Knowing where your law firm stands financially is always a wise practice, but checking your firm’s financial pulse halfway through the year can be particularly helpful. If you need to make adjustments, they’re easier to implement now than at the year’s end.
Barring any significant tangles, we recommend going through these tasks yourself—even if you’d prefer to hand some of them over to your accountant. Why? Particularly as we emerge from the pandemic into an altered professional world, it helps to know where you stand, what’s working, and what can be fine-tuned.
Billing and accounting
Every law firm should have a goal to prevent invoices from languishing past the thirty-day mark. But coming up on June 30, that’s doubly true.
Organize your finances by sending out invoices, reviewing transactions, and reconciling bank accounts and credit card statements through June 30. Getting these statements and bills in order now will set you up to have a better picture of where your firm stands financially. If these tasks feel a little overwhelming, consider investing in a practice management system that allows you to automate some of these processes.
But however you do it, if there’s a client with an invoice that’s more than thirty days old at the mid-year mark, this is the time to follow up. If you wait until December, collections will only be more of a hassle—and less likely to yield positive results.
Three-way reconciliation is another area where a modern practice management system can save you time, but however you approach it, it still needs to get done.
Printing and filing records can be especially valuable here. If you’re ever audited, having these hard copy records will make the situation much less stressful.
After you’ve made sure your billing and accounting are up to date and you’ve run bank and trust account reconciliations, it’s time to review your mid-year reports.
Look at your balance sheet as of June 30th and check for irregularities. Then, check to see if you are paying down the principal on long-term and short-term debt. Review equity, owner’s draw, and changes in assets and liabilities.
Likewise, review profits and losses for the period of January 1 to June 30. Depending on your practice area, the first and second halves of the year may look very different from one another because of the new environment as we emerge from the pandemic.
Once you have a clear picture of where the firm stands financially, you can determine whether or not your current approach is bringing you closer to your firm’s goals. This is part of why your accountant can’t check the mid-year pulse for you—these are numbers and patterns you need to understand all the way through.
If you’re seeing a different picture than what you’d hoped for, consider implementing adjustments now to bring you closer to where you’d like to be by the end of the year.
That said, the last eighteen months have brought near-constant change and surprise. It’s also possible that goals you set back in January may need to be tweaked.
And finally, whether you’re making adjustments or not, give yourself a pat on the back. You’ve completed your mid-year financial check-in! Not only will checking and reviewing finances be informative now, but come December, you’ll be immensely grateful to have less work to do as you head into the holidays.
Ready to take your firm’s financial pulse? Watch our Mid-Year Accounting presentation and download the complete checklist to get started.