I’ve had a complicated history with math. Math homework was always a time of frustration and tears. Pivotal moments in my life are intertwined with my difficulties with math. My father kindly steered me away from my dreams of medical school when he pointed out that a scientist who hated math would get about as far as a runner who hated to run. Nowhere. I changed my major from Computer Science (a major three classes shy of being a math major) to Computer Information Systems after my first brush with calculus. I then went on to marry my math tutor keeping in mind the practical benefit to my future children of at least one parent being a math whiz.
The common trope amongst lawyers and law students alike is that they went to law school to avoid math. But let’s be honest with ourselves, there is no escape. Fortunately, finance, specifically law firm finance, is more than just math. It’s profitability, it’s efficiency, it’s planning for the future. Law firm finance is really about the management of money within the context of our practices, whether in a large firm or a practice of one. Law firm finance examines how we manage resources, like time and people, to make money.
I was able to make peace with math in business school because business math made sense. And business calculus aside, it was simple math. Basic arithmetic applied to business problems is no less illuminating than the equations and theorems from traditional math classes that help explain the world around us. In the study of law firm finance, we examine what things to track and measure to identify what matters to a firm. Nothing highlights an issue or lends importance to an activity like applying metrics. Be it billable hours versus flat fees, or the rate of return on different marketing efforts, it is hard to determine what is working and what isn’t without applying basic financial analysis to the data.
In this issue of Law Practice magazine, we touch on the areas of law firm finance that help you better manage your resources and ultimately make a profit. Addressing the efficiency of your staff and your management of time and money can provide more sophisticated avenues toward profitability than just raising your rates. We’ll also discuss planning for retirement in hopes that you consider the connection between the profits of today to your lifestyle of the future. Finally, we examine trust accounting and tips for doing it properly, so that you can fill your operating account and be profitable without running afoul of the bar regulators.
I assure all my math averse colleagues that this issue is for you. You may fear math, but don’t fear this math. The Law Practice Division’s aim is to advance the legal profession through education on critical aspects of law practice, like finance. Use this issue as a tool for growing your knowledge in this area and thinking differently about money and other resources that lead your practice to be profitable. Drawing wisdom from the sage Snoop Dogg, let’s keep our mind on our money and our money on our mind.
