Question:
I forgot to pay my HST throughout the year; could you help me make aplan to pay it?
Answer:
Any good plan has to be realistic.
The problem most solo and small firm owners face in January is that theywere so busy in November and December that their marketing fell off —or just stopped.
The phone stops ringing for at least half of January and cashflow is a problem. In that environmentfear, worry and doubt can take over and many of us react by freezing into inaction — making itharder to save money.
There are three things you can do right away to fix this problem and safeguard your small businessfinances throughout the year.
1. Never stop marketing
Law firm marketing is not rocket science. The majority of solo and smalls are “referral marketers:”they have a community of friends, family, colleagues, etc., that refer to them.
Step one, make a list of your best clients and best referral sources, or people who are on your mindand call, message, or email them. Check in on how their break was, maybe meet for a coffee, or finda mutual event or discussion point to bring up.
Call or message two people per day, every day, for at least two to three weeks. This should increasesales.
2. Collect your accounts receivable?
Check your accounts receivable balance — if there is anything in your accounts receivable, call,message or email each client and ask if they can make a payment today.
Calling really puts pressure on them to address it, as people tend to hide behind email and textmessages. So, if possible, call.
If they don’t answer, email or call them again the next day. Continue this until you get an answer.
Anything 90 days or older you should consider offering a discount if they pay in the next day or so —most accountants will tell you that money is typically as good as gone if they haven’t paid in 90 days.
If you can afford to, simply take that money or a minimum of 20 per cent of it and set it aside inanother account.
3. Open a separate “tax-savings” account
Ask your bank or find another bank and open a savings account, which you will use to transfer fundsearmarked for taxes (HST and corporate taxes) for your firm.
Putting aside money every month can be a challenge when you are growing your practice or haveconsistent expenses. Generally, law firms run on a simple model — people costs are about 33 percent of total sales, hard costs like a lease or other assets are also 33 per cent of total sales, whichleaves profit the last 33 per cent.
Transfer 20 per cent of every dollar you bill and collect into that same account. Pick one or two daysper month to do this, or ask the bank to make it automatic if they can.
If your firm is billing $30,000 per month you will have saved $12,000 in two months. You will feelgreat seeing that money in that account.
Of course, this is not legal advice or accounting advice, so I recommend you speak to youraccountant or bookkeeper for guidance.
Author’s note: If you want to work privately with me to grow your practice, email or DM and drop theword “PRIVATE” in the subject line. Tell me a little about your business and what you’d like to workon together, and we’ll get you all the details.
This article was first published on Law360.ca.