Danzinger & Co. provides law firm accounting, bookkeeping and tax services for attorneys across New York — solo practitioners, litigation and personal injury firms, real estate and transactional practices in Rockland, Westchester, the five boroughs and Long Island. We keep your IOLA and escrow accounts reconciled three ways every month, track work in progress through billing to cash, calculate partner compensation from the same numbers the books use, and handle the PLLC, LLP and PC filings behind your firm.
The questions New York attorneys ask us most, answered in plain English. Swipe through.
What is law firm accounting?
Law firm accounting is bookkeeping and tax built around a practice: client funds kept in trust and reconciled three ways every month, time and work in progress tracked through billing to cash, advanced case costs carried by matter, partner compensation calculated from the same numbers the books use, and the entity, City and State filings New York requires kept current.
Done right, it tells the partners what each attorney and each practice area actually earns after overhead, and what the firm will owe at the end of the year.
How is it different from regular bookkeeping?
A service business sends an invoice and gets paid. A law firm receives money that is not its own and must keep it separate under Rule 1.15, records hours that become revenue only when billed and only if collected, advances costs it may not recover for years, and shares profit under a partnership agreement that decides who gets what.
Each of those needs its own process, which is why a generic template leaves a firm’s books telling a different story than its bank, and its trust account, within a quarter.
What numbers should a managing partner watch every month?
Four. Utilization, the share of a working day that becomes billable time, averaging 38%. Realization, the share of billable time that is actually invoiced, averaging 88%. Collection, the share of invoices that becomes cash, averaging 93%. And lockup, the days between doing the work and being paid for it, with a median of 93.
We report all four with the financials, by attorney and by practice area, so the firm can see whether the leak is in timekeeping, billing write-downs or collections.
How much overhead should a law firm carry?
Industry benchmarks put overhead at 40% to 50% of revenue for a well-run firm, with staff compensation the largest piece and occupancy next, and a small-firm profit margin near 30% before partner compensation. Above 50% is the point where margin starts to disappear.
We benchmark each line of your firm against those ranges every month rather than one average, so the partners can see whether the problem is staffing, space, technology or collections.
When should a law firm hire a CPA?
Before you form the entity, before you admit a partner or open a second office, before you take your first contingency matter, and before your first trust account has a dollar in it. Each of those locks in decisions on structure, compensation, tax and compliance that are expensive to unwind, and Rule 1.15 leaves no room for improvisation.
A CPA who works with New York firms will also flag local specifics, from the NYC Unincorporated Business Tax to the MCTMT on downstate payroll.
Many Law Firms Bill Every Hour and Still Don’t Know What They Keep — Don’t Be One of Them
A firm runs on time and trust. Hours that become revenue only when billed, and only if collected months later; client money in an IOLA or escrow account that is never the firm’s and must reconcile to the dollar; case costs advanced for years; overhead that drifts a point at a time; a partnership agreement that decides who gets what. Your timesheets show how hard the firm works. They do not show what it earns.
When all of that is booked from bank deposits alone, retainers become revenue too early, the trust account drifts from the client ledgers, write-downs go unmeasured, and the tax return surprises the partners. These are the four problems we see most often in firms across Rockland, Westchester and the five boroughs.
Challenge 01
Bank says $412,000. Ledgers say $409,300. Which client is short?
Challenge 02
Worked 8. Billed 2.6. Collected 2.4.
Challenge 03
Revenue up 12%. Partner draws down.
Challenge 04
Cases costs on the P&L. The IRS calls them loans.
01
A trust account that doesn’t reconcile three ways
Client funds in your IOLA or escrow account are fiduciary property under Rule 1.15: never commingled, tracked by client, with the ledgers, statements and bills kept for seven years. If the bank balance, the trust ledger and the sum of client ledgers don’t agree every month, the firm is one grievance or random audit away from a problem no bookkeeper can fix after the fact.
02
Hours that never become cash
Industry data puts lawyer utilization at 38% of the day, realization at 88% of what is billed and collection at 93%, with the median matter locked up for 93 days between work and cash. When time entries, invoices and payments live in three systems, the firm cannot see where the leak is, and the partners find out at year end.
03
Overhead you feel but can’t place
Overhead in a well-run firm sits at 40% to 50% of revenue, with staff the largest piece and occupancy the second. Booked as one total, a new associate, a lease renewal and a research subscription each move the number a point, and the partners are comparing draws to last year instead of margin to a benchmark.
04
Taxes the firm didn’t plan for
A contingency practice advances case costs for years, and outside the Ninth Circuit the IRS treats them as loans to the client, deductible when the matter resolves rather than when paid. Add New York City’s 4% Unincorporated Business Tax on partnerships and PLLCs and the MCTMT on downstate payroll, and a firm that books it the simple way owes more than it expected.
How We Help Law Firms in New York
A Trust Account That Reconciles and Hours You Can Collect Are the Difference Between Busy and Profitable.
Danzinger & Co. is a New City, NY CPA firm that keeps the books for solo practitioners, litigation and personal injury firms, and real estate and transactional practices. We build your law firm accounting the way a practice actually runs — retainer, trust, time, invoice, write-down, collection, case cost, partner draw — so every dollar ties out and every decision starts from what the firm keeps, not what it bills.
Here’s what we do for you:
Reconcile trust accounts three ways
Reconcile your IOLA and escrow accounts to the bank and to every client ledger each month, and keep the seven-year file Rule 1.15 requires. Bank balance, trust ledger and client ledgers proven equal every month, with disbursements matched to retainer agreements and closing statements.
Track WIP, billing & collections
Report utilization, realization, collection and lockup with your financials, by attorney and practice area. Time entries reconciled to invoices, invoices to cash, and the write-downs in between shown by attorney so the leak has a name.
Carry case costs by matter
Track advanced client costs by matter as an asset, reconcile them to settlement statements and write them off when a case closes without recovery. Filing fees, experts, depositions and records by matter, with the tax treatment the IRS expects outside the Ninth Circuit.
Calculate partner compensation
Calculate partner compensation and draws from the firm’s books under the formula in your partnership agreement. Origination and working-attorney credit, allocated overhead, draws against distributable income, and K-1s that tie to the same file.
Benchmark overhead line by line
Compare staff, occupancy, technology and marketing against law firm benchmarks every month. Each line as a percent of revenue, trended, with the movers flagged before they cost a year of margin.
Run payroll for attorneys & staff
Run payroll for associates, paralegals and staff, with MCTMT, benefits and retirement plan contributions handled. Payroll tax filings, MCTMT for downstate firms, 401(k) and cash balance plan contributions, and the reports your compensation plan needs.
Structure the PLLC, LLP or PC
Set up and account for the professional entity New York requires and the admission or departure of partners. Attorney-owned PLLC, LLP or PC, capital accounts, buy-ins and buy-outs, and the tax election that fits how the partners are paid.
File New York State & City returns
Handle New York State and City filings, including the NYC Unincorporated Business Tax, and the entity returns behind your firm. Partnership, PLLC and PC returns, quarterly estimates, NYC UBT and the compliance calendar for every registration.
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Why Choose Danzinger & Co. for Your Law Firm Accounting
We know New York law practice
Rule 1.15 trust accounting and the seven-year record rule, IOLA, PLLC, LLP and PC filings, the NYC Unincorporated Business Tax and MCTMT: we handle these for firms across Rockland, Westchester and the boroughs every month.
You talk to a senior accountant
No junior hand-offs. The person who understands your realization rate and your trust ledgers is the person who answers when you call.
Flat, predictable pricing
You know the cost before the work starts, and it doesn’t jump because you added a partner or a second office.
Stop Guessing Whether the Trust Account Reconciles. Call Us First.
One conversation is usually enough to see where lockup, write-downs and overhead are eating your margin. Call (347) 410-1839 or send us a note below.
What is three-way trust reconciliation and how often does a New York law firm need it?
It is the monthly proof that three numbers agree: the balance on the IOLA or escrow bank statement, the balance in the firm’s trust ledger, and the sum of every individual client ledger. If any two differ, a client’s money has been moved, missed or mis-posted. New York’s Rule 1.15 requires the ledgers, bank statements, deposit slips and disbursement records that make the reconciliation possible and requires them to be kept for seven years; we perform the reconciliation every month and keep the file audit-ready.
Is a retainer income when the client pays it?
Only when it is earned. An advance retainer belongs to the client until you bill against it, so it is deposited to the trust account and moves to the operating account as invoices are issued, and only then does it become revenue. A true non-refundable engagement fee is different, and the retainer agreement has to say so. We set the books up so the two are never confused, which also keeps the trust account from being overdrawn or padded.
How should a contingency-fee firm account for advanced case costs?
As an asset, not an expense, until the case resolves. Court filing fees, expert witnesses, depositions and medical records advanced for a client are generally treated by the IRS as loans to that client and deducted when the matter settles or is lost, not when the check is written. We track costs by matter, reconcile them to the settlement statement, and book the write-off when a case closes without recovery, so the tax return and the case ledger tell the same story.
Can you calculate partner compensation and produce a profit and loss statement by attorney or practice area?
Yes. Fees are coded to the originating and working attorney and to the practice area, staff and overhead are allocated on a rule the partners agree to, and the compensation formula in your partnership agreement is calculated from those same numbers every period. You see what each partner, associate and practice group actually contributes after cost, and the year-end K-1s and the NYC UBT return are prepared from the same file.
We want to hear from you!
Tell us your practice areas, how many attorneys you have and how you bill, and we’ll show you what a three-way trust reconciliation and a realization report look like. Fill out the form and a senior accountant will reply within one business day.
“Our business isn’t a typical one. We offer several services across different entities, use multiple pricing models, and manage a large international team. Danzinger & Co. took the time to truly understand how we work and built an accounting structure that fits our organization. As a result, our financials accurately reflect our business, with revenue recognized correctly and reports we can confidently rely on when making operational and growth decisions. It’s refreshing to work with an accounting firm that goes beyond bookkeeping and takes the time to understand the business behind the numbers.”
MP
Mendy PelmanOwner, Ultimate UW
“I highly recommend Moshe as an accountant. He is knowledgeable, trustworthy, and extremely detail-oriented. Moshe has consistently provided accurate financial guidance and has been a pleasure to work with.”
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