10 reports that every Managing Partner needs

Running a successful law firm and being a good lawyer shouldn’t be incongruous, but to achieve these goals managing partners need to identify – and implement – the best tools at their disposal.

In business, data is power, whether that’s data on clients, the market, legal trends, staff, finances, performance – the list goes on.

Having visibility of the key areas of a law firm will provide managing partners with the opportunity to make smarter, data-driven decisions; understanding their law firm’s data puts them in control while providing insight to trends, highlighting problems, and implementing solutions.

Before we look at the reports that managing partners should implement within their law firm, here is a quick overview on KPIs (Key Performance Indicators) and the benefits they offer.

What are law firm KPIs?

Law firm KPIs are a business metric. They are quantifiable values that measure the success of a firm’s efforts in achieving specific goals. This could be to increase revenue, clients, and referrers, and to improve profitability, customer retention, and staff satisfaction.

The KPIs implemented will depend on a law firm’s individual goals, so these need to be mapped out first to determine how their success will be measured. These values are then assessed regularly throughout a set period to determine the likelihood of success, monitor ongoing performance, and implement course correction.

When implemented properly, KPIs have many benefits, which include providing insight, accountability, and scalability across a law firm.

Tracking the right data

Managing partners should consider whether their practice management system (PMS) provides them with the right data. Typically, if the data is inputted, it can be extracted, especially if their PMS provides business intelligence tools. Integrated systems will make pulling the data more streamlined and accurate; disparate systems could mean out-of-date, error-prone data.

KPIs can be presented in dashboards or reports. Comprehensive case management solutions also enable firms to design, configure and schedule reports so they will always have the data required.

Billing analysis

This is the most crucial report for forecasting future budgets and staffing decisions.

Firms should set up monthly and year-to-date reports showcasing actual vs target billing figures. This will identify variance by individual Fee Earner and department to identify star performers. It’s also useful to show a comparison to last year’s figures over the same period to assess any growth or to highlight where adjustments are required.

Time tracking analysis

Accurate time tracking equals accurate billable time. Understanding time tracking will help managing partners to understand how to improve and ensure staff are meeting the needs of the business and using software solutions to correctly record their hours.

A detailed time tracking report enables managing partners to compare the work invoiced vs the actual work performed – useful for understanding the profitability of a flat fee.

With visibility of the facts, firms are able to make smarter decisions on price increases, resource allocation, department growth or closure, and time spent on marketing and business development.

New Matters

It is vital that firms have a grip on the number and type of enquires they receive, to help the growth and success of their firm.

Monthly reports and real-time dashboards on the number of new matters vs your target by Fee Earner and department are really useful, particularly when they include comparisons to last year’s figures to understand trends and improve forecasting.

Enquiry conversion rates

On top of the new matter reports, firms should ensure they are also monitoring the number of new enquiries received and the conversion rate from enquiry to instruction.

Drilling down further, they should also monitor where the enquiry came from (website, phone, email) and the conversion rates against those channels. This deeper level analysis means they can focus resource on the practice areas that are successful and profitable, on specific channels of marketing, and into business development to effectively grow their firm.

Client Analysis

Understanding clients is just as important as understanding financials. Knowing the behavioural trends of typical and ideal clients gives the advantage of exceeding their expectations and attracting new business.

Identifying ideal clients helps firms to focus on winning more clients like them, as usual, they’ll provide a more profitable return and easier experience. Using reports such as ‘top clients by fee income’, or ‘average payment days per clients and outstanding bills’ will help build the picture of who or what area of work requires more resources, and where firms wish to allocate spend for marketing and sales efforts.

The analysis will ultimately help managing partners to understand and serve existing clients better, and to provide them with a first-class service while boosting the firm’s reputation. This in turn helps attract new clients.

Aged Debts

A firm’s biggest cash flow challenge is late-paying clients. Keeping a tight track of aged debt and decreasing the length of time for overdue payments helps firms to thrive. With the right data, smarter decisions can be made on credit control policies, as well as identifying trends or challenging clients at an early stage.

Reports can be set up for aged bills by time overdue (30-60 days, 61-90 days, etc) and then by Fee Earner, department, and work type. The data will highlight the key problem areas and where to implement solutions first. Firms should consider whether there are specific Fee Earners or departments that are creating cash flow issues, or specific clients who need a stricter billing policy to avoid continuing to carry out work without payment.

Once an initial analysis is complete a regularly scheduled report will allow firms to scrutinise credit control efforts and continue to make further improvements.

Unbilled Disbursements

Improving cash flow is crucial to surviving future challenges and, wherever possible, firms should bill disbursements immediately to help retain operational capital whilst keeping track of unbilled disbursements. With out-of-control client debt, it can be hard to remain resilient in facing unknown challenges.

Cashflow forecast

With the individual elements that dramatically affect cash flow reported on, it is important senior partners also have a top-level cash flow report to provide the full picture of the firm’s performance.

The report should detail actual vs forecasted cash flow for each income and expense nominal, showing an opening and closing bank balance for the year.

The data will help firms make accurate predictions of their financial stability and effectively forecast for difficult times. It will also highlight where the firm has under or overspent so actions can be taken to reallocate funds or enforce limits.

Dormant matters

Reporting on dormant matters can help improve business efficiencies. The report should identify matters that are inactive or without financial postings for a determined period.

This will highlight cases that need archiving or additional attention to help with progression. Understanding what is dormant and outstanding will also aid compliance where firms are accredited by CQS or Lexcel. Regardless of compliance, it is good practice to ensure matters are effectively managed and filed.

Client money retention

It’s important to identify matters where money is being held for long periods of time. Keeping track of these matters ensures firms can monitor cases and act when needed. This will also aid compliance to SRA accounts rules ensuring firms are risk-free of errors.

Comment

Increasing cash flow, improving profitability and winning new clients should be at the top of every managing partner’s to-do list. According to The Law Society’s Law Management Section Financial Benchmarking Survey, firms are concerned about cash flow as lockdowns are lifted and also about a significantly reduced number of new matters in 2021.

Data-driven insights monitored against set KPIs is the only way to ensure that firms can navigate the future and combat those uncertainties. Using a practice management system that provides intuitive business intelligence, smart reporting, and real-time dashboards will provide firms with the visibility they need, leaving managing partners to focus on making the right decisions, not collating the right data.

Craig Matthews is Chair of the LSSA and CEO of Osprey Approach, which provides cloud-based, case management software to high-street and multi-branch law firms. With over 30 years of experience in the legal software sector, Osprey’s system, implementation, and support services are designed to help make running a law firm easier. www.ospreyapproach.com