Legal Tech Column: 3 Ways Your Midsize Law Firm Can Maximize Profitability
Law firm success isn’t solely tied to the billed hours of its attorneys. Process decisions and attainable growth goals lay the foundation for healthy, effective and profitable mid-sized law firms.
In today’s competitive environment, it’s important to ensure your firm is getting the most out of its resources to remain positioned for success. These are 3 key areas law firms can consider to ensure they remain competitive and profitable into the future.
Outsource legal processes
Legal process outsourcing has been a secret weapon of large law firms for decades. However, process outsourcing is achievable and beneficial for mid-sized firms as well. By outsourcing, firms save time and money so they can focus on what they do best: practicing law and serving clients. Procuring quality work from specialized and skilled outsourced partners allows firms to minimize overhead costs associated with hiring and maintaining in-house team members.
The legal industry is constantly evolving and firms require ongoing investments. For law firms, hardware and software alone can cost thousands of dollars per person annually. Instead of expanding departments such as IT, finance and administration, outsourcing can help firms manage the monumental increase of tasks while minimizing long-term capital investments and staffing requirements.
A complete overhaul of functions to an outsourced partner may feel like a significant change. Starting with one department or business function is a good way to get the ball rolling. Firms can then determine whether other functions or departments can be streamlined with an outside resource.
Implement the latest technology
Lagging and outdated technology can cause frustration among team members and clients and puts law firms at an increased risk for cyberattacks. It can also create ethical issues and can make it challenging for attorneys to adhere to ABA Model Rules regarding technology competence. Modern, effective technology helps drive business. If technology is prohibiting growth and employee efficiency, it’s time for an update.
Consider starting with a comprehensive assessment that evaluates the firm’s entire IT ecosystem and end-user experiences. This will help pinpoint issues so that a plan can be developed to solve problems in a holistic way. After the assessment is complete, part of a holistic plan should involve migration to cloud-based and subscription services where possible. Integration is a key indicator of how well each piece of technology can be used to further business goals and support growth. Cloud services, for example, are easy to update to the latest versions of your solutions and can be quickly integrated across your entire organization.
Improve cash cycle
Increasing revenue doesn’t necessarily mean raising billing rates. Analyze current billing processes and assess opportunities to create efficiencies and patch revenue abatements.
Prioritize accurate and timely billing. One of the simplest concepts can make the biggest difference: bill on time.
Law firms’ realization rates measure the difference between the recorded amount of work and what percentage of that time is paid by the client. A good realization rate is 90% or higher. However, by delaying billing, legal services are essentially offered at discounted rates. When invoices are issued in a timely manner, it is less likely that the bill will be challenged. Partners can also implement standards to manage submission of eBills and provide ongoing maintenance and adherence to compliance standards.
The demand for legal services is considerable and growing. Law firms that evaluate these 3 areas can improve productivity, drive efficiency, better help their clients, and ultimately, increase profitability.
Reprinted with permission from the 11/8/21 issue of Mid-Market Report. © 2021 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.