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    Year End Checklist: Financial Cleanup

    by SimpleLaw on
    Law Firm Efficiency Affordibility

    December is the time to wrap up any unfinished tasks before the end of the year. Having a financial cleanup to-do list helps attorneys keep track of any outstanding invoices, unaddressed expenses, or unanswered budget questions. That way, there aren't any surprises at the start of next year.

    Reviewing Revenue Sources

    Attorneys should periodically review the law firm's accounts and financial records. That way, they can get a better idea of what practice areas are profitable and whether law firm partners are properly compensated before the year ends. Here are few tasks attorneys should focus on:

      • Reconciling trust and operating accounts: Make sure that the law firm's money and client's money are handled properly. The last thing any attorney wants is to loose track of a client's money, or use it in a way that wasn't supposed to be.
      • Analyze profitability by practice area, client, and attorney: Which areas consistently bring in the most revenue? Which attorneys saw the biggest rise in demand over the course of the year? How does that compare to the growth rate of the same areas in the legal market? Start looking at industry reports, bar association panels, and hiring agency blog posts to get a better idea.
      • Make sure attorneys are billed properly: Sorting out unresolved time sheets doesn't just ensure attorneys are compensated for their work, it also lets clients know how much they owe the law firm. The last thing any client wants is to find out they missed a payment to their attorney because the law firm had shoddy record keeping. 

    If the law firm's struggling with keeping track of its finances, try looking for alternate ways of doing. Maybe the firm needs to adopt a more automated way of notifying clients and keeping track of payments. 

    Evaluating Expenses

    Knowing how the firm spends its money is important too. Here are a few ways attorneys can figure out where the law firm's money is going, and how they can stop it from being wasted:

      • Auditing subscriptions: Is having the service still useful for the firm? If not, just cancel it. The occasional one to five dollar payments might not seem like much, but they add up over time. The same goes for things like legal bar membership fees.
      • Assess staff costs vs. utilization: Consider things like travel costs compared to number of cases an attorney takes. Are attorneys spending more time on internal management than actually addressing their clients legal matters?
      • Marketing and technology adoption: What marketing strategies does the firm use to attract more leads? Does it use any kinds of legal technology to help automate menial tasks? If the law firm recently started using these new methods, it might be better to wait longer before making any changes. 

    Does the law firm hold any events like holiday parties or an offsite project? What about office supplies? Not accounting for even the most minor expenses could greatly cost the law firm later on.

    Building Next Year’s Budget

    It's a grueling, menial task but it has to be done. A budget plan's a crucial navigational tool not having one can eventually cost the firm dearly. However, making a good budget plan goes just knowing how money the firm makes and how much it spends. For attorneys struggling with budget planning, doing the following can help.

      • Set revenue targets based on historical trends: Figure out the average difference between revenue and expenses over the course of multiple years. Use these averages as a ballpark for what the firm needs to earn to keep functioning properly. 
      • Plan for capital expenditures: Things like software upgrades, office renovations, or adopting new legal technology can have incredible short term costs. Including these in the budget plan increases the odds of the firm weathering them financially.
      • Plan for unexpected costs: Sudden bonuses, wage increases, travel expenses can always happen. Factoring these into the budget plan mitigates their impact on the firm's finances. If they don't come up, great. If they do, then law firm has the funds to pay for it.

    Involve the entire firm in the budget planning process. Doing so decreases the chances of conflict between desired goals and the law firm's financial reality. The more aware everyone is about, the better.

    Closing Thoughts

    The end of the year gives attorneys a chance to tie up any remaining loose ends. However, not keeping track of any of these efforts basically invalidates any progress they make. After all, what's the point of year-end financial cleanup if no one remembers what invoices clients still have to pay or what expenses are unaddressed? 

    SimpleLaw streamlines all the tools for effective client communication into an all-in-one case management software program.

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