Posted by Briana McCrory, chief marketing officer at Legal Futures Associate BigHand
On one hand, you hold your law firm’s needs. On the other, client expectations. In the balance lies your firm’s financial performance – your chief responsibility as a finance officer.
As a legal CFO or a law firm finance director, you influence your firm’s bottom line tremendously by targeting the lines above it. You can’t wave a magic wand to increase revenue, but you can help your firm achieve its financial goals by making profitability every lawyer’s responsibility.
Here’s how to set the stage for success.
Support pricing strategy in the legal buying process
Law firm pricing specialists improve the legal buying process for clients who are increasingly demanding closer collaboration and more complex pricing options.
To protect matter profitability, pricing specialists create budgets using evidence-based reasoning that considers cost, hours, staffing, billable rates, outcomes of prior similar matters, and other data-driven factors.
Our recent survey shows that the pricing function’s responsibilities have grown in the prior 12 months for 61% of North American (NA) and 56% of UK firms, and the pricing team reports on the realisation of client and/or matter profits for 65% of NA and 62% of UK firms.
Increasing lawyers’ financial awareness through training on matter profits and margins can aid the pricing team’s efforts to drive higher profits. But where do you start?
Regularly share financial data with lawyers
First, require budgets for each matter and give lawyers instant dashboard access to each matter’s financial performance. Consistently communicate with regular reporting and enable groups to share ideas for delivering legal services more efficiently.
Information and collaboration encourage a sense of ownership and accountability, which is fertile ground for cultivating a culture of personal responsibility for each matter’s profitability.
Last year, our survey showed that 85% of NA and 80% of UK firms encouraged associates’ awareness of matter profitability. This year, figures rose to 94% and 90% respectively, demonstrating the importance of expanding financial awareness to all lawyers, not just partners.
However, lawyers often rely on monthly and ad hoc reporting and post-matter analyses that reveal too little, too late. Real-time access to matter data eliminates blind spots and enables lawyers to avoid costly surprises now and in the future.
Responsibility for profits requires real-time matter visibility
Tracking a matter’s performance against its budget in real time reveals when to take corrective action, on what, today—and how to avoid repeating mistakes in the future. Lawyers get answers to questions like:
- What drove billable hours over the target?
- Were too many partners working on a matter to the detriment of profitability?
- Where do metrics indicate teams can work more cost-effectively?
Yet, only 42% of NA and 32% of UK associates can access real-time automated reporting per matter, and profitability information is available to only around 20% of partners and associates in the US and UK—a lack of visibility that results in missed opportunities, inaction, and blown budgets.
Every lawyer in the firm can help you achieve your financial objectives by taking ownership of matter profitability.
Get in touch now to learn how easily BigHand Matter Pricing can help you empower lawyers to make more profitable decisions.