice, accuracy should come above all else. Otherwise, the records lose their meaning and value. Using online law firm accounting software will ensure important financial data is processed and tracked correctly, so it’s easier to keep accurate financial records for your firm’s bookkeeping and accounting. Cloud-based law firm accounting software will help you stay compliant with applicable ethics rules.
Use financial data to make better business decisions
In addition to being necessary to comply with ethics rules around law firm accounting, accurate financial records can drive law firm growth, as you need accurate data to make smart business decisions for your law firm.
Without regular—and accurate—financial reporting, you may not see potential opportunities, and smaller problems may inadvertently escalate. Unfortunately, reports that give you what you need can be cumbersome to create manually.
However, with cloud-based law firm accounting software, it’s easy to quickly produce reports that give you the insights you need. You can use these reports to create budgets for your firm, track financial trends, and more. With the right information available when you need it, you can make data-driven business decisions to help your firm succeed.
How to evaluate law firm accounting software
Implementing any technology solution at your firm is a big decision—including law firm accounting software. While the benefits of a cloud-based accounting solution as a concept are clear, not all law firm accounting and financial management software is created equal. If you’re looking at your options for a law firm accounting software comparison, keep the following considerations in mind:
Prioritize law firm accounting software features you need
Do you need software with trust accounting features? Do you struggle with billing, and need software that can help with time tracking?
Different law firm accounting software options have different features, but that doesn’t mean that you necessarily need every single feature available. Consider what functionality would be most useful, and make them deal-breakers when selecting an option.
Think about who will use the software
Whatever software you choose should be user-friendly enough to meet the needs of the people who will use it the most at your firm. If your firm’s users tend to need more technical support when using a new tool, look for options that are easy to navigate and that offer customer support options that work for them.
It may also be helpful to read law firm accounting software reviews to get an idea of the user experience of other firms who have tried the potential software before you.
Choose cloud-based law firm accounting software
With more flexibility for on-the-go and remote work, stronger security, and increased scalability, software that’s based in the cloud is advantageous to costly on-premise software solutions—including when it comes to law firm accounting software. Cloud-based solutions let you work efficiently from wherever you are and can integrate with other cloud-based solutions to create systems that benefit your firm—so you can streamline your accounting process, while always staying up-to-date.
Consider your existing tech stack and workflows
The goal is to find a law firm accounting software solution that works with and enhances the functionality of your existing tech stack. With this in mind, think about how you are (or would like to) manage certain workflows once you have implemented law firm accounting software. How could this accounting software work with how you handle your matters, time tracking, trust accounting, billing, payments, payroll, and any other important aspects of running your firm?
This is where accounting software that integrates with your legal practice management software can prove especially useful.
What kind of financial data do you need?
Whether you need specific financial data to stay compliant with your trust accounting or you want to create custom reports to help drive business decisions, law firm accounting software can help—but not all products will have all the features you want. Consider what you need, and seek out accounting software that can assist.
As a lawyer, it’s your responsibility to protect client data, including data that may be stored or processed in your law firm accounting software. With this in mind, it’s important to vet the security features of any potential solution.
For tips on data security for law firms and how to vet potential providers of cloud-based services for security, read our law firm security guide.
Choose software designed for law firms
Accounting for law firms has unique requirements for trust accounting, billing, and more. While general accounting software can help a business, choosing accounting software that’s designed for law firms will be vastly more useful. Look for legal-specific accounting tools or software that integrates with legal practice management software to create a solution that works for your law firm.
Between practicing law and managing your office, it can be difficult to keep meticulous financial records, and it’s easy to make mistakes. Even if you do get everything right, it might be hard to see your financial information in ways that help you make smart business decisions. Law firm accounting software saves you time while reducing errors and unlocking easy, useful financial reporting capabilities.
While it may be tempting to try to save costs by taking care of accounting yourself, the right law firm accounting software can help you improve your billing and collections process, save time on administrative tasks, and discover insights into your firm’s financial well-being.
From time-saving features like streamlined billing and time-tracking to features that can help your firm stay compliant with trust accounting, and more, law firm accounting software is a necessary investment for law firms.
While there are many law firm accounting options to choose from, the key is to look for options that have the features that matter most to your firm—and that can help your firm with its unique legal business needs.
Note: The information in this article applies only to US practices. This post is provided for informational purposes only. It does not constitute legal, business, or tax advice.