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Published by Prestige_Accounting on January 20, 2026

Yearly Financial Review: A 5-Step Checklist for Law Firms

Start your year with clarity, not chaos.

The beginning of the year is the best time for law firm owners to reflect on what worked, fix what didn’t, and create a plan that actually aligns with their goals.

At Prestige Accounting and Consulting, we work exclusively with law firm owners—and we’ve seen firsthand how an intentional yearly review can set your firm up for real growth, reduced tax liability, and peace of mind.

Here’s your 5-step financial review checklist to kick off 2026 like the CEO you are.

1. Review Your 2025 Financial Reports (Not Just Revenue)

Start with your Profit & Loss Statement, Balance Sheet, and Cash Flow Report for 2025. You need more than just a revenue number—you need insight.

Ask yourself:

Did profit margins improve or shrink?
Are your biggest expenses growing faster than revenue?
Did you overspend on categories like marketing, payroll, or software?
Is your operating cash flow strong—or barely keeping up?

Look at trends quarter by quarter to spot seasonal patterns and potential bottlenecks. This is the data that fuels every smart decision in your firm.

2. Reconcile IOLTA and Trust Accounts (Before It’s a Problem)

Don’t wait until March to clean up your trust account.

Now is the time to:

Reconcile your December IOLTA balance
Confirm all client balances match your liability records
Ensure no funds are missing, commingled, or unreconciled
Gather documentation in case of an audit

If your trust account hasn’t been reconciled every month, or if your bookkeeper doesn’t understand IOLTA rules in your state, this is the time to get help.

If you’re in Florida, California, Texas, Michigan, Massachusetts, or Georgia, each of these states has unique IOLTA rules. Make sure your process complies. See our IOLTA blogs → (link to our blogs)

3. Gather Tax Documents Early to Avoid Surprises

Even if your CPA won’t file until later in the season, now is when you prepare.

Pull together:

Your final P&L statement for the year
1099s and W-2s (due January 31!)
Bank and credit card statements
Mileage logs, home office expenses, and equipment purchases
Any estimated tax payments made throughout 2025
Updated owner compensation reports and draw logs

This makes tax prep smoother, faster, and far more accurate.

And if you’re switching accountants this year (or want a second opinion), having organized records makes onboarding 10x easier.

4. Audit Recurring Expenses and Vendor Agreements

You’re probably overspending somewhere—and this is the perfect time to clean house.

Review:

Legal research tools and bar association fees
Case management software
Office supplies and equipment leases
Marketing agency contracts or paid ads
Payroll and contractor rates

Ask: Are these tools delivering ROI? If not, it’s time to renegotiate or eliminate.

Pro tip: Review your software stack for duplicates. Some lawyers are paying for 3 platforms that do the same thing.

5. Set Financial Goals and Forecast 2026

Numbers don’t lie—but they don’t mean anything unless you use them to build a plan.

For 2026, forecast:

Revenue goals (broken down monthly)
Owner compensation strategy
Hiring plans and new team roles
Marketing budget and ROI targets
Tax savings goals and estimated quarterly payments

This is where you align your vision with your math.

You’ve probably heard us talk about our Climb to Cash framework—it’s how we help law firm owners map out a profitable, scalable financial plan that supports both personal and professional growth.