What is the State of Your Law Firm?

What is the State of Your Law Firm?

Last evening the President delivered the annual State of the Union address. Whether you agree with his politics or not, the idea of reviewing the current and future prospects of any organization, large or small, is always a good idea.

Most business owners, lawyers included, are usually so busy simply running their business, that they have little or no time available to actually reflect on where their business has been or where they think it will be a year from now. From my own personal experience as a law firm productivity consultant here are some real-life examples of how my own clients have benefited from such an annual review.

How much and for how long has money been owed to the firm? And by which clients? Controlling accounts receivable – the money owed to the firm – is the key to running a successful law business. Recently a client asked me to resolve a bill printing issue and in the course of finding the solution we printed out a list of all of the outstanding invoices owed to the firm. The report indicated that the firm was owed the equivalent of 4 months’ average monthly income, which was the equivalent of an interest-free loan by the firm to the clients who owed the money. I asked the senior partner if he was happy about this discovery and he told me that he never had bothered to review this particular report. The firm was used to receiving X amount per month and as long as that remained constant he never thought that there was a problem. The amount was owed by literally hundreds of clients, not merely a few laggards. Apparently the law firm’s clients had learned that the firm didn’t hound them for the money that they owed, so they did not submit it in a timely manner. If your firm does not send Past Due notices from the firm’s time and billing program, the firm is not operating efficiently.

How often are closed matters archived? Many of the firms I visit complain that their practice management software is running very slowly. While hardware or network issues can sometimes be the cause, most often it is the enormous number of “active” matters which are clogging up the system’s database. At one firm I found 36,000 “active” matters, which, when reviewed over several months, were reduced to the actual number of less than 3,400 by archiving the other 32,600 matters. Thereafter the staff was able to work more efficiently (earning the firm more money) instead of repeatedly waiting for their computer monitors to refresh with a requested list. Archiving does not delete a matter, it merely prevents it from being displayed automatically. It can always be manually retrieved.

Is the firm using the most current versions of the software used to run the practice? Most law firms adopt the position that once they buy practice management or time, billing and accounting software they need not upgrade it, as long as they are using it to perform the same work year after year. If their computers were not connected to the Internet, this would be a correct position. However, all office computer networks are connected to the Internet and are bombarded daily by update notices or actual software updates. As a result of this connection the operating system, anti-virus and even word processing software is different from the versions the software running the firm was designed to work with. A failure to stay current with that software can result in a necessary function no longer working properly. A program installed and never updated since 2009 could not be expected to work correctly with other updated and current 2014 software.

Has the firm improved its marketing strategy to obtain new clients? If a review of the number of new clients obtained in 2013 reveals a number less than those obtained in 2012 the firm is losing ground. If no one at the firm is tracking this information the firm is in trouble. While the practice of certain areas of the law may have evolved slowly over the last 10 years, the operation of the law business has changed exponentially. If your firm is not attracting new clients through the use of social media, FaceBook, Twitter, a firm newsletter or current and relevant blog posts, your firm has little reason to expect 2014 will be any better than was 2013.

Is every firm employee playing from the same game book? [As the Super Bowl readies for kickoff here in New Jersey on Sunday a sports metaphor was necessary to close out this post.] If certain partners have their department staff work differently from the rest of the firm, fail to post time entries or approve invoices in a timely manner, or otherwise hold their department out as unique, the firm will find it more difficult to achieve it’s goals for 2014. The business of law, like every other kind of business, is a team effort. If every member of the business is not positively contributing toward the overall benefit of the firm, the future prospects of the firm will ultimately suffer.

If you cannot answer the title of this post, perhaps it is time to seek the answers from other team members in your firm or to seek the help of a law office productivity consultant.

Steve Miller, JD  has provided law office productivity consulting services since 1998. He is certified in LexisNexis PCLaw®, LexisNexis Time Matters® and Amicus Attorney®.

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