5 Steps for Law Firm Budgeting
September 12, 2016
Have you ever had an expense come up that you weren’t expecting and didn’t have the money to pay for? Are you only looking at your bank balance to determine whether or not you have the funds to pay an employee? Do you want to spend money on advertising to grow your law firm but aren’t really sure how much you have available?
All these questions and more can be answered with a budget. As part of Legal Ease Bookkeeping, LLC’s services, we can help you make, implement, and track a budget. We do all the heavy lifting for you so it is easy to see how the next month or year will look, highlight areas that could be easily changed by spending less, and help you make business decisions because you will have a realistic estimate of expected profits. Here are steps I will take to help you set up a budget:
- The first step to making a budget is to look at your past spending. I will look at last year’s income and spending. With this information, I can come up with beginning estimates for the next year. If you haven’t been in business for a year, I can look at your last several months. If you think that the last year was an anomaly and I should be making a budget based off of a different year or multiple years, I can do that. A budget is a tool to help you, but it will never be perfect. The goal is to get it as close to reality as possible without over estimating profits. What I mean is that I don’t want to show that you are going to have a billion dollars in profit when really this year you will only have a million.
- The next step is to come up with the best possible estimates for the next year, line by line, category by category, and then question everything. Will your insurance be the same next year? Has it roughly gone up every year or down every year? Are you planning on moving offices partway through the year? Will your rent be the same, more, or less? Are you doing things to bring in more clients? Do you expect your income to be the same or more? Some of this I will be able to figure out by looking at the data, but some of it I will need you to help answer questions. Sometimes, I know your answer will be “I don’t know,” so I will do my best to look for trends and come up with realistic numbers for you.
- Once I have the best possible estimates for your budget, I will send it over to you to look over. We can set up a phone call to go over your questions or things you want to change, or you can shoot me an email with your changes. I will resend it to you for approval.
- After you approve the budget, we need to implement it. This may mean switching vendors to lower costs, setting up advertising to bring in new clients, or talking to partners about ways to improve the bottom line. These things will take time, and changes won’t happen overnight, but you will see progress.
- Every month when we go over your financial statements, we will also go over your budget. I will provide you with the projected and actual budget numbers so we can discuss things that are both over and under budget and whether or not we need to change the budget. Do you need to change the budget for a certain category because you have changed how you are going to do something? Do we need to lower the budget for something because you no longer spend money in that category? What steps can be taken to get this area of the budget back in line with our estimates? Are you bringing in so many new clients that you need to raise the income budget (I hope so!)?
Making, implementing, and tracking a budget for law firms can be easy with Legal Ease Bookkeeping, LLC. If you would like me to help you with your budget, click here to schedule a free 30-minute consultation. Budgeting doesn’t have to be hard, time-consuming, or a pain. It can help your law firm grow by making sure you have money in the bank to take advantage of opportunities that come up.