You went to law school to become a master of law. However, being a good lawyer does not automatically translate into being a good business person or to being good with finances. Many solo attorneys use a CFO law firm professional to help them handle the business aspect of their legal practice.
Benefits of outsourcing your business management
Outsourced CFO law firm professionals bring a particular skill set to a law firm. A CFO is experienced in providing financial reporting, such as cash flow, balance sheets, profit and loss statements, and managerial reports. They are responsible for handling cash management and banking activities. Law firms can turn to an outsourced CFO to give them an objective opinion of financial opportunities and help them make decisions regarding capital allocation.
A CFO will assist a law firm in making data-driven decisions. Small firms and solo attorneys often face financial difficulties because their choices may be driven by emotion or guided by a limited view of their short-term and long-term financial situation.
A CFO is trained to allocate resources and handle project revenue. This is why a CFO is a must for any firm looking to grow.
How to know if your law firm needs outsourced help
Hiring an outsourced CFO will require an investment on the part of your firm. However, it is considerably less than the hundreds of thousands of dollars your firm would spend if they added an in-house CFO.
Knowing when is the right time to outsource a CFO is different for each firm. Suppose you are finding yourself asking your bookkeeper or accountant questions that they can’t answer or you are having a hard time understanding the advice of your tax preparer. In that case, this may be a sign that your business has reached a point where it needs additional assistance.
If you are looking to grow your firm or become aware that your firm is bleeding cash, you may need a CFO to help right the ship. With smaller firms, CFOs manage tax prep and bookkeeping, and they see to it that the day-to-day work is completed accurately.
Even if you have a good handle on your firm’s financials, you will not have the same insight into your firm’s fiscal situation as someone who solely focuses on that aspect of your firm. Working with a CFO frees up time to allow you and the other lawyers to focus on keeping clients happy and moving things to the next level of profitability. It lets you stop focusing on financial details and focus on decision-making and high-level management.
Things to consider before outsourcing a CFO
Before taking on any more expenditures, think about your cash flow. A CFO can make a significant difference if your firm makes a lot of money some months and then goes months with little or no payments. For example, you may work on a contingency fee plan that doesn’t get paid until the case is resolved. Or your clients may pay an upfront fee, but there are no payments until months or years later.
You want an outsourced CFO who can do more than think in terms of debits and credits. You want someone that has the mindset of an entrepreneur. They should be willing to learn the ins and outs of your law firm, including how your revenue is generated. A good CFO will have the ability to communicate with peers and partners in the firm, adding to the overall dynamic of your firm.
Fusion CPA offers a number of business and accounting services to get your business on track for mindful growth. Our team of CFOs is accounting, tax, software, and business advisory experts; and consult with you every step of the way. We take advantage of innovative technology and can help you stabilize your business finances. Learn more about our services today!
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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.