The Finance Issue

Editor's Note

You're Spending Time on Firm Finances for a Reason

Heidi Barcus

Have you ever tried to calculate how much time you spend on your law firm’s financial health? Lawyers watch billables, collectables and the average billable rate on a constant basis. We spend endless hours editing, coding and rewriting bills. This month a lawyer’s time was written down because the words “work on” were used and the insurance carrier couldn’t tell if the work was lawyer work or clerical work. The carrier assumed the work was clerical work, and the time was written off. I quickly added “work on” to my list of words to avoid and shot off an email to other lawyers working on these files. Over time, I have developed a list of words that seem to trigger write-offs. However, it seems that the rules change almost as quickly as I identify the words to avoid. More and more lawyer time is written off and recategorized as clerical time. That trend is unlikely to change.

The financial health of the firm doesn’t end when the bills hit the door each month. Expenses, client entertainment, health insurance and the cost of employees impact the firm’s finances. The biggest cost to the firm is often the loss of a key lawyer. When such a lawyer leaves, the other lawyers must then identify a replacement and spend time vetting candidates. Time spent replacing lawyers doesn’t even calculate the emotional cost of change to the firm.

I recently took a look at the number of hours I devote to our firm finances on a monthly and yearly basis. It’s an exercise I encourage you to try. I’m willing to bet that at the end of next month you’ll be surprised by how many hours you devote to the firm’s finances. I am not suggesting that you curb the amount of time spent on financial matters. Instead I am suggesting it’s important to understand that the financial health of your firm is key to your success. Otherwise it wouldn’t require so much time. Some lawyers say they don’t like numbers and leave that to others. But, when it comes right down to it, we’re all interested in the numbers. I also believe that once you realize the amount of time you are investing in the finances, you will want to find ways to streamline your processes and be prepared for the next challenge to the bottom line.

We begin our Finance issue with Larry Bridgesmith’s “Collaboration Is the Future, Not Competition,” in which he argues that unresolved conflict in the workplace is expensive and that lawyers need to foster collaboration as one means to offset that expense, as corporations have done. Jeff Shavitz follows this up by noting that if you’re not accepting credit cards or other alternate means of payment, you’re likely losing profits in “Legal Payment Processing Must Change.” In “A Novel Approach: Subscription-Based Legal Services,” Steve Best discusses how a client subscription for legal services, a flat rate paid monthly, can serve both the needs of clients and provide a steady stream of income for the lawyer or law firm. Ariela Tannenbaum, in “Understanding Your Firm’s Real Financial Condition,” provides an in-depth guide for gathering salient data above and beyond accounts receivable, billable hours and collections to maximize firm profit. Ian Hu follows that up with an investigation of in-house fraud and how it may be reduced in “An Inside Job: Unearthing Fraud in Law Firms.” Finally, Kathryn Scourby delineates “A Disaster’s True Costs and How to Mitigate Them.”

I’d also like to thank Joshua Kubicki and Kim Craig for contributing to the Highlights column, while Katy Goshtasbi signs in with the first of her Perspectives columns as the new Law Practice Division chair.


Regards,

Heidi A. Barcus, Editor-in-Chief

Thanks to our Issue Team: Steven J. Best, George Leloudis and Anna Rappaport

Heidi Barcus

Partner, London Amburn, P.C.

Heidi A. Barcus is a partner with London Amburn, P.C. in Knoxville, Tennessee. She is a past president of the Knoxville Bar Association and certified by the American Board of Professional Liability Attorneys. hbarcus@londonamburn.com