Profit Pipeline Assessment

1. Billing Frequency

a. We issue bills sporadically without a set schedule.
b. We have a monthly billing cycle, but there might be occasional delays.
c. We have a strict and consistent billing cycle, ensuring timely and accurate invoicing every time.

2. On Plan vs. Off Plan

a. We don’t review our accounts receivables to determine who is on plan vs. off plan with their payments.
b. We could access the on plan vs. off plan data, but we don’t review it often.
c. Our collections team keeps track of the on plan vs. off plan data daily and if you woke me at 2 AM from a dead sleep, I could tell you what our on plan vs. off plan rate was yesterday and how much we collected that day.

3. Payment Terms and Policies

a. Our payment terms are not clearly defined, and we often negotiate individually with clients.
b. We have set payment terms, but they might not always be enforced strictly.
c. Our payment terms are clearly stated, consistently applied, and any exceptions are rare and carefully considered.

4. Follow-up on Outstanding Invoices

a. We generally wait for clients to miss a payment before calling and don't have a proactive follow-up process for unpaid invoices.
b. We do follow up on unpaid bills, but the process is ad-hoc and not standardized.
c. We have an established process to systematically follow up on any outstanding invoices, using a combination of reminders, calls, and emails.

5. Use of Technology in Receivables Management

a. We rely primarily on manual methods like spreadsheets or paper-based systems for tracking receivables.
b. We use basic accounting software to manage our receivables but might not utilize all its features.
c. We leverage advanced accounting and CRM systems, ensuring real-time tracking, automatic reminders, and detailed analytics.

6. Collections And Marketing

a. We don’t understand the role marketing plays in collections.
b. If sending an invoice and making calls regarding late invoices is considered marketing, than that’s what we do.
c. We utilize all forms of communication, including email, phone, text, direct mail, and social media direct messaging to send specific messages at different times of the year to maintain our realization rate goal for income vs. invoices.

7. Collections Strategy

a. We don’t have a specific strategy for collections; we act on an as-needed basis.
b. We have some standardized collections processes, but they're not always consistently applied.
c. Our collections strategy is comprehensive, with predefined steps, timelines, and escalation protocols.

8. Payment Plans

a. Payment plans are determined by the client.
b. We use standardized payment plans for every client based on practice area.
c. Payment plans are standardized, but we leave room for customization during the initial consultation. All payment plans are committed to during the initial consultation and the initial payment is processed.

9. Collections and A/R Team Training

a. Our staff has little to no training on how to handle billing and collections.
b. We provide occasional training or guidelines to staff about receivables but lack consistency.
c. We manage and train our collections team in the same manner we manage our appointment setting team, they have specific KPI’s to reach including but not limited to the number of contacts made each day, the on plan vs. off plan rate for the company, the total dollars collected as compared to the goal.

10. Performance Metrics and Review

a. We don’t specifically measure the performance of our collections and receivables management.
b. We review collections performance sporadically, usually when there's a noticeable issue.
c. We measure how much we receive as compared to how much we invoice, the total number of clients on a payment plan vs. those clients who have fallen off plan, and the total dollars received.

1. Profit Targeting

a. We don’t have a specific target for profit. We generally focus on revenue.
b. We've set a profit target, but it's more of a hopeful estimate than a structured goal.
c. We set a profit target, and are sure to take that profit from gross revenues and set it aside before any expenses are incurred.

2. Labor Cost Ratio (Total labor costs (including owner’s market based wage, taxes, and benefits) divided by gross revenue)

a. We are not aware of or don't regularly compute our labor cost ratio.
b. We have a rough idea of what our labor cost ratio is but are not sure if we’re in alignment with what it should be.
c. We base our hiring decisions on our labor cost ratio and determine what effect a new hire will have to either increase gross revenue or decrease labor expense. No new hires are allowed if the labor cost ratio is higher than the standard.

3. Rent To Income Ratio

a. We don’t measure rent as a percentage of income.
b. We can determine what our rent is as a percentage of income but we don’t know what it should be.
c. We have a definite goal for what rent should be as a percentage of income and we make our future leasing decisions based on that goal, even if that means someone must share an office or work remotely.

4. Owner Salary Assessment

a. Our owner's salary is inconsistent and usually taken from what's left after expenses.
b. We've tried to set a consistent salary for the owner, but it fluctuates based on business performance.
c. The owner is paid a market based salary and is treated as an operational expense, ensuring transparency and sustainability in business finance.

5. Marketing To Income Ratio

a. We don’t pay attention to how much we spend on marketing as a percentage of income.
b. We pay attention to how much we spend on marketing as a percentage of income but are not sure what it should be.
c. We have clearly defined percentages set for our marketing investment as a percentage of income. We understand what we need to invest to continue to grow the firm. And, as the firm gross revenue increases, we increase the marketing investment.

6. Annual Expense Review

a. We don’t review all of our expenses annually.
b. We will take a look at our expenses at the end of the year but not with a fine tooth comb.
c. We block dedicated time to review all expenses for the year and determine if the expense should be kept, killed or investigated for next year.

7. Tax Strategy

a. We don't have a proactive tax strategy and usually react during the tax season.
b. We've sought some tax advice, but it isn't integrated into our financial planning.
c. We've adopted a proactive tax strategy, optimizing expenses and company investment opportunities allowed by the tax code to minimize tax liabilities.

8. Routine Financial Review

a. We rarely review our financials, typically only at year-end or when taxes are due.
b. We review our financials quarterly, but the action steps post-review are inconsistent.
c. We conduct monthly financial reviews to stay on top of our expenses and profitability. Additionally, we can access updated financial statements on a weekly basis from our online financial software that is updated by our bookkeeper.

9. Debt Management

a. We take on debt without a clear strategy or plan for repayment.
b. We are cautious about debt but we have used it occasionally to help the firm during difficult times.
c. The firm avoids debt at all costs. Any credit cards we use for company purposes are paid to zero before the payment is due.

10. Future Expenses

a. We do not have a plan or budget for future expenditures.
b. We occasionally set aside funds for future expenditures.
c. We allocate a certain percentage of every gross dollar to separate bank accounts to ensure the cash is available for all major expenses that can be projected such as payroll, marketing, rent, taxes.

1. Cash Review

a. I barely balance my check book. So I only know what’s in the bank when I have to write a check or pay with a debit card.
b. I inspect my cash accounts every so often.
c. I personally review our cash accounts every day. If you woke me at 2 AM out of a deep sleep, I could tell you our cash balance.

2. Future Client Payments

a. Clients pay us what they can, when they can and we expect they will pay their invoice in full.
b. We invoice clients strategically to keep clients on plan.
c. I personally review our future cashflow report for client payments going out six-months. If you woke me at 2 AM out of a deep sleep, I could tell you our future cash flow projections for next month.

3. Measurement Of Payments

a. We don’t measure payments received from clients other than by our bookkeeper.
b. We measure payments received when we review the Profit and Loss statement.
c. We measure what payments were received on a daily basis and judge those payments according to our goals. If you woke me from a dead sleep at 2 AM, I could tell you what we received the previous day in payments received.

4. Evergreen Retainers (Even if you traditionally don’t bill hourly, how would you handle it?)

a. The client is expected to refresh their retainer when we request it.
b. Our client fee agreement clearly states the clients obligation to maintain their retainer balance but we find our clients are slow to refresh their retainers.
c. Our clients agree to an evergreen retainer that states when their current retainer reaches a certain dollar amount our system will automatically charge the client’s card on file to refresh the retainer to the agreed upon amount.

5. Earned On Receipt

a. In our state, it is not allowed by the bar association to earn our fees upon receipt, we must trust all moneys received from clients and then deposit that money into the operating account once the work has been completed.
b. It appears t is allowed by our bar association to earn our fees upon receipt, but we feel uncomfortable making that change.
c. In our state, we can earn our fees upon receipt and do not need to use a trust account.

6. Proactive vs. Reactive Communication for Payment Plans

a. We usually wait for clients on payment plans to reach out to us if there's an issue, often leading to delayed or missed payments.
b. We send regular reminders to clients about upcoming payments but don't engage in proactive communication to understand their financial situation or concerns.
c. We maintain regular, proactive communication with our clients on payment plans, understanding their needs and addressing potential issues before they arise, ensuring smooth cash flow.

7. Expense Management

a. We do not review our expenses regularly and have not set clear budgets for different operational areas.
b. We have begun categorizing and reviewing our expenses, striving for better cost management.
c. Our firm has a detailed budgeting system, ensuring all expenses are optimized and aligned with our financial growth goals.

8. Client Acquisition and Retention

a. We acquire clients without a clear strategy, leading to unpredictable income streams.
b. We have started to refine our client acquisition strategies, focusing more on high-value clients or those suited for our payment plans.
c. Our firm strategically targets and retains clients who align with our pricing models and services, ensuring a consistent and growing cash flow.

9. Debt Management

a. We have unsecured debt and it’s growing.
b. We have some unsecured debt, but we have a plan to pay it off and it doesn’t affect cashflow.
c. We have no unsecured debt other than credit cards we pay in full each month.

10. Predictive Cash Flow Forecasting

a. We don't typically run future cash flow reports and mainly respond to cash needs as they arise.
b. We occasionally run cash flow reports to predict upcoming cash needs based on existing payment plans, but do not extend our predictions to include future sales.
c. Our firm consistently utilizes detailed cash flow forecasting to predict our financial position six months to a year in advance, incorporating both payment plans and future predicted sales to ensure financial stability.