As a managing partner of a solo or small law firm, you know how important it is to effectively manage your resources. But simply creating a broad overhead budget isn’t enough. To manage your time and money meaningfully, you also need to establish—and manage—individual matter budgets.
Due to limited resources and the ever-growing pressure of competition from other firms, matter budgeting is of particular importance for small and solo law firms. By improving your matter budgeting process, you can optimize resource allocation and empower yourself to make more informed, effective decisions for your law firm. In addition to higher profits, you may also notice that more efficient internal workflows lead to heightened client satisfaction.
The power of planning
Effective matter budgeting for law firms can lead to improved cash flow, more thorough financial planning, and a well-protected profit margin. But “effective” is the keyword here. Without proper planning, your small or solo law firm’s matter budgets might not yield the results you’re hoping for. Take these steps to ensure you’re covering your bases.
Define your scope of work
Though it would be nice if matter budgets came in a convenient, one-size-fits-all package, not every legal matter needs the same resources.
Before you dive into individual matter budgets, take a 30,000-ft view of the matters you handle at your firm. Break down matters handled by your law firm into key categories. Then, you can assign varied matter budgets to each category based on their unique requirements. For instance, if you manage a family law firm, you might consider creating separate matter budgets for divorce cases, prenuptial agreements, and child custody cases.
It’s also worth considering how often your firm takes on each type of legal matter. Understanding the volume of different legal matters in a given month will help you better predict your firm’s revenue. In turn, you’ll increase the accuracy of—and adherence to—your matter budgets.
Compile your law firm’s costs
While small and solo firms tend to have smaller overhead costs than larger firms, accounting for all of your expenses is crucial to ensure that your matter budgets are sustainable.
In addition to keeping track of the usual costs of a legal case, such as court fees, you’ll also need to figure out the overhead costs of your firm. These predictable expenses tend to be the same month after month, and might include:
- Office or coworking space rent/lease
- Utilities
- Internet
- Software
- Bar association dues
- Professional service fees
- Marketing tools
- Website hosting
- Hardware purchases
- Travel expenses
Helpful hint: legal software like TimeSolv is extremely helpful for generating an in-depth report of your firm’s previous time and expense reports!
FREE Legal Billing Terms Cheat Sheet
Legal billing terms can be confusing.
TimeSolv has prepared a list of the most commonly used legal billing terms that lawyers use in routine. It's a must to have it in your pinned files, sticky notes, or however you carry your essentials while practicing.
Download our cheat sheet and get all the information you need!
Anticipate unexpected expenses
No one makes 100% accurate matter estimates 100% of the time. From expert witnesses who raise their rates at the last moment to higher-than-anticipated settlement costs, it’s impossible to predict every cost associated with a legal matter.
Don’t put your small or solo firm at unnecessary risk of losing money. Add a little breathing room to each matter budget to mitigate the impact of any costs that come up out of the blue.
Factor in your profit margin
Including a profit margin in every matter budget is crucial for the longevity and stability of your law firm. Be sure to add a percentage that represents your profit margin to every budget.
This not only guarantees that your firm collects fair compensation for its work but also creates the financial freedom necessary to plan for future scaling, venture into new practice areas, invest in new technology, or seek additional training for yourself or your team.
Don’t just set budgets—track them, too
The impact of your matter budgets is directly dependent on the consistency with which you follow them.
To avoid any surprises due to overspending, continuously monitor whether your team is compliant with your matter budgets. Yet, with so many other details to keep track of, it’s all too easy for attorneys to misjudge the amount of time or money they’re spending on a particular matter. And without accurate time and expense tracking, sticking to matter budgets can be a shot in the dark.
Integrating your time and expense tracking software with your accounting software makes the process even easier and gives you an up-to-date, full picture of how much your firm has spent overall. And with TimeSolv’s legal budgeting and project management tools, you can tell at a glance how your real-time spending on each individual matter compares to your goals.
TimeSolv sets up solo and small law firms for better matter budgeting
As a managing partner of a small law firm or solo attorney, your time is at a premium. In addition to serving your clients, a majority of administrative tasks fall on your shoulders.
TimeSolv offers features that streamline matter budgeting, making it easier for you to keep track of each individual matter’s expenses and progress—without pulling your time and mental energy away from other important tasks.
TimeSolv’s budgeting and matter estimate tools allow you to create budget limits and alerts for your attorneys. This prevents timekeepers from unknowingly exceeding the budgeted amount and fosters greater accountability around your firm’s valuable resources. By looking at an easy-to-read progress bar for each budget, you and your team will have a clear visual representation of how much time and money has already been spent, so all of your decisions about a legal matter can be as budget-friendly as possible. If an attorney does go over a matter budget, TimeSolv will automatically send a reminder.
In combination, these features save you time and help you manage your firm’s finances more effectively, so you can run your small or solo firm profitably and efficiently.
To learn more about how you can leverage TimeSolv to manage matter budgeting more effectively, download The TimeSolv Guide to Better Matter Budgeting or start your free trial of TimeSolv today.
FREE Legal Billing Terms Cheat Sheet
Legal billing terms can be confusing.
TimeSolv has prepared a list of the most commonly used legal billing terms that lawyers use in routine. It's a must to have it in your pinned files, sticky notes, or however you carry your essentials while practicing.
Download our cheat sheet and get all the information you need!
