Working on accounting is my favorite thing to do, said very few lawyers. Lawyers are people of the word. We love words and books. Numbers, not so much, which is why I believe that every lawyer needs a financial team to rely upon for keeping the numbers straight and growing efficiently.
Your Financial Team
Yes, you are a lawyer capable of leaping tall opinions in a single bound. But you are not an accountant or bookkeeper (unless you happen to have that training from a past career). The time and energy that you put into keeping your accounts up-to-date are wasted. Why?
Let me ask you this- are you keeping up with the tax code? The new developments for small business owners in accounting? Do you regularly throw down a 1040EZ form, just because? If not, then you are not the most qualified person to handle the financial responsibilities for your law firm. You need help.
Specifically, you need three teammates: your bookkeeper, your accountant, and your wealth advisor
Curious about Profit First, the accounting system I use? Come to the Tutorial
You want to get in a relationship with an accountant from the very start of your law practice. She can help you figure out the best type of entity for your firm. For instance, my company is and an LLC with an S corporation election that helps me save money on taxes.
Here are a few more things you accountant can help you with that you might not have known:
-Give you advice about estimated tax payments
-Help you set up independent contractors properly
-Explain your financial reporting and what it means to your growth
-Deal with any past filing issues
-Do your taxes
Your accountant can help you grow by:
-Creating a business budget
-Giving you advice on timing big purchases
-Monitoring your cash flow for patterns
I like to say that your accountant helps you keep more of the money you make.As with all your teammates you
Your bookkeeper is your constant companion. You might talk to your accountant once or twice a year, especially around tax season. Your bookkeeper will be in contact with you on a monthly basis, helping to organize your books and create reports for you.
The best bookkeeper I’ve had before Billie Anne, my current bookkeeper, was Kathy Elefterakis. Amazingly patient, funny woman. She was very used to working with startup companies, which made her the perfect choice for me. Kathy didn’t bat an eye when I showed up with my box of receipts.
My training business had taken off and I was traveling a lot with very little time for minding the books. The first year I could manage it because it was a building year and my revenues weren’t that high. Next year, I landed a corporate client and bingo, I was in trouble with the accounting. That’s when I broke down and reached out for help.
Kathy set me up on Quickbooks and I had 3 accounts: checking, tax savings, and expenses.I routinely dropped one-third of any payment into the tax account and split the rest between checking and expenses. The system worked, kinda. I was terrible at reporting the numbers.
Now, thankfully, reporting and tracking are made easier with tools like DocHub, where the app pulls my data in from different sources and my bookkeeper has access to it. No more waiting for me.
All that goodness happened when I mpved to using the Profi First system of accounting. More on that later.
Your Wealth Advisor
Your wealth advisor helps you fund your dreams. Your bookkeeper manages your money on a day-to-day basis. Your accountant helps you keep more of that money instead of sending it to Uncle Sam. But your wealth advisor is there to help you achieve your real goals, the ones you’ve been working so hard for.
That big goal might be buying a house or a vacation home. Paying for college for your kids or funding your transition to a new law practice area. Whatever makes you happy.
It can feel intimidating to work with someone who wants to get all up in your money story. I know I didn’t like it one bit. However, I picked a wealth advisor who specifically works with people who have money issues. She saw my resistance, dealt with it without ever letting it slow down our progress. I have a wealth map that I can pull out to see how I’m doing and whether I’m on track. My dream is to leave each of my children a house.
Get a wealth advisor to help you plan for your future. You probably want to work with a fee-based professional. I find that I like knowing that their recommendation is not based on who is paying the better commission.
Selecting the Right Provider for you
Picking your financial team is similar to choosing a mate. It's part emotion, part practical considerations. Personally, I like to work with people who get and appreciate me the way I am.
With my team, I don't have to hide anything like before. They aren't bothered by the fact the numbers get me flummoxed or that I'm not very organized with receipts. I don't have to waste energy pretending to be what I am not. Instead, I chose a team who likes me the way I am and wants to take care of me. I'm pretty lucky and grateful for them.
Lawyers and doctors have intellectual smarts, but often have bad habits when it comes to financial smarts. Professionals tend to spend more money after years of being deprived by study and sacrifice. Look for a financial team who is accustomed to working with lawyers so they can spot issues and fix issues common to lawyers.
Make sure you like the tools your financial team uses. Otherwise, you will be less likely to follow through with them. Ask questions about what tools your teammates use to:
-Communicate with you
-Share data and updates
-Update you on compliance issues
My team and I communicate by email; share documents with HubDoc and Dropbox. I pay electronically, which makes life so much easier. Do you have a team? How easy are your systems? You can read about the other essential teammates your law practice needs here
Play by the rules
Now that you have the right teammates in the correct positions, you're ready to play the game of business. Or, are you?
You might not know what kind of accounting system your new team should use with your law practice. Understandable. I never could tell the difference with cash vs accrual accounting.
Profit First Tutorial
Have you heard of the book, Profit First: Transform your BUsiness from a Cash-Eating Monster to a Money Making Machine by Mike Michalowicz?
I discovered the book a few years ago. What I love about Mike is that he takes a relaxed approach to it all. You still get the information and the strategy, just without the high-brow language. It's enjoyable to read this book because Mike shares his personal stories, which normalizes accounting for me.
Finally, I'd found an accounting system that I could understand and follow. I was so impressed I hired two Profit First professionals to work with me (because there were still a few things I didn't get like the 6 accounts).
Profit First is the right system but it has a learning curve for sure. I want to make that easier for you.
On October 10 my financial team, Billie Anne and Wendy, my bookkeeper and accountant respectively, and I held a Q & A webinar for you to explain more about Profit First and how it can work for your law practice.
Don't miss this tutorial if you want to make more money, be more organized and stop stressing over the numbers.