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3 Steps to Success Using Financial Goals

by Tom Boyle |

Taking Steps Today for a Better 2016

I spent the week between Christmas and New Year’s doing a thorough review of the past twelve months.  Not exactly the most exciting way to spend a week that should be filled with family and friends.  My 2015 did not end as strong as planned, and I wanted to do a deep dive to understand why.  I put the following questions on the table:   did I reach my financial milestones, is my business in a better position today than it was 12 months ago, and did my business allow me to reach my professional and personal goals?

Each question and subsequent answer warrants its own article.  Here, I’m going to focus on the financial question – did I reach my financial milestones?  On the financial side, your results can be broken down into two simple categories:  money coming in the door (ie – revenue) and money going out the door (ie – expenses).  For me, I took the hardest look at my costs.  I knew the most immediate impact I could have on improving my firm’s financials is to take action on reducing the money going out the door. 

When I looked at my costs, I found that I had two charges hitting my credit card every month for services I did not use.  Shame on me for not uncovering this earlier, but this can easily happen when you’re consumed with managing the day to day operations of your practice.  These charges were hitting my card for the past nine months and totaled $600.  This hurt.  Discovering the $600 overpayment created immediate motivation for me to take action, and I cancelled both services. 

The next cost that I looked at was my internet charges.  I need internet, so I expect some cost for this service.  However, the monthly costs looked high.   I was charged $190 per month on internet service.  I have no basis for knowing if this is reasonable or not, but my gut told me it was high.  Based on my gut intuition, I called my cable company to get a better understanding of my monthly invoice and inquire about a better deal.  Within twenty minutes, I negotiated my bill from $190 per month to $115 per month.  Savings of $75 per month or $900 per year.  I felt like I transformed from a CPA to a master negotiator, but the real trick was simply making the call.  Once I made the call, I asked for specials and bluntly asked for a reduced rate.  They wanted me to sign on for another two year contract to get the special pricing.  I was willing to accept this tradeoff in exchange for savings of $900 per year. 

These two examples lead to the next part – developing a budget and creating systems to utilize the budget throughout 2016.  If I had the discipline and the right systems in place throughout 2015, I would have identified these high costs and recognized cost savings a lot sooner.  Here are the steps I am taking to ensure my past mistakes are not repeated.

I start by reviewing the presentation of my financials.  Are my financials presented in an easy to read format where I can quickly gain value from them?  I want a simple chart of accounts.  If I’m a small law firm, my chart of accounts should not include hundreds of accounts.  This invites complexity into the accounting system.  Follow the rule of less but better.   

Next, create the budget.  I begin by projecting what each month should look like.  For revenue, adjust for any anomalies in the prior year and any known changes over the upcoming year.  On the cost side, I should be able to predict what my expenses will be each month.  I start with an independent calculation as opposed to beginning with last year’s numbers as a baseline.  For most of my costs, I can predict what the monthly expense will be.  For example, I can accurately project what my payroll costs will be based on my staff’s salary and payroll taxes.  This holds true for other consistent costs like rent, internet, phone, professional liability insurance, etc.  I know what my invoices are each month, so I create the budget to reflect my actual invoices.  Then, I compare these numbers to my actual results from last year.  Where am I high or low?  Do my independent predictions match my results from last year?  If they don’t, I need a better understanding of my actual results from last year and determine if I need to adjust the budget.

The final step is developing a system and execution plan for 2016.  I’ve spent time reviewing my chart of accounts and developing a budget.  How do I take this work and make it meaningful?  I want a system and routine where I compare my actual results against my budgeted projections.  I want to work with my accounting team or accounting software to incorporate these reports in my month-end process.  It’s a matter of discipline to review each month.  Establish a threshold where any variance outside the threshold warrants investigation and action.  If I had this system and routine throughout 2015, I would have saved myself $1,500. 

It’s easy to discuss this in theory.  The challenge is to take a few hours today so your goals are reached by December 2016.  This is always about forward looking.  There’s nothing I can do about the past.  It’s time to take action today to have a successful 2016.

About the Author

Tom Boyle



Tom Boyle is Co-Founder of TrustBooks, web-based software for managing trust activity in compliance with state bar requirements.  TrustBooks is simple and intuitive, so trust accounting isn’t intimidating.  Prior to TrustBooks, Tom owned Boyle CPA, a CPA firm that provided accounting and consulting services to small businesses with a focus on law firms. TrustBooks offers a 30 day free trial at www.trustbooks.com.

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