Maximizing Law Firm Efficiency With Outsourced Accounting

Peter Magistrale

CPA and Law Firm CFO

As a law firm partner, you’re always looking for ways to improve profitability and build a thriving practice. But with so much time spent serving clients and developing new business, keeping up with the complex financial management needs of a growing firm can feel overwhelming.

By making use of outsourced accounting, you can partner with an experienced provider like Respublica to gain access to accounting experts dedicated to helping your law firm succeed. Imagine having clear visibility into your firm’s performance, making data-driven decisions to drive growth, and getting home in time for dinner with the family. Sound too good to be true? Keep reading to learn how outsourcing can transform the way you manage your firm’s finances.

Understanding Outsourced Accounting Services

What exactly does “outsourced accounting” mean? In short, it involves hiring an external company to handle some or all of your law firm’s accounting functions, from day-to-day bookkeeping to high-level financial strategy. The beauty of outsourcing is that you can customize the services to your unique needs.

For smaller firms, this might mean having a virtual bookkeeper reconcile accounts and generate reports each month. As your firm grows, you may benefit from controller-level services like cash flow forecasting and budgeting. And if you’re ready to take your practice to the next level, a Virtual CFO can provide strategic guidance to optimize profitability and plan for the future.

At Respublica, we specialize in delivering controller and CFO level support. Our team becomes an extension of yours, working behind the scenes to streamline processes, provide timely insights, and keep your financial engine running smoothly. The result? You spend less time buried in spreadsheets and more time practicing law.

How outsourced accounting differs from in-house accounting

In-house accounting requires law firms to hire and maintain a team of accounting professionals. This team is responsible for managing all financial tasks, including bookkeeping, financial reporting, tax compliance, and strategic financial planning. While having an in-house team provides direct control over accounting processes, it also comes with significant costs, including salaries, benefits, training, and overhead expenses.

On the other hand, outsourced accounting allows law firms to access a team of experienced professionals without the need to hire full-time staff. This approach provides flexibility, cost savings, and access to specialized expertise. Firms like Respublica offer a range of services, from basic bookkeeping to advanced CFO services, tailored to meet the specific needs of law firms.

The Growing Trend Of Outsourced Accounting

If you’re still on the fence about outsourcing, you’re not alone. Many worry about losing control or compromising client confidentiality. But with the right provider, outsourcing can actually enhance data security and give you greater command of your finances. 

Here are five reasons why more and more law firms are making the switch:

  1. Focus on revenue-generating activities 

Every minute you spend wrestling with accounting software or chasing down late payments is time you could be billing clients or bringing in new business. By outsourcing routine financial tasks, you free up valuable bandwidth to focus on the high-impact activities that drive revenue and fuel growth.

  1. Reduce overhead costs 

Hiring a full-time controller or CFO is expensive, especially for smaller firms. Factor in benefits, payroll taxes, office space and training, and the costs can quickly eat into your bottom line. Outsourcing gives you access to amazing financial talent at a fraction of the cost of an in-house hire.

  1. Access to industry expertise 

Wouldn’t it be great to have an accounting team that speaks your language? Respublica’s professionals understand the unique financial dynamics of law firms, from trust accounting to WIP management. We know the metrics that matter most for your practice area and can help you benchmark your performance against industry standards.

  1. Scale smarter 

As your law firm evolves, so do your accounting needs. Maybe you’re opening a new office, adding a practice area, or navigating a partner transition. Outsourcing gives you the flexibility to dial services up or down as your requirements change, without the headache and expense of hiring or laying off staff.

  1. Harness the power of technology 

They use cloud-based technology stacks which integrate seamlessly with leading legal practice management systems like Clio and Practice Panther, so you can manage your front and back office with ease. With real-time dashboards and KPI tracking, you’ll always know exactly where your firm stands.

outsourced accounting services

Key Areas Of Outsourcing For Law Firms

Outsourcing is a strategic move for law firms looking to enhance their operational efficiency.  Here are the main areas where outsourcing can make a significant difference.

  • Accounting and Financial Management

Outsourced bookkeeping, controller, and CFO services can handle all aspects of a law firm’s financial management. This includes maintaining accurate financial records, preparing financial statements, and providing strategic financial advice. By outsourcing these tasks, law firms can ensure that their financial operations are efficient and compliant with industry standards.

  • Administrative Tasks

Outsourcing administrative tasks can streamline operations and free up time for core legal work. This includes tasks like billing, payroll, and accounts payable/receivable management. By outsourcing these tasks, law firms can reduce administrative burdens and improve operational efficiency.

  • IT Services

Enhancing operational efficiency and data security is crucial for law firms. Outsourcing IT services can ensure that law firms have access to the latest technology and robust security measures to protect sensitive client information.

Outsourced Accounting In Action

What does a successful outsourcing engagement actually look like? Imagine you’re the managing partner of a 15-attorney personal injury firm. You know you need better financial data to make informed decisions, but your in-house bookkeeper is swamped and doesn’t have a CPA.

You decide to explore outsourcing and schedule a consultation with a virtual accountant. The team analyzes your current processes and identifies several areas for improvement:

  • Invoices are going out late and collections are inconsistent
  • Financial reports are only generated quarterly, so you lack real-time visibility into performance
  • The firm has grown, but your budgeting and forecasting hasn’t evolved

They develop a customized solution that includes:

  • Weekly financial reports and KPI dashboards to track progress
  • Streamlined billing and collections process to improve cash flow
  • Rolling 12-week cash flow forecast to anticipate challenges and opportunities
  • Quarterly budget review and strategic planning sessions with partners

In the first 90 days of the engagement, your collection rate improves by 10%, freeing up an extra $50,000 of cash per month. You’re able to make data-driven decisions about resource allocation, such as when to hire an additional paralegal. And with accurate, timely financials, you have peace of mind knowing exactly how the firm is performing at any given time.

Choosing The Right Partner

Not all virtual accounting providers are created equal. When evaluating potential partners, look for a firm that:

  1. Specializes in serving law firms 

You wouldn’t hire a real estate attorney to handle a complex M&A transaction. The same logic applies when outsourcing accounting. Choose a provider like Respublica with deep experience working with law firms of similar size and practice focus to yours. They’ll be better equipped to anticipate your needs and add value from day one.

  1. Invests in best-in-class technology
    To get the most out of outsourcing, partner with a firm that uses secure, cloud-based platforms like QuickBooks Online and Xero. You should have 24/7 access to your financial data and be able to collaborate with your team in real-time.
  1. Offers the right mix of services 

As your law firm evolves, your accounting needs will become more complex. Look for a provider that can scale with you over time, ideally offering a spectrum of services from bookkeeping to controller and CFO support. Consider what services you need now and what you might require 3-5 years down the line.

  1. Prioritizes data security and confidentiality 

Your clients trust you to protect their sensitive information. Make sure any outsourcing partner has the powerful data security measures in place, including encrypted file transfer, multi-factor authentication, and regular employee training. Ask for details on their privacy and confidentiality policies.

  1. Provides exceptional service and communication 

Outsourced accounting is a collaborative partnership. Choose a provider that sets clear expectations for communication and deliverables from the start. You should have a dedicated primary point of contact and feel confident that your questions and concerns will be addressed promptly. Great service is the foundation of any successful outsourcing relationship.

Get Started With Respublica

Ready to discover how outsourcing can transform your law firm? Respublica makes it easy to get started. Here’s what you can expect:

  1. Discovery call 

We’ll spend time learning about your firm’s goals, challenges, and current accounting processes. This helps us determine which of our service packages is the best fit.

  1. Custom proposal

Within 1-2 business days, we’ll send you a detailed proposal outlining our recommendations, pricing, and timeline. Once you sign off, we’ll kick off the onboarding process.

  1. Seamless onboarding 

We’ll work hand-in-hand with your team to gather information, document workflows, and integrate our systems with yours. Most engagements are up and running within 30 days.

  1. Ongoing support and optimization 

You’ll have a dedicated client success manager who will check in regularly to ensure we’re meeting your needs. As your firm evolves, we’ll proactively recommend ways to optimize your service package

Throughout the process, you’ll have access to our comprehensive library of resources, from our law firm benchmark report to our blog post on ‘What Makes The Best Virtual CFO Services, The Best?’.

Our virtual accounting services for law firms

Respublica offers three service packages tailored to the needs of law firms:

  1. Virtual Accounting Manager: This introductory service combines traditional bookkeeping with limited KPI reporting. It is designed for law firms that need basic financial management support and are looking to transition to more advanced services in the future.
  1. Virtual Controller: This mid-level package includes everything in the accounting manager package, plus forecasting, budgeting, and more comprehensive KPI reporting. It is ideal for law firms that require detailed financial analysis and strategic planning.
  1. Virtual CFO: The top-tier service includes unlimited KPIs, monthly forecasting, and up to five-year budgeting, providing comprehensive financial support. This package is designed for law firms that need high-level financial oversight and strategic guidance.

Take the first step towards transforming your law firm’s financial management. Contact us today to schedule a free consultation. Your future self (and your partners) will thank you.

FAQs

What is outsourced accounting?

Outsourced accounting involves delegating accounting tasks to external professionals instead of handling them in-house.

Why should law firms consider outsourcing accounting?

Outsourcing allows law firms to focus on core legal activities, reduce costs, and access specialized expertise.

Will outsourcing our accounting be disruptive to our day-to-day operations?

A well-planned onboarding process and open communication between your firm and the outsourced accounting team will minimize disruption and ensure a smooth transition.

How does outsourcing improve financial management?

Outsourcing provides accurate financial records, comprehensive reporting, and strategic financial advice.

What are some signs that a law firm might benefit from outsourced accounting?

Firms struggling with late invoicing, inconsistent collections, lack of financial visibility, or difficulty scaling their accounting processes as they grow are prime candidates for outsourcing.

Can outsourcing be scaled based on demand?

Yes, outsourced accounting services can be easily scaled up or down based on the law firm’s needs.

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