If your small or medium law firm is struggling financially, don’t panic. Before making any decisions that will affect the future of your firm, follow these steps.
Review Your Firm’s Weaknesses
I’m not just talking about monetary weaknesses, like overspending or under-budgeting, though it’s essential to look out for those issues, too.
Take all potential stressors into account. Have you recently lost any significant relationships with clients, or have you lost key staff members or attorneys? Is your firm involved in any disputes with other firms?
Also be sure to look over every area where your firm isn’t performing up to par; any aspect that might be inefficient or outdated. Is your technology current and running well? Are you tracking your time properly? Are your attorneys and marketing strategy aligned with the current market trends?
Any change to your regular routine could put an unnoticed strain on your firm’s finances, as can redundant techniques and inefficient workflows. After analyzing for disruptive activity or outdated technology, see what corrections you can make that will account for these disruptions, improve productivity, and reduce spending.
Create Cashflow Forecasts
Instead of making quarterly or yearly budgets projections, start creating daily, weekly, and monthly cash forecasts so you can more accurately track your spending and eliminate any unnecessary spending.
You may find that you spend an extra $200 per month on a transcription program that you’ve used twice, or that you have a few magazine subscriptions that serve no purpose but to decorate your office.
Operating costs and human commitments are more difficult to reduce, though these areas often take up the largest part of a budget:
- Reducing operations costs may entail restructuring operations, which could require a structural overhaul.
- Reducing human commitments could sour relationships or negatively impact work quality.
Refer to your previous analysis of your firm’s weaknesses to determine whether it is, in fact, necessary to redefine your firm’s operational structure to create a more efficient, cost-saving system. In doing so, you may be able to eliminate archaic modes of operation while cutting costs and retaining talent.
Make sure that throughout this entire process, you keep in constant contact with your bank and your accountant. Keep your financial advisors in the loop and you’ll be able to make better and more informed decisions about how to allocate your spending.
Bring In Outside Help
There are times when reducing or reorganizing cash flow isn’t enough and you’ll want to bring in outside consultants to help your firm get back on its proverbial feet. You may want to get in touch with one of the following experts:
- If debt is an issue plaguing your firm, get in touch with a debt counselor to set your records straight.
- Consider restructuring your insurance to reduce deductibles or avoid trouble if you ever need to file for bankruptcy.
- If you’re looking for access to capital while waiting for legal fees to pay out, get in touch with a legal funding firm
- Always speak frankly and honestly with your financial advisor and your accountant.
The sooner you figure out what’s stalling your finances, how to manage your budget, and who can offer your firm the cash flow solutions it needs, the sooner your law firm can resume growth.
Written by David Smethie, Senior Marketing Director of Balanced Bridge Funding.