We are continuing to talk about the fourth area that makes up the five areas of every business in the world which is “billing.” You will remember the other four areas are: “Clients” or “customers”; “Administration”; “Getting the work done”; and “Collecting.

This week we are going to talk about a form we use in our office that is called a “Daily Cash Sheet.” By now, you will understand that since this form has the word “cash” in it, this must be one of my very favorite forms. I must admit there is absolutely no substitute for knowing where you are at from a cash point of view on a daily basis no matter what kind of business it is that you are running. If you are an entrepreneur at heart, you will want to know exactly where you are at so you can figure out where it is that you are going!

Many years ago I developed this “Daily Cash Sheet” so that I and all the other people that were helping me run the law firm would know where we were at on a daily basis with regard to all of the important financial information as it was necessary to make day-to-day decisions about the operation of the law firm.

The “Daily Cash Sheet” form is set out here in full.

As you can see, I broke the “Daily Cash Sheet” down into the five work days of each week for a given week out of the fifty-two weeks of the year. I further broke the sheet down into three parts:

1. Operating Account;

2. Trust Accounts; and

3. Fees and Expenses Received.

Today we will discuss the first of the three areas of the “Daily Cash Sheet.”

I. Operating Account: You can see from the form that the form is broken down into the five work days of the week. Additionally, the left hand column has in it:

1. Beginning Balance;

2. Draws;

3. Deposits;

4. Balance After Deposits;

5. Withdrawals; and

6. Ending Balances.

You can see that this will tell you exactly where you are starting and ending each day with regard to how much money you have in the bank. Let’s talk about each of these items in the left hand column one at a time. “Beginning Balance” is self-explanatory. “Draws means any monies you are drawing down on your line of credit. “Deposits” means total deposits for the month on the Operating Account. “Balance After Deposits” is also self-explanatory because you take the beginning balance, add to it any draws you have made on your line of credit, add to it the deposits and now what you have is a new balance before any withdrawals. “Withdrawals” are any checks you have written, and you can see that what we do is attach a copy of a disbursements ledger that comes off of our computerized check writing system, or it could come from a one right system or any other type of disbursements ledger that you have in your office. “Ending balance” is also self-explanatory because that is where it shows you where you are at the end of each day with regard to where you started, what you deposited, what you wrote checks for and what you ended up with.

You can also see that we have some other information available under the Operating Account section that we try to keep track of on a monthly basis. We try to show the “total deposits for the month on the Operating Account” so that is money that was received on account to differentiate it from money that may have been put in the account because you have received permission from the client to put the retainer in your general account. This “total deposits for the last month on the Operating Account received on Account” is your true income for the month. Likewise, having “total monthly expenditures” shows you exactly how much you spent that month and that you can do the quick math between what you have received on account and what you have spent to see where you are at on a given month with regard to being able to make a profit. The “month to date budget requirements” is the information you receive from your budget with regard to how much money you have actually budgeted on a pro-rata basis for the number of days in the month. Lastly, “monthly budget requirements” show the full amount of what you have budgeted for that given month.

Next week we are going to continue talking about the “Daily Cash Sheet.” I will comment about the “Trust Accounts” and “Fees and Expenses Received” portion of this form. I think you will continue to see how helpful it is to have an idea of exactly where your firm is every day from a cash point of view.

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.