Every law firm wants to increase its bottom line. That’s a given. But, there are many ways to go about doing this and each must take into consideration your firm’s unique needs.
If you’re just starting out here are some tips on how to steadily increase your firm’s profits.
- Come Up with Concrete Performance Goals
One way to ensure profitability as a law firm is to monitor and improve performance. This can be done through Key Performance Indicators or KPIs for short.
KPIs are designed to measure the value of each task as it relates to its effectiveness at helping to achieve the firm’s larger business goals.
Note that KPIs aren’t created equal, so it’s important to come up with standards that meet your firm’s unique needs instead of basing them on general industry standards.
For instance, if your goal is to increase your billable hours, then you should create KPIs to support that objective.
- Always Monitor Cash Flow
It’s important to see the forest for the trees by moving between client work and working on your firm effortlessly and simultaneously.
Remember that the only way you can help your clients is if your firm is financially sound and in order for your firm to be financially sound, you have to spend time tracking its cash flow.
“Regularly check your firm’s cash flow statement and financial reports so that you always have an intimate understanding of your financial situation,” says expert Joshua Holt.
- Try to Reduce Overheads
How do you reduce your firm’s overhead? Go through your firm’s expenditure for the past year to figure out where you need to cut costs.
Don’t be rash but keep an open mind and remain objective.
You may find that you need to negotiate a lower rate with a service provider or vendor. Perhaps you need to reduce the number of employees you have or bring on technological innovation that’ll help you reduce your staff.
- Improve Your Billing System
Cash flow is and always will be king in any business, law firms included. That’s why you want to avoid and prevent things like billing errors or incorrect billing.
Instead, use a comprehensive and reliable billing system that can guarantee accuracy and effectiveness. Ditch the old-school manual billing style and use a centralized billing system instead.
It’ll automatically and digitally produce bills, and all you have to do is review and approve them before they’re sent to the client.
- Manage the Capital and Debt of Your Firm
Every law firm carries a fair amount of debt and the burden can feel heavier and heavier as the years go by. But, this should stay in tandem with the firm’s invested capital.
We’re not saying debt is bad because you need a little of it for the health of your firm. But taking on too much can compromise your credit score and make your dealings with creditors a little more difficult.
Keep your firm’s foundation strong by maintaining a fair amount of working capital that can be utilized to manage cyclical fluctuations and inevitable downturns.