We are nearing the end of our discussion with regard to the fourth of the five areas that make up every business in the world. This fourth area is the area of “billing.” As you know, the other four areas are: “Clients” or “customers”; “Administration”; “Getting the work done”; and “Collecting.”

This week we will continue discussing the cumulative running year end reports we use in our office. They are as follows:

1. Cash Received on Account: This report takes just the cash received on an account verses the monthly expenses. I must admit this report is like the “mother lode” of all reports. It is simple, bottom line and really tells you everything you need to know on a “macro” basis. What this report does is set out on a yearly basis the amount of cash received on an account every month. It also shows you an annual total and a monthly average. At the bottom, it shows you a monthly average for those particular months over the history of your law firm. I am sure you won’t be surprised that I tell you that the months of January and February are usually our lowest months of the year. Our highest months on average have been July, August, and December. Again, I don’t think you will be surprised. Insurance companies want to settle cases in December so they can take unused reserved money and put it back into their cash reserves. Clients like to pay their bills at the end of the year to get as much deduction as they can for their businesses. Lawyers are usually interested in bringing in as much money as possible because that is how year end bonuses are paid and next year’s salaries are set. As they say, “the stars align” to make December usually your best month of the year. Correspondingly, that makes January and February difficult months. Recently I began asking my bookkeeper to assign numbers to the months in my cash received on account monthly and yearly history so I could see which months were in first place and which months during the year were in other places. So far this year, we have had five months that have been the best months we have ever had in those months. We have had three months that have been the second best months we have ever had, one month that was the third best month we ever had, one month that was the fourth best month we ever had and one month that was the sixth best month. I am sure you won’t be surprised to find out that the month that was the sixth best month we had this year coincided with my being out of the office for the whole month of June. One of the things you learn very quickly is that there is about a sixty day cycle where you are not doing a lot of billing in a particular month will show up approximately sixty days later. Ouch! Overall though, we are projected to have the best year our firm has ever had since 1993. Also, this report sets out monthly net expenses so you know every month what your expenses have been over the history of your firm as well as the monthly average and the percentage of your overhead. It also tells you what months have been your biggest overhead. Again, you will not be surprised to find out January and February are low months with regard to expenses, because there simply isn’t enough money to pay very much. In addition, you will find out you spend more money in December than any other month because usually you have more money to spend. Additionally, the overhead percentages are very good numbers to look at because they will tell you how much of your hard earned effort is going into paying the overhead just so you can make a living. Previously I have commented that if you can get your overhead percentage number under 50% you are in heaven. Again, you will not be surprised to find out that in years where you have more cash received on an account, you also have a tendency to spend more money, and therefore your overhead number goes up. I think the lowest that my overhead number has ever been since 1993 is 44.7%. That was in a year where we were going through some personnel transitions, so it is not surprising that in a year when our monthly net expenses were down was also in a year when our cash received on account was also down. I have never figured out a way over the years to insure that you have no personnel changes, the secret is to simply let the people go, and see if they can be replaced with somebody better. Luckily, I think that has always been the case with me. We have lost some very good people, but for some reason, we have been very lucky to replace those who have left with people who have been equally as good if not better. I think the fact that I am able to write this information about this report is indicative of how valuable it can be, because it certainly reminds you of your history and the verities of practicing law and the ups and downs of having to collect fees for your services!

2. Time Billed: Just like the monthly report, basically what this report does is simply set out the amount of hours that every attorney spends in billing for clients both in hourly and contingent fee cases on a yearly basis as opposed to a monthly basis. Again, it is very simple to see who is putting in the time. I have made the comment many, many times that “if you’ll just put in the time, the rest takes care of itself!” I find it incredibly ironic that those people who have put in the time over a twelve year period have been the most successful with regard to dollars and cents into the firm and therefore into their own pocket. How ironic! Not really! Simply stated, I think that the comment might be something like “effort equals dollars!” Several years ago I had a person tell me about a concept that I previously discussed that also can be applied here. The concept is “poor pitiful Pauline or poor pitiful Paul.” For some reason Pauline and Paul never seem to be able to get the job done. It is always somebody else’s fault that they are not making as much money as they need to make and that things are not going the way that they need to go. My suggestion is that you immediately let go from your employment any “poor pitiful Pauline’s” or “poor pitiful Paul’s.” Replace them immediately with people who are hungry, people who have a great attitude, and are willing to be trained, but most importantly, are not afraid of hard work! We keep these yearly statistics in terms of time billed, time worked, and total hours. We have this information for every year that our firm has been in existence. I find it very interesting that the more hours I put in, the more money I make. Not surprising! Obviously, you have to keep a balance and don’t forget your family and your personal life, but also don’t be afraid to put in the time that needs to be put in, in order to get the job done!

Next week we will finish talking about the cumulative reports that we use in our office.

Talk to you next week!

Jim Wirken is a civil trial attorney and the Chairman of the Board of The Wirken Law Group in Kansas City.