Quarterly Review and Planning for Law Firms: Professional and Personal

Welcome to Law Life

In my 6th Law Life article, I want to focus on the importance of financial planning for law firms and families. As we reach the year's midpoint, it’s the perfect time to review the last six months of financials, assess budget variances, and plan for the third quarter and the remainder of 2024. Effective financial planning is critical to meeting personal and professional goals.

The Importance of Financial Planning

Financial planning encompasses setting goals, measuring progress, and adjusting as needed. For law firms, this means analyzing expenses, revenue, projections, marketing campaigns, and the rate of return on investments. Personal finances involve budgeting, tracking expenses, and planning for future financial goals.

My Financial Journey

In my first Law Life newsletter, I shared the transformational lessons I learned after COVID. Before this period, my law partner and I lacked a structured financial plan. We didn’t have dashboards or key performance indicators (KPIs) to track marketing campaigns and budget expenses. We paid bills and took K-1 draws as needed.

However, learning about business, marketing, sales, and operations also taught me about financial responsibility. Planning, setting goals, measuring, and reviewing financials have become integral to our practice. This process must be repeated quarterly, year after year, to ensure growth and stability.

Implementing Financial Systems: Lessons from Traction

One of the most impactful books I’ve read on this topic is "Traction" by Gino Wickman. This book emphasizes the importance of setting up systems and routines in business at regular intervals. For example, it advocates for quarterly goals, referred to as "quarterly rocks." In our firm, we call them "boulders."

The philosophy behind quarterly boulders is to set priorities for the quarter, providing focus and clarity on the most important tasks. Additionally, setting KPIs to track these goals is essential to understand where you stand with your targets.

Essential Financial Reports

It is crucial to prepare, review, and use regular financial reports to set and achieve goals in business and personal lives. I highly recommend maintaining the following reports:

1. Profit and Loss Statement: The revenue, expenses, and profit over a specific period.
2. Balance Sheet: A snapshot of assets, liabilities, and equity at a given time.
3. 12-Month Forward-Facing Budget: Project income and expenses for the next year.
4. Budget Variance Report: Compares expenses to the planned budget, highlighting variances.
5. Accounts Receivable: Tracks money owed to your business from clients.

To ensure accurate financial reporting, we work closely with my accountant, who has a staff member responsible for bookkeeping on QuickBooks. They categorize transactions, and we review any uncategorized expenses or income to maintain precise financial records.

Mid-Year Financial Review

There is one week left in the second quarter of 2024. It’s hard to believe we are already halfway through the year. Now is the time to review your financials against your goals and projections and to plan for the next two quarters. Clarity and measurement are required for growth. This system of financial responsibility is crucial for our businesses and personal lives.

Assessing Liabilities and Debt

Assessing your liabilities and debt is critical, particularly in light of interest rates. Review your outstanding liabilities and the interest rates you are paying. Develop a strategy to pay down high-interest debt in your business and personal finances. Again, if you need help understanding these concepts, a simple Google or YouTube search can be invaluable.

This Week’s Resources

Each week, I share resources that I discuss. Here are some resources that I referred to and found valuable. I hope you find value as well:

• My TEDx Talk on Reclaiming Time
• Traction by Gino Wickman

Engage with Law Life

I hope this insight into financial planning inspires you to review and improve your financial strategies for your law firm and personal life. If you found this helpful, please like, comment, and share it with friends and colleagues who might benefit from this insight.

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Thank you for joining me for another issue of Law Life, where we explore the tools and practices that enhance our professional and personal lives. Until next time, stay financially savvy and thrive.