Make More Rain : benchmarking, cash flow issues

Measuring Law Firm Profitability

Admin — Thu, 14 Feb 2008 08:00:00 GMT

One way to get an idea of your firm's financial health is to report on the firm's profitability. There are many ways to calculate profitability depending on what you are looking to track. In this example, we are taking into consideration the value of fee earners against their cost. The value of an attorney, for the purposes of this post, is the billed rate per hour.

You determine attorney cost per hour by taking the salary of the attorney, the cost of their dedicated resource(s), the cost of their work space, the cost of equipment used, and other incidental costs (not billable to the client) incurred by the fee earner. This can be sticky for some firms where principals may not be agreeable to apportionment of cost. In cases like this or where the firm is more evenly apportioned in staff and office use, a less accurate but easier calculation would be to add up all the general ledger cost accounts (excluding fee earners' payroll), divide by the number of fee earners, then add salary. It is better to do the work and determine actual cost.

Once arriving at a cost per fee earner, reduce to a cost per hour (by dividing cost per fee earner by worked hours billed per year) and then you can use this to subtract from the attorney's billed rate to get the profitability rate. This is excellent indicator of the value of your billable rates and by extension the attorneys charging these rates.

With profitability reports like the one above that is part of Juris' Active Information product, you can determine how much value (in terms of dollars) you are getting for every billable hour worked by the fee earner. You can set margin per fee earner and track the profitability rate against the target margin as well. Efficiency is an important key to higher profits. A report such as this in a historical context helps you track efficiency of the fee earner.

To take it one step further: you can use, for analysis purposes, the collected rate to compare to the cost per attorney. You shouldn't make this analysis until the invoice has been zeroed out (either by payment or adjustment), so this is not really a good indicator of current profitability. But it can be helpful in a profitability analysis of a given client or fee earner. Again, tools like Juris' Active Information can track collected rate and thus make calculating all the formulas above automatic.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Want To Have A Record Year For Your Law Firm?

Admin — Mon, 18 Sep 2006 17:50:40 GMT

Put a plan in place to reduce the time it takes to bill for services. Couple faster billing with deliberate collection efforts, and law firm partners will enjoy a record income year.

On average, 148 days pass before payment for legal services is deposited in the law firm’s bank account. That is almost half a year’s worth of fees. Based on the 2005 Juris Law Firm Economic Survey, the typical midsized law firm takes 72 days to put a bill in the mail. Another 76 days elapse before that bill is collected.

Because most law firms use the cash method of accounting, neither work in process (unbilled fees) or accounts receivable (billed but uncollected fees) appear on the law firm’s balance sheet. Combined, these represent the typical firm's largest asset.

Law firms don’t pay enough attention to cash flow in a systematic way. They aren’t in tune with the value of unbilled fees and uncollected cash, especially when cash flow seems consistent with past patterns. If you don’t get the bills out quickly and accurately, your firm is going to perform poorly relative to what the outcome could be. Slow billing and collection appears to be a problem with firms of all sizes and across all levels of performance.

There is no justification for slow billing. How do you speed it up? Start the process by asking your accounting and administrative staff for a plan to do just that. Work with them to finalize that plan. Support that plan. Give them objectives (targets) based on their approved plan. Measure performance against those targets. Recognize and reward their accomplishments. Hold people accountable (including partners) for their role in the plan.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

The Making of a Successful Law Firm Business

Admin — Fri, 15 Sep 2006 17:37:00 GMT

We know that measurement alone improves performance. But combine measurement with goals and plans to achieve those goals and the whole ball game changes. Planning, goal setting, measuring, and accountability go hand in hand with increased management and teamwork. The resulting culture in such law firms sets those firms and their performance completely apart from those firms who are not similarly engaged.

Yet only about one-fourth of midsized firms report that planning is a key component to their mode of operation. Why should you be one of those? Per-partner income for those firms is twice that of the next best performing 25 percent of firms and seven times that of the lowest performing 25 percent.

What do you need to do to become part of that top performing group?

Engage in the planning process
Set goals and objectives
Develop plans for achieving those goals
Measure progress and hold people accountable

Doing the above will require adequate management and foster a team culture.

The above per-partner income information comes from the recently published Juris Law Firm Economic Survey of midsized U.S. law firms. For more information or to purchase the publication, go to Juris Survey.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Legal Benchmarking Symposium brings together Redwood, Citgroup, Juris and PriceWaterhouseCoopers

Admin — Tue, 05 Sep 2006 18:19:31 GMT

It is not too late to register for theSeptember 20th Legal Benchmarking Symposium provided you act quickly,. The event is being hosted by Redwood Analytics and includes presentations by Redwood and other leading benchmarking survey providers including The Citigroup Private Bank, PricewaterhouseCoopers LLC and Juris, Inc.

We know from imperial data that top performing law firms pay attention to the numbers—theirs and those of their peer group. Benchmarking and use of business intelligence can lift a law firm to a new level of performance and partner income. A recent Juris, Inc. survey of midsized law firms disclosed that partners in the top performing 25 percent of these law firms earned twice the income of the next twenty five percent and more than 7 times the per partner income of the bottom twenty five percent.

Unlock the Potential of Your Business.

Join other managing partners and law firm executives for an informative, interactive and valuable learning experience to facilitate an industry-wide effort to drive standardization and innovation in the legal benchmarking arena. Find out how your peers and competitors are using the power of information to grow their businesses, improve operations, and increase profitability.

2006 Legal Industry Benchmarking Symposium

September 20, 2006 Gaylord Opryland - Nashville, Tennessee
8:00-3:30 p.m.

Don’t miss Tuesday night’s networking event!

Wine tasting and dinner at the home of Stephen Collins, President and CEO of Juris, Inc. on Tuesday, September 19th from 7:00pm – 10:00pm with live bluegrass music! RSVP by September 15th to 877.377.3740 or events@Juris.com. Transportation to and from the Gaylord Opryland Hotel and the Radisson Opryland will be arranged departing at 6:30pm. For more information go to www.juris.com.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.