Bookkeeping Best Practices for Law Firms

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Law firms have little to no wiggle room for bookkeeping mistakes. Other professional services may face loss of reputation and take a financial hit if they make a mistake. As a law firm, you will be managing your firm’s own finances, plus clients’ money. You could end up in serious hot water if you don’t follow trust accounting laws. Bookkeeping for law firms takes the best of the best minds. 

Are you growing as a law firm? It might be time to look into assistance from experts who know about law practice bookkeeping. Read on to learn about the importance of trust accounting and more.

Why bookkeeping matters for law firms

The precise laws for managing your firm’s accounting and trust accounts will depend on where you operate. In NSW, for instance, the Legal Profession Uniform General Rules 2015 will largely inform how you record your firm’s financials and report on all trust accounts within your control. Simply put: good bookkeeping for law firms keeps them compliant. 

Beyond the need to keep a governing eye satisfied, reliable bookkeeping practices also improve your overall business. When you aren’t playing catch up with your bookkeeping, you will have a better view of your organisation’s financial health. This includes:

  • Cash flow. How much cash is actually coming in and out of your firm? Knowing this critical information helps you plan for the future and spend wisely. 
  • General ledger maintenance. Every transaction in your law firm should be recorded twice: once as a debit and once as a credit. If you spend $1,000 on paper supplies, you have $1,000 less in cash on hand, but $1,000 more in office supply inventory. Accurate bookkeeping helps you keep an honest ledger. 
  • Payroll expenses. For law firms, salaries and other benefits make up a huge portion of your overhead. You can offer responsible pay increases and bonuses only if you know what you can actually afford. 
  • Protect assets. It’s imperative for a law firm to protect its assets with smart investments and a reasonable budget. Good bookkeeping keeps your firm’s overall interests top of mind. 

Best practices for law firm bookkeeping

The needs for your firm will be unique. That being said, there are some common best practices that apply to nearly any law firm. As you begin an inventory of your law firm’s financial health, keep these must-dos on your checklist. 

Set a budget

A bank account in the red can only lead to disaster. Use insights from your bookkeeper and CFO to draft an annual itemised budget. 

Stay on top of trust accounting

In addition to setting up a client trust with the law firm’s name property cited, there are rules regarding record keeping of trust accounts. Your firm must keep, in printed or computerised form: a copy of the trust’s receipts and payments, a copy of reconciliation statements, a copy of the trust’s debts and lenders, and a list of controlled money accounts and their balances. These must be drafted each month. You must also keep detailed records of deposited funds for trust accounts. 

Use detailed financial reporting to identify opportunities

The more refined your data, the better it can inform your decisions. A good bookkeeper will generate regular reports that reflect your spending and income and pass them along to you or your CFO. Once in the hands of your highest financial executive, your reports can turn into the inspiration for new opportunities to grow your business or cut some fat. 

Read More: Visory’s Reporting and Insights

Avoid data entry errors

Data entry errors are a self-inflicted injury that needn’t happen. Double-entry bookkeeping can help you avoid many of these mistakes, as can working with good accounting software. Keep in mind that your law firm finances may require a different software than your trust accounts. There are specific software programmes available for trust accounting — these software systems are compliant with local trust rules and regulations and can assist you from making errors. 

Outsource bookkeeping for your law firm

You may need the help of a professional bookkeeper. If you don’t know where to start, a bookkeeping service is a great jumping off point. They can connect you with professionals who know all about bookkeeping for law firms and how to avoid common pitfalls. Plus, an outsourced bookkeeping team keeps your overheads low and doesn’t require you to clear out an office. 

Are you ready to make monthly accounting and annual tax returns a lot easier? Enlist the help of a trusted team.

Learn more about Visory’s bookkeeping for professional services business.

How Outsourced Bookkeeping Can Help Your Architecture Firm

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Professional services organisations have a lot to keep track of. Billable hours, employee bonuses, and accounts receivable are just the beginning. Bookkeeping for architects is a big job. Many firms assume they need to hire someone full-time to manage their books. But there may be a better alternative. 

Architecture firms can outsource their bookkeeping to an online bookkeeping service that is ready to hit the ground running. Partner with someone who knows about architecture firms’ unique needs and can nail a balance sheet to boot. 

Read on to learn more about how outsourced bookkeeping can help your firm keep your reports accurate and current. 

How Outsourcing Bookkeeping Can Benefit Architecture Firms

You want to keep your financial records ready for inspection — whether by the ATO or a potential investor. Why pour hours of your leaders’ time into this task when you can outsource it?

Advancing your bookkeeping strategy is a whole lot easier if you have a dedicated bookkeeper on call. This helps your human resources staff remain dedicated to hiring and company culture, leaving payroll and benefits management to your financial expert. Plus, your executives never have to fret about reconciling bank accounts or tracking down late invoices. 

Here are some of the reasons an outsourced team with experience with businesses like yours can change your entire financial picture for the better.

Outsourcing your books may lead to faster payments

Is there anything worse than phoning your clients again and again to ask for a payment? It’s awkward and frustrating. As an architecture firm, you’re likely billing by project. You need the cheque to close out the billable hours on your end. The more you’re chasing money, the more money you continue to waste!

An outsourced accounts receivable team can streamline the payment process to make it easier for your clients to pay. They may also send out routine reminders that encourage your clients to submit payment. 

An experienced bookkeeper will also be on top of your team’s time tracking, to make sure you are always billing correct amount. Double-entry bookkeeping helps your financial team catch errors early and avoid billing mistakes. 

Getting help lets you focus on your business 

You may be spending more time and resources on your finances than you realise. As your firm grows, it will become untenable to do your own books. One-in-three small businesses say they spend at least 80 hours per year on lodging their taxes alone! Another 13% of surveyed businesses say they spend more than 10 hours per month on payroll taxes. Imagine what you could be doing with your time if you leave financial management to a trusted outsourced team.

Using a virtual bookkeeping keeps your firm financially healthy

Understanding your cash flow keeps you in the loop about your overall financial health. If your books are a month behind, you could be moving toward insolvency and not even realise it. A dedicated virtual bookkeeper will contact you when they spot any red flags or a negative trend in your cash flow. This is invaluable. 

Know Your Numbers to Maintain Your Architecture Business

There are many reasons for insolvency in any business. According to the Australian Securities and Investments Commission, however, there are some common trends for business collapse. The most recent data is about businesses that became insolvent between 2018-2019. 

ASIC says the top three reasons for a business to fail, according to data about recently closed organisations, are:

  • Inadequate cash flow 
  • Poor strategic management of the business
  • Significant trading losses 

Of those three reasons for lodging insolvency, cash flow was reported in 51% of all cases of business collapse. In other words, if an architecture firm has high spending and not enough client funds coming in — you could go under. Having a dedicated off-site bookkeeper can help you identify when you’re spending too much. A virtual CFO can even offer insights and strategy about how to get back on track. 

It’s worth noting that architecture firms and other professional services are not among the top three industries to have collapsed in the ASIC report. Still, knowing your numbers allows you to improve your business practices and make smarter investments.  

The final word

Bookkeeping for architects is a specialised practice. If you outsource your financial needs to someone familiar with project-based accounting in the professional services industry, you’re a step ahead of other firms.  

Learn more about Visory’s bookkeeping for professional services business.

How Outsourcing Bookkeeping Can Help Your e-Commerce Business

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All businesses are responsible for keeping accurate books. If you start losing track of your financial health, your organisation is flying blind. Plus, you could end up with serious tax penalties. 

Online stores have additional needs and challenges. E-commerce bookkeeping requires more than the profit and loss statements, general ledger, and bank reconciliations that all businesses use. You’ll also have to navigate tricky situations like foreign sales and website merchant fees that brick and mortar businesses can often avoid. And who is handling your off-site inventory management? 

An outsourced bookkeeping service may be the answer to your hand-wringing. With the help of an off-site financial expert at the helm of your accounts, you can get back to marketing and customer relations. 

What is Bookkeeping?

Simply put, bookkeeping is the process of keeping records about your business’ financial transactions. This includes your expenses, revenue, debt, and more. Bookkeeping records everything from your monthly shipping costs to the fees you pay to third-party payment processors. Then, your bookkeeper analyses the numbers to create insights into your overall financial wellbeing. 

E-commerce bookkeeping requires regular reports. Your financial staff will need to regularly create and analyse documents that include:

  • Profit and loss statements that track your expenses and income over a set period of time. 
  • Cash flow statements that summarise the money you have coming in and out of your e-commerce business. 
  • Balance sheets that provide a snapshot of your organisation’s financial health at a given point in time. 

Your bookkeeper may also track your personnel costs, bad debts, and lodge your annual taxes. These tasks all fall under the umbrella of bookkeeping. 

Why Bookkeeping Matters for e-Commerce Businesses

As someone running an e-commerce store, you may not have eyes on your inventory or your customers. Ever. This makes tracking receipts and invoices all the more important. They are the only tangible evidence of your sales. 

Not only does honest, accurate bookkeeping help you understand the true health of your company, but it keeps you in good standing with the government. The Australian Taxation Office (ATO) requires specific records from each e-commerce business. Tax requirements include:

  • Records that have not been altered and are stored in a way that restricts the information from being changed or damaged. You can often meet this requirement by using secure accounting software. 
  • A minimum of five years of records for your business must be available. The government wants you to keep records five years from the date the records were prepared or obtained.
  • The ability to produce financial records for the ATO on-demand. You must have the ability to produce any and all records relating to your income and expenses if the ATO wants to verify the information. 

Bookkeeping for e-commerce allows you to meet the minimum legislative requirements set by the government. But other entities may also need to see your records. Business accounting documents may also be required for the following situations. 

  • Obtaining credit. If you need a business loan or want to bring on an investor to your e-commerce business, they are sure to ask for current financial statements.
  • Selling your business. If someone wants to buy your business, your bookkeeping records can convince them of how profitable your online store really is. 
  • Working with a CFO. Whether you hire an in-house or virtual CFO, your new executive will need access to financial reports. It’s the only way for them to offer meaningful insights and propose changes. 

Read More: The Ultimate Guide to Bookkeeping for e-Commerce

Why Should You Outsource Bookkeeping

As an e-commerce business, you’re dealing with enough. Website design, shopping cart glitches, and new product photo shoots – this is where your attention needs to go. If bank account reconciliation and month-end cash flow reports start to get in the way, you need help. 

Outsourcing your e-commerce bookkeeping has several advantages over hiring in-house staff. Not only can you save money, but you can access an entire team of savvy financial experts instead of relying on a single person to juggle it all. 

Benefits of Hiring a Bookkeeping Service

Here are some of the reasons you might want to hire a virtual e-commerce bookkeeping team.

  • You’ll save on payroll costs. You can hire a flexible contract bookkeeper who only works as many hours as you need them and/or can afford. You won’t put your e-commerce business in the red paying for a full-time staff member you don’t always know what to do with. 
  • Finding the right person is easier. A bookkeeping service has access to hundreds of experts. They can connect you with someone who knows the e-commerce industry, so you don’t have to personally conduct a tonne of interviews to find a good candidate. 
  • Turnover is a breeze. When you go virtual, you will probably have a few people on your account. If one person moves on, your bookkeeping service will still be familiar with your organisation and can seamlessly transition a new bookkeeper into place. You won’t have a gap between bookkeepers. 
  • It’s a major time saver. Running an e-commerce business is time-consuming enough without having to track your own receipts. Turning to a bookkeeping service frees up many hours each week for your back office staff. 

How To Hire a Bookkeeping Service for Your e-Commerce Business

Does the idea of trusting someone with your bookkeeping and accounting have you nervous? Fear not. When you connect with an experienced team, your books will be in good hands. Not only does a virtual bookkeeping team have an obligation to absolute transparency, but they can automatically create any reports you need.

You’ll want to start the process of hiring a remote e-commerce bookkeeping team by finding a service that knows e-commerce up and down. Interview your potential account manager and let them give you a customised quote and bookkeeping plan. You want to feel comfortable, because this relationship can last for years and have major implications for your business.

Sign up for our free business health check to see how Visory can help you grow your e-commerce business!

How Do Bookkeeping Services Work?

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Your business may have had small beginnings, but with the right mix of patience and passion, you’ve had the privilege of watching your business expand and grow. Handling your own financial records might have made sense in the beginning, but is it time to consider partnering with an online bookkeeping service. 

Virtual bookkeeping services can provide all of the same benefits as an in-house bookkeeper at a fraction of the cost. Relying on these specialised services can help you with running your day-to-day operations, preparing your annual tax returns, and everything in between.

Today, we’ll take a quick look at how bookkeeping services work and show you how to choose the right bookkeeper for your company.

What Does a Bookkeeping Service Do?

Bookkeeping and accounting services are designed to manage and plan your company’s financial processes, helping you stay on top of your financial health.

Typically, services include the following:

  • Tracking income and expenses
  • Managing cash flows
  • Paying bills
  • Tax preparation and planning
  • Reconciling bank statements
  • Financial planning
  • Managing payroll
  • Generating financial reports

Typically, a bookkeeping service offers a three-tiered approach to handling your company’s books. The first tier is created by the bookkeeping software specialist, who will create a file that’s customised to the unique needs of your business.

Learn More: Visory’s Bookkeeping Services

The second tier is the full-charge bookkeeper, who will be the one performing many of the duties described above. They can also provide assistance in the event of a tax audit, as well as help with long-term planning to optimise your tax returns.

The third tier is known as the controller. The controller’s role is to increase your company’s financial accountability and monitor your financial statements for accuracy. The controller can also generate regular (often monthly) financial reports and bring any critical issues to your attention.

Keeping Your Financial Records in Order

Online bookkeeping services can also provide valuable assistance in maintaining and organising your financial records. This can be particularly important when it comes to tax planning and strategy. Your receipts and financial documents can be leveraged to minimise your tax debts and increase your chances of a return.

Some business owners may be concerned about handing their sensitive financial records over to a third party, worried that doing so may limit their access or expose their business to hackers or cybercriminals. But the opposite is actually true.

The advanced accounting software employed by today’s virtual bookkeeping firms can give small business owners increased access to their financial data, all while keeping it safely organised on a secure server.

Do You Need a Bookkeeper or an Accountant?

Many small business owners try to cut corners by handling their own books. This may seem like a cost-saving strategy, but it comes with a price. 

As a business owner, your focus belongs on the revenue-generating activities that will expand your business. You may actually be limiting the growth of your business by focusing on administrative details.

A dedicated bookkeeper can help you manage your cash flow, pay bills, handle payroll, and more. Not only does a bookkeeper take these responsibilities off your plate, but they can also provide you with big-picture data that can help you hone your business strategy, preparing you for growth in the future.

How Much Does a Bookkeeping Service Cost?

Bookkeepers are often one of the first employees that business owners choose to hire. Unfortunately, the cost of an in-house bookkeeper can be prohibitively high. 

According to the Institute of Certified Bookkeepers, bookkeepers in Australia start at an average of $60 per hour, with rates jumping to $80 per hour for advanced services. Hiring a full-time bookkeeper can become costly, even if you only need them a few hours here and there.

Compare that to the low monthly rate of today’s online bookkeeping and accounting services. You can outsource your bookkeeping to an online bookkeeper for a few hundred dollars per month. This can save you thousands of dollars when compared to hiring a full-time employee.

In most cases, the monthly price will be influenced by such factors as:

  • The size and revenue of your business
  • The services you need (tax planning usually costs extra)
  • The personalised attention of a dedicated bookkeeper
  • The communication options between you and your bookkeeper

But even the most expensive bookkeeping services will be significantly more affordable than hiring your own bookkeeper.

How Can a Bookkeeping Service Benefit Your Business?

The low costs of a bookkeeping service are often enough to entice frugal entrepreneurs. But partnering with an online bookkeeper has multiple benefits for your business that can’t be overlooked. 

These benefits include:

  • Niche experience and specialised skill sets
  • Faster reporting
  • Access to financial data and monthly reports
  • Personalised financial guidance and support
  • Access to the latest financial software
  • Consistent communication

Think of it this way: If your in-house bookkeeper takes a sick day or goes on holiday, what happens to your books? You’ll likely grind to a halt until he or she returns to the office. In our fast-paced business world, this can create a delay you can live without. 

A virtual bookkeeping service can help keep your business running 24/7, 365 days a year.

Additionally, it’s unlikely that your in-house bookkeeper can match the specialised experience or education of an online team. Partnering with an online firm grants you access to a more diverse group of financial professionals, some of whom may have the specialised training or experience to address complex or unique issues.

How to Choose the Right Bookkeeper

How do you choose the right bookkeeping service for small businesses? With so many choices available, it can be hard to think through your options. But there are several key features you’ll want to consider before partnering with an online bookkeeper.

Industry Experience

First, you’ll want a company that understands your industry. The financial needs of a restaurant may be very different from an online retailer. You’ll want to choose a bookkeeping service that can take these specialised needs into consideration and provide service and guidance that fits your business.

Potential for Growth

Secondly, you’ll want a company that’s capable of scaling along with your business. As your business grows, so will your needs. You may have an increased need for regular communication with your accounting and bookkeeping professionals, or you may need to have additional input regarding tax strategy. 

Learn More: Your Guide for Finding The Best Bookkeeping Service

You’ll want a company that offers services that can evolve with your changing business, one that can help you reach the benchmarks on your road to success.

Clear Communication

Third, you’ll want a company that offers clear, direct communication. You never know when you’ll have a question about your financial health or need to access a crucial piece of data. You’ll want a company that gives you access to your data through user-friendly accounting software.

We’ll Handle the Books; You Handle the Business

Have you been struggling with keeping your books up-to-date? Has tax season been a source of stress? It’s time to get your head out of the back office and back in the game. Visory can help you do that. 

Our team of financial experts can help you run your business more smoothly and efficiently than ever before. Learn more about Visory’s bookkeeping services and discover how our team can improve the way you do business.

How to Outsource Your Bookkeeping

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You may realise that your books are getting out of hand, but you also know you’re not ready to hire a full-time bookkeeper. So, what is a growing business to do? Outsourcing your bookkeeping can be the answer to your financial needs. 

Learning how to outsource bookkeeping is easier than you might think. If you have experienced professionals on your side, you can get set-up with outsourced online bookkeeping in just days. A trusted bookkeeper gives you access to your financials whenever you need them, generates vital reports, and offers insights into where your organisation can streamline your processes. All at a lower cost than a full-time employee. 

Read More: 5 Ways Outsourcing Bookeeping Can Help Grow Your Business

How to Outsource Bookkeeping

So you want to outsource your bookkeeping and accounting — where do you begin? Let’s start by going over your options. You can always vet and hire a local bookkeeper to work on contract. This saves money and may allow for a remote relationship. Using a virtual bookkeeping service gives you access to an entire team and allows you to add more people as needed. 

Is one of these options right for your business?

Hire a local freelance bookkeeper

A local freelance bookkeeper has unique advantages. Your contractor may be able to come into the office periodically as needed, so you get some in-person assistance without having to provide a full office space. Your freelance bookkeeper may also know the specific needs of your industry in your area. 

Some freelancers are open to more work. As your organisation scales upward, you can ask if they would like to be hired in a more permanent role. This will allow you to bring on a full-time staff member who is already up to speed on your procedures and familiar with your books. 

Use a virtual bookkeeping service

Instead of hiring a single freelancer, you may also want to engage a remote bookkeeping firm to handle your books on a regular basis. What’s the difference? For one, you will probably have access to more than one person. And, you can add more people to your virtual team as your needs change. Likewise, you can scale back down if you want to. 

A virtual bookkeeping company may also be able to connect you with a wider pool of potential bookkeepers than you’d find in your area. You’ll work with an industry expert who can teach you things even a savvy business owner may not know about potential tax deductions or ways to save money in your field. 

How Does Outsourcing Bookkeeping Work?

If you’re wondering how to outsource bookkeeping, one of your top questions is probably “How is it different than regular bookkeeping?” And what an important question it is. The truth is, business owners can benefit from both traditional bookkeeping and virtual help. Let’s discuss how a virtual team is different from in-house staff. 

In-house vs. Outsourcing

In-house bookkeeping requires a different budget and set of tools than outsourced bookkeeping services. Here are some of the ways an in-house team differs from an outsourced bookkeeper. 

In-house bookkeepers

  • Require a dedicated office space and equipment
  • Represent an added payroll expense and mandatory benefits costs
  • May not yet be necessary for a growing business
  • Will inevitably turn over, resulting in rehiring and training costs

Outsourced bookkeepers  

  • Don’t require an equipment investment or dedicated office space
  • Charge based on a pre-contracted price per week or month
  • Are good for companies at any size
  • Can seamlessly add or change members of your team without disruption 

Is Outsourcing Right for Your Business?

Outsourcing may be the right choice for your business’ bookkeeping needs if:

  • You simply don’t have time to do your own books anymore, yet you don’t need a full-time bookkeeper 
  • You want to free up time to focus more on research, development, marketing, and sales 
  • You have limited office space to accommodate a bookkeeping team
  • You don’t want to train a new bookkeeper every few years
  • You’re not sure what your bookkeeping needs will be over the next few years, requiring flexibility

Outsourcing your bookkeeping is as simple as calling Visory. We can connect you to experts in your industry who will help with tax time, monthly reports, and other financial needs. You gain the benefits of an in-house bookkeeping expert without carrying costs of a salaried employee. Even better, you don’t sacrifice transparency just because your team members are off-site. You can see your vital reports and financial health whenever you need to. It’s the best of both worlds.

Click here to learn more about Visory’s Bookkeeping Services

Tips for Advancing Your Architecture Firm’s Bookkeeping

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Business is booming — can your accounting keep up? Bookkeeping for architects requires great attention to detail. As you grow from a small firm to a thriving organisation, it may be time to recruit some additional help in the bookkeeping department. 

An architecture firm must combine project management, invoicing and employee revenue tracking to create a full picture of financial health. Can your staff handle it all? And should they have to? Your unique bookkeeping needs will demand a tonne of time and resources. Here are some tips for advancing your firm’s bookkeeping, and how to call in reinforcements.

Read More: 5 Ways Outsourcing Bookkeeping Can Help Grow Your Business

What do you need to keep track of?

Bookkeeping for architects is different than bookkeeping for retail sales or the entertainment industry. With large-scale projects billed on an accrual basis, you need to be particularly diligent about tracking your accounts receivable. Overheads in architecture and similar fields are also higher than it might be for a smaller operation. 

Here are some of the primary metrics that an architecture firm should keep track of:

  • Overhead rate: Calculate the ratio of indirect expenses to direct labour. The overhead for the architecture industry is typically over 100%; a good number to strive for is about 150%.  
  • Utilisation rate: This rate reflects how much of your employees’ time is spent on billable projects. Shoot for at least 60%. There will always be some time spent on non-billable tasks, such as training new employees, meetings and internal emails, but a high utilisation rate makes you more efficient and profitable. Accurate time tracking is key.  
  • Age of accounts receivable: Most architecture firms want to receive final payment within 60 days. This keeps your cash flow in order and limits the amount of money chasing your staff has to do. 
  • Personnel expenses: Annual leave days, sick days, and other staff benefits are an additional labour cost to track. 
  • Cash flow: This metric is one of the most crucial for any architecture firm. You can be profitable on paper, but if you don’t have enough cash flow you won’t be able to meet financial obligations. 
  • Long-term assets: Keeping an up to date balance sheet shows what you own and what you owe currently. It will also help you track assets and debts in the long term. Long term assets can be anything from valuable equipment to loans. 

Tips for bookkeeping for architecture firms

Your firm’s business development hinges on your ability to remain profitable and flush. When you’re working with billable hours, that means careful bookkeeping that highlights where you’re overspending and tracks outstanding receivables. 

These basic tips are a good place to start if you’re doing an inventory on your accounting health. Ask yourself, have you done these five things?

  1. Develop a reporting pack

A reporting system in the cloud keeps accounting practices organised and transparent. You can run automatic reports using software such as Xero or MYOB, and you can set  your software up to pull data straight from bank accounts and more. 

  1. Outsource your bookkeeping so you can focus on your business

Every minute your executives are spending on the books is a minute they are not billing to clients. Your architecture firm can become more efficient and profitable by outsourcing your bookkeeping to experts who know architecture and similar industries. 

  1. Stay on top of billing and expenses

Catchup bookkeeping should not be a regular practice. Current cash flow calculations and accounts payable data provide a realistic sense of solvency at any given moment. You also want to keep up on expenses because you may be able to deduct some of your expenses. If you don’t have proper records, you won’t be able to claim deductions. 

  1. Review your architecture firm’s books regularly

Running regular weekly and monthly reports helps you catch mistakes. Reconciling your bank statements  can ensure that you catch any missing money, forgotten receivables, and other discrepancies. Bank reconciliations are a good end-of-month routine.

  1. Maintain a chart of accounts

Itemisation helps you sort out your books client by client. You want to keep a chart of accounts so you can always tell which clients are current who have an outstanding bill. By having a digital chart of your accounts, you can properly code expenses and hours to the appropriate account. 

Do you need some help with your books? Visory offers bookkeeping for architects at all stages of business. Whether you are a budding firm or a thriving organisation with years under your belt, we have bookkeepers who can handle your finances. 

Learn More: Visory’s Bookkeeping for Professional Services

Construction Bookkeeping 101: Everything You Need to Know

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construction bookkeeping

When you’re in the construction industry, bookkeeping was probably the least of your concerns. However, construction bookkeeping is an essential skill if you hope to run a profitable organisation and successfully manage your finances.

In order to help you refine your bookkeeping practices, we’ve created this introductory guide. Below, we’ll outline the key aspects of bookkeeping for construction businesses. We even throw in some proven tips that you can start using right away!

How is Bookkeeping Different for Construction Businesses?

Construction bookkeeping is extremely complex. You have to track each individual project, manage income, and account for operational costs. Since no two projects that you undertake are the same, you must have a proven system for monitoring expenses and revenue.

Strong construction bookkeeping practices are also essential when you want to successfully bid on a project. Your bids have to accurately account for all expenses. If you bid too low, then you could potentially lose money on the project.

Key Concepts for Construction Bookkeeping

In order to optimise your bookkeeping practices, you must first understand the core components of construction accounting. These include:

Project-Driven/Job-Based Accounting

Like most contractors, your business is probably based around individual projects. In order to succeed using this approach, you have to bid rationally and keep costs under control. You must accurately track the cost of each individual job or project. Otherwise, you won’t be able to achieve desired profit margins to sustain your business.

Construction Billing Processes

There are two primary construction billing processes that you can implement. Many companies will use different billing processes for various projects, so it’s a good idea to be familiar with each style.

The first process is known as fixed-price billing. When you’re using this approach, you quote clients a price based on the estimated total cost for a particular project. 

The benefit to this method is that you can provide clients with a clear bid upfront. The downside is that any overages come out of your profits!

The second option is known as unit pricing. When you’re using this method, you bill the client an agreed-upon fixed rate for every unit that you complete. If you estimated the per-unit cost accurately, then you can improve your overall revenue.

Managing Varying Income, Expenses, and Other Operational Costs

Our final key concept involves learning to manage varying income and expenses.  Throughout the course of a particular project, you have to ensure that your bookkeeping practices are sound. Otherwise, you can overstretch available resources. This can leave you unprepared in the event that you encounter operational costs due to factors beyond your control.

Bookkeeping Tips for Construction Businesses

Now that we’ve outlined the key concepts of bookkeeping for construction businesses, let’s look at a few ways that you can improve your financial tracking practices. 

Use an Online Bookkeeping Service/Outsource Your Bookkeeping

One of the best ways to help ensure your financial information is precisely tracked is to outsource the job! With the help of an online bookkeeping provider like Visory, you can gain access to expert accounting and recording services. Our team can provide your organisation with industry-specific reporting and insights that you can use to drive new growth.

At Visory, we take the time to match you with a bookkeeper who will understand the unique demands of your industry. We will ensure they are the right fit for your organisation so that you can get the most out of your bookkeeping services.

Read More: 5 Ways Outsourcing Bookkeeping Can Help Grow Your Business

Track Invoices and Payments When They Are Received

If you want to achieve long-term success with your construction business, then you have to track all invoices and payments when they are received. 

Failing to keep up with all of your invoices can result in outstanding debts that get overlooked. This is one of the fastest ways to ruin your profitability and hinder the growth of your organisation.

Use Job Costing to Manage Project Costs

Job costing is an accounting practice that makes it easier to manage project expenses. When you’re using this method, you’ll accumulate the individual costs of overheads, labor, and materials for a specific project. 

Job costing is a great tool to track the specific costs of an individual job. You can also analyse this data to find ways to reduce the expenses of jobs you take on down the road.

While job costing can be used in a variety of industries, it is especially beneficial for construction bookkeeping. When you’re taking on a long-term project, job costing can also help you to identify potential overages. This will give you time to make adjustments in order to reduce costs or reach out to the client about a billing increase.

Use Multiple Bank Accounts

If you are currently operating multiple projects from a single account, you could be  making a huge mistake. We recommend using multiple bank accounts for your construction company. This allows you to track revenue and expenses more accurately for each project. 

When you are managing each job from a separate account, you can avoid common bookkeeping and billing errors.

Choose the Best Revenue Recognition Method for Your Business

Revenue recognition is a principle that outlines the best ways to account for your organisation’s earnings. This principle defines the specific conditions under which revenue should be recognised. 

While there are several revenue recognition strategies available, the most popular option for construction bookkeeping is known as the “percentage of completion” method.

Using this method, you must report revenue on what is known as a period-by-period basis. Your expenses, gross profit, and revenue are recognised in each period based on the approximate percentage of work that has been completed. 

A period is usually a financial year, but you may decide to count each quarter as a separate period when you’re working on shorter projects.

Construction Bookkeeping from Visory

While the tips above can certainly help you to improve your construction bookkeeping practices, the entire process remains incredibly complex. That is why you should consider partnering with Visory! 

We offer comprehensive bookkeeping and accounting services for a variety of industries, including construction companies. Sign up for a free financial health check and a Visory Success Manager will help to analyse your business’ financials and identify potential improvements for your construction business.

8 Bookkeeping Tips for Your Law Firm

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bookkeeping for law firms

Running a legal practice is demanding, you have a lot of things on your plate. In addition to following up with clients and preparing for court proceedings, you also have to ensure that your accounts are in order. But keeping up with your finances can be incredibly complex, no matter what the size of your firm might be.

In order to help, we have outlined 8 bookkeeping tips for your law firm. Implementing these proven strategies can help avoid the common pitfalls that are often associated with legal bookkeeping.

Accounting vs. Bookkeeping for Legal Practices

Oftentimes, the phrases “accounting” and “bookkeeping” are used interchangeably. However, this is not quite accurate. Bookkeepers are tasked with accurately recording financial transactions. Accountants interpret, analyse, and summarise this data.

Your legal practice will likely need both accounting and bookkeeping services. When used together, these services can help you to account for every dollar spent and earned throughout the course of a financial year.

Read More: Do I Need a Bookkeeper, an Accountant, or Both?

Tips for Law Firm Bookkeeping

When handling the bookkeeping responsibilities for your legal practice, it is essential that all transactions are accurately recorded. By following the tips below, you can improve your law firm bookkeeping practices. 

1.    Don’t Mix Personal and Business Expenses

While it may seem like it saves time to mix your personal and business expenses, this is a huge mistake. Even if you are operating a small legal practice, different types of expenses must be tracked separately. Over the course of a year, it can be easy to confound personal and business expenditures, which will make it more difficult for you to report your taxes properly.

You should have a separate account for your business expenses and never use your personal account or credit card for business-related activities. By maintaining separate accounts, you will find it much easier to track your expenses throughout the year. 

2.    Outsource Your Bookkeeping: Use a Bookkeeping Service like Visory

If you really want to optimise your legal practice bookkeeping, then you should consider outsourcing through a company like Visory. We offer online bookkeeping and accounting services that can scale with your business. 

Our experts do more than simply clean up your books. We provide industry-specific reporting and insight to drive new growth. We offer fixed monthly subscriptions with custom-tailored service packages. 

3.    Track Your Practice’s Finances Constantly — Don’t Wait Until Tax Time

One of the best things you can do to improve your bookkeeping practices is to track your finances regularly. You should compile weekly and monthly finance reports that detail every transaction. Keep this information well organised so that you can easily access it at the close of your financial year.

If you wait until tax time, you could find yourself scrambling to gather transaction data. This means that you could miss out on some great tax deductions and end up paying more than you should at the end of the year. 

4.    Maintain a Chart of Accounts

A chart of accounts is a list of your legal firm’s General Ledger Accounts, from the first asset account through the last expense account in your legal practice’s accounting books. Maintaining a chart of accounts is a great way to support quality reporting.

Creating these charts is only half the battle. You must also update them regularly to ensure that all information is accurate. While it may seem tedious, maintaining account charts is a great way for lawyers to stay organised. If you don’t have the bandwidth to do this yourself, a good bookkeeper can manage a chart of accounts for you.

Read More: Learn More About Visory’s Bookkeeping Services

5.    Stay Up-to-Date on Trust Accounting

Maintaining your Trust Account is a crucial part of compliance for legal practices. This can get difficult if you don’t have a bookkeeper experienced in dealing with Trust Accounts. 

An experienced bookkeeper will ensure that your Trust Account is reconciled regularly and in line with your accounting software to help ensure that you stay compliant at all times. Even a small discrepancy could result in penalties from regulators. 

6.    Use Bookkeeping to Identify Opportunities

Did you know that accurate bookkeeping can actually help you increase cash flow and grow your business? When leveraged properly, bookkeeping can provide valuable insight into your firm’s finances and long-term outlook. You can identify trends, improve income tracking capabilities, and better manage your funds.

Ultimately, you will be able to use this information to refine your business practices. You can reduce waste and maximise your profitability. In turn, you will have additional funds available to scale your business.

7.    Avoid Data Entry Errors or Leaking Money

While our next tip may sound like a given, data entry errors are actually extremely common. Even a seemingly small mistake can throw off your entire bookkeeping process. To make matters worse, it can cause your firm to start leaking money.

There are four common sources of revenue leaks in the average law firm. The first can be attributed to recording errors. If you are not accurately documenting all billable hours, then you are essentially giving away free legal services.

The second common cause of lost revenue is billing at rates that are too low. The third source of revenue leaks is the over-use of write-offs. While most law firms use write-offs, inaccurate record-keeping could lead to accidentally subtracting too many hours. 

The final cause of lost revenue for your firm is not collecting on all billed services. Accurate data entry practices help you to keep track of all billed services and ensure that clients pay what they owe.

8.    Track Your Tax Deductions

While you must constantly track your firm’s finances, you should also keep up with your tax deductions throughout the year. Every time that you make a purchase that is eligible for a tax deduction, document it. Save necessary receipts and transaction records so that you can claim these deductions at tax time.

Law Firm Bookkeeping from Visory

As you can see, handling law firm bookkeeping can be incredibly involved. Fortunately, there is a better way! Visory’s online bookkeeping services are affordable, scalable, and effective.

Interested in learning more about Visory’s bookkeeping services? Complete our free financial health check to see if Visory fits your law firm’s goals and needs.

11 Top Benefits of Online Bookkeeping

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Keeping your books in order does more than offer peace of mind. An accurate accounting of your financial status also allows you to attract more investors, avoid tax penalties, and help ensure that your staff are always paid on time. 

If you’re a small business rapidly growing into a large organisation, you will eventually outgrow at-home accounting software. Professional online bookkeeping services might be the answer. Once you learn about online bookkeeping benefits, we think you’ll be persuaded to enlist a little (or a lot of) help with your general ledger. 

Do You Really Need to Outsource Bookkeeping?

You can certainly do your own bookkeeping in your back office. But as your business scales upward, it’s easy to fall behind on weekly reports and lose track of some expenses. The risk of forgetting to pay an invoice will be forever in the back of your mind when you lay down to sleep at night. 

Alternatively, you can switch to an online bookkeeping team. Handing over your books to a virtual team can help you save money and time, avoid mistakes, and gain access to experts. We can’t recommend entrusting a virtual team of bookkeeping professionals enough. You can even add new members to your online bookkeeping team whenever you have new accounting needs. 

Top Reasons to Hire Online Bookkeepers 

Online bookkeeping is a way to manage your accounts receivable, accounts payable, financial reports, tax reports, and more — without an in-house team. Your online bookkeeper can become a valued member of your staff, even at a distance. These are the top reasons to switch to online bookkeeping. 

Save money on payroll.

Hiring a full-time staff member requires you to pay more than an hourly rate or salary. You’re also responsible for mandatory benefits. These benefits include superannuation, sick leave, and long service leave. If you enlist a bookkeeper as a vendor, you can save money on payroll and use it for other essential expenses. 

Avoid catch-up bookkeeping.

Paying someone to go through your books and find mistakes you made months ago is time consuming and expensive. Stay up to date on your finances by turning to an online bookkeeper. By creating monthly reconciliation reports and maintaining your general ledger, you can avoid painful troubleshooting later. 

Get meaningful insights.

One of the most important online bookkeeping benefits is that you won’t just keep your money straight — it can help you see into the  future. No, really! A professional bookkeeper can help to detect where you’re losing money. They can also tell you where your business is thriving. Insights into which customers spend the most money and which products are failing allow you to be more strategic. 

More accurate bookkeeping.

A simple mistake can have a huge ripple effect. When you reconcile your books, you’ll be grateful for accurate records. Double-entry bookkeeping records each transaction twice. It’s more accurate, but takes more time and effort. Let a bookkeeper take over the task to reduce  common mistakes that often happen when you’re in a rush. 

Properly categorised expenses.

Making sure your expenses are categorised properly helps you make important decisions. Are you spending too much on shipping? Do you have spending redundancies in your marketing costs? You can make better decisions when you see precisely where your cash is going and why. Online bookkeeping makes it easy to code each transaction into categories. 

Prepare taxes painlessly. 

If you fail to pay taxes on time, fail to withhold taxes properly, or fail to meet your obligations — you could be looking at penalties. Lodging your taxes the right way means having organised books. Your online bookkeeper can handle all the hard work for you.  

Avoid onboarding and training. 

Hiring a new in-house accountant or bookkeeper could mean putting them through a training programme. Not only does this prolong the hiring process, but it costs money. And if your bookkeeper quits? You’re back at square one. With an online bookkeeping service, you often have access to a team. If one person leaves, another bookkeeper can jump in seamlessly. 

Leverage industry-specific expertise.

Many online bookkeeping services also offer experts in your field. Is your main business e-commerce sales? You need someone on hand who knows how to track high inventory turnover and shipping costs. If you sell food, you’ll want a bookkeeper who can track licensing fees and make recommendations. Going virtual for your bookkeeper means you can be matched to someone who knows your industry, regardless of where they are located. 

Use automated reporting.

Cloud-based accounting is a game changer. It’s one of the key online bookkeeping benefits. Since they’re not on location, a virtual bookkeeper will have to maintain your records in the cloud, which gives them access to some of the most up-to-date bookkeeping software. You can even ask your bookkeeper to generate automated reports. Schedule revenue, spending, and payroll reports each month to make sure you never fall behind. 

Be more efficient with your time.

Time you spend categorising invoices is time you’re not spending on research and development, marketing, and getting to know your customers. Simply put: online bookkeeping frees up tonnes of time. Your executives can concern themselves with growth instead of calculating reports. 

Accomplish money management faster.

Experienced online bookkeepers know what they’re doing, every step of the way. If you’re trying to do your own books, you are bound to miss a few deadlines. And affordable in-house bookkeepers may take a few weeks to get caught up. Online bookkeepers provide a seamless experience, generating your reports and tracking expenses in real-time. 

When you outsource bookkeeping, you free up time and resources for your back office. Imagine how much more time you’ll have for brainstorming marketing strategies and dealing with customer service if you’re not wringing your hands over an expense report. Visory makes the switch to online bookkeeping easy. Once you are quickly onboarded, you have access to a team of experts. You can grow or scale back your bookkeeping team as needed. And even better, you have around the clock access to your books!

13 Key Financial Metrics & KPIs for Professional Services

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professional service business working at a table

Managing a professional services firm often involves moving at a frenetic pace. You must be able to seamlessly transition from things like reviewing a client proposal to reporting campaign results to business partners.

While these tasks are an essential part of managing your business, tracking financial metrics is equally important. These financial metrics allow you to stay apprised of various components of your firm’s overall performance. The practice of tracking this data is often referred to as online bookkeeping.

Chances are that you are already tracking a few business financial metrics. However, you may not be confident that you are monitoring the best data points.

Below, we have compiled a list of 13 key financial metrics that your business can leverage to help facilitate growth and improve profitability.

How to Check Your Financial Health

Thanks to modern software, there are plenty of options for checking the financial health of your professional services firm. You can track various metrics independently or partner with a firm that provides bookkeeping for professional services.

Many professional service providers find that allocating this responsibility to a third-party provideris the most pragmatic approach. These teams specialise in online bookkeeping services and can help find the perfect software for your industry. 

You can access this data from anywhere and detect concerning trends early on. This allows you to be proactive in taking control of your firm’s financial future.

How Often Should You Check Core Financial Metrics for Your Professional Services Business?

Many professional services business owners wonder how often they should check their financial metrics. You may even find yourself asking these very same questions. The simple answer? Frequently.

You can collect information about all of the best business financial metrics in the world. However, they will not do a bit of good unless you analyse them to gain insights about your firm.

Generally, we recommend assessing key performance indicators (KPIs) at least once per week. Develop a routine and check your metrics on the same day each week. While many of the data points outlined below may not show significant changes on a weekly basis, it is still important to review them regularly.

Some of the metrics detailed below may only need to be checked monthly or quarterly. Others, such as annual recurring revenue, can only be assessed yearly.

By routinely checking your business’ financial metrics, you can help increase revenue and improve profitability.

Metrics

1.   Revenue

Of all of the business financial metrics, revenue is one that all professional services firms should track. 

Revenue is an important data point to track. However, it does not provide a complete picture of your business’ overall performance. When it is paired with additional key performance indicators outlined below, revenue can tell you a lot about your current business model.

2.   Annual Recurring Revenue (ARR)

When you’re organizing your online bookkeeping services, it is also important to track ARR. ARR is a metric that quantifies income from annual services. 

For instance, let’s say that a particular client signed a two-year contract for $100,000. The ARR for that client would be $50,000 because that would represent how much you earn from that account per year. ARR is a predictable income stream that can help you to grow your business.

3.   Profit

When it comes to key business financial metrics, perhaps none is as important as profit. This data lets you know what your net income will be after expenses. Unlike revenue, profit gives a much clearer view of the health of your professional services firm. 

When you’re calculating profits, make sure to account for all expenses. This includes customer acquisition costs and costs of goods sold (COGS). If you offer ongoing service, COGS can be substituted for the cost of creating and maintaining your software.

4.   Qualified Leads:  MQLs and SQLs

Qualified leads are target clients that are primed to make a purchase. These buyers are already actively seeking information about your services and are deep in the sales funnel.

There are various types of lead-related business financial metrics available, depending on which types of services you provide. 

Marketing qualified leads (MQLs) are buyers that fit your defined target audience to a ‘T’.  Consumers in the MQL phase are aware that there is a solution to the problem they are facing. However, they are not completely aware of your product offering. 

Sales qualified leads (SQLs) are the B2B variant of MQLs. An SQL is a person with the authority to make a buying decision. Once you identify clients that are SQLs, it is time to present them with quality content to close the deal.

5.   Customer Acquisition Cost (CAC)

When a firm’s revenue is high, but profits are low, it is time to assess additional business financial metrics to identify the root cause of the problem. One such KPI is CAC.

CACrefers to the average amount spent to obtain new clients. Ideally, you want to have a low CAC and a high purchase rate per consumer.

For instance, let’s say that your CAC is approximately $15. This means it costs your firm $15 to acquire a single customer. If the average client is spending $100 AU, then your CAC to purchase ratio is good. However, if average purchase amounts and CAC are nearly even, then you may need to reevaluate your business strategy.

6.   Customer Lifetime Value (CLV)

Most of the business financial metrics on our list are great for all professional services firms. However, our next KPI is geared specifically toward established firms. 

CLV outlines how much a client spends on your services throughout their lifecycle. The lifecycle of your clients will be heavily dependent on your industry. Some professional services businesses will retain customers for years.

In order to calculate CLV, subtract CAC from the amount of total revenue earned from that customer. Acquiring customers cheaply and retaining them for years can help your business improve profitability.

7.   Proposals Sent

One of the more basic business financial metrics that we recommend tracking are proposals sent. Contrary to popular belief, the goal is not to send out an absurdly high number of proposals. Instead, you should focus your attention on targeting quality leads. 

If you find that your “proposals sent” metric has dropped, review your lead-generating practices. Meet with your sales team and seek out their feedback. Is the issue that they are not getting enough leads? If not, perhaps they need to refine their outreach practices.

8.   Win Rate

Win rate is a great KPI that can be used to hold your sales staff accountable. In order to calculate win rate, divide deals closed by the total number of proposals sent. 

Much like the proposals sent metric, the higher the better is not necessarily what you’re aiming for. If your rate is over 90%, then your services may be priced too low. You do not want to sell your business short and hinder profitability. Increasing your rates slightly may reduce the win rate, but it will lead to higher revenue in total.

On the other hand, win rates below 50% are a sure sign that something is awry with your sales practices. Once a high-quality lead is identified, your sales team should be able to close a good number of the deals they present. An ideal win rate is approximately 70%.

9.   Net Margin

Unlike win rate, some business financial metrics are a bit more difficult to calculate. Net margin is a prime example. However, it is an important KPI to track.

Net margins translate your revenue to actual profits. In order to calculate this figure, you must have a firm grasp on CAC and COGS. Unhealthy net margins can prevent you from scaling your business.

10.  Cash Flow from Operations

Your business must maintain a positive cash flow to meet deadlines, hire new staff, and grow. Firms without strong cash flow are not flexible, which can hinder performance.

An important part of managing cash flow includes deciding when you are going to charge clients. If you take on a large number of new accounts and do not charge anything upfront, your firm may quickly have a cash flow deficit. 

11.  Client Retention Rate

Acquiring new clients is costly. Retaining existing customers is much more efficient and practical. If your client retention rate is low, then it is time to find out why.

In order to calculate client retention rate, subtract the number of clients at the end of a period from the number of clients obtained during the same period. This will yield the number of starting clients. Next, multiply that figure by 100. This will be your client retention rate.

12.  Average Churn Rate

The churn rate is also referred to as the rate of attrition. Professional service firms use this metric to determine how many clients cancel services during a given period of time. 

A high churn rate may be a sign that your sales team is closing deals with clients that are a poor fit for your company.

13.  Revenue per User (RPU)

RPU is one of the best business financial metrics for professional service businesses. As the name implies, RPU indicates the amount of income generated on a per-client basis. 

You can utilise this metric to project future profits as you scale your business. You can also make decisions about possible pricing adjustments to ensure net margins are sustainable.

Closing

By incorporating these KPIs into your online bookkeeping services, you will be able to more effectively track the financial health of your firm. You will gain key insights into what your team is doing well. Your management team will understand how to improve the client experience and generate additional profit.

If you want to optimise your ability to leverage these metrics, consider bookkeeping for professional services from Visory. Our experts can supercharge your financial back office and give you the tools needed to grow your business! Contact us to learn more about customised online bookkeeping for professional services.