All Our Tips
Cash Flow Reports – Part 5: Unbilled Disbursements
Where are the money pits in your practice? One of the biggest is called: “Unbilled Disbursements” These disbursements represent expenditures on behalf of clients that you expect will be recovered in due course. Of course, therein lie the assumptions: that you will be able to bill for them and you will be able to recover them in time. But there is a quote of Ayn Rand that is appropriate here:
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.
Yes you need to expend funds on files you are handling. But don’t forget that you are the driver in terms of managing these funds. Drive these disbursements recklessly and you can end up a wreck and in financial ruin. Accordingly, our next cash flow report that you should be generating and reviewing is:
#5 – Unbilled Disbursements
These disbursements represent credit that you have extended to your clients and therefore, capital that is unavailable for you to operate your practice. You have taken operating capital – funds required to pay rent, cellular phone service and wages – and invested them into client files. Problem is – there is no fixed time within which to recover these expenses. And no return other than a straight recovery. So you are losing money each day they are outstanding.
Therefore: whenever possible, bill these immediately in order to recapture this operating cash for your firm. Even better: ask for trust retainers up front that can be used to pay these disbursements quickly and easily when you render a bill for these disbursements. This way you are not the person who ends up financing your client’s files!
Disbursements can be one of the biggest components of total firm debt, particularly in litigation practices. As we all know, accumulated debt can sink even the largest ship. Keep in mind that total debt as a percentage of net fixed assets = 50-80% (hopefully you place on the lower end of this scale).
By keeping down the client disbursements, you reduce the overall debt that your firm is carrying – thereby giving you greater resiliency in troubled economic times.
Pop Culture References for Legal Research
I posted at Slaw about my need for pop culture references for legal research training for law students. When I tweeted about my post Sarah Glassmeyer responded with the wiki I’ve got a hit. Wow!
A wiki describing video clips, songs and print illustrations from pop culture that can be used in class to demonstrate research techniques or legal concepts
What? Why? What?
Three excellent questions, to paraphrase Buffy. When preparing for class, we’ve all occasionally found ourselves wanting to throw in a little something which illustrates that lecture’s core concept — a brief example that will stick in the students’ minds or relieve the monotony of a 75-minute lecture. But trying to find the right one isn’t always easy. Then again, our own law professors did it; our colleagues do it from time to time too. Why not harness the hive mind and ask everyone to contribute ideas?
Way to go Deborah Schander and the law librarians at Georgia State University.
To illustrate how groovy this site is, follow the navigator in the right panel to Mandatory versus Persuasive Authority and check out the Good Will Hunting clip regarding a legal argument using Common Law.
Use an Email Message as a Reminder for Small Tasks
Through the course of the day, you will find many smaller tasks coming to your attention. They can come from many sources – perhaps you all of a sudden remembered something you wanted or needed to do, and more often than not, someone else will ask you to do something.
You can’t suddenly drop what you are doing every time one of these tasks comes up – you would never get anything done. But you need to make sure you capture a reminder of these tasks so you can complete them.
Here is a simple way you can do this: Open a new e-mail message when a small task comes to your attention. Type a short descriptive blurb in the subject line, and, if required, type more details in the subject line. This leaves you will a visual reminder of that task in your email program.
When you come back to your e-mail program through the course of the day you will get a helpful reminder of the task. Hopefully you can get it done at some point during the day.
However, if the task remains undone at the end of the day, simplly save the message in your Drafts folder so you have a reminder tomorrow. You can do this by closing the message (Click on the X to close it out.) and clicking on “Yes” on the request to save to your drafts folder.
When you start your email program the following day, you will have a detailed reminder of the task in your Drafts folder. Use this trick to make sure you capture smaller tasks. This technique is for capture smaller tasks that will take a few minutes or less. Tasks that take longer should be on your formal to do list.
Cash Flow Reports – Part 4
Johann Wolfgang von Goethe once said: “Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.”
There is an old adage that time equals money. But unbilled time doesn’t equal money until it is billed and collected. Accordingly, our cash flow report #4 in this series of posts is: Work In Progress: Is your WIP increasing or decreasing?
What does your WIP report say about time that you have banked? Is it trending larger or smaller or staying about the same? If your WIP is increasing, is it due to time being put into contingency files that have the potential of paying off at some point in the future? Or is it building because you have not been billing regularly? One of the signs of a lawyer in trouble is their burgeoning unbilled WIP. They come into the office and log time – but there is no real value in that time and they know the reaction that they will get from clients if they try to collect. So it builds…
Accordingly, on files that can be billed monthly, you are doing yourself a disservice (and potentially digging yourself into a financial hole) if you fail to bill for the work done. By way of a benchmark, your WIP over 180 days as a percentage of your Total WIP should be within 20 to 40%. Any more than that and the value of your WIP is diminishing since it loses value over time.
Follow Goethe’s advice and take care of your (unbilled) time as you would of your unspent money.
Run-on Sentences
I was reading the proclamation for beginning the 1st Session of the 28th Legislature recently, which made my mind turn to run-on sentences. The Proclamation reads in part:
WHEREAS it is deemed expedient for certain causes and considerations to convene the Legislative Assembly of Our Province of Alberta for the First Session of the Twenty eighth Legislature, WE DO WILL that you and each of you, and all others in this behalf interested, on Wednesday, the 23rd day of May 2012, at the hour of 1:30 in the afternoon, at Our City of Edmonton, personally be and appear, for the despatch of business, to treat, act, do and conclude upon those things which, in the Legislature of Our Province of Alberta, by the Common Council of Our said Province, may, by the favour of God, be ordained.
The the Microsoft Word 2010 grammar default settings pass the above paragraph with no problems. A revision to the Proofing Options (found under the File tab – also called the Backstage View) tells me that this is a Long Sentence and I should consider revising it.
There are fee for service sites, like Grammarly.com that will automate proofreading. Anyone using tools like these to improve your legal research output?
Use Google as a Dictionary to Look Up Word Definitions
Some of us will have fond memories of grabbing a traditional book dictionary to look up the definition of a word. In grade school we had a smaller dictionary with big print and the occasional picture. Somewhere in most of our homes you will be able to find a big dictionary with lots of pages of very small print and no pictures.
In all likelihood, our personal dictionaries are all gathering dust. Why? There is no longer a need to go and grab a dictionary of the shelf to look up the definition of a word. Simply go to Google and type the word define, a space, and the word you want the definition for. Google will work its magic and give you a search results screen with a definition at the top, and links to various online dictionary sites further definitions.
Remember to go to Google next time you need look up the definition of a word.
Cash Flow Reports – Part 3
Edward Gibbon once said: “I am indeed rich, since my income is superior to my expenses, and my expense is equal to my wishes.”
In our prior posts we have looked at income projections from a couple of different perspectives. This third post in our Cash Flow series starts to look at expenses in a bit more detail.
You can have billings (and fee collections) that exceed your wildest dreams, but if your expenses exceed your fee collections, you will be in financial trouble.
Accordingly, our tip this week is as follows:
#3 – Compare your Actual versus your Budgeted Costs:
What are your actual expenses compared to your budget? This will tell you whether you are managing to run your office within the financial constraints that you anticipated.
If your costs are high compared to your budgeted amounts, then you must cut other costs to compensate, or increase your collected billings in order to have a balanced income statement. For immediate impact, look at controlling your costs before trying to increase your income, as cost cuts take effect immediately, but income is subject to the collection ‘lag.’ This is often difficult, however, because salaries and real estate/rental costs are usually a firm’s largest expenses, and they are difficult to cut quickly.
In fact for most law practices the actual amount of expenses that can be cut quickly are often quite small in comparison to the overall budget. This is partly due to the fact that a law office must enter into long-term commitments such as rent (for office space, copiers and other equipment), communication expenses (internet, cellular and telephone), salaries and the like in order to stay in business. In our experience, law firms delay paying existing expenses if things get tough. However, that will result in longer-term damage to your reputation if it continues.
If your actual costs are higher than your budgeted amounts, you need to do some investigative work. Are your expenses higher due to increased client disbursements? If so, perhaps you can bill out the disbursements and/or ask for retainer funds to be able to cover these expenses. Are office overhead costs higher than anticipated? If so, where can you reduce your expenses? Can you bring in another lawyer to help share expenses? While we advocate cutting staff only as a last-ditch step, can you move to using contract employees that you only pay for when you need them?
When it comes to cash flow, managing your expenses can be just as important as managing your work.
Annotated Acts
One extremely useful type of source for legal research is an annotated act. An annotated act looks at a piece of legislation and consolidates the interpretation of that section by section and sometimes they include expert commentary.
Annotated acts are not available for every piece of legislation, but when they are available, it is a great place to start. Most annotated acts are only available in print – some exceptions being the Canada Business Corporations Act and the Criminal Code. Check your local bar association, courthouse or law society library for annotated acts.
Sorry to all the students who have asked me for an annotated Alberta Insurance Act over the years. The only annotation of insurance legislation is Ontario specific.
Any authors out there?
Cash Flow Reports – Part 2
This is the second in a series of ten tips dealing with cash flow reports and cash flow management.
Gregory Nunn once said: “Never underestimate the value of cold cash.”
While our first cash flow management tip looked at comparing your actual billings as measured against your projected monthly billings, this week we are taking things one step further in terms of looking at how well you are doing in terms of collecting your billings as measured against your projected cash needs.
Accordingly, our second cash flow report that you should be generating from your accounting system is:
#2 – Projected billings versus cash flow needs:
Here you are comparing your collected billings to your budgeted cash flow needs for the month. This tells you if you will be in a projected positive or negative cash balance for the month. In a perfect world you would be bringing in at least enough cash to meet your projected expenditures for the month, but we all know that we don’t live in a perfect world.
While you can survive a short-term shortage in cash (often by borrowing or holding off on certain expenses), over the long haul you have to bring in sufficient cash to meet all your expenses and then some to stay afloat.
What is often surprising to lawyers is that you can actually ‘grow’ yourself into a cash shortage. How does that work you ask? Studies have indicated that you will have approximately a 105 day ‘lag’ between the date you incur an expense and the day you recoup that expense from your client. If you are busy opening new files for clients and incurring expenses on their behalf, you may find that the funds you are investing in these new files are not available to meet your overhead expenses. You are actually growing yourself into a cash shortage!
It is vitally important to keep a handle on your potential cash deficit by always looking at your collections as compared to your budgeted or projected cash needs. In this way you can start to take action – early – to avoid a ‘cash crunch’ rather than facing it at the end of the month – when salaries and rent are due. When it comes time to paying the bills, never underestimate the value of cold hard cash.
United Nations Documents
Today’s Tip: Monitor UN documents with RSS
Since I last looked, the United Nations Documents site has a new look and feel. For what the site is trying to deliver, it feels very browsable.
One new (to me) feature is the ability to have an e-Subscription.
At the UN’s e-Subscription page you are now able to select what documents you want to receive by email or RSS feed. Available documents include the UN Journal, as well as documents from the General Assembly, Security Council, Human Rights Council, Economic and Social Council and others.
Watch for those little RSS symbols.
