The responses show that despite revenues exceeding expectations last year, profits are still down, and to be competitive in the long-term, law firm leaders need to accelerate their financial innovation initiatives in 2024.
A rising cost base and outdated billing practices are having more of an influence on profit than firms have previously given it credit for. The report highlights the impact of changing market dynamics that affect profitability as well as the need for new financial performance metrics and firm-wide financial acumen to limit profit leakage and create a culture for long-term success.
Key findings from the report include:
- 59% of firms confirm write-offs have increased over the past year (43% by more than 10%), and 60% expect write-offs to increase further in 2024
- 25% of firms admit to poor scoping of work with clients or even not agreeing on the scope of work (up by 10% from last year)
- 47% of firms reveal that missing/late time entry and poor-quality timecards influence profitability (up by 21% from last year)
Firms are planning to address these areas of profit leakage in the coming year with different strategies.
- 64% plan to collect and bill more frequently while 31% will adjust their billing terms.
- 33% plan to increase the frequency of communication throughout the matter.
- 90% of firms confirm they have already implemented or plan to implement lawyer compensation to increase profitability margins, and 51% are planning to train lawyers to have more commercial awareness.
The research highlights the gap between the lawyers delivering services and the finance team tasked with realizing cash. Implementing the initiatives highlighted in the report in early 2024 will help firms boost firm-wide commercial acumen and improve client engagement so they can avoid disappointing year end profits like they saw in 2023.
Download BigHand’s Annual Law Firm Finance Report for more valuable insights and strategies on boosting profitability.
