Improve your Law Firm Practice Management

If 2012 hasn’t produced a result for your practice that you are delighted with, what changes are you going to make in 2013 to ensure that you don’t simply repeat the previous calendar year?

When it comes down to it, improving financial results in a legal practice is really about two things:

  1. Improving your law firm practice management; or
  2. Improving your legal marketing

In this blog I am going to concentrate on several law firm practice management issues.

Of course law firm practice management can incorporate many things. I recently had an article published in Law Fuel in New Zealand on two key areas, being pricing and your average hourly rate. If you want to quickly lift profitability in your practice, perhaps to make up for a poor 2012 result, I think that these two areas will get you there probably quicker than anything. To read the article go to

If improving cash flow is your most pressing issue, there are many things you can do.

One of the easiest things to start with is to start to regularly measure the Key Performance Indicator  ( KPI) that relates to cash flow. This KPI is Lockup , or the total of your Debtors and Work in Progress usually expressed in terms of days of Lockup. To explain what I mean, go to this past bloghttp://

If cash flow at your practice is not as good as you would like and you don’t measure Lockup at least weekly, I suggest that it is not likely to change any time soon. You really can manage what you can measure and conversely what you don’t measure is not managed. The choice is yours, but it is a pretty easy choice I think.

Your lock up when expressed in terms of so many days of fees is telling you on average, how long it takes your practice from accepting instructions on a matter to banking the cash. For example if your practice annually bills $2,000,000 or thereabouts and you have a combined debtors and WIP of $1,000,000 then it is taking you over 180 days to turn instructions into cash, or 6 months. Way too long.

OK, you now have a good handle on what is happening with your Lockup,  clearly the aim of this KPI is to reduce it. The lower this number, the quicker you are turning instructions into cash and hence the better your cash flow.

I suggest that most cash flow problems in a legal practice are caused in the initial meeting with the client. This meeting is critical. There are generally three outcomes to this meeting from a cash flow point of view.

  1. Your client will leave that meeting with a clear understanding of what your expectations are for payment and with agreement to those expectations
  2. Your client may not agree to those expectations and go to a competitor who is happy for them  choose their own arrangements, one of which is to choose not to pay
  3. The client will leave the meeting with absolutely no idea of your expectations.

Clearly the outcome that is likely to give the best cash flow result is outcome 1).

You don’t want or can’t afford the client from outcome 2), so best to let them do down the road to your competitor.

Unfortunately the client from outcome 3) is all too familiar.

Many practices are full of the clients from outcome 3) and as a result, their cash flow is suffering accordingly.

If cash flow is an issue in your practice and you are only prepared to make one change in your practice next year, make sure that the change is to fill your practice with clients from outcome 1).

If you are uncomfortable talking money with your clients, like this, then don’t.

As long as someone in your practice has this discussion with the client, your cash flow will improve.

Learn from doctors. When did you last talk money with your doctor? It is almost always the receptionist or practice manager who has that conversation with you.

I know these sound like simple strategies but don’t confuse simple with easy. No they are not necessarily easy, but the payoff for you is worth it, if you think less stress and more cash in you r pocket, is a worthwhile result.

Have a great Christmas and please try to take a good break from your practice, as that will help also you to be more successful in 2013.