New ideas about law firm profitability
Welcome to this month’s issue of inVOICE. These “5-minute reads,” brought to you by InvoicePrep, are short, informational executive briefs designed for law firm executives and managing partners. They provide practical tips and provoke new ideas to make your management of your Firm more effective. (For our prior newsletters please visit us here).
Last month, we explored the question of what technologies clients expect law firms to be using on their behalf. We suggested that clients have increasingly high expectations of firms when it comes to software and technology that improve firm efficiencies. Certainly clients are investing heavily in tools that increase speed, performance, and efficiency; why would their law firms not be as well?
We highlighted, and agreed with, two well credentialed experts who suggest that, whatever the tools being evaluated, firms need to focus on those that are obvious in their application and which help lawyers do what they do better. At the same time, we emphasized that good technology isn’t about replacing humans – often to the contrary, it’s about maximizing what humans can do, making them smarter and better decision makers in the process.
New Ideas about Law Firm Profitability
My thoughts for this month come from an interesting article that I read on AttorneyAtWork.com, an interesting and informative site for attorneys of all types. The article that caught my eye was written by Bob Weiss, and is entitled “[The] Best Way to Maximize Your Law Firm’s Profits.”
Several interesting suggestions are made in the article, which stems from an analysis of the 2016 Real Rate Report. For those of you who don’t know, the Real Rate Report is published by Wolters Kluwer’s ELM Solutions, one of the industry leading companies in the legal cost containment (e-billing) market. (ELM Solutions is the new name for the combination of TyMetrix and DataCert).
The article bases its recommendations on two findings from the Report. First, Senior Associate rates in firms increased at almost double the rate of Partners in 2015. Second, firms that provide clients with legal services in multiple practice areas charge more than average rates for most, if not all of their services.
The article suggests several recommendations, based on these findings, which I’ll paraphrase (possibly poorly) as follows: Firm partners should stop fighting the nature of millennials and should instead nurture them. By organizing firm attorneys into effective collaboration-based industry teams, and by encouraging attorneys to collaborate across practice areas to come up with valuable innovative solutions, firms can achieve some of the critical factors that are associated with the higher rates summarized in the Report. Collaboration, it is argued, leads to higher performance and greater profits.
Shiny Objects or Plums and Oranges!?
While I don’t disagree with the benefits of collaboration, my perspective into the operations of many law firms suggests that there is simply more “low hanging fruit” available to firms who want to increase their profitability. In fact, I believe that some of the core obstacles to profitability are right in front of us – namely the opportunity to improve billing practices, to be paid more for the work performed, and to rid the billing process of the inefficiencies traditionally inherent to it.
We often cite the results of our initial industry survey of more than 50 managing firm partners. It was, in fact, the results of this survey that got us into this business in the first place.
The thoughts expressed by these managing partners were sobering. They felt that too much time is required of the invoicing process, that clients take too many adjustments to invoices, and that the adjustments are intrinsically unfair. They rated the effectiveness of their processes on the low end of the scale and commented on the increasing overhead associated with the entire operation.
I am convinced that if we were to take that industry survey again today the results would be the same, or only incrementally improved. Firms who have not improved fully their invoicing processes – who have not deployed the right technology and have not put the process in the hands of true experts – shouldn’t (in my humble opinion) run off and start new collaborative teams. Instead, they should fix what lies before them. It would yield much faster return on investment and realize much quicker results.
I’ll provide a very concrete and real example. We have a customer, proudly featured in one of our White Papers, who, by focusing on their invoicing process:
- Realized an 85% improvement in payer reductions (essentially from seven to one percent);
- Gained 6.5% in gross billing proceeds; and, at the same time;
- Reduced by 50% the responsible attorney’s time in the billing process.
These are concrete results, with real dollars going to the Firm’s bottom line. And the Firm got there by simply picking the plums and oranges hanging low in front of them. There was no focus on shiny objects, no attention to millennials, and frankly nothing overly “sexy” about the approach. Instead, there was just a recognition that having experts help with one of the most critical paths to firm profitability – invoicing – made complete and utter sense.
What do you think? Is it easier to chase the shiniest new ideas, or to improve upon established firm processes? I’d like to hear your thoughts!
Alternatively, InvoicePrep is sponsoring the Federation of Defense and Corporate Counsel’s (FDCC’s) Annual Meeting in Montreux, Switzerland this month (July 24-29). If you are attending, let’s connect there and I’ll tell you more about how easy it can be to pick plums and oranges.
InvoicePrep enhances law firm profitability by improving e-billing quality and accuracy. When invoices are prepared properly, payment is more prompt and the number of denied charges decreases. InvoicePrep’s system is streamlined, efficient and uses a combination of cutting-edge technology and professionals with extensive legal invoice compliance and e-billing software knowledge. To learn more about InvoicePrep, please visit www.invoiceprep.com