In most small and mid-sized firms, the back office is held together by one or two people. Often it is a partner doing the trust reconciliation on the weekend, or a practice manager who has become the only person who understands the ledger. Neither is a good use of the person doing it, and both become a risk the moment that person goes on leave.
Outsourcing practice management means handing some or all of that work to a specialist team. Here is how to think about it.
What you can hand over
Almost anything to do with money, administration or software platforms. The most common pieces are:
- Office account management: bookkeeping, reconciliations and month-end.
- Trust account management: receipting, reconciliations and preparing for the annual examination.
- Tax compliance: BAS and the obligations around it.
- Payroll: pay runs, leave and award compliance.
- Billing and debtors: getting invoices out and money in.
- Matter management and management reports: keeping the system tidy and telling partners how the firm is doing.
Firms also outsource the setup work around their software: installation and training, bookkeeper training, workflow creation, precedent customisation and first-line support.
What stays with you
The legal work, the client relationships and the decisions. A good provider prepares, reconciles and reports, and the firm approves. You should always be able to see what has been done and why.
How it is billed
Arrangements vary. At LAPM the work is billed in units for the time actually spent, which suits how lawyers already think about work, and there is no lock-in contract. Whatever the model, ask for a task list and a cost outline up front so you can compare it with what the work costs you now. Remember to count the partner time and the fee-earner time currently going on it, not just salaries.
Start with a few tasks
You do not have to hand over the whole back office at once. Most firms start with the job that hurts most, often the trust reconciliation or payroll, and add more once they trust the team doing it.
Questions to ask any provider
- Who will actually do the work, and what is their experience with law firm trust accounting?
- Which systems do you work in? (Ours: LAPM Accounting, MYOB and Xero.)
- How is the work billed, and is there a minimum term or lock-in?
- What happens when the person doing our work is on leave?
- How will we see what has been done, and who approves what?
- Can you support us through the annual trust examination?
- Can we start with one or two tasks?
Not only law firms
Trust accounting is the same work wherever people hold other people’s money and answer to a regulator for it. Real estate agencies, trustees and accountants advising clients on their trust obligations use the same kind of service.
See what LAPM’s practice management team takes over. 98% of firms that hand it to us stay.