Larry Chester: Turning Legal Work Into Real Cash Flow, Not Just Paper Profit

Voiceover: Welcome to the 1958 Lawyer, the show for attorneys who know the old model isn’t working anymore. The billable hour, the 12 hour day, the expensive office no one visits. Your host, Ron and Rebecca Bockstahler, are here to question all of that and more by exploring smarter, healthier, more flexible ways to run a law firm. No more burnout, no more outdated expectations, just real conversations with attorneys who are proving there’s a better way. If you’re ready to build a law firm that’s profitable and livable, you’re in the right place. Now, here are your hosts, Ron and Rebecca.

Ron Bockstahler: Welcome to the 1958 Lawyer, the podcast about the business of law. I’m your host, Ron Bockstahler, joined by my co-host, RB. A US bank study found that 82% of small business failures involve poor cash flow management. And here’s the part that should get every attorney’s attention: a lot of those businesses were profitable on paper right up to the end. Solo and small firm lawyers see a profit on the P and L, and still can’t explain why the account is empty when payroll hits. Today, we’re breaking down the profit trap with someone who’s spent his career inside it. Larry Chester, founder and president of CFO Simplified, Larry spent 25 years as a corporate CFO and manufacturing and service businesses before building a fractional CFO practice that helps law firms and privately held businesses improve profitability, strengthen cash flow, and in his words, understand the story behind the numbers. Larry, welcome to the show.

Larry Chester: Thanks very much, Ron. It’s great to be with you this morning. Same thing with you, RV. Great to be here.

Rebecca Bockstahler: Welcome. All

Ron Bockstahler: right, before we get to our first questions, I want to set the table for our listeners. The most dangerous financial statement in your firm might be the one that says you’re making money, because profit on paper doesn’t pay Friday’s payroll. With that, Larry, let’s start with you. You said the financial statements can tell an owner what happened, but a CFO’s job is the story behind the numbers. Give us the short version. What does a fractional CFO actually do, and who do you do it for? The job of

Larry Chester: fractional CFO is to make sense out of financial statements for the non-financial individual. Every software that I’ve ever seen prints up three primary financial statements, an income statement, a balance sheet, and a statement of cash flows, and the business owners that I talked to look at either one of them, or three of them, or none of them. The key is that the CFO is going to look at that inch, that financial statement, and explain what it means, so that the business owner can make decisions that make the business more profitable, that help cash flow, or that help the business owner make decisions based on the actual numbers of how the business is operating, rather than what they’re feeling in their own gut. Most entrepreneurs, when they start a business, make decisions based on their sense of what they think the market looks like, what they think their customers are saying, how they think their business is operating, and the reality is that those financial statements tell them what the truth is, and so understanding not just what the numbers are but what’s happening behind those numbers, so that you can make the decisions, because just knowing that your business did $100,000 of sales last month doesn’t necessarily tell you what you need to do to make more money or how much money you made out of that $100,000 of income that you had.

Rebecca Bockstahler: Well, that kind of brings us right into the title of the episode, which is, you know how to, okay? I just blanked on that, but anyway, let’s just get to my first question. Larry, how does a firm show a profit on a financial statement, or P and L, but still come up short when the payroll or rent is due? Walk us through where the cash might actually be going.

Larry Chester: So, a financial statement gives you a report of what happened during the prior month. It doesn’t necessarily tell you how much money you have in the bank. So what you need to do is understand what your expenses are when those expenses occur, and how much money you have when you have to pay those bills. So that’s why a cash flow forecast is always key, or having a large enough credit line that it doesn’t make any difference how much money you have in the bank, because you can always borrow to be able to cover it. I don’t think that’s necessarily the best idea either, but the reality is that there’s a big difference between profit and cash flow. Profit tells you the difference between your income and your expenses. Cash flow tells you how much money you have in the bank that you can use. I’ve seen businesses where they made a profit last year, but the profit was based on a number of things, and it may have been based on an increase in inventory. Or it may have been based on an increase in receivables. Well, an increase in receivables shows that you’ve invoiced people, but it doesn’t mean that you’ve collected the money. And so, until you collect that money, until you have that cash in your hands, that doesn’t – the income statement doesn’t tell you how much cash you have in your hands, all it tells you is what your profit was last month, and you know what they say, you can’t take a check, you can’t take your bank statement to the grocery store. Well, by the same token, you can’t take your bank statement to your employees and say, but look, there’s money right here, you know there needs to be money in the bank to be able to cover the checks that you’re issuing.

Rebecca Bockstahler: Yeah,

Ron Bockstahler: Larry, what are you some of the most common mistakes that you see in small businesses, and especially in small law firms? You know, what mistakes are they making more than any? Maybe there’s two or three that you’re seeing all the time.

Larry Chester: You know, I think the biggest mistake that people make is that they don’t really look at financial statements. They’re so busy being lawyers, all right, that and dealing with the clients because they know they have to bill those hours out on a regular basis. That they say, look, the bank knows how much money I’ve got, they’re doing the right thing. So they take a look at the bank statement and they say, well, the bank says that I’ve got $20,000 in the bank, so therefore I must be making money. Well, that’s what’s called running your business by checkbook. Okay, it doesn’t really tell you how much profitability you have, it just tells you how much cash you have in the bank today. So part of the issue is understanding where your expenses are going, what money you’re spending, what activities you’re spending money on, and when you’re collecting the money that you should be collecting, because the fact that you’ve invoiced people doesn’t necessarily mean they’re going to pay you, and one of the things, so the first mistake is looking at cash balance in your bank account, as opposed to your income statement, the second is not paying attention to your accounts receivable. One of the things that I know is that lawyers are very, very uneasy about calling their customers to say, you know, you owe me $375 you owe me $10,600 when are you going to pay it? That’s something that makes everybody nervous, any business owner, it makes any business owner nervous, but I think lawyers from a class of business seem to be more reticent to make those phone calls than other business owners I’ve worked with.

Ron Bockstahler: Hey, don’t, don’t be stealing next week’s show, it’s all about collections. We might have to have you back. We’ll flow

Rebecca Bockstahler: right into it. This is part one of two. Okay, more than happy

Larry Chester: to come back next week, and talk about conference people. Okay.

Rebecca Bockstahler: Well, let’s talk about reading the story behind the numbers. So, for the solo attorney doing their own QuickBooks, or maybe they’re leaning on a part-time bookkeeper, what should they be looking at every week that they probably are not looking at?

Larry Chester: Well, usually you’re going to get a financial statement on a monthly basis. Okay, so you’re going to be looking those things and looking at those numbers on a monthly basis. The income statement is going to give you a summary of things that happen, so it’s going to tell you what your gross sales are, it’s going to tell you maybe what your total marketing expenses were, it’s going to tell you what your total payroll is, it’s going to tell you what you’re paying for your internet fees and other things. The issue is to take a look at the report behind that and to say, okay, I’ve got this much that I’m spending for my overhead expenses, for rent, heat, utilities, you know, whatever the other things are, furniture, rental, leases, and those kinds of things, but the question is, Do you know what you’re spending for each one of those categories, so that you can see and track that on a monthly basis to see, is one of those expenses going out of whack. One of the things that I learned a long time ago was what’s called management by exception, you can take a look at your financial statement and take a look at the report on a month to month basis. In other words, take a look at six months or 12 months in a string on a single report and say, okay, marketing was $2,000 $2,000 $2,000 $5,500 Holy cow, what happened there? That’s what you need to take a look at to figure out what’s different, and how things have changed, not just in the category on the income statement, but the information behind it. What did you spend that extra $3,500 on? If you don’t remember, or if you’re not seeing it, you need to be able to look at the detail to understand that. Yeah,

Rebecca Bockstahler: that’s interesting. I feel like you have been listening to Ron and I talk, because we spent a lot of time talking about the exceptions,

Larry Chester: but that’s, but that’s truly a principle of running a company, is management by exception, because you can’t look at everything and dig into the detail of everything on your income statement or your balance sheet every month, you just don’t have the time, you’ve got a business to run and you’re going to take. Certain number of hours to look at your financial statements, but you need to be able to look at them quickly, and so it’s understanding what’s important and being able to take a look at that focus, or take a look at those numbers from a focused perspective, so that you get reports that not only tell you what’s going on but tell you the detail of what’s happening, because you can’t change a grand number, you can’t look at your at your credit card bill and say, gee, we spent $4,000 extra this month, we’re gonna have to spend less next month. Well, okay, but if you don’t know what you spent that $4,000 on, how can you change your spending pattern this month so that you’re spending less?

Ron Bockstahler: Yeah, it’s, it’s so.. I want to, you know, a model. We use a score card, so I’m curious, because we always talk about the three financial reports: P and L, balance sheet, and cash flow statement. But what else are you and say for a law firm, or would you recommend they also check? I mean, one example I know that I always look at is my client acquisition cost. Are there other things that you like to hit on to say, okay, we got to pay attention to these things that don’t show up on a traditional financial statement.

Larry Chester: I think certainly you’re looking at your monthly expenses that are not part of overhead but part of operating expenses. Okay, so things like marketing costs, things like temporary staffing. I know a lot of small law firms don’t have full-time staff that they’re working with on a regular basis, so rather than knowing that they’re going to spend, pick a number, $75,000 a year for an assistant, they’re spending a different amount on a monthly basis, because they’re being billed based on the activities that are being, they’re being done, so understanding what those variable expenses are is important, so that you can manage those expenses, and I think taking a look at profitability by a case by matter that the lawyer is working with, so that you understand what your revenue is for that one matter, but also understanding what the costs are that go along with it, because the fact that you spent 100 hours on it, and you’re billing out at $300 an hour, doesn’t mean that you made $30,000 All that means is you brought in $30,000 If I hope they paid their bill, they pay their bill, right? That’s that, that’s that story for next week, but the issue is the issue is if you’re dealing with expenses like that. How do those expenses fit in with the revenue, so that you can say, hey, look, I made money on this particular matter. I’ve seen law firms where there’s a particular lane of business they’re working in, you know, they want to be full service to their clients, so if something happens, they say, “Well, look, you know, I can take care of that for you. Well, all right. How many hours did you spend doing that? How much revenue did you get for it? And did you make money on it? Because I know, especially smaller law firms want to provide more services to the clients that they have, so that they become really a trusted advisor for those clients, and then they do something that, let’s say, they’re not as efficient at, they have to find more research for, they have to hire other people to help them get them information, and now the 1020, 30 hours they spent working on that. Certainly, they had revenue from it, but the costs that they have that are tied to that one particular matter are much greater than they were on the things that that particular attorney is very skilled at.

Ron Bockstahler: That’s interesting. So, I know Larry, you’ve got some great stories, and we want to hear about one. So, tell us, you know, no names, you guys name the clients. I understand that, but look, a company that looked profitable on paper, that was poor, a cash poor in reality. What did you find when you got inside the numbers, and how’d you fix it?

Larry Chester: So this is more true of like a manufacturing or distribution company than it is for law firms. I think law firms are much simpler because there are fewer moving parts, but that doesn’t mean that they shouldn’t spend time looking at their parts to make sure that all the numbers are in the right place, but I think the key is understanding what your costs are. So, I had a distributor of computer supplies that was a client of ours, and they were selling, especially at the start of the pandemic, they were selling computers like crazy, because everybody was working from home, and everybody needed a laptop or a computer to be able to connect to their system, and so they were selling all their stuff on Amazon, and they had written a little program that made sure that they were competitive on every price that they, every item that they were selling, because it compared what other similar items were selling across the board from other suppliers. The problem was that nobody ever checked the profitability of each one of those items, and working with Amazon, Amazon has a lot of add-on costs that relate to the operation of moving inventory, storage of inventory, you know, and things like that, and what we found when we. Dug into it was that more than 50% of the items they were selling, they were selling at a loss, because this program, this computer program that they had written, was pricing everything so that they were low seller and could sell the product, but it wasn’t comparing what they were spending to be able to either acquire or manage that product through the sale, so sales are not the ultimate, you know, the ultimate is profitability, and that’s one of those interesting things with it. Business owners, whether that be lawyers or any other kind of business, always brag about what their sales are and how much their sales are bigger than they were last year. Nobody ever talks to their friends and their cohorts about how much money they made in the bottom line, how much they put in their wallet. What they were doing is because they’re looking at revenue and they’re not really looking at what their costs are, and so I think even in any kind of a company, understanding what your costs are for every item that you’re selling, and, and to be honest with you, lawyers don’t think they have inventory, but they really do. The inventory is the hours they have available to sell, right?

Ron Bockstahler: Right. So, their

Larry Chester: inventory is volatile. I’ve talked to restaurant tours who have perishable inventory, you know, they have vegetables and meat and fish that’s going to spoil, so they have to sell it within a period of time. Well, a lawyer’s time is his only inventory, and that inventory is volatile. If I don’t use that 15 minutes right now to make money, I’m never going to get it back. I can’t reach back into the drawer and pull out the 15 minutes that I wasted and use it for something else. So, being productive in the amount of time that you’re using and tracking that, I think, is a very important thing.

Ron Bockstahler: So, in doing that, Larry, real quick, think about visit this zero cost sum game. I remember sitting on a board of a school where we had about 280 students, and we knew we can bring another 20 inside end of the year in without increasing our expenses, we do it at half cost, like, okay, we’re going to cut it. We just want to get those 20 in and say $12,000 versus $20,000 Now you’re a lawyer and you’re looking and you got a staff, you got associates on your staff, and you’re looking at them, then they build last three months 100 hours a week, a month, and they got 173 hours if they were working a 40 hour week, would you recommend at any level where you say, hey, sometimes you might want to find ways to discount and creative as a CFO coming in, is there a chance you might look at that and go, here’s a couple strategies, is that part of what you do?

Larry Chester: Yes, and I think that’s a little harder on law firms, or where you’re dealing with manpower hours, than it is where you have a significant overhead item. I had a company that was a manufacturer, and they did embroidery and silk screening, and there was a certain fixed cost of the leases of the machines, you know, and that type of thing. And so, during busy season, during the holidays, we brought in a second shift, because all we had was labor, that was the only cost we had. Now, if you have a law firm and you say, “Look, we’re really busy, I could have people working overtime to be able to handle these additional cases. Okay, hold on, those other hours are costing you money, and that overtime may be costing you more than what you’re getting for the additional business you’re bringing in, especially if you’re going to sit down and say, well, my normal rate is $300 an hour, but we’ll do this for $250 an hour, just that I can get the extra business in, and we’ll do it, we’ll do it, and get it, get it done, and make some extra money. Well, that associate that you were paying $100 an hour to, you know, now all of a sudden you’re paying them $150 an hour to that same work. Well, now your cost is significantly more, and you’ve dropped your rate and have more expense, you’ve got to take a look at that honestly and say, what are my true costs, what is my true revenue, and am I truly making money on that when it’s all said and done.

Ron Bockstahler: Yeah,

Rebecca Bockstahler: yeah. Well, what’s the biggest surprise you found when you’ve been working with law firms? That’s a trick question

Larry Chester: surprise. I’ve, well, you mean there’s only one I can say? No, we can say

Rebecca Bockstahler: it can be multiple.

Larry Chester: The I think the biggest, the biggest surprise to me is that lawyers, and excuse me for saying this, but every lawyer agrees with me. Lawyers are wonderful, serving clients and getting them the results that they need and working for them honestly and fully. Lawyers are terrible business people. Okay, and so the things that we’re talking about, about understanding what your costs are, so that you know how much money you’re making, knowing. Where your expenses are, and what, and what you can modify in your expenses to be able to make that money. Sitting down and making sure that you collect on the receivables, sending an invoice to somebody does not mean you’re getting money in your pocket. I’ve always said, you know, if you don’t collect something from somebody, if you don’t collect the money, what you’ve done is just given them charity, you’ve handed them something for free, and that’s, and if you want to do that, that’s great. I think it’s wonderful for lawyers to do pro bono work, but the reality is, if it shouldn’t be an accident, okay, it should be something you planned on, and, and the other thing is that there are a lot of lawyers I know who have gotten a dual specialty. There are also CPAs, and so they say, well, I don’t need somebody to do my bookkeeping, I don’t need somebody to do our accounting, I don’t need somebody to look at my books and tell me whether I’m making money or not, because I’m a CPA, or I have a CPA in my firm, and they look at our financials on a regular basis. Well, I’ll tell you, when a CPA, when an individual gets their CPA, what are they specializing in? They’re not specializing in operational finance, they’re specializing in tax and government reporting and those kinds of things. When we work with somebody, we’re looking at operational finance, we’re looking at what their expenses are, what they’re making money on, what expenses they could reduce, how they could expand the work that they’re doing to make more money. What are the things that are causing them to be not profitable or not as profitable as they could be? Those are the things that are important, and those are operationally based, and that’s something that a CPA, who’s working on a tax basis all the time, doing his taxes at the end of April, the end of July, at the end of the beginning of October, I mean, they’re used to filing taxes and looking at numbers that way, not looking at profitability as much, and that’s really where a CFO or a solid bookkeeping company changes things, and I think the third thing is making sure that your checkbook is balanced, that your bank account is balanced on a monthly basis. I mean, you can’t assume that the bank is doing it correctly, but the other side of it is you have to make sure that what’s happening in the bank is also showing up in your financial reporting, those two have to match, and that’s what a good bookkeeping company does, is make sure that your bank account and your bank transactions match with the expenses that are showing up and the revenue is showing up on your financial reporting, because if it isn’t, then you don’t know how much money you’re truly making, or you may be looking at your reports and getting an improper and inaccurate view of that, and how can you do any planning if your financial numbers aren’t telling you what the truth

Ron Bockstahler: is? Larry, give us like one or two minutes on checks and balances and fraud, and how do you prevent, I guess, fraud or theft within your.. yeah,

Larry Chester: I, you know, I think the.. the one thing I’ll say to you is, if you have an employee that’s been working with you for a long time, that is a good friend that is trustworthy to the nth degree, and you trust them no matter what. My caution is, don’t. All right, because every fraud that has ever been committed has not been committed by somebody who was not trustworthy, who was not on the confidant of the business owner, they’re they’re done by people who have said, well, you know, I need a little more money this month, or I didn’t get the raise I was supposed to get, so I’m going to take $100 out of the petty cash account just to be able to cover that extra grocery bill that I have, and I’ll put it back on Monday, all right. And then it’s $200 and then it’s writing a check to a friend for something more than what the actual cost was of doing the business. There are many different ways of committing fraud in any business, so the thing that I say is you have to have somebody different reconciling the bank account than you have issuing the checks. You have to, as a business owner, as the lawyer who is the managing partner of your business, you have to take a look at payroll every single pay period and say, did everybody get paid the amount they should have? Did everybody work and, and bill me for the number of hours that they actually spent doing the job? And is that payroll accurate? When you get a credit card, you need to take a look at those credit card expenses. I mean, you. You give your credit card to your associates, to your assistant, to your, to anybody who’s working in your office. Say, yeah, just put it on the credit card, don’t worry about it. And then you’ve got to take a look at that credit card bill when it comes to make sure that what else did you buy from Amazon? What else did you see? I mean, wait a minute, I, I didn’t put any miles on my car this this month. Why were there three gas fills at three different gas stations in Hinsdale? I don’t live anywhere near Hinsdale.

Ron Bockstahler: Why

Larry Chester: is the gas being purchased there? So, as a business owner, the minute you give information that’s access to your bank account, and it could be a credit card that’s access to your bank account. It’s not just your checking account that gives people access to your bank account. It could be automatic debits, it could be wires that are coming in or going out. You’ve got to know what all of those are. If you aren’t taking a look at your bank statement, if you aren’t double checking something on your bank statement and understanding what each one of those entries are, that’s a risk. I’m not saying there’s fraud, I’m saying it’s a risk. Okay, and so having somebody do too much, giving somebody too much access without that oversight is a risk, and it’s something everybody needs to be careful about.

Rebecca Bockstahler: Yeah,

Ron Bockstahler: we appreciate that. For attorneys getting off, they’re going off on their own this year. What’s the first two or three things that you’re going to put in, tell them to put in place from the cash side before they sign a lease or hire anybody? I

Larry Chester: think you’ve got to have a checking account that’s separate from your personal account, you have to have a business account. Yeah, but I’m just starting out. I don’t care. Take $100 and open up a bank account, open up a checking account. Keep your personal work, your personal financial work separate from your business financial work. Have a separate credit card for your business than you have for your personal stuff, you can say to me, yeah, but all my credit cards are, have my name on them, I don’t have a credit card made up to the Larry Chester Law Firm. Well, I understand that, but you have a credit card that you can say, this credit card is only for business. All right, this credit card is for my personal stuff, that’s how you can separate those two things. All right, and the third thing is have somebody do your bookkeeping on a prompt basis. every month. I can’t tell you how many people come to me and say, you know, we’ve grown, my business has grown over the last three years. Can you can you reconcile our bank account going back to 2021 Because we haven’t done that. I said, well, how have you filed your taxes? Well, I just give my bank statements to my accountant and he adds all of them up and he figures out what my income should be, what my taxes should be. I’m telling you, bad mistake. Not only don’t you understand what your profitability is, and what you’re making, but I’ll bet you dimes to donuts you’re paying more in taxes than you should, because your accountant is not understanding what all your expenses are, and what you’ve spent your money on, and I’ll bet there are other things that are being charged off or not being charged off that should be, so you’re paying more to Uncle Sam than you should, and you don’t have under any understanding what your profitability

Ron Bockstahler: is.

Rebecca Bockstahler: Yeah, well, here’s something that you alluded to earlier, and we might talk about again next week, but as you said, attorneys are famously bad at chasing their own invoices. So, what’s your practical fix for receivables discipline in a firm that’s maybe let’s say one to five attorneys.

Larry Chester: Okay, first of all, you don’t have the attorneys called to collect money. You never have in any business, you never have the salesman. All right, and the attorney is the salesman. Okay, you never have a salesman call a customer to say I need you to give me money, because you don’t ever want to be in a position where you, as the salesman, calls a customer and the customer doesn’t want to take your call because he knows that you’re going to be calling to ask for money, so always have somebody else make the phone call. The second thing is you want to make those calls on a regular basis. You don’t want to wait until somebody’s 90 days past due before you make that phone call. First of all, they’re not paying the bill because there’s something about an invoice that you sent out three months ago that they’re not happy about. They don’t even remember why anymore. Okay, they’ve moved on, and you call them and say, but wait a minute, you owe me $10,000 for the work that they did, and they, they’re going to tell you, well, I’m not happy with how that ended up, so what’s your answer as a lawyer to that problem? Your answer is to say, okay, so how about if I give you $2,000 off, will you bring. Get checked for $8,000 Well, I’ll write your check for $7,000 Okay, I’ll take it. I’ll take it, because $7,000 is better than nothing. All right, when you just took the profitability that you made on that $10,000 and you threw it out the window. Okay, so you’re doing collections after the fact, and you’re collecting as much as you can, just to be able to clear the air on it. Well, you’re throwing money out the window, and so you always have always call people quickly to make sure that they know that you’re watching it, and I’m not saying I’m not saying wait two weeks, wait a month. I’m saying if you don’t get a check within five days, make that phone call. Have your assistant, have your business, have your assistant, or your bookkeeper, or whoever it is, not you call and say, I just wanted to check and make sure you got our invoice number 1234 and just wanted to see when you’re having that set up for processing. There’s nothing dangerous about that, and it certainly isn’t going to make you feel bad calling. Just say, I just wanted to check and make sure you got it. I mean, strange things happen in the mail, right? I just want to make sure you got the invoice, and I just want to know when you have it set for payment, and you know something, if they turn to you and say we’ve got it set for payment in the first of next month, and this is the 10th of the month. Well, then you can say, oh gee, that’s great. Thank you for letting me know, or you can say, you know, I’d really appreciate it if you could process that a little more quickly. Is there a chance you could run that next week for us, I mean, one clerk talking to another clerk, there’s no risk there,

Rebecca Bockstahler: right. Very

Ron Bockstahler: true. Have you written, you’ve written that a bookkeeper, a controller, a CFO, and a CPA are four different jobs for a solo or small firm. Who does what, and when does a firm actually need a CFO level thinking, not just clean books,

Larry Chester: okay? A CPA is going to do your taxes, that’s what they’re focused on. Alright, a bookkeeper is going to keep your bank account straight, so that your books, your internal books, they usually QuickBooks or something else that doesn’t make any difference, your internal books are matching what the bank says. Alright, that’s important. The issue is, where are you getting your advice to explain to you what the financial statements are telling you? That’s allowing you to understand exactly what you’re making money on and what you’re not making money on, and so when you get to the point where you don’t have any understanding of what’s happening with your, with your financial statements, and whether you’re making money or not, in your, excuse me, in your firm, that’s the time that you really need to talk to somebody to give you more information. So, we’ve started a new program called the Kitchen Table CFO that really is for small businesses, where for a couple $1,000 a month, we’ll take a look at your financial statements and spend a couple of hours with you going over them and answering any questions you have, and that’s and part of that is taking a look at six months worth of income statements, so that we can give you a trend analysis and understand, and you can understand whether you’re doing better this week than you were last week, and remember you’re not figuring out whether you did better because you have more money in the checkbook than you had last month. All right, you’ve got to understand profitability, and so we would do a trend analysis to show you where your expenses are and where your income is, and how that all matches up, and I think you know, for $2,000 a month, that’s a really fairly inexpensive way of having a high-powered CFO give you the information you need and be able to answer the questions that you have that you need to be able to make decisions with, so that you can continue to be successful and grow your business.

Rebecca Bockstahler: Yeah, that’s fantastic. Well, last one, Larry, and I think this might be one that you told us you wanted. What can a firm do to make sure they stay on the right track, business-wise? And then, if the listener does exactly one thing this week, what should it be?

Larry Chester: I think if you do one thing this week, you should find somebody else to do your bookkeeping, if you’re not having somebody else doing your bookkeeping. I mean, seriously, I, I, I have attorneys that I work with, and I, I trust them, and they’re great attorneys, and I get a bill from them three months from now,

Rebecca Bockstahler: right?

Larry Chester: You know, you talk about cash flow problems, if you’re not billing your people, your clients on a regular basis, where’s your money coming from? Okay, I’m telling you, I don’t call my suppliers and say, ‘Hey, I didn’t get a bill from you this month or last month, when are you going to send it to me? If you’re not interested in me paying you, why should I be? Concert, all right. So, make sure that you have cash flowing through your business. That’s the one thing. So, if you’re not billing every week, that’s a big mistake. You should be billing every week. If you don’t have a software program that’s allowing you to track your hours, and you’re trying to track your hours on a sheet of paper, that’s a mistake, because the things that you did today, you’re not going to remember on Friday. I mean, today’s Thursday is today Thursday. Today’s Thursday, I have a hard time remembering what I’m going to do, you know, if I, if I sit down Friday night, or well, I’m going to do my billing over the weekend, and I sit down with my sheet of paper, or whatever, on Saturday or Sunday night after a whole long weekend of doing things, and saying, “Now, what did I do on Thursday, and how much time did I spend working on that? Well, I’m sorry, you’re not going to be accurate, and maybe you’re going to overcharge your clients, and they’ll get annoyed with you, maybe you’ll undercharge your clients, and you won’t make as much money as you should have made. So, I think tracking that, doing your invoicing promptly, having somebody do your bookkeeping for you, so that there’s somebody watching those numbers and working to collect your cash on a regular basis, that’s those are the three biggies.

Rebecca Bockstahler: Those are solid.

Ron Bockstahler: That’s all we have for today. Larry, thank you so much for making the difference between profit and cash so plain, and for showing us that numbers that actually tell the story, right? What happened?

Voiceover: Absolutely.

Ron Bockstahler: Let’s see, today’s.. if today’s conversation got you thinking about your own firm’s cash flow, which I hope it did. You know, take one idea from Larry, maybe two ideas he just gave you, and put it to work this week. You can find Larry and his team at CFO simplified.com He does have a landing page with a slash Amata on there. He is a preferred partner of Amata. We got him in the show notes. He’s going to have.. he’s got.. gosh, they got three links in the show notes to really help people, including some great stories. I think you’ve worked with so many clients that you’ve got some great stories out there to share. So, please go to the show notes and check Larry out once again. Larry, thanks for being on the show. We really, really appreciate having you.

Larry Chester: My pleasure. It was fun. Thanks very much. Thanks. Real

Ron Bockstahler: quick, our sponsorship, the 1958 lawyers, brought to you by Amata. For more than 30 years, Amata has helped law firms of all sizes do more with less, built on our five pillars: fractional support staff, virtual office options, office space, legal community, and a marketing support program. Whether you’re a solo practitioner just starting out, or an established firm looking to right-size your overhead, Amata gives you the infrastructure of a big firm without the big firm price tag. Learn [email protected] to model offices.com correction, learn more to model corp.com I should even know that stuff. All right, until next time, work on your firm, not Justin.

Voiceover: Thanks for listening to the 1958 lawyer. If you like the show, tell a friend, and please subscribe, rate, and review us on Apple, Spotify, or wherever you get your podcasts. If you’d like to hear more about Ron, Rebecca, or Amata, go to AmataOffices.com That’s AmataOffices.com All the links are also in the show notes.