With bonuses banked, budgets approved, and the end-of-year collections race a fading memory, you might not be thinking about profitability. After all, 2024 profits were a “near record high” for law firms and the economic outlook is sunny. But Q1 is the perfect time to invest in profitability. These four steps (plus technology tips) will help you prepare for a prosperous 2025.
1. Master time tracking, entry, and billing
On the revenue side of the profit equation, billable hours are king. But it’s common for attorneys and professional staff to struggle with time tracking and entry. That, in turn, creates challenges for the back-office staff and the supervising attorneys responsible for billing. The following suggestions can help you track and enter time with more ease:
- Track all of your time so that it can be billed and counted towards your billable hours targets. You or your supervising attorney can always write down or write off time if necessary.
- As much as possible, track your time contemporaneously. The longer you wait to track time, the more difficult it will be to reconstruct what you did.
- Write your narratives right away. It’s much easier to write detailed narratives that support your time when the work is fresh in your mind.
- Enter your time promptly (ideally, before you sign off every day) to avoid a stressful last-minute crunch.
- Double-check your entries periodically. It’s common to mistakenly bill time to the wrong matter; the “lost” time never gets billed. Checking your WIP and Aging AR reports regularly can help you find lost time.
Tech tips: Time tracking software can make time tracking and entry easier. Consider looking for mobile time entry options and automated prebilling modules to cut down on time-consuming, paper-based processes.
2. Make collections a regular part of your work
It’s common for partners to spend the last month of the year scrambling to collect unpaid bills, but that strategy may be costing you money. The longer it’s been since the services were provided, the harder it is to collect on the bill. Boost your collections efforts by:
- Checking your WIP and Aging AR reports frequently: at least once a month.
- Make collections a year-round effort. In many cases, you’ll collect more if you spread out your collections efforts—which means more profit sharing and/or bigger bonuses.
- Simplify the collections process. For some firms, that means hiring dedicated collections staff. You can also use software to automate some parts of collections.
- Implement electronic payment processing. Clients can pay with just a few clicks, and it’s faster than waiting for a check to arrive in the mail (and clear the bank).
Tech tips: Look for software with strong reporting capabilities so attorneys can track their collections efforts. Automated collections software can also be a benefit, but choose tools that leave you in control of the tone and timing of reminders. Consider adopting tools with integrated electronic payment processing.
3. Streamline work to reduce costs
On the cost side of profitability, efficiency is the name of the game. Deployed strategically, automation can help back-office staff avoid monotonous, repetitive tasks that aren’t the best use of their special expertise. Potential improvements include:
- Modern accounting software that matches your staff’s unique needs
- Using integrated electronic payments* to simplify accounts receivable
- Automating burdensome workflows when possible
- Enabling mobile technology that allows people to work where they are
Tech tips: Include accounting staff in software searches to ensure features match their needs. Investigate the benefits of e-payments. Look into mobile technology and automation options.
*Ethical guidelines and laws vary across jurisdictions.
4. Make profitability visible
Good business intelligence (BI) can help you set smart profitability goals and achieve them. And BI visibility can benefit people at every level of your firm:
- Firm-wide and practice group leaders need intelligence to understand the firm’s current profitability at various levels (e.g., individual, practice group, department, firm) and to compare the current status to future goals.
- Individual attorneys need insight into their own numbers. Ideally, this includes not just performance reports shared with leadership, but real-time, self-serve reports that allow attorneys to course-correct mid-month to meet profitability targets.
Tech tips: Seek out BI software that helps you zoom in on profitability factors unique to your firm. Ideally, reporting will help you meet targets, not just measure profitability retrospectively.
Orion: Your partner in profitability
We built financial management software with law firm profitability in mind, and we’re always striving to better your bottom line. Discover features like:
- Simple time-tracking from your desk or phone
- Electronic prebilling—no more passing around piles of paper
- Automated collections support that you control
- Powerful accounting platform with compliant electronic payments
- Business analytics designed just for your firm
Ready for a more profitable 2025? Demo Orion today.