Financial security isn’t just for your personal life – law firms should seek to have the same peace of mind that comes with the right long-term financial planning. Not only is it less stressful, but it also leads to sustained success when you’ve made sure the right processes are in place. In the busy world of running a practice though, planning and consistency are key to making it happen.
Get paid for your work
One of the first steps toward financial security is making sure the firm is getting paid for all of the work that’s done. Too often time goes unrecorded and expenses fail to get reimbursed. No matter how hard you work, it’s going to be hard to get solid footing if you’re not putting it on an invoice.
Have a plan in place for how time and expenses are going to be recorded, preferably as they happen. The how is up to you. Technology can make the task easier with apps tied to your practice management program that automatically tie them to matters. But if you need to, you can always use a spreadsheet or timekeeping service like Toggl or Harvest to keep track.
Have a collections plan in place as well. It would be nice if every client paid their invoices on time, but that’s probably not going to happen. Set aside dedicated time to send reminders or use your billing system to schedule automatic reminders.
Leverage data and planning
Financial security requires some thinking ahead. To make the best possible decisions for your firm, you need to take a look at the data to help give you insight. Gut feelings will only get you so far. Run the numbers and look at important metrics and trends before forecasting or making any choices.
As you plan out an overall strategy, you should also be thinking about when you’re making payments. Cash flow and having the funds to cover them can sometimes require some balancing. Be aware of the payments you have going on and the invoices you’re expecting clients will pay – you want to make sure you can cover all your costs. If you can wait to make a payment without a penalty, it may make sense to hold off rather than paying well before the due date.
Protect your firm
Running reconciliation reports helps protect your clients – but it also helps protect your firm. You need to make sure the numbers match up to prevent any fraud issues. It’s not unheard of for money to “go missing” in law firms, so you want to be proactive in preventing it in yours – no matter how much you trust your bookkeeper or accountant.
Monthly reporting is a big help in catching any discrepancies. Not only should reconciliations line up, but you should also be reviewing monthly statements for any suspicious transactions. An approval process for checks can also be used as a preventative measure.
Excellent legal representation for your clients aside, your firm needs to have financial security if you want it to last. Otherwise, you’ll be a few slow months away from a serious problem. Get paid, use data, start planning, and protect your firm to establish true financial security.
Want to know more ways to reach financial peace of mind? Watch the full webinar, How to Improve Your Law Firm’s Financial Security Today, or download the eBook, The Simple Guide to Improving Your Law Firm’s Financial Security.