What They Didn’t teach you at the Law School
Law School prepares you to think, write and research like a lawyer, but once you’re at the door of a law firm or a courtroom, there’s a whole new set of skills you need. The present series of articles aims to enrich a new lawyer with all these skills in order for him/her to excel.
Financial security is no longer a guarantee for established law firms, let alone lawyers with brand new practices. With a variety of factors like legal software and effects of the economic recession looming large, lack of financial stability is a big problem.
In order to minimize expenses and maximize profits, you must learn to use your time, staff, and resources as efficiently as possible. You can secure your firm’s future by making some smart financial decisions.
Consider Your Capital Options
Whether you’re opening a new practice or trying to maintain your firm’s success, you need some financial capital. Each of the following sources of capital presents unique benefits and risks:
- Personal Savings—When you invest in yourself, you need to stick to essential purchases and maintain a safety net that will support you in tough times.
- Personal Loans—You may approach your friends and family members by agreeing to interest rates that exceed their current savings account gains.
- Bank Loans—Interest rates are cheaper than credit cards, but bank loans require much, much more information about your current and future financial outlook.
- Personal Credit Cards—You may receive additional benefits from a credit card company, but if you spend more than you earn, high rates must be managed.
Minimise Your Up-Front Costs
Although the items that make up your office are long-term investments in your productivity and professional reputation, the cost on these can be minimized by either re-using personal possessions or taking advantage of low prices from second-hand and wholesale retailers. You can start with the bare minimum like: a desk and chairs providing comfortable seating for yourself and at least two clients; a laptop; a mobile phone; a scanner and a printer; and the latest version of an accounting system.
Maintain an Account for Recurring Costs
Rent and utilities aren’t the only expenses that will result in monthly bills. Remember to leave room in your budget for certain monthly and recurring costs like: at least one year of personal living expenses before starting your practice; costs of research services; expenses incurred on securing an internet connection; as also amount spent on marketing efforts.
Wisely Manage Your Cash Flow and Credit
Your financial success will depend on your ability to manage your cash flow and lines of credit wisely. Take every possible step to protect yourself from future losses.
Consistent, accurate bookkeeping is the key to ensure your firm’s financial stability. It is very important to find your break-even point and accordingly set your expense budget otherwise you may fall short and accumulate debt.
Taxes and unexpected expenses prove to be a burden if you’re not already prepared for them. Set aside money for this purpose, if possible. If you withhold a third of your income in a separate account, you won’t face any unpleasant surprises or a penalty for paying a lump sum later. Remember to deduct business expenses whenever possible. Keep track of new equipment you purchase, make big purchases before the end of the calendar year, if possible, and keep your receipts for every purchase.
Avoid Common Financial Mistakes
No lawyer wants to learn financial lessons the hard way, but small and struggling law practices are especially vulnerable to the consequences of poor financial decisions.
If you don’t record all billable time at a rate that reflects your experience, you’re giving away your services for free. Keep track of every call you take, write down your tasks as you complete them, and don’t slash rates for loyal clients or less productive sessions.
Learn to switch to a paperless office not only to save cost of hard copies but also to avoid the filing cabinets taking up valuable space, as also avoiding documents getting lost, and thus saving on your energy and maintenance costs. However, wherever necessary, charge your clients for the paper and printing costs and minimize your own expenses.
Use your support staff efficiently; don’t waste your valuable time completing tasks that the support staff can do, and never ask your skilled and senior staff to complete tasks below their pay grade.
Remember, time is money. So, take control over your office hours by enforcing no-interruption hours and asking the staff to brainstorm solutions before coming to you with problems.
Don’t settle for uncooperative clients; instead invest your time on clients who pay on time, cooperate, promote your firm by word of mouth, and cause you little stress.
From destructive viruses and data breaches to inexperienced IT consultants and inefficient computers, technology problems could cost you a fortune. So, invest in newer operating systems, new and reliable hardware, onsite warranties, data backup services, and IT staff with legal experience.
Don’t underestimate the psychological impact of financial setbacks. If you make an effort to avoid common mistakes, and choose your clients and cases carefully, you will be able to focus on doing the best job you can.