Opening a New Law Firm

Managing your cash flow, as opposed to merely administering it, requires you to be future-oriented, proactive and creative. It also requires you to take responsibility for organizing the systems within your law firm that will routinely provide you with the necessary information on which to base decisions. 

A regularly reviewed and revised budget provides valuable information about the financial performance of your practice. You should prepare a monthly analysis recording the month's revenue, expenses and the year-to-date total for each category in your budget.

This report should automatically be prepared when the monthly trust reconciliation is done. Although the information produced by such a simple budget process may be limited, it will provide you with a basic monthly overview of how your practice is doing.

A more sophisticated budget will include items such as revenues, capital expenses, expense/revenue ratios, loans, cash-flow requirements for disbursements and other more complex law firm management variables.

Your budget can become quite complex as you add variables. Use your judgment, supported by your accountant, to ensure that the information produced is useful.