Contribution from our SPONSOR ZipBooks authored by Freedom Ahn. Freedom is a writer and marketer at ZipBooks, whose writing has also appeared in global publications including The Independent (UK), Huffington Post (USA), The Telegraph (UK), The Chicago Sun-Times, The Los Angeles Times, The Jerusalem Post, and more.
Effectively utilizing a financial dashboard in your practice is complex. You want an easy way to get a pulse on your practice, monitor what’s most important, and leverage it to grow and improve. You might even have budgets and financial plans in place, and you want to know how to quickly determine if you’re still on the right track.
A trusted set of reports will help keep you ahead. Here are five reports you should be generating on a regular basis:
Billable Hours
A billable hours report helps you note meaningful variances and discrepancies over time, across projects, and among clients. You should generate this report often, and analyze it to keep track of your productivity and efficiency. You’ll want to break it out by lawyer and client. Even better, if you can include projected billable hours to check against expectations, you’ll be able to improve your work over time.
Quarterly, you can review cumulative billable hours to check your profitability. Combine it with a client activity report to identify clients (or lawyers) that operate as “loss leaders.” It can help you decide to invest more time into client relationships or even scale back your relationship with certain clients.
Income Statement
The income statement shows your profitability and where you’re spending your money. This report should be generated monthly as both a month-by-month and a YTD report. Compare your income statement to the month prior and to the corresponding month for the preceding year to highlight how your business is changing. Are you earning more now than you were at this time last year? Are your profits margins increasing, or are you spending too much on items that aren’t helping grow your practice?
Accounts Receivable
Keeping an Accounts Receivable report current and accurate helps you ensure you’re getting paid in full and on time. Generate the accounts receivable report at least monthly; include the total outstanding balances for each client, the aged balances, and any disbursements due. Use the report to know who owes you money and how much, and to keep track of your cash flow projections.
Client Activity
The client activity report gives you a snapshot of billed and unbilled services for your clients. It should be generated at least bi-weekly, for each client, and should include:
- Fees billed and effective hourly rate;
- Fees collected;
- Accounts receivable (both outstanding and aged) and written off accounts;
- Trust balances;
- Work-in-process and unbilled disbursements added during the month;
- Write-up and write-down separated by client, lawyer, and invoice.
This report is a powerful tool for identifying future workload, accounts that are in arrears, and where cash flow can become bottlenecked.
Dashboard
Finally, this may be one report, but a live dashboard can make things simpler and easier to digest.
Your dashboard report should include:
- Month-to-date income and monthly income comparisons
- Accounts receivable by clients and total sales by clients
- Cash-flow analysis to show the firm’s cash-in/ cash-out status. This can help you get a firm understanding of your practice’s ability to maintain payroll and overhead short-term;
- And a healthy dose of your expenses – either by vendor or accounting category
Generating accurate reports in a timely and consistent manner is important to any business, but when it comes to growing your legal practice it’s your critical first step. You’ll need to act on the information in these reports. Inaccurate or late information can mean your firm is playing catch-up before the race even starts.
You might think it will be easy to handle all this yourself. Afterall, attorneys and accountants are both INTJ careers, and lawyers usually make exceptional accountants. The only problem is that you rarely have the time to handle your own books, manage your clients, and grow your firm.
Growth is difficult without a solid foundation. When you don’t need to worry about your financial reporting you can concentrate on what you love to do; and that’s the best, most effective way to grow your practice.
If you want a hand in keeping your bookkeeping up-to-date, let us know. We’re happy to add a personal bookkeeper to your team — or just answer your questions. ZipBooks fully supports Girl Attorney, so check out our Girl Attorney special and get 10% off bookkeeping forever.
