Practical Ways to Get Your Entire Firm Pulling for Profitability

You want your lawyers to focus first and foremost on providing excellent service to clients. This is the sure source of more business, and of course happy clients pay their bills. But we cannot leave it at that. Firms must use tools and business processes to drive not just revenue but profitability. The best results come from the entire firm pulling for profitability, not just the financial managers.

Five Practical Tips to Drive Profitability Using the Power of
Business Intelligence (BI) Software

  1. Provide a visual dashboard into financial information for individuals to monitor performance.

    Lawyers should be invested in not just "billing hours" but in the financial health of the firm. This includes making sure their hours are billed and collected. BI software should provide easy-to-read graphs that will allow them to monitor a client's WIP or A/R status without wasting their time poring over financial reports. Using their ownership of the client relationship, lawyers can address problems or adjust their client priorities based on real-time data.

  2. Manage billing vs. projection by professional each month to monitor cash flow and measure performance against firm benchmarks.

    Strong Business Intelligence software should also bring performance monitoring to every desktop. It should lay out performance expectations and measure the results on a monthly basis to improve accountability and anticipate cash flow. Individual lawyers should be able to view their own projections and results, and firm managers should be able to keep an eye on their practice areas or even firm-wide performance. Again, with the use of easy-to-read graphs, the information comes out of the shadows of long complicated reports and into view for those that can take action using the information.

  3. Monitor effective rates to identify practice areas and fee arrangements that are the most profitable for the firm.

    Generating revenue is only part of the profitability puzzle. Also important is an understanding of what types of work or fee arrangements are most lucrative for the firm. BI software should provide real-time access to these effective rates and deliver firm managers solid data to allocate appropriate resources and focus firm goals. These goals could include pursuing the most profitable types of business or adjusting fee arrangements in areas that are resulting in lower effective rates.

  4. Analyze profitability by professional using direct costs and weighted indirect costs.

    A lawyer or practice area may have excellent effective rates, but how does it all stack up in the end against real firm expenses? BI software can move beyond measuring Key Performance Indicators (KPI's) and deliver profitability reports that take into account all of the direct costs (salary, benefits, etc.) as well as the indirect costs (office space, support staff, etc.) that make up expenses.

  5. Use performance information to mentor junior lawyers.

    Bringing on new lawyers can provide the firm with much needed billable resources. But it is most effective when they hit the ground running. BI software can play a key role in making a new recruit quickly productive and profitable. Firms that have implemented robust BI software report that it helps the firm's lawyers understand how their actions lead to their success. Providing lawyers real-time access to their individual financial data provides an objective measurement of their performance, benefiting the mentored professional and the entire firm.

Use these tips as a starting point to evaluate and implement a robust Business Intelligence software. Then use it as a springboard into how BI can improve business processes that fuel firm profitability. Remember that Business Intelligence is not an end in itself but rather a tool to provide data for decision making. It is up to the firm managers to follow through and implement business process changes that fuel profitability.

Dimension Funding

Advanced Legal provides firms with a complete range of ProLaw services including implementation, data conversion, customization, development, end user training and support. The company also offers BI Pro, a business intelligence and financial reporting software that includes profitability analytics, colorized charting and multi-period trend analysis. Click here for more information.

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