How accountants make life easier for Biglaw attorneysLittle credit is given to how much simpler accountants make personal taxes for Biglaw attorneys. When you are a salaried associate, or even a partner, the accountants at your firm make your life far easier, especially at tax time.
When you file your personal taxes using tax software or a tax preparer who does large volumes of tax returns, that is because the firm’s accountant has done the hard part. If your primary income is from the draw and distributions of your Biglaw firm, without the complexity of income-bearing investments, filing taxes is usually a simple matter. For most litigators, you are far more likely to spend time dealing with audit requests from your clients’ accountants than you will need to spend on your personal taxes.
Outside of tax season, the accounting department is toiling behind the scenes to make sure that the firm remains a profitable endeavor. It is a well-known fact that big firms are not cost-efficient. The budget for a Biglaw firm is in constant flux, and a tremendous amount of money goes into running the machine of a large firm.
Think of a firm as a ship. The bigger the firm, the larger the vessel. The accounting department is in charge of the maintenance that keeps the ship afloat and steaming ahead under full-power. There are constant leaks of money, instead of water, that threaten to sink the boat. There are also economic downturns, which in or ship analogy, would be intense storms that threaten to sink the ship.
Attorneys and other support staff are free to do their jobs because they can rely on the skilled accounting staff to handle the monetary maintenance of a firm’s business. Many accounting departments in large firms work almost autonomously. Partners have learned to trust the senior accountants to notify them of issues that need their attention and to keep them in the loop through regular reports.
Open a solo practice or become a partner at a smaller firm and you will soon appreciate the work accountants doLeaving the cocoon of Biglaw will grant you a whole new appreciation for the role that the accounting department plays in making a firm run with smooth efficiency. You are now an owner, or part owner, in a service business for tax purposes. Finding a good accountant is as integral to success as establishing the right banking relationship or picking the best malpractice insurance provider. The difference is that the accountant is going to make your day to day life simpler or harder, depending on their skill level.
The decision about which accountant to hire is more difficult if you cannot justify hiring a full –time accountant. Good accountants are highly prized, and like attorneys, some may work from their own firm, taking on profitable clients. Others prefer the advantages of working in-house for businesses. Law practices can find themselves at a difficult crossroad where you need the personalized time and attention of a dedicated accountant, but the firm is not large enough to justify a full-time position of a high-end accountant.
The compromise is often hiring someone to handle “accounting” who is not a certified public accountant (CPA), or who is but does not have the experience of Biglaw accountants. Hiring an underqualified staff member can be a mistake with substantial implications. Instead, consider hiring an accounting firm who has an accountant familiar with the accounting side of law practices, and establish a working relationship with this person.
Investing the time to hire a reputable, skilled accountant with a solid reputation in the legal field is one of the smartest things you can do when getting started. To find these genies that can simplify your life and increase the firm’s chances of success, talk to other attorneys with law practices similar to your own. Word of mouth from people you know, in the age of digital marketing, is still the best way to find someone with the specific skill set you need.
Understanding what your accountant or accounting department doesEven new attorneys fresh from law school have a basic understanding of what the firm’s accounting department does, but it seldom goes beyond the most basic nuts and bolts. Unfortunately, accounting can start to seem like the unseen overlords that make life more complicated with their demands for information and other time-consuming tasks.
To truly appreciate the contribution of the accounting department, consider:
Accounting for a law firm, at its most basic level, is recording and analyzing the finances of the firm. Accountants are advisors and interpreters of money and also frequently deal with customers, vendors, and financial institutions.
Managing financial data
- Tax information
Under each of the above financial topics, there could be dozens of subtopics, all of which are tracked by the accounting department. Financial reports are generated that help to reconcile all billing, receivables, spending, and so much more.
Offering sound financial adviceAccountants are the front line resource for financial advice about firm business. After all, no one knows the intricacies of the finances of a firm better than the accountant. They can offer vital insight into matters like expenditure trends and revenue generation.
That information has a direct impact on matters like outsourcing services, hiring decisions, expansion projects, and taking loans. Accountants should be involved in all decision-making about the future and growth of the firm.
Choosing new technologyThe explosive growth of technology means that cutting edge software purchased five years ago is obsolete today. Software related to any financial aspect of the firm should satisfy the needs of the accounting department.
Accountants have to stay on top of the latest trends in accounting software, and given that they are intimately familiar with the accounting practices of your firm, they are uniquely suited to choose the best accounting software. Technology has advanced so that some software can be used firmwide to do everything from project and file management to running complex financial statements.
Protect your firm’s relationship with the accounting department or accounting firm you useGiven the importance of a good relationship with your accountant, you need to make sure you are doing your part to keep that relationship healthy. Steps you should be taking to make sure you are doing your part include:
- Recognize the hard work that the accounting staff does behind the scenes. In a law firm, those who generate revenue are the superstars. However, it is essential to recognize all the work that accountants do to make sure that revenue is protected.
- Understand how busy accountants and their departments can get. Tax season can be overwhelming, so leave strategy and planning sessions for after tax season.
- Assemble requested information and get it to the accountant as soon as possible. When an accountant request information and there is a serious delay in getting it to them, it can leave them scrambling to play catch up.
- Treat accountants with the same professional courtesy you expect and realize that they cannot work miracles. They are not responsible for the current tax climate that is hitting Biglaw hard, nor is it their fault when the economic toll of a downturn starts to impact the bottom line.