Law Firm Practice Areas: Family Law Accounting Nuances



When working with clients who have the practice area of family law, several areas stand out that can be challenging. First of all, with this practice area, you will have a good volume of transactions of a similar amount and possibly some similar names.

The Chart of Accounts, even for a family law firm, typically includes five main categories: assets, liabilities, owner's equity, revenue, and expenses, plus many subcategories. We have a great legal-specific one we share here.

Common Bookkeeping Pitfalls for a Family Law Firm

  1. Cash payments: Family law may have clients that pay in cash. A good workflow and procedure for handling this in the law firm are paramount.
  2. Tracking the volume of clients and payments: The amounts charged are the same, and the clients' names can be similar. Monitoring at this level has to be detailed. Find the person in charge of Accounts Receivable and review the workflow. Ensure that one person is tracking this data and that there is also oversight by a partner.
  3. Merchant Services: Have a great merchant provider (we recommend Gravity Legal). This way, you have the trust transactions hitting the IOLTA account and any merchant fees landing in the operating bank.
  4. Track all business expenditures: There are a lot of receipts and paperwork in a family law practice. Most are billed back to the clients (advanced client costs). Is there a method in place for collecting these receipts in one place? The matter should be coded to each expense. Then each fee should be integrated into the accounting system as an attachment to the transaction for better tracking.
  5. Intermingling personal & business expenses: Many family law practices are solo. If the attorney wants to run a legitimate business, they should never combine personal and business expenses. Intermingling the two makes it nearly impossible to claim your expenses, not to mention to track the financial profitability of your firm. It is frowned upon by the IRS.
  6. DIY bookkeeping/marketing: The tendency here is to wear the marketing hat and the bookkeeper hat amongst the other hats you have to wear as a business owner. Bookkeeping requires processes and attention, just like everything else in your firm, but tracking the trust makes this task even more critical.  If you do the bookkeeping work in the evenings, that does not set up an optimal workflow.
  7. Trust must be tracked to the penny: This is imperative! And in a family law practice, there may be a lot of transactions and movement of funds. These must be adequately tracked so the law firm stays compliant.
  8. The bar association requires reconciliation: You must maintain a 3-way bank reconciliation for the trust matters. Additionally, you should be reconciling advanced client costs and other banks, credit cards, and loan accounts.

Every family law attorney we have serviced works hard! There are long hours in court, and their clients contact them at all times of the day. It is a lot on their shoulders--it's so time-consuming!  If an attorney wants to run their firm successfully, they should run a few KPIs like client analysis by matter and other high-level KPIs like marketing and billable hours analysis tracking your utilization rate. Most family law attorneys are exceptionally busy. The work can be fulfilling, but it is difficult to manage independently.

We hope this blog post has helped you find new strategies to help you make the most of your family law practice. If you have any other questions or concerns about working with clients in the legal industry, please contact us anytime at 239-848-0001.