How An Accounting Firm Can Revolutionize Your Legal Practice (Best Of)

Welcome to Accountants LawPod, where accounting professionals and law firms converge, hosted by Linda Artesani, Sarah Prevost, and Stephen Libhart.

Welcome back to the podcast, everyone. And this week, well, we're filming this in August, so it doesn't— I don't know when it will drop, but we're actually up against some of the tax deadlines. only up against it because we're running out of time to get the work complete for the tax professional to actually process the taxes. So we're starting to get the freakout calls, right?

We've had a lot of that this week. Yeah.

Yeah.

Well, we got the 9/15 is the final day, right? The D-Day for filing on an extension for S corps and partnerships. And really, you got to have that stuff in no later than April 15th.

How many times have we gotten a call? We got till 9:15, right? No, we don't. Tax professional has till 9:15, and we have a lot of work to get done before 9:15. If you haven't done one thing with it, it's all in a shoebox. I used to call my shoebox clients. Did you ever have a shoebox client, Steve?

Oh, yes. Yes. Pick up the shoebox and take it back. Yeah, it was a lot of fun.

Was it ever in order when you opened the box?

No, no, no.

Was it—

or you'd get back to— you'd get back to your office and they'd call and say, oh, I forgot to give you this file, you know.

Oh, it was never in order. It would come in a box in a pile, like they had the box under their desk and they were like, oh, this goes to the accountant, this goes to the accountant, and they just tossed it in.

Those were the days.

Was it in order? Probably in chronological order. If you go all the way— if you flip the box over, you'd be good to start with January.

I always loved the paperclip of, I don't know if you need this, but I'm just going to give it to you. And I was like, well, this was a personal expense, so no, I don't need this. But anyways, what are we talking about today? What's our topic?

We're going to talk about— oh, I forgot already. That's terrible.

How to work with your legal accounting firm.

There you go. Good, Steve, you got a new job.

Thank you. I've done my part. I'll see you guys later.

Bye.

I think the label, the title was going to be how an accounting firm can revolutionize your practice.

Exactly.

You're fired, Steve. Sarah gets the job.

Thanks, Sarah.

Very true. So how can we as accounting professionals revolutionize the job for the lawyers, the attorneys? And attorneys do a specific work. They're highly professional and they're very knowledgeable. But when it comes to this The stuff that we know, it's really not their forte. And I think that that's part of how we can be that bridge to getting them to a really good place, because this is what we know. We don't know how to work in a courtroom, but we know this stuff inside out. We get excited and jazzed up about numbers, and I think that this is where we can be that partner with their firm to help lift them up and hopefully help them navigate getting to Wherever they want to be, whatever the goals are, we can help them achieve their goals or at least get them in that direction.

Yeah. Steve, what do you— what is it?

Well, you know, just like a client will hire a law firm because that's the expert person to help them through whatever it is that they're hiring them to do. It's the same with a law firm. It's more than just legal expertise. That's where we come in, having us on the other side, helping them with their numbers and keeping it all organized. Looking at their financial trends and my favorite subject, the KPIs. But looking at all of those things and keeping it organized for them allows them at the dollar level that they're charging their clients to really maximize their revenues and on the back end have all the data that they need to have a profitable and strong business, not to mention the trust accounting side of it.

Yeah, the compliance piece, right?

But we—

Compliance piece.

We can be their secret weapon, right? We're that person who handles the day-to-day. And I think that sometimes when you, when you start to work with a law firm that has had that be absent and they're not handling day-to-day work and it's behind, you're really not having a good purview of where you want to be or your goal setting because you're digging and you're always looking into the past and not really looking for the future.

Mm-hmm.

So I think that that's a big part of what we do. And it has to start with conversations too. It starts with conversations about goals. I always love when we bring that up, Sarah, to an attorney, because they kind of look at us sometimes, and then we have to shift the, shift the conversation, because sometimes they're not ready for that question, or they've really been— these attorneys are so busy, they're not ready to answer that question because they have head down, work, work, work, work, work, working on their cases, working for their clients, and then their business kind of becomes an aftereffect. And getting that answer from them about where do you want to be in a year? It's a hard question for them to answer. And a lot of times we'll say, okay, well, how's your— we'll start out with how's your personal life? How's your wife? How's your husband? How are your kids doing? Do they, you know, how are they doing in school? They must be getting ready for school now and have those conversations first. And that can bring you to the goals and then bring you to the goals in the business because the goals in personal life are a good reflection of how you're doing in business. You want to buy that Ferrari, you know, if that's on your goal that you want to buy that, you got to figure out how to get the money to do that.

I really like that comparison.

Well, I'm reading a book right now, and it's about— it came from a friend of mine that is a yoga— owns a yoga studio. And she said, Linda, you got to read this book, Why the Monk Sold His Ferrari. It's something like that, that title. So I just started reading it. So why the monk— how the monk sold his Ferrari. And it's interesting to listen. It started— I just started. I'm like in the 3rd chapter. But yeah, so, but it's true, right? So you see the attorneys have these goals, and they know where they want to start to shift their money to. They know what they want to buy. Maybe they want to buy a house. We usually are the last person to know that they're in the process of getting a mortgage until we get the, I need these documents today. And then all of a sudden it's like, oh, and then they finally, it'll come out that I'm buying a house and the mortgage person, you know, the mortgage broker or whoever needs these documents. It's like, oh, I wish you had told me ahead of time. But all that comes with, and if you don't have good books, you don't want to be handing over those financials if they're not clean.

Correct. You know, another way I look at it too is a lot of times Linda and I will ask not just goal-setting questions. How does your firm operate? Where does the sales call come in? How does the information flow?

That's so key.

We're so critical in understanding the front end all the way to the end, the back end, to giving you that right data, as you said, having correct data that a lot of times you will find We will suggest or help guide or implement with you side by side better changes and processes on the front end, because we're realizing that your staff is wasting time on really kind of mundane, ridiculous things that maybe are not presented in a way to you. And you're just looking at this like, why is my labor cost going up so much? I seem to have to need more money. for payroll because so-and-so is getting overtime or so-and-so is hitting their 40 hours when they really should be 32. And we find that when we're tweaking the data, the information in the data, and we start to see it in a different way because this is our forte, we will ask these questions. And wow, there's a load that comes off. And there's this big reprieve of saying, oh, wow, you can actually help me with that? And it's fun, actually. I got to say, I like the operational tweaking.

Sarah, don't you think that going to a generic bookkeeper that does not specialize in law is not going to get you that same result?

Yeah, right.

I mean, Steve, you've seen it, right? And we know the KPIs, for example, of what we should be looking at, that maybe somebody who just does books for every kind of different company is not going to have that kind of insight.

Yeah, there's nothing wrong with those generalists. But if you really are— you're a professional, we're a professional, we chose to niche in this space. We get that 90-foot, 100-foot view of a multitude of different practice areas, and we get to see a trend in a whole different perspective. We're going to— we're not just coming in as the firm, accounting firm. We're coming in. I think, Steve, you brought this up and Linda, you did too at the very beginning. We're the partners in this.

We—

We're the neutral outside people that can look at it through a completely clean lens. And if I could, Linda, ask you, you've brought this up before in the podcast, could you please share your story about the one time Where the, the lady was doing all the keystrokes because she didn't want to embrace the new software. This is, this is a great example.

Well, the software— so we were hired to do a migration, a data migration off of one older software that I don't even know if it still exists. They may have made it into an online version now, but it was a desktop version, and bring her into QuickBooks Online and another billing software. And we couldn't figure out why she was so far behind in her work. Yeah.

Labor costs, to your point, Sarah.

Yeah. And she was such a yes lady. She always wanted to please her bosses. She's a wonderful person. And we've uncovered at some point, and Sarah, it might have been you that uncovered it, that she was doing the work in the new software, but she didn't trust it. So she was still doing the work in the old software. So she was doing double work. And she was— and I remember that we had the conversation with the owner and he's like, you've got to get her out of that old software. We don't want to be there. We want to be— I think younger partner, right? Wanted to move forward the future. It didn't— there was no need to keep this other software that was already starting to break and be clunky. So I remember we got on with her one day and I, I'm like, okay, how do you enter a deposit in the new software? And we counted the times and clicks she had. It was like 3. And then we said, how do you do it in the old software? And it was 11. 11 different screens. 11. She knew it. She knew it like the back of her hand. But she's like, oh wow. And I said, see how much easier it is just to do the same? You had the same result. We can pull up the the profit and loss, and you could see the, you know, the income is there and the income's here. There's no difference. It's this thing. And that was the eye-opening day that I think she left the old software finally behind and embraced the new software. Now she's crackerjack at it. We still have that client. She's a lovely person.

And see, this is a great example of how from the outside at our 100-foot level, Sarah, you know, you were able to make a difference for that client and their labor cost. And all those little things add up.

All that little time. You know, it's fascinating too is, you know, it's always— we see this in partnership firms. There's always somebody that's had an accounting course in their college days that will raise their hand and like, I— and then you start talking and they realize, oh, I understand what you're saying, but I don't know what you're saying. So we'll have to restate some things. They get the general sense of it. But those college days are behind you, friends, right? You went to school for this and we live, breathe, and honestly, our industry is rapidly changing between all the new tools and all the AI and all the different advances.

All of the tax requirements.

All of it. Yeah. I just actually speaking of in my mailbox, in my email box, I have an IRS thing about all the new stuff. to look at because there's some changes coming. And, you know, it's hard to navigate alone as a business owner. And then on top of that, you have your personal side, like you mentioned, Linda, and then your business side, and you're one person, right? Or you're maybe one of 3 in a partnership, and there's rainmakers, there's operators. We— you got to shift the dynamic and look to a supportive team and to a team that I feel like what we do is often lift you up, or, or, you know, that the store is being kept well, your compliance is being kept well in the back.

Well, and I was just going to mention that word. We should probably jump into the compliance piece of it. And that's what makes it so unique to that. That's our niche. That's, that's where we make a huge difference is keeping you compliant with the trust accounts. I mean, that's just massively important.

Linda, how many times Oh, sorry.

We run into firms that have a bookkeeper in place and they don't even know what a 3-way bank reconciliation is. And it's right, it's with their state bar and it's not happening. They just think they've reconciled in QuickBooks good enough.

Well, that's what I was going to ask you, Linda. How many times have you heard that, oh no, our trust account is balanced?

All the time. And then we go, mm-hmm, mm-hmm. And how many times has it been balanced? Sarah, we have had a couple.

We've had a couple. I'll give you one.

One out of many.

The reason why I say is because those uncleared items.

Yes.

Right.

So that's why I'll give you a little bit. I'll give you—

They will ignore that. And that is still part of compliance. Those uncleared can't sit there in perpetuity forever and just ignore it every year. And we see them. We've had files that have gone back 2012, 2015, and they're just sitting there. And I'll tell you what, you're gonna get in trouble because you can't just ignore the fact that you sent out the check and nobody cashed it. It has to be addressed. And if you can't find the person, you have to put exhaustive efforts in, and then you have to turn it over to the state.

And that's another— We, we just had a client who passed away, and there was 1 penny on a check that they had to write, which was an error in the settlement agreement. Personal injury firm, and it was an error in the settlement agreement. And I told him, you've got to give that penny back to your client. And of course, the client never cashed the check. The attorney has passed away. And so we had to go through Attorney Regulation Council to deal with a penny. I mean, how much money was spent on that one penny? But we have to do that.

Yeah, that's sad. That's a lot of work. Yeah.

And, you know, I like to ask them, How do you reconcile? How do you do your 3-way reconciliation? And that will tell you a lot right there. Because usually if they— if you get the kind of the blind stare, you know that there's an opportunity there to get that cleaned up. So.

Yeah. And what software are you using? Because sometimes using any software and they— if they're not using any software and they say a spreadsheet, you're like, oh, you're running a firm of how much on— you know, if you have the trust accounting in place, you really need to have something more robust than a spreadsheet. Because in our experience, every spreadsheet we've been given, the formulas are broken or not right, or they're not gathering right in a row. And then your numbers aren't right. And then, you know, you might think it looks okay on that front page and you've got a tab for every, you know, every matter, but it's just not a great way. It's not a great way to proceed with business. There's corners you can cut, yes, but that's not one of them. That's not where you want to cut corners, I don't think.

I agree. And the other thing too is within the record keeping, Are we actually doing the hard costs and the soft costs, those advanced client costs, correctly?

Yes.

Are we overstating our financial statements on one and understating on the other? So our net income isn't there. It's impacting us personally, right? In the end, it's net income.

When it comes to educating them, you know, do those hard and soft costs belong on the balance sheet, the income statement? You know, where do they belong? Where should they live? If you're one of those law firms that's just turning over your your reports at the end of the year to the tax preparer and they don't know that much about your business or legal accounting, that's a whole nother subject. But—

That's so true. That is so true.

Then if you've got these, these client costs on the profit and loss statement, it's skewing your numbers for taxes unless they're really paid. Yeah, it's just not a good practice.

The other, the other thing we see is misallocation of merchant fees. Wire fees, especially with trust handling that. And then the last thing is a lot of times to what you just said, Steve, is if we think that we're looking at it and we say, hey, you know, could we have a conversation with you and your tax person about your entity structure?

Right.

We'll have these conversations because we're business owners. We know structurally how we would like to be. We're not going to give you the tax advice because that's not our forte. But we want to partner with you as a business owner to another, you know, to another business owner, tax individual, and have this conversation to ensure, do things meet the proper marks for you? Are you actually the right entity for what you need to be for your future? To the point of what Linda was saying, are you protected? Sometimes the sole props, you got to wonder, it's like, is it okay to be that really in the end? Should you be something else legally?

So, and sometimes it can result in tax savings if you move them and shift them to something else. And then there's also the alternate of, you know, they may be in a partnership, but they need to, they need to push it out to an S corp so they can pay themselves a reasonable salary and get the tax thing handled. And it's something that we do see with a lot of attorneys. Maybe they buy the building, and there's a lot of financial strategies out there, uh, can really work too that can help optimize your money and make sure that you're paying less taxes if that's what your goal is. But sometimes there's just the things you can do and it takes strategy, it takes financial planning. And I think that that's a big piece that can kind of be missed if you're outsourcing to maybe something less expensive that's like $200 a month. It's not gonna cut it on any firm to do this kind of work. That's just bank feed rule, you know, people putting rules in bank feeds.

Yeah.

If you outsource it to that place and you're gonna get, you get what you pay for. So no matter what you spend, you're gonna get that back. And if you spend a little bit more, you might, it might cost you more in your, as an overhead expense. That's what we are. But in the long run, we could save you a lot of tax dollars, which is why I love Steve's have a side spreadsheet for the things that we saved you money on. Because a lot of times that gets forgotten. We may have come up with something like, you know, we, and we see this because we have this purview of all these different companies. And believe me, we, the 3 of us, love to go digging in and seeing what everybody's doing because we can see what works, what doesn't work, and where the money's being spent. And now we can advise you on things that we have seen from other clients or just know from studying this stuff. I mean, we spend a lot of time studying, listening to your podcasts that are for your industry. We love reading about all of the things that we do. We really do love this stuff. We love the Clio Trend Report. We love a lot of the reports that come out. There's one from the Bar Association. We read this stuff so we can learn. what others are doing so we can effectively pass that information on to you and we process it.

You know, I was just thinking too, as you were talking, Steve, Linda, tell me what you feel. It's like any practice area. Family law is family law. Are they doing corporate business litigations?

Right. Right.

You know what I mean? If you have the tax knowledge, but You're not processing tax returns, should you be? Like, where does this line draw? And this is the same, I guess, as what we're saying as a reflection of us as individuals. We're specialized, and it's something we enjoy being specialized in. Same for you.

You know, one of the things we can look at too is, or that we do see all the time, is let's take a personal injury firm compared to a real estate development firm. You know, the real estate development firm is going to see— generally going to— if they're collecting their receivables, they're going to see that money very quickly.

Mm-hmm.

Also, they can work on retainers and work against them and earn that money and all that. Whereas your personal injury firm, they might have a slip and fall case that they're working on and they do all their court cases and all their hearings and all their filings and all their things. The settlement may not come for another 2 or 3 years. The insurance payment, you know, payout on the case, all that. And so they're working in this roller coaster with cash flow, and that we can really help them out with that quite a bit. And, and, uh, you know, it's, it's all different kinds of law, and we all have our favorite types that we like to work with. And we become, within this niche that we work in, we become even— we drill down even more and become even more experts with the type of firms that we're working with and the nuances that come with it.

Mm-hmm.

And there's different workflows. We have different workflows.

Right.

Personal injury firm, we have a totally— Sarah and I have developed these workflows that it's with our staff that there's a whole set process because we work hand in hand with whoever in the office does a lot of the work. They're there in the office, they can ask questions. And when these matters settle, we have to hurry up and get that all put in so that we can divvy out the funds. And it's, it's a whole specialized workflow just for that. And for our family law firm, we deal with a lot of movement of funds and names that are similar. You might have, you know, It could be Smith versus Smith, and that's because the wife and the husband— and you'll have to deal with some of that if they're using a mediator. Maybe they're both paying and only half goes to your client. There's a lot of different setups that we can put in place to make this work smoothly, because when you're dealing with a lot of the same names, you've got to make sure that things are booked to the right name. Uh, find that in immigration.

Immigration firm, you know.

Yeah, immigration is the same thing because you can have somebody with a totally different name coming in to pay for 6 or 7 people that are not the same named people, but that person speaks English and is the advocate for them, and they come in and pay for the— for those people. And it's those things that you don't think about that come from being even more specialized inside of each practice area that we are pretty good at. And we've got workflows and automation. I think that we've embraced— all 3 of us have embraced technology and the right tools. We know what to use, and it— and it's something that's ever evolving. We have to have eyes on everything because we may be really loving one tool and then find out that something out there might be better. But sometimes we don't want to jump ship. Sometimes we do jump ship. It depends. It's kind of fun that we always kind of make a— we make a lucid chart and to see what our software is. And we do that to kind of help our clients too, because we start to implement software that they've never seen before. A lot of the firms are still in every very antiquated, which is what makes this job fun, because we can take them From a place of paper and a lot of checks and move them completely out of that into something more future, future ready, something more sustainable, save time. What one firm, what did we do, Sarah? That firm was spending, I forgot how many people spent time on AR and they were, had a software they were using that they had to print every invoice regardless if it could be emailed. You couldn't print, pick just some.

Yeah.

You had to print and they were printing 2,000 to 3,000 invoices a week, a month.

Wow.

And it was, we saved so much paper for that firm because they had, it was a waste. They, half of them never got mailed and they were emailed and we got in there and then we started to talk to the staff to find out who did what job. And we found out there were people doing the same job. There was overlapping, it was an overlapping workflow. And we ended up, it actually saved that firm. Like one of their AR people was shifted to a better position once we put them on a better software. And they, she was doing things that are a little bit more where you use your brain. It was not so much repetitive and it saved like a whole half a day or for a whole like 20 hours in, in their workday that they didn't need to have anybody doing that work anymore because it was taken, picked up by automation.

And to your point, that goes on that spreadsheet of where we saved them money.

Yeah.

Later on when we're talking to them about this is the difference we've made for your law firm, this is what we've helped you improve. And you didn't even know that that was going on, that the multiple people were doing the jobs. Because you're busy being the leading— not only the leader in the firm, but the lead attorney or what have you. And, you know, there's a lot to do. You have a lot— have to wear a lot of hats.

Well, we see these firms grow quickly too. That's the other piece. Like, we see them grow fast. Yeah.

Well, the thing that I'm thinking about too is in specialty, we have a whole team of women that do leads billing, e-billing, and file billing that's fractured.

And that's a science all by itself.

It is.

Right? And so we have built, to your point, Linda, we have worked with some of our key people at some sort of automation, communication, simplistic streamlining. Because when I first saw the workflow, I said, no, we cannot do it in this antiquated way. This just— and it was— I don't want to say the individual was— yeah, it was slow. But I don't want to say the— I don't want to critique the individual that was previously doing it. But it was so antiquated and so mystery. The questions from the partners were, is this even close to being done? Now on the fly, I could open up our software and I can see exactly where we are for that current month's billing and know what our team— without even having a conversation with any of the ladies, know exactly where we are and the percentage of billing that's been completed. And then on the opposite side, we've got a completely other— it's the same company, just completely other. And so we looked at that in totality and we said, what can we do to streamline? A couple years in of working with them, not dropping the bomb in the first 6 months, and found out the tool that we currently use in Clio, we can add a piece and use it as an internal. So taking from Grow to Manage and use Grow as an internal piece and build out a process that streamlines an entire capture set of data.

Wow.

Currently being sent to us in fractured pieces, redundant workflows, and boy, Will that be a game changer? I'm excited to report back on that. And it's been a partnership all the way through. So there's so much that we can offer.

And we don't come in and reinvent the wheel on people. So I don't want anybody to be scared hearing this, especially if an attorney is listening and they're like, they're going to come in and change the world. We don't change the world. We know from working, change is hard for every person. I don't care who you are. And it's just we take it in small pieces to get you to might be the end of the year. It might even be to the next year that we have to get you there. We get you there, but it's in smaller chunks because everybody's gonna learn new software. There's a cost to doing a lot of these things, but in the run, the savings is there. And anytime we automate and implement technology, we end up saving. It's more accurate, so there's less errors. And when there's less errors, you get more accuracy, and that's gonna give you a better reflection of your numbers and will help you figure out where you wanna go. You're gonna have a better a better result back on your financial statements. You're going to get better data, which we all like data.

Yeah. So it supports the compensation modeling. Yes. Barely even touched on. So that's a topic because this has been a lively conversation. I've really enjoyed it. So thank you both for diving down this road.

Yes, it's fun. Can you tell how much we love doing this?

Yeah. Yeah. So true. Well, we do. I mean, that's, that's what we do. And I think that when you start to look at law firms and you can take some, especially some of the, some of the ones that are a little bit in the backwards, that they just stayed stuck in an old practice, in an old place, they didn't know where to go. We can step in and really help get them to the better place where they can be ready to keep going in the future and staying on top of technology. And, and that just doing that alone, if you have to replace the in-house bookkeeper or the person that's doing some of that data entry, it's hard to find somebody that— and some of this old antique software, it's hard to find somebody that can do that work. They have, they have no idea of how to use these old products and keeping them in something that's newer. They're used to it. It's online. You'll be so much better off. Definitely.

Nowadays with the— just one other final thing with the way that we're all working, you know, where people aren't going to the office as much as they used to, or the 4-day work weeks. I just read an article this morning about how the 4-day work week is really catching on and the productivity is actually better. Because people can rest, you know, those sort of things. We're out here working behind the scenes as part of the operation, and we're focused. We're not interrupted sitting at our desk in the law firm. We're not interrupted. The phones aren't ringing. We're— we are able, you know, our accounting brains are able to focus on the task at hand and get it done so much more efficiently and really look behind those numbers and drill down and be able to report instead of just giving you a bunch of financial reports and saying, okay, next month after the billing cycle, next batch will go in. Yeah, all done. It's a whole different world.

Yeah.

So that's what we have to talk about today on helping you guys out with revolutionizing your practice.

To support the Accountants Law Pod, please take a moment to like, share, and review this episode and be sure to subscribe to this podcast on YouTube and wherever you find your favorite podcasts. If you have questions, topic requests, or guest suggestions, you can email us at info@accountantslawpod.com or send us a message through our website, accountantslawpod.com. To join us in the Accountants Law Lab, which meets every Friday, visit our website at accountantslawlab.com to sign up.

Great conversation. I, I hope that helps some lawyers out there somewhere that are like, I think I need something more specialized. I think I'm done doing all my billing by myself.

Demystify what does it mean, people like us in this industry. So yeah, it was a great conversation.

Well, thank you so much, everybody.

See you all next time. Bye, everybody.

Bye-bye.