Pen and Paper vs Electronic
Many small firms struggle to choose between electronic and paper-based bookkeeping systems for their trust accounting. While each method has its upsides and drawbacks, we argue below that a properly organized and maintained electronic system is superior to its paper-based ancestors. Read on below to find out why!
Pen-and-Paper: The Good, the Bad, and the Ugly
Many small firms begin practicing using a paper-based trust accounting bookkeeping system. The immediate advantages are obvious. On a small scale, paper-based systems are simple, require very little upkeep, require no additional software training or learning, and can even fairly be described as elegant.
The main issue with paper-based bookkeeping systems for trust accounting is its scalability. As your firm grows, and your client-base increases, those few sheets of paper quickly multiply and become dozens, if not hundreds, of pieces of paper. A handful of daily entries quickly grows to become completely unmanageable. And as the workload intensifies, mistakes get made and entries are missed. Additionally, if, for whatever reason, someone other than the primary bookkeeper needs to fill in and make entries, he or she is often unable to make heads or tails of whatever system is in place.
Finally, paper-based systems are notoriously insecure. If your office suffers a break-in, flood, or fire, those fragile, little pieces of paper are liable to be stolen, drowned, or burned.
Electronic: The Good, the Good, the Good, and the Inconvenient
Electronic bookkeeping systems don’t suffer from the same drawbacks as paper-based systems. Not only have they become simple to learn and use, they are almost infinitely scalable. As your firm grows, your bookkeeping system can grow with you. If someone else needs to step in and handle the bookkeeping entries for a few days, he or she has a standardized system to work with, and no illegible handwriting to decipher. This goes doubly for professional bookkeepers you’ve hired to keep an eye on your firm. They’ll find it much easier to make sense of an electronic system than a paper-based system. Depending on the solution you deploy, they may even be able to log in remotely.
Finally, electronic information is, contrary to the opinion of a few old-schoolers, generally more secure from theft and damage than paper-based systems. This is especially true when your information is stored in a cloud-based or web-based platform. Cloud solutions don’t rely on local storage systems and are typically encrypted with bank-level security and encryption protocols. While you’ll want to check with your state bar regulations and guidelines to ensure that cloud-based solutions are compliant, they can be a remarkably efficient solution to bookkeeping problems. (Keep an eye out for next week’s article on cloud bookkeeping solutions to learn more.)
There is one significant downside. An electronic system requires that its users become familiar with a new piece of software. This is less of an issue than it used to be, as modern forms of bookkeeping software are remarkably user-friendly, but it adds another layer of complexity on top of the already arduous task of keeping up with the technology of running a firm.