Redwood Analytics

As 2009 closes and the legal industry is scrambling across the country, many firms are realizing that their collection pushes are not going to bring them anywhere near their original budgeted fee collections.  Much of that is due to the economic conditions that have impacted all industries.  Another reason is a lack of vision on key indicators that should have been addressed when creating the original budget.  Several firms did what they usually do and budgeted for a small percentage increase in fee receipts from the previous year's collections.  They did this because that worked well during the boom through the middle of this decade.   Unfortunately the fault in that sort of planning is being realized today.  On top of that because of these "delusions of grandeur" a downward spiral has been created where collections that would normally be collected in 2010 are being thrust to this year as attorneys look to meet their targets.  In other words cannibalization of collections next year is prevalent.  Given the economic conditions with clients, this becomes especially difficult and also detrimental from a relationship standpoint. 

As you close your budget season for 2010, please learn from the mistakes made in the previous year.  It is better to have a realistic target so expense and revenue controls can be maintained.  It is not easy to swallow a declining revenue target for many partners, but is better to plan realistically and be optimistic that you can beat your goals then to plan optimistically and be looking for pennies in the couch when the time to tally comes.