Mid-Year Financial Review Checklist for Law Firm Owners
July 1, 2025
What to Do Now to Avoid a Big Tax Bill in Q4
July 8, 2025
How to Catch Up on Bookkeeping Without Falling Behind
Let’s be honest—if you’re reading this, there’s a good chance your books are not up to date. And you’re not alone.
Most law firm owners fall into one of three camps:
You’re behind but think you’ll catch up “when things slow down” You’re relying on a bookkeeper… who’s silent or reactive You’re crossing your fingers and praying it works out at tax timeHere’s the truth: falling behind on bookkeeping isn’t just an operational issue—it’s a financial blind spot that costs you time, money, and clarity. And it snowballs fast.
But you can catch up without dropping everything. This blog will show you how to do it the right way—without interrupting your daily casework or risking compliance mistakes.
Why Bookkeeping Backlogs Are So Dangerous for Law Firms
If you haven’t reconciled your books since Q1 or beyond, here’s what’s quietly happening in the background:
- You don’t know if you’re making money or just staying busy
- You can’t calculate your estimated taxes accurately
- You’re likely missing deductions and reimbursements
- Your IOLTA compliance could be at risk
- You can’t confidently make hiring or investment decisions
Psychologically, it becomes easier to avoid the books than to face the mess. But the longer you wait, the more expensive and risky the clean-up becomes.
Here’s the mindset shift:
Bookkeeping isn’t a chore—it’s your best source of decision-making power. Step-by-Step: How to Catch Up on Your Law Firm’s Bookkeeping (Without Losing Your Mind)
1. Stop Digging. Get Current Moving Forward.
Don’t obsess over January if you’re in July. Start by getting this month entered and reconciled. Then work backward in manageable sprints.
Why it works:
Most attorneys never catch up because they try to do everything at once—and then avoid the task entirely. The best CPA-backed strategy is to stabilize now, clean up later.
2. Create a “Catch-Up Calendar”
Break your backlog into phases:
This month: Reconcile all accounts and match trust transactions Last 3 months: Categorize income/expenses, fix chart of accounts Q1: Finalize adjustments and flag items for your CPASet calendar reminders weekly. Even just 30 minutes per week of focused clean-up gets results.
3. Use Bank Feeds & Rules to Automate What You Can
If you’re using QuickBooks or Xero, set up bank feeds and create bank rules for recurring transactions (like subscriptions, software, or vendors).
That means less manual data entry, fewer mistakes, and a faster reconciliation.
4. Reconcile All Bank Accounts—Especially IOLTA
You must reconcile:
- Operating account
- IOLTA/trust account
- Any credit cards, savings, or payroll accounts
CPA Reminder: IOLTA accounts must be reconciled monthly, and client ledgers should match the trust balance. If not, you’re out of compliance.5. Flag Transactions You Don’t Recognize—Don’t Guess
Don’t guess or auto-categorize just to get to “done.” That’s how deductions get missed and reports become meaningless.
Instead:
- Flag unknown charges
- Create a “questions for CPA” column
- Keep a short list of recurring vendors and what they do
6. Document Retainers and Earned Fees Properly
One of the biggest errors we fix for lawyers: trust funds moved without documentation.
Track:
- Date of retainer received
- When/why funds were moved to operating
- Service details for earned revenue
If you don’t, the bar—and the IRS—may assume commingling or misappropriation.
7. Don’t Ignore Payroll and Owner Distributions
Many firms fail to record:
- Owner draws (if not on payroll)
- Partner distributions
- Tax withholding for S Corps
These omissions lead to incorrect profit reports and tax filings—and you’ll feel that pain in Q4.
Is This You? (Common Red Flags You’re Behind)
- You haven’t looked at a financial report in 90+ days
- You can’t say your trust account balance off the top of your head
- You have no idea what you paid yourself this year
- You’re afraid to open QuickBooks
- You avoid CPA emails because you don’t have “answers”
If this feels familiar, it’s not a failure—it’s a signal.
It means you need a system and support, not more guilt.
Recap: What Law Firm Bookkeeping Needs to Track
If you’re catching up or hiring help, these are the bare minimum categories you need to track monthly:
- Revenue by case type
- Operating expenses (itemized)
- Trust account transactions
- Owner pay (salary vs. draw)
- Taxes paid (and taxes owed)
- Net profit
- Accounts receivable and unbilled time
This is what your CPA needs.
This is what your bar association expects.
And this is what you need to make confident decisions.
Final Word: You Can Catch Up—But You Can’t Ignore It
Let’s keep it real. As a CPA who works exclusively with lawyers, I’ve seen brilliant attorneys jeopardize their compliance, profitability, and growth—just because their books were behind.
Don’t let avoidance turn into chaos.
Call to Action: Let Us Do the Catch-Up So You Can Focus on Clients
If you’re behind, we can fix it—fast.
At Prestige Accounting and Consulting, we specialize in:
- Law firm bookkeeping cleanups
- Trust account audits and compliance
- Owner pay and tax strategy
- Financial systems that actually work
Book a Clean-Up Consult and let’s turn that backlog into clarity.
