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Both accounting and the legal profession require high levels of sophistication because of their complexity. In most cases, it is not possible to expect an attorney to understand accounting principles as well as an accountant does, and it is likewise not reasonable to expect an accountant to have the knowledge to represent people in court or explain complex laws and regulations. While these professions involve separate bodies of knowledge and distinct practices, accounting is important for law firms and attorneys. There are multiple reasons why law firms turn to certified public accountants (CPAs) and accounting firms to handle their accounting needs. Here is some information from TMD Accounting about the benefits lawyers derive from retaining accounting firms for their firm’s needs.

Maintain Regulatory and Ethical Compliance

Attorneys must pass the bar and ethics exams after graduating from law school before they can become licensed to practice law in New Jersey. Becoming licensed to practice law is the culmination of years of work. Attorneys must strive to comply with all of the regulatory requirements that govern the legal profession, including regulations about accounting standards and trust accounting. They also must comply with the rules of ethics for attorneys. Violating professional regulations and standards can lead to serious penalties and the potential loss of the attorney’s license through disbarment or suspension. Seeking South Jersey law firm accounting services from TMD Accounting can help to ensure your law firm maintains regulatory and ethical compliance and avoids the risk of potential disciplinary sanctions.

Understand the Firm’s Financial Health

South Jersey law firm accounting services allow principals to see exactly where their firms stand financially at any point. This can help them identify areas in which cuts should be made, unnecessary expenses, opportunities for growth, and other necessary changes to make. Having this type of information at your fingertips can help you adjust course at any time to keep your profit margins healthy and your expenses low. Your accountant can also make recommendations on how to grow and expand in a fiscally responsible way.

Accounting firms provide financial analysis, reports, and metrics to help you identify areas that need improvement, areas in which your firm is performing well, and overall trends your firm has been experiencing. This type of insight can help you make better financial decisions about the direction in which your firm should go.

Time Savings

Some solo practitioners and small law firms attempt to complete their books themselves and deal with their own accounting needs. However, even if you worked in accounting before you changed professions and pursued a career as a lawyer, trying to handle all of the accounting services on your own can take away time from focusing on your business. In most cases, attorneys do not have a solid grasp of generally accepted accounting practices (GAAP) and might be prone to making costly errors. Trying to manage your firm’s accounting on top of your other duties can be time-consuming and overwhelming. When you outsource your accounting to an experienced professional accountant, it will free up your time to devote to your cases, clients, and your business operations.

Tax Planning and Compliance

Staying on top of your taxes is critical for law firms. Attorneys might need help choosing the most appropriate legal entity structure for their firms that will provide them with the best tax savings while also shielding them from potential liability. Throughout the year, firms need to be cognizant of multiple types of taxes and filing requirements, including payroll taxes, quarterly tax filings, annual tax filings, partnership returns, and others. When your firm partners with a professional accounting firm, you can benefit from tax strategies that might save your firm significant sums when it’s time to file your tax returns and recommendations for deductions and credits that you might otherwise overlook. An accountant can also keep you apprised of changes in the tax laws when they occur so that your firm can make adjustments to maximize tax savings.

Prevent Financial Fraud

Attorneys want to avoid financial fraud at all costs. Whether inadvertent or intentional, actions like commingling of law firm and client funds and other similar issues can lead to serious penalties and potential criminal liability. Working with an accounting firm can help to keep your finances organized and in order and identify issues as they arise. Unfortunately, law firms are not insulated from internal theft, embezzlement, and similar crimes committed by employees. Regular audits and accounting can help to identify these types of problems before they balloon and allow firms to hold those responsible accountable for their actions. Catching internal thefts and fraud quickly can help to prevent firms from sustaining substantial losses and protect clients from thefts of client funds.

Protect the Firm’s Reputation

Law firms that have organized accounting practices, good systems for tracking trust accounting, billable hours, and client communication are much likelier to enjoy good reputations among their clients and peers within the legal community. By contrast, if your accounting practices are disorganized, they can set your firm up for client complaints and cause serious harm to your reputation.

Talk to Us About South Jersey Law Firm Accounting Services

Whether you are a solo practitioner, a small law firm, or a mid- to large-sized law practice, you should consider allowing a professional accounting firm to handle the accounting practices for your business. When you outsource your accounting needs to TMD Accounting, we can help you understand the financial picture of your business and ensure you meet tax and other regulatory compliance standards. To learn more, call us today to schedule a consultation at 1-856-228-2205.