Book ClubFinance

The Biggest Mistake Every Lawyer Makes About Finances

I like knowing my numbers. Now, I’m not talking about 1s, 2s, and 3s. I’m talking numbers like revenue, pretax profit percentage, and cost per acquisition. I want to know how every dollar comes in, what it took to get that dollar in, and, if it goes out, where it goes. Not only do the numbers fascinate me, knowing them gives me a strong sense of where my business is going. I don’t feel like I’m at the helm steering on a feeling.

Some folks get their financial numbers from a bookkeeper or accountant. If you do, that’s great! – so long as the numbers reported are the ones you want and not ones filtered through a particular lens. In many cases, numbers can be manipulated to support whatever we want to see. While it’s tempting to go down that path, we have to be careful that when it comes to our businesses, we know the honest truth.

Although I dig into my numbers both weekly and monthly, that’s not to say I love doing it. In school, I actively avoided high-level math classes with Olympic-level skill. Even in the first years of my business, I would lift one hand off my eyes just enough to peak at the one number that made me feel good and then quickly close them and proclaim, “The business is healthy!” even though I really had no idea whether that was true or not.

At the beginning of the year, however, I decided I needed to get serious. If I was going to be a business owner, I had to do it all – even the hard stuff. Even if the truth was ugly, I needed to know it was so I could start to make it better. So I dug in. I read books and learned what numbers were true indicators of my business’ health. It was scary, and I was nervous. I felt dumb when I had to read a paragraph six times because I wasn’t getting it, but I stuck with it. I put my ego aside and did the work. Fortunately, when I laid it all out, my numbers were too bad. They weren’t great, but they could have been a whole lot worse, considering my previous eyes-wide-shut approach.

Now that I have a clear and honest picture of my numbers and regularly look at them without outside influence, I can make smart, evidentiary decisions about things like hiring, expenses, and compensation. I’m don’t act on feeling anymore because I’ve got the numbers to back me up.

To actually track and report my business finances, I use two programs: Excel and Wave. The system is nothing fancy, but it gets the job done for me. There are many options for accounting and bookkeeping software with a wide range of features, including:

No matter what combination of software and third-party help you use, what’s most important is truly understanding the numbers. Read books; ask questions; go to seminars. Know what the bottom line really is, not just the shiny totals at the top.

When it’s your business on the line, you can’t afford to close your eyes and hope the ship will float, or better yet, sail.

This is not an ad. I do not endorse or receive compensation from any tools mentioned.

What process do you currently use to update and review your numbers? Do you feel like you have a full understanding of them? What would help you feel more in control?