For attorneys who have achieved this dream, they know that this certainly isn’t the end game. New challenges present themselves. It’s not just about being a successful attorney anymore, the attorney has now become a businessman/woman, and they need to be successful at that, too.
In the legal industry the stakes are much higher. Law firms are heavily scrutinized, and there are many regulations that if ignored can result in disciplinary actions. So the pressure is certainly on to run a tight, efficient, and compliant firm.
Successful firms are successful because they have successful habits. Here are some habits that any attorney looking to manage a thriving firm should practice.
1. Spot problems before they become problems through the use of dashboards.
Many successful law firms implement a series of dashboards that allow them to pull some of their most important data into one place. By taking a firm’s most important data and pulling it into one centralized dashboard, a firm gains insight in real time into trouble that may lie ahead.
While a dashboard may not be a crystal ball, it does display trending data that can give you great insight into your firm’s future. Here are some of the most important data sets successful firms tend to capture in dashboards.
- A snapshot of some of their most important billing items. This includes unbilled time expense cards, unpaid invoices, overdue invoices, unbilled tasks, unbilled events, and unbilled notes.
- Timekeeper utilization data that details how many hours have been put in against how many hours have been billed.
- Information concerning a firm’s four most important balances: unpaid balance, unbilled balance, the operating retainer balance, and trust retainer balance.
- A record of completed events, tasks, or notes that are billable but have not yet been billed.
- A billing summary that identifies what the firm has billed, and how much of what has been billed 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 can begin to identify problems concerning collection of fees from clients, your firm’s balances, and the productivity of different attorneys in the firm.
2. Eliminate multiple points of data entry.
At most firms, law practice management and business accounting are in two separate systems. The problem is that in many cases the same data needs to be entered into both systems. This means every time a transaction is entered or edited, it must be done in both systems. And that problem compounds if firms accept credit card payments, as the money trail can then be lost.
If law practices can keep business accounting and practice management in one system, data will only need to be entered once, reducing costly errors and the time spent on data entry in the practice.
3. Track income by practice area.
This third habit is where many successful firms can really differentiate themselves from other firms that may not be as business savvy.
Many firms practice a wide range of case types. These case types can call for different methods of billing, and represent different pieces of revenue for a firm. By tracking a law firm’s income by practice area or case type, the firm can create 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, and
- which practice areas aren’t worth the firm’s time.
Understanding all of this put 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.
Just as a matter of efficiency and to ensure 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 the attorney is actually putting the work in on that matter. Tracking the time you spend on a specific matter as an attorney is carrying out the work ensures that all hours spent on a matter will be accurately captured and accounted for. By successfully accounting for all time spent on a matter, attorneys can be confident that they are being compensated accurately.
In instances where firms take on cases or matters with fixed fees or contingency fees, it is still important to accurately capture time spent as it happens. It may not play into how a client is billed, but it is still important that firms are diligent in tracking the time spent on these cases. By tracking the time spent on fixed fee and contingency cases, successful firms are able to understand their rate of productivity and the ratio of work to income earned on different case types.
5. Make money by not losing money.
Successful law firms make sure that they don’t leave money on the table, or drop it under the table. It is so crucial that law firms do all they can to reduce and avoid leakage.
Leakage can be one of a firm’s greatest enemies. It means that a firm isn’t collecting money from clients that it should be for one reason or another.
Unfortunately leakage is a common issue faced by many attorneys. Accounting and billing is such an important component of managing a firm, but lawyers often 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 that everything must be billed at the time of expense, and
- 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 understand that the area of IOLTA Accounting is one of the most heavily scrutinized areas of their business. Failure to comply with stringent regulations could ultimately result in the disbarment of a firm.
Successful firms that remain compliant with IOLTA accounting regulations are mindful of:
- Commingling of funds: Successful firms avoid any type of co-mingling, be it: Client to Client Co-Mingling, Client to Law Firm Funds Co-Mingling, or Client’s Multiple Matters Co-Mingling.
- Three-Way Reconciliation: Depending on the state, firms are required to perform a Three-Way Reconciliation every 30 to 60 days. Technology allows this process to be automated. By automating the three-way reconciliation process, successful law firms are able to rest easy, understanding that they are always “audit ready.”
- Compliance: It would be extremely easy to pass compliance issues to hired bookkeepers, but a successful firm simply cannot. A firm’s ability to practice law cannot be compromised, otherwise the firm could lose everything. While managing partners at a firm are not accountants, they are lawyers, and they understand their own industry’s compliance regulations better than anyone else. While an accountant may have be an expert when it comes to accounting, legal accounting is an entirely different animal. This means that to remain compliant, legal-specific tools and professionals are necessary!
7. Understand that they are no longer just lawyers, but serious business people.
Managing a firm goes far beyond just practicing law. All too often lawyers will find it easy to simply make excuses when they are faced with issues concerning the business of their firm. Successful law firms don’t hide from financial issues, they meet them head on. This means that successful firms don’t sit on their finances for weeks and months at a time waiting for their bookkeeper to pay a visit. They take matters into their own hands and implement to appropriate tools and systems needed to manage not just any business, but a legal business.