How to read and understand the financial accounts of a law firm

Produced in partnership with Robert Mowbray of Taylor Mowbray LLP

Practice notes

How to read and understand the financial accounts of a law firm

Produced in partnership with Robert Mowbray of Taylor Mowbray LLP

Practice notes

This Practice Note provides information about how to read and understand the financial accounts of a law firm.

Why are financial accounts important?

Law firms need to look at their accounts to see how they are performing and understand what needs to be done to improve performance.

What is available in a set of year-end accounts will depend upon the:

•
legal constitution of the firm
•
rules that govern the form and content of the accounts

In addition to year-end accounts, you may elect to produce monthly or quarterly management accounts, which should be regularly reviewed. For further information on management accounts, see Practice Note: The importance of good time recording.

What financial statements make up a set of financial accounts?

Every firm needs to prepare a set of annual financial statements that make up the firm’s financial accounts. There are six financial statements potentially available:

•
profit and loss account
•
balance sheet
•
cash flow statement
•
notes to the accounts
•
report to members
•
audit

Robert Mowbray

Partner, Taylor Mowbray LLP

Robert is an accountant who has worked in and with professional service firms for 30 years and who is an expert on law firm profitability and management. He has provided training and consultancy services to over 1,000 firms across 30 countries. His clients have included everything from the largest City and Global firms, through large regional firms and down to the most entrepreneurial smaller firms. He is regularly asked to help with a wide range of issues including time recording, pricing and fee negotiation, project management, accelerating cash flow, strategy, profit sharing arrangements and improving the quality of management information . Robert is the author of “Maximising the profitability of law firms” and was the author of the Law Society’s annual financial benchmarking survey from 2006-2009. He is the author of “Law firm finance and administration handbook – A practical guide for COFAs and finance professionals” and writes the annual NatWest financial benchmarking survey. He has been voted “Trainer of the year” by the Legal Education & Training Group and is an Industrial Fellow of the Business School at Kingston University. Robert trained in the early 1980s with PWC and spent 20 years as a partner at Macintyre Hudson LLP before setting up Taylor Mowbray LLP with Janet Taylor in 2009 to be a niche and independent advisor to professional service firms.

Jurisdiction(s):

United Kingdom

Key definition:

Performance definition

What does Performance mean?

The performance of the work in public is an act restricted by the copyright in a literary, dramatic or musical work.

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