Cash Flow Forecasting for Law Firms
A cash flow forecast estimates how much cash your firm will have each week or month, based on expected collections and upcoming bills. For law firms, where fees can arrive unevenly and payroll comes due like clockwork, a simple rolling forecast is one of the best ways to avoid cash crunches and make confident decisions.
Why Law Firms Need a Cash Flow Forecast
Collections are uneven, especially for contingency and large-matter work.
Payroll, rent, and insurance are due on fixed dates.
A profitable firm can still run short of cash. See: Law Firm Profit and Loss
A forecast shows problems weeks ahead, while there’s still time to act.
What Goes Into a Law Firm Cash Flow Forecast?
Starting cash: your operating account balance. Never include trust funds.
Expected collections: based on open invoices, your aging report, and typical payment patterns.
Expected fee transfers from trust: only for fees that will be earned and billed.
Fixed costs: payroll, rent, insurance, software, and loan payments.
Variable costs: advanced client costs, marketing, and one-time purchases.
Owner draws: planned distributions to partners.
How to Build a Simple Forecast
Start with today’s operating cash balance.
List expected collections by week, using your A/R aging report.
List every known payment by week, starting with payroll.
Add planned owner draws and large one-time expenses.
Calculate the ending cash balance for each week.
Update the forecast weekly and compare it with what actually happened.
Many firms use a rolling 13-week forecast, which looks about three months ahead and adds a new week as each one ends.
Using the Forecast to Make Decisions
Time large purchases and owner draws for stronger weeks.
Step up collection efforts before a tight period. See: How to Collect Unpaid Legal Fees
Plan around expected settlement timing. See: Contingency Fee Accounting
Decide early whether a line of credit is needed, rather than in an emergency.
How Azar Insights Helps
Accurate, reconciled books so the forecast starts from real numbers
A rolling cash flow forecast built for your firm
Fractional controller and small business CFO support to review the forecast with you and plan ahead
Frequently Asked Questions
What is a cash flow forecast?
It’s an estimate of the cash your firm will have in the coming weeks or months, based on expected collections and known expenses. It helps you see shortfalls before they happen.
Should trust funds be included in a law firm’s cash flow forecast?
No. Trust funds belong to clients. Only include fees once they’re earned and properly transferred to your operating account.
How far ahead should a law firm forecast cash flow?
Many firms use a rolling 13-week forecast for day-to-day planning, alongside an annual budget for the bigger picture. See How to Build a Law Firm Budget.
How often should we update our cash flow forecast?
Weekly works best for a short-term forecast. Each week, replace estimates with actual results and add a new week at the end.
What’s the difference between a budget and a cash flow forecast?
A budget plans revenue, expenses, and profit for the year. A cash flow forecast tracks the timing of cash coming in and going out, so you know whether you can cover what’s due.
Related Reading
Law Firm Budget · Monthly Law Firm KPIs · Profit and Loss
About Azar Insights
Azar Insights provides outsourced bookkeeping, accounting, and fractional controller and CFO services for law firms nationwide. With 15 years of accounting experience, we work remotely with solo attorneys and multi-partner firms using secure, cloud-based tools.