Cash Flow Forecast Template for Law Firms

Law firms record time today and collect for it months later. Hours become invoices at month end, clients pay on their own schedule, and contingency matters may take years to settle. Attorney and staff salaries, rent and case costs advanced for clients are paid monthly. A cash flow forecast shows how much of the firm’s work is still waiting to become cash, and whether the firm can fund that gap.

Why law firm cash flow is different

• Work in progress is not cash. Unbilled time and unpaid invoices can add up to several months of revenue.
• Collections are slow. Many clients pay 45 to 90 days after invoice, and some need chasing.
• Trust money isn’t operating cash. Client funds held in trust belong to clients until earned and transferred.
• Contingency fees are lumpy. A single settlement can bring in a large sum, but its timing is uncertain.
• Case costs are advanced. Filing fees, experts and records are often paid by the firm and recovered later.

A worked example

A firm bills about $72,000 a month in hourly fees. Clients pay 10 percent in the month billed, 45 percent the next month and 30 percent the month after. The remaining 15 percent is written down or paid much later.

Only $7,200 of March’s billing is cash in March. If the firm also expects a contingency settlement in May, the forecast should show two versions of the year: one with the settlement and one without it.

How to build a law firm cash forecast

1. Forecast billable hours and rates by attorney.
2. Convert hours to invoices by month, allowing for write-downs.
3. Apply realistic collection timing by client type.
4. Add flat fees, earned retainers and referral fees.
5. Enter contingency settlements only when timing is reasonably certain, or as a scenario.
6. Add salaries, rent, legal research, insurance, bar dues and case costs advanced.

Common mistakes

Treating trust account balances as available cash. Forecasting from hours recorded rather than cash collected. Relying on a contingency settlement to fund payroll. And forgetting malpractice insurance and bar dues are annual lumps.

What the template gives you

The Law Firm template includes a Billing & Collections tab that converts hourly billing into collections based on how clients actually pay. Contingency settlements, flat fees and retainers have their own lines, and the scenario switch shows the firm’s position if a large settlement slips.

Key assumptions built into the Law Firm template

• The Billing & Collections tab turns what you invoice into cash actually collected for “Hourly billing collections”. The example assumes 10% is paid in the month invoiced, 45% the following month and 30% two months later. Invoices sent before the start date are entered separately so the first months are right, and anything never collected shows as bad debt, so you can see what slow payers cost you.
• 5 cash in lines and 7 cash out lines are already named for law firm businesses, and every one can be renamed or extended.
• The example figures follow a fairly even year, which suits most law firm businesses; add your own seasonal pattern if you have one.

Every assumption sits in a yellow input cell, so you replace the example with your own numbers in minutes. The same figures flow through a 13-week weekly view, a 12-month monthly view and a 3-year outlook, and a dashboard shows your lowest balance, the weeks that fall below your minimum buffer and your cash runway.

Free or premium?

If you only need the basics, the free 12-month template or the free 13-week template will get you started today. The premium Law Firm template saves the setup time and adds the tabs above, best and worst case scenarios, and an actual vs forecast tracker that shows where your forecast was wrong, so next month’s is better.

Law Firm cash flow forecasting: questions

How should a law firm handle trust money in a cash flow forecast?

Leave client trust funds out of operating cash. Only include fees in the month they are earned and transferred from trust to the operating account.

How do law firms forecast contingency fees?

Include them only when the timing is reasonably certain, or model them as a best-case scenario so payroll never depends on an uncertain settlement.

What is a good collection rate for a law firm?

Many firms aim to collect 90 percent or more of what they bill, within 60 to 90 days.