Our Law Firm Client Already Had a Bookkeeper. Here’s Why They Came to ProfitWise.
By ProfitWise - a Visa Business Plans company
One of our law firm clients already had a bookkeeper when they came to ProfitWise.
The books were being reconciled, expenses were categorized, and the partners received financial statements. The problem was that they weren’t getting much use out of the information.
They could open the P&L and see how much the firm had earned and spent, but they wanted to understand what was happening behind those numbers and, more importantly, how they could use that information to run the firm.
That’s where our work with them started.
We Wanted the Books to Reflect How the Firm Actually Operates
Our first priority was making sure the bookkeeping gave us the level of detail we would need later.
A law firm has its own financial dynamics, so we wanted to clearly understand what the firm was spending on attorney and staff compensation, marketing and client acquisition, technology and case-management systems, outside professional services and the other costs associated with running and growing the practice.
Once the books were structured appropriately and consistently maintained, we could start comparing those expenses with revenue and looking at how the relationships between them were changing over time.
That’s when the financial statements became much more useful.
We Don’t Just Send the P&L
Every month, we meet one-on-one with our bookkeeping clients to review their financials.
With this law firm, that means we aren’t simply emailing a report and expecting the partners to interpret it themselves. We go through the numbers together, compare the results with previous periods and talk about anything that changed enough to deserve attention.
For example, we might see that revenue has increased substantially over the previous year, while profit hasn’t increased at nearly the same rate.
Now we have something to investigate.
Perhaps attorney payroll grew considerably as the firm added capacity. Marketing spending may also have increased as the partners invested more aggressively in bringing in new cases. At the same time, new software, subscriptions and other overhead may have gradually added another layer of expense.
Individually, each decision may make perfect sense. Looking at them together helps us understand why the additional revenue isn’t producing the increase in profit the partners expected.
Then the Partners Asked About Another Attorney
This is where knowing the firm’s books becomes particularly valuable.
The partners were considering another attorney because the firm was busy and the existing team was carrying a heavy workload.
We already understood how the firm’s revenue and expenses had been developing because we worked with those numbers every month. So instead of looking only at the proposed salary and deciding whether the firm could afford it, we could analyze what the hire would mean within the broader financial picture.
We considered the full cost of adding the position and how much additional revenue the firm would need to generate to support it. We could also look at how long it might realistically take for the new attorney to build a sufficient workload and what the firm’s finances could look like during that period.
The conversation was no longer simply about whether there was enough money in the bank to cover another salary.
It became a discussion about what the new attorney would need to contribute financially and whether the timing made sense for the firm.
This Is Why Specialized Bookkeeping Matters
Bookkeeping is the foundation of everything we were able to do with this client.
Without accurate, current financial information, we wouldn’t have had a reliable picture of how the firm was performing or how its cost structure had changed as it grew.
But we also believe business owners should be able to do something with that information.
That’s why our bookkeeping service includes monthly one-on-one meetings. We want our clients to understand their numbers, ask questions about what they’re seeing and recognize changes before they become much larger issues.
When a decision requires deeper analysis, as this firm’s hiring decision did, our Fractional CFO work allows us to take the same financial information and use it to model what could happen next.
For this law firm, the books had always told the partners what the business had done.
What they wanted was help understanding what those numbers meant for what they should consider doing next.
