The sentiment in law firms today is upbeat – employment is picking up, business volume is increasing and a large majority are looking to grow their practices. But there’s no room for complacency – good financial management will be crucial to how well you are able to take advantage of the opportunities it presents. An enterprise resource planning (ERP)-led approach to business management will prove valuable.
Working capital is the life blood of your firm, so operating liquidity is as important today in this buoyant economy as it was in the recessionary one. If you have access to cash, you’ll be able to respond to new market opportunities, ahead of competitors. With lockup being the greatest cash management challenge, it’s imperative that you raise invoices at the earliest contractual opportunity so that collections can commence in a timely manner. Exposing the right information in the right format and at the right time will empower your fee-earners to manage their own lockup through role profiles and dashboards. It’ll also give finance a view of performance by team to proactively benchmark and champion change. Through a business management approach, you can optimise the cash cycle and free-up cash to allow the organisation to make critical investments to leverage new business opportunities. It’ll allow you to automate processes across purchase orders, client matters, and customer and supplier invoices to provide a clear picture of the firm’s liquidity and offer accurate cash flow projections.
Make financial planning an ongoing and dynamic process so that you can take timely corrective action to meet business goals and capitalise on market developments. One of the big advantages of business management systems is that they provide powerful integration between finance and HR enabling firms to align budgets, business goals and forecasts with the skills and resources available. You can create rules for how your firm must operate based on its unique business model.
The pressure on billing rates and pricing will continue as demand for fixed fees increases. You need to charge fees that are accurately based on expected duration of tasks, level of personnel best suited to matters, combination of fee models to maximise budgets, discounts offered, outsourcing costs and such. This onus rests on finance departments to provide business development teams with accurate information so that work is appropriately tendered and managed. A business management system provides processes for cost and profitability analysis, and aligns fee structures with the revenue goals of the firm.
To stay competitive, you need to continuously make incremental improvements in response to changing market requirements. A robust financial and business management platform will facilitate this, and allow you to adapt and grow.