Many lawyers are hesitant to regularly look at their finances. In addition to the regular workload and marketing, maintaining a budget seems overwhelming and is often undervalued in time management. After all, when managing a business, there are so many different factors that can affect cash flow and finances: personnel issues, economy changes, client payment plans, marketing and advertising, clerical errors, and many others. Although it may seem difficult to organize and prioritize the finances of a law firm, there are six key categories that break down the budget so that it can easily be managed.
In this episode of The Un-Billable Hour, host Christopher Anderson interviews financial analyst Brooke Lively about the six key numbers every attorney should know. Three are involved with the money that exists or has already been spent: cash position, budget, and accounts receivable. Lively emphasizes the importance of knowing how much the firm has, how much it is owed, and what is being spent. She recommends that an attorney then take these numbers and analyze them to provide cash projections, budget variance, and income variance. Any noticeable changes can lead to modifications to save the company unnecessary losses. By simply paying attention to these six numbers each month, the success of a lawyer’s practice could greatly increase.
Brooke Lively currently serves as a CFO to over twenty small and solo law firms around the country through her organization, Cathedral Capital. She focuses on fundamental analysis, firm modeling, and valuation backed by strong quantitative skills. She holds an MBA with a double concentration in Investments and Corporate Finance and has been awarded the Chartered Financial Analyst certification.