Managing cash flow is one of the biggest problems many small business face and Solicitors are no exception.
Having enough funds to pay staff on time, pay yourself and expand the business can be very challenging when there isn’t enough cash to do so.
In many experience working with small and medium-sized law firms I have come up with a few of my own observations in managing ash flow. So here are my 7 Strategies to managing cash flow to ensure you meet your financial obligations
1. Budget, budget, budget. I know you have heard this a thousand times before but preparing a budget is key! Budgeting for income and expenses can help you to make better financial decisions in your business.
2. Compare variances. Compare your budgetary finances against your actuals. Prepare a cash flow forecast as this allows you to analyse where your income and expenses are being received and spent so you can make adjustments.
3. Implement a credit control system. If you have outstanding debts it is important to maintain an active debt collection service. Make financial arrangements for clients you are unable to pay your fees on time so you have regular income being paid to your account.
4. Keep your costs to a minimum. Cut down on unnecessary expenses to keep your cash flowing.
5. Invoice regularly. Once you completed work for your clients, bill more frequently. The sooner you invoice the sooner you can place in credit control and eventually be paid.
6. Review bank accounts daily. Online banking allows you to keep updated with the cash inflow and outflows.
7. Review your financial reports regularly. Being busy is good but it is no good if you are not reviewing your financial reports on a regular basis. Review your Profit and loss, Trial Balance reports and Outstanding bills reports at least weekly, most monthly to ensure you know where you are spending your money and receiving the same. This simple but effective task together with the above will give you the analysis you need to know.