Top 10 Legal Billing Pitfalls – Mistakes You Can Avoid

Pitfall # 8 – Not Handling Client Advances Properly

In today’s difficult economic climate, cash flow and profitability for most law firms depend on a roster of clients who pre-pay (also known as client advances or retainers). However, from an accounting/bookkeeping perspective, law firm client advances (retainers) need special treatment and must be handled very carefully. While most other businesses deposit client advances in their business account, lawyers cannot do so that easily.

For attorneys, improper handling of retainers can result in disciplinary action. Time and again, attorneys are admonished for failing to handle funds properly. Client advances may need to be deposited in a trust account or in the firm operating account, a decision that must be made carefully because state rules vary and change from practice to practice.

Since client advances are debited as legal fees are earned, your legal billing software must track the remaining retainer balances at all times and invoices must correctly reflect balances.

The varied nature of client advances, an initial deposit to trust and/or operating account, and reducing balances as fees are earned can significantly complicate your back office operation if not handled systematically. Due to the uniqueness of client advances and the consequences of mishandling them, choose your legal billing software with this fundamental requirement in forefront rather than as an afterthought and you can avoid Pitfall # 8.

To see a more detailed presentation and learn how easy it is to account for advances if your billing system is set up properly, register for Easy Soft’s interactive webinar, How to Avoid Legal Billing Pitfalls. Learn how to evaluate systems that can streamline your back office operation for legal billing, trust account management and collections, and in turn, tighten state regulation compliance and improve your firm’s financial picture.