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With the end of the financial year fast approaching, taking stock of your law firm’s finances is critical for setting up your practice for financial success. By setting aside time before July 1 rolls around to methodically review your records, close on outstanding receivables and budget for the year ahead, you’ll give your firm a competitive edge and make planning for the coming year that much easier.
Prepare and plan for the upcoming financial year
Assess your firm’s financial health and performance
Assessing the financial health and performance of your law firm at the end of financial year is crucial for helping make informed decisions and ensuring long-term success. Through conducting a comprehensive analysis of your financials, you are able to better understand your law firm’s current financial position. Key performance indicators such as revenue per lawyer, profitability by practice area and client retention rates can provide valuable insights into the firm’s operational efficiency and revenue-generating capabilities. Benchmarking against industry standards and competitors can also offer perspective on your firm’s relative performance.
Develop your budget
Developing a solid budget for the new financial year is beneficial for law firms to effectively manage resources and plan for growth for the upcoming year. Once you have a clear understanding of your financial standing from the previous year, you can set realistic revenue targets and allocate resources accordingly. It’s essential to factor in potential changes in overhead costs, such as rent, utilities and staffing, as well as any planned investments in technology or marketing initiatives. Additionally, incorporating a contingency fund for unexpected expenses can help mitigate any financial risks for your firm.
Plan for optimising your cash flow
Planning to optimise cash flow for the upcoming financial year is essential for the financial health and stability of your law firm to help develop realistic revenue projections and implement strategies to accelerate cash inflows. This may include encouraging prompt payment from clients and simultaneously streamlining your accounts receivable processes to minimise delays in receiving payments from clients.
On the expense side, you can plan to negotiate favourable payment terms with vendors and suppliers to optimise cash outflows. Planning for regular cash flow forecasting and monitoring throughout the year can also allow your law firm to proactively identify cash flow gaps and take corrective actions as needed, ensuring sufficient liquidity.
Review and refresh your understanding of your trust accounts and trust accounting obligations
Meeting your trust accounting obligations is a key responsibility not just as a lawyer, but also as a business owner. At the end of the financial year, you must reconcile your trust account records, ensuring that client funds are appropriately managed and accounted for. If you are using Clio as your legal practice management software for your firm, the trust accounting process is straightforward and easy to complete. Clio is proudly certified in trust accounting by the Law Society of New South Wales. This significant achievement reflects the company’s commitment to providing legal technology solutions that meet the highest industry standards set by the Law Society, including robust accounting practices and strict internal controls. It also demonstrates to potential clients that law firms utilising Clio prioritise security and compliance. Firms can readily maintain compliance with the state’s trust accounting laws and regulations while also reducing the risk of errors that could have legal and financial consequences.
Assessing technology needs and vendors
Assessing technology needs is a critical step for law firms looking to modernise their operations and stay competitive. Firms should conduct an evaluation of their current processes and identify areas where technology can improve efficiency, enhance client service and streamline workflows to ultimately set themselves up for success this financial year. This may include identifying pain points in time tracking, billing, client communication and collaboration among legal teams. Once your firm’s technology needs are identified, firms can begin evaluating potential vendors based on factors such as the comprehensiveness of their solutions, ease of integration with existing systems, scalability, security features, user-friendliness and cost-effectiveness.
It’s essential to conduct thorough research, request demos and engage in discussions with vendors to ensure that their offerings align with your firm’s specific requirements and long-term strategic objectives. Law firms can leverage technology as a strategic asset to drive growth, improve efficiency and deliver exceptional client experiences.
With Clio’s legal software, firms can get access to secure, reliable and scalable software that can:
- Streamline your billing
- Integrate with your most used apps
- Provide matter management
- Time and expense recording
- Cost efficient plans that suit your firm’s needs
- Client collaboration
- Trust accounting
and much more!
You can prepare for the new tax year with ease with Clio’s 10% EOFY offer* by signing up before June 30, 2024. Join the many Australian law films making the switch to Clio today – the #1 legal platform trusted by over 150,000 legal professionals worldwide!
*T&Cs apply.
We published this blog post in May 2024. Last updated: .
