Forecasting Is More Useful Than Budgeting in Most Law Firms

September 8

Most law firms take the time to prepare an annual budget. It is a common occurrence that this process becomes a spreadsheet exercise and is rarely any real part of any management decision making process. If fact, I have moved my clients to a process that looks more like forecasting.

Most law firm expenses are fixed and or predictable (salaries and rent) and very little is to be gained by focusing more attention on expenses. This not to say that expenses are not important, but it is to say it is easier to identify and fix cost issues.

What is not nearly as predictable is revenue, which often times is left to a spreadsheet that calculates hours, rates and some realization factor.


I prefer instead to employ a planning process that includes a firm financial plan, individual practice plans, and a priorities document that is sensitive to actual firm performance. This process is more evolutionary and not necessarily annual.


Finally, management reporting is an important part of the process. Recognizing that most time and billing systems contain numerous reports, and the fact that most partners have no time to read them, I have had better success by creating reports that partners naturally read. This has not been easy, and trying to balance out what they want to see with what they need to see has been a challenge. As I see it, however, that is an essential part of the financial managers job description.


A solid strategic planning process gives clear direction and goals. It illuminates the benefits of collaboration and shared opportunities, enhancing the likelihood that the culture itself will support productive behaviors. 


If any of these symptoms look familiar to your firm, a more effective strategic planning effort is recommended. PerformLaw can help you implement effective processes to help you avoid the frustrations and wasted time related to poorly planned initiatives.  The decision to bring in outside support to help manage a strategic planning process results in three primary advantages that include reduced time investment, additional expertise and insights, and objective feedback. Supporting your in-house management resources with outside help is also a good decision.