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Strong Financial Management a Must for Law Firms

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With new business models taking hold and international expansion into new and emerging markets becoming a strategic priority for many law firms, commercial acumen of the highest level is required by players in the legal sector. Strong financial management is now critical to business success, and CFOs need to play a critical role in executing business strategy and organisational goals of law firms.

Legal services providers today must offer a range of alternative fee arrangements, which greatly complicates how customers should be charged for services. Fees charged must accurately reflect expected duration of tasks, level of personnel best suited to matters, combination of fee models to maximise budgets, discounts offered, outsourcing costs;  and so on. Therefore, CFOs must take the lead in developing a framework that best meets the needs of customers and utilises the organisation’s resources to deliver services profitably.

CFOs in law firms must play a significant role in adding value to clients and the business by providing high-level, factual insight into what has worked well, where issues need to be rectified and what aspects of the business require improvement. To this end, they must devise ways to secure visibility of every aspect of the business operation including resource utilisation, cost allocations, realisation, risks and profitability. This information will enable them to conduct more forward-looking price analysis and stay-ahead of the curve of evolving pricing models, identify new types of costs and upcoming business trends to stay competitive. 

Today, law firms need to demonstrate profitability to new owners and business partners in a manner that is commonly understood in the mainstream business world. CFOs must standardise reporting across legal practice areas and jurisdictions to ensure a fair and transparent performance assessment process. This will be imperative for assessing business performance, mapping it back to business goals and reporting to management with actionable information.

Also, regulatory and accounting challenges are growing as is the tax scrutiny on corporates. CFOs must put processes in place to collect, timely and accurate business information to ensure that all legislative and tax responsibilities are met with.

CFOs will need to use their financial expertise to achieve the delicate balance of realising their organisation’s targets and delivering on customers’ requirements profitably. While they must collaborate with all parties and stakeholders individually to understand and meet expectations, simultaneously the finance department must become more centralised to gain a comprehensive, objective picture of the business.

Underpinning the enterprise with a business management approach that is facilitated by future-proof technology is a reliable way of achieving the above. Such technology streamlines and links all the critical functions of an enterprise to give a holistic view of the business; and upon which management can confidently base future business decisions.

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