What is finance? It is money. We all need money to purchase goods or things for day-to-day tasks. We need money to buy everyday goods, like food but we also need money to pay house rent or to buy other things. Just like us, businesses also need finance. Without money, no business can run, pay wages or buy materials to run operations. The law firm is one of the most common business organization these days. Lawyers who have a good amount of savings are starting their own law firms and working for themselves. They don’t have to worry about working for any other company because they do it for themselves and make a lot more money.
All businesses need finance, and so does a law firm. The owner of the business should always make sure to save some funds for the future of the business. There are many reasons why you would need finance for your business.
1) In difficulties
Finance may be needed by a law firm when it is not doing well in terms of revenue. For example, a law firm already suffering from losses might need to pay for the advertising and marketing costs to make the business more popular, or a law firm with negative cash flow might need to pay back the client for not meeting his expectations and bringing promising results. Law firms need finance to cover short-term costs.
2) During expansion
The lawyers who run a successful firm will often hope to expand their business. The owners will have to cover the cost of the land, pay for the additional assets. Some owners also prefer to expand their business by taking over other businesses. In both cases, the owner will need capital to cover additional costs of the business and pay the debtors.
The owners of a law firm need to pay for capital expenditure or revenue expenditure.
– Capital Expenditure
Capital expenditure is money spent on long term assets of the business lasting more than a year. The expansion of the business will need more assets. The owner of the business will have to buy more assets for the newly formed franchise of their business.
– Revenue Expenditure
Revenue expenditure is all about money spent on day-to-day operations. It includes paying for the advertising costs or paying back the clients. It is the kind of expenditure used to pay for the day-to-day operations of a working business.