Professional Services Accounting ARTICLE -

6 Ways to Cut Costs and Increase Revenues in Your Law Firm

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

Law firms of all sizes are eager to find ways to grow their profit margins these days. It’s not hard to figure out that the most effective approach is two-pronged: reducing your costs and boosting your revenues. Here are six ways to accomplish both.

Streamline staffing

Payroll is typically a law firm’s largest expense. The question is, do you really need all of the people you employ?

Layoffs and reduced hours can be painful but are often necessary, especially when more cost-efficient options are available. To turn a fixed into a variable cost that you incur only when you need the labor to complete a project, consider using “virtual assistants” who can work remotely over the Internet; outsourcing IT instead of keeping someone on full-time; and contracting with per diem or of-counsel attorneys.

Rein in IT and office equipment

It’s natural to want the latest and greatest technology, but in reality you often can do without. Evaluate your needs before upgrading or rushing out to buy the newest thing. Your current technology might be all you require for now. And when computers need replacing, consider whether used or refurbished models will do the trick.

You can also look into economical alternatives to the commonly used but costly software applications such as Microsoft Office Suite. Google Apps and OpenOffice.org offer comparable and compatible products at reasonable prices or even for free.

In a similar vein, reassess whether you truly need multiple pieces of equipment, such as fax machines, scanners and printers when a copy machine, when properly configured, can do all these jobs. If you can’t justify keeping them, sell the equipment or donate it to a worthy charity.

Please note, though: If your copiers, fax machines and printers don’t have automatic encryption features, take them to a reputable dealer to have the hard drives wiped clean. You don’t want your clients’ confidential information to make its way into strangers’ hands.

Use brokers

You can snag significant savings by retaining brokers to find you the best deals on phone and Internet service. Brokers essentially act as your agent, requesting and evaluating bids for services. You secure lower prices, and the service providers pay the brokers’ commissions.

Get serious about collections

This is no time to take a lackadaisical approach to collections. Establish firm collection policies, communicate them clearly to clients and enforce them. Develop a tickler system to review accounts receivable weekly, identify those clients that are behind on payments, call them and send them reminders.

Manage cash flow

A predictable cash flow can help reduce monthly anxiety. One method of maintaining cash flow is to bill your clients in waves. For example, send out invoices three or four times a month, to a third or quarter of your clients each time. That way, you’ll have revenue coming in throughout the month.

If you don’t have the resources to bill multiple times each month, send your invoices about a week before the end of the month, instead of the first day of the month. It increases the probability of getting paid before the end of the following month.

Offer discounts

Just the word “discount” can send shivers down an attorney’s spine. But it needn’t invoke fear if you’re judicious in extending discounts to clients. Reserve them for those clients you want to hold on to for the long term but that may have problems satisfying their financial obligations in the short term. Leave no doubt in the client’s mind, however, that future services will be billed at your regular rate.

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.

related links