Where do you REALLY make and lose money?

on 15 January, 2013 Email this Email this - Print this Print this

One of the benefits of keeping good financial records, is that you can really analyse your data and understand what is making your business tick. Periodically – it might be quarterly, or annually – at the calendar year end, or financial year end… it would benefit you to spend an afternoon to look at what is actually happening in your business.

Lisa Newton (CoreLegal founder member and founder of Boogles Ltd, the London-based specialist bookkeeping service for solicitors and barristers) offers her perspective on what can be the difference between profit and loss for  law firms.

Where are you actually making money?

You need to ask yourself this question. Try not to blindly go from one year to another without knowing the answer to this question. This is where recording data accurately really does help. Imagine you are an ‘employment lawyer’. Instead of recording all billable time as just ‘sales’ it’s more helpful to classify the sale more specifically. E.g. tribunal hearing, consulting, training/talks, employment contracts….  It is easy to ‘think’ that you’re making more sales in one area, without realising, that you’re actually spending more TIME in that area, but it doesn’t necessarily mean its profitable or useful time.

Its easy to be side-tracked.

We tend to like to do the jobs / tasks we like to do – but that doesn’t make them any more profitable. Once you’ve identified the areas which actually make you money – your job is then to increase the activity in this area, and find other income streams to add to your business.

The best thing about looking at an income & expenses statement, is that it will clearly show you, in black and white – what the list of income items are. Aside from those that are active streams (sales), there will be some passive streams (hopefully) – bank interest, maybe commissions received. Retainer income can also be a useful one to have on your income chart. Can you charge people to be their employment lawyer on a ‘retainer’ basis?

There are only 24 hours in a day, so the aim of the game, is to be able to charge for hours that you don’t actually have to physically work. This is where your business can make you money.

 

Stop the loss

The fastest way to make more money right now is to stop losing money! Most people in business are so focused and concentrated on sales and billing, that they’ve lost count and allowed their expenses to spiral out of control. Sometimes this will happen because we slip. We take our eye off the ball.. and the next thing we know… someone else is spending on our behalf (the secretary) and all sorts of things have turned up at the office or we don’t monitor the spend, and end up on direct debits and standing orders for a range of things that ‘seemed like a good idea at the time’ but eventually, just end up being expenses. And its at times like those that you need to just STOP. Spend a morning going through all the direct debits and standing orders on the account, and see if you recognise them all and whether they’re actually still needed. Sometimes, when a chunk of money comes in, people end up buying something equally as large and the money goes right back out the door again.Sometimes, (when times were bustling), you sign up to contracts that are 12, 24 or 36 months in length, which were easily affordable at the time of signing, but now that things have s lowed a bit, it’s a bit more tricky. So if you find yourself in this situation – don’t bury your head in the sand, but try and come to an arrangement. Cancel if you can. Its often the little, seemingly small monthly expenses which can mount up when combined and they just weigh down the business.

Fix your processes, and ensure money on account is coming in and that you run a regular (weekly) or fortnightly income and expense account – so that you can keep track that MORE is always coming in, than going out.

Often, small businesses get trapped,and realise that their fixed costs (money going out) is high, and fixed, whereas their income is variable and unstable, so they can’t effectively trust that there’ll be enough month-to-month. And this can become a huge source of stress and tension. If you find yourself in this situation, then get a grip on whats going out, and then work on finding a way to get a reliable (fixed) monthly amount coming in to you.

 

An impartial set of eyes on the numbers, such as those of a bookkeeper can be a huge help in these situations as they can alert you to where the business is heading.

Find out more about Boogles’ specialist bookkeeping services for solicitors at http://www.booglesltd.com/ or call 020 3371 8894


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Topics: bookkeeping · outsourcing · Professional opinion · reducing overheads · Uncategorized
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