How busy lawyers keep on top of their financial management
Routine Financial Management
Staying on top of your financial management is important. It is a false economy to believe that leaving everything until later will be fine. You will always spend less time in total on financial management if it is done sooner rather than later. Busy lawyers can easily forget to perform this important task and very quickly their finances can get out of control. It is all about identifying and operating the right routines.
There are perhaps 4 key things which need to be managed and the necessary routines are as follows:-
1. Time recording
Every morning you need to check that you and your team have closed all time for the previous day as otherwise time will be forgotten and lost forever. Considerable amounts of work can now be done overnight with technology but this must be captured before worrying about today. On a weekly basis, it is important to review the time captured by the team and to ensure that everyone is busy and has work to do for the following week. If this is left to the month end then it will be too late to plug any periods of under-utilisation.
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At the end of each month it is important to discuss time capture statistics with the team and to thank them for their effort and for their assistance in helping the team to stay at or above target.
2. Keeping clients informed on costs
Clients hate to get nasty surprises about their fees and it is imperative that you stay on top of this and proactively advise clients of any changes to the original estimate. There are two routines that can help with this. The first is to ask clients when taking instructions about when they would like updates on progress and costs as the matter progresses. Diary reminders can then be used to make sure that communication with the client is maintained.
Another useful routine is to use your accounting system fully and to ask for an alert when the WIP on a file reaches a certain percentage of the estimate given to the client. You will need to decide on the appropriate percentage but perhaps when 30% of anticipated time has been recorded you would be able to better predict the likely total time to be incurred on the matter.
Most lawyers react badly at the end of the month and manage to get enough bills out to keep the firm afloat. It might be better if you proactively manage the billing process and attempt to accelerate the speed with which work is completed and the associated bills issued. This can be done with a routine at the start of the month to review all open files. If you already have the information to progress the file then the work can be done and billed in the first half of the month. If you are waiting for information then a chaser should be arranged now so that the file can be progressed and billed in the second half of the month.
4. Cash collecting
The culture in most firms is to delegate responsibility to credit control and lawyers are unlikely to do anything until chased to accelerate cash receipts. You should have a discipline at the start of each month to phone around all outstanding bills so that there is every chance of the money being received by the end of the month. This task can obviously be delegated to a secretary or a more junior fee earner but it needs to be done.
It really is your choice. Do you want to run simple proactive routines now or do you want to have to tackle difficult financial problems later?
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