We are headed into the second quarter of 2023, and hopefully your firm is off to a great start. But have you checked in with your bottom line lately? Can you forecast where you will end the year? Do you understand your firm income, expenses, profit and cash reserves? These are all important pieces to managing your firm finances. And there is no more powerful tool in your financial toolbelt than a budget.
A solid budget will help you track finances throughout the year, and help you know if and where you need to adjust expenses. But if the word “budget” overwhelms you, don’t fear. You aren’t alone. Think of a budget as a planning tool to use to watch your business grow and change your mindset. In our business, the firms we see using and reviewing their budgets are growing faster than those without one.
Here are five tips to help you create a budget and keep it relevant throughout the year. You have some homework with this blog. We’ll be checking back in a future blog post to see how everyone is doing.
Five Tips for a Solid Budget Plan
- Build your budget with tools you already have in place. Use your profit-and-loss data from the prior year as a launchpad to get yourself started. From there, include forecasted expenditures for larger capital assets and improvements, as well as projected costs for financed projects in the coming year. Don’t have a good starting point? A simple spreadsheet will also do the trick. There is a great free template in Google Sheets for an annual business budget.
- Be deliberate and decisive. When planning your budget, set aside time to be intentional and give thought to your budget process, but not so much time that your budget becomes outdated before it is put to use. Your budget can and should be updated as the year goes on to accommodate any changes in your circumstances.
- Update regularly to reflect your budget’s reality. Being realistic is a crucial part of setting the right goals for your firm. Your budget should show agility—not be set in stone. You should be reviewing your circumstances throughout the year and adjusting as needed to reflect economic, organizational, or other changes affecting your firm. You have to expect the unexpected, so give yourself room for adjustment and adaptation. Your business plan is a living document, your budget should be as well.
- Know your focus. Keep an eye on the big picture but be prepared to dial-in when necessary. Focus on the details where it matters, such as your regularly occurring operational expenses.
- Utilize your resources. Let the tools of QuickBooks and Excel bring efficiency to your budgeting process and monthly review. Once your budget is loaded into QuickBooks, a monthly report comparing your budgeted profit-and-loss to actual performance can easily become a standard monthly report.
Not getting monthly financial reports or not sure where to start? Give us a call at CPN Legal. We are here to help.
Here are a few additional resources on budgets to help get you started.
- Clio – Create a Budget
- ABA – 2022 Budgeting & Planning Report, part of the 2022 ABA TechReport
- Lawyerist – Budget Plan
Need help with your finances? CPN Legal’s team has 20+ experts ready to help. Contact Nicole Tedford at firstname.lastname@example.org.