“Attorneys working in smaller firms, you have to realize, are working their tails off,” said Faith Larson, Managing Director and attorney with Javlin Capital. “They don’t have a CFO keeping track of everything. Precious resources are spent primarily on one thing: clients.”
We get it, but firm finances are important. It’s ironic, really, because adequate management of a firm’s finances and making more money go hand in hand/are directly related. Here are some of the more common mistakes we see:
1) Flying blind on cash flow. Timing of in-bound cash is critical, as you know. One attorney close to Case Funding said he lists dates when rent, payroll, and other bills are due and then reconciles timing of those due dates with typical client inflows. He also said: “Clients almost always pay late…so not keeping a close eye on cash flow can be a practice killer.” Plan ahead as much as possible. Financial security is rarely accidental.*
2) Using your own money to temporarily cover case expenses. Some attorneys have low-interest home equity lines of credit, or related funds, to temporarily offset case costs. Used sparingly, these tools can be smart financing solutions. But the cost of some cases—especially when they have deferred settlement schedules—can exceed personal resources. In those cases, using your own money to offset case costs can cause major cash flow challenges.
3) Not listening to financial advice. It’s especially bad if an attorney’s on top of his/her legal game; a healthy ego can block even the best financial advice.
Running a law practice is not for the weak-hearted. Finding and winning good cases while managing costs and operations compounds both the importance and challenge of staying “in the black.”
Call 1-800-543-4043 or EMAIL us to talk about funding your practice so you can focus on your clients and cases.
* “10 Sure Ways to Fail: Common Financial Mistakes & How to Avoid Them,” David J. Bilinsky and Reid F. Trautz; Law Practice Management; April 2003
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