It’s no secret that client expectations are shifting, and law firms are feeling the squeeze from compounding cost inflation in their salary base over recent years. It’s no longer enough to deliver great legal services – firms have to keep an ever-closer eye on matter profitability. The problem is, many firms still see profitability as the responsibility of finance teams alone, leaving lawyers without the right tools to connect their legal work to the financial outcomes that really matter.
BigHand's 2025 Annual Law Firm Finance Report paints a compelling picture on these challenges, how firms are responding to these pressures and where they’re falling short when it comes to equipping lawyers with the commercial acumen they need.
The Current Landscape
Once an accountant, always an accountant - let’s look at the numbers. According to BigHand’s report:
- 74% of firms provide associates with WIP/AR data and matter budgets for actuals - good start!
- But only 34% offer training to help lawyers actually use this information effectively - not so great…
Clearly, many firms know they need to improve firm-wide financial acumen, because 64% of those surveyed intend to train their lawyers for greater commercial awareness. However, only half (52%) plan to deliver this in the next year.
This echoes various surveys in recent years which consistently show firms know commercial acumen is important, but are unable to make meaningful progress on improving it.
And whilst adding Data Scientists (38% of firms surveyed) and Finance Business Partners (36%) are positive developments in this space, both arguably fall into the historic trap of matter profitability being someone outside the core legal team’s problem.
Lawyers are closest to all the financial decisions that make a difference over the course of a year – whether that’s partners pricing work, seniors scoping or associates chasing down accounts receivable – it is those closest to the clients that have the biggest financial impact.
Why It Matters
That 42% of firms are targeting reduced WIP/debtors and increased matter profitability in performance reviews is encouraging and suggests firms grappling with the significance of these issues in a more concerted way.
I’ve been an advocate for evaluating partners based on profits and cashflow (rather than revenue) for years but, from experience, if this is not underpinned with a strong understanding of what these concepts mean, and what is within individual’s ability to influence, then I suspect firms will see limited benefits from this alone.
Firms have to put the groundwork in to make sure lawyers understand what makes a matter more or less profitable, before they start holding them to account in performance reviews against those metrics.
The best data in the world won’t help if the lawyers delivering legal work don’t understand the financial context of that work.
The report also outlines increasing clients expectations around pricing transparency, with a quarter of firms highlighting meeting those expectations a top challenge, with half expecting those demands to increase further.
So this isn’t just a need for training to enhance internal profitability measures - clients are savvier than ever and expect their legal teams to demonstrate not just legal expertise, but commercial value.
Closing the Gap
So, what can firms do to close this gap? Three actions come to mind:
- Build financial literacy into training programmes. Every associate should have a grasp of key concepts like WIP, AR, and matter profitability. Seniors need to understand how to scope and price work effectively, and new partners how to grow their practice profitably and sustainably
- Go beyond the data. Don’t just hand over reports - help lawyers interpret and act on the numbers, be that traffic lights to highlight issues or visuals to illustrate trends
- Tie training to business goals. Make sure every lawyer understands how their day-to-day decisions impact the firm’s overall strategy, and reinforce this by building these goals into individual performance reviews
I quite like BigHand’s “Doom Loop” - where write-offs and discounting cancel out any rate increases and I see that trend playing out. Firms that embrace commercial acumen training stand to tackle that Doom Loop head on.
BigHand's 2025 Annual Law Firm Finance Report digs into the trends discussed here in detail, offering plenty of insights on how firms can get ahead of the curve. It’s well worth a read.
