September/October 2019

Perspectives

Understanding the Need for Sound Firm Financing

Rodney Dowell

Money. I cannot think of a more difficult topic for attorneys to discuss or to properly handle.

The practice of law is a cherished profession, but we know that it is also a ruggedly competitive business that needs attorneys trained to understand and oversee the financial side of this business. Throughout my career I have seen terrible outcomes for firms that do not understand their finances or do not have proper financial controls. I have witnessed firms fall apart because cash flows were inadequate, partnerships dissolve because of money disputes, firms sued due to overaggressive billing or solo attorneys losing their practice because they fail to charge enough. Firms have faced disciplinary action because they did not have proper financial controls, resulting in stolen money or misused IOLTA funds. I have watched firms fail because they overexpanded and other firms become simple lifestyle firms with no growth because they do not understand how to leverage their finances. I have worked with attorneys desperately hanging on to service centers that were not profitable, never understanding that the correlation between being busy and profitable was not direct. I remember my start-up firm when we had to find out how to set up IOLTA accounts, learn about profit and loss statements, understand the value of cash and learn what our true profit centers were.

Fortunately, like thousands of attorneys before and after me, I discovered the value provided by the ABA’s Law Practice Division (LP) in helping me and others learn about the many financial issues facing us. When I needed help, I knew that LP could give me answers to the money questions that would allow my partners and me to create a healthy, growing firm. LP continues to provide critical content for firms to understand and control their finances. You need only look at this issue of the magazine, but you will also find in past publications articles on how to understand the firm’s financial condition, how to unearth fraud and how to capture your time effectively. Go ahead, look here, and take the time to look at the September/October 2018 issue to see what you missed in the previous Finance issue.

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