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When it comes to tax season, there are generally three types of law firms. Those that maintain meticulous accounting records all year long; those that leave tax prep to the last possible minute; and those that fall somewhere between the two. For law firm leaders and administrators who find their practices at less than their desired level of preparedness, this time of year can be extremely stressful. But, there are some steps that law firms can take to help alleviate that stress for a more seamless approach to tax season.
First, it’s important to know all relevant dates, deadlines, and filing requirements. For instance, firms that operate on a fiscal year that differs from the calendar year may have different tax return due dates. Also, limited partnerships have different filing responsibilities than limited liability partnerships. These may seem like small distinctions, but they are extremely important for ensuring compliance.
The next step is organization. For firms that have maintained accurate financial records throughout the year, this will likely not be a huge problem. But other firms may have to put in a little work to get everything in order. Records like previous tax returns, expense receipts, income statements, and balance sheets need to be compiled and organized into a system before being handed over to the firm accountant. Disorganized and incomplete files can lead to inaccurate filings with unnecessary tax liability.
The final preceding step involves recognizing the firm’s responsibility as a business entity and as an employer. For instance, what tax obligations come along with operating as an S-Corp law firm? Which employees require W-2 forms and which are actually independent contractors requiring 1099- Misc. forms? By what date does the firm have to provide these forms to firm members? There is a lot to think about, but it is all necessary as law firms plan for tax season.
At the bare minimum, business expenses must be both ordinary and necessary for a legal practice in order to be claimed. Let’s take a look at a list of the most commonly used law firm deductions, along with some precautions to consider before claiming them as business expenses:
An increasing number of law firms accept credit card payments from clients, and many credit card processing companies charge firms a per transaction or monthly flat fee in exchange for transferring those payments. The IRS has determined that the fees associated with these transactions may be deducted as businesses expenses.
In addition, fees that law firms incur while using their own business credit cards may also be deductible, including finances charges, annual fees, monthly fees, and late fees. There is a caveat though - the fees must be actually paid or incurred by the practice. Fees stemming from a firm member’s use of the firm’s business credit card for personal expenses may not be deductible.
The rules around deducting office expenses can be somewhat confusing, so it’s important to consult a tax professional before filing. However, some of the most common tax deductions related to law office expenses include:
Most law firm marketing expenses can be deducted, including website costs and print advertisements. For firms that include networking within their marketing strategies, a percentage of meal and entertainment expenses may also be deductible as long as the event was primarily related to firm business.
Legal professionals can typically deduct education expenses that are deemed “ordinary and necessary” to the profession. As stated in IRS publication 535: “For example, an attorney can deduct the cost of attending classes that are required by the state bar association to maintain his or her license to practice law.”
Under some circumstances, legal conferences may also be eligible deductions if they are targeted towards improving the law practice in some way. It’s best to notify the firm accountant about all educational expenses so they can determine which are appropriate deductions.
Dues paid by law firms to professional associations on behalf of firm members may also be deductible as business expenses. This includes bar fees, trade association dues, and chamber of commerce fees. Public service organizations may also qualify as long as their main purpose is the provision of community services.
Law firms may also be able to deduct a variety of insurance premiums. As stated by the IRS, this includes malpractice insurance covering personal liability for professional negligence. Premiums for property insurance to cover damage and liability for incidents inside the physical law office may also be fully deductible.
In order to stay on top of legal industry trends and changes to the law, firms need to purchase a variety of resources for members to utilize. While most firms have moved to virtual library options, many still maintain a collection of physical books. For those firms, the depreciating value of these books may be deductible, much like any piece of office equipment.
There is a caveat to this deduction though. The only tax-deductible items are those that can be utilized for longer than a year. That leaves out periodicals and resources purchased on a monthly or annual basis, as well as those with yearly volume additions. There may be other deductions available for those resources though, so it’s always best to consult an accountant for clarity.
Travel on behalf of a law firm may also be tax-deductible. That includes travel that occurs outside of a regular radius to handle a specific case or research a particular matter. Travel cost deductions may also include air travel and hotel accommodations to conferences or out-of-state meetings, as long as they are substantially related to the business of practicing law.
The most important components of tax preparation are deadlines, organization, and documentation. With an awareness of potential tax deductions and guidance from a skilled accountant, law firms can successfully navigate tax season.
This is the time of year when we set—and, for some of us, quickly break—our New Year’s resolutions. But some resolutions are more important than others.
As we enter our third year of living with the coronavirus, facing continuous uncertainty and unpredictable market fluctuations, the resolutions that prioritize our well-being are vital. Financial well-being is an important piece of that puzzle and one, thankfully, that we, and our law firms, can plan for.
Try as they might, law firms aren’t immune to market changes. If anything, firms must adapt more quickly and more efficiently than businesses in other industries. While pivoting fast is typically not a hallmark of the legal industry, law firms must be able to anticipate market conditions, how these conditions might impact the law, and what their clients can do to best prepare and protect themselves. Lawyers need to turn all of this introspection and planning inward for themselves.
To continue to serve your clients most effectively, your firm must be operating efficiently. You must have a consistent cash flow that allows you to continue marketing campaigns, acquire clients, and hire new lawyers to do the work.
The key to this is a comprehensive financial strategy. Here’s how you should get started building yours:
Start with informed planning. Though the way the pandemic will continue to affect our lives may change, the financial information you have gathered over the last couple of years, along with the lessons you’ve learned, will be vital in preparing for what’s to come.
We know that COVID is here to stay, so your law firm must adapt to thrive and grow. Think both short-term and long-term and keep a careful eye on law firm funding. Get in the habit now of monitoring your cash flow and capital every week. This is one resolution that must stick.
Improving your firm’s short-term finances starts, like all great projects, with a spreadsheet. The hard numbers are most important here. What is your law firm’s cash flow? Cash on hand? Available lines of credit? What expenses do you have? Have you paid yourself and your team, and if so, how much?
If you’ve kept close track of these metrics over the last few years, begin analyzing these figures to discern short-term patterns. If you haven’t, there’s no time like the present to start!
The first figure to check out is your cash reserves. You should have enough in your account to cover a month of expenses, but it’s best if you can cover three or more months’ worth of expenses.
To infuse your firm with cash, consider whether there is a way to accelerate your collections process. If possible, shift away from contingency fees so you earn more of your fee upfront. If not, consider how you can take steps to reduce collections and receivables.
Additionally, make sure that you’ve paid yourself and your people. With the pandemic, the last thing you need is for your staff to worry that you aren’t able to cover their salaries. Give them peace of mind, if possible, that their job is secure and stable.
Pay close attention to the story that the numbers tell and evaluate the figures realistically and regularly. We recommend having a firm grasp on what these metrics are on a weekly, monthly, quarterly, and yearly basis. Learn just how often you should be tracking what with our reporting guide. You won’t be able to realize the big payday that you anticipate in Q4 if your firm runs out of capital in Q2.
Adjust your budget as needed and work toward building reserves. If the past two years have taught us anything, it’s that we need a rainy day fund. Building those reserves and continuing to cover monthly operating expenses will likely require revisiting your budget and jettisoning unnecessary expenses, such as printing costs. It might also require re-evaluating and improving your current billing and collections methods.
Also, don’t forget that you’re not a nonprofit. Clients expect good work, and you should be paid for that good work. Accurate and timely billing, availability of pre-bill approvals, and transparency of the process benefit all parties. Improved technology around billing and collections can reduce possible friction with clients and, in turn, give you more time to focus on case strategy. Considering your law firm’s short-term finances is invaluable in continuing its day-to-day operations, acquiring new business, and preparing for long-term expansion.
The key to your long-term financial strategy is simply to have one! Start thinking and documenting your plan now—you can always adjust it as you go along to account for changes in the market.
Here are some important questions to ask yourself when creating your firm’s long-term plan:
“Neither a borrower nor a lender be”: if you operate your law firm like this line from Hamlet, you’re not running your law firm like a business. Like your short-term and long-term goals, your law firm’s need for funding will be specific to your firm. The way you access that funding will also vary.
Some ways that you may be able to finance your firm’s growth include loans from private lenders, financial institutions, or government lenders, like the Small Business Administration or private equity. Some lenders will help you with litigation funding, which will cover any costs you incur while you’re defending a client. Others will help you cover your day-to-day operations or marketing costs. As with any transaction, you should conduct your due diligence and ask around for referrals from your financial advisor and other firms that you trust.
You may also be able to tap into your personal savings or loans from friends and family to start or maintain your practice. Other options include financing your firm through credit cards or lines of credit. Keep in mind that accumulating credit card debt is inherently risky and that you and your firm should carefully consider these risks.
Revenue-based financing once your firm is up and running is a great option. With this option, you pledge a percentage of your future revenue in exchange for an investment of cash.
We also recommend researching whether your firm qualifies for various loans such as those targeted specifically to small businesses or to provide financial relief due to the ongoing pandemic. No matter which method of funding you choose, ensuring your firm has adequate capital is important to continuing your operations, paying yourself and others, and achieving your long-term growth.
Keeping accurate, comprehensive records is key to running your firm smoothly and achieving any long-term goals. Well-organized law firm accounting records are a must, including a detailed budget and financial statements. Keep track of capital in and out and stay on top of your income statement.
The optimal practice is the most consistent practice, and technology can be your best friend here. There are important insights to be obtained by reviewing your budget: Which cases are the most profitable? Which drain the most resources? Where is money being spent but not made? Pay close attention and adjust regularly as needed.
Capital is important in continuing to run and grow your law firm. This requires regular and timely payment from clients, which can be difficult to stay on top of when you’re also busy handling the day-to-day demands and operations of your firm.
Here are a few tips:
Increasing profitability doesn’t hinge on billing. Firms must create long-term client relationships through excellent work, and it’s easier to do excellent work when you’ve minimized administrative friction and improved accessibility to your firm’s information.
Technology can truly transform your law firm’s operations. From billing and case management to integrated platforms for one-stop access for your clients, tech can help you run your law firm smoothly and allow you to focus on your long-term growth. Choosing the right technology makes it easy to invest intelligently in your law firm — smart tech investments should be a yearlong resolution too.
While modern technology has changed the way that many lawyers connect with their clients, it hasn’t changed the fact that confidentiality is key when it comes to the attorney-client relationship.
In fact, the American Bar Association (ABA) has addressed the rise of cybersecurity threats (like hacking) with an attorney’s ongoing obligation to safeguard confidential client information and communications. Not only do lawyers need to stay informed about the benefits and limitations of new technology, but they also need to try to prevent unauthorized and inadvertent access to their clients’ information.
So, how can you take advantage of the benefits of modern technology to optimize the client experience at your law practice and maintain your clients’ confidentiality at the same time?
There’s an easy answer: it’s called a client portal.
A client portal is cloud-based legal software that creates a secure space for lawyers and clients to connect and share information about their cases while automating administrative tasks. It’s a tool that helps you standardize representation so that you can consistently provide an excellent experience for every client, every time.
In the portal, both the attorney and client can upload, store, and share documents; calendar appointments; set reminders for court dates; send bills and make payments, and communicate easily via chat features and automated text messages. Using a centralized client portal also creates a digital client file that is easily referenced in future court hearings or meetings and ensures that all of the information shared is stored securely away from hackers and accidental exposure.
A client portal is a means to streamline and improve the client experience from beginning to end, to keep client data completely confidential, and to cut down on the overall cost spent on administrative tasks related to managing clients.
If you plan on staying competitive in the modern legal world, your law firm needs to start using a client portal to better manage current clients and increase client conversion through automation. You’ll turn more potential clients into actual clients by looking at the data collected by the client portal, and you’ll save money by making your staff’s job easier and faster.
A client portal is one of the easiest ways to get clients coming back for more because, aside from providing valuable analytics, it makes being your client easy. For example, it’s a lot easier for a client to upload standardized intake forms and documents in a secure portal online rather than dealing with encrypting an email to their lawyer or sending confidential information without it. It’s also easier than coming into the office, especially in the era of COVID-19. This makes a better overall client experience and saves time and effort on the part of the lawyer and administrative staff.
Portals also make it easy for clients to communicate with you, and that makes them more likely to have a positive experience. The client portal creates one place to easily send and receive messages to one another 24/7, so they won’t need to call at inconvenient times or leave messages with administrative staff. Plus, lawyers won’t need to give clients their private cell phone numbers. You and your clients can also easily review past conversations to quickly find information and maintain a record for the future.
With a client portal, law firms can streamline workflows, like legal billing and payment, which saves money for the firm. It’s an easy way to send invoices to your client and to receive payments through a secure online system without needing the assistance of staff. Clients can download the bills at any time and send questions directly in the portal instead of calling the office and leaving messages. This leads to happier clients who feel informed about billing and organized at all stages.
A client portal is also a great way to give administrative staff access to all documents and a complete history of a client’s representation. This helps staff in charge of billing, legal operations, and paralegal and investigative work do their job better without needing to go digging around the office and asking questions. A client portal also facilitates remote work, which can cut down on costs associated with office space and keep your entire staff working within one system.
Basically, a client portal doesn’t just make you money because it makes clients happy. It also makes you money by cutting costs and increasing productivity across multiple different areas of the firm.
The point of the client portal is to optimize the client experience and streamline client management processes around the law firm. With that in mind, a great client portal should have the highest functionality and include the following features:
All of these elements should be included in a professionally designed portal that is customized with law firm logos and colors to create a personalized touch.
Of course, a client portal must be intuitive and helpful, but the most important feature of a client portal (or any legal technology) is reliable security and firewall protection.
Law firms are not immune to data breaches. At the end of the day, lawyers must use due diligence to keep client data, online communications, and shared documents confidential. If they don’t, they might risk breaching their ethical obligations and losing their clients’ trust.
Computers are easily hacked, and cell phones are sometimes lost or stolen. Plus, in the era of remote work, there’s a risk that lawyers and staff might opt to use piecemeal platforms or apps that you haven’t vetted for security. You shouldn’t assume that your email is secure either. Law offices are prime targets for hackers, given the valuable secrets they hold.
That’s why it is more important than ever to shift to a client management model that includes a secure client portal with top-notch protective features, like encryption and two-factor authentication. These protections will safeguard confidential information and store data securely, so you’ll never have to worry about someone stealing your client’s data or taking the hit of a dreaded data breach.
There are many ways to upgrade your client intake process, but a client portal is a great first step.
A client portal can streamline client intake and standardize the client’s first experiences with the law firm, so you’re always putting your best foot forward. It’s also a great way to automate administrative tasks and workflows related to intake while boosting productivity among other staff and reducing costs across the board. There’s no reason to rely on outdated client intake practices when you have a client portal to make it easy and cost-effective.
For example, client portals make it easy to send intake forms for clients to fill out before your first meeting and for clients to enter personal identifying information all in one place. This data is usually populated in a larger system to cut down on data-entry-related tasks around the office. It also minimizes the time that each lawyer or staff member must spend meeting with and gathering information from a client.
Certain platforms can even track the metrics when it comes to intake, which is great for a legal operations department that works tirelessly to maximize resources and save money. Since intake starts from the moment a potential client reaches out to your firm, you can use the portal to track where potential clients are coming from and customize intake to target your ideal client. You’ll also be able to look at the ROI on your marketing spend over time so that you get a clearer picture of the law firm’s finances.
Let’s not forget that a client portal can automate conflict checks that are usually performed during intake and conveniently generate a report that protects the confidentiality of your clients. Conflict checks can be costly and complicated for legal practices, but the power of computing makes it fast and simple with the right platform. Some even offer the ability to create a “virtual wall” to adjust permissions settings and prevent certain lawyers with a conflict in the office from accessing sensitive information on a particular case. This reduces the risk of accidental exposure and confidentiality breaches among coworkers.
If you’re thinking about incorporating a client portal into your arsenal of practice management software to improve your client service, you should try out a free demo for an introduction to our platform. We’re happy to show you all the features so that you get comfortable with the functionality of our client portal and can see how it will help your law firm become more client-centered and profitable.
Family law clients are in deep conflict. They’re facing some of the most trying situations in their lives, whether it’s a matter of a separation agreement, divorce, alimony or child support dispute, or child custody battle. Their nerves are likely frayed, and they need support and guidance.
So, prospective family law clients probably need a little more hand-holding and care than many other types of clients. Because their issues are so personal, they likely need an empathetic ear. They’d also benefit from a client intake process that eliminates the fear of working on personal matters with a stranger and makes it easy for them to start moving forward.
One way that family law firms can make client intake easier for prospects is to offer a questionnaire that helps prepare clients for the information they need to share, so they can organize their thoughts and documents in advance.
Here’s how an online intake form can help you make the most of the intake process, so you start your attorney-client relationship off on the right foot:
Clients create value for any business, including law firms. Since the practice of law is a client-based (and reputation-based) business, law firms need to provide an outstanding client experience from the very beginning.
Keep in mind that your family law clients are likely a source of repeat business. (Let’s hope that their disputes are one-and-done and that they instead help you grow your firm’s revenue by attracting new clients with positive online testimonials and referrals.)
Unfortunately, many lawyers are too busy practicing law to give a lot of thought to the client experience. That’s a mistake because there’s little otherwise to differentiate you from other law firms. To ensure your clients walk away with a great impression, you should communicate regularly with them and keep them updated on their case, use technology to create a client portal for ease of billing and calendaring, and of course, develop a thoughtful client intake process.
The practice of family law is different from other areas of law because it’s emotionally charged and often adversarial. It’s also incredibly personal and potentially embarrassing or terrifying— especially for victims of emotional and physical abuse.
Family law clients often feel a little shellshocked when they first walk in for an initial consultation. Not only are they going through something traumatic, but then they must share the most personal, intimate details of their ordeal with a complete stranger. That’s why it’s critical for lawyers to build a sense of trust with new clients at the very beginning— and to do so very quickly.
Without that trust, clients may not share important information that is potentially damaging to their case. Worse yet, they might run for the door and into a different lawyer’s office.
The best way for a family law lawyer to create a positive client intake experience is to prepare in advance. That way, you’ll be ready to handle any emotional discussions more productively. This might mean implementing technology for a smooth virtual intake process or giving your client a form to fill out beforehand.
A client intake form, when built correctly, can give your clients direction. It can also get them used to talking about their issues so that they don’t get so flummoxed that they clam up and refuse to talk or unload like you’re their therapist.
Streamlining the intake process also cuts down on the risk of making a bad first impression. When asking questions about personal matters like domestic disputes, attorneys at law may appear to be insensitive. A questionnaire avoids that discomfort because you’ll be informed about the client’s situation in advance and be ready to start proposing solutions.
And if you share the form before your meeting, rather than requiring clients to fill it out when they get to your office, you’ll be more prepared for your first meeting.
You’ll need more than a basic contact form to get the information you need to improve the intake process. A comprehensive family law intake online form asks targeted questions. While it may not cover every single angle you’ll need to know about your client, it will give you a baseline of information to guide your conversation during the initial consultation.
The key is to start with general information and then move to more specific details. Here are some of the things that your family law intake form should cover:
It’s also a good idea to ask a few narrative questions, such as “describe your relationship with your kids,” “explain your biggest concerns about this situation,” and so forth. Questions like these give new clients a chance to tell their stories before talking to you. You can use this background to frame your discussion.
If you don’t already have a client intake form, download our template (see the pop-up to your left?) to start building your own. Using an online client intake form can strengthen your client relationships, giving you the foundation for a better client experience from the very beginning.
It’s no secret that the last two years have been filled with unprecedented challenges. But, navigating these challenges has armed attorneys and legal operations professionals with valuable lessons about providing legal services in the midst of difficult times. Moving into 2022, the legal industry as a whole is taking those lessons and turning them into resources to support a successful year to come.
Firms want tools that help them handle routine tasks in a more efficient manner so they can save time and drive revenue. As such, two words will define the legal industry in 2022: streamlined and convenient.
Keep reading to explore some of the trends that will drive these concepts and shape the industry in 2022.
As consumers in the larger economy, legal clients have come to expect convenience from every business they patronize, and that includes law firms. They want a seamless client experience that meets them where they are without requiring what they perceive as unnecessary steps. With a goal of maintaining positive client relationships, firms will increasingly rely on technology to meet that objective.
Tools like virtual meeting platforms, client portals, and electronic payment capabilities will maintain their prevalence among law firms in 2022. Even as some firms have returned to in-person meetings and proceedings, many clients still expect the convenience of conducting business from the comfort and security of their homes. To remain competitive within the industry, firms of all sizes will have to meet this expectation.
Discovery is often one of the most convoluted tasks that a law firm handles, requiring time-consuming contributions and coordination between all parties to a matter. It can be a complicated process that drives industry efforts to make the process easier to handle. E-discovery uses artificial intelligence (AI) and automation technology to collect and produce data in response to formal requests within a legal proceeding. Not to mention, it is a $2B industry that helps law firms pull relevant information from volumes of various types of records. A cost-effective alternative to traditional discovery methods, e-discovery is expected to continue growing and helping firms increase revenues in the year ahead.
Outsourcing has become a widely accepted practice for law firms in recent years as they look for ways to complete administrative, and even legal, tasks in an efficient and cost-effective manner. Outsourcing involves the identification of tasks and practice areas that can be best handled by outside service providers. According to experts, the outsourcing of legal processes will continue to be a growing industry in the year ahead, providing law firms with services related to accounting, legal billing, and various tech functions.
By outsourcing some necessary non-legal duties, firms can spend more time and resources on their most profitable tasks. But some firms are even choosing to outsource some of their more intricate legal processes. The use of contract paralegals will continue to expand during 2022. Firms benefit from bringing in these professionals to work on specific matters without the extra overhead costs that come along with hiring a new employee. Particularly within small and mid-sized firms, paralegal outsourcing can help drive revenue in an efficient manner.
“New law” is taking outsourcing to another level with many big firms hiring contract attorneys to handle matters on an as-needed basis. This innovative way of providing legal services is largely in response to consumer complaints about high costs and hourly fees. Firm leaders have discovered that the use of contract lawyers can help them control their costs. They can then pass some of those savings onto their clients, while also maximizing profits.
In 2022, “new law” offers law firms and individual attorneys the flexibility they need as the uncertainties of the pandemic persist. They can pivot quickly to remain competitive while continuously meeting client needs and driving revenue.
Automation is a major driver for streamlining the practice of law, and any reduction in repetitive law firm tasks equates to more time for work that drives revenue. Automation technologies are evolving the basic administrative functions of a law firm through the use of AI innovations. They take on various forms, and each can significantly ease the day-to-day functions of a law firm. In 2022, firms will look for the repetitive tasks that create bottlenecks within their workflows and seek out automation options that can better handle them. Tasks like calendaring, client onboarding, conflict checks, and even the creation of some court documents can be effectively handled through automation.
Remote work was a quick necessity at the start of the pandemic, but moving into 2022, firms will look for ways to evolve these arrangements, making them more efficient, seamless, and responsive. The “make it work” perspective will be replaced with one that embraces serious thought and strategy. Firms will revisit their policies to identify areas for improvement.
As better technology adds to a more effective remote working environment, communication will play a large role. Firms will seek improved communication systems to remove obstacles that thwart both collaborations between firm members and effective communications between the firm and clients. The use of cloud-based softphones and texting platforms will expand in 2022, along with client portals. From lead management to collections, firms will seek ways to raise the communication bar.
The wave of legal technology will not come to an end in 2022. Many courts and jurisdictions recognized the efficiency of processes like remote hearings and no-appearance proceedings when they became a necessity, and even as the world reopens, they will continue utilizing these tools. The access to justice will expand and legal technologies will keep evolving to meet these needs. As such, law firms will also continue embracing new technologies as the year progresses.
For law firms to thrive in 2022, they will need to pay close attention to analytics and reporting. Information related to revenue, profits, expenses, and practice area performance will be key to making decisions about the direction and growth of firms. Over the past year, attorneys and law firm administrators have put a lot of thought and effort into transforming their practices and working to make them pandemic-proof. 2022 will be the year of determining whether these new processes have actually translated into real profits. To do this, firms will need technologies that make the capturing and reporting of data quick and easy. With a data-focused perspective, law firms will be able to make informed decisions in the new year.
Part-time work generally does not come to mind when thinking about jobs within the legal industry, but experts suggest that this will be a trend in the coming year. Many employees enjoyed the work-life balance that they experienced during shutdowns. They will seek ways to continue that flexibility in 2022 and part-time opportunities offer a viable solution. Firm members can earn enough money to meet necessary expenses and even pay down some student loan debt while maintaining a level of freedom within their personal lives.
Experts suggest that the increased demand for legal services that started during the pandemic will continue into 2022, especially for the following practice areas:
Firms can meet these increases in a number of ways. They should first recognize the potential that lies within these practice areas and the types of prospective clients that they may bring through the door. Firm leaders can identify which of these practice areas best align with the strengths of their firms and how to best leverage existing resources to serve these clients. With an understanding of increased demand within the legal industry, law firms can take advantage of this trend in the coming year.
You know that your law firm is a business. But only recently have firms started focusing on how to improve their business. (After all, the leading legal industry organization dedicated to legal ops, the Corporate Legal Operations Consortium (CLOC), has only been around since 2016.) To date, few firms today have hired dedicated legal operations professionals, much less created a formal legal operations function.
An easy first step on the journey toward more effective legal operations is hiring an experienced legal operations manager. A driven and dedicated legal operations manager can make all the difference for a law firm that is looking to optimize business processes to increase revenue and productivity.
Legal operations is the business of running a law firm.
While lawyers may spend the bulk of their time engaged in the practice of law or strategic planning for matters, the legal operations department works behind the scenes to make sure all of that is done as efficiently and profitably as possible. Strong legal operations departments work to streamline processes within the law firm to maximize operational efficiencies, helping lawyers work smarter and faster so they can earn more revenue.
Day to day, this might look like monitoring lawyer productivity, identifying new legal analytical tools, budgeting for the firm, and managing third-party providers. Over time, it means implementing new processes and practices that will guide the law firm along the path to becoming a thriving business.
A legal operations team is no longer a luxury reserved for large firms. It’s now a valuable resource for small and midsized law firms that live and die by the bottom line. Legal operations should be a priority for law firms of all sizes, especially those looking to grow.
You can’t have an effective legal ops department without a fearless leader. That’s why near the head of the table in the legal operations department sits the legal operations manager.
A legal operations manager oversees various legal ops team members’ day-to-day activities and ongoing projects. Depending on the size of the law firm, the legal ops manager might report to a director of legal operations and be responsible for a larger team or just one or two legal operations specialists or analysts.
Either way, the legal operations manager must take stock of the current state of affairs of the law firm and come up with ways to make it better.
Legal operations managers take a deep dive into the firm’s budget. They break down where money is going within the firm and where money is coming from. They also provide stable financial planning for the future.
Legal ops managers use past yearly spending to build forecasting models and proactively identify new, creative ways to optimize financial resources within the firm. Many legal ops managers will also analyze processes related to e-billing to streamline outdated, tedious, and repetitive workflows. They study peer law firms as part of benchmarking exercises, always looking for innovative ways to price work and trim expenses.
But legal operations managers do much more than just budgeting! They also look at individual lawyer productivity and identify ways to make everyone at the firm work smarter. Sure, legal ops managers can’t step into the shoes of the managing partner, but they’ll have valuable input on staffing questions that firm leaders will want to listen to. Among other metrics, they analyze data related to billable hours, assigned cases, and revenue generated as a result of each lawyer’s work.
From that data, a strong legal ops manager comes up with ways to assign certain cases to lawyers who are more or less productive, depending on the needs of the firm and the ideal legal spend per case. They might also plan training for lawyers and staff and develop policies designed to increase firm productivity. Some legal ops managers even go as far as making recommendations on hiring and firing decisions.
Legal operations managers oversee third-party vendors, such as alternative legal service providers, freelance lawyers, and other professionals, like experts and consultants, who provide services to the law firm. In the past, firms might have relied on word-of-mouth recommendations or professional connections to decide where to outsource work rather than choosing the best, most efficient vendor based on objective criteria.
Proactive legal ops managers challenge traditional sourcing models. They also look for opportunities to rethink pricing arrangements and work to negotiate favorable rates from third-party vendors to maximize the value for every dollar spent. They scour the job boards and vet candidates to ensure that their firm avoids wasting money in the recruitment and onboarding process.
At the heart of it all, legal ops managers must collect, analyze, and translate the firm’s data. That means breaking data down for partners in the firm who might not be so business inclined.
Legal ops managers are responsible for data that extends across many different areas of the law firm. Their most common focus is the budget, scrutinizing data from their e-billing system to understand their revenue by practice area or case. They also collect data about lawyer productivity and translate that into smart hiring practices and case-assignment strategies that save money.
To collect this data, a legal ops manager will spend time researching and trying out innovative technology to choose the best tech for the firm. They’ll need to understand the latest trends and the opportunities to expand and incorporate new platforms into their work and the work of others in the office. This technology is important to optimizing processes and saving time (which means saving money) throughout the firm.
Most legal operations managers have a bachelor’s degree and at least some experience in legal project management or operations, whether in another law firm or in-house. Optimal candidates often have a blend of corporate legal department and law firm experience, which will ensure they have a deep knowledge of the inner workings of law firms along with the know-how and skills to position the firm as a leading outside counsel capable of addressing the needs of even the most demanding general counsel.
A job description for a legal operations manager will focus on competencies such as analytical skills, problem-solving skills, and communication skills that enable ops managers to speak to a variety of stakeholders at all levels of the firm. They should also have experience managing projects, developing policies, and collaborating with legal teams to deliver results.
Successful legal ops managers often have strong backgrounds in vendor management and change management initiatives. Extensive knowledge of technological solutions, including contract management, knowledge management, and matter management, will help the legal ops manager harness the inherent value in the firm’s data and inform their recommendations for procurement and service delivery strategies.
Hands down the best way for a legal operations manager to increase their firm’s efficiency is to leverage technology.
Legal technology has dramatically improved over the years. Instead of toiling away in the law library, lawyers can find relevant cases and statutes with just a few keystrokes. There’s no need to struggle to estimate the likelihood of winning a case because artificial intelligence and machine learning tools can do that for you. And - let’s not forget technology that helps with client recruitment, management, and correspondence.
Not only does a legal operations manager need to understand how to use these types of technology to make lawyers' work more efficient, but they must also understand how to leverage technology to make the entire law firm more efficient as a business.
Luckily, there are platforms that can help legal operations managers monitor key performance indicators (KPIs) like legal spending as a percentage of the firm’s revenue, the cost of a case per matter, and the cost per lawyer. This technology can also crunch the numbers so that legal ops managers can see whether the firm is optimally productive. Platforms can track the percentage of cases resolved vs. litigated, staffing and paralegal spend by lawyer, legal hours vs. administrative hours, and deadline compliance. Legal ops tools can even track the amount of time that a case takes at each pivotal point and the overall satisfaction of each client.
By leveraging innovative technology and continually re-evaluating the firm’s current processes, legal ops managers can get a clearer picture of the firm’s financial status and use the data to come up with new ways to make things run smoother, make the lawyer’s jobs easier, and make the law firm more profitable.
The future of legal operations management is constantly evolving.
Law firms’ financial, strategic, and internal decision-making is increasingly based on quantitative data instead of guesswork. That data is valuable for legal ops managers who need to evaluate productivity and streamline efficiency within the law firm. Instead of merely reporting on the data to firm leaders, future legal ops managers will play a vital role in redefining how law firms can work smarter and build a better business model.
This is a tremendous opportunity for legal ops professionals to engage in the business management of a law firm and to take part in the legal technology revolution. It is also a chance for law firms to differentiate themselves from competitors by creating value and to leap headfirst into the modern era.
Of course, there will be challenges: changing the status quo in a law firm can be difficult at times. But once law firm leaders see the value created by a great legal operations team, headed by a strong legal ops manager, it won’t take long for them to get on board.
By spending time now to build a strong legal operations team headed by an experienced, tech-savvy legal operations manager, you can modernize your firm and situate it to capitalize on future trends in legal operations.
A recent study from Bloomberg suggests that a third of law firms don’t have a dedicated legal operations function. But is that true?
To paraphrase Shakespeare, we think it’s a case of a rose by any other name smelling as sweet. Even if firms don’t have a formal legal operations team or use specific job titles like “director of transformation” or “manager of service delivery,” they’re still engaging in at least some operations-related activities. For example, they’re probably:
If you’re dabbling in these activities or considering whether your firm needs a dedicated legal ops professional, you may be wondering how deep to go down the rabbit hole in forming your team. Let’s take a closer look at what a legal ops team does and how you should go about building yours.
In a nutshell, legal operations is about running the business side of a law firm. It includes managing law firm productivity, avoiding risks, monitoring compliance, handling department budgeting, implementing technology, studying data from legal analytics tools, and sourcing and managing third-party providers, among other things.
Legal operations’ mandate is to ensure that the firm provides legal services efficiently and in a profitable way that stimulates the firm’s growth. In short, legal ops is tasked with optimizing a law firm’s performance.
According to the Corporate Legal Operations Consortium (CLOC), there are 12 main functions of a legal operations team:
CLOC explains that addressing these 12 functional areas leads to operational excellence. According to CLOC, operational excellence is “a philosophy that embraces problem-solving and leadership as the key[s] to continuous improvement and a mindset that embraces certain principles and tools to create sustainable improvement within an organization.” It involves the execution of a business strategy to reduce risk, lower operating costs while increasing productivity, and raise revenue through tactical and strategic objectives.
Given the breadth of these functional areas, it will be difficult for a single legal ops professional to oversee and optimize all of these areas. That’s where a legal ops team comes in.
As law firms feel greater pressure to do more with less, they need to find new ways to trim their bottom line and optimize their productivity. Midsize firms are already lean, so they can’t meet their goals by simply reducing headcount and raising their billable hours targets.
Legal operations helps midsize law firms find new ways to deliver better service to their clients. Not only can it help lawyers attract more clients by developing alternative fee arrangements that are beneficial to both sides of a transaction, but it can also ensure that law firms are maximizing their profitability by staffing properly. That means assigning the right work to the right level resource, whether that’s a paralegal, junior associate, senior associate, or partner.
Adding technology to the mix can simplify the practice of law and improve the quality of life for lawyers in midsize firms. And, most importantly, the data that tech tools, such as e-billing, matter management, contract management, document management, and data management tools, collect for firms can help them ensure compliance with client billing guidelines as well as understand opportunities for the firm to improve. Analytics from these tools help increase the firm’s transparency with clients and allow lawyers to better predict case budgets and outcomes.
You don’t need to be a lawyer to work in legal operations—but a legal background, whether as a lawyer with a law firm or in an in-house corporate legal team, won’t hurt. Legal operations professionals must be able to understand the law firm’s business model and be able to add value in conversations with law firm leaders.
The optimal candidate is likely someone with business acumen and possibly a financial and data analytics background. Someone with a law degree and MBA may offer the right blend of expertise for the role. But don’t be afraid to tap someone inside your firm if they’re already contributing to work on your firm’s processes, vendor management, technology, or data analysis.
The director of legal operations, sometimes called the head of legal operations, runs the legal ops team and usually reports directly to the firm’s managing partner.
The director is responsible for managing the entire legal ops team and for making higher-level decisions. These decisions might include the final opinion on resource allocation, vendor procurement, personnel matters, or leadership initiatives. The director of legal operations might also recommend whether to implement new technologies, advise on pricing structures, or suggest ideas to streamline processes that are wasting money. Usually, these recommendations are based on a synthesis of data and information provided by the lower-ranking members of the team.
It is important to hire someone with a demonstrated ability to identify and implement changes in legal technology, people, and processes. The director should also have well-developed change management and leadership skills, especially since they will be leading and acting as a role model for the rest of the team.
The Legal Operations Manager is the second in command of the legal operations team. They oversee all legal operations projects and manage team members’ day-to-day activities.
The manager should have strong leadership and communication skills since they will be guiding the team directly and interacting with a variety of stakeholders, including law firm leaders and possibly even a client’s general counsel or other department leaders. They should also have a strong sense of judgment, knowing when to share information with the director and with firm leadership. You should look for someone with years of experience managing people, driving process improvement, and collaborating across multiple departments.
A strong legal operations manager will understand the ins and outs of the law firm, including its hiring needs and the intimate financial details of the firm’s daily operations. They must be highly organized and detail-oriented with extensive experience in project management and streamlining processes to maximize operational efficiencies.
A legal operations specialist generally focuses on identifying areas of need and optimizing workflows. It is a highly collaborative role that requires strong communication skills and the ability to understand how other departments function. Examples of their work might be following up with legal operations analysts or researching new technology.
A legal operations specialist works directly under the legal operations manager. This position is usually generalized and a catch-all for the remainder of the work that falls under the purview of the legal operations manager.
It is important to hire someone who can handle a variety of projects and thrives in a fast-paced work environment with minimal guidance. A self-starter and easily motivated legal operations specialist is an excellent addition to round out your team.
A legal operations analyst is a more specialized role than that of a legal operations specialist. Unlike a specialist who (somewhat paradoxically) performs more generalized tasks, an analyst collects and synthesizes data specific to the legal team’s metrics.
The analyst does a deep dive into the functioning, caseload, work habits, and key performance indicators (KPIs) for each lawyer. This helps the legal operations manager decide where to allocate resources and how to better manage the legal department to increase profitability. Their work might affect the number of cases that each lawyer takes on, influence decisions about whether to hire additional local outside counsel or improve attorney management practices to boost productivity.
You should look for a detail-oriented individual with experience monitoring and reporting on data who can also collaborate on a larger team and between multiple departments. An analytical employee with an understanding of both the minutiae and the bigger picture will be an asset to any legal operations team.
Assembling a legal operations team might feel a bit daunting, but it doesn’t have to be. Instead, look at it as an exciting opportunity to grow your firm.
Start by identifying any gaps in your current legal operations team (or draft a plan for implementing one). Then create a plan for how you’ll start tackling the core functions we outlined above, whether it’s by recruiting new hires for the roles described here or sharing the work between existing staff. (Keep in mind, though, that legal operations responsibilities are often extensive enough to require a full-time role!)
The sooner you build out and formalize your legal operations team, the sooner you’ll start to see results in terms of more efficient processes, better client service, and more robust profits. Legal operations can also eliminate some of the headaches of practicing law, as your firm’s lawyers benefit from more organized knowledge management and accelerate their work with data-driven tech tools.
Remember that the purpose of a legal operations department varies from firm to firm based on each firm’s needs and current operating practices. Look at what your law firm needs today and strive to craft a legal operations team that can not only handle those needs but also bring your law firm into a future that you may not have yet imagined.
Every law firm should start 2022 with accurately balanced accounting that is ready for all that the new year will bring. However, doing so requires the complete closure of books from the 2021 fiscal year.
While this annual process is typically easier for firms that have consistently updated their books monthly, those that wait until year’s end can still complete this important task successfully. This year-end closing process comes together through reconciling bank accounts, adjusting entries, and preparing financial statements for analysis.
The following are some annual bookkeeping processes to help your law firm set the foundation for financial success in the coming year. Like what you’re reading? We’ve also prepared a handy checklist for you to follow to ensure your books are up to date as 2022 approaches.
Settling invoices and outstanding client accounts will make it much easier for your firm in the coming year by bringing all income up to date before the year’s end. If any invoices for completed work are yet to be issued, you should create and send them immediately.
Outstanding invoice payments also require prompt follow-up. An abundance of unpaid invoices can result in decreased revenue and law firm cash flow, impacting a firm’s ability to meet its financial obligations at the start of 2022. Firm administrators should run an accounts receivable report for an up-to-date listing of all unpaid bills.
The firm can then take the following steps to settle the accounts that firms deem collectible:
For any seriously past due accounts that cannot be settled, firm leaders must decide whether or not they are ultimately collectible. The likelihood of collection decreases significantly over time, so for accounts that will likely never be paid, it may be appropriate to write them off by December 31st.
Expense tracking must be a part of the year-end closing process. It is equally as important to account for money going out of the firm as it is to track revenue coming into the firm. Without this information, attorneys and firm administrators lack a true picture of the practice’s financial well-being. Don’t go into 2022 believing that your firm is more financially viable than it actually is, which could potentially lead to problems like inadequate cash flow and the inability to cover firm overhead.
For firms that do not track expenses monthly, it is useful to conduct an audit of all 2021 expense records to ensure that every cost is included in the year-end closeout. This not only helps with financial analysis and budgeting for the new year but also benefits the firm’s accountant as they work to identify expenses that may be tax-deductible.
If possible, aim to settle all outstanding debts before closing out the yearly books. This includes all vendors that provide services or equipment to your firm, as well any contractors that the firm has outsourced duties to throughout the year. By settling these debts, firms benefit from a fresh start for the new financial year without residual expenses.
After all revenue and expenses are recorded, law firms should perform bank reconciliations to ensure that all financial records line up with bank statements. Any discrepancies need to be reviewed and investigated.
The best practice for this task is to reconcile monthly as soon as bank statements arrive. Otherwise, firms must contend with 12 months of bank statements in a short period of time, making it more challenging to identify errors.
Most jurisdictions require law firms to reconcile client trust accounts on a monthly, or at least quarterly, basis. However, this does not negate the duty of completing year-end trust account and retainer reviews. An annual review is useful for double-checking reconciliations done throughout the year to ensure that no mistakes or miscalculations were missed. The ledger sheet for each client’s trust account should line up completely with the corresponding bank statements.
In addition to trust accounting, firms should also review client retainer balances to determine which retainers need to be replenished. Firms should also ensure that all earned funds have been appropriately transferred into operating accounts from retainers held in trust.
Another task for closing the 2021 books is ensuring accurate and updated records of fixed assets. These are long-term assets with a usage life of more than a fiscal year that law firms use in the delivery of services.
Some examples of fixed assets that your firm may have acquired in 2021 include:
If your law firm purchased any type of fixed asset over the past year, its financial details should be recorded, and its yearly depreciable value should be reviewed by an accountant or accounting software. Calculated depreciations can potentially be written off as tax deductions.
Law firms withhold payroll taxes from employees’ earnings to pay taxes required by the state and federal governments. The amounts deducted and sent to the government vary depending on the employee’s salary and wages. As a business, it is your law firm’s responsibility to manage these taxes and ensure that accurate amounts are sent. A year-end closeout should include a review of payroll taxes to make sure that these tax liabilities accurately match your firm’s quarterly payroll returns.
Year-end is also an opportune time for processing 2021 employee W-2s and contractor 1099s, so it’s important that firms ensure accurate records for all members. Firm administrators should verify employee and contractor information and make any necessary changes.
When all revenue, expenses, and data are finalized and entered, firms should run the following financial statements:
The annual closeout also presents a good opportunity to review some firm practices related to legal billing and firm accounting. Firms can run reports related to time tracking and billing to ensure that all firm members have been recording tasks in a timely and comprehensive manner. This data can also reveal any delays in the process of converting tracked time into client invoices.
When all year-end financials have been analyzed and finalized, law firms can securely close their books. This is more than a theoretical step, it is an actual process.
For instance, some financial experts advise setting a lock date to prevent any additional changes or edits to the closed books. Firm leaders may assign a password for admin and accountants’ access to ensure and maintain data integrity.
Once the books have been closed, pat yourself on the back (you’ve earned it) and get ready for 2022!
[vc_row type="in_container" full_screen_row_position="middle" column_margin="default" scene_position="center" text_color="dark" text_align="left" overlay_strength="0.3" shape_divider_position="bottom" bg_image_animation="none"][vc_column column_padding="no-extra-padding" column_padding_position="all" background_color_opacity="1" background_hover_color_opacity="1" column_link_target="_self" column_shadow="none" column_border_radius="none" width="1/1" tablet_width_inherit="default" tablet_text_alignment="default" phone_text_alignment="default" overlay_strength="0.3" column_border_width="none" column_border_style="solid" bg_image_animation="none"][vc_column_text]It’s already mid-December, and the end of the fiscal year will be here before we know it.
Evaluating end-of-year compensation for your attorneys may be the last thing (or, we’ll say it, most dreaded thing) on your to-do list as you work through closing the books for 2021.
There is some good news - you don’t have to go it alone. We were lucky enough to be joined on a webinar by Amanda Koplos, Executive Director, and Stephanie Donaldson, Controller, at Shuffield, Lowman & Wilson, P.A., a 40+ attorney, full-service law firm practicing in the areas of corporate law, estate planning, real estate, and litigation based out of Orlando, Florida.
Amanda and Stephanie have a wealth of experience in law firm operations and leadership, having worked in five firms over the course of their careers. They were gracious enough to share their own theories and best practices surrounding end-of-year compensation for attorneys. Here is what they had to say:[/vc_column_text][vc_column_text]
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Amanda: In my experience, law firms typically divide compensation for timekeepers into multiple categories. Some are based on production; others are based on intangibles that are harder to measure that take into account the overall profitability of the firm or contributions that timekeepers made such as time spent on business development, mentoring other attorneys, or working on the business in a management capacity.
Stephanie: I have seen the same thing. I basically refer to it as objective compensation and discretionary compensation. Objective compensation is exactly what you think it means: there are a series of goals and if an attorney hits those goals, they receive that objective compensation or a combination of salary and bonuses. Discretionary compensation takes into account all of the things previously mentioned but it can also have components such as “overachieving” on objective goals. For example, if billable hours are a function of your objective bonus, and an attorney were to hit those and go over, some firms might add that into discretionary compensation.
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Amanda: Lots and lots of spreadsheets!
Stephanie: While that is true, I recommend a few different methods for gathering information. I rely on our accounting system to produce reports. However, in specialized circumstances, I am exporting data from our practice management software and manipulating it in Excel. These reports vary throughout the year and the only way I am able to keep track of them is by running reports on an ongoing basis. For example, I may give each timekeeper one report every month so they can see how they are progressing, while also running a report at the end of each quarter, and finally, at the end of the year.
Amanda: Not to mention, these reports may vary depending on who you are giving the report to. An individual report is going to look significantly different than the one given to firm management or practice group leaders. Those reports are different from the individual attorney reports because leadership needs to see consolidated timekeeping information. My advice here is that you really need to put a procedure in place at the beginning of the year, and prioritize updating and reporting monthly. We know what a time crunch the end of a firm’s fiscal year is and you don’t want to spend hours in December creating standard reports.[/vc_column_text][/vc_column][/vc_row][vc_row type="in_container" full_screen_row_position="middle" column_margin="default" scene_position="center" text_color="dark" text_align="left" id="q3" overlay_strength="0.3" shape_divider_position="bottom" bg_image_animation="none" shape_type=""][vc_column column_padding="no-extra-padding" column_padding_position="all" background_color_opacity="1" background_hover_color_opacity="1" column_link_target="_self" column_shadow="none" column_border_radius="none" width="1/1" tablet_width_inherit="default" tablet_text_alignment="default" phone_text_alignment="default" overlay_strength="0.3" column_border_width="none" column_border_style="solid" bg_image_animation="none"][vc_column_text]
Amanda: At the various firms I have worked at your “need” for information differs based on your position. Here’s an example: one firm might track collections based on who worked on the matter or by working timekeeper, meaning collections will become a driving factor for individual attorney compensation. Each attorney is going to want a basic report every month that shows the total collections on the matters they have worked on. Since it is just the collections attributable to them, they don’t need to know (nor do they probably care) what all of the other timekeepers collected on the same matter. So, you want a report that shows you “collections by working timekeeper” and you want to be able to filter it for one attorney with the ability to set date ranges such as a month, quarter, or year. You can pull those reports directly out of a good time and billing system. However, that shows only one side. You also need the ability to see how that ties to compensation for individual timekeepers by taking the raw data on collections and combining it into a report that shows the progress toward a bonus goal.
Stephanie: You need to make the report simple, yet functional. I’m a numbers person so I always want to dump a ton of data into one report. But, if the attorney can’t understand it, it’s a waste of time.
Amanda: I actually had a conversation with an attorney one time. She said, “yeah I get those reports every month but I never look at them or understand them.” I was befuddled by that because that report would help her plan how to make more money. So, I simplified the report for her, she finally “got it” and it was much more successful for everyone involved.
And that’s just reports for individual timekeepers! Then, we might have more in-depth reports for practice area chairs and for the managing partner that help leadership look at everything going on from a full-firm view. Sure, you need the individual numbers, and firm administrators need access to them, but you need to be constantly benchmarking where you are now and how you’re going to fare at the end of the year. A good controller gives you reports that are both historical and include predictions.
Stephanie: Since we’re talking about compensation in firms where there is a lot of variable compensation, (in other words: more discretionary than objective) I have to predict how much compensation we will be paying out on a monthly, quarterly, or annual basis, in addition to predicting how much cash we’ll need to pay that compensation and how the budget (and thus bottom line) is impacted by those predictions.
Amanda: It’s a lot of reports and it’s important to have an organization system. We’re even developing better systems for that. We are investing in pushing information to people and building reports that are specific to users that they can access easily, ideally within their time and billing system.[/vc_column_text][/vc_column][/vc_row][vc_row type="in_container" full_screen_row_position="middle" column_margin="default" scene_position="center" text_color="dark" text_align="left" id="q4" overlay_strength="0.3" shape_divider_position="bottom" bg_image_animation="none" shape_type=""][vc_column column_padding="no-extra-padding" column_padding_position="all" background_color_opacity="1" background_hover_color_opacity="1" column_link_target="_self" column_shadow="none" column_border_radius="none" width="1/1" tablet_width_inherit="default" tablet_text_alignment="default" phone_text_alignment="default" overlay_strength="0.3" column_border_width="none" column_border_style="solid" bg_image_animation="none"][vc_column_text]
Stephanie: When a firm pays based on originations, the larger the firm, the harder it is to track that manually. So, you have to use a system that is sophisticated enough to handle variables. For example, originations can change if a rainmaker leaves the firm and doesn’t take the case/client/matter with them for whatever reason. They can also change if an attorney starts as an associate and is then promoted to partner, as those roles are paid differently. There isn’t a set way that situations like these are handled; I’ve seen it done in different ways at different firms.
You also need to be able to do split originations and have origination split changes throughout the year through a combination of an accounting system and a manual system. As of now, we do find that we pull information out of our practice management software to get the raw data but still have to manipulate it a bit to line up with the actual compensation plan.
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Amanda: At the end of the day, we’re all trying to get to the same outcome, which is getting the numbers where we need them and making sure we can all make educated decisions as a result. Stephanie functionally gets everything we need in terms of origination in place right at the beginning of the year, setting us up for success throughout the year.
Stephanie: Origination is a combination of an automatic and manual workflow. That’s why we originated the “two-look” process. Anytime in our compensation program where manual data entry is required we double-check each other’s work. It is a team effort.[/vc_column_text][/vc_column][/vc_row][vc_row type="in_container" full_screen_row_position="middle" column_margin="default" scene_position="center" text_color="dark" text_align="left" id="q6" overlay_strength="0.3" shape_divider_position="bottom" bg_image_animation="none" shape_type=""][vc_column column_padding="no-extra-padding" column_padding_position="all" background_color_opacity="1" background_hover_color_opacity="1" column_link_target="_self" column_shadow="none" column_border_radius="none" width="1/1" tablet_width_inherit="default" tablet_text_alignment="default" phone_text_alignment="default" overlay_strength="0.3" column_border_width="none" column_border_style="solid" bg_image_animation="none"][vc_column_text]
Stephanie: Everything changed when COVID hit!
Amanda: It’s true. Some firms place a lot of value in business development, so those compensation plans might have a component of needing to produce a certain number of business development hours or needing to attend a certain number of functions throughout the year. When everything was shut down during COVID, that was interesting because those firms had to rewrite compensation plans because they were very heavily based on that origination that wasn’t happening as much.
Stephanie: Sometimes that requires us to create a second budget based on what we think might happen because obviously, the last two years were so up in the air. There is a lot more playing it by ear now.[/vc_column_text][/vc_column][/vc_row][vc_row type="in_container" full_screen_row_position="middle" column_margin="default" scene_position="center" text_color="dark" text_align="left" id="q7" overlay_strength="0.3" shape_divider_position="bottom" bg_image_animation="none" shape_type=""][vc_column column_padding="no-extra-padding" column_padding_position="all" background_color_opacity="1" background_hover_color_opacity="1" column_link_target="_self" column_shadow="none" column_border_radius="none" width="1/1" tablet_width_inherit="default" tablet_text_alignment="default" phone_text_alignment="default" overlay_strength="0.3" column_border_width="none" column_border_style="solid" bg_image_animation="none"][vc_column_text]
Amanda: First of all, make sure you can easily measure it and report it before it becomes a component of compensation, even the discretionary portion. And if you’re using a third-party system, (hopefully you are) you want to make sure what you want to measure can be reported by that system. While it’s not always cut and dry, if you manage expectations early on and keep stakeholders informed throughout the year it’s easier for everyone.
I also recently read two books that I highly recommend for anyone evaluating their law firm compensation model: Compensation Plans for Law Firms by James Cotterman and Dividing the Pie: Law Firm Compensation Systems by John Westcott, Jr.
Compensation is also so personal; I would recommend hiring a consultant or a neutral third party to review it and make recommendations.[/vc_column_text][/vc_column][/vc_row][vc_row type="in_container" full_screen_row_position="middle" column_margin="default" scene_position="center" text_color="dark" text_align="left" overlay_strength="0.3" shape_divider_position="bottom" bg_image_animation="none"][vc_column column_padding="no-extra-padding" column_padding_position="all" background_color_opacity="1" background_hover_color_opacity="1" column_link_target="_self" column_shadow="none" column_border_radius="none" width="1/1" tablet_width_inherit="default" tablet_text_alignment="default" phone_text_alignment="default" overlay_strength="0.3" column_border_width="none" column_border_style="solid" bg_image_animation="none"][vc_column_text]
End-of-year compensation is a tough time of year. You’re pulling a lot of reports and making changes on the fly in order to deliver the best outcome for all involved. While you’re going through the process, (which you may be currently and that’s why you’re reading this) it is important to think about ways you can prevent yourself from having to reinvent the wheel next year.
Don’t lose sight of all the work you did to close out the year. Take a moment to reflect in January to make sure your team is in alignment and ready to go with smoother processes in place for the year ahead with these tips we’ve provided today.[/vc_column_text][/vc_column][/vc_row]
Tis the season for law firms to give back and expand on their charitable endeavors! For some firms, this may be a one-time holiday event, while others may choose an initiative that continues into the new year and beyond. Whatever the case, giving back helps firms solidify themselves as members of their communities with a vested interest in their people and their wellbeing, and also provides a powerful brand-building tool.
Let’s explore the various aspects of law firm humanitarianism, including the benefits of giving back and some ways that law firms can serve their communities in the holiday season and throughout the year.
It should go without saying that the best reason for giving back to the community is helping those in need. Legal professionals should take an interest in the communities in which they work and the people they serve, which includes taking steps to address unmet needs. A charitable spirit is a perfect reason to give back, but it is far from the only one.
A 2019 Forbes article discussed the value of corporate philanthropy. It talks about the “do-good renaissance” currently taking place within the business world, where brands increasingly seek ways to do good in the world. This expansion into community giving is partially due to the industry pressure of keeping up with their competitors, but it also occurs in response to consumer expectations.
Consumers want to patronize businesses positively impacting the world, and that includes law firms. They appreciate when companies take on these endeavors as their responsibility.
This is particularly true among younger consumers who see their patronage as an indirect way of also giving back, so they choose businesses that engage in charitable ventures towards social good and actively support causes they also care about. Giving back helps firms increase client and lead engagement.
Community involvement also helps law firms to:
When developing and implementing a community service plan, your law firm should consider some important factors. First, take a serious look at your community to identify opportunities to provide assistance. For example, is there a large homeless population in need of assistance? Perhaps childhood hunger is a major concern, or the local sports league needs sponsors. You should evaluate your practice and employee strengths and interests, then select activities that capitalize on them.
Once a community need is identified, you can establish a goal and get firm employees invested in the plan. It’s easy to write a check and walk away, but law firms benefit much more by involving employees in the giving back process.
By providing employees with an opportunity to give, law firms promote morale and collaboration among the team. For a single event, firms can divide tasks among firm members. For an ongoing initiative, firms may set aside a certain number of hours for employees to volunteer annually.
An important part of execution is sharing the charitable plan with your law firm’s clients and the public at large. These stakeholders want to see the impact of your community investments, so make it easy for them to find it. Include a page on your website that highlights the firm’s commitments. It could display the number of volunteer hours donated by firm members or the number of people helped through firm initiatives. Some firms choose to highlight the amount of money donated throughout the year.
This promotion may feel a bit unethical and against the charitable spirit, but the more profitable a law firm becomes, the more it can give back to the community. Highlighting the firm’s impact on the world helps to attract new clients and satisfy current ones. It all comes full circle, your firm should not shy away from sharing its work within the community.
Every law firm brings different skills and passions to the table, so it’s important to find initiatives that fall within your practice culture. Here are some ways that law firms can make a difference within the communities they serve:
This is probably the most common form of law firm community investment. Many firms maintain a system for choosing and handling pro bono cases. Some do so through legal volunteer organizations that specialize in a specific practice area, while others allow their members to take on pro bono cases internally within their firms.
Most nonprofits and community organizations need monetary donations to keep their operations running and continuously providing services, so a check is always greatly appreciated. Your firm may choose to identify a single organization for a donation or it may choose a particular cause and give donations to multiple agencies working within that space.
You can also sponsor a fundraiser with all proceeds going to a nonprofit. For the active members of the firm, a charitable sports tournament or race could be a great way to raise money while promoting teamwork. Your firm could also offer to match monetary donations that firm members individually make to their favorite nonprofits.
Pro bono work is not the only form of volunteerism available to attorneys. Every community has organizations that need volunteers in order to maintain their operations. Firms can encourage members to find a cause that they personally care about and allow them to use a set number of firm hours each month to further that cause. Alternatively, the firm can identify one collective cause or organization for members to volunteer with on a regular basis or at a designated firm “day of service.” Both options provide law firm members with an avenue for volunteering their time to the community.
Law firms can provide valuable guidance to young people through mentoring programs. This may look like time devoted to school-aged children’s programs or college student internships. Firms may also develop mentoring programs that assist adult community members, such as resume writing workshops or life skills training courses.
Community members look up to legal professionals and many would welcome an opportunity to learn from a law firm partner or associate. Through mentoring programs, law firms can give back to the community in the short term while positively impacting participants for years to come.
Whatever endeavor a firm undertakes, it must be done with a spirit of authenticity. Clients are savvy, especially within today’s environment, and they can easily recognize actions that are done for the purpose of furthering a firm’s agenda rather than uplifting the community. No matter how big the effort, a lack of sincerity can result in a negative pushback. The greater visibility that results from a law firm’s community actions are added benefits, but marketing should not be the driver behind community engagement.
Community engagement helps law firms meet two important needs: contributing to making the world a better place and strengthening the firm’s reputation while bringing in more business.
Especially during the holiday season, law firms should embrace a charitable mission and craft a plan for giving back.
