What is Your Firm’s Financial Position?
(a 2-minute read that is really worth your while!)
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Here’s a pop quiz question – How do you know where you firm stands financially?
- We look at our bank statement. If there’s money, we’re good.
- Our bookkeeper tells us. That is, once we give them our information. We’re somewhat behind in doing that.
- We look at our accounts receivable report.
Hint: NONE of these answers are good ones.
Like it or not, the calendar says we’re past the mid-point of this year. Are your financial reports still in the first quarter? Some of our clients tell us their accountants are still working on getting them the final balances for last year!
Managing a firm requires a clear understanding of your finances. You can’t plan for the future if you don’t know where you stand today. Now is the time to make informed decisions for the rest of this year and prepare for next year.
Here are the basic reports every business leader, partner, or manager should know:
- Profit & Loss Report (also known as an Income Statement)
- Available Cash (you can get this from your latest bank reconciliation report for each cash account)
- Accounts Receivable – This report tells you what you might receive. It’s up to you to make sure you collect it!
- Estimated liabilities – Taxes, loans, accounts payable
- Payroll reports – Year-to-date and upcoming
Are there other useful reports? Yes – but this list will give you what you need to identify possible cash-flow issues, upcoming tax and other liability payments, and incoming revenue. Knowing this helps you make better decisions.
Finally, the blueprint for making decisions and planning for the future involves budgets. A budget gives you a practical roadmap for your money. It helps you set priorities, control spending, prepare for upcoming expenses, and spot potential shortfalls before they become problems. With a clear budget, you can make decisions with more confidence instead of relying on guesswork.
Our team at Crosspoints Consulting Group can recommend programs that provide this information. Some of them are part of all-in-one solutions that help you manage your day-to-day practice; others are specialized if you want a deeper dive into your finances. We can answer your questions about reports and budgets, or work with your financial advisors. Want to know more? Contact us at info@crosspointecg.com or call us at 877-375-2810.
See also:
- Planning for Your Year-End
- Accounting for Law Firms
- Trust Account Management
- Read more of Dana Riel’s Posts
Dana Riel is President and Founder of Business Solutions, Inc., serving the Washington, D.C. metropolitan area since 1985. Her firm is the authorized training center for the region for Time Matters and PCLaw by PCLaw|Time Matters, PLLC; Timeslips and Sage 50 Accounting by Sage Software; and QuickBooks by Intuit Corporation. She also serves as a consultant for Caret Legal (formerly known as Zola Suite), CosmoLex, Soluno & TimeSolv. As a trainer, Dana has provided training services to organizations such as the DOD Defense Logistics Agency, Judge Advocate General’s Office (JAG)/Department of the Navy, University of the District of Columbia School of Law, U.S. Department of Commerce and the U.S. Department of Veterans Affairs, as well as with small‐ to mid‐size law firms in the Baltimore‐Washington D.C. area. In 2009, she participated in the series of day‐long seminars sponsored by the District of Columbia Bar Association Practice Management Section, titled “Basic Training: Learn About Running a Law Office”. Ms. Riel also served as an Adjunct Professor in Georgetown University’s Paralegal Studies Program, having taught the course, “Legal Ethics/Legal Technology” in 2009; and “Legal Technology” for the Spring and Summer Semesters of 2010. She presently serves on the Advisory Board for PCLaw|Time Matters, PLLC.
