Meet Legal Billing and Accounting Requirements

Legal Billing and Accounting Requirements

Law firm billing and accounting requirements are different from other service businesses. Even within the circle of legal practices, requirements vary greatly from one practice area to another.

Easy TimeBill legal billing software and Easy Trust, trust accounting software are popular legal specific programs that meet billing and compliance requirements for hourly, fixed and contingency fee structures.

Hourly Fee Practices

Family law, estate planning, general civil and commercial litigation, elder law and commercial bankruptcy are some legal practices that use an hourly fee structure.

Typical Hourly Fee Legal Accounting Operations

• Receive client advances (retainers)
• Record daily billable time across multiple matters
• Record matter expenses as incurred
• Generate bills at fixed intervals
• Receive payments from client advances or new money from clients
• Transfer earned trust funds to operating accounts, if advances were placed in a trust account.

Legal Billing Software for Hourly Billing Needs

The Easy TimeBill legal billing software module meets all legal billing requirements. You can:

• Set a timekeeper's billing rates
• Receive advances (in operating or trust accounts)
• Enter billable time
• Enter expenses
• Generate invoices
• Receive funds
• Prepares payment reminders, collection and low retainer balance letters
• Generate billing and administrative reports

Trust Accounting Software & Hourly Fees

The Easy Trust, trust accounting software module meets all trust accounting requirements for an hourly fee structure. You can:

• Receive advances
• Track trust funds for individual matters
• Print disbursement checks
• Reconcile bank account statements
• Generate required reports, including three-way reconciliations

Hourly Fees and Operating Account Bookkeeping

For operating accounts, it is best to use an industry standard accounting program like QuickBooks. CPAs usually prefer such programs because they work very well with year-end tax preparation software. The only Easy TimeBill legal billing software data transferred to QuickBooks will be hourly legal fees received in operating accounts (from new funds or trust funds) and quarterly/yearly account receivables.

Fixed Fee Practices

Real Estate and Consumer Bankruptcy are two common fixed fee legal practice areas.

Typical Fixed Fee Operations

Fixed fee arrangements include a fixed fee plus cost basis or a fees set for a fixed interval (e.g. monthly retainer). Advances received are typically deposited into trust accounts. Settlement funds, such as real estate closing settlement transactions flow through attorney trust accounts.

Fixed Fee Billing Requirements

Billing requirements for fixed fee practices are generally very simple. Easy TimeBill legal billing software can generate a fixed fee plus cost bill or generate a periodic fixed fee bill. Record time spent for each matter is still a good idea, even though the time may not be billable (due to fixed fee matter). Tracking all time devoted to a case can help you analyze the profitability of fixed fee matters.

Trust Accounting Software for Fixed Fee Matters

The Easy Trust, trust accounting software module meets all fixed fee trust accounting requirements. You can use Easy Trust to:

• Track trust balances for individual matters
• Print disbursement checks
• Reconcile bank account statements
• Generate required reports, including three-way reconciliations
• Transfer closing ledger data to Easy Trust in one click, if you use Easy HUD

Contingency Fee Practices

Personal injury and debt collection are the most common legal practices that work on a contingency fee basis.

Typical Operations for Contingency Cases

Contingency fee case expenses must be tracked while a matter is open. At settlement, funds are initially deposited into trust accounts. A closing statement of fees is prepared. The statement itemizes reimbursable case expenses and a fixed percentage of remaining funds goes toward a firm's legal fee. Once a closing statement is approved, funds are drawn from a trust account and transferred to an operating account. The remaining trust funds are disbursed to clients and other parties.

In collection practices, the process might be repeated as funds are collected, rather than waiting for final settlement.

The funds an attorney advances in contingency fee cases are generally considered interest free loans and are not tax deductible. Maintaining a separate account for contingency case expenses purposes is best rather than mixing them with normal operating expenses.

Contingency Fee Billing Requirements

Because contingency fee practice billing requirements are generally very simple, the, Easy TimeBill legal billing software module is not necessary. However, recording time spent for each matter is useful to measure profitability.

Tracking Case Costs With Trust Accounting Software

The Easy Trust, trust accounting software module can track case costs and generate matter cost statements. Simply create a separate bank account for this purpose and the program will track the cost of individual matters.

Trust Accounting Software and Contingency Fee Cases

The Easy Trust module meets all trust accounting needs for contingency fee cases. The software allows you to:

• Track trust balances for individual matters
• Print disbursement checks
• Reconcile bank account statements
• Generate required reports, including three-way reconciliations

Contingency Fees and Operating Account Bookkeeping

For operating account bookkeeping, it is best to use an industry standard accounting programs such as QuickBooks. Only legal fees received from contingency fee case settlements or collections must be recorded as income. Reimbursable case expenses are directly applicable to specific costs, since the IRS considers attorney advanced funds an interest free loan to the client in a contingency fee arrangement.