ABA Journal.com recently posted this interesting article with 10 tips to recession-proof your law firm. Below are a few of the tips, but you can see the full list here.
1. CASH FLOW
Proper management of cash flow is critical. Take a good, hard look at your balance sheet. Draft a worst-case, 12-month cash flow scenario by assuming a drop in revenues of as much as 25 percent. Identify what changes you could implement and when, should the worst occur.
If you have an office administrator who handles budget management, consider the addition of monthly or quarterly status reports. Such reports can prevent a tardy reaction should there be a drop in your monthly financials.
And while the going is still good, try to put cash aside to build a financial safety net.
2. CREDIT
A good credit rating is crucial now, especially for solo practitioners, since personal credit is what banks normally look to when determining risk for an entrepreneur. Before your worst-case scenario occurs, it may be wise to consider increasing your line of credit. It’s better to approach a lender with a positive financial forecast than when your balance sheet reflects a recession.
3. ACCOUNTS RECEIVABLE
Keep an eye on someone whose debt to you is increasing. Before allowing a substantial debt to accrue, a diplomatic yet candid discussion can be beneficial.
Remember, if a client goes under and your cash flow is tight, that will adversely impact your compensation more than a one-time, frank discussion about timely payment. Instituting a retainer requirement for new clients is a good policy, and also useful for those with a history of delinquencies.
4. SPENDING
Discretionary items such as complimentary bagels and sodas are usually what most managers think to cut. Yet chipping away at the perks of the workday does little if your firm is nursing credit card debt or incurring unnecessary travel and operational expenses.