Mid-Year Financial Health Check: Key Accounting Insights for Law Firms
- Accounting Girl
- Jul 31
- 4 min read
As we cross the midpoint of the year, law firms have a unique opportunity to assess their financial health and make adjustments that ensure a strong finish.
A mid-year financial health check offers law firms a chance to take stock of their reconciled books, stay ahead of Accounts Receivable (AR), and evaluate spending using budget-versus-actual comparisons. For many law firms, these essential elements of financial planning are easier said than done—but they are critical for compliance, financial growth, and peace of mind.
At Accounting Girl, we specialize in empowering law firms with tailored accounting solutions that simplify even the most complex financial processes. Whether it's trust account reconciliation, payroll management, or strategic financial planning, our expertise helps law firms thrive. Let us guide you through a few best practices for a mid-year financial check-up.
Reconciled Books: The Foundation of Financial Stability
Reconciling your books is not just a good-to-have—it’s mandatory for law firms, particularly when trust accounts are involved. As Abigail Seymour from Camino Law shared, the legal profession requires meticulous trust account reconciliation to comply with state audits.
Failure to have accurate books can result in legal penalties, loss of business credibility, and operational inefficiencies.
A mid-year review should include a full reconciliation of:
Trust Accounts: Ensure compliance with state and federal regulations. This is non-negotiable for law firms as audits can occur at any time.
Operating Accounts: Verify transactions, match balances, and identify discrepancies.
Expenses: Categorize and confirm all expenditures are accurately recorded.
Without reconciling these aspects, it’s impossible to gain an accurate financial picture or stay on top of tax obligations. The peace of mind reconciled books provide cannot be overstated, as they represent a firm financial baseline that sets the tone for future success.
At Accounting Girl, we take reconciliation even further by ensuring that trust and operating accounts align perfectly every month. If your books aren’t reconciled yet, now is the time to make them a priority.
Accounts Receivable: Don’t Let It Fall Behind
For any law firm, Accounts Receivable (AR) is the lifeblood of cash flow. By the middle of the year, AR can easily spiral out of control if systems and processes haven’t been put in place to efficiently manage payments. Law firms often encounter challenges such as:
Delayed or missing payments: Complex billing for legal services can confuse clients, resulting in late payments.
Mismanaged follow-ups: Without a structured system, overdue invoices can be overlooked or mishandled.
Cash flow issues: Missed payments can lead to difficulties covering payroll or operational costs.
Billing best practices tailored for law firms can significantly improve AR management. For example, sending clear invoices, automating follow-ups, and maintaining transparency with clients can optimize collection efforts. Read more about how Accounting Girl tackles billing to help law firms stay ahead of cash flow challenges.
At mid-year, law firms should analyze their outstanding invoices. Are there any clients who’ve yet to pay? Are follow-up processes proactive enough? Addressing these questions ensures AR remains manageable and cash flow stays consistent.
Budget vs. Actual: The Power of Financial Comparison
Have your firm’s predictions on income and expenses held true, or have they shifted significantly from your budget forecast? Reviewing budget vs. actuals early in the year equips you with insights to make agile financial decisions.
Here are key focal points during this review:
Revenue Targets: Compare actual income with budget predictions. If revenue is tracking below expectations, identify root causes such as under-billing or missed business opportunities.
Expenses: Pinpoint areas where spending exceeded budgeted amounts. Do adjustments need to be made for the second half of the year?
Profit Margins: Align revenues with expenses to measure overall profitability.
As Abigail shared in her experience with Accounting Girl, the ability to understand the bigger financial picture with clear reports and analytics opened the door to better decision-making. We often recommend quarterly financial comparisons—not just annual—to law firms who want to stay agile and avoid surprises.
By mid-year, issues of overspending or falling short on revenue goals shouldn’t be ignored. Instead, they should be evaluated carefully with the goal of refining processes and strategy for the months ahead.
For firms needing deeper expertise in interpreting such financial comparisons, Accounting Girl can act as your outsourced CFO! Learn more about our superpowers here.
Make Mid-Year Financial Health a Priority
Above all, mid-year financial health checks are a time to pause and reflect. Your firm’s finances are a cornerstone to success, and with accounting challenges unique to this industry—such as trust account compliance, AR tracking, and operational spending—it’s essential to have specialized support.
If managing reconciled books, staying competitive with AR follow-ups, and navigating budget vs. actual comparisons feels overwhelming, the expert team at Accounting Girl is here to help. Just as we empowered Abigail Seymour to transition to legal accounting seamlessly, we can customize a plan for your law firm’s specific needs.
The months ahead bring new opportunities to grow your profitability and maintain compliance. Don’t wait until the year-end rush to evaluate your finances—start now and finish the year strong with proactive accounting practices. Reach out to Accounting Girl, and let’s work together to make your law firm’s finances efficient, accurate, and productive.
Additional Resources
Looking for more insights on law firm accounting? Check out the following resources:
It’s time to transform your law firm’s finances! Let’s achieve compliance, peace of mind, and long-term success—together.
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