Growing your business is an exciting adventure, but let’s be honest, it can be pretty challenging. You want to serve more clients, boost your revenue and build a bigger team. But to do that, you have to make sure your law firm financial systems are ready for the ride.
Table of contents
- First, Evaluate Your Current Financial Systems
- What Your Scalable Financial Systems Should Include
- Take Charge of Your Law Firm’s Financial Systems
Trust me, a solid financial foundation makes managing your growing law firm much easier. So, let’s look at your law firm’s financial system, spot any weak spots — and set yourself up for success.
First, Evaluate Your Current Financial Systems
Before we dive into the specifics of ensuring your law firm’s financial systems are scalable, let’s assess your current situation. Here are the key areas to consider when evaluating your firm’s financial systems:
Key Financial Metrics
Take a moment to think about which financial metrics you’re currently monitoring. Are you keeping a close eye on your cash flow forecast, owner compensation, and work in progress (WIP)? These essential indicators help you make informed decisions and plan for growth. If you’re not already tracking these metrics, it’s time to start.
Budgeting and Profit Planning
How well are you managing your firm’s budget and profit plan? Establishing a well-defined budget and profit plan helps you allocate resources efficiently and ensures your firm stays on track for growth. Make sure you’re regularly reviewing your budget versus actual reports to identify areas for improvement and course correction.
Team Productivity and Capacity
Understanding your team’s productivity and capacity as your law firm grows is essential. Setting goals and holding your team accountable helps to ensure everyone is working at their full potential. Analyzing your team’s WIP can help predict next month’s revenue and give you an idea of when to expand your team.
Marketing and Sales Conversion
Understanding how clients find your law firm and measuring your marketing efforts is crucial for growth. Track your conversion cycle to identify areas where your marketing message may not align with your business goals. Pay special attention to the number of sales calls booked, as this can help predict how many new clients or projects you’ll secure in the upcoming month.
Financial Controls and Procedures
Assess the effectiveness of your current financial controls and procedures. Are you regularly reconciling accounts, reviewing financial reports, and monitoring expenses? Having strong financial controls in place is essential to safeguard your law firm’s assets and ensure accurate financial management.
What technology are you using to manage your law firm’s finances? The right tools can streamline your processes, save time and help you make better decisions. If your current technology isn’t integrated from the first time a client contacts you until their case is closed, you have work to do.
What Your Scalable Financial Systems Should Include
Once you’ve assessed your law firm’s financial systems, it’s time to identify areas that need improvement or may not be scalable.
Keep in mind that your systems must be adaptable and flexible— able to handle changing needs as your firm grows, like adding new clients or projects and updating budgets quickly. The ability to scale up or down as needed is crucial for any successful expansion.
Here are a few areas to address:
The more efficient your financial processes, the better you can handle growth. This is where technology comes in. Assess your current systems and look for tasks that can be automated. Embrace tools and systems that streamline tasks such as invoicing, expense tracking and payroll. You should be using cloud-based accounting software, billing platforms and expense-tracking tools wherever possible. Research and test different options to find the best fit.
You need current data to make informed decisions, spot trends and respond to challenges or opportunities as they arise. Choose systems that offer real-time updates and make sure your team understands how to interpret the data.
Robust reporting and analytics features
These tools will help you track progress, identify areas for improvement, and make data-driven decisions to steer your firm in the right direction. We like systems that can run these reports automatically —remember, automation streamlines tasks!
Take Charge of Your Law Firm’s Financial Systems
By assessing your current situation and addressing weak spots, you’re setting yourself up for smooth sailing as your law firm grows.
If all this overwhelms you, you don’t have to tackle everything alone. Consider outsourcing specific tasks to financial professionals or hiring someone to manage your firm’s financial systems. Bringing in experts takes some pressure off your plate as your firm grows. Remember, you didn’t go to law school to deal with numbers!
Establish Strong Internal Controls
Bringing in experts doesn’t mean you abdicate responsibility for your firm’s finances. As your law firm scales, it’s essential to establish strong internal controls to minimize risk and ensure accurate financial management. Implement checks and balances and regularly review your procedures to maintain control and safeguard your firm’s assets.
I hope this guide helps you ensure your law firm’s financial systems are ready to scale. With the right financial foundation, you can focus on providing top-notch legal services and building the law firm of your dreams.
So, go ahead and take charge of your financial systems and set your law firm on a path to success.
Image © iStockPhoto.com. Updated from a post originally published in 2015.
Don’t miss out on our daily practice management tips. Subscribe to Attorney at Work’s free newsletter here >