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Mid-Year Financial Review Checklist for Law Firm Owners
As a law firm owner, Q3 isn’t just another quarter—it’s your best chance to take control of your numbers before year-end tax pressure hits.
Whether you’re flying high on caseloads or quietly questioning your cash flow, now is the perfect time to pause and do a mid-year financial checkup. Why? Because decisions made in July and August will determine whether you optimize tax savings—or scramble to fix expensive mistakes in December.
This isn’t about generic budgeting advice. This is a law firm-specific financial review, crafted by a CPA who works exclusively with attorneys and understands how your business actually runs.
Why a Mid-Year Review Matters for Law Firms
Law firms operate on tight margins, unpredictable case cycles, and unique compliance rules. That makes financial planning more complex—and more critical.
- Missed deductions? You won’t catch them after December 31.
- Overpaying taxes? You won’t get that cash back until next year.
- Poor cash flow management? That’s how firm growth gets stalled.
A mid-year financial review isn’t optional—it’s how you stay profitable and protected.
The Mid-Year Financial Review Checklist for Law Firm Owners
1. Review Your Year-to-Date (YTD) Profit and Loss Statement
Pull a P&L report from January 1 to today.
Look for:
- Net income trends vs. the same period last year
- Spikes in expenses that weren’t forecasted
- Any revenue categories that are underperforming
Red Flag: If your revenue has grown but profit hasn’t, your expenses may be scaling faster than your intake process.
2. Check Your Cash Flow
Profit isn’t the same as cash. Review your cash flow statement to see:
- When money is coming in (and from which sources)
- How fast your accounts receivable is turning over
- Whether you have enough reserves for taxes, emergencies, and payroll
Quick Tip: If you haven’t already, separate your operating and owner distributions accounts. This makes profit tracking and tax withholding easier.
3. Reconcile and Clean Up Your Bookkeeping
Make sure:
- All bank accounts (including IOLTA) are reconciled monthly
- Trust transfers are properly documented and matched to earned income
- Vendor payments and reimbursements are categorized correctly
Important: If you haven’t done monthly reconciliations, catch up now. Don’t wait for your CPA to do it all at tax time—it’s more expensive and riskier.
4. Evaluate Your Tax Payments
If you’re making estimated tax payments, ask:
- Are you using actual YTD numbers—or guessing based on last year?
- Have your profits grown significantly this year?
- Have you claimed all available business deductions so far?
You may be:
- Overpaying and choking cash flow
- Underpaying and facing a big tax bill + penalties
Speak with your tax advisor (or book a consultation) to recalculate your Q3 and Q4 estimates based on updated financials.
5. Analyze Your Compensation Structure
If you’re taking random draws instead of a structured pay system:
- You could be distorting your firm’s financials
- You may not be withholding enough for taxes
- It may limit your ability to invest in marketing, staffing, or reserves
CPA Tip: For LLCs, S Corps, or partnerships, set a compensation plan aligned with your tax strategy—owner draws, salary, distributions, and reserves should all be tracked separately.
6. Forecast for Q3 and Q4
Use the YTD data to plan ahead:
- Expected revenue from open and new cases
- Known expenses (software, staff, professional fees)
- Any seasonal slowdowns or surges
Then create a working budget for the rest of the year. Not having one is like practicing law without a calendar system.
7. Review Your KPI Dashboard
If you don’t have a financial dashboard yet, now’s the time to build one. You should be tracking:
- Revenue per practice area
- Average case value
- Client acquisition cost
- Real-time net profit margin
- Collection rate
Software tools like QuickBooks, Clio, or specialized dashboards can automate this process. But first, you need clean books.
8. Audit Your Compliance
- Are trust accounts reconciled and separated?
- Are payroll taxes filed properly?
- Have vendors been sent W-9s and contracts for 1099 prep?
- Are retainer agreements reflected accurately in billing and trust?
Compliance isn’t a once-a-year project—it’s part of your financial hygiene.
Bonus Tip: Don’t Do It AloneIf reading this checklist feels overwhelming, you’re not alone. Most law firm owners weren’t trained to think like CPAs. That’s where we come in.
At Prestige Accounting and Consulting, we help lawyers:
- Understand their real numbers
- Forecast growth confidently
- Make smarter tax decisions
- Build a back office that supports—not drains—profit
Book Your Mid-Year Financial Checkup
This is your chance to course-correct before Q4.
Avoid the December panic. Fix the leaks now.
Click here to schedule your free check-in with The Lawyers’ CPA team and finish strong.
