Law firm profit leakage: how an intelligent practice management system can help improve firm’s financial health

Running a successful law firm involves more than just delivering exceptional legal services; it also requires a keen focus on financial health. The beginning of the year often means analysing financial performance reports, work in progress (WIP) cleanouts and debt collection campaigns. While there may not be a quick fix or magic pill to cure financial challenges, this blog aims to enlighten you on how employing the right practice management system can support you.

In this blog post, we’ll delve into the strategies embedded in Crespect that address common profit leakages, particularly in areas such as managing WIP, debt collection, and others.

At Crespect, we often quote our founder Aku Sorainen: “You get what you measure,” and we are committed getting those measurements right. However, to measure data, you first need to have qualitative data, store it in a place that is easily accessible and presented in a format that not only top-notch CFOs and data analytics can read. 

Enter Crespect – an intelligent legal practice management system that not only simplifies data entry but also presents financial performance from an everyday perspective rather than just in quarterly or annual reports.

There are several ways in which Crespect supports law firms in controlling profit leakage. Let’s overview them together:

Simplifying data entry reduces the time required to input information. Time is the currency of a law firm, and when data entry is cumbersome, it can lead to delays, human errors and decreased overall efficiency. We pay a lot of attention to user experience and  ensure that data entry is user-friendly and hassle-free. Furthermore, Crespect’s automated billing process prevents human errors and accelerates the billing process. When lawyers intuitively understand the data requested from them or provided to them  and are not distracted by overwhelming myriad of data fields, they can efficiently track their time without wasting any time on lengthy training sessions. Crespect’s adaptability to mobile and tab screens also contributes to the ease of data entry, allowing fee earners to track their time and expenses on the go. 

Providing lawyers with real-time results and insights on how they are doing with reaching their main KPIs reinforces a sense of accomplishment and encourages continued effort. At Crespect, we bring billed and used time to lawyers’ dashboards so they can take ownership of their performance and understand how their actions contribute to the overall success of the firm. Regular visibility into progress helps to maintain focus and commitment to achieving long-term targets. When lawyers can easily track their performance and achievements on a weekly, monthly, or quarterly basis, it also eliminates the supervisor’s burden of constantly breathing down on colleagues’ necks. Performance accountability fosters quicker data entry and improves financial health. 

Crespect recognises client price pressure and the growing popularity of alternative fee arrangements, leading to a trend of fee-earners not being able to bill all the used hours. That’s why at Crespect, the separation between used and billed time is clearly defined. Any billable hours write-offs will not harm the statistics of used hours, fostering the environment where the emphasis is put on hours realisation and the elimination of obstacles preventing lawyers from efficiently investing their time. Only by measuring realisation rates law firms can identify such inefficiencies as failure to automate documents, duplicative work, and the need to improve law firm processes and technology. 

Ensuring that invoices are approved, confirmed and sent out swiftly is the key to shortening the lock-up time (the number of days it takes for a law firm to convert its WIP and accounts receivable into cash). As lock-up time consists of days to bill and days to collect, Crespect puts all the effort into ensuring that automatic and paperless invoicing with a smooth approval workflow shortens the time required for billing as much as possible. With features like amendments, specification corrections, discount applications, CAP control, primary case language reminders, and alternative fee arrangement support, Crespect covers all aspects of the invoicing process. 

Smooth invoice issuing is just one side of the “financial health” coin; tracking collections and staying on top of debts, preventing them from turning into ”old” debts is another side of the coin that law firm management should constantly track. With Crespect’s smart notifications, automated debt collection workflows, and collections monitoring via integrations, we aim to turn this headache into a well-oiled process that occurs without breaking a sweat and without organising internal ‘Debt-cleanout’ campaigns.  

Finally, the law firm will continue leaking profit if financial data is visible only to the revenue control team and the firm’s CFO. At Crespect, we bring financial data to responsible lawyers’ perimeter by showing not only the number of cases or billed time but also thoroughly highlighting uninvoiced hours on both, the client and matter, level which helps to manage the cap fulfilment with ease. Furthermore, we surface revenue trends, client portfolio growth and decline, different invoice statuses, and provide performance reporting to supervisors and managers, including not only basic trends but also law firm’s utilisation and realisation rates. Tracking this information allows law firm administrators to analyse trends over time and reveal are lawyers are utilising their time effectively or spending too much time on non-billable tasks. 

Sounds interesting? Book our demo and discover how you can have even better control over your law firm’s profit and build a solid foundation for long-term success in a competitive legal landscape.