Law Firm Annual Budget Planning Checklist

Export from Clio, Centerbase, PCLaw, or whichever PMS the firm uses. Break out by practice group (litigation, transactional, IP, family) and fee type (hourly, flat, contingency, AFA) so the forecast can be built up the same way.

Realization (billed / worked) and collection (collected / billed) by timekeeper and by practice group. Junior associate realization below 85% is a write-down problem worth flagging before next year's hours target gets set.

Walk the contingency docket with the responsible partners. Apply a probability and timing weighting to each matter — gross settlement, fee percentage, lien deductions, expected close quarter. Treat anything past appellate review separately; those don't fund this year.

Sum the bottom-up forecasts: hourly billings (rate × target hours × realization), flat-fee matters, contingency expectations, and any AFA arrangements. Capture the projected gross figure for the cash-flow model downstream.

Rent, utilities, phones, PMS license (Clio / MyCase / Centerbase), DMS (NetDocuments, iManage), e-filing subscriptions (PACER, NYSCEF, File & ServeXpress), Westlaw or Lexis, and any eDiscovery platform retainer. Pull current invoices rather than relying on last year's totals — vendors raised prices.

Get the renewal quote from the carrier 60 days before the policy anniversary. Premium scales with headcount, practice mix, and prior-claims history; a new high-risk practice area (securities, M&A) materially shifts the quote.

Base salary, payroll taxes, benefits, and the discretionary bonus pool tied to billable-hour and origination targets. Equity partner draws sit separately in the cash-flow model — don't double-count.

State bar dues, CLE provider subscriptions (Practising Law Institute, state bar CLE, Lawline), and ethics-hour requirements per attorney. Multi-jurisdiction attorneys carry parallel CLE obligations.

PMS migration, DMS upgrade, eDiscovery platform shift, attorney laptop refresh cycle, conference-room AV, security stack (MFA, MDM, endpoint protection). Tag each with a useful-life estimate so it amortizes correctly.

Score against payback period, partner strategic priorities, and risk-mitigation value (a security investment with no direct ROI may still rank above a nice-to-have). Defer anything below the line until the mid-year review.

Pick the funding source: operating reserves (no partner action needed), bank financing (line of credit or term loan), or a partner capital call. Capital calls require partnership-agreement-defined notice and a partner vote — plan accordingly.

Send formal notice per the partnership agreement (typically 30 days), prepare the call memorandum with amount per partner and use of proceeds, and put the vote on the next partner-meeting agenda.

Roll the revenue and expense plans into a 12-month cash forecast. Litigation firms with heavy contingency mix will see lumpy months — model the trough rather than averaging it away.

Pass-through entity tax (PTET) at the firm level where elected, plus partner-level estimates. Schedule draws against the cash forecast — drawing into a thin month is the most common cause of mid-year line-of-credit pulls.

Pull the AR aging from the PMS. Anything over 90 days needs a partner-led collection conversation; anything over 180 should be reserved against. Tighten the evergreen-retainer threshold for clients with chronic 60+ aging.

Run a 15% revenue-shortfall scenario against the cash forecast. Identify the month where reserves go negative — if it's inside the year, the budget needs a rebuild rather than a tweak.

Pull discretionary spend first — marketing, training above CLE minimums, deferred capex. Compensation reductions are last and require partner-level conversation, not an administrator decision.

Verify per-claim and aggregate limits against current matter exposure — a single deal-in-progress over the per-claim limit is an underinsurance signal. Cyber coverage is increasingly carved out or sublimited; read the endorsements.

Three months of fixed operating expense is a common floor; six months is healthier for contingency-heavy firms. Document the target so the next mid-year review has a benchmark to measure against.

Standard set: realization, collection, billable hours per attorney, WIP days, AR days, revenue per lawyer, profit per equity partner. Specify monthly vs. quarterly reporting and who receives each report.

Standing slot on the management committee agenda. Variance over 10% on any line is a drill-down trigger, not a footnote.

Walk through the deck at the partner meeting. Capture the decision, the managing partner's signature, and any conditions or revisions raised in discussion so the recirculation step has a clean record to work from.

Apply the revisions captured at the partner meeting, redline the changes against the originally circulated version, and send to the partnership for ratification before the fiscal year starts.