It’s a simple question – and unfortunately many don’t.
Legal Practice Management Systems (PMS) vary significantly and it is impossible for accountant’s to know the intricacies of every accounting system in every industry in which their clients operate.
Legal PMS’s vary from those built to be UK centric or global which can determine how well suited they are for local regulatory or tax rules. They can recognise revenue differently. They can have complex system architecture which can be difficult to map data flows. They can be standalone or integrate into other accounting systems.
So how do you choose?
It is important when choosing new accounting software, for law firms to bring their accountant into the decision making process. If their Accountant does not understand the software or spots potential issues in using it, should you consider another PMS system? Or another accountant who does?
By providing Outsourced Legal Cashiering to its clients, Ascentant Accountancy are specialists in Legal PMS’s. Our team uses them day to day and understand the reporting, the data workflows and the quirks of each system. Our support covers assisting law firms with VAT returns, management accounts, forecasting and annual accounts as well.
If software is set up incorrectly with an “out of the box” plug and play configuration, it is easy for things to go wrong. Similarly where systems are set up by consultants with no financial knowledge you’ll soon encounter big issues.
When it comes to preparing year end accounts if things are incorrectly set up it can be difficult to interpret reports, data and accounts. This is where solicitors must be careful that software is correctly set up and that synching happens plus data is mapped accurately.
Ascentant Accountancy have come across PMS’s where revenue is incorrectly recognised or recorded, incomplete VAT returns have been submitted or the system settings are wrong which impacts the profit and loss report. Far from ideal!
Where systems work hand in hand with an API, data is not pushed through from one system to another, the Chart of Accounts is incorrectly mapped or costs are charged in full to the Profit & Loss which should not be. It starts to become a huge mess.
It is important that your Accountant understands the way that your PMS works and the system mechanics behind postings made by users. If they understand the system well, they can sense check the data to produce accurate financial statements, management accounts, forecasts and tax returns.
If they do not understand the PMS, they cannot accurately produce accounts and may be relying on inaccurate and incomplete data.
Where data is misinterpreted or incomplete data is used to compile Accounts and Tax Returns, the wrong amount of tax will be paid to HMRC as it will be based on the wrong figures. This could lead to paying too much tax or too little and filing penalties with HMRC. Where the system has been incorrectly mapped or the incorrect settings have been used, revenue may be incorrectly recorded into the accounts, leading to poor profit or incorrect charges to the accounts.
Ask your Accountant:
- Are they comfortable that profit costs, cost recoveries and disbursements are being correctly recorded for revenue recognition?
- Do they know how to reconcile debtors and disbursements to the trial balance?
- Do they understand the data workflows behind postings?
- Where an API is used between systems, is it correctly synched? Do they know how to check that all data is correctly flowing between systems?
- Is the Chart of Accounts correctly mapped?
- Can they sense check the data in your VAT return?
- Do they understand the system settings and reporting?
- Do they know how to reconcile source data to system reports?
- Do they understand the balances in PMS control accounts?
If your Accountant does not understand your PMS, can you be confident that they can accurately compile your Accounts and Tax Returns?
Working daily with Legal PMS’s, Ascentant Accountancy really do understand how they work and how to accurately produce your Accounts, Tax Returns and Management Accounts with confidence.
Ascentant Accountancy work with a range of systems such as LEAP Legal, Clio, Tikit P4W, Advanced Legal, Insight Legal, Osprey, Proclaim and more. We are a LEAP Legal Bookkeeping and Accountancy partner and Xero Certified.
If you think your law firm could be facing any of the issues we describe please don’t hesitate in contacting us on 01332 981920 or firstname.lastname@example.org for a confidential chat. Ascentant Accountancy are a Derby based Accountant that work with Legal practices and Law firms across the country.