Professional Services Accounting ARTICLE -

Keep Your Eye on Costs with a Recovery System

Target Audience: Legal Professionals, Professional Service Firms, Law Firm Partners, Law Firm Accounting

Two things boost law firm profitability: increased revenues and reduced costs. If, like many firms these days, yours is having trouble with the revenue portion of this equation, it’s time to concentrate on cost controls. A cost-recovery system can help you do that.

Add it up

Serving clients’ needs can add up: Legal research, courier service, overnight package delivery, printing and copying, scanning, and telephone calls and faxes are just a few common daily expenses. If your firm bills a flat rate for these items, you may be missing out on potential revenue by leaving some recoverable costs unrecovered.

Tracking office expenses through a cost-recovery system helps show you — and your clients — where the money is going. It also enables you to recoup costs without overcharging clients. Suppose, for example, your firm starts equipping photocopiers, scanners, printers and fax machines with control terminals that require users to input client account numbers before they can be used. Even if you can’t make 100% of these activities billable, an increase in the percentage of billable activities from, say, 50% to 75% will provide immediate — and significant — savings.

Software essentials

Cost recovery software — either standalone or integrated with proprietary research databases — is essential for cost tracking, client validation and bill-back functions. Such software can collect and store information from everything from control terminals to telephones to computers. It enables system administrators and other authorized users to add or delete billing codes and perform other functions as needed.

Administrators also can review billing information daily and create customized reports. For example, pop-up screens tied into your client code system will request information from the user, such as a client number, before the user can begin a search. Any search conducted by a firm member can be dissected in a report that indicates the client, the user, the database accessed, the amount of time spent and other relevant information.

Software and systems vary, so be sure to shop around so that you get the features your firm needs. And ensure the software you choose is compatible with your other management systems.

Newer is better

To remain competitive and better serve your tech-savvy clients, be sure to keep pace with advancing technology. Assess your existing software, ongoing license costs and the actual use of the software, and consider upgrading to current versions if your systems are more than five years old. Old software may have compatibility issues with other management systems and lack adequate security and support.

Newer software generally offers better usability and features. For instance, you’ll have real-time access, which allows you to see work in progress for any project at any time and bill more accurately, helping to cut costs while increasing profitability.

An up-to-date and well-designed system’s cost-cutting benefits can add up to more funds to invest in other technologies that will help your firm run more efficiently and productively. It also helps ensure your firm is in compliance with any federal or state statutes that require extensive financial reporting and electronic record keeping.

Clients benefit, too

The advantages for your firm’s bottom line are clear, but clients may be less enthusiastic about your new or upgraded cost recovery system. Be sure you provide a schedule of rates for everything from printouts to courier service to new clients, as well as rate revisions to existing clients. Such transparency communicates to clients that your firm is budget conscious and has considered their budgets as well.

Find out how our expertise in professional services accounting can add value to your business. Email us or call us at 1 (888) 875-9770.

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