Law schools focus on teaching students how to represent clients, not how to maintain a profitable law firm. Thus, whether you’re a part of a solo practice, a small or large firm, you have to delicately balance representing clients without losing money. Often times you may resolve clients’ cases before receiving payment causing you to have little money to pay employees or keep the firm financially fit. Also, a law firm may miss out on a huge portion of revenue that could be set aside for cash-on-hand purposes.
Rethink the Information Technology Department
Get rid of the information technology or IT employee. For a solo to mid-sized law office with approximately 100 employees, it may be cheaper to outsource your IT needs. You can hire a company that provides on call services than having an IT employee sitting around waiting for something to go wrong.
Maintain Billable Records
Keep billable time records. It’s easy to not record all the billable work you do. For instance, you may want to provide the client a discount because you think the bill is too high or you may simply forget. Whatever the reasons, when a lawyer and/ or paralegal don’t write down all the hours worked on cases, a firm loses money.
Keep Money at the Forefront
Think money, not clients. Use a screening process to weed out clients who don’t pay before accepting their cases. Of course, law school teaches a lawyer to represent clients, not their money. However, accepting clients who can’t pay is one way of losing money.
Accept credit cards. Typically, a firm accepts cash, money or personal checks. A smart move, however, if you’re having too many problems with clients not paying is to accept credit cards. A credit card payment is instant, upfront money that doesn’t bounce.
Establish an aggressive account receivable department. A lawyer wants to focus representing clients, not how much money owed. Thus, you may want an account receivable department-even if it’s one person to call clients when they haven’t paid.
Things to Consider
Regardless of how large or small your law firm is, you need to create a plan to help you stop wasting money. Creating a plan may require you to look at each department in your firm to understand how much money the department is wasting.
Resource:
Janice Mucalov, LL.B, “Ten Ways Law Firms Lose a Lot of Money,” The Canadian Bar Association.