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.

However, I often needed more in-depth help on finance issues. Again, I have usually turned to LP because its books are second to none in detailing what I needed to help my firm move forward. A perennial favorite is Mark Robertson’s How to Draft Bills Clients Rush to Pay, which helps get money in the door, while also reading Trust Accounting for Lawyers in One Hour, by Sheila Blackford, which keeps the disciplinary bodies at bay. If you want an in-depth understanding of your finances, Results-Oriented Financial Management: A Step-by-Step Guide to Law Firm Profitability, by John Iezzi, is a must-read.

In that “content is king,” LP also provides an array of CLE programs that help establish a smooth path for your firm’s success. You can find programs addressing The Wisdom of a Thoughtful Partner Compensation System or Legal Time/Billing/Accounting Software Options: How to Make the Right Choice. LP continues to develop and provide critical content for solo attorneys and medium-sized and large firms.

The wealth of information afforded our members requires active participation and an interest in lifelong learning. Engaging with LP, whether as a magazine reader or as an active LP member, will help you and your firm avoid financial pitfalls and build a successful law firm. The best way to learn about critical financial issues is to be where people are talking about the issues. You can do that by becoming an active member of LP. Come and join us in Portland, Oregon, on Oct. 3–5, 2019. Here you can mingle with leaders in law practice management issues, you can actively participate in LP’s work, and we would love to have you. At the forum you will be able to talk with other law firm leaders about the financial issues they face, and you can exchange ideas with your peers. Please come! We would love to have you.

Rodney Dowell is the chair of the Law Practice Division. He is a mediator in Massachusetts working with families and couples resolving high-conflict disputes. He also works with attorneys and organizations on management issues and entity conflict.