Cash flow is one of the most important aspects of your legal practice.
The ebbs and flows can often lead to stress, sleepless nights, late fees, interest payments, and potentially – if it involves late payment or lodgement of your taxation or superannuation payments – a show cause notice with the Queensland Law Society Regulation team.
When cash flow is poor, there may be a tendency to ‘bury your head in the sand’, solider on and to keep billing. However, taking the time to stop and assess the situation is crucial to your success.
Here are a list of questions we recommend asking yourself if you’re finding that cash flow has emerged as an issue in your practice:
How have you measured and recorded your operating costs?
Are you billing enough to cover your operating costs?
Are you recovering what you are billing? If not, perhaps you have a billing issue or a client communication issue. Maybe you have misread the needs and demands of your client demographic. Are you acting for your ideal clients?
Have you effectively communicated when, how and what you are billing? (Note that this is not just complying with your costs disclosures). Many practitioners struggle or avoid this discussion.
On what basis are you billing – hourly rates, value billing, fixed prices?
If you are billing time, are you recording all of your billable time; are you writing off substantive amounts of your time? Why?
How did you calculate your billing rates? Invariably this is a mixed response in the profession, ranging from “I charge what I was charged out at as an employee,” to “I charge $x more/less than Practice Z” (neither may be appropriate in your existing circumstances).
Are you capturing and recovering disbursements in a time-effective manner?
How regularly do you bill your clients? Do you bill immediately after an event on a matter, regular monthly bills, after WIP reaches a certain amount, at the conclusion of a matter, or just when you get the time to?
How detailed are your bills? Can clients clearly see the work performed or the value provided?
Do you have accurate records of the work performed on the matter, including who in your practice performed the work?
What payment methods do you offer your clients?
What are your trading terms?
Do you follow up on outstanding payments, and when?
Do you operate a trust account? Are you using it?
Do you continue to work on client matters when there are bills outstanding?
If you would like a review of your cash flow or billing practices, the Practice Advisory Service is a confidential, complimentary service to members offered by QLS Solicitor Support Pty Ltd (a wholly owned incorporated legal practice of QLS). Our consultants help you reality test your ideas and innovations, provide strategies to anticipate or overcome practice hurdles and help you achieve your goals.
Our solicitors have years of experience running their own practices and are able to provide guidance in essential areas, such as appropriate management systems for incorporated legal practices, legal project management, records management, costs disclosure, client agreements, and practice management generally.
Submit an expression of interest for a consultation with a Practice Advisory Service solicitor today.