Expense Tracking Tips for Solo and Small Law Firms

If you’re a small or solo law firm, expense tracking may often seem like an afterthought. There are so many critical tasks that fill your day, and rarely enough time to do them all. So maybe your expense tracking looks like a quick scroll through your bank history and a half-hearted search for receipts. We don’t judge. 

That said, while expense tracking may not be as urgent as client case matters, it is an important part of business administration. If you underreport your expenses, you’re losing money. If you attribute expenses to the wrong client, you open yourself up to compliance violations. And if you overstate your expenses, even by accident, you open yourself up to an IRS audit—which nobody has time for.  

Expense tracking used to be a manual task for businesses. Today, solo and small firms can take advantage of the latest tech tools designed to allow legal practices to track their expenses accurately and easily. By using these tools, you can turn expense tracking into the easiest part of your day, spend more time focusing on your clients, and build client trust through clear and transparent invoices

Expense tracking challenges for solo and small law firms 

If you operate a solo or small law firm, you probably have a few operational pain points that drive you crazy. Maybe it’s time tracking, or sending out client invoices. Maybe it’s project management or team management. Maybe it’s running reports. The options are endless.  

But here’s a secret you can borrow from larger firms: many repetitive, manual administrative tasks can be streamlined with some degree of automation.  

Task automation does not replace jobs—it just makes certain tasks easier to complete (and less annoying). This frees up time for your firm to focus on client case matters, or high-level strategic projects to grow your firm.  

Three tips for better expense tracking 

Here are some tips for better expense tracking and ideas for tools you can leverage to create a smarter, more efficient system.  

1. Use billing software with integrated time and expense tracking 

Accurate time and expense tracking is critical to getting paid accurately for your work, stay in compliance, and build trust with clients. But many small or solo law firms default to manual tracking.  

With time tracking, waiting until the end of the day (or even week) can cost you up to 25% of your billable hours in lost time. Incorrect reporting for time or expenses can result in breach of compliance with the ABA’s Model Rules of Professional Conduct and your state bar.  

Manual time and expense tracking increases the chance for human error in attributing the correct expenses to the correct client codes. It can also erode client trust and extend the billing process, which can impact your firm’s liquidity. 

Legal project management software is specifically designed to make it easier to run a law firm. Billing software helps firms automate tasks within the billing and invoicing process to speed up client payments, streamline taxes, and ensure accuracy.  

Look for a billing software with integrated time and expense tracking. An automated time tracker allows team members to record their hours in real-time and attribute them to specific client or business codes. This client code automatically integrates billable hours into each client’s invoice. Instead of manually attributing each unit of time, your team just has to review each invoice for accuracy.  

For expense tracking, team members can use similar features to attribute business expenses to client codes or administrative costs. By categorizing each expense with accurate details, you foster client trust with transparent, accurate billing practices.