It’s time for your firm to make your 2012 News Year Resolutions; these might help you decide on some that will be sure to please the partners.
Improve Cash Flow. I’ve written several articles in the past regarding improvements in cash flow, mostly around the collections process, here is one. Improving cash flow starts with the engagement process. All new clients and even some new matters require a standard firm engagement letter that is executed BEFORE starting work for the client. Payment terms must be clearly identified along with retainer requirements. Is the “retainer” classified as an IOLTA payment in your state, there is actually a big difference, read here.
The use of automated Collections software with Wizards (workflow) will greatly improve collections, see Mary’s story here and here. The idea is simple, you’ve done the work, you should get paid. One unique possibility is to ask clients to pay by ACH Debit, we all do it for expenditures like our credit cards, monthly mortgage payments, utility bills etc. At the end of the month just send the client an email with a PDF bill attached and then after an agreed to period, like 20 days, sweep the money from their bank account. There are much fewer accounts receivable issues and cash flow improves immediately.
Provide Partners with Information not Data. Law firms are guilty of providing partners with stacks of month end reports with tons of “data”. What the partners want to know is; so what?, what does this mean?, what should we do about it?, how does it affect us?. The CFO at the firm should make sure the information the partners receive is understood by the partners from a business point of view. Partners are attorneys, they too many times want to see all the details, all the reports, and do their own research, that’s what attorneys do. A smart law firm will boil all this down into summary format and provide the analysis up-front. A good Business Intelligence system with a data warehouse will help automate this process.
Provide Accrual Based Analysis not Just Cash Reports. Most firms in this country choose to operate on a cash basis, however cash basis reporting. See my story on cash vs. accrual accounting here. Beginning in 2012 start educating your partners on accrual basis reporting, show them a more clear picture of how the law firm is structured from a profitability point of view. There is more to law firm profitability than the current cash balance in your check book.
Reduce Risks. Rick management becomes a much more important topic as a firm grows geographically and diversifies into more areas of law. Why, because there is more room for errors that can be very embarrassing and costly. Conflict checking for business issues and adherence to federal laws may actually out-weigh some of the normal legal representation issues. For example, here is a story dealing with a potential new client embarrassment. Make you’re your firm isn’t caught up in a SDN violation, it could be very costly. Check this out.
Lower Internal Costs through Productivity Gains. This is so easy to say, yet a little more difficult to do. We’ll focus on improvements in just the quality of what you do, see this story on quality. There can be many more ways to improve productivity and lower costs, check this out.
I hope your firm enjoys a peaceful and happy new year.