Skip to main content

Law Firms/Cash Flow

As you're focused on your clients' cases, you may not always have time to keep the financial health of your law firm at the top of your mind.

How Law Firms Can Manage Cash Flow

Assess your cash flow at the present

For starters, you need to evaluate your current cash flow situation and assess what actions should be taken to optimize. Compare incoming revenue to current expenses. Look at recent and historical activity and identify patterns. Then, look toward the future.


Be sure to forecast cash flow to get a firm grasp on what you can expect in the near term as well as further down the line. This will help you prepare for forthcoming hurdles and unexpected late payments. You can generate reports specifically for this purpose with most modern accounting software.

Discussing fees and payment plans with clients

As you take on a new client, you will inevitably have the conversation about your fee. Discuss this in as much detail as possible so clients understand exactly what to expect. Also discuss payment options, including payment plans and how you would expect these to be handled by the client.

Automatic payments

It's a good idea to set up an automatic payment option for clients when it makes sense to do so. This will ensure payments are made on time and regularly without delays.

Stay on top of accounts receivable

You must keep a close eye on accounts receivable and ensure that late payments and non-payments are regularly followed up on. If you're having difficulty getting certain clients to pay you, follow-ups are a good time to discuss different payment options. Try to be flexible, but in a manner that is ultimately going to get you paid more quickly.

Always keep a cash reserve

Your firm should have a business savings account to be used specifically as a cash reserve. This will provide a pool of money to draw from to make up for any cash flow issues that arise. Contribute to the reserve on a regular basis to ensure it is adequate when the time comes to tap into it.

Know retainer balances and proceed accordingly

Jessica Gonifas, CPA, writes for Attorney at Law Magazine 1, "Do you ever get surprised by a client retainer running out? Bill your clients for additional retainer BEFORE they run out. Your #1 goal is to get paid in advance. You will have $0 in collection costs and write-offs this way."

Use an accountant

While having an accountant is an expense, and as a result, will have an impact on cash flow itself, using one may be a good idea as they can help you optimize your cash flow management practices and help ensure your business remains as healthy as possible.

Cash flow problems can damage even a profitable law firm. Don't let a lack of proper management hurt yours.


Learn about our Business Lending promotion today.

Business Lending

Learn More ›

Celebrating our 50th year of serving California

50th Anniversary

Learn More ›

Satisfied business owner.

Commercial Real Estate

Learn More ›