The overarching aim of every law firm is to boost profitability. Cost-cutting is certainly one way to improve practice profitability yet it is not the only way. Shift your focus away from reducing administrative costs and appearance costs, choose the right e-billing software and you’ll find your bottom line gradually improves.
How to Improve Law Firm Cash Flow
Your quest to improve law firm profitability ultimately comes down to revenue vs. expenses. Shift your focus to departmental budgeting that keeps costs in check, review those budgets with regularity and you’ll make headway toward advancing the bottom line. In particular, it might help to partially transition to a virtual office. Segue to a virtual office and you’ll reduce your overhead expenses ranging from utilities and rent to insurance premiums, maintenance, and more.
As time progresses, more and more law firm processes can be automated. In fact, legal invoicing can now be automated. Seize the opportunity to automate your legal processes, implement cutting-edge practice management software to expedite processes and you’ll find your team spends less time performing repetitive, time-consuming activities. Some such programs can also expedite financial reporting for law firms through automated processes.
Don’t be Afraid to Delegate
Though delegating work to paralegals, litigation assistants and administrators has an inherent cost in the form of an hourly wage or salary, relying on others also has the potential to boost your bottom line. Delegating work ultimately frees you to focus on more challenging legal projects.
It might even make sense to outsource legal services to others who do not require benefits, paid time off, and other costly perks. The minor financial hit of paying another party to contribute to your firm really will ramp up efficiency to the point that it proves to be a net positive for the firm’s profitability.
Track Metrics Including Cash Flow
It is a mistake to assume your law firm will end up in the black as opposed to the red. Closely monitor your firm’s financial metrics and you will keep your finger on the pulse of your firm’s financial health. Everything from your net overhead to revenue billed, cash flow, and beyond should be tracked so you can quantify an accurate profit or loss. Continue to track key performance indicators and you’ll have the data you need to make numbers-based decisions that ultimately help you stay in the black.
Above all, focus on your cash flow. Healthy law firm cash flow is fundamental to law firm financial success. Client advances in the form of retainer payments will certainly help boost cash flow. If your firm requires an infusion of cash, strive to decrease expenses, ramp up revenue by pursuing unpaid invoices and carve out alternative payment options and arrangements for clients billed in arrears.