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Is This Your Situation: Choosing Key Management Reports

 

Numbers may not be your forte, but keeping track of certain numbers is key to the success of any law firm. Here are the management and financial reports you should prepare or have an outside source prepare for you.

  • Cash-flow projections: These spreadsheets track how cash comes in and flows out of your business. Reports usually track 12 to 18 months of revenue and expenses. Most firms run these reports annually and update them monthly.
  • Balance sheet: This lists a firm's assets and liabilities on a particular date.
  • Profit-and-loss statement: This is also called an "income statement" or "P&L" for short. The P&L charts a firm's profitability annually or quarterly, shedding light on its financial performance and health. The P&L shows revenues, costs, and expenses and signals to a firm that, to become profitable, it must either cut expenses, increase revenue, or both.
  • Accounts payable aging: This report gives a picture of how much money a firm owes, to whom, and when. This valuable planning tool tells a firm which bills are due this month or somewhere down the line, usually in 30-day increments.
  • Accounts receivable schedule: This monthly report shows how much each client owes the firm. This schedule is key to keeping on top of collections, likely an attorney's least favorite thing to do.
  • Accounts receivable aging: This periodic report shows how long clients' bills have been outstanding, which provides a snapshot of how financially healthy a firm's clients are. Collections that are slower than normal can be a warning that a firm is slowing down or taking on risky clients.
  • Hours worked: Every lawyer knows there's a difference between hours worked and billable hours; both are included in this regular report that compares these hours to a daily, weekly, or monthly billing goal. A 2012 LexisNexis survey of about 500 attorneys showed a 33 percent gap between average hours worked and hours billed to clients. The biggest nonbillable time-eater was "practice management and administrative tasks," like billing, accounting, and filing. According to the survey, bigger firms typically report fewer nonbillable hours than small firms with one or two lawyers.
  • Write-offs: This report shows which bills a firm never expects to collect from clients. Write-offs can result from a client complaint about service or billing, or they can result from hours spent on cases that a firm decides not to collect. Write-offs often are used as a snapshot of a firm's efficiency.

Numbers may not be your thing, but they're ours. Give us a call, so we can help you set up a reporting system that will keep your business on track.

 
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Siegel Solutions Inc
Siegel Solutions Inc
(781) 487-7000
info@siegelsolutions.com
144 Gould Street Suite 205
Needham, MA 02494
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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