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.
Wesst LegalEdcenter will be presenting a teleseminar on the topic of financial planning and metrics for reviewing profitability. Wednesday at 10 a.m. PT
Unless there is a specific goal, one usually expressed in a number, there can be no goal. It’s been said that unless something can be measured, it has no value. Yet, when talking about creating a financial plan or a budget or, sometimes, even a strategic plan, there frequently comes a glaze over lawyers’ eyes. “That’s something for someone else to do, not me.” Yet, it’s this financial component that let’s us know whether we’re successful. How else could we tell? By the amount of money in our bank account? Yes, but how do we know whether that amount shouldn’t or couldn’t have been more? What is our benchmark?
This program will answer these questions.
Buying legal services is generally compensated, still, by the hour. But, according to Wall Street Journal writer, Ashby Jones, on May 2, 2007 (Marketplace Section) says that technology now permits law firms to gather cost information in greater detail than ever … and thus permits them to determine what it cost to deliver those services. With this, law firms are more willing to enter into fixed fee arrangements.
Some General Counsel, responsible for their company’s legal expenses, are interested in fixing the fees in order to be able to budget for their department’s expenses. Cisco, for example, has more than 70% of its annual $125 million legal budget under fixed fee arrangements.
When a client calls to inquire about your bill, opportunity is knocking! (more…)
If only we knew that we could file late and not get penalized! We could have kept our money in the bank longer … or not sold the securities needed to raise the cash to pay the taxes.
IRS noted that Taxpayers, Tax Professionals with TurboTax problems have until midnight April 19 to e-file (IR-2007-91, April 18, 2007)
This has not been a good few days for technology: TurboTax and Blackberry both went down! This would have made for a good bet. But, perhaps with so many technological devices at hand, it should not be a surprise when crashes occur.
New postal regulations may not be understood. They go into effect in May. If you don’t want your costs to go up by as much as 50%, you need to pay attention.
I must have been naive, but I always thought cashier’s checks meant that the money represented by the check was segregated by the bank and awaited deposit to give the bearer the funds. It seems that isn’t necessarily true, as it turns out. But, the real fraud is committed by the criminal mind in counterfeiting those cashier’s checks, something I didn’t think possible. (more…)
March 19, 2007
BUSINESS FINDS LEGAL SALARIES HARDER TO STOMACH
To Contain Costs, Corporate Counsel Seek New Ways to Price Legal Work
By Bobbi Murray
Daily Journal Staff Writer
LOS ANGELES – A fresh raise for law firm associates this year has renewed discussions among corporate counsels about how to trim legal costs.
In-house lawyers say they aren’t unwilling to foot an outsized bill for bet-the-company cases. But they are increasingly looking askance at bills larded up with high associate salaries working on routine matters. (more…)
The Ambrose law firm in Oregon is using the flat fee billing modality to significantly improve profits. Quoting Ed Poll, the writer in this article said: "According to Poll, ‘determining what a fee should be is an art, not a science.’ It requires the firm to consider the costs of running the firm, to have a tap on the marketplace and to understand the value to the client, he said…"
Profits can be stated in a mathematical formula: P = R – E. But, the "E" has a limitation. You can reduce expenses only so much before you start cutting out the "meat" of the law firm. "R," on the other hand, has no limit. You can increase revenue without limitation. Focused practice development efforts will attract new work; and once you get the work, you can develop the appropriate infrastructure to handle the increases.
Congratulations to Dave Ambrose and his crew of outstanding folks.
An interesting article appears in Law Office Management & Administration Report, April 2007 issue about the new associate salary increase. The point of the article is that “money isn’t the answer…” to keep associates. (more…)