Who should be doing the work: cost comparison and TCO analysis

Who should be doing the work: cost comparison and TCO analysis


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.

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 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.

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.

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” 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.

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.


If these numbers are more agreeable than doing things yourself, you're not alone.

Canadian firms have long delegated their bookkeeping and law firm management to 'someone else' so they can handle a client's legal matter exclusively.

This method reflects an enduring industry standard, whereby the lawyer wants to maximize his or her time on obtaining billable hours, while administrative duties are left to someone else. For a long time, this was the best option.

However, the cost of maintaining this method of bookkeeping is no longer the most affordable or efficient method of handling a firm's finances and compliance obligations.

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.

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. If interested, you can visit this page to learn more about uLawPractice Premium Bookkeeping Services