Category: Cash Flow – Finances
Can lawyers find jobs in today’s market? The Wall Street Journal (page 1, Sept. 24, 2007) suggests that it’s not so easy today. That’s consistent with my earlier blog post that lawyers are “between a rock and a hard place.”
It is also consistent with my assertion that law is a business, or framed in the context of my registered trademark, The Business of Law® is governed by the principles of economics. Yes, law is a profession, but as Tower Snow, once managing partner of the former Brobeck, Phleger & Harrison law firm in San Francisco said, “Law is subject to the same laws of economics as any other business…” (more…)
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Many years ago, a good friend of mine said that the problem with aging is that we’re mired in history rather than focusing our perspective on today.
Thus, today’s article in The American Lawyer by David Brown may shock those of us who are over the age of 30!
He talks about the “paycheck report,” a survey of “mid-level” associate compensation. Associates’ paychecks exceed $200,000 per year and, in some instances, reach $350,000!
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According to NALP, 14% of law school graduates earn $135,000 (now $160,000) starting compensation. 42% earn $55,000 or less.
This is consistent with statistics that show experienced lawyers earning less than the public believes lawyers earn: 50% at less than $100,000 and 25% at less than $50,000!
Thus, lawyers are "between a rock and a hard place!" The public believes that figures reported in the Wall Street Journal of August 22nd to the effect that lawyers are now charging $1,000 per hour is the norm or standard. Yet, only a few lawyers are commanding that fee level, and then only in the "bet the company" kind of cases. Commoditized work cannot command that rate. Even in extraordinary matters, that rate approaches what one New York law firm partner said is clients’ "vomit point."
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I was asked if the current credit crunch/crisis is affecting law firms.
My response was that the credit crunch, I think, is somewhat artificial … and folks that are being hurt are ones that extended themselves too far in the first place without a safety net …. Or ones whose business just evaporated without warning (although there usually is some kind of warning if observant).
Law firms with a line of credit will …. (more…)
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At the ABA conference in San Francisco last week, I had the pleasure to moderate an outstanding panel of experts about the financial management of their firms and their “best practices.” The panel consisted of Bob Hirshon, CEO of Stoel Rives in Portland, OR (and former ABA president); Marcia Wasserman, COO of Nossaman Guthner Knox & Elliott; Larry Kleinberg, CFO of Munger Tolles & Olson; and Ron Yano, CFO of Loeb & Loeb.
Reid Trautz mentioned his observations from our panel:
“From a terrific panel of firm financial managers moderated by Ed Poll, comes these interesting ideas:
- Firms are taking advantage of the new check scanners offered by some banks to more quickly and securely deposit client checks.
- More firms are closing their billing on the 25th day of each month to get their bills into the “first of the month” billing cycle of clients–both businesses and individuals.
- Law firms are putting more pressure on partners to collect bills sooner (nothing new there!), but they are using automated e-mail and other added technology features now available in many time & billing programs to keep the pressure on, well, automatically!
- Larger firms are doing more to ensure that each new client matter has a signed representation letter or agreement before starting any work. This is a smart practice, and is just one area where large firms tend to lag behind smaller firms.”
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The Canadian Bar Association has a series on how to get paid. Check it out if you’re collecting anything less than 95% of what you bill.
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In 2004, the California Supreme Court in Fletcher v Davis said that a lien by an attorney on a fund or judgment the lawyer receives to ensure compensation of an hourly fee engagement is enforceable. (more…)
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Failure to collect fees can sink a law firm. After billing $100, some lawyers can collect only $65. Can your firm survive with a realization rate of only 65%? What enables some lawyers to collect what they bill and other lawyers unable to do so?
Collecting Your Fees: Ethically Getting Paid from Intake to Invoice will be offered by the ABA on June 21st at 10 a.m. PT.
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No longer is there a debate about whether a law firm is in business. It is clear that the answer is yes!
In Australia, a class action law firm has filed an IPO. This is the first for a law firm following new legislation in Australia that allows firms to raise funds on the public markets and allows non-lawyers to invest. A similar bill is under consideration in the United Kingdom.
While safeguards must be in place to prevent non-lawyers from practicing law, why shouldn’t they be allowed to invest in law firms just as they do in other professional service or manufacturing entities? As the proverb suggests, "these are interesting times."
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There are two basic methods for keeping track of law firm financial performance: accrual and cash accounting. Accrual records income irrespective of whether cash has been collected, and reflects billings, work in progress (completed but not yet billed) and accounts receivable (work billed but not yet collected). Cash accounting, on the other hand, reflects only collections, never billings or work in progress.
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