Cash Flow Forecasting for Law Firms
Why do law firms struggle with cash flow?
Contingency work means the firm fronts case costs for months or years before a settlement pays. Hourly work bills monthly but collects in 45 to 90 days, and realization rates mean not every billed hour becomes cash. Trust and IOLTA balances look like money in the bank but belong to clients and never count as firm cash.
Meanwhile payroll is the largest cost in almost every firm and it is due on the same date regardless of what settled that month.
How does Cash Flow Frog handle law firm cash flow?
- Operating books only. Forecasts build from your operating accounts in QuickBooks Online, Xero, or FreshBooks, so client trust funds stay out of the picture where they belong.
- Scenarios: model a settlement landing in month 4 versus month 9 and switch between the two to see which one requires the credit line.
- Daily automatic updates as invoices, collections, and case costs post.
- Drill down from any dip to the transaction behind it, and plan up to 3 years out for multi-year contingency portfolios.
Worked example: carrying a contingency case
A 12-lawyer firm carries $148,000 in monthly payroll, overhead, and fronted case costs. Hourly collections run $155,000 a month but drop to $104,000 over the summer, months 6 through 9. A $300,000 contingency fee is expected somewhere between month 6 and month 12. This is the late-settlement scenario.
Late-settlement scenario, months 1 to 9 (opening balance $45,000)
With the settlement in month 12, the forecast shows the firm $96,000 negative by month 9. Switched to the month-6 settlement scenario, it never goes below $36,000. Seeing both in month 1 means the firm arranges the line of credit in month 2, on its own terms.
It makes cash flow forecasting dead simple, all QuickBooks updates are automatically updated in the app, new invoices or bills are integrated into the forecast.
Maria Davis
How do you set up a law firm cash flow forecast?
Connect the firm's books
Connect the firm's operating books: QuickBooks Online, QuickBooks Desktop, Xero, or FreshBooks.
Build the baseline
The baseline forecast builds from open invoices, bills, and collection history.
Adjust collection timing
Adjust expected collection timing per client to reflect real 45 to 90 day behavior.
Model settlements
Add expected settlements as dated scenarios and switch between optimistic and late cases.
Review monthly
Review monthly with partners; data refreshes daily.
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What people are saying about us
Tieshena Davis
CEO, Publish Your Gift®
A true life saver!
I've been trying to find an efficient and simplified way to forecast our cash flow and expenses, this is the complete solution.
Robert Hughes
Owner, Hughes Engineering, PLLC
Extremely useful
Extremely useful, helping me maintain my cash flow through an aggressive growth period, evaluate the financial planning for the future, and sleep better at night.
Cara Curphey
Founder Albion Bookkeeping & Consulting
Peace of mind
Finally found one that works for us! We tried several and finally found one that actually gave us what we needed - great UX, intuitive software, accurate forecasting.
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See the gap before the settlement drags. Connect QuickBooks, Xero, or FreshBooks, free trial. Related: scenario planning, accounts receivable, and the cash flow forecast.