Managing their own firm is a dream come true for many attorneys. They spend years in law school in order to pass the bar exam. Then they spent hours upon hours inside and outside of the courtroom honing their craft in order to build an impeccable reputation. Then, one day, that dream becomes a reality, and the attorney is in charge of their own firm.
Attorneys who have achieved this goal understand that it is far from the end. New difficulties emerge. It’s no longer enough to be a successful attorney; the attorney has also evolved into a businessman or woman, and they must be successful in that arena as well.
The stakes are much higher in the legal industry. Law firms are closely scrutinized, and there are numerous regulations that, if not followed, can result in disciplinary action. So the pressure is on to run a tight, efficient, and compliant business.
Successful businesses succeed because they have successful habits. Here are some habits that any attorney who wants to run a successful firm should cultivate.
1. Spot problems before they become problems through the use of dashboards.
Many successful law firms use a series of dashboards to consolidate some of their most important data into one location. By consolidating a company’s most important data into a single centralized dashboard, a company can gain real-time insight into potential problems.
While dashboards are not a crystal ball, they do display trending data that can provide valuable insight into the future of your company. The following are some of the most important data sets that successful businesses tend to capture in dashboards.
- A summary of some of their most significant billing items. Unbilled time expense cards, unpaid invoices, overdue invoices, unbilled tasks, unbilled events, and unbilled notes are all examples of unbilled items.
- Timekeeper utilization data that shows how many hours were worked versus how many hours were billed.
- Unpaid balance, unbilled balance, operating retainer balance, and trust retainer balance are the four most important balances of a company.
- A record of completed billable events, tasks, or notes that have not yet been billed.
- A billing summary that shows what the firm has billed and how much of that has been paid by clients.
- A record of top clients in order of who has submitted the most in payments.
Once your firm begins to track, understand, and analyze this data, it will be able to identify issues with client fee collection, firm balances, and the productivity of different attorneys in the firm.
2. Eliminate multiple points of data entry.
Most law firms have separate systems for law practice management and business accounting. The issue is that in many cases, the same information must be entered into both systems. This means that any transaction must be entered or edited in both systems. This problem is exacerbated if businesses accept credit card payments, as the money trail is then lost.
If law firms can keep their business accounting and practice management in the same system, data will only need to be entered once, reducing costly errors and time spent on data entry in the practice.
Adware is another type of malware. It is an aggressive form of advertising software that sabotages systems in order to serve up intrusive and malicious advertisements and popups. Adware can be extremely inconvenient and downright annoying to deal with, but it is often not as dangerous as other types of malware.
There are also Botnets, which are best described as entire networks of infected computers. These networks are designed to work in unison while under the control of an attacker.
Trojans, on the other hand, are a type of malware that disguises itself as supposedly legitimate software or is hidden within ostensibly legitimate software that has been compromised. Trojans operate invisibly, creating back doors into systems and networks to allow other malware to infiltrate.
Worms are particularly dangerous because they infect entire networks of devices, whether on the internet or locally. Worms cause havoc when they use network interfaces. Unfortunately, once a single machine becomes infected, the infection is likely to spread to other machines at your law firm.
3. Track income by practice area.
This third habit is where many successful businesses can truly distinguish themselves from competitors who may not be as business savvy.
Many law firms handle a wide range of case types. These case types may necessitate different billing methods and represent different revenue streams for a firm. Tracking a law firm’s income by practice area or case type allows the firm to generate new sets of valuable business intelligence that will allow them to understand:
- Which case types produce the most revenue.
- Where the firm should invest its marketing dollars.
- Which practice areas aren’t worth the firm’s time.
Understanding all of this puts the firm’s managing partners in position to make brilliant, data-driven decisions that can bring their firm to the next level.
4. Account for all time spent, as it is spent.
As a matter of efficiency and ensuring that all of a law firm’s time is billed, all of the time an attorney spends on a matter should be accounted for as long as the attorney is actually working on that matter. Tracking the time you spend on a specific matter as an attorney works ensures that all hours spent on a matter are accurately captured and accounted for. Attorneys can be confident that they are being compensated correctly if they successfully account for all time spent on a matter.
Even when firms take on cases or matters for fixed or contingent fees, it is still critical to accurately capture time spent as it occurs. It may not affect how a client is billed, but it is still critical that firms track the time spent on these cases. Successful firms can understand their rate of productivity and the ratio of work to income earned on different case types by tracking the time spent on fixed fee and contingency cases.
5. Make money by not losing money.
Successful law firms make certain that money is not left on the table or dropped under the table. It is critical that law firms do everything possible to reduce and avoid leakage.
Leakage can be one of a company’s most dangerous enemies. It denotes that a company is not collecting money from clients that it should for one reason or another.
Unfortunately, leakage is a common problem for many attorneys. Accounting and billing are critical components of firm management, but lawyers frequently lack the time and expertise to manage their firm’s finances.
Successful law firms reduce or avoid leakage by:
- Allocating direct costs to matter files as they are spent.
- Understanding everything must be billed at the time of expense.
- Accounting for all overhead costs.
Of course, this is all easier said than done. Many of the most successful firms will use different sets of legal technologies to ensure that their finances are successfully managed without spending large amounts of time or money.
6. Pay great attention to and remain compliant when it comes to IOLTA Accounting.
Successful law firms recognize that IOLTA Accounting is one of the most scrutinized areas of their business. Failure to comply with stringent regulations may result in a firm’s disbarment.
Successful firms that adhere to IOLTA accounting regulations keep the following in mind:
Commingling of funds: Successful firms avoid all forms of co-mingling, including client-to-client co-mingling, client-to-law-firm fund co-mingling, and client-to-law-firm fund co-mingling.
Three-Way Reconciliation: Firms are required to perform a Three-Way Reconciliation every 30 to 60 days, depending on the state. This process can now be automated thanks to advances in technology. Successful law firms can rest easy knowing that they are always “audit ready” by automating the three-way reconciliation process.
Compliance: It would be very easy to delegate compliance issues to hired bookkeepers, but a successful firm simply cannot do so. The ability of a firm to practice law cannot be jeopardized; otherwise, the firm may lose everything. While managing partners are not accountants, they are lawyers who are intimately familiar with their industry’s compliance regulations. While an accountant may be an expert in accounting, legal accounting is a completely different beast. This means that legal-specific tools and professionals are required to remain compliant!
7. Understand that they are no longer just lawyers, but serious business people.
Managing a firm entails much more than just practicing law. When confronted with issues pertaining to their firm’s business, it is all too common for lawyers to simply make excuses. Successful law firms do not avoid financial issues; rather, they confront them head on. This means that successful businesses do not sit on their finances for weeks or months at a time, waiting for their bookkeeper to come in. They take matters into their own hands and implement the necessary tools and systems to manage a legal business, not just any business.
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