A cost comparison and TCO analysis of practice management and legal accounting for small Canadian law firms and sole practitioners. This white papers analyzes the cost of doing bookkeeping by your self v/s outsourcing it to an expert

1.
Who should be doing the work: a
cost comparison and TCO
analysis of practice management and legal
accounting for small Canadian law firms
and sole practitioners
Abstract:
This paper aims to educate Canadian sole practitioners and small law firms about the
Total Cost of Ownership (TCO) accrued by maintaining various forms of automated and
outsourced bookkeeping and legal accounting software services.
In the last decade, legal accounting and practice management bookkeeping software
has rapidly matured, providing firms increased access to affordable services previously
unobtainable to sole practitioners and small firms.
In-house staff (including lawyers themselves) are capable of handling their own
bookkeeping with advanced software, but emerging new solutions are also giving firms
the option to nearly entirely outsource their accounting and bookkeeping. Audit
readiness and regulatory compliance can be contracted out at a far more affordable rate
than what can be achieved through traditional measures of handling accounting and
in-house clerical work.
By using uLawPractice’s Premium Bookkeeping Services, Canadian firms can save
more than $10,500 on total costs associated with audit preparation, accounting, and
bookkeeping over the course of a year. Year over year, savings can amount to more
than $50,000 over the course of 5 years.

2.
Total Cost of Ownership: an explanation
Analyzing Total Cost of Ownership (TCO) is an important calculation to make for any
business because it takes into account all the factors which attract costs over time. In
the context of bookkeeping and law firm management, there are many cost factors to
consider which ultimately accumulate over time.
Much like the cost of a vehicle, the up-front purchase price of software are only price
tags and do not accurately portray how much money or time will actually be spent as
the business runs its course. For example, the cost of a person driving a vehicle,
parking, gas are all relevant to the total cost of ownership because they bleed earnings.
The use of software and labour to handle the bookkeeping function of a legal business
also has a TCO. In this paper, the uLaw team will be focusing on the amount of money
that small firms can expect to spend on a bookkeeping solution just to handle its own
paperwork. Audit costs are also factored into this analysis. We assume that legal
professionals need to plan for an audit once every 2 years, according to Law Society
estimates. Over a 5-year period, a legal firm should expect at least two audits.
Premium Bookkeeping Services. What is it?
Legal firms across Canada can freely choose how to maintain their books and records,
provided that regulatory obligations to both the Canada Revenue Agency (CRA) and
provincial law society guidelines are fulfilled.
According to​ ​Law Society literature​, the use of legal accounting and practice
management software solutions are the most efficient to handle books and records.
This is especially the case in comparison to outdated forms of bookkeeping and
accounting; such as home made spreadsheets, manual double entry processes, and so
on.
At present, several types of software are available which serve Canadian practitioners
to varying degrees of compliance. While specialized software for legal accounting is

3.
most efficient, the Law Society of Ontario warns there is one downside: training is
required in order to learn how to properly use it.
If a firm chooses to select legal accounting and practice management software, the
question of total cost quickly eclipses the initial price of the software. To fully get a grip
on the true cost of practice management and legal accounting, one ought to scrutinize
who specifically will be using the software, as their efforts and labour comes at a
price--even if it’s handled personally by the legal practitioner.
Clerical duties can be handled in-house, either by a lawyer or administrative
assistant/secretary. Someone at the firm must undertake the responsibilities and
ongoing effort to build and maintain the books.​ ​Using the cost of human resources and
overall division of labour at the firm, a proper TCO analysis should be conducted to
make an informed choice on how a firm should handle the (production of, and)
management of its records.
Some firms might opt for a solution which contracts-out its bookkeeping to increase
profits because the result can translate into an increase in billable hours. Refer to the
three tables below for recent estimates on 1 and 5 year-TCO for in-house vs.
outsourced bookkeeping services.
Bookkeeping Alternates for Legal Professionals- TCO
Analysis
Below is a list of three different options law firms can choose to handle their
record-keeping and law office management protocols. A thorough break-down on all the
costs associated with each alternative will calculate an estimated TCO.
Armed with this data, financially-minded law firms can look at the data themselves to
see which option is most effective according to their needs.

4.
Alternative #1: Doing it yourself
The scenario: In an effort to cut down on costs, the legal practitioner intends to handle
his or her bookkeeping and record-keeping functions on their own.
Outcome: In a single year, the estimated TCO of a practitioner handling his/her own
audit preparation documents over a single year is $12,330. In five years, this number
jumps to more than $60,000. Refer to the table below for a break-down of the figures.
Note: figures cited are pre-taxed Canadian dollars
Doing it yourself as legal practitioner
uLaw Premium Bookkeeping
Services
Cost of training One Time
for the Lawyer $0.00 $150.00
for the Bookkeeper $0.00 $0.00
Cost of the work per month
Number of Hours required 6hr @$150/hr 2hr @$40/hr0
for the Lawyer $900.00 0$
for the Bookkeeper $0.00 $80.00
cost of the software per month
for the lawyer $90 $44
for the bookkeeper 0 $20
Cost of audit prep time 15hrs per audit 2 hrs per audit
for the lawyer $2,250.00 $200.00
for the bookkeeper $0.00 $80.00
5-year TCO $61,650. $8,990.
1-year TCO $12,330. $1,798.
% more expensive than uLaw solution 585.76% www.ulawpractice.com

5.
“Doing it yourself” can be a costly decision
At first glance it may seem the most alluring to handle all of your books and records on
your own. Unfortunately for many lawyers these types of tasks are often delayed for
evenings or weekends, or whenever there isn't any other tasks to be done.
Accumulated efforts over time to handle your own paperwork can prove to actually be
counterproductive, as the value of your labour diminishes with each passing hour that
you’re spending doing clerical work.
Ineffective time management, when record-keeping edges into personal and family time
especially, can contribute significantly to stress experienced at work, leading to burnout
and poor job satisfaction.

6.
Alternative #2: Work done by in-house or external
bookkeeper
The scenario: A law firm incurs the cost of having an internal administrative assistant or external
bookkeeper to produce and manage records to prepare for auditing processes by both the
Canada Revenue Agency (CRA) and the Law Society.
Outcome: An approximate cost of $6,360 can realistically be expected to be paid over the
course of a single year with this method of handling a firm’s finances. Over five years, this price
grows to more than $30,000. The table below shows how these figures are derived.
Work done by In-House Admin or External
Bookkeeper
uLaw Premium Bookkeeping
Services
Cost of training
for the Lawyer $150.00 $150.00
for the Bookkeeper $0.00 $0.00
Cost of the work
Number of Hours required 4hr @$60/hr 2hr @$40/hr0
for the Lawyer $150.00 0$
for the Bookkeeper $240.00 $80.00
Cost of the software
for the Lawyer $90.00 $44.00
for the Bookkeeper $30.00 $20.00
Cost of Audit prep time 15hrs per audit 2hrs per audit
for the Lawyer $300.00 $200.00
for the Bookkeeper $750.00 $80.00
5-year TCO $31,800. $8,990.
1-year TCO $6,360. $1,798.
% more than best solution 253.73% www.ulawpractice.com

7.
As can be seen in the chart above, many firms across Canada are opting to switch the way
they’re managing the business component of running their law office. The price of maintaining
in-house bookkeeping, whether conducted by a practitioner or an external bookkeeper, is
significantly higher than the most affordable and efficient method of bookkeeping.
Alternative #3: Using uLawPractice Premium Bookkeeping
Services
The scenario: A firm chooses to contract-out the work required to remain in compliance with
regulators by using uLawPractice’s Premium Bookkeeping Services.
Outcome: An approximate cost of about $1,798 can realistically be expected to be paid in a year
using this method of handling a firm’s financial and practice management protocols.

8.
The outsourced advantage
From day one, there is a marked and substantial benefit to outsourcing a firm’s
financial and practice management obligations to a trusted provider of Premium
Bookkeeping Services.
uLaw’s Premium Bookkeeping Services places the onus on a trained and
certified specialist to regularly reconcile a firm’s trust and general accounts, in
addition to numerous other time-consuming and complicated facets of remaining
in good standing with auditors from both the Law Society and the Canada
Revenue Agency.
Visit this page​ to learn more about uLawPractice Premium Bookkeeping Services