Your Year-End Results

Kathy Fortin

January 15, 2020

 

How was your Firm’s Year-end?

The end of the year brings with it an opportunity to reflect on the financial results of your law firm. For some firm owners, looking at the revenue numbers may mean facing disappointing results for a year of hard work. Perhaps it has been this way year after year. From our standpoint, year end is a time to take a close look. If the results disappoint you there are always oportunities to improve. What can you do differently so that next year you will not be disappointed?

The first thing you can do is monitor the firm’s financial progress on a regular, at least monthly, basis. Do you have the ability to produce financial reports on your own? Are they available for you to view anytime on your desktop or laptop? Or, ask your bookkeeper to provide them to you.

The reports should include:

  1. Profit & Loss Statement
  2. Balance Sheet for year-end
  3. Aged Work-in-Process
  4. Aged Receivables
  5. Billable Hour Reports by attorney and paralegal
  6. Billings Report
  7. Cash Receipts Report
  8. Billing Realization Report (which compares dollars billed against value of the hours invested)
  9. Collection Realization Report (which compares dollars collected against amount billed)

 

Having a report that provides a comparison of revenue for the prior two years is helpful. If you want to increase revenue, these prior years’ results will be critical to setting new goals.

We often hear clients complain, “Everyone in the firm is busy and working as hard as ever, but we can’t seem to increase revenues.” Throughout our years of working with small firms we have learned that small improvements can make a difference to have your best year yet.

While small law firms are known for having more relaxed cultures, one of the down sides is the lack of setting and tracking the firm’s goals. There is a business strategy called “The Repeatability Model” which involves identifying what is achievable first and then making it a practice to repeat it. What revenue is achievable for your firm? Is it 5% or 10% greater than last year? By focusing on your recent revenue status, you can set a new goal. Then, communicating with everyone in the firm in a transparent manner is needed. Your goal can only be reached if everyone in the firm is incentivized to do their best to contribute toward the goal.

There is more to this process. What will follow in my next few Blog posts will be how to get control of your revenue picture and how to improve it. For now, start by looking at your financial reports and think about how you can increase revenues from last year.