Law: not just a profession, but also a business
In association with Insight Legal: financial trends, and how firms can track them
April marks the start of a new financial year for many firms, and of course the start of the new tax year. It is often the time when directors or partners take a step back to review the past year and what lies ahead.
Law is not just a profession; it is also a business. It is vital for any successful organisation to review performance and set clear objectives for the coming year. It can be a daunting task to balance the management functions of a law firm with client matters, but any successful business must do it.
Looking back, law firms are noticing some interesting changes. For example, the 2016 NatWest financial benchmarking survey indicated an 8% increase in average charge-out rates that year, bringing the UK average to £162 per hour. In 2017, however, the hourly average dropped by £1 to £161. Only a small change, but surprising given the consistent increases in preceding years.
Charge-out rates are not the only thing decreasing either. The survey found that after five years of steady increases, average fees per fee earner dropped from £144,000 to £136,000, down 5.6%. With firms reporting an increase in fee income over all, the conclusion is that perhaps they are taking on new staff, as opposed to looking at the efficiencies of existing staff.
It is surprising how many firms focus on analysing fees earned and time recorded, rather than profit. Perhaps this is because it is simply easier to measure. However, using the right practice management and financial systems will help you see how you and your staff work now, identify inefficiencies and monitor the effect of any changes.
Having worked with many firms for so many years, it is clear to me that there are two prerequisites if a firm is to be profitable over a long period. The first is being professional and the second is being commercial.
For a law firm, being commercial starts with having budgets that set targets for the key performance indicators, and then having regular, timely and accurate management information available to all, which encourages everyone to strive constantly to find ways to work more profitably.
Improving productivity is undoubtedly the best way of increasing profitability and a few simple, comprehensive management tools can help your business to thrive.
Deborah Edwards, director at Insight Legal Software Ltd
To discuss this topic further or the services we can offer, please call us on 0141 406 1355, email us at firstname.lastname@example.org or visit our website; www.insightlegal.co.uk