According to a recent BigHand survey of over 825 law firm leaders in North America and the UK, 75% of firms have experienced decreased demand for legal services and expected the decline to continue in the next 12 months. Firms adopted several strategies to manage the fall, including:
- 21% accepted lower profit margins,
- 17% reduced bonuses and profit per equity partner (PEP), and
- 20% resorted to lawyer reductions.
But equity partners will not tolerate profit declines forever. Junior lawyers and staff continue to push back against pay cuts and increased workloads. Meanwhile, clients increasingly resist rising legal fees without proof of enhanced value.
To secure your law firm’s ongoing prosperity now, consider cultivating a culture of financial acumen and placing strategic growth at the forefront. That starts by giving lawyers access to up-to-the-minute financial data on their clients and matters.
By better understanding the firm’s overall health and monitoring the real-time financial performance of their matters, lawyers can assess evolving situations more thoroughly and adjust their approaches more strategically for better outcomes over the long run. Here’s how harnessing your law firm’s business intelligence (BI) and financial data helps your firm operate at peak efficiency:
Reveal the impact of decisions on law firm financial performance.
With controlled access to relevant data, lawyers better understand the financial impact of past decisions. Analyzing economic consequences reveals the factors that influenced those outcomes, in turn revealing how to optimize future decisions for positive results.
For example, data can guide lawyers in matching task and workload assignments to individuals with the ideal expertise and availability. As they optimize resource allocations to produce the highest quality legal work in the most cost-effective manner, they also maximize client savings and satisfaction.
Firms can also pinpoint the clients and matter types that lead to higher overall profitability, which helps lawyers decide which new clients and matters to pursue and accept. Spotting cross-selling opportunities is easier for generating additional revenue from existing clients.
Reduce write-offs that cause law firm profit leakage.
Comparative analyses show how write-offs and discounts erode potential profits. Lawyers can then reduce the conditions that lead to them, which encourages lawyers to:
- Engage in more transparent communications with clients about billable hours.
- Identify and resolve potential and existing issues before they escalate.
- Learn how to use automated tools to streamline legal workflows and billing processes.
All are positive steps toward building stronger, more profitable client relationships.
Avoid budget overruns to reduce profit leaks.
Advance beyond the days of discovering cost-devouring events months after they occur. Financial transparency is the key. Dashboard visualizations give lawyers fast, comprehensive views of how well their matters are performing and how they can improve. One reason matters with budgets average a 10% increase in realization is because tools that track budgets trigger dashboard alerts telling lawyers to act quickly to prevent runaway costs.
Speed cash flow to increase profits.
Analytics on lock-up inventory, write-offs, and other vital metrics transform static numbers into actionable insights. By monitoring timekeeping, billing, and payment data, lawyers can take proactive steps to unlock WIP and speed receivables, getting cash flowing in over the long haul to avoid drastic measures such as layoffs and PEP reductions.
Long-term profitability for law firms requires a new combination of improved financial insight and strategic decision-making. Ensure your firm’s continued success by fostering a more financially savvy culture and prioritizing strategic growth. Get in touch today to learn how BigHand's advanced legal business intelligence tool can help you unlock your firm's full potential.
