Personal Injury Law Firms: Accounting & Workflow Management for Contingency Attorneys
Sep 04, 2023Contingency attorneys specializing in personal injury cases require meticulous accounting and efficient workflow management. As a financial professional serving these attorneys, it is crucial to understand the complexities involved in tracking expenses, calculating fees, managing cash flow, and providing valuable financial insights. Modern accounting tools and software can streamline operations, enhance client service, and optimize overall effectiveness. In this blog post, we will delve into the nuances of accounting for contingency attorneys and explore software recommendations to enhance workflow management.
Tracking Client Expenses
Contingency attorneys have trust that I consider “after the fact.” Our primary focus is tracking and managing expenses related to advanced client costs. These expenses, such as filing fees and medical bills, must be meticulously recorded and categorized to ensure accurate billing and reimbursement once the case is settled. Tracking expenses diligently is essential, as any missed expenses become the law firm's liability, impacting the overall financial outcome of the case.
Legal Fees Calculation
A notable distinction of contingency attorneys is that their legal fees are typically calculated as a percentage of the judgment won rather than an hourly rate. The average rate a contingency lawyer takes as legal fees earned is 33%. Employment law also traditionally works on contingency, but their average rate is 40%. Sit down with your attorney-client and discuss their fees; understanding the fee structure agreed upon with each client is crucial.
Loans and Cash Flow Management
Due to potentially extended case durations, cash flow can be a significant concern for contingency attorneys. Many take out a loan to pay for the upfront client expense. Establishing sub-accounts under the loan principal and diligently tracking loans obtained by clients from companies like Advocate Capital is essential for proper reimbursement upon winning the case, including any accrued interest. Efficient cash flow management ensures smooth operations throughout the case.
Advertising Expenses
Personal injury firms heavily invest in advertising to attract clients. Understanding different advertising forms, such as billboards, online, or paid ads, is crucial for effective expense tracking. Subcategorizing advertising expenses helps attorneys assess the effectiveness of various marketing strategies and optimize their return on investment. Software like Clio or HubSpot can provide valuable insights into the client journey and the success of advertising campaigns.
Work in Progress and Case Duration
Unlike other businesses, personal injury cases can span several years. Regularly reviewing outstanding checks and ensuring they are not left unclaimed is essential for financial management. Correctly booking expenses and reconciling the advanced client cost account is critical to providing accurate financial reports. Work-in-progress management ensures proper tracking of expenses throughout the case.
Liens and Financial Settlements
Contingency attorneys may encounter situations where liens are placed on clients' settlements. Collaborating closely with the attorney of record allows for pre-itemizing and understanding the financial implications of these liens. Accurate accounting practices enable the law firm to determine the final amount to be disbursed to the client while ensuring the law firm's expenses and fees are appropriately accounted for.
Providing Value as a Financial Advisor
As a financial professional working with contingency attorneys, you have the opportunity to provide invaluable support beyond bookkeeping. You become a trusted advisor by helping your clients understand the effectiveness of their advertising strategies, tracking attorney production, and assessing case profitability. By providing comprehensive financial insights, you assist in making informed business decisions that optimize cash flow and maximize client satisfaction.
Accounting and workflow management for contingency attorneys in personal injury law firms require a deep understanding of the unique aspects of their practice. By mastering the nuances of tracking client expenses, calculating fees, managing cash flow, and providing valuable financial insights, you become an indispensable asset to these attorneys. Utilizing specialized software solutions like Dext, Hubdoc, Clio, LeanLaw, File Vine, or CasePeer streamlines operations, ensuring accurate financial reporting and enhancing client service. With efficient accounting and workflow management, personal injury law firms can thrive and provide exceptional client services.
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