There is empirical evidence to show why most people should not defend themselves in court. There are just as many reasons why most business owners should not be setting up their own accounting systems. We frequently say that there are about 2,000 ways of doing accounting wrong and two ways to do it right.
A large number of law firms that we speak to, including our current clients, started out doing their own bookkeeping. They did this to save money or believed that the accounting platform wasn’t “that difficult.”
The reality is that these accounting systems like QuickBooks come with parameters. They are designed to be set up and used by people who have the skill sets and understand accounting. It takes, on average, seven years to become a lawyer and eight years to become a CPA. If you have a joint JD/MBA, congratulations, you may skip this chapter. The skill set most attorneys have is different than the skill set it takes to properly set up, use and manage an accounting system. If you don’t set it up properly, it is a nightmare to get it right once you get going.
The setup process is very particular and is probably the most important part of the initial training. What I have found to be the most cost effective way of getting started is:
- Have a CPA do the initial setup
- Get trained on only the pieces you need to use
- Have a CPA create the reports and explain how to use them
A CPA firm that understands your business and helps you get set up correctly will not only save you hours but also a lot of money. Let’s look at the numbers:
- Average hourly rate for a lawyer – $150
- Time to learn and setup the accounting system – 40 hours
- Time spent each month on accounting – 10 hours
The opportunity cost of doing your own accounting is $6,000 initially and $1,500/month.
Typical costs of hiring a CPA firm:
Initial setup – $2,000
Monthly bookkeeping fee – $1,000
In year one, you could save $4,000 on setup
and $6,000 in monthly accounting fees.
That doesn’t even include the tax benefits of hiring an accountant!
Do you object?
If you are an attorney and you want more detailed info about how to minimize taxes and maximize profits, check out this free digital book entitled "Accounting for Attorneys: How to minimize taxes, maximize profits and create more time for the things you love"
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