Associates Need Financial Savvy

by | Aug 11, 2017 | Business Strategies

Financial savvy is an integral part of serving your clients well. While there are many areas of financial
and accounting knowledge that can improve an attorney’s ability to serve their clients, we’ve picked
a few recurring themes as a jumping off point.
Cost-Benefit Principles: Almost every financial decision involves weighing the costs of
implementation versus benefits. Whether it is a major renovation, expanding a project or facility or
redesigning charts of accounts that are underlying a set of financial statements, constant attention
must be paid to the relation of expected benefits to anticipated costs. A strong grounding in
financial theory and good ol’ common sense will help you assess your cost/benefit ratio and make
the appropriate estimates.
Time Value of Money: Key financial decisions often depend on properly applying present and
future value concepts. One example is when attorneys must assist clients in assessing the impact of
changing interest rates on debt instruments used for business transactions. Forecasting accuracy
depends on the appropriate application of discount rates to an anticipated economic benefit in order
to derive the equivalent current benefit.
Valuation Concepts: Determining the value of closely-held securities may be required in legal
areas, such as estate planning, litigation, bankruptcy, taxation and some commercial transactions.
Similar concepts apply to the valuation of intangible assets, like intellectual property rights. An
attorney's ability to understand and properly apply valuation methodologies, along with the sound
opinion from a qualified specialist (e.g., CFF or ABV), can result in substantial client benefits.
Economic Principles: Fundamental economic concepts will enhance a legal practitioner's ability to
counsel clients. Supply and demand principles often are at play with a variety of feasibility
assessments and related business transactions. An attorney who can recognize and assess what
constitutes an economic benefit can be paramount to the overall value proposition in the attorney-
client relationship.
Balance Sheets and Income Statements: Balance sheets and income statements are crucial
sources of information for financial decision-making. Balance sheets impart the financial position of

an enterprise as of a specific date while income statements relate a to the revenue and expense
activities of a business over time. Understanding the economic activity of an organization calls for
attorneys to understand the net difference between revenues and expenses on income statements
that is captured in the change in the retained earnings line of the balance sheet.
Storing and Maintaining Financial Information: Understanding how and why financial data and
records are stored and maintained—electronically and physically—is imperative for a practitioner.
Many guidelines surround record retention – request a copy of our record retention document if you
need some guidance in this area!
In order to become financially savvy, legal practitioners must go beyond superficial knowledge to
improve their ability to respond to a variety of situations that may arise in legal practices. Becoming
a student of these topics will allow your knowledge to go broader and deeper, and your professional
relationships to thrive. For more information about how our firm can help you establish financial
literacy programs for your associates, please contact us today.