Why Your Business Should Have a Legal Budget
All businesses should have a legal budget to keep on top of things and be able to manage when unexpected issues arise. Keep reading to find out more.
It is important to plan and tightly manage your business’s financial operations. The most effective way to manage this is through a legal budgeting process. A budget is a formal statement of estimated income and expenses based on future plans and objectives. They are always used when large amounts of money are needed for comprehensive projects. A bank will always ask to see a budget before loaning a large sum of money for a project. Public companies project their costs and expenses in quarterly and annual increments. Recently, there has been a trend towards legal budgeting to manage finances and legal fees. Companies have now been requiring outside counsel to provide a budget in exchange for receiving business. There is a big legal risk when businesses are dealing with a large sum of money. Hence, it is essential to have a legal budget to assist in these situations.
What is a legal budget?
A budget is a plan that allows you to control your finances and ensure you are able to fund your present obligations. Moreover, it enables you to make steady financial decisions and reach your objectives. It also ensures you will have money for any future projects. Budgets outline what you will spend your money on and how that money will be financed. A budget is not a forecast, it is a planned outcome for what your business wants to achieve. Furthermore, there are certain things you should include in your budge. These include things like the cost of your premises, rent and the utilities you use. It should also include staff costs and equipment costs. Moreover, a legal budget will incorporate legal and professional costs including insurance.
Businesses often focus on their day-to-day problems rather than the bigger picture. However, successful businesses set aside time to create and manage budgets. They also review business plans and regularly monitor their financial performance. Businesses should consider potential legal matters during this planning stage. Legal budgets are useful when businesses can identify potential legal risks from their future transactions. The business can use their legal budget and consult lawyers to help them without having to remove money from other budgeted plans.
The benefits of a legal budget
Planning allows your business to anticipate potential areas of need in your business. This is particularly important in high risk businesses which are likely to face problems. There are many benefits to having a legal budget. These include being able to:
- An increased ability to make improvements to the business and predict potential future legal problems
- Sound financial information on which you can base your business decisions
- Improved clarity and focus
- Increased confidence in your decision-making ability
- Manage your money more effectively
- Increase staff motivation to prevent such problems
- Monitor performance and meet objectives
A budget is not a forecast, it is used as a plan for the future to meet business objectives. Successful companies will use a legal budget to prevent potential legal problems from arising in the future. This will allow business to allocate some funds towards such issues. Hence, businesses will still have enough funds to continue with other projects. Contact a business lawyer for more information.
Aditi currently works in the Content Team as a Legal Intern for Lawpath. She is in her third year of a Bachelor of Law and Bachelor of Commerce (Accounting) at Macquarie University. She is particularly interested in Property and Criminal Law.