How Does Trust Accounting Software Work for Law Firms?

Law firms and lawyers alike can be critical in adopting new technologies such as trust accounting software to support the professional side of their work. In a business atmosphere, it is an absolute must to implement software that will not only help them stay efficient in executing the business processes but will also address the specific needs of their practice.

Challenges and Opportunities for Modern Law Firms

The legal profession is already a mature industry of expert services, which inevitably evolves too as time passes by. Now that digital technology slowly permeates into its processes, procedures, and infrastructures especially on the business side of things, we can expect a different approach and methodology when it comes to running one.

In Peer Monitor’s 2014 Report on the State of the Legal Market, it was reported that US law firms were faced with tremendous challenges due to unproductivity and sluggishness in demand growth. Fast-forward today as people are starting to recuperate from the aftermath of the great recession, we see how the market shifted behavior as a consequence. Consumers are now looking for lower prices but greater value. This is the same on the business side; owners are gearing towards efficiency while driving the costs down.

Although private expert services are generally expensive by nature, the increasing market competition is starting to pull the fees down. This is primarily because there are more professionals in the field now and technology found a way to sort of commoditize the services. Current customer demands and behavior lead to more flexible pricing schemes. As part of the information revolution, we can seek practical legal counsel without shelling out anything. As the legal landscape changes, we see non-traditional legal practitioners slowly penetrating the market as well.

Another notable difference on how the market behaves towards the legal sector is legal management. Gone are the days that we experience meeting stoic-faced lawyers and their weird assistants, and waiting for hours for our documents to be processed. Legal services are expected to be more personalized, processes more efficient and outcomes are realized faster. There is a clamor for the client-centered approach in delivering services that are flexible and scalable depending on the need.

Aside from lawyers and law firms being exposed to tighter competition, changing customer behavior and expectations, these are more challenges (and the ways on how to overcome them) they encounter in the modern world:

1. The penetration of digital technology

We cannot deny how technology affected our lives in many positive ways. We can now enjoy more convenience and gain confidence in our work because of improved efficiency. Industries are reaping the fruits of technology with how they operate and in innovating new products and services that will add more value to our lives.

As a consequence, the bar is raised in terms of client expectations. There is no stopping clients of legal services to demand the same. They have become empowered, thanks to the accessibility of information from the internet. They have more confidence in demanding more value for what they pay, and they expect that lawyers will give emphasis on rendering their services with much efficiency and progressive thinking in laying down data-driven solutions.

Sometimes, too much (unverified) information can add unnecessary pressures on both the lawyer’s and the client’s sides. Now that more clients have the tendency to research on the internet before speaking to a lawyer, misunderstandings are more likely to arise. While the lawyer’s best intention is to help the client, the initial information may raise doubt and fears which may hinder the client from getting the best solution to his problem.

Another challenge is seen in terms of using the new technologies for their benefit. While the former paragraphs talked about disruptions brought about by technology, it pushes law firms to think of ways on how to push the odds in their favor.

One of the favorable aspects of digital technology, particularly the internet, is cost efficiency. The rise of mobile technology and cloud computing can empower law firms in terms of accounting, marketing, management and manpower services. Automation can reduce the need to hire more people for administrative work, leaving more time for law practitioners to focus on their cases. Billable hours can be effectively tracked, and social media and CRM can help get more clients and expand customer services.

2. The rise of online legal service providers

The internet paved a way for professional lawyers to extend their services to clients even without entertaining them personally. Their services might be limited to practical advice or legal documentation only, but nonetheless what they are offering is substantial enough to hold a market in itself. While this aspect of convenience benefits both parties, this has become another reason for competition that drives the costs of services down.

There are also alternative legal service providers that are gaining their own client-bases. Even if they don’t pose a threat, they cut off a significant portion of the income block from professional practitioners or from those belonging to real law firms.

3. Regulation and compliance

With more law firms adopting newer, internet-based technologies, and legal service providers utilizing online services, there is more need to include pointers to existing compliance and regulation standards concerning information technology, particularly online practice and online information protection.

Compared to general accounting, trust fund accounting processes more critical information such as compliance reports; thus it needs a more secured system and extensive computing capabilities. Without a system or software to support it, it may require more time that should’ve been attributed to the legal service provision.

4. Accounting and legal services management

Clients are becoming savvier, and processes complicated. Now that penetration rates of technology are going higher and wider, the legal profession is no exemption.

Accounting and management can be increasingly complex, now that law firms employ more people to focus on different types of cases as a way to expand their services. Since the demand is high for flexible pricing schemes, lower per-hour rates and fixed-pricing for basic services, the need for a strong accounting system is also persistent.

Trust accounting income calculation is tedious, especially when dealing with multiple trust clients. Errors, in this case, are critical since it may incur legal implications on both the client’s and firm’s or lawyer’s end.

Modern law firms will continue to bring in newer challenges as we see it heading towards more adoption of technology. Law Technology Today gives emphasis on the increasing adoption of big data and its growing influence over the cases that these firms are handling. More so, we can also see that processes involved in the business will be relieved with the use of legal software specially designed for law firms and its unique needs.

Accounting Software Choices for Law Firms

Running a law firm requires you to juggle your business processes together with your expert services. Technology becomes a vital aspect to run the business smoothly and leverage with the competitors.

Robust accounting software is a valuable tool for law firms to exercise full control over their expenditures and profits. Accounting in a legal setting is crucial as it can either sustain or break the firm. It is also an important strategy that can affect the efficiency of the firm’s services. A trust accounting software for attorneys is specialized software used to comply with the high standards of the IOLTA. Here are four different ways on how accounting can be done in the legal profession:

1. Manual book keeping

This is a more traditional approach, but some law firms prefer the old style, especially when the firm has the same accounting book keeper from the beginning. But accounting-related tasks today can be cumbersome, and compliance standards are more complex, which may render this strategy ineffective.

2. SMB accounting software

This tends to be the most generic approach. But still, the basic functionalities and features of a small business accounting software can be useful for law firms in general. Some software can also be customizable and are scalable which is favorable for the business nature of law firms. However, there are certain limitations when it comes to unique functions that support law firms like trust accounting, which an SMB accounting software could not cater to.

3. Non-generic/legal-specific accounting software

This specialized accounting software is built specifically for law firms and practitioners. It has built-in features that can support the effective execution of legal services that satisfy clients and conform to legal standards and ethics.

Lawyers have special needs, especially in the aspect of accounting, reporting, and management. Failure to fulfill these may have serious implications over client expectations and may even have legal consequences.

One of the major considerations when deciding on legal-specific accounting software is its capability to deal with trust accounts. It is specially developed to meet the requirements of Interest on Lawyers Trust Accounts (IOLTA). This kind of compliance requires heavy reporting and documentation which may not be met by general accounting software.

How does trust accounting software work? A trust accounting software is designed to present the right details that auditors need to keep them satisfied. It is also integrated with top-of-its-class security features that will protect your crucial customer data and permits a safe automatic transfer of funds upon billing. It can also support manual transfer for clients to pay for operating fees.

A trust accounting software is an important breakthrough for law firms, enabling them to cater to the special needs of their business and of their clients with ease, confidence, and efficiency. This way, they gather trustful and loyal clients which give them the leverage in the market.

A trust accounting software is also a strong indication of how law firms and practitioners have finally overcome the challenges of modern technology penetration by turning the tables in their favor. While there are more areas of improvement as far as other challenges arise, software technology breakthroughs like a trust accounting software empower modern lawyers of today, giving them more capabilities to serve their clients and their modern needs of today.

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