Picture a deserted island. No email, no phone, no client emergencies. Once a month, a boat pulls up with a note from your law firm that contains exactly three numbers. Those numbers have to settle one question: do you stay and enjoy the island, or get on the boat and go help your firm?
The Three Numbers That Tell the Story
In most scenarios, if you could only see three numbers about your firm's health each month, these are the ones to pick:
- Revenue. This shows whether money is coming in and whether the firm is growing, holding steady, or slowing down.
- Net profit. This is what remains after expenses, which matters because strong revenue means little if nothing is left over.
- Cash. This is what you have on hand to cover payroll and bills, and a profit on paper cannot do that.
Put simply, revenue is what came in, profit is what you kept, and cash is what you have. Together, they give a quick read on whether the firm is in good shape.
Personal Injury Firms Need Different Numbers
Revenue, profit, and cash make a solid starting point for many firms, but they are not the right three data points for every practice. The numbers that matter most depend on what drives your firm. A personal injury firm, for example, depends on a steady flow of new cases, so it needs to watch the front end of the pipeline long before revenue shows up.
Its list might look like this:
- New prospects. A steady flow of calls and inquiries tells you whether your marketing is working.
- New clients. This reveals how well your team turns those prospects into signed cases.
- Cash in the bank. Contingency cases can take a long time to pay out, so you need to know the firm can keep running in the meantime.
The point is that your three numbers should reflect what actually moves your firm forward.
Stay on the Island or Get on the Boat?
Once you have your three numbers, the decision is simple. If all three look good, go ahead and stay on the island and order another coconut. If one looks off, get on the boat, because your firm may need you.
Plenty of other figures deserve attention too, including collections, accounts receivable, billable hours, new matters, and realization rates. But a few well-chosen numbers can tell you quickly whether something needs your attention, long before it becomes a crisis.
Know Your Numbers Before You Need the Boat
Knowing which numbers matter is the first step. Pulling them together accurately every month is the harder part, and it’s easy to let it slide when you’re busy running a practice. Since 2011, CPN Legal has provided accounting and bookkeeping to more than 300 law firms, from solo practitioners to large partnerships with numerous staff members and high caseloads.
From our office in Cincinnati, our accountants, bookkeepers, and KPI specialists support clients nationwide with personalized strategies, so the figures you rely on are accurate and ready when you need them.
Here are a few of the services that help law firms keep a close eye on their numbers:
- KPI reporting. We help you identify and track the metrics that reflect what drives your firm, whether that’s revenue, profit, cash, or intake.
- QuickBooks integration. Connecting your accounting software to your firm’s workflow keeps your financial data organized and easier to trust.
- Clio bookkeeping consulting. If your firm runs on Clio, we help ensure your books and practice management data align.
- Payroll setup and processing. We handle the details, so your team gets paid accurately and on time.
Each of these comes with convenient onboarding and the ongoing support of our team, which means less time spent managing your firm’s finances and more time spent helping it excel.
If you want clear answers about your firm’s overall well-being, call (513) 463-1817 or contact us online to talk with our team. Whatever the boat delivers, you’ll know exactly what the numbers say and whether it’s time to stay put or sail back.