With an increasing number of legal practice management solutions (PMS) integrating with Xero for office and general accounts, the Legal Tech Buyers Guide explore the positive benefits of using Xero in your legal practice.
Broader Market and Flexibility
Legal PMS solutions focus heavily on the key industry-specific features like time tracking, case management, and client / trust accounting while Xero focuses on accounting for a wide range of industries. This broader scope gives Xero the flexibility to manage the wider aspects of a law firm's finances, including general business expenses, payroll, and VAT compliance.
Extensive Features
As a world class accounting solution Xero offers a suite of features and benefits that are unmatched in traditional legal PMS solutions:
Global Business Functionality: Xero is designed for businesses of all types and sizes, offering features like multi-currency support, inventory management, and payroll management, which many legal-specific systems lack. These tools help law firms manage broader business functions beyond just legal time and billing.
Deep Banking Integration: Xero’s bank feed integrations go far beyond what legal-specific software typically offers. Xero supports connections with thousands of global banks, providing real-time bank reconciliation, something that is often a manual process in legal accounting systems.
Financial Forecasting Tools: Xero’s tools for financial forecasting and budgeting give firms a long-term view of their financial health. While legal-specific systems tend to focus more on operational aspects like time billing and client profitability, Xero’s broader financial forecasting helps law firms make strategic decisions for growth and sustainability.
Machine Learning for Expense Categorization: Xero uses AI to automatically categorize transactions and learn from user behaviour, improving accuracy and reducing time spent on manual categorization. This level of automation and intelligence is not typically seen in legal-specific software.
App Marketplace with Diverse Integrations: Xero’s marketplace offers integrations with a wide range of business apps, far beyond what legal-specific accounting systems typically offer. This allows law firms to build a customized tech stack tailored to their broader business needs.
Cash Flow Tracking and Forecasting: Xero offers real-time cash flow forecasting and tracking, helping law firms anticipate and manage their finances. Legal-specific systems often focus on short-term metrics like billable hours or matter-specific profitability, without providing comprehensive firm-wide cash flow tools.
Digital VAT Submission via MTD: Xero’s built-in Making Tax Digital (MTD) compliance for VAT ensures that firms can submit VAT returns directly to HMRC through Xero, streamlining compliance without the need for third-party tools.
Ease of Use and Training
Xero is widely regarded for its ease of use:
Intuitive Interface: Its interface is simple, modern, and user-friendly, allowing law firms to onboard quickly without requiring extensive accounting knowledge or training. This is a significant advantage over legal-specific systems, which can be cumbersome, requiring substantial time for staff to learn.
Wide User Base: Xero is used by businesses globally, meaning that support, training resources, and documentation are widely available.
Cloud-Native and Real-Time Access
Xero is built as a cloud-native solution, offering features that are inherently more flexible than older legal accounting systems or even hybrid cloud solutions:
Anytime, Anywhere Access: Xero allows law firm partners, accountants, and finance teams to access real-time data from anywhere. This is critical for firms that need flexible work environments, whether from multiple offices or remote locations.
Automatic Updates: Xero constantly updates and improves without firms having to manage complex upgrades or new versions, a key difference from many legal industry-specific software that might require manual updates, often leading to downtime or additional cost.
Superior Financial Reporting and Insights
Xero offers real-time, customizable financial reporting, providing insights into firm performance that go beyond the legal-centric view:
Cash Flow and Profitability: With Xero, law firms can monitor their overall financial health in real-time, including cash flow, profit and loss, balance sheets, and bank reconciliation. These reports are critical for strategic planning and decision-making.
Budgeting and Forecasting: Legal-specific systems tend to focus heavily on case-level profitability or timekeeper performance, but Xero enables firms to create comprehensive budgets and perform financial forecasting—essential for long-term business growth.
Automation and Integration
Xero’s extensive automation features and integrations streamline accounting processes in ways that traditional legal-specific systems often can’t:
Bank Feed Automation: Xero automates bank reconciliations through live bank feeds, reducing the time and effort involved in manual data entry. This level of automation is often missing or less efficient in legal-specific accounting solutions, which may still rely on manual reconciliation processes.
Invoicing and Payment Automation: Xero automates the generation of invoices and sends payment reminders to clients, saving time and improving cash flow. It also integrates with payment gateways like Stripe and GoCardless, allowing law firms to accept online payments seamlessly, which might not be available in some legal-specific systems.
Expense Management
Xero simplifies expense management:
Expense Tracking on the Go: Xero’s mobile app allows lawyers and staff to snap photos of receipts and log expenses in real-time, eliminating the risk of losing paper receipts and enabling immediate reimbursement for expenses tied to client matters.
Automatic Categorization: Using AI and machine learning, Xero automatically categorizes expenses based on previous transactions, reducing the workload for the finance team.
Expense Tracking by Matter/Client: Expenses can be tracked directly against a matter or client, ensuring accurate client billing
VAT and Tax Compliance
Xero’s deep integration with UK tax regulations is a major advantage:
VAT Automation: Xero automates VAT tracking, reporting, and submission through Making Tax Digital (MTD). This feature ensures that law firms remain compliant with HMRC requirements, without needing to manually manage VAT returns.
Tax Reporting: Xero offers built-in tax tracking, simplifying tax filings for law firms, which may not be as streamlined in legal-specific systems where tax management is often an afterthought.
Cost-Effectiveness and Scalability
Xero offers a scalable pricing model, making it cost-effective for law firms of all sizes:
Affordable Subscription Plans: Xero’s pricing scales according to the firm’s needs. There are no large upfront costs or expensive implementation fees.
Pay for What You Use: Law firms only pay for the features they need, avoiding the all-in-one bundles from legal-specific software that can include unnecessary features or functionality at a higher price.
Third-Party Integrations and App Marketplace
Xero’s app marketplace is extensive, providing law firms with the ability to expand Xero’s functionality through integrations. Xero connects to hundreds of third-party apps, including CRM systems, payroll tools, and document management systems, giving law firms more flexibility in how they manage their operations. Legal-specific accounting platforms typically do not offer this breadth of integration options.
