Financial Management: How to Stay Afloat

Financial Management: How to Stay Afloat

Financial Management: How to Stay Afloat

In order to be successful, attorneys need know a lot about a lot of things. And financial management is one of those pieces of knowledge you need to have for law practice success.Here are 6 factors you should have a handle on:1. Your client base. Without a sufficient number of clients to keep those billable hours going, you can't sustain a successful practice. This doesn't mean you have to take every case that comes your way just to keep your firm going. What it does mean is that you need to attract the clients that you want, who are willing and able to pay.2. Good case management. The lawyers and other firm professionals must work on each case to generate billable hours. They must also make sure that too much time or unbillable time (hours spent in training, doing pro bono work, in meetings that can't be billed, and participating in firm management) isn't spent away from the cases. When you monitor the work by comparing the billable hours to a goal or target each month, you can have better control. It's also important to track the unbillable time so you can see where it is spent and if that time is being spent wisely.3. Proper billing rates. The hourly rate you charge your clients should reflect the geographical area you practice in, and the experience and specialty of all professionals working on the case. The client should be aware of who will be assisting the main attorney, and how much the hourly rate is for each so there aren't disputes down the road.4. Monthly billing. If you don't bill on a regular cycle, it's harder to get paid. It's best if you can send a statement each month. Not only does it keep your client apprised of the work being done, but it avoids sticker shock if you bill on a less than monthly basis. Also, it may be easier for your client to pay the smaller amount.5. Accounts receivables. If your client doesn't pay in a timely manner, call her and make sure she received the bill. If she didn't, resend it. If she did, remind her that it is past due. It is difficult to collect money that is more than 60 days past due, so stay on top of who owes you money and take care to collect.6. A budget. You need to have a good plan in place for both revenue and expenses. Each year your firm should establish a new plan and review it often to make sure you're on track. Make sure your goals are realistic and reachable and revise the numbers upon each review, if necessary. Your plan for revenue should state how much you expect to collect in fees through the year. Of course this is difficult to do because you can't always predict the amount and timing of revenue. Your plan for your budget should also include an estimate of how much you will spend through the year. The expenses include salaries, lease payments, operating expenses, insurance, advertising and technology.One way you can control all of these items is to have a good client accounting software program. It can monitor every factor (except the first, your client base!), and generate various reports that will help you keep your financial management organized and on track. There are a lot of choices when it comes to client accounting software, so you'll have to take unbillable time to check them out!

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