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I make it a practice to have clients fund and replenish evergreen retainers (and I ask for a replenishment when the trust account balance is low, before it rubs out). It does not always work perfectly, and clients can also delay replenishing retainers, but it has definitely improved my cash flow significantly.
My clients are large companies with 30-60 day payment terms. So I may have 60 days before I actually get paid for the work I do. Net 30 is very common, but still like waiting 30 days sometimes stresses cash flow
Mentor
I try to wait to pay myself until I have three months of business expense funds in the business account. It is easier to go without than to take personal funds and write a check to the firm to cover expenses.
*runs out
Mentor
Are you talking about absorbing the cash flow to your firm or to yourself personally, or both?
Mentor
I’m interested to hear what others say. For our firm it’s about keeping overhead low and not taking a salary or regular pay for partners. So partners only get paid when enough money has come in. Typically the partners get paid once a month but there have been times where the partners were not paid for a couple months because receipts were lagging.
For me personally it is about living below my means, keeping a larger buffer of cash, and budgeting. My spouse and I have buffer budget category where we keep a typical draw in case I don’t get paid in any one month. We also have a buffer where I dump any extra money above this amount (let’s say we get paid twice in one month or double, for example). So, our money to spend or invest each month is the regular draw (that we received in the prior month or the one we have saved) plus 1/12 of the extra buffer. It helps smooth out our perceived income.