While providing clients with the best possible legal advice should be the goal of any reputable attorney, in order to run a trusted law firm, sound internal business practices must also be in place and prioritized. This goes beyond just protecting clients’ confidential documents, data, and financial information; a truly ethically-minded practice must also take steps to increase its own financial security.
Too often, lawyers are so focused on attending to their clients’ needs that the needs of the firm get placed on the back-burner. While an entirely understandable situation, it’s one that must be avoided at all costs in order to protect the business’ future. Here, we have compiled the top 10 tips to increase your firm’s financial security, from best billing and payments practices to steps you can take to protect against fraud.
Billing & Payments
Tip #1: Put a system in place that allows you to track all time and all costs, regardless of a team member’s location. This will prevent “leakage,” or lost funds that are never recognized because meetings, tasks, and events weren’t properly billed. Especially now that an increasing number of people work remotely, being able to record credit card charges and other costs on-the-move is essential.
Tip #2: Bill on time. In order to be paid on time, you must bill on time. Clear and consistent expectations between client and attorney help to create an atmosphere of trust and transparency.
Tip #3: Set a collection reminder with an exponential reduction for longer bill pays.
Tip #4: This one may sound counterintuitive at first, but don’t be overly eager to pay vendor bills especially if it relates to client costs. Instead, utilize a system that can hold and release funds based on the client’s payment status.
Smart Practice Management
Tip #5: Wherever possible, implement a productivity-driven compensation/bonus plan for employees. Though the line between personal and professional can seem to blur (especially in a small firm), it’s important to remember that it is first and foremost, a business.
Tip #6: Along the same lines as #5, be sure to establish permission controls and operate on a need-to-know basis.
Tip #7: Track income by practice areas to ensure Matter’s Obligation does not become a headache. For example, in the case of PI/WC/Family Law Mediations, bills incurred by clients (from doctors, hospitals, other attorneys, etc.) will come to you following a settlement or home sale. Again, good communication and clear expectations are crucial here to establish proper tracking processes. With the court/client’s approval, disburse payments to third-parties and yourself before turning the rest over to the client.
Tip #8: Enforce formal monthly reconciliations of all accounts. This includes locking your books and reviewing bank statements alongside a reconciled report yourself. Remember, compliance is a nondelegable responsibility so while you may have others gather this information for you, it is up to you to sign-off on it.
Financial Fraud Prevention
Tip #9: If possible, reconcile systems daily so you’ll become aware of accidental mistakes or fraud as soon as possible. Additionally, be aware of automatic bill clearing to avoid a possible cash flow issue.
Tip #10: Don’t trust others to open bank statements. A person perpetrating theft can also alter bank statements.
Even if your firm already has long-standing safety practices in place, it is important to reevaluate your systems and processes to make sure the business is protected from potential threats. Taking these ten steps will help to jumpstart your journey toward financial security. For more information on these 10 Tips to Improve your financial security, watch our recent webinar on-demand.