Accounting, Finance, Marketing and Management for Recent Grads
A lack of formal business training may adversely impact recent legal graduates' practices in two ways. Lawyers entering solo practices or small firms that must manage their own practices will lack the knowledge base to do so effectively. Lawyers representing businesses will be less effective representing and developing clients. The information below is a quick introduction to what recent law graduates should know about accounting, finance, marketing and management.
Accounting and finance . Lawyers managing solo or small firm practices must develop procedures to account for client billing, collections and expenses and to ensure their records will withstand an Internal Revenue Service audit.
With regard to billing, attorneys may opt to simply keep track of hours, and bill clients manually, using a typical word processing program. However, there are other software solutions specifically for billing, such as Timeslips. Typically, multiple billing parties with different rates will need specialty billing software, whereas a solo may not.
To maintain records of expenses and revenues' it is important for an attorney to consult with a CPA to determine items that may be deductible expenses for IRS purposes. A CPA will often work with a bookkeeper who will maintain accounting records for the law practice, typically using QuickBooks. The attorney may transmit monthly statements and receipts to the bookkeeper, who will maintain records. Another alternative is for attorneys to purchase QuickBooks and maintain records themselves or through an office administrator. Again, billing clients accurately and regularly while ensuring compliance with IRS rules is the goal.
A lawyer managing a solo practice or a small firm should consult a CPA to understand the advantages of tax-deferred retirement accounts such as a SEP-IRA.
If a lawyer works for a firm that has its own internal procedures, these internal management principles are nonissues. However, if an attorney lacks tax and accounting expertise, that attorney must involve a CPA or tax attorney to make sure that transactions are handled in a manner that is tax efficient.
A firm is no different than its clients: Tax considerations drive many decisions, such as choice of entity and the manner of structuring a transaction. Business lawyers would benefit from taking CLE courses or night classes at a local college that address basic accounting and financial issues, to allow them to identify issues they should delegate to other professionals.
Appraising the value of a business is an issue that pervades many business transactions. Business lawyers and litigators who handle commercial matters should learn the basic precepts of business valuation. It is not uncommon for a less sophisticated client who is buying or selling a business to ask his lawyer to advise him of the appropriate sales price. While giving a precise answer may be unadvisable, a lawyer should at least be able to describe various methods of valuation, such as book value, discounted cash flow analysis, comparables and multiples of earnings per share. Again, CLE, college courses, and various books and articles can give attorneys a basic introduction to key concepts. For those willing to invest the time, a few hours in finance and accounting at any local college is very valuable.
Marketing and management . To represent a business client effectively, a lawyer should understand the client's product or services, how the client markets those products or services, and how the clients manages the business. Indeed, it is paramount that a lawyer takes the time to learn the client's business early in the engagement. Oftentimes, a chalkboard session with the client to learn more about her company's products or servicesis most beneficial.
Additionally, a lawyer should learn client development skills to ensure long-term success. For solo and small firm lawyers, developing a well-optimized website is important; optimization means key word searches will bring the lawyer's website to the top of the lists resulting from Internet searches. Television and other forms of advertising may also be effective primarily for lawyers that represent individuals in divorce, bankruptcy, personal injury and other matters where the prospective clients are likely to turn to advertisements to locate a lawyer.
Many lawyers believe networking is the cheapest and most effective form of "advertising" because they prefer referrals as their primary source of business. The following are sample activities that may serve this function: attending local and state bar functions; serving on local and state bar committees; drafting CLE articles and giving CLE presentations; becoming involved in civic organizations, such as local charities, the chamber of commerce or other organizations; and becoming involved in a local alumni association.
For lawyers working for firms with existing infrastructure, the management component will be largely preordained. However, small firm or solo lawyers must address numerous practice management issues such as hiring, supervising and possibly terminating administrative staff; setting up filing systems; and choosing and maintaining IT systems. The solo and small firm sections of the Texas and local bar associations provide resources, as does the State Bar of Texas' website.
Mark S. Farha is a Dallas solo. He holds an M.B.A from Southern Methodist University Cox School of Business and a J.D. from Vanderbilt University Law School. He focuses on business law. His e-mail address is firstname.lastname@example.org.