The financial health of your law firm is vital throughout the whole life cycle fo your business. It is crucial for you to continually improve it by performing the best practices in healthcare law firm accounting, such as analyzing financial statements compiled by an experienced healthcare law firm CPA. Financial statements prepared by your accountant provide information that can significantly impact your short-term and long-term plans. These reports can also show you your firm’s earnings, liabilities, and expenses.
Preparing accurate financial statements is an extremely important part of your healthcare law firm’s bookkeeping as they show you the value of your firm’s equity at any point in time. Healthcare law firm bookkeeping can oftentimes be very complex especially if you do not have a deep level of accounting experience to know things like the value of your assets should equate to the value of your equities and liabilities.
Having accurate financial statements is an essential part of your healthcare law firm’s tax planning strategy. They allow your health law firm accountant to evaluate:
Your bank assets
Equipment you own
Properties owned by your firm
Any debt you have
Lines of credit
Financial Statements can also help your partners or shareholders understand how much capital you have. You could also check the value of your firm’s profits or losses.
Ways Of Financial Reporting For Healthcare Law Firms
Law firms require almost the same reports that other types of businesses need. Some of these reports include balance sheets, changes in owner’s equity, cash flows, and income statements. Your income statement is a vital part of your health law firm bookkeeping as it shows you things like:
The incomes and expenses in your reports can be recognized using different methods. The method you will apply will determine the timing of the recording of these amounts. If your healthcare law firm reports using the cash basis method, your revenue shown on your income statement reflects income that has actually been received. On the other hand, if you use accrual basis for your health law firm tax planning, then your income statement would show what has been earned, regardless if payment has been received.
The same principles apply for expenses. If a healthcare law firm CPA reports using the cash basis, any expenses on your income statement will reflect money that you actually paid out. With the accrual basis, your profit and losses will include expenses that you have incurred whether or not they have been paid. Once all is said and done, your firm’s net income is calculated by subtracting your expenses from your total revenue. This helps you to see if you are running at a profit or a loss.
Why Law Firm Tax Planning Is Essential
You need to know where your law firm sits financially. Healthcare law firm tax planning is challenging because it is not always clear what income is taxable and when they should be taxed. A healthcare law firm financial adviser can help you make sense of your tax responsibility for things like trust accounts, fees, litigation settlements, and more. Here at Fusion CPA, our healthcare law firm CFO advisory services can help you understand what parts of your cases are tax-deductible. We can also help you create reports that will guide you in creating policies for the operations of your firm. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.