Make More Rain : policies/ procedures, marketing

The End of Generally Accepted Accounting Principles?

Admin — Fri, 18 Apr 2008 07:00:17 GMT

In the April, 2008 issue of CFO magazine, the cover story reads: "Goodbye GAAP: It's Time To Prepare For the Arrival Of International Accounting Standards". These international standards, called the International Financial Reporting Standards (IFRS), are being sought to replace generally accepted accounting principles (GAAP), an evolving set of accounting standards in the US since the Securities and Exchange Commission (SEC) was established in the 1930's.

What started as a reconciliation of the two is now seen as "more of a takeover than a merger of equals - many who favor a single global standard hope to wipe out GAAP altogether".

Grant Thornton has a paper outlining the major differences between GAAP and IFRS that can be viewed by clicking here. James Turley, Chairman and CEO of Ernst & Young, also makes an argument for the move to IFRS that was published by the Wall Street Journal in November of last year.

How does this affect firms who are currently not even using GAAP? Many small and mid-size firms have historically kept their books on a cash basis. In the 2007 Law Firm Economic Survey by LexisNexis, the failings of cash basis accounting were exposed - in particular, the lack of reporting on work in process gives firms only half of their financial picture. And, based on the respondents in the 2007 survey, there is no correlation between per partner income and cash basis accounting. The fallacy of having to report to the IRS on an accrual basis if you reported internally in this manner were reiterated.

Many of the requirements of GAAP and IFRS apply only to publicly traded companies. This lack of mandate is tempting to law firms, who are not forced to change their accounting methodology. However, one of the main management priorities respondents in the 2007 survey reported was better benchmarking. What are other firms doing? How do we compare?

Using tools such as Lexis® Insight helps. But these tools are meant to be starting points for analysis. As Stephen Collins noted in the Introduction of the 2007 Survey:

"Without applying the accrual concept, law firms can't reliably forecast cash flows or anticipate funding needs. The unrealized value of unbilled fees and accounts receivable are clouded. In fact, cash basis accounting may contribute to the industry-wide experience of very slow cash flow cycle times. Key financial metrics such as realization cannot be accurately measured by matching the appropriate revenue to the related adjustments. As a result, many firms are losing significant amounts of fee revenue to adjustments and they don't even know it it."

For nearly 80 years, the answer was generally accepted accounting principles. It appears that due to the expansion of free trade agreements and globalization in general, there may be a new standard. For firms who want to improve profitability and are looking to move from cash basis accounting to accrual to help measure performance, take heed.

How To Compensate A Rainmaking/Investor "Muted" Partner?

Admin — Tue, 15 Apr 2008 07:00:49 GMT

A reader emailed me with a question related to the compensation of a non-practicing equity partner whose responsibilities include only the investment of capital in the firm and bringing in new clients. The firm has a niche practice and is looking to expand. Their plans require more capital than the existing partnership can manage. They are in a position to bring in another partner who will be responsible for infusing additional capital in the firm. The partner will also do some rainmaking. The new partner will not be responsible for any management or production and will not be expected to manage any of the clients in which he brings.

Because of the rainmaking responsibilities, I wouldn't classify the partner as a "silent partner". However, since the partner won't participate in the day to day management of the firm nor will be responsible for any production, it may be better to classify him as "muted".

I asked several attorneys I knew and didn't get very good answers. Thus I am taking the question to More Partner Income readers. What ways would you suggest this firm compensate an equity partner whose responsibilities are only investment in the firm and rainmaking?

Marketing 101 for Law Firms

Admin — Thu, 20 Sep 2007 17:48:27 GMT

There are two things I remember from my Marketing 101 college days. First is to turn your competitor’s “strength” into a weakness. Who can forget the Avis “We try harder” campaign that turned the Hertz leadership position into a weakness and conversely turned Avis’ second place position into strength? Nowadays, Hertz has turned the table on low cost car rental companies with their campaign “Who do you think we are, Hertz?”

The second thing I can remember is my professor using the Hershey's candy bar story to bring home the importance of advertising. When I was young and someone was going the store, you frequently heard the following conversation:

“Bring back a candy bar”. “Sure, with or without?"

You see, back then there was only one candy bar that came to mind—Hershey's, in two variations, plain or with almonds. Hershey's market share was so dominant that, according to my professor, the company decided that it could discontinue media advertising and put the savings in the company’s coffers. It only took one generational shift, a surprisingly short period, for the Hershey’s bar to become the candy of old people. It wasn’t cool. The Hershey’s bar is still around and it is still one of the best candy bars you can buy. But when was the last time you had a Hershey’s bar—plain or with nuts?

Both of the above points, turning competitors’ strengths into weaknesses and the importance of advertising, are brought home in the article “What Really Works” by Ross Fishman (www.rossfishmanmarketing.com) in the September 2007 issue of the ABA’s Law Practice magazine. He notes that most lawyers score poorly when it comes to responsiveness in returning calls. The best of them usually have a standard of “we return your call within 24 hours”. I know a lot of firms who brag about their 24-hour call return standard. They promote it as a strength! Fishman helped turn that strength into a weakness for his Chicago client with the Laner Muchin Challenge. The firm delivered expensive looking hour glasses to prospects and challenged them to call their labor and employment lawyer and then to call Laner Muchin with the same message to see who calls back before two turns of the hourglass ran out.

Firms that had been pitching 24-hour turnaround looked pretty weak next to Laner Muchin’s quick response. I really would have liked the Laner Muchin messages to have been “returned within the hour.” But the promotion, as is, was effective, once again illustrating the disconnect between what law firms think is quality service and what their clients really want.

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.

Voice Mail -- a Lawyer's Friend or Foe

Admin — Fri, 11 May 2007 17:21:38 GMT

How phone calls are handled either works for or against you, and that goes for both ends—incoming and outgoing.

It is important enough that the ABA publication Law Practice devoted two pages to the subject in April 2007. For my money, the most important advice from author Dan Pinnington is to call your office and find out how calls are really being handled. As Dan says, you might be surprised by what you hear.

Now remember this is likely to be a prospect's first brush with how your firm works. From the caller’s perspective, if you can’t handle a call correctly, professionally and responsively, how can they expect you to handle their work differently?

As for established clients, most now feel they are better served if they can call your direct line. If you provide your clients with a direct number and then hide behind voice mail because you don’t want to be disturbed, you turn an intended good thing into an actual irritant for your client. Pinnington advises using a phone with a call display. He writes, “Many lawyers who had thought they would use call displays to avoid calls….find they actually take more calls because knowing the caller’s identity allows them to understand how much time will be involved before they pick up the phone.” He also says “…that four seconds between when the name pops up and you take the call magically seems to get you in the right frame of mind."

As for calls received by the receptionist, always give callers the option of leaving a traditional message or voice mail. He warns against asking callers for their identity prior to giving them the option of leaving a message or voice mail. “If you don’t take a call after a client has been asked who they are, you create the impression that you are avoiding their call.”

For those calls that do go to your voice mail, Pinnington provides the following advice:

1. Open with your name and title so the caller is sure they reached the correct mail box.

2. Update the message daily to include details of your schedule.

3. Indicate whether you’ll be checking voice mail or when you will be back in the office.

4. Always give the caller an option to transfer to a live person.

5. Encourage the caller to leave a detailed message.

6. Let the caller know when they can expect their call to be returned—after noon today, within 24 hours by the next day, etc.

Test your own voice mail system. Is the message clear? Are you speaking too fast? Are you limiting the caller to a 60-second message rather than getting the full details that would make your job easier?

As for the times you are the caller being asked to leave a voice message, Pinnington says the most important point in his entire two-page article is his advice that you “Clearly and slowly state your phone number. …Most people say their number at speeds approaching warp5, with the result is that it is unintelligible. Slow down and take a deep breath between each digit. Okay maybe not quite that slow, but you get the point.”

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income contact Juris National Sales Center at 877/377-374, e-mail info@juris.com or go to www.Juris.com.

E-mail or Phone?

Admin — Mon, 20 Jun 2005 17:11:35 GMT

My wife uses e-mail, but only reluctantly. She says one of these days they will invent something you can just pick up, punch a few numbers and talk to the person on the other end. Sounds similar to something already on your desk, doesn’t it? --the phone.

There are things that need to be dealt with face-to-face or, at least, person-to-person over the phone. Before e-mail became the predominant form of business communication, I used to say, “If you write a letter, you are just going to get a letter back; pick up the phone and resolve the matter". That is still true today. E-mail is a powerful means of communicating, but it is not well suited to negotiating, mediating, or feeling out the other side. Face-to-face and following that phone-to-phone are still the best tools you have.

So the next time you start to send that e-mail, think about picking up the phone instead. Both are great tools properly used.

Tracking time

Admin — Wed, 18 May 2005 17:52:28 GMT

Yesterday, I was having a discussion with the president of Juris, Inc. concerning spoilage in a law firm.

If the business end of a widget factory is widgets, then the business end of a law firm is billable hours. The more you produce the more units you have for sale. It follows that if a law firm decides to increase its revenue, it will need to produce more hours. One of the first things it can do is eliminate or reduce spoilage--time that gets worked but not counted.

Many fee earners still record time the old fashioned way - handwritten notes given to accounting or to a legal assistant to decipher and manually enter into the firm’s billing system. What is wrong with this tried and true method? You are guaranteed to under report billable time. It is the classic scenario of working hard and not getting paid for it.

A busy fee earner, without the tools to easily track time as worked, overlooks short, unplanned phone conversations with clients, opposing counsel or others regarding a billable matter.
The manual method tends to focus on blocks of time spent on legal matters. Time spent reviewing bills or other case-related administrative efforts go unreported.
After-the-fact methods of recording time, as opposed to as-worked methods, usually result in under-estimating the actual time devoted to the task preformed.
Under-reported time increases when work is performed out of the office. Phone calls and e-mail still reach the fee earner and time responding to them is often overlooked.

If an attorney billing at $200 per hour neglects to capture 15 minutes of billable time each day, it translates roughly to $250 per week. The 15 lost minutes daily can add up to about $12,000 a year per lawyer. In a firm with a leverage of just 1 to 1, that adds up to $20,000 or more per year in per partner income. My experience is that the actual unreported billable time in most law firms is much higher.

Timekeepers need the tools to easily record and report time as work is performed. They need to be able to do that anywhere and at anytime. Management needs the tools to monitor reported time against timekeeper targets. They need that information in time to change the outcome.