Now is the time to rethink your practice management and livelihood. You and your staff are probably working remotely because of the pandemic. Thus, it is even more essential to think about your law firm accounting and taxes to have a clear financial indicator of your law firm’s well-being and what your next steps should be.
Here we offer insights to guide you on your way from the best practices for expense management to the value of going paperless. All you need is the right mindset, the right advice, and the right technology.
Best practices for a paperless expense management
For law firms, having neat paperless expense management is essential for minding the bottom line. Incidences of late expense submissions may result in the client refusing to pay beyond the cut-off date. As a result, the law firm may have to absorb the cost, consequently shrinking profit margins. On the other hand, non-submission of expenses may result in the law firm owners being caught off guard by tax bills.
We explore a few tips, which you will find helpful in remedying this situation:
- Keep your personal and business account separate
When you have your personal and business bank account in one place, it makes accounting and auditing more complex. A quick solution is to open a business bank account and a personal bank account to ensure that your expenses are separate. Come tax time, a business account keeps it clean, accurate and a lot easier for cross-referencing.
Before choosing a bank, it is essential to do your research. Consider factors like internet banking, service, standards and support. The idea is that the bank should make it easy for you to keep track of your income and expenses.
- Store your receipts digitally
Even though you have a separate business account, it is essential to retain records of your expenses. Receipts these days fade very quickly, so we recommend capturing a picture of your receipt and filing it on cloud storage so that your in-house accountant or tax professional can look into it and process it. CoreMatter makes it easy for your in-house accountant to then record it under Disbursements and Vouchers. These financial records then show up in your partner dashboard so that you can see exact details of expenses and keep track from there.
- Understand the different expenses for tax purposes
Have your in-house accounting and tax professional brief you on the available tax deductions so that you understand what kind of costs will help you reduce your law firm’s taxable income, resulting in your firm owing less. Usually, the expenses listed must be necessary for maintaining your business. Here are some examples that could apply:
- Home office: There are expenses incurred when working from home, and you can file these under tax deductions. Depending on the country you live in, home expenses such as a mortgage, interest, rent, or utilities can be considered part of the tax deductions. Of course, you will need to check the in-house accountant and tax experts. Primarily if you use your home exclusively for business.
- Meals and entertainment: Most lawyers treat their clients to meals. Sometimes it is followed by tickets to the theatre or a concert (It could be online these days). These meals and entertainment are tax-deductible. Hence it would be best to keep detailed notes, including who was treated to a meal, what we discussed and receipts for each of these occasions. This is in case the tax authorities want to know more.
- Equipment, computers and furniture: Your new online meeting room with the cameras, mic and new computers or that new office chair are tax-deductible expenses. Be sure to scan and record these receipts into your system.
Additional deductions may include legal software subscription fees, travel, continuing education, health insurance, internet, and email services, professional association dues, and so on. Review with your tax professional to make sure what you think is a deduction is indeed a deduction.
- Get a legal tech solution
Many legal technologies look promising, but there aren’t many like CoreMatter because it gives you more value for money. CoreMatter doesn’t just take care of your legal accounting and billing system – it also helps you ace legal practice management – all on a secure cloud.
CoreMatter is fast, affordable and straightforward to use, which can be a significant asset. The system minimizes the amount of work required by the end-user to get their expenses recorded. Both lawyers and administration staff have access to the same network, so lawyers can snap an image of a receipt and send it to the system’s administration and accounting staff. The accounting staff can then complete and submit the expenses, which can play an essential role in submitting expenses on time.
It becomes easy for the managing partner to approve expenses via the CoreMatter system to ensure that billable expenses are listed effectively as part of the case management. CoreMatter’s in-built compliances standards also make it easy for the firm to ensure that all fiduciary duties are being met.
The Value of Going Paperless
There are so many benefits for law firms to go paperless, especially if you have a system like CoreMatter that comes pre-built with all the features you need to succeed. Imagine having a secure cloud-based and secure system to help you cut down on administration time, expense management, practice management and legal accounting.
- Manage your team remotely
- Manage disbursements at a click of a button
- Track fee earners using multiple timers
- Search for a query rather than shuffle through files
- Assess your legal firm’s overall performance when compared to long-term goals
- Ensure that you stay compliant with all regulations
- Help you decide on budgets and financial key performance indicators (KPIs)
- Run your practice anywhere, anytime, even during the pandemic
In a nutshell, running a paperless practice is easier than you think, and it is more evident than ever that the versatility going paperless affords you is indispensable.
Sign up today for a free demo to learn more about CoreMatter!
CoreMatter, the leading cloud-based case management tool in Southeast Asia, frees your firm from the mess of the mundane to focus on what matters most.