Law firms are under greater and greater pressure to raise profitability. Demand is essentially flat, more and more businesses are going in-house for legal help, and overstaffing is prevalent. It’s no wonder why the gap between the most- and least-profitable firms is widening.
But what can you do? Working harder or raising fees will only get you so far—there’s a finite number of hours in the day, and clients can easily switch to competitors. You can automate many of your key processes in order to save time, but you’ll need to go even further than that in order to distinguish yourself. It’s time to look inward at something that’s right under your nose, even though you may not know about it. The answer is in your firm’s operating data.
Gathering the Numbers You Need
Your law firm already has a lot of accessible data. Your time entries dictate billing and tell you exactly how much your employees are working. Your accounting system shows you profits, losses, and myriad other metrics. Hopefully your billing software indicates which clients are past due, at the very least. In short, with the way you’re currently managing accounting, time and expenses, billing, and other processes, you have information.
The problem—or the opportunity—is that right now, that information is largely siloed. You can do a certain amount of necessary and productive work with the systems you’re using right now, but they’re all separate.
You could do so much more if you combine all of your data. For example, if you merge your time entries with allocated tasks and billing, you can discover every employee’s margins. You can link data from those systems to predict your cash flow, too. Or if you combine your accounting and billing information, you’ll get a picture of each client’s profitability. Maybe then you’ll find out that certain clients should receive a little more attention, and others a little less.
You can figure out all of these calculations by integrating your software, using formulas in spreadsheets, or downloading and uploading different reports. But can it be easier?
The Power of Quality Software
Doing all of this manually will be beneficial, but it takes time and effort that you probably don’t have. That’s why it’s worthwhile to find a comprehensive software platform that stores your billing, time and expense, and accounting data in one place.
Instead of spending hours entering data, you should only input it once through a process that’s fast and intuitive. And rather than doing calculations effectively by hand, the software should immediately offer all the insights you need. That way, you can make billing decisions in real time, safeguard against budget overruns, understand your staff’s workload, and properly control your cash flow. Forecasting, budgeting, and even hiring will be more straightforward when you can properly predict—and optimize—the amount of cash flowing into your firm. Moreover, your clients will appreciate your accurate estimates, realistic timelines, and improved efficiency.
See? Boosting your law firm’s profits is realistic, just as long as you have the right tools.