Post by Janet Day |
Today many law firms operate in multiple jurisdictions and this trend is likely to continue. The latest Acritas Sharplegal (UK) 2014 survey shows that 77 per cent of companies now require legal services in other countries, especially the US, Germany, France, UAE and China. On average, 44 per cent of legal spend by companies is used for legal advice in another jurisdiction. What is more, 42 per cent of companies expect legal spend outside the UK to increase in the next 12 months.
With such a spread out operation, financial management of a law firm can be challenging. In my mind, two areas especially stand out – cost effectively managing debt and the exchange rate exposure.
Finance heads in law firms are incessantly challenged to reduce debtor days. Typically debtor days can range from anywhere between 120 to 300 days. So even if we take the lower end of 120 days, essentially it means that a law firm practically runs on an empty tank for four months before a client clears an invoice. Then add to this the ever growing complexity and risk associated with compliance. Managing the debt profile of a law firm is therefore no mean feat.
Furthermore, in a multi-jurisdictional business environment, managing a law firm’s exchange rate exposure can be tricky. Finance heads require real time visibility of both exchange rate fluctuations as well as how those spikes are impacting on the firm’s’ bottom line – often even a small variance in currency can impact the firm’s performance in real terms.
Enterprise resource planning (ERP) systems offer advanced and dynamic financial management functionality, which can help overcome these issues. Finance directors can access information in a single view on all fronts – from inventory, compliance, working capital and human resources through to profitability – down to a very granular, even matter level, if required. The system allows complex invoicing, catering to varying currencies, fee structures and invoice frequency. ERP systems tend to be multi-language and multi-currency platforms too, therefore they facilitate timely management of exchange rate exposure. For instance, the finance team could move funds around to other geographies for the short term to minimise the impact of fluctuation in particular currency rate.
Today, as I see it, multi-regional law firms have little choice in adopting ERP. It is a proven approach to business management.