Creating Your Firm Budget


Much like the auto mechanic with four non-running trucks in the front yard, my experience has often been that small firms are operating without a firm grasp on their budgets. We can advise our clients all day long as their best next move to save on taxes, save for retirement, and enhance their financial position, but when it comes to our businesses, we struggle.

Any time you’re in a position of advising yourself, you’re going to meet your own resistance. I once worked as the financial controller of a law firm, and the black and white, right, and wrong CPA in me was horrified to learn that the general approach to everything with litigators was that they could just litigate their way out of anything, so very little foresight was necessary. It makes me wonder if we think we can budget or tax plan our way out of anything?

The reality is, especially if you’re still running a season practice, budgeting and foresight is 100% necessary to continue to thrive and grow. Even if you’re not looking to grow in the size of your practice, just maintaining your status can be challenging when economies change, inflation changes, technology changes and clients change. So how do we become more proactive and less procrastination oriented when it comes to our small firm budgets?

If you’ve ever worked with an EOS coach, you’ll know what I mean when I say we need to focus on the rocks first, the bigger picture items that absolutely must be considered because they’re non-negotiable for firm survival. I believe the top three rocks for almost every firm are people, technology, and innovation.

People are your team, it’s not your clients. Clients will come and go, but at the end of the day, your success will struggle along if you don’t have the right people in the right positions within the practice. This is everything from the person going to the post office right through to the visionary firm leader. Accountants tend to be very “this is how we have always done things” and a side effect of that is people falling into positions because it makes the most sense from a longevity or next steps perspective. We often fail to consider whether or not that’s really the next best move. With this high-level thinking, you might find that you need to hire for a new position, or someone needs a raise, or someone isn’t a good long term fit. All this needs to be factored into your budget. Without the flexibility to build the best team, your services, and subsequently your revenue, will suffer.

Technology seems like a no brainer and then I still hear about a firm printing and scanning paper. The reality here is that AI is already having a massive impact on businesses. If we’re not investing in technology, our practice is essentially moving backwards. Whether you improve your workflow through automation, go paperless, hire an outsourced tax preparer, or switch to zoom client meetings, it doesn’t matter as much as your long-term focus on constantly technology improvements. There should be an annual budget and plan for how the firm is moving this needle forward.

Innovation goes along with our “this is how we do it” adage. If no one in the practice can be a creative genius, it’s time to budget for some outside help. We may not all be naturally inclined towards innovation, after all, we look at historical numbers all day, but it’s necessary for all business survival. The only guarantees in life are death, taxes, and nothing will stay the same. Our practices must always be looking at how we’re changing, growing, learning and developing in order to stay relevant. This might

affect multiple areas of your budget such as marketing, people, technology, or even switching up your client base. In any of these cases, your budget needs to be prepared to make the changes.

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