10 ways to make your law firm profitable
This blog article covers 10 ways to make your law firm profitable. At any law firm, the aim is always to make as much profit as possible. However, in today’s competitive landscape, this is a lot easier said than done. If you have been trying to think of different ways to generate a greater amount of law practise profit, yet you have hit a brick wall, don’t fret. Below, we are going to take a look at ten of the ways that you can make your law firm more profitable.
Capture billing time accurately
There is only one place to begin, and this is with making sure that you are capturing billable time accurately. This is something that a lot of law businesses are failing to do because they are not making the most of automated systems for time recording. If this applies to you, then you are probably going to be missing out on hundreds of billable hours per annum. According to research that was conducted by Thomson Reuters, 37 per cent of senior legal practitioners still capture time manually.
This is worrying because it means that billable hours are being underestimated. In fact, in the same study, it was revealed that over half of those interviewed admitted that their billable hours were being underestimated by anywhere between 10 and 40 per cent. This means that, every year, hundreds of hours are going to waste instead of being billed for. The best way to make sure that this does not impact you is to find a good practice management system.
There are a number of different solutions that are on the market today and will help to make sure you are not missing out on money you should be charging for. There are a number of different ways that they do this, including the use of automated clocks being integrated seamlessly with your management system, documents, and telephone. This makes sure that all times are captured while you are on the go. After all, it is not uncommon for law professionals to do a bit of work while they are at home or while they are on-the-go.
These hours never end up being billed for but they should be. By investing in a good practice management software system, you can make sure you never have to miss out on this money again.
Aside from making sure that you capture billing time properly, it is also advisable to look for ways to cut administration. If you capture time as you work, you are not going to need admin staff to conduct the laborious tasks of entering fee earners’ timesheets manually on a daily basis. This means that your support staff are going to be freed up to do what they do best, which is, of course, support you. They will be using their high-end skill set to boost the productivity of your business, which, in turn, is also going to help you to secure higher profit levels.
Differentiate your law firm
You should also look for different ways that you can set your business apart from the crowd and generate new profit avenues for you. For example, you may want to look into new practice areas if this is feasible. You can do this by training your existing employees. Alternatively, you may want to look at recruiting lawyers who are experts in practice areas that are not your company’s specialty. Expanding the practice areas of your company is one way to increase profitability.
However, you need to make sure that this is done based on research. Find out what areas of law are in high demand. Do not merely choose a lawyer in any sort of field without any thought about it. You need to make sure that the new area of law that you choose to practice is actually going to move your company forward.
In addition to the suggestions that have already been mentioned, another way that you will be able to boost profit levels at your law firm is if you learn to outsource properly. There is no denying that more and more businesses are making the most of everything that outsourcing has to offer.
After all, in the modern day, handling everything in-house is becoming impossible. However, in order to ensure that outsourcing is effective and that it has a positive impact on your bottom line, you need to outsource with care. This means outsourcing the right tasks and making sure that you choose a provider with care.
In terms of determining what you should and should not outsource, you need to look at outsource those tasks that are time consuming and do not result in profits being made. These should not be activities that make up part of your core services. Instead, they can include matters such as marketing and legal transcription.
By outsourcing elements of your business like this, you will be able to ensure that your workforce are putting their skills to best use by focusing on the tasks that suit them best. This will help you to turn a profit. Make sure you do your calculations, though. Outsourcing can be cheaper overall because you will be paying for a service as and when you need it or on a monthly basis.
Reduce data entry errors
You also need to make sure that you look for different ways that you can reduce data entry mistakes. After all, humans are not perfect and errors can happen from time-to-time. However, we all know that mistakes can result in money being lost. Therefore, it is important to embrace technology in order to make sure that accuracy is maintained.
Track your expenses
In addition to the points that have already been discussed, another way to increase your law firm profit is to track the expenses your business has against the budget your client has. If you speed up the manner in which information enters your system, as advised, then you will have an accurate snapshot of unbilled disbursements and work in progress thanks to your automated entry system.
As entries are going to be updated instantly, you will be able to see how you are tracking in comparison to the budget your client has. This means that you will be able to discuss any potential overruns before they become an issue.
Being billed for something after the fact is going to anger your clients and they may not accept that you are trying to charge them for this. Instead, the best thing to do is be ahead of the game. If you can see that your money is depleting too quickly in regards to the budget your client has, you can contact them at the earliest opportunity to discuss the situation and determine whether or not they will be willing to add to their budget or whether you are going to have to make some cut backs.
Stay away from bad clients
Of course, it is not always going to be possible to distinguish the good clients from the bad. However, you do need to be diligent here. There are a lot of different ways that a client can be considered ‘bad.’ This includes clients who do not pay their legal fees on time or at all.
This also includes clients who put you on a retainer just so that you are available yet they do not provide you with ongoing work that can be billed. You will want to stay away from clients like this, and there are a number of ways to ensure that this is the case. You may want to conduct a credit check on new clients to make sure that they do not have a history of missing payments. Aside from this, doing research online can be helpful. You never know what you are going to uncover by doing a quick search of a business on the Internet.
Run detailed reporting
You not only need to make sure that you are watching how your teams are tracking in regards to the budget, but you can also manipulate the data so that a number of different reports can be run that will help you to make sure your firm is running as efficiently as possible. You should look for any cost anomalies or overruns, locate profitable areas of your company, and determine the best ways for your fees to be structured.
You know what they say; knowledge is power, and this is definitely the case when it comes to the law industry today. Make the most of the data that is available to you so that you can make the tweaks that are needed to make your business as profitable as possible.
Save money on printing
There is no denying that a lot of law companies out there today spend too much money on printing and paper. You can save thousands of pounds every year on consumables if you reduce your paper consumption and, consequently, the physical storage space that you are going to require. By making the most of automated entry systems, you are not going to need to print all of your reports. Instead, you can print, save, or view reports only when you need to do so.
Assess the way you handle billing
Last but not least, there is no denying that one of the biggest expenses for businesses is running out of cash. When people do not pay their bills on time, it can create a snowball effect. This can mean that you run out of money and that you need to go into your business overdraft, which, of course, will result in fees.
Because of this, one of the best ways to ensure that your law firm is as profitable as possible is to look at the way you go about billing your clients. We have already discussed the importance of making sure that you bill for all of the hours you work. However, there are a number of other steps that you can take in this regard as well.
This includes billing accurately and often. Make sure you send your invoices out on a regular basis so that there is a steady flow of invoices going out all of the time. Whenever a task is complete you may decide to send out an invoice. Or, you may decide to send out your invoices on a specific day every month. This will depend on the nature of your law firm. Aside from this, you should consider your payment terms. How long do your clients have to pay?
What happens if they do not pay within the time frame that you have stated? Are your payment terms clear and do all of your clients know them? These are all of the things you need to consider when making sure that you bill efficiently and effectively at your business. You may also want to consider getting new and existing clients to pay in advance, or at least pay for a portion of the service upfront.
As you can see, there are a number of different approaches that you can follow in order to generate a greater amount of law firm profit with these 10 ways to make your law firm profitable. If you follow the suggestions that have been mentioned, you should be able to notice a difference when it comes to the amount of profit that your law company is able to generate. However, it is critical to remember that Rome was not built in a day. Patience is required. You cannot simply expect to double your profits overnight.