Profit First for Lawyers An Uncomfortable Truth: Cash Flow Is Not Profit
“I remember the owner of a multimillion dollar law firm who had positive cash flow. Yay! Unfortunately, the law firm was slowly going out of business because it was losing $100,000 each month and the owner didn’t even know it.”
– RJon Robins
If you’ve ever looked at cash coming into your firm and assumed that meant you were profitable, this episode is a wake-up call you can’t afford to miss. In a segment pulled from Chapter 13, page 118 in the Profit First for Lawyers book, you’ll hear about the crucial difference between cash flow and actual profit – and why confusing the two could quietly destroy your law firm.
From The Recording Studio
In a conversational clip from the audiobook recording session, RJon breaks down the four key financial metrics every law firm owner needs to track. Karli joins in with questions to get clarity on why cash flow projections matter. RJon further illustrates the importance of knowing the difference between cash flow and profits with a cautionary tale about a multimillion dollar law firm that was secretly bleeding money. When RJon revealed the truth about what the financial reports actually showed, the owner’s response was…surprising. You’ll want to hear this conversation to understand why some business owners prefer comfortable lies over uncomfortable truths. This episode is a great reminder to go back and reread Profit First for Lawyers, Chapter 13 The Basics.
Key Takeaways:
- Cash flow measures money in and out while profitability measures whether you’re actually making money after all costs.
- Positive cash flow can hide the fact that your law firm is slowly going out of business
- Your balance sheet tells the real story. If you’re not reading it, then your business is flying blind.
- Find out where your cash flow is coming from: new sales, borrowed money, or unfulfilled work?
- You cannot delegate financial oversight completely. You must personally verify the systems are in place and review regularly to ensure they are being followed.
Resource: Profit Leak Assessment
The Profit Leak Assessment is a practical, on-demand course to help law firm owners find thousands of dollars in potential profit leaks. Karli teamed up with Evelyn Aucoin, Financial Literacy and Strategy Expert with How To Manage A Small Law Firm to create this resource for law firm owners. Click the button below to start plugging the profit leaks in your firm. Your future self will thank you for it!
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