Nowadays, with the increasingly competitive market, most clients demand more from law firms. Law firm profitability often dictates the success of their work. According to the American Bar Association, law firm profitability is a “critical management task that influences strategic management decisions.” Unfortunately, when it comes to traditional law firm partnership financial reporting models, they aren’t simple to analyze within the legal sector.
Furthermore, law firm profitability is proof that most law firms have become businesses, although their operations are not like regular businesses. But, they can be akin to a large corporation with public stock investors. Their clients are the investors, and the more the client’s legal work increases, the more the law firm earns.
With that being said, if you want to improve your law firm profitability, here are a few things you should know.
1.) Use Technology and Do Away with Manual Processes
If you take a look at traditional law firms, you can see that they are no longer able to compete with progressive law firms. They use manual processes, which means that their work productivity is lower than their counterparts. Thus, it’s essential for law firms to use technology such as legal accounting software to boost their law firm profitability. There is software that helps lawyers stay on top of their deadlines or provide storage for their documents. Some also help by making it easier for law firms to enter data in all their accounts without having problems like double data entry.
2.) Save on Time by Streamlining Administrative Tasks
Some law firms spend excessive time on non-billable tasks like finding documents, filing and billing payment, or entering data on their account and IOLTA account, among others. All of these administrative tasks can cause lesser work productivity. For these reasons, it’s better to take care of all of them through legal software. Lawyers will then have more time to prioritize their most urgent tasks.
3.) Work Remotely With Worries
According to recent surveys, there’s an increase of at least 70% of law firms working remotely. They use technology that allows them to do their work on the go and in real-time. So, the more things they get done quickly, the more their law firm profitability enhances. That’s why it’s also important to find legal software that’s effective and secure.
4.) Track Profitability Factors
By using technology, law firms can track their law firm profitability. This is because data would be easily available to them. They’ll know the factors that affect their profitability. For instance, they’ll know which practice area or client is more profitable than others. By doing this, they’ll recognize which helps them and where they are losing out. Therefore, law firms will understand what parts they should put more effort into and how they can improve their competitiveness.
5.) Utilize Effective Legal Accounting Software
An important way to increase profitability and productivity is with legal accounting software. For example, they can help lawyers bill accurately and often. As we all know, billable hours are the lifeblood of a law firm. Thus, you can have a software where lawyers will not fall behind their invoices. It will encourage them to be vigilant with their billings. Aside from that, it also makes it easier for law firms to comply with tax laws and regulations. When it comes to legal accounting, there are many things that they must follow so the IRS won’t fine them. One of these is keeping their IOLTA account separate from their personal account.
For traditional law firms, now is the time for you to increase your law firm profitability by keeping up with the times. If you need help with improving your legal accounting, you can reach us at Prestige Accounting Solutions. Our team of tax experts is skilled and experienced with working in various sectors. This includes law firms. So, get in touch with us.