Rupert Sanders once said: “We just did the best we could with quite a limited budget, to be honest, and had a lot of success.” Rupert may not have been talking about a law firm budget, but his point is that you may be surprised at your success when you take the time to set out the expenses (and income) framework within which you plan to operate in the year.
This is a new year. A time to make positive resolutions to take you to your future. Part of building the bridge to your future is to outline your expected income and expenses for the next 12 months by building a Budget and then tracking your actual income and expenses against that budget.
The budget incorporates at least the following:
- Forecast for future financial performance – income and expenses, grouped by categories. Expenses can be both fixed (ie rent, salaries, leases) and variable (file disbursements that rise with the volume of work). Income can be determined by month and allows you to see any mismatches between income and expenses month by month that will have to be covered one way or another.
- Month by month – 12 months is the typical period, broken down month by month.
- Fudge factor 20% – it is a rule that expenses will *always* be higher than expected and incomes lower…so build in a fudge factor to give yourself some wriggle room.
- An excel spreadsheet incorporating the typical expenses in a solo and small firm by categories can be found at:
- Twelve-Month Law Practice Cash Flow Budget Worksheet
So start the New Year on the right foot and build a budget for your practice. You may just be pleasantly surprised at your success by the time the year end draws neigh.