3 Ways to Boost a Law Firm’s Bottom Line
A law firm without a strong revenue stream will soon sink. While every firm's circumstances are different, there are several sure methods for improving finances.
Much like running any type of organisation, managing a law firm requires the ability to make sound decisions. You need to allocate your resources properly and create systems that raise productivity and reduce overhead.
On top of this, there is also a need to finance marketing activities and make payments on malpractice premiums, and there’s a good chance that you might overlook details that could have a big impact on the bottom line. To help maintain your law firm’s revenue stream, here are a few tips you can follow:
1. Identify your benchmarks
To start, take a look at your firm’s expenses and revenue stream. If the former surpasses the latter, then it is high time to make crucial changes. Identify what you want to reduce or maximise. Most firms would focus exclusively on reducing their cost-per-client metric. Others would put more effort in generating high quality leads in a bid to raise profitability.
Regardless of your goals, you should have a realistic number to aim for. If your firm specialises in personal injury cases, aim for a benchmark of 45 leads per month. This will depend mostly on the number of lawyers you have that work in this area, so always aim for a target that follows the SMART model.
2. Improve your billing system
Attorneys may be the lifeblood of any law firm since they are the ones that generate revenue, but it’s your billing system that puts your financials in order. Without an effective system for tracking billable hours and unpaid invoices, your attorneys risk not getting paid for the actual amount of work they put in.
An effective workaround to this is accurate timekeeping. Have your attorneys take note of every client correspondence, double check their invoices, and report any issues or inaccuracies. Doing so prevents the risk of billable hours falling through the cracks.
3. Automate and outsource
Considering the amount of work that’s involved, your firm has to spend money on paralegals and assistants. Having too many on the payroll will only drain funds faster, but on the other hand, having less staff on board would mean stretching yourself and your lawyers too thin. It’s because of this dilemma that law firms consider outsourcing activities such as legal research, marketing, and day-to-day admin work to freelancers and virtual assistant agencies.
Law firms can also choose to automate attendance policies and use practice management software for everything else such as time tracking, calendar management, and contact database management. Whether it’s delegating tasks to offshore assistants or using the latest tools, both of these options can optimise your productivity at a lesser overhead.
There are other ways that can help maintain a positive cash flow for your law firm, but the important thing here is to be proactive when seeking out issues that eat into the bottom line. It’s your role as the managing partner to prevent these issues from surfacing and create opportunities for further expansion.