Running a successful law firm is as much about running a business as it is practicing law. It is the business side of law that has a habit of bogging firms down. They get so busy with the business of law that they are not devoting enough time and attention to practicing it. This is no way to run a law firm.
Identifying the business challenges law firms face is the first step toward overcoming them. Below are the top five concerns gleaned from our own observations of the legal sector. Note that NuLaw addresses several of them by design. As a Salesforce case management application, NuLaw was built with the business side of law in mind.
1. Inadequate Accounting Software
Choosing a generic accounting package and then adapting it to law firm needs has been standard practice for years. But it is not a smart practice. Generic accounting packages do not account for many of the intricacies of legal accounting. Law firms need accounting packages that are ABA compliant.
For the record, that is just what you get with NuLaw. Our accounting and billing modules are fully compliant. Our software is the perfect tool for tracking billable hours, generating invoices, and processing payments. Best of all, it can be integrated with other popular accounting packages.
2. Data Entry Errors
We created NuLaw to be a one-stop solution capable of replacing the collection of separate software applications many law firms still rely on. All of those separate applications require separate data entry which increases the risk of errors. Such errors are not good for business. A better way to go is to consolidate all of those packages into one so that data entry is minimized.
3. Routine Reconciliations
Financial reconciliation is critical to business success. In the legal sector, reconciliation can be complicated due to the nature of legal accounting. But complicated reconciliations are not a reason to avoid them. The accounting team should be reconciling at least on a monthly basis so that decision-makers understand the firm’s financial position.
4. Account Charting
Law firms typically have multiple accounts for completing different kinds of transactions. Keeping track of those accounts is necessary so as to prevent inappropriate mixing of funds. So how does a law firm do so? By making use of a chart of accounts.
Account charting is an old bookkeeping trick designed to keep funds properly separated. Keep the accounts separate is nonnegotiable for attorneys. They have both legal and ethical obligations to manage their accounts properly.
5. Income Tracking
Finally, the business side of law requires analyzing financials from a strict business perspective. An appropriate example would be tracking income from various streams within the firm. Income tracking provides decision-makers with some of the information they need in order to determine firm specialization.
Perhaps your law firm boasts five different areas of specialization. Perhaps three of those specialties generate substantial revenues while the other two are borderline. In order to make wise decisions for the future, you need to be able to track each specialty’s financials, not the least of which is income. A specialty that is not generating enough revenue needs to either be improved or abandoned.
It is abundantly clear there is more to running a successful law firm than hiring some attorneys and obtaining a few cases. There is a business side to law that should not be ignored. When sound business principles are combined with an equally sound practice of the law, attorneys and their firms flourish. Ignoring one or the other puts a firm’s long-term future in jeopardy.