Should you outsource your bookkeeping?

Affinity Counseling

Solo and small firms often find the role of a bookkeeper tough to fill. Most small firms may not need a full-time bookkeeper, leading them to try incomplete solutions or handle the work themselves. In many small firms, no single person plays the consistent everyday role of ensuring orderly finances. Regardless of how simple you believe your firm’s finances to be, having a constant form of oversight is valuable. A bookkeeper can streamline your finances and prevent costly errors, helping your firm stay compliant and financially healthy.

Here are eight key bookkeeping tasks that require consistent attention.

1. Time entry

If you bill by the hour, someone must be certain that time is entered into the billing system. Time entry is not the bookkeeper’s responsibility, but you should have an enforced policy of contemporaneous time entry. Then, your bookkeeper looks at daily or weekly reports to ensure people stay current with time entry. Trying to recall what you did for a client on March 3 – when it’s now March 31 and you are about to run bills – is a recipe for frustration and lost money.

2. Expense entry

If you advance costs for clients, you must have an expense recovery process and a set of eyes reviewing your bills and identifying opportunities to recover costs. Many small firms overlook this step. The partner/owner/solo runs to the courthouse for a hearing, tosses a $5 parking fee on their personal debit card or the company credit card, and then forgets to enter the recoverable expense on the client’s matter. A dedicated bookkeeper would be tasked with reviewing the company credit card, check register, bank statement, and bills to ensure all costs advanced have been properly invoiced for recovery.

3. Prompt billing

Bills should be sent out every month, or every quarter – whatever frequency you have adopted – but it should be consistent. You cannot get paid if you do not send bills.

4. Collections

Bills that go out should be paid by your terms. When they are not, someone should be following up for payment. Solo and small firms are not positioned to finance their clients’ legal bills.

5. Accounts payable

You want to get paid, and so do your vendors. Often paying bills is done when the partner/owner/solo has time. They get a bill and simply pay it without regard to the balance in the operating account, or without considering what other bills are coming due. Managing accounts payable is just as important.

6. Bank reconciliations

All operating accounts and trust accounts should be reconciled monthly. Too often, we log into online banking, see a positive balance, and assume we have money available. Be aware of the Rules of Professional Conduct governing your clients’ funds, trust account reconciliation, use of trust accounts, and the like.

7. Reports/month end

What’s your AR (accounts receivable) balance? What’s scheduled to be paid? What are the bank balances? How much WIP (work in progress) awaits billing? Someone should be responsible for running these reports and making sure the partner/owner/solo understands them.

8. Payroll

Even if payroll is outsourced, someone must ensure it’s submitted on time – weekly or monthly.

While this list appears long in article format, it might not represent 40 hours of work per week, and you may not want to increase your firm’s overhead with the cost of another employee – including salary, benefits, technology, office space, PTO, health insurance – even on a part-time basis. In that case, outsourcing is the answer for your firm.