“Keep it simple” – That’s the conventional wisdom from accountants and financial experts regarding law firm charts of accounts. And if you follow that wisdom for your law firm, you’re liable to end up looking at the backs of your competition wondering why you can’t seem to get ahead of them. If you want to win at the game of business, you’ll need to buck conventional wisdom to get the proper information you need. When it comes to marketing, information is key and your COA is where that information is located.
Marketing Is Much More Than “Miscellaneous”
Other than for tax preparation and to continue managing the same wasted resources every month, what use is an over-simplified COA for marketing purposes?
How can you determine whether your promotional dollars are well-spent if you don’t have any ROI details? How can you identify, by percentages, which marketing initiatives are bringing you leads who commit? Can you isolate the marketing expenses that aren’t bringing viable leads, tapping resources that could be utilized elsewhere?
Charting Your Law Firm’s Marketing
Of course you need to organize your firm’s finances, segregate accounts into asset, liability, equity, revenue, and expense. But don’t think for a minute that a single line entry for “Professional/Promotion/Advertising” is going to be useful to you for making managerial decisions.
Conventional wisdom is dead wrong in its over-simplification of marketing expenses for law firms, especially for small and solo law firms. You need to track every dollar to determine if your promotion is working. So you can stop what doesn’t work and emphasize what does work.
Here are two examples to show how conventional wisdom is still instructing attorneys to keep it simple with their marketing accounts:
First, I love how The State Bar of Georgia put out a Standard COAs for Smaller Law Offices, it’s a great place to start. But for the attorney who needs to make marketing decisions, the details are virtually absent. Here’s the breakdown of accounts in the SBG example:
Professional/Promotion
570 Travel & Related Expense
571 Professional Dues & CLE
572 Recruiting: Professional Staff
573 Entertainment
574 Promotion & Advertising
One entry for all things related to Promotion & Advertising? Why would you mix those together in the first place? This is no better than creating an account for Miscellaneous Marketing.
Second, I visited The Florida Bar which offered a similar Standard COAs for Solos and Small Law Offices:
Professional/Promotion/Marketing
570 Travel & Related Expense
571 Professional Dues & CLE
572 Recruiting: Professional Staff
573 Entertainment and Business Meals
574 Promotion, Marketing & Advertising
One line for everything relating to Promotion, Marketing & Advertising? Does every marketing initiative have equal value? Of course not!
If your firm follows the conventional wisdom – using one COA entry for all things marketing, great and small – then you’re wasting valuable information, resources, and money.
Not All Marketing Initiatives Are Equal
For you to know where your cash is being spent and whether those marketing initiatives are actually benefiting your firm, you’ll have to reject conventional COA wisdom.
It’s time to drill down deep. When you set up the marketing segment of your COA, break expenses down into very discrete categories that can be tracked at the push of a button:
- Advertising
- Radio
- Station #1
- Station #2
- Station #3
- Television
- Station #1
- Ad #1
- Ad #2
- Station #2
- Ad #1
- Ad #2
- Yellow Pages
- Pay Per Click
- SEO/Website
- Direct Mail
- Campaign #1
- Campaign #2
In my last post, I talked about the importance of cash flow management. Coupled with that is the need for a COA that’s meaningful in its itemization, putting you in the best position to make sound business decisions and to plan for your firm’s future. The key to generating wealth and achieving autonomy through your law practice is improved business decision-making over your marketing dollars.
Building a better business, one COA at a time…
