In March 2004, the United States Senate passed Resolution 316 proclaiming April “National Financial Literacy Month.” The idea is to bring focus to personal and business finances and recognize where there are lapses in current and future financial planning.
When an attorney opts to open a solo practice, he or she is essentially opening a small business. For advice and perspective on establishing a law firm, we turned to LRIS Business and Real Estate panel member, attorney Eric Toscano.
Emmy Pasternak (EP): When an attorney decides to open a solo practice, he or she is essentially opening a small business. What is the first thing that an attorney should do to get the business off on the right foot?
Eric Toscano (ET): Prepare a budget. Income projections may consist of very rough estimates until you have a sense of your practice areas and pricing. But rough estimates are better than no estimates. Expense projections should be fairly predictable with a bit of research.
EP: What are common financial mistakes attorneys make when opening a practice?
ET: Overspending. It is not necessary to spend thousands of dollars on brand design, website, and printing. I’ve always outsourced my design work overseas—most recently via 99Designs, which I highly recommend. Gotprint.com offers very competitive prices for high-quality printed materials, e.g., letterhead, business cards, and envelopes.
EP: What is something you wish you had done/known when you initially started your own practice?
ET: Starting your own practice actually requires a relatively modest capital outlay and very little cash. A new firm can be profitable in a month or two. If you have good credit and a solid business plan, consider funding your firm by opening a new credit card. Citi’s Simplicity Card offers 0% APR for the first 21 months, which equates to an interest-free business loan for nearly two years.
EP: To me “financial literacy” means having a good grasp of where you stand financially (debts, assets, etc.) and where you would like to be financially in 5 years, 10 years, and eventually, in retirement. What does it mean to you?
ET: Good organization and planning. For a new law firm, if you can project revenue one month, three months, and six months out, you can take steps to achieve your business goals and not find yourself scrambling to make ends meet every month.
EP: What are resources that you looked to, or continue to look to, when dealing with the finances of running your own practice and advising clients?
ET: A good CPA/accountant is critical. QuickBooks allows for budgeting and powerful reporting. Clio is excellent for law practice management and invoicing. LawPay is the best for accepting credit card payments and complies with California IOLTA accounting guidelines.
EP: Speaking of IOLTA guidelines, do you have any good practice management tips for maintaining client trust accounts?
ET: The state bar’s Handbook on Client Trust Accounting for California Attorneys is a must-read for attorneys unfamiliar with client trust accounting. Attorneys should reconcile their client trust account on at least a monthly basis.
No matter what you call it – literacy, capability, or awareness, comprehension of the whole financial picture prior to establishing a business is vital for the longevity and prosperity of the business – that is, your law firm.