Week1: Law Firm Finance Roles and Responsibilities

Introduction

As a law firm administrator, one of your first challenges is navigating a role that can feel unclear or undefined. Ask ten legal administrators what their job involves, and you might get similar job titles—but wildly different day-to-day tasks. That's because "legal administration" is a broad umbrella, covering everything from corporate functions to HR, IT, and especially finance. This guide will help you gain clarity on your finance-related responsibilities so you can manage them confidently, especially as your firm grows.

In this study material, we’ll walk through:

• The different finance-related roles in a law firm

• The best practices for each role

• How to manage responsibilities as the firm scales

• Tips for hiring or outsourcing effectively

What is “Finance” in a Law Firm?

When people hear the word “finance,” they often think it just means “anything with money.” But it’s more nuanced than that. Finance in a law firm includes functions like billing, collections, bookkeeping, compliance, tax reporting, and long-term financial planning.

Here’s a quick example: A firm once asked the finance team to fix a computer virus so they could send invoices. The confusion? The finance team can help with billing, not IT support. Knowing where responsibilities begin and end is key to keeping operations efficient.

Core Financial Roles in a Law Firm

Let’s break down the major finance roles:

1. Billing & Collections

2. Bookkeeping

3. Taxation & Compliance

4. Financial Planning & Strategy

5. Treasury & Financing (covered in advanced sessions)

   
   

Each of these areas serves a different—but connected—function.

Billing & Collections

These roles are often grouped together, but they involve different skill sets and workflows.

Billing

Billing is about creating and managing invoices based on legal work performed. This includes:

• Reviewing time entries and case activity

• Organizing billable vs. non-billable hours

• Generating and sending invoices

• Coordinating approvals from attorneys

• Tracking retainer and trust balances

  
  

Best Practices for Billing:

• Set a regular billing schedule (e.g., monthly billing on the 15th).

• Review time entries weekly or bi-weekly, even if you bill monthly. It’s easier to verify details from a few days ago than from several weeks ago.

• Put billing deadlines on the calendar so attorneys prioritize reviews.

  
  

Real-World Comparison:

• Firm A waits until the end of the month to review activities. This creates delays, confusion, and write-offs due to forgotten or miscategorized work.

• Firm B reviews time weekly, allowing quick clarifications and smooth monthly billing. Their forecasting is more accurate and utilization rates are higher.

  
  

Collections

Collections is about getting paid. This includes:

• Tracking overdue balances (Accounts Receivable or AR)

• Sending reminders or follow-ups to clients

• Working with attorneys on next steps for aged balances

  
  

Best Practices for Collections:

• Review AR aging weekly (e.g., track balances that are 7, 15, 30, or 60+ days overdue).

• Communicate with lead attorneys when balances age beyond a threshold. Attorneys can decide if continued legal work is appropriate.

• Assess client trends: If certain case types or clients consistently pay late, consider changes to client intake or retainer policies.

  
  

Example:

Case Type	Avg Case Value	# of Cases	AR Balance	Avg AR per Case
Deportation Defense	$6,500	12	$32,000	$2,667
Visa Renewal	$2,000	30	$9,000	$300

This data could lead to questions like: Are clients in one service line less likely to pay? Is the value worth the financial risk?

Bookkeeping

Bookkeeping is more than just “keeping the books.” It includes:

• Recording income and expenses

• Reconciling bank and credit card accounts

• Managing IOLTA/trust account compliance (3-way reconciliation)

• Paying vendors

• Generating financial reports

  
  

Many firms either hire internally or outsource bookkeeping. Here's a comparison:

Factor	Internal Bookkeeper	Outsourced Bookkeeping
Monthly Cost	~$4,500 + benefits	~$1,500 flat rate
System Setup	Knowledge varies	Experienced in law firm systems
Frequency	Daily/Weekly	Bi-weekly or Monthly
Payroll	May handle manually	Often integrated

Best Practice: Choose internal if you need full-time daily support and your budget allows. Outsource if you need expert help without the overhead.

Taxation & Compliance

Most law firms are pass-through entities, meaning the firm itself doesn’t pay income tax, but the owners do.

Taxation Includes:

• Income tax preparation (by a CPA)

• Payroll tax filing (automated through payroll systems)

  
  

🛡 Compliance Includes:

• Bar association trust/IOLTA reports

• Business license filings

• State & federal reports (e.g., W2s, 1099s)

• Employee benefit reporting

• State-specific taxes, such as Business & Occupation (B&O) taxes in Washington

  
  

Best Practice:

• Keep a compliance calendar for filing deadlines.

• Work with your CPA or accountant to avoid last-minute surprises.

Financial Planning & Strategy (Intro)

This function helps you think ahead.

Financial Planning Is:

• Reviewing past trends (lagging indicators)

• Predicting future performance (leading indicators)

  
  

Examples:

• Lagging metric: Revenue last month

• Leading metric: # of new consultations scheduled this week

  
  

Strategy Is:

Using insights to make business decisions. For example:

• If AR on deportation cases is consistently high, consider focusing on services with lower payment risk.

• If utilization rates are low, review time management and task delegation.

  
  

This area is explored more in Finance Module 2, but it’s important to begin noticing how current data shapes future decisions.

Hiring the Right Finance Support

As your firm grows, you’ll need to assess:

• Which roles you need in-house

• Which roles can be outsourced

• What skills you’re looking for (e.g., someone detail-oriented for billing; someone strategic for planning)

  
  

Tips for Hiring:

• Use clear job descriptions tailored to law firm needs

• Ask candidates for industry-specific experience

• Consider working with vendors familiar with law firm financials

• Establish KPIs (key performance indicators) early to measure success

Summary Checklist

Use this as a quick reference as you study or apply what you learn:

• Understand the core roles: Billing, Collections, Bookkeeping, Tax, Strategy

• Create a consistent billing cycle and review process

• Separate billing from collections (they require different skills!)

• Reconcile accounts monthly and track financial health

• Maintain a compliance calendar for taxes and filings

• Begin thinking strategically with leading and lagging indicators

• Reevaluate service lines based on AR and revenue trends

• Hire or outsource based on your firm’s stage, size, and goals

This material is your starting point for mastering the financial side of law firm administration. By understanding each role, establishing best practices, and using your data wisely, you'll create a system that supports both the financial health of your firm and your success as a law firm leader.