In my experience, attorneys seem to display an almost visceral dislike for – or fear of – accounting. Perhaps it is because, as professionals, they recognize what they don’t know, respect another profession’s specific area of expertise, and are content to delegate this responsibility. Perhaps it’s because they simply dislike the topic. Perhaps both. Nevertheless, accounting for law firms is an important component of the business side of law.
While attorneys can choose to ignore accounting, however, the fact is that law firms cannot. Like it or not, accounting is a necessary exercise for any business, law firms included.
Law Firm Accounting, however, is for the most part a bit different from generic small business accounting. Four specific items seem to set law firm accounting apart:
- IOLTA/Trust Fund Accounting
- Recovery of Costs Advanced
- Work-in-Process Tracking
- Calculation of Alternative Fee Arrangements (AFA’s)
Reasonably priced small business accounting software has been around for some time now, including some software targeted specifically at the law office.
Law office technology consultants tend to break down law office accounting software into two categories:
- “Best of Breed” software
- “All in One” software.
“Best of Breed” software is the term we use for those legal-specific products that can integrate with a generic accounting product, to supply the necessary components lacking in that general purpose accounting software.
Timeslips and Billing Matters are two examples of this class of software, providing additional, legal-specific functionality to a small business accounting product like QuickBooks or Sage 50/Peachtree.
For the small law office, the popular product in the “All in One” category is PC Law, with Juris filling that spot for larger firms. These products offer full general ledger functionality, along with financial statements, check writing, and other “pure” accounting functions, all with a law office twist, however. In the last year or so another important selection parameter has emerged: the choice of “on premises” vs. “Cloud-based” accounting software.
The arrival of QuickBooks Online, Clio, Xero, and various other Cloud-based products has added another dimension to the selection process.
To this point the Cloud-based choices have all adopted the “Best of Breed” approach, offering legal-specific software functionality that augments either a Cloud-based or on-premises general accounting product.
We have not seen an “All in One” Cloud-based accounting product offered to the legal profession – until very recently.
Cosmolex seems to be the first Cloud-based system to offer full law office accounting functionality. Their product appears to be extremely strong in accounting for trust accounts, tracking and recovering advanced costs, accounting for time spent against Alternate Fee Arrangement billings, and keeping an accurate record of “to be billed” time (i.e., Work-in-Process).
To date we have had only a few brief exposures to this “new kid on the block”, but our initial impression is that they “get it” when it comes to law office accounting, and they seem to be putting in place a strategy to systematically expand their functionality, embracing some elements of a practice management system (calendaring, contact tracking, task lists, etc.).
In the ever more crowded “Cloud products for Lawyers” space it is still too early to be picking clear winners and losers, but for firms looking to move to the Cloud with an accounting product designed specifically for the law office, we think that Cosmolex is a legitimate contender.
Stay tuned as we get more experience with this interesting product.
Have questions about law office accounting software? Send them our way, and we will do our best to provide honest, unbiased answers. Email us at info @ easternlegalsystems.com, or give us a call at 877-357-0555.