As an administrator, managing partner, financial partner or other law firm leader concerned with getting the most bang for your firm’s hard-earned bucks, you should be putting aside time to study your firm’s finances.
In order to do that, you’ll need to become acquainted with budgets for revenues; cash flow; partner compensation; your business plan; expenses and client advances.
According to Joel Rose, who put together “Financial Management Strategies Enhance a Law Firm’s Success” for the Law Practice Management Tip of the Week, sponsored by the New York State’s Bar Association’s Committee on Law Practice Management (January 20, 2010), these six areas should be looked at when you are seeking to get a firm grip on what will improve the bottom line.
You may also wish to implement brand new ways of billing, and perhaps introduce a way in which lawyers who are quick to bill and collect are given special recognition.
As far as client advances are concerned, this is an area of “great concern” to Mr. Rose. “Don’t permit them,” he stresses. He has no problem with advancing costs for filing fees, but he thinks that clients should pay other costs, such as “court reporters, costs of transcripts, exhibits and expert witness fees” out of their own pockets.
As part of the solution, Rose suggests firm practice “toughness” and believes that firms should run advances through the income statement.
Rose lists a myriad of other ways in which to save costs but cautions that firms shouldn’t overlook what will get you paid in the first place. Remember, he notes, service is the key.
“I want to emphasize that systems and controls do not give you results in and of themselves,” he notes. “It is the quality of legal services, marketed in a common sense way, rendered to clients that produces the psychic and monetary reward lawyers seek.”
Along the same lines, you shouldn’t be so inflexible with your financial controls that you “hamstring” your attorney’s productivity. If you, as the administrator, have been hearing continual negative feedback about a protocol that was supposed to free everyone up to better service clients, you may want to reconsider the value of implementing such a policy. This will be the case when, for instance, following such controls prove to be so burdensome that, as a result, deadlines are not met.
This does not mean that some strictures shouldn’t be introduced, ‘though. Rose notes:
“The true measure of leadership among lawyer managers in today’s law firm is the ability to maintain a careful balance between the need to encourage each lawyer’s initiative, provide the much needed atmosphere of professional camaraderie typical of the partnership type of law practice and plan and implement the modern financial tools without which the best practice can fail.”
So, by all means, look into computerized invoicing, a centralized billing system, and acknowledgment of lawyers who are prompt to bring in cash flow, but remember…controlling the monetary factor is only part of the equation.