Should You Hire a Bookkeeper to Handle Payroll?

Payroll is challenging for all business owners—but for lawyers, it is especially complicated. Law firms often use freelancers and contractors for various tasks, and tracking billable hours for yourself and your associates can be challenging. 

Streamlining the payroll process requires a lot of time and attention...and as a busy lawyer running your own firm, you probably feel like you could use a little more of both of them! That’s why we recommend hiring a capable bookkeeper to handle payroll for you.

The Money-Making Process

Payroll is especially difficult for law firms because of the illusive billable hour. This is how many hours you can bill your clients for actual work done for them. 

The billable hour is a rather difficult unit of time to define—you don’t want to hand a client a large bill they refuse to pay because they can’t believe it actually took that long, but you also don’t want to have an employee work eight hours for a client, but only have two or three of those be billable. 

As a lawyer, your time goes through three rates before you receive money from your client: the utilization, realization, and collection rates.

Utilization Rate

This is how many billable hours you or one of your associates work for a client. According to a study by Clio, the average utilization rate for a lawyer in 2020 was just thirty-one percent—meaning in an 8 hour work day they billed their client for 2.48 hours.

Realization Rate

These are the hours you bill your clients. In 2015, a lawyer’s realization rate for billable hours was about eighty-two percent. So for all the billable hours a lawyer worked for a client, they sent a bill to their client for eighty-two percent of the work.

Collection Rate

The collection rate is how many hours the client actually pays for. In 2020, the average collection rate for a lawyer was eighty-eight percent. Lawyers didn’t see payment for an average of twelve percent of their billable work.

The discrepancy between your employee’s utilization rate and your firm’s collection rate comes out of your pocket. This is by no fault of you or your employees—this is simply the nature of the system. It does make tracking hours a challenge, and why different firms pay some employees by the hour and others by salary. 

To say the least, it’s quite the task to make sure work hours are accurate, payroll happens on time, and the books balance. And the hope is you don’t have to fill those non-billable hours with bookkeeping!

The Payroll Details

A good bookkeeping firm helps you increase your billable hours by taking payroll and many other administrative tasks off your hands. They often work closely with your payroll providers to keep track of each of your employees’ payment plans, and cut checks for them every two weeks.

State and Federal taxes, retirement, insurance, bonuses...these are all factors to consider and keep track of while handling payroll. 

Your Time is Money

If you are running your own law firm, you definitely have a fantastic work ethic. Managing employees, contacting clients, working cases...it requires you to be constantly involved in multiple projects at once. 

Brennan Bookkeeping takes the project of payroll off your busy schedule; we make sure you and your employees are paid accurately and on time. We also send you monthly updates, letting you know exactly where your books stand and giving you a clear look at the financial health of your firm. 

We are familiar with the taxes required in each state, and stay on top of any and all pay changes that happen with your employees. Handling 401(k)s and benefits for your employees also falls within our skillset. We work with your benefits provider to make sure each of your employees are taken care of.

Let us help you optimize your billable hours by taking payroll off your busy schedule!