Managing your firm finances

How can I effectively manage the financial aspects of my micro law practice?

Managing the financial aspects of your law practice involves several key steps:

1. Create a budget – list out all your known expenses, and provision a buffer for contingencies, for yourself and for superannuation. Consider what those expenses look like over the course of the year – renewals in May each year is often a large practice expense, but one that is not a surprise.
2. Cash flow management involves understanding your anticipated expenses and payment terms, and ensuring you have enough cash available to cover those expenses when due.
3. Review your billing practices – what is the most efficient system for your practice? Are you making effective use of your trust account? Do you have billing software? Do you have different payment options for clients?
4. Regularly review your financial reports to inform practice decisions. Ensure you know how to navigate your way around a cashflow statement, balance sheet, and profit and loss. By integrating billing and accounting software, you can generate financial reports that provide you with up-to-date information rather than relying on statements prepared for year end.
5. Know your tax obligations and plan appropriately. Ideally tax planning will occur each time you receive a payment (at least on a monthly basis) by setting aside a portion of funds for payment of BAS and PAYG.
6. Automate administrative tasks, including payment of accounts. Schedule reminders for contract renewals (i.e. equipment or mobile phone contracts) so you know when your contract term ends. This will provide you with an opportunity to do a cost analysis of alternate providers or renew or update equipment leases before your term expires.

Fiscal management of your practice is not an annual event like lodging a tax return, it is an ongoing and crucial part of your legal practice.

If you would like assistance and support in managing the financial aspects of your practice, reach out to the QLS Practice Advisory Service. The Practice Advisory Service offers referrals to the Business Advisory Service. Do you have a Q&A for the Practice Advisory team?