By Dennis Hung • January 02, 2019•Careers, Firms and the Private Sector
Running a successful law firm requires you to attract and retain clients as well as to provide exceptional service on a consistent basis. More than that, you need to properly manage your law firm’s budget and finances so that you regularly operate in the black. Unfortunately, there are several expenses that are common in law firm operations and that may be easy to overlook. As you review and update your law firm’s budget, consider if these commonly-overlooked expenses may need to be incorporated in your firm's financial plan.
Equipment Repairs and Replacements
A typical law firm has many types of equipment, and all equipment will eventually require repair work or a full replacement. This commonly includes a copier, computers, a server, a printer and other office equipment. If you own the building you are in or if your lease places the burden of repair costs on you, you may also need to account for repairs and replacements for the HVAC system, the hot water heater and other property-related features. You may also pay for warranty premiums or service plans, and these expenses may not yet be listed in your firm's budget.
Software Programs and Application Subscriptions
While you and your team may use some free applications and programs from time to time, there may be many applications that require a subscription. In some cases, you may need to pay a per-user fee on a monthly basis. These subscription fees can add up to a sizable amount of money and must be accounted for financially. In addition, your project accounting software and other similar types of programs may need to be updated or replaced regularly. Each of these updates or replacements could cost hundreds of dollars or more, so this can take a toll on finances as well. If you fail to account for these expenses in your budget, you may find your numbers constantly being off, and you may even potentially operate in the red as a result of the oversight.
While many lawyers spend a considerable amount of their time in the office each day, travel is understandably a part of the job as well. Even if this travel mostly consists of traveling to clients’ locations and to the courthouse, business travel expenses can mount. Fuel, commercial auto insurance premiums and deductibles, employee travel expense reimbursements and other related expenses should be included in your law firm's budget. Remember to keep receipts and invoices for these expenses so that you can include them in your business tax filing and reduce your overall tax liability.
Your law firm’s budget understandably includes employee expenses, such as salary, paid insurance premiums, retirement benefits and more. However, in-house labor may not be the only type of labor that you use. For example, you may hire a contract IT to provide services on an as-needed basis. Researchers, temps, financial planners and others may also be hired on a contract basis. Consider if you currently use contract labor for any purpose regardless of how minor it may seem or if this expense may have a place on your budget going forward.
Identifying all expenses that your business may have in the weeks and months ahead is critical to proper financial management. Even seemingly small or unimportant expenses must be accounted for in order for your budget to be correct. As you update your law firm’s budget, assess whether these or other expenses that you have not yet accounted for may need to be added to the budget. Then, for all line items on the budget, review the cost estimate to ensure that it is realistic. By taking these steps, you can prepare a more precise business business budget to guide your financial decisions in the future.