There are six key numbers that every self-respecting equity owner of a law firm should be looking at every month. Every month you should be looking at a budget, a budget variance report, a cash flow projection, an aged accounts receivables report and a cash position operating and trust. Remember these six key numbers.
Once your revenues are over a million dollars then we can start talking about a balance sheet. Until your revenues are over a million dollars a balance sheet is really just a distraction. Until you get to that million dollar mark, you just need to manage the business and propel it to this point through a cash flow projection management.
A decent bookkeeper, a good bookkeeper, should be able to give you these reports very easily. If your bookkeeper can’t or won’t give you a written budget variance report every month, a cash flow projection and six week cash flow projection you should consider getting a new bookkeeper. You need to know where you stand every month as far as revenues projected to come in, expenses projected to go out go. These are key numbers you need to be aware of, and you need a bookkeeper that will give you these numbers.
I’m not saying this to be funny, I’m saying this seriously. You need a new bookkeeper! I’ve had this conversation with thousands of lawyers over the last 10 or 12 years and usually the problem is that the bookkeeper went to law school, in other words, usually the lawyer is being pennywise and pound foolish and trying to be their own bookkeeper. Here are a couple of tips on how to decide if you need to hire a new bookkeeper.
First off, your bookkeeper is probably not very good unless they went to accounting school, have a finance degree or formally studied bookkeeping. For bookkeepers there is a very good chance that you may be a brilliant lawyer but a very bad bookkeeper.
Number two, it is extremely difficult to be objective with ourselves and to hold ourselves accountable for our budget, budget variance report and our cash flow projections. That’s why the owners of the most successful solo and small law firms have an outside chief financial officer. This officer is appointed to sit there and go over the budget, variance report, cash flow projections,and make a plan based on the accounts receivables report. Once you have someone appointed to this job, you won’t go deeper and deeper with the client month after month and they owe you tons of money. You won’t have to go over the cash position in your operating account and your trust account.
The way you get control over the finances of your law firm is by making the decision to plan and get help. You decide how you’re going to live your life, how you’re going to run your business and who can help you reach these goals. Don’t try to be your own bookkeeper. You can hire a bookkeeper in most markets today for $35, $45 an hour. As an attorney you may bill by the hour, which I don’t recommend, have a flat fee, value-based or other creative billing, either way, your time is worth much more then it would cost you to hire a bookkeeper.
Being efficient, is one of the main goals every law firm should be focused on. What would take a good bookkeeper three hours takes you six. Not only does it take you a long time but you hate it. It makes you miserable, it doesn’t inspire you, it doesn’t make you excited and where do you think all of that energy goes to? It trickles over to the next time that you meet with a prospective client or a potential referral source.
Get a good bookkeeper, ask the bookkeeper to watch this video. They can watch a bonus video at smalllawfirmCFOservices.com, and you should watch it as well. It’s a 45-minute complimentary lesson on each of these six key numbers so you understand what you need out of your bookkeeper. If there is one thing to take from this video, it’s this.. if your bookkeeper can’t or won’t give you these six key financial reports every month, you need to move on. You are wasting time and energy.
Get a better bookkeeper. If the bookkeeper is you, you definitely need a better bookkeeper.
There’s no reason to delay the life you want to live.
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